AMENDED AND RESTATED CASH MANAGEMENT            EXHIBIT 4.8
                                   AGREEMENT

                               21 NOVEMBER 2007

                             BANK OF SCOTLAND PLC
                         (AS CASH MANAGER AND SELLER)

                                      AND

                      PERMANENT MORTGAGES TRUSTEE LIMITED
                            (AS MORTGAGES TRUSTEE)

                                      AND

                       PERMANENT FUNDING (NO. 1) LIMITED
                                (AS FUNDING 1)

                                      AND

                       PERMANENT FUNDING (NO. 2) LIMITED
                                (AS FUNDING 2)

                                      AND

                             THE BANK OF NEW YORK
        (AS FUNDING 1 SECURITY TRUSTEE AND FUNDING 2 SECURITY TRUSTEE)

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                                   CONTENTS

CLAUSE                                                                     PAGE

1.       Definitions and Interpretation.......................................2
2.       Appointment of Cash Manager..........................................2
3.       The Services.........................................................3
4.       Payments, Accounts, Ledgers..........................................4
5.       Early Repayment Fees.................................................9
6.       Swaps................................................................9
7.       No Liability........................................................10
8.       Costs and Expenses..................................................10
9.       Information.........................................................11
10.      Remuneration........................................................13
11.      Covenants of Cash Manager...........................................14
12.      Services Non-Exclusive..............................................14
13.      Termination.........................................................15
14.      Further Assurance...................................................17
15.      Miscellaneous.......................................................18
16.      Confidentiality.....................................................19
17.      Notices.............................................................20
18.      No Partnership......................................................21
19.      Assignment..........................................................21
20.      Amendments and Consents.............................................21
21.      Exclusion of Third Party Rights.....................................21
22.      Counterparts........................................................22
23.      Severability........................................................22
24.      Governing Law and Submission to Jurisdiction........................22

SCHEDULE

1.       The Cash Management Services........................................23
2.       Cash Management and Maintenance of Ledgers..........................25
3.       Form of Funding 1 Quarterly Report..................................36
4.       Form of Funding 2 Quarterly Report..................................38

Signatories..................................................................40

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THIS AMENDED AND RESTATED CASH MANAGEMENT AGREEMENT (this AGREEMENT) is made as
a deed on 21 November 2007

BETWEEN:

(1)      BANK OF SCOTLAND PLC, (registered number SC327000) (formerly The
         Governor and Company of the Bank of Scotland), a public limited
         company incorporated under the laws of Scotland whose registered
         office is at The Mound, Edinburgh, EH1 1YZ (acting in its capacities
         as the CASH MANAGER, the SELLER and a BENEFICIARY);

(2)      PERMANENT MORTGAGES TRUSTEE LIMITED (registered number 83116), a
         private company incorporated under the laws of Jersey, Channel Islands
         whose registered office is at 47 Esplanade, St. Helier, Jersey, JE1
         0BD, Channel Islands (acting in its capacity as the MORTGAGES
         TRUSTEE);

(3)      PERMANENT FUNDING (NO. 1) LIMITED (registered number 4267660), a
         private limited company incorporated under the laws of England and
         Wales whose registered office is at 35 Great St. Helen's London EC3A
         6AP (acting in its capacities as FUNDING 1 and a BENEFICIARY);

(4)      PERMANENT FUNDING (NO. 2) LIMITED (registered number 4441772), a
         private limited company incorporated under the laws of England and
         Wales whose registered office is at 35 Great St. Helen's London EC3A
         6AP (acting in its capacities as FUNDING 2 and a BENEFICIARY);

(5)      THE BANK OF NEW YORK, a New York banking corporation acting through
         its offices at One Canada Square, London E14 5AL(acting in its
         capacities as the FUNDING 1 SECURITY TRUSTEE, which expression shall
         include such company and all other persons or companies for the time
         being acting as Funding 1 Security Trustee (or co-trustee) pursuant to
         the terms of the Funding 1 Deed of Charge and the FUNDING 2 SECURITY
         TRUSTEE, which expression shall include such company and all other
         persons or companies for the time being acting as Funding 2 Security
         Trustee (or co-trustee) pursuant to the terms of the Funding 2 Deed of
         Charge).

WHEREAS:

(A)      On the Initial Closing Date and on several subsequent dates, Halifax
         (then in its capacity as the Seller) agreed to sell and assign certain
         mortgage loans (together with their related security) it had
         originated to the Mortgages Trustee. The Mortgage Trustee has held the
         assigned mortgage loans as bare trustee for Funding 1 and the Seller
         and, as of the Programme Date, Funding 2 pursuant to the terms of the
         Mortgages Trust Deed.

(B)      On the Initial Closing Date and several subsequent Closing Dates,
         Funding 1 has used the proceeds of Funding 1 Intercompany Loans
         granted to it by Funding 1 Issuers to pay Halifax (then in its
         capacity as the Seller) for an increased share in the Mortgages Trust.
         As of the Programme Date, Funding 1 may continue to use the proceeds
         of Funding 1 Intercompany Loans and Funding 2 may use the proceeds of
         Loan Tranches advanced under the Master Intercompany Loan Agreement to
         pay the Mortgages Trustee for an increased share in the Mortgages
         Trust.

(C)      Halifax (then in its capacity as the Cash Manager) agreed to provide
         Cash Management Services to the Mortgages Trustee, Funding 1 and the
         Funding 1 Security Trustee and, as of the Programme Date, to Funding 2
         and the Funding 2 Security Trustee in relation to, inter alia, the
         Trust Property on the terms and subject to the conditions contained in
         the Cash Management Agreement.

(D)      On the Reorganisation Date, pursuant to the HBOS Group Reorganisation
         Act 2006, The Governor and Company of the Bank of Scotland was
         registered as a public company under the Companies Act

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         1985 and changed its name to Bank of Scotland plc and the business and
         all property and liabilities of Halifax (including its cash management
         business and its rights and obligations under the Cash Management
         Agreement) were transferred to Bank of Scotland.

(E)      The parties to the Cash Management Agreement have agreed to further
         amend and restate the terms of the Cash Management Agreement on the
         date hereof as set out herein.

IT IS HEREBY AGREED as follows:

1.       DEFINITIONS AND INTERPRETATION

1.1      The amended and restated master definitions and construction schedule
         signed by, amongst others, the parties to this Agreement and dated 21
         November 2007 (as the same may be amended, varied or supplemented from
         time to time with the consent of the parties to this Agreement) (the
         MASTER DEFINITIONS AND CONSTRUCTION SCHEDULE) is expressly and
         specifically incorporated into this Agreement and, accordingly, the
         expressions defined in the Master Definitions and Construction
         Schedule (as so amended, varied or supplemented from time to time)
         shall, except where the context otherwise requires and save where
         otherwise defined herein, have the same meanings in this Agreement,
         including the Recitals hereto and this Agreement shall be construed in
         accordance with the interpretation provisions set out in clause 3 of
         the Master Definitions and Construction Schedule.

1.2      This Agreement amends and restates the Cash Management Agreement made
         on 14 June 2002 as amended and restated on 22 March 2006 and 17
         October 2006 (the PRINCIPAL AGREEMENT). As of the date of this
         Agreement, any future rights or obligations (excluding such
         obligations accrued to the date of this Agreement) of a party under
         the Principal Agreement shall be extinguished and shall instead be
         governed by this Agreement.

1.3      Any reference in this Agreement to any discretion, power or right on
         the part of the Mortgages Trustee shall be exercised by the Mortgages
         Trustee only as directed by the Beneficiaries but subject in each case
         to the provisions of Clause 16 of the Mortgages Trust Deed.

2.       APPOINTMENT OF CASH MANAGER

2.1      APPOINTMENT

         Until termination pursuant to Clause 13, the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee (according to their respective estates and interests)
         each hereby appoints the Cash Manager as its lawful agent to provide
         the Cash Management Services set out in this Agreement, including in
         relation to:

         (a)     the Mortgages Trust;

         (b)     Funding 1; and

         (c)     Funding 2,

         and the 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 herein shall be construed so as to give the

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         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 FIRST ISSUER NOTES

         The appointment pursuant to Clause 2.1 is conditional upon the issue
         of the First Issuer Notes and the making of the First Issuer Term
         Advances under the First Issuer Intercompany Loan Agreement and shall
         take effect upon and from the Initial Closing Date automatically
         without any further action on the part of any person PROVIDED THAT if
         the issue of the First Issuer Notes by the First Issuer has not
         occurred by 14 June 2002, or such later date as the First Issuer and
         the Lead Manager may agree this Agreement shall cease to be of further
         effect.

2.4      APPOINTMENT CONDITIONAL UPON ACQUISITION OF A BENEFICIAL INTEREST

         The appointment pursuant to Clause 2.1 is conditional upon the
         acquisition by Funding 2 from the Seller of a portion of the Seller's
         beneficial interest in the Mortgages Trust pursuant to the Seller
         Trust Property Assignment Agreement and shall take effect upon and as
         of the Programme Date automatically without any further action on the
         part of any person PROVIDED THAT if Funding 2 has not acquired from
         the Seller a portion of the Seller's beneficial interest in the
         Mortgages Trust by 17 October 2006, or such later date as Funding 2
         and the Seller may agree, the appointment of the Cash Manager as agent
         of Funding 2 under Clause 2.1 shall not take effect.

3.       THE SERVICES

3.1      GENERAL

         The Cash Manager shall provide the services set out in this Agreement
         (including, without limitation, the Schedules to this Agreement) (the
         CASH MANAGEMENT SERVICES).

3.2      APPROVALS AND AUTHORISATIONS

         The Cash Manager shall maintain, or procure the maintenance of, the
         approvals, authorisations, consents and licences required in
         connection with the respective businesses of the Mortgages Trustee,
         Funding 1 and Funding 2 and shall prepare and submit, or procure the
         preparation and submission of, on behalf of the Mortgages Trustee,
         Funding 1 and Funding 2, all necessary applications and requests for
         any further approvals, authorisations, consents or licences which may
         be required in connection with the respective businesses of the
         Mortgages Trustee, Funding 1 and Funding 2 and shall, so far as it is
         reasonably able to do so, perform the 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 Cash Management Services shall include procuring (so far as the
         Cash Manager, using its reasonable endeavours, is able so to do)
         compliance by the Mortgages Trustee, Funding 1 and Funding 2 with all
         applicable legal requirements and with the terms of the Transaction
         Documents to which each of the Mortgages Trustee and/or Funding 1
         and/or Funding 2 is a party, PROVIDED ALWAYS THAT the Cash Manager
         shall not lend or provide any sum to the Mortgages Trustee, Funding 1
         or Funding 2 (other than as expressly contemplated by the Transaction
         Documents) and the Cash Manager shall have no liability whatsoever to
         the Mortgages Trustee, Funding 1, Funding 2, the Funding 1 Security
         Trustee, the Funding 2 Security Trustee or any other person for any
         failure by the Mortgages Trustee, Funding 1 or Funding 2 to make any
         payment due under any of the Transaction Documents (other than to the
         extent arising from (a) the Cash Manager failing to make a payment in
         its capacity as Servicer, Funding 1 Swap Provider, Funding 2 Swap
         Provider or

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         in any other capacity under the Transaction Documents, or (b) the Cash
         Manager failing to perform any of its obligations under any of the
         Transaction Documents).

3.4      LIABILITY OF CASH MANAGER

(a)      The Cash Manager shall indemnify each of the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee on demand on an after Tax basis for any loss,
         liability, claim, expense or damage suffered or incurred by any of
         them in respect of the negligence, bad faith or wilful default of the
         Cash Manager in carrying out its functions as Cash Manager under this
         Agreement or under the other Transaction Documents or as a result of a
         breach by the Cash Manager of the terms and provisions of this
         Agreement or such other Transaction Documents to which the Cash
         Manager is a party (in its capacity as Cash Manager) in relation to
         such functions.

(b)      For the avoidance of doubt, the Cash Manager shall not be liable in
         respect of any loss, liability, claim, expense or damage suffered or
         incurred by the Mortgages Trustee, Funding 1, Funding 2, the Funding 1
         Security Trustee, the Funding 2 Security Trustee and/or any other
         person as a result of the proper performance of the Cash Management
         Services by the 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 Cash
         Manager or as a result of a breach by the Cash Manager of the terms
         and provisions of this Agreement or any of the other Transaction
         Documents to which the Cash Manager is a party (in its capacity as
         Cash Manager) in relation to such functions.

4.       PAYMENTS, ACCOUNTS, LEDGERS

4.1      BANK ACCOUNTS

(a)      The Cash Manager hereby confirms that the Mortgages Trustee GIC
         Account has been established on or before the date hereof pursuant to
         the Bank Account Agreement and the Mortgages Trustee Guaranteed
         Investment Contract and that the Mortgages Trustee GIC Account Mandate
         in the agreed form will apply thereto at the Initial Closing Date. The
         Cash Manager undertakes (to the extent to which the same is within its
         control) that at the Initial Closing Date the Mortgages Trustee GIC
         Account will be operative and that the Cash Manager will not create or
         permit to subsist any Security Interest in relation to the Mortgages
         Trustee GIC Account (but without prejudice to the Mortgages Trust).

