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                                                                     Exhibit 4.9

DRAFT: 25/02/03

THIS SECOND ISSUER CASH MANAGEMENT AGREEMENT is made on [6th March], 2003

BETWEEN:

(1)      HALIFAX PLC, a public limited company incorporated under the laws of
         England and Wales whose registered office is at Trinity Road, Halifax,
         West Yorkshire HX1 2RG acting in its capacity as the Second Issuer Cash
         Manager;

(2)      PERMANENT FINANCING (NO. 2) PLC, a public limited company incorporated
         under the laws of England and Wales (registered number 4623188) whose
         registered office is at Blackwell House, Guildhall Yard, London EC2V
         5AE (the "SECOND ISSUER"); and

(3)      U.S. BANK NATIONAL ASSOCIATION, a national banking association formed
         under the laws of the United States of America, acting through its
         office at 1 Federal Street, 3rd Floor, Boston, Massachusetts 02110
         acting in its capacity as Security Trustee.

WHEREAS:

(A)      On the Second Issuer Closing Date the Second Issuer will issue the
         Second Issuer Notes. The Second Issuer will make the Second Issuer Term
         Advances to Funding 1 from the proceeds of the issue of the Second
         Issuer Notes.

(B)      The Second Issuer Cash Manager is willing to provide cash management
         services to the Second Issuer and the Security Trustee on the terms and
         subject to the conditions contained in this Agreement.

IT IS HEREBY AGREED as follows:

1.       DEFINITIONS AND INTERPRETATION

1.1      The Amended and Restated Master Definitions and Construction Schedule
         and the Second Issuer Master Definitions and Construction Schedule,
         both signed for the purposes of identification by Allen & Overy and
         Sidley Austin Brown & Wood on [5th March], 2003 (as the same may be
         amended, varied or supplemented from time to time with the consent of
         the parties to this Agreement) are expressly and specifically
         incorporated into this Agreement and, accordingly, the expressions
         defined in the Amended and Restated Master Definitions and Construction
         Schedule and the Second Issuer Master Definitions and Construction
         Schedule shall, except where the context otherwise requires and save
         where otherwise defined herein, have the same meanings in this
         Agreement and this Agreement shall be construed in accordance with the
         interpretation provisions set out in CLAUSE 2 of the Second Issuer
         Master Definitions Schedule. In the event of a conflict between the
         Amended and Restated Master Definitions and Construction Schedule and
         the Second Issuer Master Definitions and Construction Schedule, the
         interpretation given in the Second Issuer Master Definitions and
         Construction Schedule will apply.

2.       APPOINTMENT OF SECOND ISSUER CASH MANAGER

2.1      APPOINTMENT

         Until termination pursuant to CLAUSE 12, the Second Issuer and the
         Security Trustee (according to their respective estates and interests)
         each hereby appoints the Second Issuer



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         Cash Manager as its lawful agent to provide the Second Issuer Cash
         Management Services set out in this Agreement. The Second Issuer Cash
         Manager in each case hereby accepts such appointment on the terms and
         subject to the conditions of this Agreement.

2.2      DUTIES PRESCRIBED BY TRANSACTION DOCUMENTS

         For the avoidance of doubt and in connection with the powers conferred
         under CLAUSE 2.1, save as expressly provided elsewhere in this
         Agreement nothing in this Agreement shall be construed so as to give
         the Second Issuer Cash Manager any powers, rights, authorities,
         directions or obligations other than as specified in this Agreement or
         any of the other Transaction Documents.

2.3      APPOINTMENT CONDITIONAL UPON ISSUANCE OF SECOND ISSUER NOTES

         The appointment pursuant to CLAUSE 2.1 is conditional upon the issue of
         the Second Issuer Notes and shall take effect upon and from the Second
         Issuer Closing Date automatically without any further action on the
         part of any person PROVIDED THAT if the issue of the Second Issuer
         Notes has not occurred by [7th March], 2003, or such later date as the
         Second Issuer and the Lead Managers may agree, this Agreement shall
         cease to be of further effect.

3.       SECOND ISSUER CASH MANAGEMENT SERVICES

3.1      GENERAL

         The Second Issuer Cash Manager shall provide the services set out in
         this Agreement (including, for the avoidance of doubt, the Schedules)
         (the "SECOND ISSUER CASH MANAGEMENT SERVICES").

3.2      APPROVALS AND AUTHORISATIONS

         The Second Issuer Cash Manager shall maintain, or procure the
         maintenance of, the approvals, authorisations, consents and licences
         required in connection with the business of the Second Issuer and shall
         prepare and submit, or procure the preparation and submission of, on
         behalf of the Second Issuer all necessary applications and requests for
         any further approvals, authorisations, consents or licences which may
         be required in connection with the business of the Second Issuer and
         shall, so far as it is reasonably able to do so, perform the Second
         Issuer Cash Management Services in such a way as not to prejudice the
         continuation of any such approvals, authorisations, consents or
         licences.

3.3      COMPLIANCE WITH TRANSACTION DOCUMENTS, ETC.

         The Second Issuer Cash Management Services shall include procuring (so
         far as the Second Issuer Cash Manager, using its reasonable endeavours,
         is able so to do) compliance by the Second Issuer with all applicable
         legal requirements and with the terms of the Second Issuer Transaction
         Documents, PROVIDED ALWAYS THAT the Second Issuer Cash Manager shall
         not lend or provide any sum to the Second Issuer and that the Second
         Issuer Cash Manager shall have no liability whatsoever to the Second
         Issuer, the Security Trustee or any other person for any failure by the
         Second Issuer to make any payment due under any of the Second Issuer
         Transaction Documents (other than to the extent arising from any
         failure by the Second Issuer Cash Manager to perform any of its
         obligations under any of the Transaction Documents).

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3.4      LIABILITY OF SECOND ISSUER CASH MANAGER

         (a)   The Second Issuer Cash Manager shall indemnify each of the Second
               Issuer and the Security Trustee on demand on an after Tax basis
               for any loss, liability, claim, expense or damage suffered or
               incurred by it in respect of the negligence, bad faith or wilful
               default of the Second Issuer Cash Manager in carrying out its
               functions as Second Issuer Cash Manager under, or as a result of
               a breach by the Second Issuer Cash Manager of, the terms and
               provisions of this Agreement or such other Second Issuer
               Transaction Documents to which the Second Issuer Cash Manager is
               a party (in its capacity as such) in relation to such functions.

         (b)   For the avoidance of doubt, the Second Issuer Cash Manager shall
               not be liable in respect of any loss, liability, claim, expense
               or damage suffered or incurred by the Second Issuer or the
               Security Trustee and/or any other person as a result of the
               proper performance of the Second Issuer Cash Management Services
               by the Second Issuer Cash Manager save to the extent that such
               loss, liability, claim, expense or damage is suffered or incurred
               as a result of any negligence, bad faith or wilful default of the
               Second Issuer Cash Manager under, or as a result of a breach by
               the Second Issuer Cash Manager of, the terms and provisions of
               this Agreement or any of the other Second Issuer Transaction
               Documents to which the Second Issuer Cash Manager is a party (in
               its capacity as such) in relation to such functions.

4.       PAYMENTS, ACCOUNTS, LEDGERS

4.1      SECOND ISSUER TRANSACTION ACCOUNT

         (a)   The Second Issuer Cash Manager hereby confirms that the Second
               Issuer Transaction Account has been established on or before the
               date of this Agreement and that the mandate in the agreed form
               will apply to this Agreement at the Second Issuer Closing Date.
               The Second Issuer Cash Manager undertakes (to the extent to which
               the same is within its control in its capacity as Second Issuer
               Cash Manager) that at the Second Issuer Closing Date the Second
               Issuer Transaction Account will be operative and that the Second
               Issuer Cash Manager will not knowingly create or permit to
               subsist any Security Interest in relation to the Second Issuer
               Transaction Account other than as created under or permitted
               pursuant to the Second Issuer Deed of Charge.

         (b)   The Second Issuer Cash Manager shall procure that the following
               amounts are paid into the Second Issuer Transaction Account:

               (i)      all amounts of interest paid on the Second Issuer Term
                        Advances;

               (ii)     all repayments of principal on the Second Issuer Term
                        Advances;

               (iii)    all amounts received by the Second Issuer pursuant to
                        the Dollar Currency Swap Agreements and the Euro
                        Currency Swap Agreements; and

               (iv)     any other amounts whatsoever received by or on behalf
                        of the Second Issuer after the Second Issuer Closing
                        Date,

         and the Second Issuer Cash Manager shall procure that all interest
         earned on the Second Issuer Transaction Account and all investment
         proceeds from and income and distributions arising from time to time in
         respect of Authorised Investments purchased from amounts standing to
         the credit of the Second Issuer Transaction Account are credited to
         such account.


