AMENDED AND RESTATED MORTGAGES TRUST DEED       EXHIBIT 4.2.1

                               21 NOVEMBER 2007

                             BANK OF SCOTLAND PLC

                                      and

                       PERMANENT FUNDING (NO. 1) LIMITED

                                      and

                       PERMANENT FUNDING (NO. 2) LIMITED

                                      and

                      PERMANENT MORTGAGES TRUSTEE LIMITED

                                      and

                             SFM OFFSHORE LIMITED

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                                   CONTENTS

CLAUSE                                                                     PAGE

1.       Definitions and Construction.........................................2
2.       Creation of Mortgages Trust..........................................2
3.       Conditions Precedent.................................................3
4.       Acquisition by Funding 1 and/or Funding 2 of an Increased Interest
         in the Trust Property................................................4
5.       Initial Funding 1 Share, Initial Seller Share and Initial Funding
         2 Share..............................................................8
6.       Acquisition by Seller of an Interest Relating to Capitalised
         Interest.............................................................9
7.       Payment by the Seller, Funding 1 and/or Funding 2 to Funding 1 or
         Funding 2 of the Amount Outstanding under an Intercompany Loan or
         the Master Intercompany Loan.........................................9
8.       Adjustment of Funding 1 Share Percentage, Funding 2 Share
         Percentage and Seller Share Percentage on Calculation Dates.........10
9.       Minimum Seller Share................................................14
10.      Allocation and Distribution of Revenue Receipts.....................15
11.      Allocation and Distribution of Principal Receipts...................17
12.      Allocation of Losses................................................20
13.      New Beneficiary of the Mortgages Trust..............................20
14.      Ledgers.............................................................21
15.      Costs and Expenses of the Mortgages Trustee.........................21
16.      Directions from Beneficiaries.......................................21
17.      Transfers...........................................................23
18.      Covenants of the Mortgages Trustee..................................24
19.      Power to Delegate...................................................25
20.      Powers of Investment................................................25
21.      Other Provisions Regarding the Mortgages Trustee....................25
22.      No Retirement of Mortgages Trustee..................................26
23.      Termination.........................................................27
24.      Further Assurances..................................................27
25.      Amendments..........................................................27
26.      Non Petition Covenant...............................................28
27.      No Partnership or Agency............................................28
28.      Calculations........................................................28
29.      No Waiver; Remedies.................................................28
30.      Execution in Counterparts/Severability..............................28
31.      Tax.................................................................28
32.      Confidentiality.....................................................29
33.      Exclusion of Third Party Rights.....................................29
34.      Addresses for Notices...............................................30
35.      Governing Law and Submission to Jurisdiction........................31
36.      Exclusion of Trustee Act 2000.......................................31

Signatories..................................................................32

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THIS AMENDED AND RESTATED MORTGAGES TRUST DEED (this DEED) 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 SELLER, a BENEFICIARY and the CASH MANAGER);

(2)      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 a BENEFICIARY and FUNDING 1);

(3)      PERMANENT FUNDING (NO. 2) LIMITED (registered number 04441772), 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 a BENEFICIARY and FUNDING 2);

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

(5)      SFM OFFSHORE LIMITED (registered number 76015), a private limited
         company incorporated under the laws of Jersey whose registered office
         is at 47 Esplanade, St Helier, Jersey JE1 0BD, Channel Islands (acting
         in its capacity as the SHARE TRUSTEE).

WHEREAS:

(A)      On 13 June 2002 the Share Trustee assigned the Initial Trust Property
         to the Mortgages Trustee and the Mortgages Trustee declared that it
         held and would hold the Trust Property on trust absolutely for the
         benefit of Funding 1 and Halifax (then in its capacity as the Seller)
         on the terms and subject to the conditions set out in the Mortgages
         Trust Deed dated such date.

(B)      Pursuant to the terms of the Seller Mortgages Trust Assignment
         Agreement, Funding 2 acquired a portion of Halifax's beneficial
         interest in the Mortgages Trust on 17 October 2006.