(b)      The Cash Manager hereby confirms that the Funding 1 GIC Account has
         been established on or before the date hereof pursuant to the Bank
         Account Agreement and the Funding 1 Guaranteed Investment Contract and
         that the Funding 1 GIC Account Mandate in the agreed form will apply
         thereto at the Initial Closing Date. The Cash Manager undertakes (to
         the extent to which the same is within its control) that at the
         Initial Closing Date the Funding 1 GIC Account will be operative and
         that the Cash Manager will not knowingly create or permit to subsist
         any Security Interest in relation to the Funding 1 GIC Account other
         than as created under or permitted pursuant to the Funding 1 Deed of
         Charge.

(c)      The Cash Manager hereby confirms that the Funding 1 Transaction
         Account has been established on or before the date hereof and that the
         Funding 1 Transaction Account Mandate in the agreed form will apply
         thereto at the Initial Closing Date. The Cash Manager undertakes (to
         the extent to which the same is within its control) that at the
         Initial Closing Date the Funding 1 Transaction Account will be
         operative and that the Cash Manager will not knowingly create or
         permit to subsist any Security Interest in relation to the Funding 1
         Transaction Account other than as created under or permitted pursuant
         to the Funding 1 Deed of Charge.

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(d)      The Cash Manager hereby confirms that the Funding 2 GIC Account has
         been established on or before the Programme Date pursuant to the Bank
         Account Agreement and the Funding 2 Guaranteed Investment Contract and
         that the Funding 2 GIC Account Mandate in the agreed form will apply
         thereto at the Programme Date. The Cash Manager undertakes (to the
         extent to which the same is within its control) that at the Programme
         Date the Funding 2 GIC Account will be operative and that the Cash
         Manager will not knowingly create or permit to subsist any Security
         Interest in relation to the Funding 2 GIC Account other than as
         created under or permitted pursuant to the Funding 2 Deed of Charge.

(e)      The Cash Manager hereby confirms that the Funding 2 Transaction
         Account has been established on or before the Programme Date and that
         the Funding 2 Transaction Account Mandate in the agreed form will
         apply thereto at the Programme Date. The Cash Manager undertakes (to
         the extent to which the same is within its control) that at the
         Programme Date the Funding 2 Transaction Account will be operative and
         that the Cash Manager will not knowingly create or permit to subsist
         any Security Interest in relation to the Funding 2 Transaction Account
         other than as created under or permitted pursuant to the Funding 2
         Deed of Charge.

4.2      MORTGAGES TRUSTEE LEDGERS

(a)      The Cash Manager shall open and maintain in the books of the Mortgages
         Trustee certain ledgers to be known as the Revenue Ledger and the
         Principal Ledger which shall together reflect the aggregate of all
         amounts of cash standing to the credit of the Mortgages Trustee GIC
         Account from time to time.

(b)      The Cash Manager shall also open and maintain in the books of the
         Mortgages Trustee certain ledgers to be known as the Losses Ledger and
         the Funding 1 Share/Funding 2 Share/Seller Share Ledger.

(c)      The Cash Manager shall make credits and debits to the Mortgages
         Trustee Ledgers in the manner described in Schedule 2.

4.3      FUNDING 1 LEDGERS

(a)      The Cash Manager shall open and maintain in the books of Funding 1
         certain ledgers to be known as the Funding 1 Revenue Ledger, the
         Funding 1 Principal Ledger, the Funding 1 General Reserve Ledger, the
         Funding 1 Cash Accumulation Ledger and, if the Funding 1 Liquidity
         Reserve Fund is established, the Funding 1 Liquidity Reserve Ledger
         which shall together reflect the aggregate of all amounts of cash
         standing to the credit of the Funding 1 GIC Account and the Funding 1
         Transaction Account and all amounts invested in Authorised Investments
         purchased from amounts standing to the credit of the Funding 1 GIC
         Account and the Funding 1 Transaction Account from time to time.

(b)      The Cash Manager shall also open and maintain in the books of Funding
         1 certain ledgers to be known as (i) the Funding 1 Principal
         Deficiency Ledger, which comprised, on the Initial Closing Date, three
         sub-ledgers known as the AAA Principal Deficiency Sub Ledger, the AA
         Principal Deficiency Sub Ledger and the BBB Principal Deficiency Sub
         Ledger, and shall comprise on the Fourth Issuer Closing Date, four
         sub-ledgers known as the AAA Principal Deficiency Sub Ledger, the AA
         Principal Deficiency Sub Ledger, the A Principal Deficiency Sub
         Ledger, and the BBB Principal Deficiency Sub Ledger (ii) the Funding 1
         Intercompany Loan Ledger and (iii) the Funding 1 Liquidity Facility
         Ledger. If Funding 1 enters into New Intercompany Loan Agreements and
         the New Term Advances advanced thereunder have different Term Advance
         Ratings to the Term Advance Ratings assigned to the existing Term
         Advances (including the Fourth Issuer Term Advances), then the Cash
         Manager shall establish new sub-ledgers in respect of the Funding 1
         Principal Deficiency Ledger, which shall correspond to the Term
         Advance Ratings assigned to each such New Term Advance.

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(c)      The Cash Manager shall make credits and debits to the Funding 1
         Ledgers in accordance with the provisions of Schedule 2.

4.4      FUNDING 2 LEDGERS

(a)      The Cash Manager shall open and maintain in the books of Funding 2
         certain ledgers to be known as the Funding 2 Revenue Ledger, the
         Funding 2 Principal Ledger, the Funding 2 General Reserve Ledger, the
         Funding 2 Cash Accumulation Ledger, the Start-Up Loan Revenue
         Contribution Ledger and, if the Funding 2 Liquidity Reserve Fund is
         established, the Funding 2 Liquidity Reserve Ledger which shall
         together reflect the aggregate of all amounts of cash standing to the
         credit of the Funding 2 GIC Account and the Funding 2 Transaction
         Account and all amounts invested in Authorised Investments purchased
         from amounts standing to the credit of the Funding 2 GIC Account and
         the Funding 2 Transaction Account from time to time.

(b)      The Cash Manager shall also open and maintain in the books of Funding
         2 certain ledgers to be known as (i) the Funding 2 Principal
         Deficiency Ledger, which comprises six sub-ledgers known as the AAA
         Principal Deficiency Sub Ledger, the AA Principal Deficiency Sub
         Ledger, the A Principal Deficiency Sub Ledger, the BBB Principal
         Deficiency Sub Ledger, the BB Principal Deficiency Sub Ledger and the
         Funding 2 Subordinated Loan Tranche Principal Deficiency Sub Ledger
         and (ii) the Master Intercompany Loan Ledger, to be divided into
         sub-ledgers each of which shall record payments made under each Loan
         Tranche.

(c)      The Cash Manager shall make credits and debits to the Funding 2
         Ledgers in accordance with the provisions of Schedule 2.

4.5      BANK ACCOUNTS

(a)      The Cash Manager shall procure that so far as it may be able in
         relation to all Loans comprised in the Portfolio, the following
         amounts are paid into the Mortgages Trustee GIC Account:

         (i)     all Monthly Payments, other interest received under and in
                 respect of the Loans and any costs or other amounts received
                 under the Loans (including in any such case amounts recovered
                 on enforcement of rights against any Borrower or guarantor of
                 the Borrower, any Property or any of the Borrower's or
                 guarantor's other property or assets);

         (ii)    all final releases and all repayments or prepayments of
                 principal under the Loans;

         (iii)   any amount received by or on behalf of the Mortgages Trustee
                 pursuant to any Halifax Insurance Policy or the Buildings
                 Policies; and

         (iv)    any other amounts whatsoever received by or on behalf of the
                 Mortgages Trustee after the Initial Closing Date,

         and the Cash Manager shall procure that all interest earned on the
         Mortgages Trustee GIC Account is credited to such account.

(b)      The Cash Manager shall procure that the following amounts are paid
         into the Funding 1 GIC Account:

         (i)     all Funding 1 Revenue Receipts;

         (ii)    all Funding 1 Principal Receipts;

         (iii)   all amounts received by Funding 1 pursuant to the Funding 1
                 Swap Agreement; and

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         (iv)    any other amounts whatsoever received by or on behalf of
                 Funding 1 after the Initial Closing Date,

         and the Cash Manager shall procure that all interest earned on the
         Funding 1 Bank Accounts and all investment proceeds from Authorised
         Investments purchased from amounts standing to the credit of the
         Funding 1 GIC Account are credited to such account.

(c)      The Cash Manager shall procure that all Liquidity Drawings under the
         Funding 1 Liquidity Facility are paid into the Funding 1 Transaction
         Account.

(d)      The Cash Manager shall procure that all transfers and withdrawals of
         amounts standing to the credit of the Funding 1 Transaction Account
         and the Funding 1 GIC Account shall be made in accordance with the
         provisions of the Funding 1 Deed of Charge.

(e)      The Cash Manager shall procure that the following amounts are paid
         into the Funding 2 GIC Account:

         (i)     all Funding 2 Revenue Receipts;

         (ii)    all Funding 2 Principal Receipts;

         (iii)   all amounts received by Funding 2 pursuant to the Funding 2
                 Swap Agreement; and

         (iv)    any other amounts whatsoever received by or on behalf of
                 Funding 2 after the Programme Date,

         and the Cash Manager shall procure that all interest earned on the
         Funding 2 Bank Accounts and all investment proceeds from Authorised
         Investments purchased from amounts standing to the credit of the
         Funding 2 GIC Account are credited to such account.

(f)      The Cash Manager shall procure that all transfers and withdrawals of
         amounts standing to the credit of the Funding 2 Transaction Account
         and the Funding 2 GIC Account shall be made in accordance with the
         provisions of the Funding 2 Deed of Charge.

(g)      Each of the payments into the Mortgages Trustee GIC Account, the
         Funding 1 GIC Account, the Funding 1 Transaction Account, the Funding
         2 GIC Account and the Funding 2 Transaction Account referred to in
         Clauses 4.5(a), (b), (c), (d), (e) and (f) shall be made forthwith
         upon receipt by the Mortgages Trustee, Funding 1, Funding 2 or the
         Cash Manager, as the case may be, of the amount in question.

(h)      For the avoidance of doubt, as soon as reasonably practicable after
         becoming aware of the same, the Cash Manager may, and shall, withdraw
         Cash from, as the case may be, the Mortgages Trustee GIC Account, the
         Funding 1 Transaction Account, the Funding 1 GIC Account, the Funding
         2 Transaction Account and/or the Funding 2 GIC 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.

(i)      The Cash Manager shall promptly notify each of the Mortgages Trustee,
         Funding 1 and/or the Funding 1 Security Trustee (in the case of
         Funding 1 Bank Accounts), Funding 2 and/or the Funding 2 Security
         Trustee (in the case of Funding 2 Bank Accounts) (as applicable) of
         any additional account which supplements or replaces any account
         specifically referred to in the definitions of the "Mortgages Trustee
         GIC Account", the "Funding 1 Transaction Account", the "Funding 1 GIC
         Account", the "Funding 2 Transaction Account" or the "Funding 2 GIC
         Account", as the case may be, in the Master Definitions and
         Construction Schedule.

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(j)      Each of the Cash Manager, the Mortgages Trustee, Funding 1 (in the
         case of Funding 1 Bank Accounts) and Funding 2 (in the case of Funding
         2 Bank Accounts) undertakes that, so far as it is able to procure the
         same, the Mortgages Trustee GIC Account, the Funding 1 Transaction
         Account, the Funding 1 GIC Account, the Funding 2 Transaction Account
         and the Funding 2 GIC Account and all instructions and Mandates in
         relation thereto will continue to be operative and will not, save as
         provided in Clause 4.7 below or as permitted pursuant to the Bank
         Account Agreement be changed without the prior written consent of the
         Funding 1 Security Trustee and/or the Funding 2 Security Trustee (as
         applicable) (such consent not to be unreasonably withheld or delayed).
         For the avoidance of doubt, the Cash Manager may change the Authorised
         Signatories in respect of any instructions or Mandates relating to
         Funding 1, Funding 2 and/or the Mortgages Trustee, without the prior
         written consent of the Funding 1 Security Trustee and/or the Funding 2
         Security Trustee (as applicable), in accordance with Clause 4.2 of the
         Bank Account Agreement.

(k)      The Cash Manager and Funding 1 agree that the Cash Manager shall
         procure that (i) the tranche of the Advance being made available to
         Funding 1 pursuant to paragraph 2(a) of the First Start-Up Loan
         Agreement for the purposes of funding the Funding 1 General Reserve
         Fund and (ii) the tranche (if any) of any New Start-up Loan Agreement
         for the purposes of funding further the Funding 1 General Reserve Fund
         (or any other similar reserve fund) shall be credited to the Funding 1
         GIC Account promptly upon receipt of such amounts by Funding 1, and
         the Funding 1 General Reserve Ledger shall record such credit.

(l)      The Cash Manager and Funding 2 agree that the Cash Manager shall
         procure that (i) any Advance being made available to Funding 2
         pursuant to the Funding 2 Start-Up Loan Agreement dated the Programme
         Date for the purposes of funding the Funding 2 General Reserve Fund
         (or any other similar reserve fund), (ii) any Advance (if any) of any
         new Funding 2 Start-up Loan Agreement for the purposes of funding
         further the Funding 2 General Reserve Fund (or any other similar
         reserve fund) and (iii) any Start-Up Loan Tranche or part thereof made
         available to Funding 2 pursuant to the Master Intercompany Loan
         Agreement for the purposes of funding further the Funding 2 General
         Reserve Fund (or any other similar reserve fund) shall be credited to
         the Funding 2 GIC Account promptly upon receipt of such amounts by
         Funding 2, and the Funding 2 General Reserve Ledger shall record the
         amount to be credited for the purposes of funding the Funding 2
         General Reserve Fund.