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                                       4

         (c)   Each of the payments into the Second Issuer Transaction Account
               referred to in CLAUSE 4.1(b) shall be made forthwith upon receipt
               by the Second Issuer or the Second Issuer Cash Manager of the
               amount in question.

         (d)   For the avoidance of doubt, as soon as reasonably practicable
               after becoming aware of the same, the Second Issuer Cash Manager
               may, and shall, withdraw Cash from the Second Issuer Transaction
               Account if, and to the extent that, such Cash was credited
               thereto in error and shall use its reasonable endeavours to
               ensure that such Cash is applied correctly thereafter.

         (e)   The Second Issuer Cash Manager shall promptly notify each of the
               Second Issuer and the Security Trustee in writing of any
               additional account which supplements or replaces any account
               specifically referred to in the definition of the "Second Issuer
               Transaction Account" in the Second Issuer Master Definitions and
               Construction Schedule.

         (f)   Each of the Second Issuer Cash Manager and the Second Issuer
               undertakes that, so far as it is able to procure the same, the
               Second Issuer Transaction Account and all instructions and
               mandates in relation thereto will continue to be operative and
               will not, save as permitted pursuant to the Second Issuer Bank
               Account Agreement, be changed without the prior written consent
               of the Security Trustee (such consent not to be unreasonably
               withheld or delayed). For the avoidance of doubt, the Second
               Issuer Cash Manager may change the authorised signatories in
               respect of any instructions or mandates without the prior written
               consent of the Security Trustee, in accordance with the terms of
               the Second Issuer Bank Account Agreement.

4.2      WITHDRAWALS

         (a)   The Second Issuer Cash Manager may make withdrawals on behalf of
               the Second Issuer from the Second Issuer Transaction Account
               until such time as the Second Issuer Cash Manager receives a copy
               of a Second Issuer Note Acceleration Notice served by the
               Security Trustee on the Second Issuer, as permitted by this
               Agreement, but shall not in carrying out its functions as Second
               Issuer Cash Manager under this Agreement otherwise make
               withdrawals from the Second Issuer Transaction Account.

         (b)   Upon receipt of such a Second Issuer Note Acceleration Notice, no
               amount shall be withdrawn from the Second Issuer Transaction
               Account by the Second Issuer Cash Manager without the prior
               written consent of the Security Trustee.

4.3      CASH MANAGEMENT

         In administering the Second Issuer Transaction Account on behalf of the
         Second Issuer and the Security Trustee, the Second Issuer Cash Manager
         shall comply with the provisions of SCHEDULE 2 prior to receipt by the
         Second Issuer Cash Manager of a copy of any Second Issuer Note
         Acceleration Notice served on the Second Issuer. Following service of a
         Second Issuer Note Acceleration Notice, the Security Trustee or any
         Receiver appointed by the Security Trustee will administer the Second
         Issuer Transaction Account in accordance with the terms of the Second
         Issuer Deed of Charge.

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5.       PAYMENTS UNDER SECOND ISSUER SWAP AGREEMENTS AND TERMINATION OF SECOND
         ISSUER SWAP AGREEMENTS

5.1      On each Interest Payment Date, the Second Issuer or the Second Issuer
         Cash Manager on its behalf will procure that amounts received from
         Funding 1 under the Second Issuer Intercompany Loan Agreement are paid
         into the Second Issuer Transaction Account.

5.2      The Second Issuer, or the Second Issuer Cash Manager on its behalf,
         will procure that on each Interest Payment Date:

         (a)   subject to making payments ranking higher in the order of
               priorities of payment set out in the Second Issuer
               Pre-Enforcement Priority of Payments or, as the case may be, the
               Second Issuer Post-Enforcement Priority of Payments, amounts
               received in respect of:

               (i)      the Second Issuer Series 1 Term Advances are paid to the
                        relevant Series 1 Second Issuer Swap Provider;

               (ii)     the Second Issuer Series 2 Term Advances are paid to the
                        relevant Series 2 Second Issuer Swap Provider;

               (iii)    the Second Issuer Series 3 Term Advances are paid to the
                        relevant Series 3 Second Issuer Swap Provider; and

               (iv)     the Second Issuer Series 4 Term Advances are paid to the
                        relevant Series 4 Second Issuer Swap Provider;

         (b)   amounts received from each Second Issuer Swap Provider under the
               relevant Second Issuer Currency Swap Agreement are paid to the
               Principal Paying Agent, which amounts shall be paid by the Paying
               Agents (subject to the terms of the Second Issuer Paying Agent
               and Agent Bank Agreement) to the holders of the corresponding
               classes of Second Issuer Notes.

5.3      The Second Issuer, or the Second Issuer Cash Manager on its behalf,
         will procure that on each Interest Payment Date (subject to making
         payments ranking higher in the order of priorities of payment set out
         in the Second Issuer Pre-Enforcement Priority of Payments or, as the
         case may be, the Second Issuer Post-Enforcement Priority of Payments),
         amounts received from Funding 1 in respect of the Second Issuer Series
         5 Term Advances are paid to the Principal Paying Agent, which amounts
         shall be paid by the Paying Agents (subject to the terms of the Second
         Issuer Paying Agent and Agent Bank Agreement) to the holders of the
         corresponding holders of the Series 5 Second Issuer Notes.

5.4      If on or prior to the date of the earlier of (i) repayment in full of
         the Second Issuer Notes or (ii) the service of a Second Issuer Note
         Acceleration Notice, any of the Dollar Currency Swaps or the Euro
         Currency Swaps is terminated, the Second Issuer Cash Manager (on behalf
         of the Second Issuer and the Security Trustee) shall purchase a
         replacement hedge (taking into account any early termination payment
         received from the relevant Dollar Currency Swap Provider or the
         relevant Euro Currency Swap Provider) in respect of the relevant class
         of Second Issuer Notes, against fluctuations in, as appropriate:

         (a)   the relevant currency swap rate between Dollars and Sterling or
               the possible variance between LIBOR for three-month Sterling
               deposits and either:

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               (i)      LIBOR for one-month Dollar deposits (in relation to the
                        Series 1 Class A Second Issuer Notes); or

               (ii)     LIBOR for three-month Dollar deposits (in relation to
                        the Series 1 Class B Second Issuer Notes, the Series 1
                        Class C Second Issuer Notes, the Series 2 Second Issuer
                        Notes and the Series 4 Class A Second Issuer Notes); or

         (b)   the relevant currency swap rate between Euro and Sterling or the
               possible variance between LIBOR for three-month Sterling deposits
               and EURIBOR for three-month Euro deposits (in relation to the
               Series 3 Second Issuer Notes, the Series 4 Class B Second Issuer
               Notes and the Series 4 Class C Second Issuer Notes),

         in each case, on terms acceptable to the Rating Agencies and the Second
         Issuer and the Security Trustee and with a swap provider whom the
         Rating Agencies have previously confirmed in writing to the Second
         Issuer and the Security Trustee will not cause the then current ratings
         of the Second Issuer Notes to be downgraded.

5.5      If the Second Issuer receives a Refund Payment (as such term is defined
         in the definition of "Second Issuer Revenue Receipts") then the Second
         Issuer, or the Second Issuer Cash Manager on its behalf, will pay over
         an amount equal to such Refund Payment to the relevant Second Issuer
         Swap Provider upon receipt.

6.       NO LIABILITY

         Save as otherwise provided in this Agreement, the Second Issuer Cash
         Manager shall have no liability for the obligations of either the
         Security Trustee or the Second Issuer under any of the Transaction
         Documents or otherwise and nothing in this Agreement shall constitute a
         guarantee, or similar obligation, by the Second Issuer Cash Manager of
         either Funding 1, the Security Trustee or the Second Issuer in respect
         of any of them.

7.       COSTS AND EXPENSES

         Subject to and in accordance with the Second Issuer Pre-Enforcement
         Priority of Payments or, as the case may be, the Second Issuer
         Post-Enforcement Priority of Payments, the Second Issuer will on each
         Interest Payment Date reimburse the Second Issuer Cash Manager for all
         out-of-pocket costs, expenses and charges (together with any amounts in
         respect of Irrecoverable VAT due thereon) properly incurred by the
         Second Issuer Cash Manager in the performance of the Second Issuer Cash
         Management Services including any such costs, expenses or charges not
         reimbursed to the Second Issuer Cash Manager on any previous Interest
         Payment Date and the Second Issuer Cash Manager shall supply the Second
         Issuer with an appropriate VAT invoice issued by the Second Issuer Cash
         Manager or, if the Second Issuer Cash Manager has treated the relevant
         cost, expense or charge as a disbursement for VAT purposes, by the
         person making the supply.