(m)      The Cash Manager and Funding 2 agree that the Cash Manager shall
         procure that any Start-Up Loan Tranche or part thereof made available
         to Funding 2 pursuant to the Master Intercompany Loan Agreement for
         the purposes of contributing towards Funding 2 Available Revenue
         Receipts on the Funding 2 Interest Payment Date immediately following
         the relevant Closing Date shall be credited to the Funding 2 GIC
         Account promptly upon receipt of such amount by Funding 2 and the
         Start-Up Loan Revenue Contribution Ledger shall record such credit
         (and, for the avoidance of doubt, such amounts shall not be credited
         to the Funding 2 General Reserve Ledger).

(n)      The Cash Manager shall give all notices and make all determinations
         and withdrawals under the Funding 1 Liquidity Facility Agreement on
         behalf of Funding 1, as set out therein.

4.6      WITHDRAWALS

         The Cash Manager may make withdrawals:

         (a)     on behalf of the Mortgages Trustee from the Mortgages Trustee
                 GIC Account; and

         (b)     on behalf of Funding 1 from the Funding 1 GIC Account and the
                 Funding 1 Transaction Account, but only until receipt of an
                 Intercompany Loan Acceleration Notice served by the Funding 1
                 Security Trustee on Funding 1 (with a copy to the Cash Manager
                 and the Mortgages Trustee); and

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         (c)     on behalf of Funding 2 from the Funding 2 GIC Account and the
                 Funding 2 Transaction Account, but only until receipt of a
                 Master Intercompany Loan Acceleration Notice served by the
                 Funding 2 Security Trustee on Funding 2 (with a copy to the
                 Cash Manager and the Mortgages Trustee),

         respectively as permitted by this Agreement, the Mortgages Trust Deed,
         the Bank Account Agreement, the Mortgages Trustee Guaranteed
         Investment Contract, the Funding 1 Guaranteed Investment Contract, the
         Funding 2 Guaranteed Investment Contract, the Funding 1 Liquidity
         Facility Agreement, the Funding 1 Deed of Charge and the Funding 2
         Deed of Charge, but shall not in carrying out its functions as Cash
         Manager under this Agreement otherwise make withdrawals from the
         Mortgages Trustee GIC Account, the Funding 1 Bank Accounts or the
         Funding 2 Bank Accounts.

4.7      CASH MANAGEMENT

         In administering the Mortgages Trustee GIC Account, the Funding 1 Bank
         Accounts and the Funding 2 Bank Accounts on behalf of the Mortgages
         Trustee, Funding 1, Funding 2, the Funding 1 Security Trustee and the
         Funding 2 Security Trustee (as applicable), the Cash Manager shall
         comply with the provisions of Schedule 2 prior to receipt by the Cash
         Manager of a copy of (in respect of the Funding 1 Bank Accounts) any
         Intercompany Loan Acceleration Notice served by the Funding 1 Security
         Trustee on Funding 1 and (in respect of the Funding 2 Bank Accounts)
         any Master Intercompany Loan Acceleration Notice served by the Funding
         2 Security Trustee on Funding 2.

5.       EARLY REPAYMENT FEES

         The Cash Manager shall withdraw any Early Repayment Fees paid into the
         Mortgages Trustee GIC Account and pay the same to the Seller, by
         telegraphic transfer to such account as may be specified by the Seller
         from time to time, promptly following a request for such withdrawal
         being received from the Seller. For the avoidance of doubt, the Cash
         Manager shall not record the receipt or withdrawal of Early Repayment
         Fees in any of the ledgers maintained under this Agreement.

6.       SWAPS

6.1      COMPUTATIONS UNDER FUNDING 1 SWAP

         On each Calculation Date, the Cash Manager shall determine, in
         accordance with the terms of the Funding 1 Swap, in respect of the
         relevant Calculation Period:

         (a)     the Average Fixed Rate Loan Balance, the Average Variable Rate
                 Loan Balance and the Average Tracker Rate Loan Balance (each
                 as defined in the Funding 1 Swap Agreement);

         (b)     the weighted average of the fixed rates of interest charged to
                 borrowers of Fixed Rate Loans;

         (c)     the Tracker Swap Rate; and

         (d)     the Variable Rate Swap SVR,

         and shall notify Funding 1 and the Funding 1 Security Trustee of such
         amounts, balances and rates.

6.2      TERMINATION OF FUNDING 1 SWAP

         If on or prior to the date of the earlier of either (a) the reduction
         of the aggregate principal amount outstanding of all Intercompany
         Loans to zero or (b) the service of an Intercompany Loan Acceleration
         Notice, the Funding 1 Swap is terminated, then the Cash Manager (on
         behalf of

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         Funding 1 and the Funding 1 Security Trustee) shall purchase a new
         hedge against the possible variance between (i) the Mortgages Trustee
         Variable Base Rate payable on the Variable Rate Loans, the fixed rates
         of interest payable on the Fixed Rate Loans and the Tracker Swap Rate
         and (ii) a LIBOR-based rate for three-month sterling deposits, on
         terms acceptable to Funding 1 and the Rating Agencies with a new
         Funding 1 swap provider whom the Rating Agencies have previously
         confirmed in writing will not cause the then current rating of any
         Notes of the Funding 1 Issuers to be downgraded. The Cash Manager may
         apply any early termination payment received from the Funding 1 Swap
         Provider pursuant to the Funding 1 Swap for such purpose.

6.3      COMPUTATIONS UNDER FUNDING 2 SWAP

         On each Calculation Date, the Cash Manager shall determine, in
         accordance with the terms of the Funding 2 Swap, in respect of the
         relevant Calculation Period:

         (a)     the Average Fixed Rate Loan Balance, the Average Variable Rate
                 Loan Balance and the Average Tracker Rate Loan Balance (each
                 as defined in the Funding 2 Swap Agreement);

         (b)     the weighted average of the fixed rates of interest charged to
                 borrowers of Fixed Rate Loans;

         (c)     the Tracker Swap Rate; and

         (d)     the Variable Rate Swap SVR,

         and shall notify Funding 2 and the Funding 2 Security Trustee of such
         amounts, balances and rates.

6.4      TERMINATION OF FUNDING 2 SWAP

         If on or prior to the date of the earlier of either (a) the reduction
         of the aggregate principal amount outstanding of all Loan Tranches
         (other than the Start-Up Loan Tranches) under the Master Intercompany
         Loan Agreement to zero or (b) the service of a Master Intercompany
         Loan Acceleration Notice, the Funding 2 Swap is terminated, then the
         Cash Manager (on behalf of Funding 2 and the Funding 2 Security
         Trustee) shall purchase a new hedge against the possible variance
         between (i) the Mortgages Trustee Variable Base Rate payable on the
         Variable Rate Loans, the fixed rates of interest payable on the Fixed
         Rate Loans and the Tracker Swap Rate and (ii) a LIBOR-based rate for
         three-month sterling deposits, on terms acceptable to Funding 2 and
         the Rating Agencies with a new Funding 2 swap provider whom the Rating
         Agencies have previously confirmed in writing will not cause the then
         current rating of any Notes of the Master Issuer to be downgraded. The
         Cash Manager may apply any early termination payment received from the
         Funding 2 Swap Provider pursuant to the Funding 2 Swap for such
         purpose.

7.       NO LIABILITY

         Save as otherwise provided in this Agreement, the Cash Manager shall
         have no liability for the obligations of any of the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee or the Funding 2
         Security Trustee under any of the Transaction Documents or otherwise
         and nothing herein shall constitute a guarantee, or similar
         obligation, by the Cash Manager of either the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee or the Funding 2
         Security Trustee in respect of any of them.

8.       COSTS AND EXPENSES

8.1      Subject to and in accordance with the Funding 1 Priority of Payments
         and the Funding 2 Priority of Payments (as applicable), each of
         Funding 1 and Funding 2 will on each Funding 1 Interest Payment Date
         and Funding 2 Interest Payment Date (respectively) reimburse the Cash
         Manager a pro rata

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         share (based on the principal amount outstanding on the previous
         Funding 1 Interest Payment Date and Funding 2 Interest Payment Date
         (respectively) under the Funding 1 Intercompany Loans and the Master
         Intercompany Loan (respectively) after any repayments of principal on
         such date) for all out-of-pocket costs, expenses and charges (together
         with any amounts in respect of Irrecoverable VAT due thereon) properly
         incurred by the Cash Manager in the performance of the Cash Management
         Services including any such costs, expenses or charges not reimbursed
         to the Cash Manager on any previous Funding 1 Interest Payment Date
         and Funding 2 Interest Payment Date (respectively) and the Cash
         Manager shall (if applicable) supply Funding 1 and Funding 2 with an
         appropriate VAT invoice issued by the Cash Manager or, if the Cash
         Manager has treated the relevant cost, expense or charge as a
         disbursement for VAT purposes, by the person making the supply.

8.2      Unless and until otherwise agreed by the Mortgages Trustee, Funding 1,
         Funding 2, the Funding 1 Security Trustee and the Funding 2 Security
         Trustee in writing (notified to the Cash Manager), the Mortgages
         Trustee shall not be responsible for reimbursing the Cash Manager for
         the out-of-pocket costs, expenses and charges (together with any
         amounts in respect of Irrecoverable VAT due thereon) referred to in
         Clause 8.1 above.

9.       INFORMATION

9.1      USE OF I.T. SYSTEMS

(a)      The Cash Manager represents and warrants that at the date hereof in
         respect of the software which is to be used by the Cash Manager in
         providing the Cash Management Services it has in place all necessary
         licences and/or consents from the respective licensor or licensors (if
         any) of such software.

(b)      The 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
                 Mortgages Trustee and/or Funding 1 and Funding 2 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 Cash Manager shall use reasonable endeavours to maintain in
         working order the information technology systems used by the Cash
         Manager in providing the Cash Management Services.

(d)      The 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
         Mortgages Trustee and/or Funding 1 and Funding 2 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.

9.2      BANK ACCOUNT STATEMENTS

         The Cash Manager shall take all reasonable steps to ensure that it
         receives:

         (a)     a monthly bank statement in relation to the Mortgages Trustee
                 GIC Account (and any additional or supplemental bank account
                 of the Mortgages Trustee) and that it furnishes a

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                 copy of such statement to the Mortgages Trustee, each of the
                 Beneficiaries, the Funding 1 Security Trustee and the Funding
                 2 Security Trustee;

         (b)     monthly bank statements in relation to each of the Funding 1
                 Transaction Account and the Funding 1 GIC Account (and any
                 additional or supplemental bank account of Funding 1) and that
                 it furnishes a copy of such statements to Funding 1 and the
                 Funding 1 Security Trustee; and

         (c)     monthly bank statements in relation to each of the Funding 2
                 Transaction Account and the Funding 2 GIC Account (and any
                 additional or supplemental bank account of Funding 2) and that
                 it furnishes a copy of such statements to Funding 2 and the
                 Funding 2 Security Trustee.

9.3      ACCESS TO BOOKS AND RECORDS

         Subject to all applicable laws, the Cash Manager shall permit the
         Auditors of the Mortgages Trustee, Funding 1 and Funding 2 and any
         other person nominated by the Funding 1 Security Trustee and/or
         Funding 2 Security Trustee or the Beneficiaries (to whom the 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 Cash Management Services provided by the Cash
         Manager and related matters in accordance with this Agreement.

9.4      STATUTORY OBLIGATIONS

         The Cash Manager will use its reasonable endeavours, on behalf of the
         Mortgages Trustee, Funding 1 and Funding 2, to prepare or procure the
         preparation of and file all reports, annual returns, financial
         statements, statutory forms and other returns which each of the
         Mortgages Trustee, Funding 1 and Funding 2 is required by law to
         prepare and file. Subject to approval thereof by the directors of the
         Mortgages Trustee, Funding 1 or Funding 2 (as appropriate), the 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 Mortgages Trustee, the Funding 1
         Security Trustee, the Funding 2 Security Trustee, Funding 1 and
         Funding 2 (as appropriate) and the Rating Agencies as soon as
         practicable after the end of each accounting reference period of the
         Mortgages Trustee, Funding 1 or Funding 2 (as appropriate).

9.5      INFORMATION COVENANTS

(a)      The Cash Manager shall provide a quarterly report in, or substantially
         in, the form set out in Schedule 3 in respect of Funding 1 to any
         Funding 1 Issuer, Funding 1, the Funding 1 Security Trustee, the
         Seller and the Rating Agencies and a quarterly report in, or
         substantially in the form set out in Schedule 4 in respect of Funding
         2 to the Master Issuer, Funding 2, the Funding 2 Security Trustee, the
         Seller and the Rating Agencies.

(b)      The Cash Manager shall provide, or procure the provision of, to the
         Mortgages Trustee, Funding 1, Funding 2, the Funding 1 Security
         Trustee, the Funding 2 Security Trustee and the Rating Agencies copies
         of any annual returns or financial statements referred to in Clause
         9.4 as soon as reasonably practicable after the preparation thereof.