8.       INFORMATION

8.1      USE OF I.T. SYSTEMS

         (a)   The Second Issuer Cash Manager represents and warrants that at
               the date hereof in respect of the software which is to be used by
               the Second Issuer Cash Manager in providing the Second Issuer
               Cash Management Services it has in place all necessary


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               licences and/or consents from the respective licensor or
               licensors (if any) of such software.

         (b)   The Second Issuer Cash Manager undertakes that it shall for the
               duration of this Agreement, use reasonable endeavours to:

               (i)      ensure that the licences and/or consents referred to in
                        PARAGRAPH (a) are maintained in full force and effect;
                        and

               (ii)     except in so far as it would breach any other of its
                        legal obligations, grant to any person to whom it may
                        sub-contract or delegate the performance of all or any
                        of its powers and obligations under this Agreement
                        and/or to such person as the Second Issuer and the
                        Security Trustee elect as a substitute cash manager in
                        accordance with the terms of this Agreement a licence to
                        use any proprietary software together with any updates
                        which may be made thereto from time to time.

         (c)   The Second Issuer Cash Manager shall use reasonable endeavours to
               maintain in working order the information technology systems used
               by the Second Issuer Cash Manager in providing the Second Issuer
               Cash Management Services.

         (d)   The Second Issuer Cash Manager shall pass to any person to whom
               it may sub-contract or delegate the performance of all or any of
               its powers and obligations under this Agreement and/or to such
               person as the Second Issuer and the Security Trustee elect as a
               substitute cash manager in accordance with the terms of this
               Agreement the benefit of any warranties in relation to the
               software insofar as the same are capable of assignment.

8.2      BANK ACCOUNT STATEMENTS

         The Second Issuer Cash Manager shall take all reasonable steps to
         ensure that it receives a monthly bank statement in relation to each of
         the Second Issuer Bank Accounts (subject to CLAUSE 5.3 of the Second
         Issuer Bank Account Agreement) and that it furnishes a copy of such
         statements to the Second Issuer and the Security Trustee.

8.3      ACCESS TO BOOKS AND RECORDS

         Subject to all applicable laws, the Second Issuer Cash Manager shall
         permit the Auditors of the Second Issuer and any other person nominated
         by the Security Trustee (to whom the Second Issuer Cash Manager has no
         reasonable objection) at any time during normal office hours upon
         reasonable notice to have access, or procure that such person or
         persons are granted access, to all books of record and account relating
         to the Second Issuer Cash Management Services provided by the Second
         Issuer Cash Manager and related matters in accordance with this
         Agreement.

8.4      STATUTORY OBLIGATIONS

         The Second Issuer Cash Manager will use its reasonable endeavours, on
         behalf of the Second Issuer, to prepare or procure the preparation of
         and file all reports, annual returns, financial statements, statutory
         forms and other returns which the Second Issuer is required by law to
         prepare and file. Subject to approval thereof by the directors of the
         Second Issuer, the

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         Second Issuer Cash Manager shall cause such accounts to be audited by
         the Auditors and shall procure so far as it is able so to do that the
         Auditors shall make a report thereon as required by law and copies of
         all such documents shall be delivered to the Security Trustee, the
         Second Issuer and the Rating Agencies as soon as practicable after the
         end of each accounting reference period of the Second Issuer.

8.5      INFORMATION COVENANTS

         (a)   The Second Issuer Cash Manager shall provide the Second Issuer,
               the Security Trustee, the Seller and the Rating Agencies with a
               quarterly report in, or substantially in, the form set out in
               SCHEDULE 3 in respect of the Second Issuer. Each such quarterly
               report shall be delivered to the Second Issuer, the Security
               Trustee, the Seller and the Rating Agencies by the last Business
               Day of the month in which each Interest Payment Date occurs.

         (b)   The Second Issuer Cash Manager shall provide, or procure the
               provision of, to the Second Issuer, the Security Trustee and the
               Rating Agencies copies of any annual returns or financial
               statements referred to in CLAUSE 8.4 as soon as reasonably
               practicable after the preparation thereof.

         (c)   The Second Issuer Cash Manager shall notify the Rating Agencies
               in writing of the details of:

               (i)      any material amendment to the Second Issuer Transaction
                        Documents;

               (ii)     the occurrence of a Second Issuer Note Event of Default;
                        and

               (iii)    any other information relating to the Second Issuer Cash
                        Manager as the Rating Agencies may reasonably request in
                        connection with its obligations under this Agreement,
                        PROVIDED THAT such request does not adversely interfere
                        with the Second Issuer Cash Manager's day-to-day
                        provision of the Second Issuer Cash Management Services
                        under the other terms of this Agreement.

         (d)   The Second Issuer Cash Manager shall, at the request of the
               Security Trustee, furnish the Security Trustee and the Rating
               Agencies with such other information relating to its business and
               financial condition as it may be reasonable for the Security
               Trustee to request in connection with this Agreement PROVIDED
               THAT the Security Trustee shall not make such a request more than
               once every three months unless, in the belief of the Security
               Trustee, a Second Issuer Intercompany Loan Event of Default,
               Second Issuer Note Event of Default or Second Issuer Cash Manager
               Termination Event (as defined in CLAUSE 12.1) shall have occurred
               and is continuing or may reasonably be expected to occur and
               PROVIDED FURTHER THAT such request does not adversely interfere
               with the Second Issuer Cash Manager's day-to-day provision of the
               Second Issuer Cash Management Services under the other terms of
               this Agreement.

9.       REMUNERATION

9.1      FEE PAYABLE

         The Second Issuer shall pay to the Second Issuer Cash Manager for the
         Second Issuer Cash Management Services a cash management fee (which
         shall be inclusive of VAT) which shall be agreed in writing between the
         Second Issuer, the Security Trustee and the Second Issuer Cash Manager
         from time to time.


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9.2      PAYMENT OF FEE

         The cash management fee referred to in CLAUSE 9.1 shall be paid to the
         Second Issuer Cash Manager in arrear on each Quarterly Interest Payment
         Date in the manner contemplated by and in accordance with the
         provisions of the Second Issuer Pre-Enforcement Revenue Priority of
         Payments or, as the case may be, the Second Issuer Post-Enforcement
         Priority of Payments.

10.      COVENANTS OF SECOND ISSUER CASH MANAGER

10.1     COVENANTS

         The Second Issuer Cash Manager hereby covenants with and undertakes to
         each of the Second Issuer and the Security Trustee that without
         prejudice to any of its specific obligations under this Agreement:

         (a)   it will devote all due skill, care and diligence to the
               performance of its obligations and the exercise of its
               discretions under this Agreement;

         (b)   it will comply with any proper directions, orders and
               instructions which the Second Issuer or the Security Trustee may
               from time to time give to it in accordance with the provisions of
               this Agreement and, in the event of any conflict, those of the
               Security Trustee shall prevail;

         (c)   it will use its reasonable endeavours to keep in force all
               licences, approvals, authorisations and consents which may be
               necessary in connection with the performance of the Second Issuer
               Cash Management Services and prepare and submit all necessary
               applications and requests for any further approval,
               authorisation, consent or licence required in connection with the
               performance of the Second Issuer Cash Management Services;

         (d)   save as otherwise agreed with the Second Issuer and the Security
               Trustee, it will provide free of charge to the Second Issuer
               during normal office hours office space, facilities, equipment
               and staff sufficient to fulfil the obligations of the Second
               Issuer under this Agreement;

         (e)   it will not knowingly fail to comply with any legal requirements
               in the performance of the Second Issuer Cash Management Services;

         (f)   it will make all payments required to be made by it pursuant to
               this Agreement on the due date for payment thereof for value on
               such day without set-off (including, without limitation, in
               respect of any fees owed to it) or counterclaim; and

         (g)   it will not without the prior written consent of the Security
               Trustee amend or terminate any of the Second Issuer Transaction
               Documents save in accordance with their terms.

10.2     DURATION OF COVENANTS

         The covenants of the Second Issuer Cash Manager in CLAUSE 10.1 shall
         remain in force until this Agreement is terminated but without
         prejudice to any right or remedy of the Second

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                                       10



         Issuer and/or the Security Trustee arising from breach of any such
         covenant prior to the date of termination of this Agreement.

11.      NON-EXCLUSIVITY

         Nothing in this Agreement shall prevent the Second Issuer Cash Manager
         from rendering or performing services similar to those provided for in
         this Agreement to or for itself or other persons, firms or companies or
         from carrying on business similar to or in competition with the
         business of the Second Issuer or the Security Trustee.