(c)      The Cash Manager shall notify the Rating Agencies in writing of the
         details of (i) any material amendment to the Transaction Documents,
         (ii) the occurrence of an Intercompany Loan Event of Default, Master
         Intercompany Loan Event of Default, Potential Intercompany Loan Event
         of Default or Potential Master Intercompany Loan Event of Default and
         (iii) any other information relating to

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<PAGE>

         the Cash Manager as the Rating Agencies and/or the Funding 1 Security
         Trustee and/or the Funding 2 Security Trustee may reasonably request
         in connection with its obligations under this Agreement, PROVIDED THAT
         neither the Funding 1 Security Trustee nor the Funding 2 Security
         Trustee shall make such a request more than once every three months
         unless, in the belief of the Funding 1 Security Trustee and/or the
         Funding 2 Security Trustee, an Intercompany Loan Event of Default or a
         Master Intercompany Loan Event of Default (respectively) and/or a Note
         Event of Default in respect of any Funding 1 Issuer or the Master
         Issuer (respectively) or Cash Manager Termination Event (as defined in
         Clause 13.1) shall have occurred and is continuing or a Potential
         Intercompany Loan Event of Default or Potential Master Intercompany
         Loan Event of Default (respectively) and/or a Potential Note Event of
         Default in respect of any Funding 1 Issuer or the Master Issuer
         (respectively) shall have occurred and is continuing PROVIDED FURTHER
         THAT such request does not adversely interfere with the Cash Manager's
         day to day provision of the Cash Management Services under the other
         terms of this Agreement.

(d)      The Cash Manager shall, at the request of the Funding 1 Security
         Trustee or the Funding 2 Security Trustee, furnish the Funding 1
         Security Trustee, the Funding 2 Security Trustee and the Rating
         Agencies with such other information relating to its business and
         financial condition as it may be reasonable for the Funding 1 Security
         Trustee and/or the Funding 2 Security Trustee to request in connection
         with this Agreement, PROVIDED THAT such request does not adversely
         interfere with the Cash Manager's day to day provision of the Cash
         Management Services under the other terms of this Agreement.

10.      REMUNERATION

10.1     FEE PAYABLE

         Funding 1 and Funding 2 shall pay to the Cash Manager for the Cash
         Management Services provided to it hereunder a cash management fee
         (the CASH MANAGEMENT FEE) (inclusive of VAT) which:

         (a)     in the case of Funding 1, shall be 0.025% per annum of the
                 aggregate principal amount outstanding under the Funding 1
                 Intercompany Loans on the previous Funding 1 Interest Payment
                 Date after any repayments of principal on such date;

         (b)     in the case of Funding 2, shall be 0.025% per annum of the
                 aggregate principal amount outstanding of the Rated Loan
                 Tranches and the Subordinated Loan Tranches under the Master
                 Intercompany Loan on the previous Funding 2 Interest Payment
                 Date after any repayment of principal on such date; and

         (c)     in each case, be calculated in relation to each Funding 1
                 Interest Period or Funding 2 Interest Period (as applicable)
                 on the basis of the number of days elapsed and a 365 day year.

10.2     PAYMENT OF FEE

         The cash management fee referred to in Clause 10.1 shall be paid to
         the Cash Manager in arrear:

         (a)     by Funding 1 on each Funding 1 Interest Payment Date in the
                 manner contemplated by and in accordance with the provisions
                 of the applicable Funding 1 Priority of Payments; and

         (b)     by Funding 2 on each Funding 2 Interest Payment Date in the
                 manner contemplated by and in accordance with the provisions
                 of the applicable Funding 2 Priority of Payments.

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11.      COVENANTS OF CASH MANAGER

11.1     COVENANTS

         The Cash Manager hereby covenants with and undertakes to each of the
         Mortgages Trustee, Funding 1, Funding 2, the Funding 1 Security
         Trustee and the Funding 2 Security Trustee that without prejudice to
         any of its specific obligations hereunder:

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

         (b)     it will comply with any proper directions, orders and
                 instructions which the Mortgages Trustee, Funding 1, Funding
                 2, the Funding 1 Security Trustee or the Funding 2 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 Funding Security 1 Trustee and the
                 Funding 2 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 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 Cash Management Services;

         (d)     save as otherwise agreed with the Mortgages Trustee, Funding
                 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
                 Security Trustee, it will provide free of charge to the
                 Mortgages Trustee, Funding 1 and Funding 2 during normal
                 office hours office space, facilities, equipment and staff
                 sufficient to fulfil the obligations of the Mortgages Trustee,
                 Funding 1 and Funding 2 under this Agreement;

         (e)     it will not knowingly fail to comply with any legal
                 requirements in the performance of the 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 Funding 1
                 Security Trustee and the Funding 2 Security Trustee amend or
                 terminate any of the Transaction Documents save in accordance
                 with their terms.

11.2     DURATION OF COVENANTS

         The covenants of the Cash Manager in Clause 11.1 shall remain in force
         until this Agreement is terminated but without prejudice to any right
         or remedy of the Mortgages Trustee and/or Funding 1 and/or Funding 2
         and/or the Funding 1 Security Trustee and/or the Funding 2 Security
         Trustee arising from breach of any such covenant prior to the date of
         termination of this Agreement.

12.      SERVICES NON-EXCLUSIVE

         Nothing in this Agreement shall prevent the 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 Mortgages Trustee, Funding 1, Funding 2, the Funding 1
         Security Trustee or the Funding 2 Security Trustee.

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<PAGE>

13.      TERMINATION

13.1     CASH MANAGER TERMINATION EVENTS

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

         (a)     default is made by the Cash Manager in the payment on the due
                 date of any payment due and payable by it under this Agreement
                 or in the performance of its obligations under Clauses 4.5 and
                 4.6 and such default continues unremedied for a period of
                 three London Business Days after the earlier of the Cash
                 Manager becoming aware of such default; or

         (b)     default is made by the 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 Funding
                 1 Security Trustee and/or the Funding 2 Security Trustee (as
                 applicable) is materially prejudicial to the interests of the
                 Funding 1 Secured Creditors (in the case of Funding 1) or the
                 Funding 2 Secured Creditors (in the case of Funding 2) and
                 such default continues unremedied for a period of 20 London
                 Business Days after the earlier of the Cash Manager becoming
                 aware of such default and receipt by the Cash Manager of
                 written notice from the Funding 1 Security Trustee and/or the
                 Funding 2 Security Trustee (as applicable) requiring the same
                 to be remedied; or

         (c)     an Insolvency Event occurs,

         then Funding 1 and/or Funding 2 and/or the Funding 1 Security Trustee
         and/or the Funding 2 Security Trustee may at once or at any time
         thereafter while such default continues by notice in writing to the
         Cash Manager terminate its appointment as Cash Manager under this
         Agreement with effect from a date (not earlier than the date of the
         notice) specified in the notice.

13.2     RESIGNATION OF CASH MANAGER

         The appointment of the Cash Manager under this Agreement may be
         terminated upon the expiry of not less than 12 months' notice of
         termination given by the Cash Manager to the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee PROVIDED THAT:

         (a)     the Mortgages Trustee, Funding 1, Funding 2, the Funding 1
                 Security Trustee and the Funding 2 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;

         (c)     such substitute cash manager has cash management experience
                 and is approved by the Mortgages Trustee, Funding 1, Funding
                 2, the Funding 1 Security Trustee and the Funding 2 Security
                 Trustee;

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         (d)     the substitute cash manager enters into an agreement
                 substantially on the same terms as the relevant provisions of
                 this Agreement and the 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 Mortgages Trustee,
                 Funding 1 and Funding 2 under such agreement are charged in
                 favour of the Funding 1 Security Trustee and the Funding 2
                 Security Trustee (as applicable) on terms satisfactory to the
                 Funding 1 Security Trustee and the Funding 2 Security Trustee;
                 and

         (e)     the then current ratings of the Notes are not adversely
                 affected as a result thereof, unless otherwise agreed by an
                 Extraordinary Resolution of the holders of each class of the
                 Notes of each Funding 1 Issuer or the Master Issuer, as
                 applicable.

13.3     EFFECT OF TERMINATION

(a)      On and after termination of the appointment of the Cash Manager under
         this Agreement pursuant to this Clause 13, all authority and power of
         the Cash Manager under this Agreement shall be terminated and be of no
         further effect and the Cash Manager shall not thereafter hold itself
         out in any way as the agent of the Mortgages Trustee, Funding 1,
         Funding 2, the Funding 1 Security Trustee or the Funding 2 Security
         Trustee pursuant to this Agreement.

(b)      Upon termination of the appointment of the Cash Manager under this
         Agreement pursuant to this Clause 13, the Cash Manager shall:

         (i)     forthwith deliver (and in the meantime hold on trust for, and
                 to the order of, the Mortgages Trustee, Funding 1, Funding 2,
                 the Funding 1 Security Trustee or the Funding 2 Security
                 Trustee, as the case may be) to the Mortgages Trustee, Funding
                 1, Funding 2, the Funding 1 Security Trustee or the Funding 2
                 Security Trustee, as the case may be or as it shall direct,
                 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
                 Mortgages Trustee, Funding 1, Funding 2, the Funding 1
                 Security Trustee or the Funding 2 Security Trustee, as the
                 case may be (if practicable, on the date of receipt), any
                 monies then held by the Cash Manager on behalf of the
                 Mortgages Trustee, Funding 1, Funding 2, the Funding 1
                 Security Trustee or the Funding 2 Security Trustee and any
                 other assets of the Mortgages Trustee, Funding 1, Funding 2,
                 the Funding 1 Security Trustee and the Funding 2 Security
                 Trustee;

         (ii)    take such further action as the Mortgages Trustee, Funding 1,
                 Funding 2, the Funding 1 Security Trustee or the Funding 2
                 Security Trustee, as the case may be, may reasonably direct at
                 the expense of the Mortgages Trustee, Funding 1, Funding 2,
                 the Funding 1 Security Trustee or the Funding 2 Security
                 Trustee, as the case may be (including in relation to the
                 appointment of a substitute cash manager), provided that the
                 Mortgages Trustee, the Funding 1 Security Trustee or the
                 Funding 2 Security Trustee, as the case may be, shall not be
                 required to take or direct to be taken such further action
                 unless it has been indemnified to its satisfaction (and in the
                 event of a conflict between the directions of Funding 1,
                 Funding 2, the Funding 1 Security Trustee, the Funding 2
                 Security Trustee and the Mortgages Trustee, the directions of
                 the Funding 1 Security Trustee and the Funding 2 Security
                 Trustee shall prevail);

         (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 Mortgages Trustee,
                 Funding 1, Funding 2, the Funding 1 Security Trustee or the
                 Funding 2 Security Trustee or its nominee, as the case may be
                 (which shall, for the avoidance of doubt, include any Receiver
                 appointed by it), for

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                 the purposes of explaining the file layouts and the format of
                 the magnetic tapes generally containing such computer records
                 on the computer system to the Mortgages Trustee, Funding 1,
                 Funding 2, the Funding 1 Security Trustee or the Funding 2
                 Security Trustee or such nominee, as the case may be.

13.4     NOTICE OF EVENT OF DEFAULT

         The Cash Manager shall deliver to the Mortgages Trustee, Funding 1,
         Funding 2, the Funding 1 Security Trustee and the Funding 2 Security
         Trustee as soon as reasonably practicable but in any event within
         three London Business Days of becoming aware thereof a notice of any
         Cash Manager Termination Event or any event which with the giving of
         notice or expiry of any grace period or certification, as specified in
         such Cash Manager Termination Event would constitute the same or any
         Intercompany Loan Event of Default or Master Intercompany Loan Event
         of Default or any Potential Intercompany Loan Event of Default or
         Potential Master Intercompany Loan Event of Default.

13.5     GENERAL PROVISIONS RELATING TO TERMINATION

(a)      Termination of this Agreement or the appointment of the Cash Manager
         under this Agreement shall be without prejudice to the liabilities of
         the Mortgages Trustee, Funding 1, Funding 2, the Funding 1 Security
         Trustee and the Funding 2 Security Trustee to the Cash Manager or vice
         versa incurred before the date of such termination. The 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 Mortgages Trustee, Funding
         1, Funding 2, the Funding 1 Security Trustee or the Funding 2 Security
         Trustee.

(b)      This Agreement shall terminate automatically at such time as Funding 1
         and Funding 2 have no further interest in the Trust Property and the
         Intercompany Loans and the Master Intercompany Loan have been fully
         repaid or Funding 1's obligations under the Intercompany Loans and
         Funding 2's obligations under the Master Intercompany Loan Agreement
         have been otherwise discharged.

(c)      On termination of the appointment of the Cash Manager under the
         provisions of this Clause 13, the Cash Manager shall be entitled to
         receive all fees and other monies accrued up to (but excluding) the
         date of termination but shall not be entitled to any other or further
         compensation. Such monies so receivable by the Cash Manager shall be
         paid by the Mortgages Trustee, on the dates on which they would
         otherwise have fallen due hereunder and under the terms of the Funding
         1 Deed of Charge. For the avoidance of doubt, such termination shall
         not affect the Cash Manager's rights to receive payment of all amounts
         (if any) due to it from the Mortgages Trustee, Funding 1 or Funding 2
         other than under this Agreement.

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

14.      FURTHER ASSURANCE

14.1     CO-OPERATION, ETC.

         The parties hereto 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.

14.2     POWERS OF ATTORNEY

         Without prejudice to the generality of Clause 14.1, the Mortgages
         Trustee, Funding 1, Funding 2, the Funding 1 Security Trustee and the
         Funding 2 Security Trustee shall upon request by the Cash Manager
         forthwith give to the Cash Manager such further powers of attorney or
         other written

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         authorisations, mandates or instruments as are necessary to enable the
         Cash Manager to perform the Cash Management Services.