12.      TERMINATION

12.1     SECOND ISSUER CASH MANAGER TERMINATION EVENTS

         If any of the following events ("SECOND ISSUER CASH MANAGER TERMINATION
EVENTS") shall occur:

         (a)   default is made by the Second Issuer Cash Manager in the payment
               on the due date of any payment due and payable by it under this
               Agreement and such default continues unremedied for a period of
               three London Business Days after the earlier of the Second Issuer
               Cash Manager becoming aware of such default and receipt by the
               Second Issuer Cash Manager of written notice from the Second
               Issuer or the Security Trustee, as the case may be, requiring the
               same to be remedied; or

         (b)   default is made by the Second Issuer Cash Manager in the
               performance or observance of any of its other covenants and
               obligations under this Agreement, which in the reasonable opinion
               of the Security Trustee is materially prejudicial to the
               interests of the Second Issuer Secured Creditors and such default
               continues unremedied for a period of twenty days after the
               earlier of the Second Issuer Cash Manager becoming aware of such
               default and receipt by the Second Issuer Cash Manager of written
               notice from the Security Trustee requiring the same to be
               remedied; or

         (c)   while the Second Issuer Cash Manager is the Seller, an Insolvency
               Event occurs,

         then the Security Trustee may at once or at any time thereafter while
         such default continues by notice in writing to the Second Issuer Cash
         Manager terminate its appointment as Second Issuer Cash Manager under
         this Agreement with effect from a date (not earlier than the date of
         the notice) specified in the notice.

12.2     RESIGNATION OF SECOND ISSUER CASH MANAGER

         The appointment of the Second Issuer Cash Manager under this Agreement
         may be terminated upon the expiry of not less than 12 months' written
         notice of termination given by the Second Issuer Cash Manager to the
         Second Issuer and the Security Trustee PROVIDED THAT:

         (a)   the Second Issuer and the Security Trustee consent in writing to
               such termination;

         (b)   a substitute cash manager shall be appointed, such appointment to
               be effective not later than the date of such termination;

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                                       11



         (c)   such substitute cash manager has cash management experience and
               is approved by the Second Issuer and the Security Trustee;

         (d)   such substitute cash manager enters into an agreement
               substantially on the same terms as the relevant provisions of
               this Agreement or on such terms as are satisfactory to the Second
               Issuer and the Security Trustee and the Second Issuer Cash
               Manager shall not be released from its obligations under the
               relevant provisions of this Agreement until such substitute cash
               manager has entered into such new agreement and the rights of the
               Second Issuer under such agreement are charged in favour of the
               Security Trustee on terms satisfactory to the Security Trustee;
               and

         (e)   the then current ratings (if any) of the Second Issuer Notes are
               not adversely affected as a result thereof.

12.3     EFFECT OF TERMINATION

         (a)   On and after termination of the appointment of the Second Issuer
               Cash Manager under this Agreement pursuant to this CLAUSE 12, all
               authority and power of the Second Issuer Cash Manager under this
               Agreement shall be terminated and be of no further effect and the
               Second Issuer Cash Manager shall not thereafter hold itself out
               in any way as the agent of the Second Issuer or the Security
               Trustee pursuant to this Agreement.

         (b)   Upon termination of the appointment of the Second Issuer Cash
               Manager under this Agreement pursuant to this CLAUSE 12, the
               Second Issuer Cash Manager shall:

               (i)      forthwith deliver (and in the meantime hold on trust
                        for, and to the order of, the Second Issuer or the
                        Security Trustee, as the case may be) to the Second
                        Issuer or the Security Trustee, as the case may be or as
                        it shall direct in writing, all books of account,
                        papers, records, registers, correspondence and documents
                        in its possession or under its control relating to the
                        affairs of or belongings of the Second Issuer or the
                        Security Trustee, as the case may be, (if practicable,
                        on the date of receipt) any monies then held by the
                        Second Issuer Cash Manager on behalf of the Second
                        Issuer, the Security Trustee and any other assets of the
                        Second Issuer and the Security Trustee;

               (ii)     take such further action as the Second Issuer or the
                        Security Trustee, as the case may be, may reasonably
                        direct at the expense of the Second Issuer or the
                        Security Trustee, as the case may be (including in
                        relation to the appointment of a substitute cash
                        manager) provided that the Security Trustee shall not be
                        required to take or direct to be taken such further
                        action unless it has been indemnified and/or secured to
                        its satisfaction;

               (iii)    provide all relevant information contained on computer
                        records in the form of magnetic tape, together with
                        details of the layout of the files encoded on such
                        magnetic tapes; and

               (iv)     co-operate and consult with and assist the Second Issuer
                        or the Security Trustee or its nominee, as the case may
                        be, (which shall, for the avoidance of doubt, include
                        any Receiver appointed by it) for the purposes of
                        explaining the file layouts and the format of the
                        magnetic tapes generally containing such computer
                        records on the

<PAGE>
                                       12



                        computer system of the Second Issuer or the Security
                        Trustee or such nominee, as the case may be.

12.4     NOTICE OF EVENT OF DEFAULT

         The Second Issuer Cash Manager shall deliver to the Second Issuer and
         the Security Trustee as soon as reasonably practicable but in any event
         within three London Business Days of becoming aware thereof a notice of
         any Second Issuer Cash Manager Termination Event or any Second Issuer
         Note Event of Default or any event which with the giving of notice or
         expiry of any grace period or certification, as specified in such
         Second Issuer Cash Manager Termination Event or Second Issuer Note
         Event of Default would constitute the same.

12.5     GENERAL PROVISIONS RELATING TO TERMINATION

         (a)   Termination of the appointment of the Second Issuer Cash Manager
               under this Agreement shall be without prejudice to the
               liabilities of the Second Issuer and the Security Trustee to the
               Second Issuer Cash Manager or vice versa incurred before the date
               of such termination. The Second Issuer Cash Manager shall have no
               right of set-off or any lien in respect of such amounts against
               amounts held by it on behalf of the Second Issuer or the Security
               Trustee.

         (b)   This Agreement shall terminate at such time as the Second Issuer
               Secured Obligations have been fully discharged.

         (c)   On termination of the appointment of the Second Issuer Cash
               Manager under the provisions of this CLAUSE 12, the Second Issuer
               Cash Manager shall be entitled to receive all fees and other
               moneys accrued up to (but excluding) the date of termination but
               shall not be entitled to any other or further compensation. The
               Second Issuer shall pay such moneys so receivable by the Second
               Issuer Cash Manager in accordance with the Second Issuer
               Pre-Enforcement Revenue Priority of Payments or, as the case may
               be, the Second Issuer Post-Enforcement Priority of Payments, on
               the dates on which they would otherwise have fallen due
               hereunder. Such termination shall not affect the Second Issuer
               Cash Manager's rights to receive payment of all amounts (if any)
               due to it from the Second Issuer other than under this Agreement.

         (d)   Any provision of this Agreement which is stated to continue after
               termination of this Agreement shall remain in full force and
               effect notwithstanding termination.

13.      FURTHER ASSURANCE

13.1     CO-OPERATION, ETC.

         The parties to this Agreement agree that they will co-operate fully to
         do all such further acts and things and execute any further documents
         as may be necessary or desirable to give full effect to the
         arrangements contemplated by this Agreement.

13.2     POWERS OF ATTORNEY

         Without prejudice to the generality of CLAUSE 13.1, the Second Issuer
         and the Security Trustee shall upon request by the Second Issuer Cash
         Manager forthwith give to the Second Issuer Cash Manager such further
         powers of attorney or other written authorisations, mandates or
         instruments as are necessary to enable the Second Issuer Cash Manager
         to perform the Second Issuer Cash Management Services.

<PAGE>
                                       13



13.3     CHANGE OF SECURITY TRUSTEE

         In the event that there is any change in the identity of the Security
         Trustee or an additional security trustee is appointed in accordance
         with the Second Issuer Deed of Charge, the Second Issuer Cash Manager
         shall execute such documents with any other parties to this Agreement
         and take such actions as such new security trustee may reasonably
         require for the purposes of vesting in such new security trustee the
         rights of the Security Trustee under this Agreement and under the
         Second Issuer Deed of Charge and releasing the retiring Security
         Trustee from further obligations thereunder.

13.4     NO OBLIGATION ON SECURITY TRUSTEE

         Nothing contained in this Agreement shall impose any obligation or
         liability on the Security Trustee to assume or perform any of the
         obligations of the Second Issuer or the Second Issuer Cash Manager
         under this Agreement or render it liable for any breach thereof.

14.      MISCELLANEOUS

14.1     NO SET-OFF

         The Second Issuer Cash Manager agrees that it will not:

         (a)   set-off or purport to set-off any amount which either the Second
               Issuer is or will become obliged to pay to it under this
               Agreement against any amount from time to time standing to the
               credit of or to be credited to the Second Issuer Transaction
               Account; or

         (b)   make or exercise any claims or demands, any rights of
               counterclaim or any other equities against or withhold payment of
               any and all sums of money which may at any time and from time to
               time be standing to the credit of the Second Issuer Transaction
               Account.