14.3     CHANGE OF THE FUNDING 1 SECURITY TRUSTEE OR THE FUNDING 2 SECURITY
         TRUSTEE

         In the event that there is any change in the identity of the Funding 1
         Security Trustee or the Funding 2 Security Trustee or an additional
         Funding 1 Security Trustee or an additional Funding 2 Security Trustee
         is appointed in accordance with the Funding 1 Deed of Charge or the
         Funding 2 Deed of Charge, as the case may be, the Cash Manager shall
         execute such documents with any other parties to this Agreement and
         take such actions as such new Funding 1 Security Trustee or such new
         Funding 2 Security Trustee may reasonably require for the purposes of
         vesting in such new Funding 1 Security Trustee or such new Funding 2
         Security Trustee the rights of the Funding 1 Security Trustee and the
         Funding 2 Security Trustee, as the case may be, under this Agreement
         and under the Funding 1 Deed of Charge and the Funding 2 Deed of
         Charge, as the case may be, and releasing the retiring Funding 1
         Security Trustee or the retiring Funding 2 Security Trustee from
         further obligations thereunder and while any of the Notes of any
         Funding 1 Issuer or the Master Issuer, as the case may be, remains
         outstanding shall give notice thereof to the Rating Agencies.

14.4     NO OBLIGATION ON THE FUNDING 1 SECURITY TRUSTEE OR THE FUNDING 2
         SECURITY TRUSTEE

         Nothing herein contained shall impose any obligation or liability on
         the Funding 1 Security Trustee or the Funding 2 Security Trustee to
         assume or perform any of the obligations of the Mortgages Trustee,
         Funding 1, Funding 2 or the Cash Manager hereunder or render either
         the Funding 1 Security Trustee or the Funding 2 Security Trustee
         liable for any breach thereof.

15.      MISCELLANEOUS

15.1     NO SET-OFF

         Each of the Seller and the Cash Manager agrees that it will not:

         (a)     set off or purport to set off any amount which any of the
                 Mortgages Trustee, Funding 1 or Funding 2 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 Mortgages Trustee GIC Account, any Funding 1 Bank
                 Account or any Funding 2 Bank Account or any replacement or
                 additional bank account of any of the Mortgages Trustee,
                 Funding 1 or Funding 2; 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 Mortgages
                 Trustee GIC Account, any Funding 1 Bank Account or any Funding
                 2 Bank Account or any replacement of additional bank accounts
                 of any of the Mortgages Trustee, Funding 1 or Funding 2.

15.2     NO PETITION

         The Cash Manager agrees that for so long as any Notes of any Funding 1
         Issuer or the Master Issuer are outstanding it will not petition or
         commence proceedings for the administration (including, for the
         avoidance of doubt, the filing of documents with the court or the
         service of a notice of intention to appoint an administrator) or
         winding up of the Mortgages Trustee, Funding 1, Funding 2 or any
         Funding 1 Issuer or the Master Issuer or participate in any ex parte
         proceedings with regard thereto.

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15.3     NO RECOURSE

(a)      In relation to all sums due and payable by the Mortgages Trustee,
         Funding 1 or Funding 2 to the Cash Manager, the Cash Manager agrees
         that it shall have recourse only to sums paid to or received by (or on
         behalf of) the Mortgages Trustee, Funding 1 and Funding 2 pursuant to
         the provisions of the Transaction Documents.

(b)      For the avoidance of doubt, neither the Funding 1 Security Trustee nor
         the Funding 2 Security Trustee shall be liable to pay any amounts due
         under Clause 8, and without prejudice to the obligations of the
         Mortgages Trustee, Funding 1 or Funding 2, as the case may be, or any
         receiver appointed pursuant to the Funding 1 Deed of Charge or the
         Funding 2 Deed of Charge, as the case may be, in respect of such
         amounts.

(c)      Notwithstanding any other provisions of this Agreement, all
         obligations to, and rights of the Funding 1 Security Trustee and the
         Funding 2 Security Trustee under or in connection with this Agreement
         (other than their respective obligations under Clause 14) shall
         automatically terminate upon the discharge in full (in the case of the
         Funding 1 Security Trustee) of the Funding 1 Secured Obligations and
         (in the case of the Funding 2 Security Trustee) the Funding 2 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.

16.      CONFIDENTIALITY

         During the continuance of this Agreement or after its termination,
         each of the Mortgages Trustee, the Cash Manager, the Seller, Funding
         1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee shall use its best endeavours not to disclose to any
         person, firm or company whatsoever any information relating to the
         business, finances or other matters of a confidential nature of any
         other party hereto 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 16 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 Note Event
                 of Default, an Intercompany Loan Event of Default, a Master
                 Intercompany Loan Event of Default or a 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

                                      19

<PAGE>

         (f)     in relation to any information disclosed to the professional
                 advisers of the recipient or (in connection with a prospective
                 rating of any debt issued or to be issued by any Funding 1
                 Issuer, any New Issuer or the Master Issuer) to any Rating
                 Agency or any prospective new cash manager or prospective new
                 security trustee.

17.      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 London Business Day or on the next London Business
         Day if delivered thereafter or on a day which is not a London Business
         Day or (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 Cash Manager: to Bank of Scotland plc,
                 Halifax Division, Level 3, Lovell Park, 1 Lovell Park Road,
                 Leeds LS1 1NS (facsimile number +44 (0) 113 235 7511) for the
                 attention of the Head of Mortgage Securitisation with a copy
                 to Bank of Scotland plc, Treasury Division, 33 Old Broad
                 Street, London EC2N 1HZ (facsimile number +44 (0) 20 7574
                 8303) for the attention of Head of Mortgage Securitisation and
                 Covered Bonds;

         (b)     in the case of the Mortgages Trustee: to Permanent Mortgages
                 Trustee Limited, Esplanade, St Helier, Jersey JE1 OBD, Channel
                 Islands (facsimile number +44 (0) 1534 726391) for the
                 attention of the Secretary with a copy to Bank of Scotland
                 plc, Treasury Division, 33 Old Broad Street, London EC2N 1HZ
                 (facsimile number +44 (0) 20 7574 8303) for the attention of
                 Head of Mortgage and Securitisation and Covered Bonds;

         (c)     in the case of the Seller: to Bank of Scotland plc, Halifax
                 Division, Level 3, Lovell Park, 1 Lovell Park Road, Leeds LS1
                 1NS (facsimile number +44 (0) 113 235 7511) for the attention
                 of the Head of Mortgage Securitisation; with a copy to Bank of
                 Scotland plc, Treasury Division, 33 Old Broad Street, London
                 EC2N 1HZ (facsimile number +44 (0) 20 7574 8303) for the
                 attention of Head of Mortgage Securitisation and Covered
                 Bonds;

         (d)     in the case of Funding 1: to Permanent Funding (No. 1)
                 Limited, 35 Great St. Helen's, London EC3A 6AP (facsimile
                 number +44 (020) 7398 6325) for the attention of the
                 Secretary; with a copy to Bank of Scotland plc, Treasury
                 Division, 33 Old Broad Street, London EC2N 1HZ (facsimile
                 number +44 (020) 7574 8784) for the attention of Head of
                 Mortgage Securitisation and Covered Bonds;

         (e)     in the case of Funding 2: to Permanent Funding (No. 2)
                 Limited, 35 Great St. Helen's, London EC3A 6AP (facsimile
                 number +44 (020) 7398 6325) for the attention of the
                 Secretary; with a copy to Bank of Scotland plc, Treasury
                 Division, 33 Old Broad Street, London EC2N 1HZ (facsimile
                 number +44 (020) 7574 8784) for the attention of Head of
                 Mortgage Securitisation and Covered Bonds; and

         (f)     in the case of the Funding 1 Security Trustee and the Funding
                 2 Security Trustee: to The Bank of New York, One Canada
                 Square, London E14 5AL (facsimile number +44 (0) 20 7964 2533)
                 for the attention of Corporate Trust Administration - ABS/MBS,

         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 17.

                                      20

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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 MORTGAGES TRUSTEE, FUNDING 1 AND FUNDING 2

         None of the Mortgages Trustee, Funding 1 nor Funding 2 may assign or
         transfer any of its respective rights and obligations under this
         Agreement without the prior written consent of:

         (a)     in the case of the Mortgages Trustee, each of the
                 Beneficiaries, the Funding 1 Security Trustee and the Funding
                 2 Security Trustee;

         (b)     in the case of Funding 1, the Funding 1 Security Trustee and
                 the Cash Manager; and

         (c)     in the case of Funding 2, the Funding 2 Security Trustee and
                 the Cash Manager,

         except that Funding 1 may assign its respective rights hereunder
         without such consent pursuant to the Funding 1 Deed of Charge and
         Funding 2 may assign its respective rights hereunder without such
         consent pursuant to the Funding 2 Deed of Charge.

19.2     NO ASSIGNMENT BY CASH MANAGER

         The Cash Manager may not assign or transfer any of its rights and
         obligations under this Agreement without the prior written consent of
         the Mortgages Trustee, each of the Beneficiaries, the Funding 1
         Security Trustee and the Funding 2 Security Trustee.

20.      AMENDMENTS AND CONSENTS

20.1     Subject to Clause 2, Clause 3 and Clause 4 of the Controlling
         Beneficiary Deed (as applicable) and (in the case of Funding 1) Clause
         25 of the Funding 1 Deed of Charge and (in the case of Funding 2)
         Clause 12 of the Funding 2 Deed of Charge, no amendment or waiver of
         any provision of this Agreement shall be effective unless the same
         shall be in writing and signed by (or by some person duly authorised
         by) each of the parties to this Agreement. In the case of a waiver,
         such waiver shall be effective only in the specific instance and as
         against the party or parties giving it for the specific purpose for
         which it is given. 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.

20.2     Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee will each exercise all rights, powers, benefits
         and/or discretions conferred on it under this Agreement (including,
         without limitation, in giving its consent, approval or authorisation
         to any event, matter or thing requested hereunder) in accordance with
         Clauses 2, 3 and 4 of the Controlling Beneficiary Deed (as applicable)
         and (in the case of Funding 1) Clause 25 of the Funding 1 Deed of
         Charge and (in the case of Funding 2) Clause 12 of the Funding 2 Deed
         of Charge.

21.      EXCLUSION OF THIRD PARTY RIGHTS

         The parties to this Agreement do not intend that any term of this
         Agreement should be enforced, by virtue of the Contracts (Rights of
         Third Parties) Act 1999, by any person who is not a party to this
         Agreement.

                                      21

<PAGE>

22.      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.

23.      SEVERABILITY

         Where any provision in or obligation under this Agreement shall be
         invalid, illegal or unenforceable in any jurisdiction, the validity,
         legality and enforceability of the remaining provisions or obligations
         under this Agreement, or of such provision or obligation in any other
         jurisdiction, shall not be affected or impaired thereby.

24.      GOVERNING LAW AND SUBMISSION TO JURISDICTION

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

24.2     Each party to this Agreement hereby irrevocably submits to the
         exclusive jurisdiction of the English courts in any action or
         proceeding arising out of or relating to this Agreement, and hereby
         irrevocably agrees that all claims in respect of such action or
         proceeding may be heard and determined by such courts. Each party to
         this Agreement hereby irrevocably waives, to the fullest extent it may
         possibly do so, any defence or claim that the English courts are an
         inconvenient forum for the maintenance or hearing of such action or
         proceeding. The Mortgages Trustee irrevocably appoints Structured
         Finance Management Limited at 35 Great St. Helen's, London EC3A 6AP as
         its agent for the service of process.

IN WITNESS whereof the parties have caused this Agreement to be executed and
delivered as a deed the day and year first before written.