14.2     NO PETITION

         The Second Issuer Cash Manager agrees that for so long as any Second
         Issuer Notes are outstanding it will not petition or commence
         proceedings for the administration or winding-up of the Second Issuer
         or participate in any such proceedings with regard thereto.

14.3     NO RECOURSE

         (a)   In relation to all sums due and payable by the Second Issuer to
               the Second Issuer Cash Manager, the Second Issuer Cash Manager
               agrees that it shall have recourse only to sums paid to or
               received by (or on behalf of) the Second Issuer pursuant to the
               provisions of the Second Issuer Transaction Documents.

         (b)   For the avoidance of doubt, the Security Trustee shall not be
               liable to pay any amounts due under CLAUSES 7 and 9, and without
               prejudice to the obligations of the Second Issuer, nor shall it
               be liable to pay any amounts due to any Receiver appointed
               pursuant to the Second Issuer Deed of Charge in respect of such
               amounts.

         (c)   Notwithstanding any other provisions of this Agreement, all
               obligations to, and rights of, the Security Trustee under or in
               connection with this Agreement (other than its


<PAGE>
                                       14



               obligations under CLAUSE 15) shall automatically terminate upon
               the discharge in full of all Second Issuer Secured Obligations,
               PROVIDED THAT this shall be without prejudice to any claims in
               respect of such obligations and rights arising on or prior to
               such date.

15.      CONFIDENTIALITY

         During the continuance of this Agreement or after its termination, each
         of the Second Issuer, the Second Issuer Cash Manager and the Security
         Trustee shall use its best endeavours not to disclose to any person,
         firm or company any information relating to the business, finances or
         other matters of a confidential nature of any other party to this
         agreement of which it may exclusively by virtue of being party to the
         Transaction Documents have become possessed and shall use all
         reasonable endeavours to prevent any such disclosure as aforesaid,
         PROVIDED HOWEVER that the provisions of this CLAUSE 15 shall not apply:

         (a)   to any information already known to the recipient otherwise than
               as a result of entering into any of the Transaction Documents;

         (b)   to any information subsequently received by the recipient which
               it would otherwise be free to disclose;

         (c)   to any information which is or becomes public knowledge otherwise
               than as a result of the conduct of the recipient;

         (d)   to any extent that the recipient is required to disclose the same
               pursuant to any law or order of any court of competent
               jurisdiction or pursuant to any direction, request or requirement
               (whether or not having the force of law) of any central bank or
               any governmental or other authority (including, without
               limitation, any official bank examiners or regulators);

         (e)   to the extent that the recipient needs to disclose the same for
               determining the existence of, or declaring, a Second Issuer Note
               Event of Default, or a Second Issuer Cash Manager Termination
               Event, the protection or enforcement of any of its rights under
               any of the Transaction Documents or in connection herewith or
               therewith or for the purpose of discharging, in such manner as it
               thinks fit, its duties under or in connection with such
               agreements in each case to such persons as require to be informed
               of such information for such purposes; or

         (f)   in relation to any information disclosed to the professional
               advisers of the recipient or (in connection with a prospective
               rating of any debt to be issued by the Second Issuer or any New
               Issuer) to any Rating Agency or any prospective new cash manager
               or Security Trustee.

16.      NOTICES

         Any notices to be given pursuant to this Agreement to any of the
         parties hereto shall be sufficiently served if sent by prepaid first
         class post, by hand or facsimile transmission and shall be deemed to be
         given (in the case of facsimile transmission) when despatched, (where
         delivered by hand) on the day of delivery if delivered before 17.00
         hours on a Business Day or on the next Business Day if delivered
         thereafter or on a day which is not a Business Day or

<PAGE>
                                       15


         (in the case of first class post) when it would be received in the
         ordinary course of the post and shall be sent:

         (a)   in the case of the Second Issuer Cash Manager, to Halifax plc at
               Trinity Road, Halifax, West Yorkshire HX1 2RG (facsimile number
               +44 (0) 1422 391 777 for the attention of Mortgage Securitisation
               Manager with a copy to HBOS Treasury Services plc, 33 Old Broad
               Street, London EC2N 1HZ (facsimile no. +44 (0) 20 7574 8784) for
               the attention of Head of Capital Markets and Securitisation;

         (b)   in the case of the Second Issuer, to Permanent Financing (No. 2)
               PLC at Blackwell House, Guildhall Yard, London EC2V 5AE
               (facsimile number +44 (0) 20 7556 0975) for the attention of the
               Directors with a copy to Halifax plc at Trinity Road, Halifax,
               West Yorkshire HX1 2RG (facsimile number +44 (0) 14 22 391 777)
               for the attention of Mortgage Securitisation Manager; and

         (c)   in the case of the Security Trustee, to U.S. Bank National
               Association, at 1 Federal Street, 3rd Floor, Boston,
               Massachusetts 02110, (facsimile number + 1 (617) 603 6638) for
               the attention of Corporate Trust Services,

         or to such other address or facsimile number or for the attention of
         such other person or entity as may from time to time be notified by any
         party to the others by written notice in accordance with the provisions
         of this CLAUSE 16.

17.      VARIATION AND WAIVER

         No variation or waiver of this Agreement shall be effective unless it
         is in writing and signed by (or by some person duly authorised by) each
         of the parties. No single or partial exercise of, or failure or delay
         in exercising, any right under this Agreement shall constitute a waiver
         or preclude any other or further exercise of that or any other right.

18.      NO PARTNERSHIP

         It is hereby acknowledged and agreed by the parties that nothing in
         this Agreement shall be construed as giving rise to any partnership
         between any of the parties.

19.      ASSIGNMENT

19.1     ASSIGNMENT BY THE SECOND ISSUER

         The Second Issuer may not assign or transfer any of its rights and
         obligations under this Agreement without the prior written consent of
         each of the Security Trustee and the Second Issuer Cash Manager, except
         that the Second Issuer may assign its respective rights hereunder
         without such consent pursuant to the Second Issuer Deed of Charge.

19.2     NO ASSIGNMENT BY SECOND ISSUER CASH MANAGER

         The Second Issuer Cash Manager may not assign or transfer any of its
         rights and obligations under this Agreement without the prior written
         consent of the Second Issuer and the Security Trustee, such consent not
         to be unreasonably withheld or delayed.


<PAGE>
                                       16



20.      EXCLUSION OF THIRD PARTY RIGHTS

         A person who is not a party to this Agreement has no right under the
         Contracts (Rights of Third Parties) Act 1999 to enforce any term of
         this Agreement, but this does not affect any right or remedy of a third
         party which exists or is available apart from that Act.

21.      COUNTERPARTS

         This Agreement may be executed in any number of counterparts (manually
         or by facsimile) each of which, when executed and delivered, shall
         constitute an original, but all the counterparts shall together
         constitute but one and the same instrument provided, however, that this
         Agreement shall have no force or effect until it is executed by the
         last party to execute the same and shall be deemed to have been
         executed and delivered in the place where such last party executed this
         Agreement.

22.      GOVERNING LAW

         This Agreement is governed by, and shall be construed in accordance
with, the laws of England.

IN WITNESS WHEREOF the parties have caused this Agreement to be executed the day
and year first before written.


<PAGE>
                                       17


                                   SCHEDULE 1

                            CASH MANAGEMENT SERVICES

The Second Issuer Cash Manager shall:

(a)  operate the Second Issuer Transaction Account and ensure that payments are
     made into and from such accounts in accordance with this Agreement, the
     Second Issuer Deed of Charge, the Second Issuer Bank Account Agreement and
     any other relevant Second Issuer Transaction Document, PROVIDED HOWEVER
     THAT nothing herein shall require the Second Issuer Cash Manager to make
     funds available to the Second Issuer to enable such payments to be made
     other than as expressly required by the provisions of this Agreement;

(b)  keep records for all taxation purposes (including, without limitation,
     those relating to VAT);

(c)  subject to any applicable law, assist the Auditors of the Second Issuer and
     provide such information to them as they may reasonably request for the
     purpose of carrying out their duties as auditors of the Second Issuer;

(d)  make all filings, give all notices and make all registrations and other
     notifications required in the day-to-day operation of the business of the
     Second Issuer or required to be given by the Second Issuer pursuant to the
     Second Issuer Transaction Documents;

(e)  arrange for all payments due to be made by the Second Issuer under any of
     the Second Issuer Transaction Documents, PROVIDED THAT such moneys are at
     the relevant time available to the Second Issuer and PROVIDED FURTHER that
     nothing herein shall constitute a guarantee by the Second Issuer Cash
     Manager of all or any of the obligations of the Second Issuer under any of
     the Second Issuer Transaction Documents;