                                      22

<PAGE>

                                  SCHEDULE 1

                         THE CASH MANAGEMENT SERVICES

The Cash Manager shall:

(a)      make the determinations set out in Schedule 2 hereto;

(b)      operate the Mortgages Trustee GIC Account, the Funding 1 GIC Account,
         the Funding 1 Transaction Account, the Funding 2 GIC Account, the
         Funding 2 Transaction Account or any other Bank Account and ensure
         that payments are made into and from such accounts in accordance with
         this Agreement, the Mortgages Trust Deed, the Funding 1 Deed of
         Charge, the Funding 2 Deed of Charge, the Bank Account Agreement, the
         Mortgages Trustee Guaranteed Investment Contract, the Funding 1
         Guaranteed Investment Contract, the Funding 2 Guaranteed Investment
         Contract and any other applicable Transaction Document PROVIDED
         HOWEVER THAT nothing herein shall require the Cash Manager to make
         funds available to the Mortgages Trustee, Funding 1 or Funding 2 to
         enable such payments to be made other than as expressly required by
         the provisions of this Agreement;

(c)      keep records for all taxation purposes (including, without limitation
         VAT);

(d)      assist the auditors of the Mortgages Trustee, Funding 1 and Funding 2
         and provide such information to them as they may reasonably request
         for the purpose of carrying out their duties as auditors;

(e)      make all filings, give all notices and make all registrations and
         other notifications required in the day-to-day operation of the
         respective businesses of the Mortgages Trustee, Funding 1 and Funding
         2 or required to be given by the Mortgages Trustee, Funding 1 or
         Funding 2 pursuant to the Transaction Documents;

(f)      arrange for all payments due to be made by the Mortgages Trustee
         and/or Funding 1 and/or Funding 2 under any of the Transaction
         Documents, PROVIDED THAT such monies are at the relevant time
         available to the Mortgages Trustee and/or Funding 1 and/or Funding 2
         and PROVIDED FURTHER that nothing herein shall constitute a guarantee
         by the Cash Manager of all or any of the obligations of the Mortgages
         Trustee, Funding 1 or Funding 2 under any of the Transaction
         Documents;

(g)      without prejudice to the role of and in conjunction with the relevant
         Corporate Services Provider under the relevant Corporate Services
         Agreement, keep general books of account and records of the Mortgages
         Trustee, Funding 1 and Funding 2; 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;

(h)      without prejudice to the role of and in conjunction with the relevant
         Corporate Services Provider under the relevant Corporate Services
         Agreement, provide or procure the provision of company secretarial and
         administration services to the Mortgages Trustee, Funding 1 and
         Funding 2 including the keeping of all registers and the making of all
         returns and filings required by applicable law or by US or UK
         regulatory authorities (including the Securities and Exchange
         Commission), co-operate in the convening of board and general meetings
         and provide registered office facilities;

(i)      itself on behalf of the Mortgages Trustee, Funding 1 and Funding 2,
         PROVIDED THAT such monies are at the relevant time available to the
         Mortgages Trustee, Funding 1 and Funding 2, pay all the out-of-pocket
         expenses of the Mortgages Trustee, Funding 1 and Funding 2, incurred
         by the Cash

                                      23

<PAGE>

         Manager on behalf of the Mortgages Trustee, Funding 1 and Funding 2,
         as the case may be, in the performance of the Cash Manager's duties
         hereunder including without limitation:

         (i)     all Taxes which may be due or payable by the Mortgages
                 Trustee, Funding 1 and Funding 2;

         (ii)    all registration, transfer, filing and other fees and other
                 charges payable in respect of the sale by the Seller of the
                 Portfolio to the Mortgages Trustee;

         (iii)   all fees payable to the London Stock Exchange plc;

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

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

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

         (vii)   all premiums payable by the Mortgages Trustee in respect of
                 the Insurance Policies;

(j)      at the request of Funding 1 or Funding 2, as the case may be (but also
         with the prior written consent of the Funding 1 Security Trustee or
         the Funding 2 Security Trustee, as the case may be), invest monies
         standing from time to time to the credit of the Funding 1 GIC Account
         and the Funding 1 Liquidity Stand-by Account (if any) or the Funding 2
         GIC Account, as the case may be, in Authorised Investments, subject to
         the following provisions:

         (i)     any such Authorised Investment shall be made in the joint
                 names of the Funding 1 Security Trustee and Funding 1 or the
                 Funding 2 Security Trustee and Funding 2, as the case may be;

         (ii)    any costs properly and reasonably incurred in making and
                 changing Authorised Investments will be reimbursed to the Cash
                 Manager, the Funding 1 Security Trustee and the Funding 2
                 Security Trustee by Funding 1 or Funding 2, as the case may
                 be;

         (iii)   all income or other distributions arising on, or proceeds
                 following the disposal or maturity of, Authorised Investments
                 shall be credited to the Funding 1 GIC Account or the Funding
                 2 GIC Account, as the case may be; and

         (iv)    the Funding 1 Security Trustee, the Funding 2 Security Trustee
                 and the Cash Manager shall not be responsible (save where any
                 loss results from the Funding 1 Security Trustee's, the
                 Funding 2 Security Trustee's or the 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;

(k)      determine the Loan Tranche Interest Amount payable in respect of each
         Subordinated Loan Tranche and each Start-Up Loan Tranche for the
         relevant Loan Tranche Interest Period in accordance with Clause 7.2 of
         the Master Intercompany Loan Agreement.

                                      24

<PAGE>

                                  SCHEDULE 2

                  CASH MANAGEMENT AND MAINTENANCE OF LEDGERS

1.       DETERMINATION

1.1      On each Calculation Date based on the amount of monies standing to the
         credit of the Mortgages Trustee GIC Account as at close of business on
         the London Business Day immediately preceding the relevant Calculation
         Date, the Cash Manager shall determine each of the following:

         (a)     the amount of Principal Receipts and Revenue Receipts received
                 during the preceding Calculation Period; and

         (b)     the amount of Mortgages Trust Available Revenue Receipts and
                 Mortgages Trust Available Principal Receipts to be distributed
                 to Funding 1, Funding 2 and to the Seller on the Distribution
                 Date immediately following the relevant Calculation Date.

1.2      On each Calculation Date, the Cash Manager shall determine each of the
         following:

         (a)     the amount of any Losses incurred on the Loans in the period
                 from the immediately preceding Calculation Date to the
                 relevant Calculation Date;

         (b)     the Funding 1 Share, the Seller Share, the Funding 2 Share,
                 the Funding 1 Share Percentage, the Funding 2 Share Percentage
                 and the Seller Share Percentage in accordance with clause 8 of
                 the Mortgages Trust Deed; and

         (c)     the Minimum Seller Share in accordance with clause 9.2 of the
                 Mortgages Trust Deed.

1.3      Four Business Days prior to each Funding 1 Interest Payment Date the
         Cash Manager shall determine each of the following:

         (a)     the amount of any Funding 1 Available Revenue Receipts to be
                 applied on the following Funding 1 Interest Payment Date in
                 accordance with the Funding 1 Pre-Enforcement Revenue Priority
                 of Payments;

         (b)     the amount of any Funding 1 Available Principal Receipts to be
                 applied on the following Funding 1 Interest Payment Date in
                 accordance with the Funding 1 Principal Priority of Payments;
                 and

         (c)     the amount of any Funding 1 Income Deficit.

1.4      Four Business Days prior to each Funding 2 Interest Payment Date the
         Cash Manager shall determine each of the following:

         (a)     the amount of any Funding 2 Available Revenue Receipts to be
                 applied on the following Funding 2 Interest Payment Date in
                 accordance with the Funding 2 Pre-Enforcement Revenue Priority
                 of Payments;

         (b)     the amount of any Funding 2 Available Principal Receipts to be
                 applied on the following Funding 2 Interest Payment Date in
                 accordance with the Funding 2 Principal Priority of Payments;
                 and

         (c)     the amount of any Funding 2 Income Deficit.

                                      25

<PAGE>

1.5      The Cash Manager shall make all the determinations referred to in
         paragraphs 1.1 to 1.4 above on the basis of the following assumptions:

         (a)     that the amount of any Losses will not increase;

         (b)     that any debit balance on the Funding 1 Principal Deficiency
                 Ledger or the Funding 2 Principal Deficiency Ledger, as the
                 case may be, will not increase; and

         (c)     such other assumptions (including without limitation as to the
                 amount of any payments or provisions to be made in accordance
                 with the applicable Funding 1 Priority of Payments or the
                 Funding 2 Priority of Payments, as the case may be) as the
                 Cash Manager considers appropriate.

         The Cash Manager shall on request notify the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee in writing of any such other assumptions and shall
         take account of any representations made by the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee (as the case may be) in relation thereto.

1.6      The Cash Manager shall, if necessary, perform all currency conversions
         free of charge, cost or expense at the relevant exchange rate (for the
         purposes of any calculations referred to above, ((a)) 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%
         being rounded down to 9.87654%) and ((b)) any currency amounts used in
         or resulting from such calculations will be rounded in accordance with
         the relevant market practice).

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

2.       PRIORITY OF PAYMENTS FOR MORTGAGES TRUST AVAILABLE REVENUE RECEIPTS

         The Cash Manager shall (unless the intended recipient of the relevant
         payment agrees otherwise) on each Distribution Date withdraw Cash from
         the Mortgages Trustee GIC Account and/or, in the case of sums to be
         provided for, retain Cash in the amounts required (to the extent that
         such withdrawal does not cause the Mortgages Trustee GIC Account to
         become overdrawn or, if any amounts are retained by way of provision
         for the relevant liability and are thus not withdrawn, to the extent
         that withdrawal of those amounts that are withdrawn would not, if such
         retained amounts were also to be withdrawn, cause the balance on the
         Mortgages Trustee GIC Account to become overdrawn) in an aggregate
         amount equal to the Mortgages Trust Available Revenue Receipts on each
         Distribution Date. The withdrawal shall be used to make the payments
         and provisions in the order of priority set out in clause 10.2 of the
         Mortgages Trust Deed (in each case only if and to the extent that
         payments or provisions of a higher priority have been made in full).

3.       PRIORITY OF PAYMENTS FOR MORTGAGES TRUST AVAILABLE PRINCIPAL RECEIPTS

         The Cash Manager shall (unless the intended recipient of the relevant
         payment agrees otherwise) on each Distribution Date, withdraw Cash
         from the Mortgages Trustee GIC Account (to the extent only that such
         withdrawal does not cause the Mortgages Trustee GIC Account to become
         overdrawn) in an aggregate amount equal to the Mortgages Trust
         Available Principal Receipts on each Distribution Date to make the
         payments in the order of priority set out in clause 11 of the
         Mortgages Trust Deed.

                                      26

<PAGE>

4.       PRIORITY OF PAYMENTS FOR FUNDING 1 AVAILABLE REVENUE RECEIPTS

         Funding 1 Available Revenue Receipts will be applied by the Cash
         Manager on each Funding 1 Interest Payment Date until enforcement of
         the Funding 1 Security pursuant to the Funding 1 Deed of Charge or
         until such time as there are no amounts outstanding under any
         Intercompany Loan Agreement, in making such payments and provisions in
         the order of priority set out in the Funding 1 Pre-Enforcement Revenue
         Priority of Payments (in each case only if and to the extent that
         payments or provisions of a higher priority have been made in full) as
         set out in Part 1 of Schedule 3 to the Funding 1 Deed of Charge (as
         the same may be amended, varied or restated from time to time).

5.       PRIORITY OF PAYMENTS FOR FUNDING 1 AVAILABLE PRINCIPAL RECEIPTS

         Funding 1 Available Principal Receipts will be applied by the Cash
         Manager on each Funding 1 Interest Payment Date until enforcement of
         the Funding 1 Security pursuant to the Funding 1 Deed of Charge or
         until such time as there are no amounts outstanding under any
         Intercompany Loan Agreement, in making such payments and provisions in
         the 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)
         set out in Part 2 of Schedule 3 to the Funding 1 Deed of Charge.

6.       FUNDING 1 INCOME DEFICIT/FUNDING 1 LIQUIDITY FACILITY

6.1      If the Cash Manager determines four Business Days prior to a Funding 1
         Interest Payment Date that there will be a Funding 1 Income Deficit,
         then the Cash Manager, on behalf of Funding 1, shall pay or provide
         for such Funding 1 Income Deficit by applying Funding 1 Principal
         Receipts (plus any part of the balance of the Funding 1 Cash
         Accumulation Ledger which is not comprised in Funding 1 Available
         Principal Receipts) to make good such Funding 1 Income Deficit, and
         the Cash Manager shall make a corresponding entry in the relevant
         Funding 1 Ledgers as described in paragraphs 13 and 18 below.

6.2      If the Cash Manager determines there are no (or insufficient) amounts
         standing to the credit of the Funding 1 Principal Ledger and the Cash
         Accumulation Ledger to cure the Funding 1 Income Deficit then on the
         London Business Day immediately preceding a Funding 1 Interest Payment
         Date the Cash Manager will, subject to paragraph 6.3 below, direct
         Funding 1 to request a drawing pursuant to Clause 5.1 of the Funding 1
         Liquidity Facility Agreement to apply towards such Funding 1 Income
         Deficit.

6.3      A Funding 1 Liquidity Drawing may not be used to pay interest or
         principal (as applicable) on the Term Advances if and to the extent
         that there are funds standing to the credit of the Funding 1 Liquidity
         Reserve Fund that are available to cure such Funding 1 Income Deficit
         on such Funding 1 Interest Payment Date.

7.       PRIORITY OF PAYMENTS FOR FUNDING 2 AVAILABLE REVENUE RECEIPTS

         Funding 2 Available Revenue Receipts will be applied by the Cash
         Manager on each Funding 2 Interest Payment Date until enforcement of
         the Funding 2 Security pursuant to the Funding 2 Deed of Charge or
         until such time as there are no amounts outstanding under the Master
         Intercompany Loan Agreement, in making such payments and provisions in
         the order of priority set out in the Funding 2 Pre-Enforcement Revenue
         Priority of Payments (in each case only if and to the extent that
         payments or provisions of a higher priority have been made in full) as
         set out in Part 1 of Schedule 3 to the Funding 2 Deed of Charge (as
         the same may be amended, varied or restated from time to time).

                                      27

<PAGE>

8.       PRIORITY OF PAYMENTS FOR FUNDING 2 AVAILABLE PRINCIPAL RECEIPTS

         Funding 2 Available Principal Receipts will be applied by the Cash
         Manager on each Funding 2 Interest Payment Date until enforcement of
         the Funding 2 Security pursuant to the Funding 2 Deed of Charge or
         until such time as there are no amounts outstanding under the Master
         Intercompany Loan Agreement, in making such payments and provisions in
         the 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)
         set out in Part 2 of Schedule 3 to the Funding 2 Deed of Charge.

9.       FUNDING 2 INCOME DEFICIT

         If the Cash Manager determines four Business Days prior to a Funding 2
         Interest Payment Date that there will be a Funding 2 Income Deficit,
         then the Cash Manager, on behalf of Funding 2, shall pay or provide
         for such Funding 2 Income Deficit by applying Funding 2 Principal
         Receipts (plus any part of the balance of the Funding 2 Cash
         Accumulation Ledger which is not comprised in Funding 2 Available
         Principal Receipts) to make good such Funding 2 Income Deficit, and
         the Cash Manager shall make a corresponding entry in the relevant
         Funding 2 Ledgers as described in paragraphs 13 and 25 below.