(f)  without prejudice to the role of and in conjunction with the Second Issuer
     Corporate Services Provider under the Second Issuer Corporate Services
     Agreement, keep general books of account and records of the Second Issuer;
     provide accounting services, including reviewing receipts and payments,
     supervising and assisting in the preparation of interim statements and
     final accounts and supervising and assisting in the preparation of tax
     returns;

(g)  without prejudice to the role of and in conjunction with the Second Issuer
     Corporate Services Provider under the Second Issuer Corporate Services
     Agreement, provide or procure the provision of company secretarial and
     administration services to the Second Issuer including the keeping of all
     registers and the making of all returns and filings required by applicable
     law or by UK regulatory authorities, co-operate in the convening of board
     and general meetings and provide registered office facilities;

(h)  on behalf of the Second Issuer, PROVIDED THAT monies are at the relevant
     time available to the Second Issuer, pay all out-of-pocket expenses of the
     Second Issuer, incurred by the Second Issuer Cash Manager on behalf of the
     Second Issuer in the performance of the Second Issuer Cash Manager's duties
     hereunder including without limitation:

     (i)   all Taxes which may be due or payable by the Second Issuer;

     (ii)  all necessary filing and other fees in compliance with regulatory
           requirements;

<PAGE>
                                       18


     (iii) all legal and audit fees and other professional advisory fees; and

     (iv)  all communication expenses including postage, courier and telephone
           charges;

(i)  with the prior written consent of the Security Trustee, invest monies
     standing from time to time to the credit of the Second Issuer Transaction
     Account in Authorised Investments, subject to the following provisions:

     (i)   any such Authorised Investment shall be made in the joint names of
           the Second Issuer and the Security Trustee;

     (ii)  any costs properly and reasonably incurred in making and changing
           Authorised Investments will be reimbursed to the Second Issuer Cash
           Manager and the Security Trustee by the Second Issuer; and

     (iii) all income and other distributions arising on, or proceeds following
           the disposal or maturity of, Authorised Investments shall be credited
           to the Second Issuer Transaction Account.

     The Security Trustee and the Second Issuer Cash Manager shall not be
     responsible (save where any loss results from the Security Trustee's or the
     Second Issuer Cash Manager's, as the case may be, own fraud, wilful default
     or negligence or that of their respective officers or employees) for any
     loss occasioned by reason of any such Authorised Investments whether by
     depreciation in value or otherwise provided that such Authorised
     Investments were made in accordance with the above provisions;

(j)  (i)   if necessary, perform all currency conversions free of charge,
           cost or expense at the relevant exchange rate;

     (ii)  if necessary, perform all interest rate conversions (whether it be a
           conversion from a floating rate of interest to a fixed rate of
           interest, or vice versa) free of charge, cost or expense at the
           relevant interest swap rate; and

     (iii) for the purposes of any calculations referred to in SUB-PARAGRAPHS
           (i) and (ii) above, all percentages resulting from such calculations
           will be rounded, if necessary, to the nearest one hundred-thousandth
           of a percentage point (e.g. 9.876541% (or 0.09876541) being rounded
           down to 9.87654% (or 0.0987654)) and (ii) any currency amounts used
           in or resulting from such calculations will be rounded in accordance
           with the relevant market practice;

(k)  make all returns and filings required to be made by the Second Issuer and
     provide or procure the provision of company secretarial and administration
     services to the Second Issuer; and

(l)  arrange payment of all fees to the London Stock Exchange plc or, as
     applicable, the UK Listing Authority of the Financial Services Authority.

<PAGE>
                                       19


                                   SCHEDULE 2

                   CASH MANAGEMENT AND MAINTENANCE OF LEDGERS

1.   DETERMINATION

(a)  On each Second Issuer Note Determination Date, the Second Issuer Cash
     Manager shall determine each of the following in accordance with this
     PARAGRAPH 1:

     (i)   the amount of any Second Issuer Principal Receipts and Second Issuer
           Revenue Receipts available as at the following Interest Payment Date;
           and

     (iii) the Principal Amount Outstanding of the Second Issuer Notes, the Pool
           Factor, and the Note Principal Payment of the Second Issuer Notes in
           accordance with the Conditions.

(b)  (i)   The Second Issuer Cash Manager may make all the determinations
           referred to in PARAGRAPH 1(a) on the basis of any reasonable and
           proper assumptions as the Second Issuer Cash Manager considers
           appropriate (including without limitation as to the amount of any
           payments to be made under PARAGRAPH 3 below during the period from
           and including the Second Issuer Note Determination Date to but
           excluding the next Interest Payment Date).

     (ii)  The Second Issuer Cash Manager shall on request notify the Second
           Issuer and the Security Trustee in writing of any such other
           assumptions and shall take account of any representations made by the
           Second Issuer and the Security Trustee (as the case may be) in
           relation thereto.

(c)  Each determination made in accordance with this PARAGRAPH 1 shall (in the
     absence of bad faith, wilful default, negligence and/or manifest error) be
     final and binding on all persons.

2.   NOTIFICATION OF DETERMINATIONS

(a)  The Second Issuer Cash Manager will cause each determination of Second
     Issuer Available Funds to be notified forthwith to the Second Issuer.

(b)  The Second Issuer Cash Manager shall procure that the determinations and
     notifications required to be made pursuant to CONDITION 5(C) of the
     Conditions are made.

3.   PRIORITY OF PAYMENTS FOR SECOND ISSUER REVENUE RECEIPTS

     Second Issuer Revenue Receipts will be applied, as applicable:

     (i)   on each Interest Payment Date; or

     (ii)  on each day when due in respect of amounts due to third parties
           pursuant to PARAGRAPH (b) below or amounts due to the Second Issuer
           Account Bank under the Second Issuer Bank Account Agreement pursuant
           to PARAGRAPH (d) below,

     in each case until enforcement of the Second Issuer Security pursuant to
     the Second Issuer Deed of Charge or until such time as there are no Second
     Issuer Secured Obligations

<PAGE>
                                       20


     outstanding, in making such payments and provisions in the following order
     of priority (in each case only if and to the extent that payments or
     provisions of a higher priority have been made in full and to the extent
     that such withdrawal does not cause the Second Issuer Transaction Account
     to become overdrawn) (the "SECOND ISSUER PRE-ENFORCEMENT REVENUE PRIORITY
     OF PAYMENTS"):

     (a)  first, pari passu and pro rata, to pay amounts due to:

          (i)   the Security Trustee, together with interest and any amount in
                respect of VAT on those amounts, and to provide for any amounts
                due or to become due during the following Interest Period to the
                Security Trustee under the Second Issuer Deed of Charge;

          (ii)  the Note Trustee, together with interest and any amount in
                respect of VAT on those amounts, and to provide for any amounts
                due or to become due during the following Interest Period to the
                Note Trustee under the Second Issuer Trust Deed; and

          (iii) the Agent Bank, the Paying Agents, the Registrar and the
                Transfer Agent, together with interest and any amount in respect
                of VAT on those amounts, and any costs, charges liabilities and
                expenses then due or to become due during the following Interest
                Period to the Agent Bank, the Registrar, the Transfer Agent and
                the Paying Agents under the Second Issuer Paying Agent and Agent
                Bank Agreement;

     (b)  secondly, to pay amounts due to any third party creditors of the
          Second Issuer (other than those referred to later in this order of
          priority of payments), which amounts have been incurred without breach
          by the Second Issuer of the Second Issuer Transaction Documents and
          for which payment has not been provided for elsewhere and to provide
          for any of those amounts expected to become due and payable during the
          following Interest Period by the Second Issuer and to pay or discharge
          any liability of the Second Issuer for corporation tax on any
          chargeable income or gain of the Second Issuer;

     (c)  thirdly, pari passu and pro rata, to pay amounts due to the Second
          Issuer Cash Manager, together with any amount in respect of VAT on
          those amounts, and to provide for any amounts due, or to become due to
          the Second Issuer Cash Manager in the immediately succeeding Interest
          Period, under this Agreement and to the Corporate Services Provider
          under the Second Issuer Corporate Services Agreement and to the Second
          Issuer Account Bank under the Second Issuer Bank Account Agreement;

     (d)  fourthly, pari passu and pro rata, to pay:

          (i)   on each Funding 1 Interest Payment Date amounts due to the
                Series 1 Class A Second Issuer Swap Provider in respect of the
                Series 1 Class A Second Issuer Swap (including any termination
                payment but excluding any Second Issuer Swap Excluded
                Termination Amount) and from amounts received from the Series 1
                Class A Second Issuer Swap Provider to pay on each Interest
                Payment Date interest due and payable on the Series 1 Class A
                Second Issuer Notes;
<PAGE>
                                       21