10.      OTHER PAYMENTS

         Each of the Beneficiaries and the Cash Manager agrees, and the
         Mortgages Trustee concurs, that (save as otherwise specified below)
         the following payments may be made from the Mortgages Trustee GIC
         Account (to the extent that withdrawal of those amounts would not
         cause the balance of the Mortgages Trustee GIC Account to become
         overdrawn) on any date:

         (a)     if any amount has been received from a Borrower for the
                 express purpose of payment being made to a third party for the
                 provision of a service (including giving insurance cover) to
                 either that Borrower or the Seller or the Mortgages Trustee,
                 to pay such amount when due to such third party or, in the
                 case of the payment of an insurance premium, where such third
                 party and the Cash Manager have agreed that payment of
                 commission should be made by deduction from such insurance
                 premium, to pay such amount less such commissions when due to
                 such third party and to pay such commission to the Cash
                 Manager and to pay any premiums in respect of any Insurance
                 Policy or other insurance policy relating to any Loan
                 comprised in the Portfolio;

         (b)     to pay to any person (including the Cash Manager) any amounts
                 due arising from any overpayment by any person or arising from
                 any reimbursement by any person of any such overpayment
                 (including, for the avoidance of doubt, where arising from the
                 failure of a direct debit);

         (c)     to pay when due (but subject to any right to refuse or
                 withhold payment or of set-off that has arisen by reason of
                 the Borrower's breach of the terms of the relevant Mortgage or
                 Loan) any amount payable to a Borrower under the terms of the
                 Mortgage or the Loan to which that Borrower is a party, and to
                 pay when due any amount payable by the Mortgages Trustee to
                 the Seller pursuant to clauses 3.3, 4.4 and 5.2 of the
                 Mortgage Sale Agreement;

         (d)     to pay to the Seller any amounts (including, for the avoidance
                 of doubt, any Early Repayment Fees) received and held by the
                 Mortgages Trustee on trust for the Seller pursuant to clause 5
                 of the Mortgage Sale Agreement;

         (e)     to pay when due and payable any amounts due and payable by the
                 Mortgages Trustee to third parties and incurred without breach
                 by the Mortgages Trustee of the Mortgages Trust Deed and not
                 provided for payment elsewhere in this paragraph 7;

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         (f)     to refund any amounts due arising from the rejection of any
                 payments in respect of a Loan and any other amounts which have
                 not been received by the Mortgages Trustee as cleared funds;
                 and

         (g)     to refund to the Seller any amounts which represent amounts
                 received from Borrowers but which do not form part of the
                 Mortgage Account balance or comprise unpaid interest as at the
                 relevant date and which are amounts owed by such Borrowers in
                 respect of the period prior to the date on which the Mortgage
                 Loan (together with its Related Security) relating to such
                 Mortgage Account was transferred to the Mortgages Trustee as
                 and when identified by the Cash Manager and if a Borrower
                 fails to pay the full amount that it owes, the Cash Manager
                 shall be obliged to refund to the Seller only such portion of
                 the amount which relates to any period prior to such transfer.

11.      USE OF LEDGERS

         The Cash Manager shall forthwith record monies received or payments
         made by it on behalf of the Mortgages Trustee, Funding 1 or Funding 2
         in the ledgers in the manner set out in this Agreement. If, at any
         time, the Cash Manager is in any doubt as to which ledger a particular
         amount should be credited or debited, it shall consult with the
         Funding 1 Security Trustee and the Funding 2 Security Trustee (as
         applicable) thereon.

         Except in the case of the Funding 1 Principal Deficiency Ledger or the
         Funding 2 Principal Deficiency Ledger, a debit item shall only be made
         in respect of any of the Mortgages Trustee Ledgers, the Funding 1
         Ledgers and the Funding 2 Ledgers and the corresponding payment or
         transfer (if any) may only be made from the Mortgages Trustee GIC
         Account, the Funding 1 GIC Account, the Funding 1 Transaction Account,
         the Funding 2 GIC Account or the Funding 2 Transaction Account, as the
         case may be, to the extent that such entry does not cause the relevant
         ledger to have a debit balance. In the case of the Funding 1 Principal
         Deficiency Ledger, each Funding 1 Principal Deficiency Sub-Ledger, the
         Funding 2 Principal Deficiency Ledger and each Funding 2 Principal
         Deficiency Sub-Ledger, a credit item shall only be made to the extent
         that such entry does not cause such ledger to have a credit balance.

12.      REVENUE LEDGER

         The Cash Manager shall ensure that:

         (a)     the following amounts shall be credited to the Revenue Ledger:

                 (i)     all Revenue Receipts; and

                 (ii)    all interest received by the Mortgages Trustee on the
                         Mortgages Trustee GIC Account; and

         (b)     any payment or provision made under paragraph 2 above shall be
                 debited to the Revenue Ledger.

13.      PRINCIPAL LEDGER

         The Cash Manager shall ensure that:

         (a)     all Principal Receipts shall be credited to the Principal
                 Ledger; and

         (b)     any payment or provision made under paragraph 3 above shall be
                 debited to the Principal Ledger.

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14.      LOSSES LEDGER

         The Cash Manager shall ensure that all Losses shall be recorded in the
         Losses Ledger.

15.      FUNDING 1 SHARE/FUNDING 2 SHARE/SELLER SHARE LEDGER

         The Cash Manager shall ensure that the Current Funding 1 Share and the
         Current Funding 1 Share Percentage of the Trust Property, the Current
         Funding 2 Share and the Current Funding 2 Share Percentage of the
         Trust Property and the Current Seller Share and the Current Seller
         Share Percentage of the Trust Property are recorded in the Funding 1
         Share/Funding 2 Share/Seller Share Ledger on the Initial Closing Date
         (in the case of Funding 1 and the Seller) and on the Programme Date
         (in the case of Funding 2) and thereafter on each Distribution Date.

16.      FUNDING 1 REVENUE LEDGER

         The Cash Manager shall ensure that:

         (a)     the following amounts shall be credited to the Funding 1
                 Revenue Ledger:

                 (i)     all Funding 1 Revenue Receipts;

                 (ii)    all interest received by Funding 1 in respect of the
                         Funding 1 Bank Accounts;

                 (iii)   all amounts received by Funding 1 representing income
                         on any Funding 1 Authorised Investments;

                 (iv)    all amounts (other than any early termination payment
                         which is to be used to acquire, if necessary, a new
                         swap) received by Funding 1 under the Funding 1 Swap
                         Agreement; and

                 (v)     any amount debited to the Funding 1 Principal Ledger
                         under paragraph 18(b)(ii) below; and

         (b)     any payment or provision made under paragraph 4 above shall be
                 debited to the Funding 1 Revenue Ledger.

17.      FUNDING 1 LIQUIDITY FACILITY LEDGER

         The Cash Manager shall ensure that:

         (a)     all Funding 1 Liquidity Facility Drawings shall be credited to
                 the Funding 1 Liquidity Facility Ledger; and

         (b)     all Funding 1 Liquidity Facility Repayments shall be noted on
                 the Funding 1 Liquidity Facility Ledger.

18.      FUNDING 1 PRINCIPAL LEDGER

         Without prejudice to paragraph 19 below, the Cash Manager shall ensure
         that:

         (a)     the following amounts shall be credited to the Funding 1
                 Principal Ledger:

                 (i)     all Funding 1 Principal Receipts; and

                                      30

<PAGE>

                 (ii)    amounts credited to the Funding 1 Principal Deficiency
                         Ledger under paragraph 4 above and paragraph 19 below;
                         and

         (b)     the following amounts shall be debited to the Funding 1
                 Principal Ledger:

                 (i)     the aggregate amount paid pursuant to paragraph 5
                         above (other than any remainder to be credited to the
                         Funding 1 Principal Ledger); and

                 (ii)    on each Funding 1 Interest Payment Date, an amount
                         equal to the Funding 1 Income Deficit on such Funding
                         1 Interest Payment Date.

19.      FUNDING 1 PRINCIPAL DEFICIENCY LEDGER

19.1     Without prejudice to paragraph 4 above, the Cash Manager shall ensure
         that there shall be debited to the Funding 1 Principal Deficiency
         Ledger:

         (a)     deficiencies arising from Losses which have been allocated to
                 the Funding 1 Share; and

         (b)     any amount required to be debited to the Funding 1 Principal
                 Ledger under paragraph 18(b)(ii) above.

19.2     The Cash Manager shall ensure that there shall be credited to the
         Funding 1 Principal Deficiency Ledger any amount to be credited in
         accordance with paragraph 4 above.

19.3     Amounts to be debited to the Funding 1 Principal Deficiency Ledger
         shall be debited in the following order:

         (a)     first, to the Funding 1 Principal Deficiency Sub-Ledger
                 corresponding to the Term Advance with the lowest ranking Term
                 Advance Rating until the debit balance thereon is equal to the
                 then principal amount outstanding of the corresponding Term
                 Advance(s); and

         (b)     secondly, to the Funding 1 Principal Deficiency Sub-Ledger
                 corresponding to the Term Advance with the next lowest Term
                 Advance Rating until the debit balance thereon is equal to the
                 then principal amount outstanding of corresponding Term
                 Advance(s),

         and so on until amounts are debited to the AAA Principal Deficiency
         Sub Ledger, at which point there will be an Asset Trigger Event.

         Losses on the Loans and/or the application of Funding 1 Available
         Principal Receipts to pay interest on the Term Advances will not be
         recorded on the Funding 1 Principal Deficiency Ledger to the extent
         that the Funding 1 Share of the Trust Property together with amounts
         standing to the credit of the Funding 1 Cash Accumulation Ledger and
         the Funding 1 Principal Ledger, in aggregate, is greater than or equal
         to the aggregate Outstanding Principal Balance of the Intercompany
         Loans on the relevant Funding 1 Interest Payment Date, after taking
         account of such Losses or the relevant application of Principal
         Receipts.

19.4     Amounts to be credited to the Funding 1 Principal Deficiency Ledger
         shall be credited in the following order:

         (a)     first, to the Funding 1 Principal Deficiency Sub-Ledger
                 corresponding to the Term Advance with the highest ranking
                 Term Advance Rating until the debit balance thereon is reduced
                 to zero;

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<PAGE>

         (b)     secondly, to the Funding 1 Principal Deficiency Sub-Ledger
                 corresponding to the Term Advance with the next highest
                 ranking Term Advance Rating until the debit balance thereon is
                 reduced to zero; and

         (c)     thirdly, to the Funding 1 Principal Deficiency Sub-Ledger
                 corresponding to the Term Advance with the next highest
                 ranking Term Advance Rating until the debit balance thereon is
                 reduced to zero,

         and so on until the balance of the Funding 1 Principal Deficiency
         Ledger is zero.

20.      FUNDING 1 GENERAL RESERVE LEDGER

20.1     A tranche (if any) drawn down on a relevant Closing Date by Funding 1
         pursuant to a Start-Up Loan Agreement for the purposes of funding the
         Funding 1 General Reserve Fund (or any other similar reserve fund)
         will be credited to the Funding 1 General Reserve Ledger.

20.2     Amounts shall be credited to the Funding 1 General Reserve Ledger in
         accordance with the Funding 1 Priority of Payments above.

20.3     Amounts shall be debited to the Funding 1 General Reserve Ledger on
         each Funding 1 Interest Payment Date in order to be applied in
         accordance with the order of priority of payments set out in Schedule
         3 to the Funding 1 Deed of Charge.

21.      FUNDING 1 LIQUIDITY RESERVE LEDGER

21.1     Amounts shall be credited to the Funding 1 Liquidity Reserve Ledger in
         accordance with the Funding 1 Priority of Payments above.

21.2     Amounts shall be debited to the Funding 1 Liquidity Reserve Ledger to
         the extent permitted on each relevant Funding 1 Interest Payment Date
         in order to be applied in accordance with the priority of payments set
         out in Schedule 3 to the Funding 1 Deed of Charge.

22.      INTERCOMPANY LOAN LEDGER

         The Cash Manager shall ensure that all payments of interest and
         repayments of principal on each of the Term Advances are recorded in
         the Intercompany Loan Ledger.

23.      FUNDING 1 CASH ACCUMULATION LEDGER

         The Cash Manager shall ensure that all Funding 1 Principal Receipts
         reserved by Funding 1 to pay the relevant Bullet Term Advances are
         recorded on the Funding 1 Cash Accumulation Ledger.

24.      FUNDING 2 REVENUE LEDGER

         The Cash Manager shall ensure that:

         (a)     the following amounts shall be credited to the Funding 2
                 Revenue Ledger:

                 (i)     all Funding 2 Revenue Receipts;

                 (ii)    all interest received by Funding 2 in respect of the
                         Funding 2 Bank Accounts;

                 (iii)   all amounts received by Funding 2 representing income
                         on any Funding 2 Authorised Investments;

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<PAGE>

                 (iv)    all amounts (other than any early termination payment
                         which is to be used to acquire, if necessary, a new
                         swap) received by Funding 2 under the Funding 2 Swap
                         Agreement; and

                 (v)     any amount debited to the Funding 2 Principal Ledger
                         under paragraph 25(b)(ii) below; and

         (b)     any payment or provision made under paragraph 7 above shall be
                 debited to the Funding 2 Revenue Ledger.