          (ii)  on each Funding 1 Interest Payment Date amounts due to the
                Series 2 Class A Second Issuer Swap Provider in respect of the
                Series 2 Class A Second Issuer Swap (including any termination
                payment but excluding any Second Issuer Swap Excluded
                Termination Amount) and from amounts received from the Series 2
                Class A Second Issuer Swap Provider to pay on each Interest
                Payment Date interest due and payable on the Series 2 Class A
                Second Issuer Notes;

          (iii) on each Funding 1 Interest Payment Date amounts due to the
                Series 3 Class A Second Issuer Swap Provider in respect of the
                Series 3 Second Issuer Class A Swap (including any termination
                payment but excluding any Second Issuer Swap Excluded
                Termination Amount) and from amounts received from the Series 3
                Class A Second Issuer Swap Provider in relation to such swap to
                pay on each Interest Payment Date interest due and payable on
                the Series 3 Class A Second Issuer Notes; and

          (iv)  on each Funding 1 Interest Payment Date, amounts due to the
                Series 4 Class A Second Issuer Swap Provider in respect of the
                Series 4 Class A Second Issuer Swap (including any termination
                payment but excluding any Second Issuer Swap Excluded
                Termination Amount) and from amounts received from the Series 4
                Class A Second Issuer Swap Provider in relation to such swap to
                pay on each Interest Payment Date interest due and payable on
                the Series 4 Class A Second Issuer Notes; and

          (v)   interest due and payable on the Series 5 Class A Second Issuer
                Notes;

     (e)  fifthly, pari passu and pro rata, to pay:

          (i)   on each Funding 1 Interest Payment Date amounts due to the
                Series 1 Second Class B Issuer Swap Provider in respect of the
                Series 1 Class B Second Issuer Swap (including any termination
                payment but excluding any Second Issuer Swap Excluded
                Termination Amount) and from amounts received from the Series 1
                Class B Second Issuer Swap Provider in relation to such swap to
                pay on each Interest Payment Date interest due and payable on
                the Series 1 Class B Second Issuer Notes;

          (ii)  on each Funding 1 Interest Payment Date amounts due to the
                Series 2 Class B Second Issuer Swap Provider in respect of the
                Series 2 Class B Second Issuer Swap (including any termination
                payment but excluding any Second Issuer Swap Excluded
                Termination Amount) and from amounts received from the Series 2
                Class B Second Issuer Swap Provider in relation to such swap to
                pay on each Interest Payment Date interest due and payable on
                the Series 2 Class B Second Issuer Notes;

          (iii) on each Funding 1 Interest Payment Date amounts due to the
                Series 3 Second Class B Issuer Swap Provider in respect of the
                Series 3 Class B Second Issuer Swap (including any termination
                payment but excluding any Second Issuer Swap Excluded
                Termination Amount) and from amounts received from the Series 3
                Class B Second Issuer Swap Provider in relation to such

<PAGE>
                                       22

                swap to pay on each Interest Payment Date interest due and
                payable on the Series 3 Class B Second Issuer Notes;

          (iv)  on each Funding 1 Interest Payment Date amounts due to the
                Series 4 Class B Second Issuer Swap Provider in respect of the
                Series 4 Class B Second Issuer Swap (including any termination
                payment but excluding any Second Issuer Swap Excluded
                Termination Amount) and from amounts received from the Series 4
                Class B Second Issuer Swap Provider in relation to such swap to
                pay on each Interest Payment Date interest due and payable on
                the Series 4 Class B Second Issuer Notes; and

          (v)   interest due and payable on the Series 5 Class B Second Issuer
                Notes;

     (f)  sixthly, pari passu and pro rata, to pay:

          (i)   on each Funding 1 Interest Payment Date amounts due to the
                Series 1 Class C Second Issuer Swap Provider in respect of the
                Series 1 Class C Second Issuer Swap (including any termination
                payment but excluding any Second Issuer Swap Excluded
                Termination Amount) and from amounts received from the Series
                1 Class C Second Issuer Swap Provider in relation to such swap
                to pay on each Interest Payment Date interest due and payable
                on the Series 1 Class C Second Issuer Notes;

          (ii)  on each Funding 1 Interest Payment Date amounts due to the
                Series 2 Second Class C Issuer Swap Provider in respect of the
                Series 2 Class C Second Issuer Swap (including any termination
                payment but excluding any Second Issuer Swap Excluded
                Termination Amount) and from amounts received from the Series
                2 Class C Second Issuer Swap Provider in relation to such swap
                to pay on each Interest Payment Date interest due and payable
                on the Series 2 Class C Second Issuer Notes;

          (iii) on each Funding 1 Interest Payment Date amounts due to the
                Series 3 Second Class C Issuer Swap Provider in respect of the
                Series 3 Class C Second Issuer Swap (including any termination
                payment but excluding any Second Issuer Swap Excluded
                Termination Amount) and from amounts received from the Series
                3 Class C Second Issuer Swap Provider in relation to such swap
                to pay on each Interest Payment Date interest due and payable
                on the Series 3 Class C Second Issuer Notes;

          (iv)  on each Funding 1 Interest Payment Date amounts due to the
                Series 4 Second Class C Issuer Swap Provider in respect of the
                Series 4 Class C Second Issuer Swap (including any termination
                payment but excluding any Second Issuer Swap Excluded
                Termination Amount) and from amounts received from the Series
                4 Class C Second Issuer Swap Provider in relation to such swap
                to pay on each Interest Payment Date interest due and payable
                on the Series 4 Class C Second Issuer Notes; and

          (v)   interest due and payable on the Series 5 Class C Second Issuer
                Notes;

     (g)  seventhly, pari passu and pro rata, to pay any termination payment due
          to:
<PAGE>
                                       23


          (i)   the Series 1 Second Issuer Swap Provider following a Second
                Issuer Swap Provider Default or a Second Issuer Swap Provider
                Downgrade Termination Event in respect of the Series 1 Second
                Issuer Swap Provider;

          (ii)  the Series 2 Second Issuer Swap Provider following a Second
                Issuer Swap Provider Default or a Second Issuer Swap Provider
                Downgrade Termination Event in respect of the Series 2 Second
                Issuer Swap Provider;

          (iii) the Series 3 Second Issuer Swap Provider following a Second
                Issuer Swap Provider Default or a Second Issuer Swap Provider
                Downgrade Termination Event in respect of the Series 3 Second
                Issuer Swap Provider;

          (iv)  the Series 4 Second Issuer Swap Provider following a Second
                Issuer Swap Provider Default or a Second Issuer Swap Provider
                Downgrade Termination Event in respect of the Series 4 Second
                  Issuer Swap Provider;

     (h)  eighthly, to the Second Issuer, an amount equal to 0.01 per cent. of
          the interest received on the Second Issuer Term Advances, to be
          retained by the Second Issuer as profit; and

     (i)  ninthly, to pay to shareholders of the Second Issuer any dividend
          declared by the Second Issuer.

4.   PRIORITY OF PAYMENTS FOR SECOND ISSUER PRINCIPAL RECEIPTS

     Subject to CONDITION 5 of the Second Issuer Notes, until enforcement of the
     Second Issuer Security pursuant to the Second Issuer Deed of Charge or
     until such time as there are no Second Issuer Notes outstanding, Second
     Issuer Principal Receipts will be applied as follows:

     (a)  the Series 1 Class A Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 1
          Term AAA Advance, converted into Dollars at the relevant Dollar
          Currency Exchange Rate;

     (b)  the Series 2 Class A Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 2
          Term AAA Advance, converted into Dollars at the relevant Dollar
          Currency Exchange Rate;

     (c)  the Series 3 Class A Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 3
          Term AAA Advance, converted into Euro at the relevant Euro Currency
          Exchange Rate;

     (d)  the Series 4 Class A Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 4
          Term AAA Advance, converted into Dollars at the Dollar Currency
          Exchange Rate;
<PAGE>
                                       24


     (e)  the Series 5 Class A Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 5
          Term AAA Advance;

     (f)  the Series 1 Class B Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 1
          Term AA Advance, converted into Dollars at the relevant Dollar
          Currency Exchange Rate;

     (g)  the Series 2 Class B Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 2
          Term AA Advance, converted into Dollars at the relevant Dollar
          Currency Exchange Rate;

     (h)  the Series 3 Class B Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 3
          Term AA Advance, converted into Euro at the relevant Euro Currency
          Exchange Rate;

     (i)  the Series 4 Class B Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 4
          Term AA Advance, converted into Euro at the relevant Euro Currency
          Exchange Rate;

     (j)  the Series 5 Class B Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 5
          Term AA Advance;

     (k)  the Series 1 Class C Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 1
          Term BBB Advance, converted into Dollars at the relevant Dollar
          Currency Exchange Rate;

     (l)  the Series 2 Class C Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 2
          Term BBB Advance, converted into Dollars at the relevant Dollar
          Currency Exchange Rate;

     (m)  the Series 3 Class C Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 3
          Term BBB Advance, converted into Euro at the relevant Euro Currency
          Exchange Rate;

     (n)  the Series 4 Class C Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 4
          Term BBB Advance, converted into Euro at the relevant Euro Currency
          Exchange Rate; and

     (m)  the Series 5 Class C Second Issuer Notes shall be redeemed on each
          Interest Payment Date in an amount equal to the amount, if any, repaid
          on that Interest Payment Date in respect of the Second Issuer Series 5
          Term BBB Advance.
<PAGE>
                                       25


                                   SCHEDULE 3

                     FORM OF SECOND ISSUER QUARTERLY REPORT


PERMANENT FINANCING (NO. 2) PLC
PROFIT & LOSS ACCOUNT

PERIOD ENDED
<TABLE>
<CAPTION>
                                                  This Quarter     Prior Quarter
                                                  ------------     -------------
                                                      Pound            Pound
                                                    Sterling         Sterling
<S>                                               <C>              <C>
                                                  ------------     -------------
Interest Receivable - Inter-Company Loan
Interest Receivable - Cash Deposits
                                                  ------------     -------------


Interest Payable - Notes
Interest Payable
                                                  ------------     -------------

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

Net Operating Income

Other Income

Insurance Commission

Operating Expenses
                                                  ------------     -------------
Profit/loss on ordinary activities before tax

Taxation
                                                  ------------     -------------
Profit/loss on ordinary activities after tax

Dividend

Retained profit brought forward
                                                  ------------     -------------
Retained profit for the year
                                                  ============     =============
</TABLE>

<PAGE>
                                       26


PERMANENT FINANCING (NO. 2) PLC
BALANCE SHEET

PERIOD ENDED
<TABLE>
<CAPTION>
                                                              Pound       Pound
                                                            Sterling    Sterling
                                                            --------    --------
<S>                                                         <C>         <C>
FIXED ASSET INVESTMENTS

Inter Company Lending

CURRENT ASSETS
Interest Receivable
Other debtors
Cash at Bank
                                                                        --------

                                                                        --------

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Accruals
Interest Payable Accrual
Taxation
                                                                        --------

                                                                        --------
Net current assets

CREDITORS: AMOUNTS FALLING DUE AFTER ONE YEAR
Amount due to Noteholders
                                                            --------
Total Assets less current liabilities
                                                            ========

Share Capital
Reserves
                                                            --------

                                                            ========
</TABLE>
                                      Diff

<PAGE>
                                       27


PERMANENT FINANCING (NO. 2) PLC
NOTES OUTSTANDING

PERIOD ENDED
<TABLE>
<S>                               <C>                <C>                <C>                <C>                <C>
                                  SERIES 1 CLASS A   SERIES 2 CLASS A   SERIES 3 CLASS A   SERIES 4 CLASS A   SERIES 5 CLASS A
Moody's Current Rating                   Aaa                Aaa                Aaa                Aaa                Aaa
Fitch Current Rating                     AAA                AAA                AAA                AAA                AAA
S&P Current Rating                       AAA                AAA                AAA                AAA                AAA

                                  SERIES 1 CLASS B   SERIES 2 CLASS B   SERIES 3 CLASS B   SERIES 4 CLASS B   SERIES 5 CLASS B
Moody's Current Rating                   Aaa                Aa3                Aa3                Aa3                AA3
Fitch Current Rating                     AAA                AA                 AA                 AA                 AA
S&P Current Rating                       AAA                AA                 AA                 AA                 AA

                                  SERIES 1 CLASS C   SERIES 2 CLASS C   SERIES 3 CLASS C   SERIES 4 CLASS C   SERIES 5 CLASS C
Moody's Current Rating                   Aa3                Baa2               Baa2               Baa2               Baa2
Fitch Current Rating                     AA                 BBB                BBB                BBB                BBB
S&P Current Rating                       AA                 BBB                BBB                BBB                BBB

                                  SERIES 1 CLASS A   SERIES 2 CLASS A   SERIES 3 CLASS A   SERIES 4 CLASS A   SERIES 5 CLASS A
Initial Note Balance
Previous Quarters Note Principal
Note Redemptions
Outstanding Note Principal

                                  SERIES 1 CLASS B   SERIES 2 CLASS B   SERIES 3 CLASS B   SERIES 4 CLASS B   SERIES 5 CLASS B
Initial Note Balance
Previous Quarters Note Principal
Note Redemptions
Outstanding Note Principal

                                  SERIES 1 CLASS C   SERIES 2 CLASS C   SERIES 3 CLASS C   SERIES 4 CLASS C   SERIES 5 CLASS C
Initial Note Balance
Previous Quarters Note Principal
Note Redemptions
Outstanding Note Principal

                                  SERIES 1 CLASS A   SERIES 2 CLASS A   SERIES 3 CLASS A   SERIES 4 CLASS A   SERIES 5 CLASS A
Note Interest Margins
Step Up Dates
Step Up Margins

                                  SERIES 1 CLASS B   SERIES 2 CLASS B   SERIES 3 CLASS B   SERIES 4 CLASS B   SERIES 5 CLASS B
Note Interest Margins
Step Up Dates
Step Up Margins

                                  SERIES 1 CLASS C   SERIES 2 CLASS C   SERIES 3 CLASS C   SERIES 4 CLASS C   SERIES 5 CLASS C
Note Interest Margins
Step Up Dates
Step Up Margins
</TABLE>

<PAGE>
                                       28

<TABLE>
<S>                               <C>                <C>                <C>                <C>                <C>
                                  SERIES 1 CLASS A   SERIES 2 CLASS A   SERIES 3 CLASS A   SERIES 4 CLASS A   SERIES 5 CLASS A
Interest Payment Cycle
Interest Payment Date
Next Interest Payment Data

                                  SERIES 1 CLASS B   SERIES 2 CLASS B   SERIES 3 CLASS B   SERIES 4 CLASS B   SERIES 5 CLASS B
Interest Payment Cycle
Interest Payment Date
Next Interest Payment Data

                                  SERIES 1 CLASS C   SERIES 2 CLASS C   SERIES 3 CLASS C   SERIES 4 CLASS C   SERIES 5 CLASS C
Interest Payment Cycle
Interest Payment Date
Next Interest Payment Data
</TABLE>

<PAGE>
                                       29


                                   SIGNATORIES

SIGNED BY                                                     )
for and on behalf of                                          )
HALIFAX plc                                                   )



SIGNED BY                                                     )
for and on behalf of                                          )
PERMANENT FINANCING (NO. 2) PLC                               )



SIGNED BY                                                     )
for and on behalf of                                          )
U.S. BANK NATIONAL ASSOCIATION                                )
<PAGE>




                            DATED [6TH MARCH], 2003






                                   HALIFAX plc


                                       and


                         PERMANENT FINANCING (NO. 2) PLC


                                       and


                         U.S. BANK NATIONAL ASSOCIATION










                     _______________________________________

                     SECOND ISSUER CASH MANAGEMENT AGREEMENT
                     _______________________________________






                                  ALLEN & OVERY
                                     London
                                  ICM:638826.4
<PAGE>

                                    CONTENTS

CLAUSE                                                                      PAGE
------                                                                      ----
1.   Definitions and Interpretation.......................................... 1
2.   Appointment of Second Issuer Cash Manager............................... 1
3.   Second Issuer Cash Management Services.................................. 2
4.   Payments, Accounts, Ledgers............................................. 3
5.   Payments under Second Issuer Swap Agreements and
     Termination of Second Issuer Swap Agreements............................ 5
6.   No Liability............................................................ 6
7.   Costs and Expenses...................................................... 6
8.   Information............................................................. 6
9.   Remuneration............................................................ 8
10.  Covenants of Second Issuer Cash Manager................................. 9
11.  Non-Exclusivity.........................................................10
12.  Termination.............................................................10
13.  Further Assurance.......................................................12
14.  Miscellaneous...........................................................13
15.  Confidentiality.........................................................14
16.  Notices.................................................................14
17.  Variation and Waiver....................................................15
18.  No Partnership..........................................................15
19.  Assignment..............................................................15
20.  Exclusion of Third Party Rights.........................................16
21.  Counterparts............................................................16
22.  Governing Law...........................................................16

SCHEDULES

1.   Cash Management Services................................................17
2.   Cash Management and Maintenance of Ledgers..............................19
3.   Form of Issuer Quarterly Report.........................................25

SIGNATORIES..................................................................29