25.      FUNDING 2 PRINCIPAL LEDGER

         Without prejudice to paragraph 26 below, the Cash Manager shall ensure
         that:

         (a)     the following amounts shall be credited to the Funding 2
                 Principal Ledger:

                 (i)     all Funding 2 Principal Receipts; and

                 (ii)    amounts credited to the Funding 2 Principal Deficiency
                         Ledger under paragraph 7 above and paragraph 26 below;
                         and

         (b)     the following amounts shall be debited to the Funding 2
                 Principal Ledger:

                 (i)     the aggregate amount paid pursuant to paragraph 8
                         above (other than any remainder to be credited to the
                         Funding 2 Principal Ledger); and

                 (ii)    on each Funding 2 Interest Payment Date, an amount
                         equal to the Funding 2 Income Deficit on such Funding
                         2 Interest Payment Date.

26.      FUNDING 2 PRINCIPAL DEFICIENCY LEDGER

26.1     Without prejudice to paragraph 7 above, the Cash Manager shall ensure
         that there shall be debited to the Funding 2 Principal Deficiency
         Ledger:

         (a)     deficiencies arising from Losses which have been allocated to
                 the Funding 2 Share;

         (b)     Funding 2 Available Principal Receipts allocated to fund the
                 Funding 2 Liquidity Reserve Fund up to the Funding 2 Liquidity
                 Reserve Required Amount pursuant to the applicable Funding 2
                 Pre-Enforcement Principal Priority of Payments; and

         (c)     any amount required to be debited to the Funding 2 Principal
                 Ledger under paragraph 25(b)(ii) above.

26.2     The Cash Manager shall ensure that there shall be credited to the
         Funding 2 Principal Deficiency Ledger any amount to be credited in
         accordance with paragraph 7 above.

26.3     Amounts to be debited to the Funding 2 Principal Deficiency Ledger
         shall be debited in the following order:

         (a)     first, on the Funding 2 Subordinated Loan Tranche Principal
                 Deficiency Sub Ledger until the balance of the Funding 2
                 Subordinated Loan Tranche Principal Deficiency Sub Ledger is
                 equal to the aggregate principal amount outstanding of all
                 Subordinated Loan Tranches;

                                      33

<PAGE>

         (b)     second, on the Funding 2 BB Principal Deficiency Sub-Ledger
                 until the balance of the Funding 2 BB Principal Deficiency
                 Sub-Ledger is equal to the aggregate principal amount
                 outstanding of all BB Loan Tranches;

         (c)     third, on the Funding 2 BBB Principal Deficiency Sub-Ledger
                 until the balance of the Funding 2 BBB Principal Deficiency
                 Sub-Ledger is equal to the aggregate principal amount
                 outstanding of all BBB Loan Tranches;

         (d)     fourth, on the Funding 2 A Principal Deficiency Sub-Ledger
                 until the balance of the Funding 2 A Principal Deficiency
                 Sub-Ledger is equal to the aggregate principal amount
                 outstanding of all A Loan Tranches;

         (e)     fifth, on the Funding 2 AA Principal Deficiency Sub-Ledger
                 until the balance of the Funding 2 AA Principal Deficiency
                 Sub-Ledger is equal to the aggregate principal amount
                 outstanding of all AA Loan Tranches;

         (f)     sixth, on the Funding 2 AAA Principal Deficiency Sub-Ledger,
                 at which point there will be an Asset Trigger Event (unless
                 such losses are recorded when ((i)) the aggregate principal
                 amount outstanding of all Subordinated Loan Tranches, BB Loan
                 Tranches, BBB Loan Tranches, A Loan Tranches and AA Loan
                 Tranches is equal to zero and ((ii)) the sum of (A) the amount
                 standing to the credit of the Funding 2 General Reserve Ledger
                 and (B) the amount standing to the credit of the Funding 2
                 Revenue Ledger together with amounts determined and due to be
                 credited to the Funding 2 Revenue Ledger prior to the
                 immediately following Funding 2 Interest Payment Date after
                 such debit is made, is greater than the amount necessary to
                 pay the items in paragraphs (A) to (E) in the Funding 2
                 Pre-Enforcement Revenue Priority of Payments on the
                 immediately following Funding 2 Interest Payment Date after
                 such debit is made);

         Losses on the Loans and/or the application of amounts standing to the
         credit of the Funding 2 Principal Ledger and/or the Funding 2 Cash
         Accumulation Ledger to pay interest and fees on the Master
         Intercompany Loan will not be recorded on the Funding 2 Principal
         Deficiency Ledger to the extent that the Funding 2 Share of the Trust
         Property together with amounts standing to the credit of the Funding 2
         Cash Accumulation Ledger and the Funding 2 Principal Ledger, in
         aggregate, is greater than or equal to the aggregate Outstanding
         Principal Balance of the Rated Loan Tranches and Subordinated Loan
         Tranches under the Master Intercompany Loan Agreement on the relevant
         Funding 2 Interest Payment Date, after taking account of such Losses
         or the relevant application of Principal Receipts.

26.4     Amounts to be credited to the Funding 2 Principal Deficiency Ledger
         shall be credited in the following order:

         (a)     first, in an amount necessary to reduce to zero the balance on
                 the Funding 2 AAA Principal Deficiency Sub-Ledger;

         (b)     second, provided that interest due on the AA Loan Tranches has
                 been paid, in an amount necessary to reduce to zero the
                 balance on the Funding 2 AA Principal Deficiency Sub-Ledger;

         (c)     third, provided that interest due on the A Loan Tranches has
                 been paid, in an amount to reduce to zero the balance on the
                 Funding 2 A Principal Deficiency Sub-Ledger;

         (d)     fourth, provided that interest due on the BBB Loan Tranches
                 has been paid, in an amount necessary to reduce to zero the
                 balance on the Funding 2 BBB Principal Deficiency Sub-Ledger;

                                      34

<PAGE>

         (e)     fifth, provided that interest due on the BB Loan Tranches has
                 been paid, in an amount necessary to reduce to zero the
                 balance on the BB Principal Deficiency Sub-Ledger; and

         (f)     sixth, provided that interest due on the Subordinated Loan
                 Tranches has been paid, in an amount necessary to reduce to
                 zero the balance on the Funding 2 Subordinated Loan Tranche
                 Principal Deficiency Sub Ledger.

27.      FUNDING 2 GENERAL RESERVE LEDGER

27.1     An amount drawn down on a relevant Closing Date by Funding 2 pursuant
         to a Funding 2 Start-Up Loan Agreement or of a Start-Up Loan Tranche
         under the Master Intercompany Loan Agreement for the purposes of
         funding the Funding 2 General Reserve Fund (or any other similar
         reserve fund) will be credited to the Funding 2 General Reserve
         Ledger.

27.2     Amounts shall be credited to the Funding 2 General Reserve Ledger in
         accordance with the Funding 2 Priority of Payments above.

27.3     Amounts shall be debited to the Funding 2 General Reserve Ledger on
         each Funding 2 Interest Payment Date in order to be applied in
         accordance with the order of priority of payments set out in Schedule
         3 to the Funding 2 Deed of Charge.

28.      FUNDING 2 LIQUIDITY RESERVE LEDGER

28.1     Amounts shall be credited to the Funding 2 Liquidity Reserve Ledger in
         accordance with the Funding 2 Priority of Payments above.

28.2     Amounts shall be debited to the Funding 2 Liquidity Reserve Ledger to
         the extent permitted on each relevant Funding 2 Interest Payment Date
         in order to be applied in accordance with the priority of payments set
         out in Schedule 3 to the Funding 2 Deed of Charge.

29.      MASTER INTERCOMPANY LOAN LEDGER

         The Cash Manager shall ensure that all payments of interest and
         repayments of principal on each of the Loan Tranches are recorded in
         the Master Intercompany Loan Ledger.

30.      FUNDING 2 CASH ACCUMULATION LEDGER

         The Cash Manager shall ensure that all Funding 2 Principal Receipts
         reserved by Funding 2 to pay the relevant Bullet Loan Tranches are
         recorded on the Funding 2 Cash Accumulation Ledger.

31.      START-UP LOAN REVENUE CONTRIBUTION LEDGER

31.1     The Cash Manager shall ensure that all amounts received by Funding 2
         under a Funding 2 Start-Up Loan Agreement or a Start-Up Loan Tranche
         under the Master Intercompany Loan Agreement or part thereof for the
         purposes of contributing towards Funding 2 Available Revenue Receipts
         on the Funding 2 Interest Payment Date immediately following the
         relevant Closing Date are credited to the Start-Up Loan Revenue
         Contribution Ledger.

31.2     The Cash Manager shall ensure that all amounts referred to in
         paragraph 31.1 above are debited to the Start-Up Loan Revenue
         Contribution Ledger on the Funding 2 Interest Payment Date immediately
         following the Closing Date on which they were advanced for the purpose
         described in paragraph 31.1 above.

                                      35

<PAGE>

                                  SCHEDULE 3

                      FORM OF FUNDING 1 QUARTERLY REPORT

INTERCOMPANY LOANS BALANCES

[Balances]

Last quarter closing balance
Repayments
New Term Advances
CR to Cash Accumulation Ledger in period
CR to Principal Ledger in period
Closing balance

CASH ACCUMULATION LEDGER
Opening balance
Principal received
Principal paid
Closing balance

PRINCIPAL LEDGER
Opening balance
Principal received
CR from Principal Deficiency Ledger
Principal paid
Closing balance

AVAILABLE CREDIT ENHANCEMENT

General Reserve Fund at closing

Last quarter closing General Reserve Fund

Drawings to make a bullet repayment
Other drawings
Closing of balance of General Reserve Fund
Target of balance General Reserve Fund

                                      36

<PAGE>

PRINCIPAL DEFICIENCY LEDGER                        AAA    AA    BBB

Opening Principal Deficiency Ledger Balance
Losses this Quarter

Principal Deficiency Ledger top up from Revenue
Income
Closing Principal Deficiency Ledger Balance

SUBORDINATED LOAN OUTSTANDING

[Balances]

Last quarter closing outstanding
Accrued interest
Repayments Made
Closing balance

                                      37

<PAGE>

                                  SCHEDULE 4

                      FORM OF FUNDING 2 QUARTERLY REPORT

MASTER INTERCOMPANY LOANS BALANCE

[Balance]

Last quarter closing balance
Repayments
New Loan Tranche
CR to Cash Accumulation Ledger in period
CR to Principal Ledger in period
Closing balance

CASH ACCUMULATION LEDGER
Opening balance
Principal received
Principal paid
Closing balance

PRINCIPAL LEDGER
Opening balance
Principal received
CR from Principal Deficiency Ledger
Principal paid
Closing balance

AVAILABLE CREDIT ENHANCEMENT
Funding 2 General Reserve Fund at Programme Date
Last quarter closing Funding 2 General Reserve Fund
Drawings to make a bullet repayment
Other drawings
Closing balance of Funding 2 General Reserve Fund
Target balance of Funding 2 General Reserve Fund

                                      38

<PAGE>

PRINCIPAL DEFICIENCY LEDGER                        AAA    AA    BBB

Opening Principal Deficiency Ledger balance
Losses this quarter

Principal Deficiency Ledger top up from Revenue
Receipts
Closing Principal Deficiency Ledger balance

SUBORDINATED LOANS OUTSTANDING

[Balances]

Last quarter closing outstanding
Accrued interest
Repayments made
Closing balance

                                      39

<PAGE>

                                  SIGNATORIES

CASH MANAGER AND SELLER

EXECUTED as a DEED by                       )
BANK OF SCOTLAND PLC                        )    /s/ IAN STEWART
acting by its attorney                      )    /s/ DAVID WILKINSON
in the presence of:                         )

Witness's signature: /s/ CHRIS WALL

Name:

Address: ALLEN & OVERY LLP
         LONDON
         E14 5DU

MORTGAGES TRUSTEE

EXECUTED as a DEED on behalf of             )
PERMANENT MORTGAGES                         )    /s/ ABU KAPADIA
TRUSTEE LIMITED,                            )
a company incorporated in Jersey,           )
Channel Islands, by                         )
being a person who,                         )
in accordance with the laws of that         )
territory is acting under the authority of  )
the company in the presence of:             )

Witness's signature: /s/ CHRIS WALL

Name:

Address: ALLEN & OVERY LLP
         LONDON
         E14 5DU

FUNDING 1

EXECUTED as a DEED by                       )    /s/ CLAUDIA WALLACE
PERMANENT FUNDING (NO. 1)                   )    /s/ HELENA WHITTAKER
LIMITED acting by two directors             )

FUNDING 2

EXECUTED as a DEED by                       )    /s/ CLAUDIA WALLACE
PERMANENT FUNDING (NO. 2)                   )    /s/ HELENA WHITTAKER
LIMITED acting by two directors             )

                                      40

<PAGE>

FUNDING 1 SECURITY TRUSTEE

EXECUTED as a DEED                          )
for and on behalf of                        )    /s/ VINCENT GIRAUD
THE BANK OF NEW YORK                        )
by its authorised signatory
in the presence of:                         )

Witness's signature: /s/ CHRIS WALL

Name:

Address: ALLEN & OVERY LLP
         LONDON
         E14 5DU

FUNDING 2 SECURITY TRUSTEE

EXECUTED as a DEED                          )
for and on behalf of                        )    /s/ VINCENT GIRAUD
THE BANK OF NEW YORK                        )
by its authorised signatory
in the presence of:                         )

Witness's signature: /s/ CHRIS WALL

Name:

Address: ALLEN & OVERY LLP
         LONDON
         E14 5DU

                                      41