(C)      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 1985 and
         changed its name to Bank of Scotland plc and the business and all
         property and liabilities of Halifax (including its beneficial interest
         in the Mortgages Trust and its rights and obligations under the
         Mortgages Trust Deed) were transferred to Bank of Scotland.

(D)      The Mortgages Trustee holds the Trust Property as bare trustee for the
         Beneficiaries upon, with and subject to the trusts, powers and
         provisions of the Mortgages Trust Deed.

                                       1

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(E)      The Seller carries on the business of, inter alia, originating
         residential first mortgage loans to individual Borrowers in the United
         Kingdom including under the Halifax brand and of managing and
         administering such mortgage loans and residential first mortgage loans
         that were originated by Halifax. Halifax assigned the Initial
         Portfolio to the Mortgages Trustee on 14 June 2002 and (from time to
         time) has sold New Portfolios to the Mortgages Trustee, pursuant to
         the terms of the Mortgage Sale Agreement. Bank of Scotland may sell
         further New Portfolios to the Mortgages Trustee pursuant to the terms
         of the Mortgage Sale Agreement. The Initial Portfolio is, and any New
         Portfolios are and shall be, held by the Mortgages Trustee (in
         relation to Scottish Loans, in its capacity as beneficiary under a
         Scottish Declaration of Trust) on trust for the Beneficiaries upon,
         with and subject to the trusts, powers and provisions of the Mortgages
         Trust Deed.

(F)      The parties to the Mortgages Trust Deed have agreed to further amend
         and restate the terms of the Mortgages Trust Deed on the date hereof
         as set out herein.

NOW THIS DEED WITNESSES:

1.       DEFINITIONS AND CONSTRUCTION

1.1      The amended and restated master definitions and construction schedule
         signed by, amongst others, the parties to this Deed 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 Deed) (the MASTER
         DEFINITIONS AND CONSTRUCTION SCHEDULE) is expressly and specifically
         incorporated into this Deed 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 Deed, including the Recitals hereto and
         this Deed shall be construed in accordance with the interpretation
         provisions set out in CLAUSE 3 of the Master Definitions and
         Construction Schedule.

1.2      This Deed amends and restates the mortgages trust deed made on 13 June
         2002 as amended and restated on 6 March 2003, 25 November 2003, 12
         March 2004, 22 July 2004, 18 November 2004, 23 March 2005, 22 March
         2006 and 17 October 2006 (the PRINCIPAL DEED). As of the date of this
         Deed, any future rights or obligations (excluding such obligations
         accrued to the date of this Deed) of a party under the Principal Deed
         shall be extinguished and shall instead be governed by this Deed,
         provided that the Mortgages Trust shall not be terminated as a result
         thereof but shall continue on the terms of the Principal Deed as
         amended by this Deed.

2.       CREATION OF MORTGAGES TRUST

2.1      INITIAL TRUST PROPERTY

         On 13 June 2002 the Share Trustee assigned the Initial Trust Property
         to the Mortgages Trustee and the Mortgages Trustee declared that it
         held the Initial Trust Property on trust absolutely as to both capital
         and income by the Mortgages Trustee for the benefit, as beneficial
         tenants in common, of Halifax (then in its capacity as the Seller) as
         to the Initial Seller Share Percentage and Funding 1 as to the Initial
         Funding 1 Share Percentage.

2.2      INITIAL CLOSING TRUST PROPERTY

         Pursuant to the provisions of the Mortgage Sale Agreement, Halifax
         (then in its capacity as the Seller) assigned the Initial Closing
         Trust Property to the Mortgages Trustee on the Initial Closing Date.

                                       2

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2.3      FUTURE TRUST PROPERTY

         From time to time and pursuant to the Mortgage Sale Agreement, Halifax
         (then in its capacity as the Seller) has sold and Bank of Scotland (in
         its capacity as the Seller since the Reorganisation Date) intends to
         sell the Future Trust Property to the Mortgages Trustee.

2.4      TRUST PROPERTY

         Subject to CLAUSE 3.4, the Mortgages Trustee shall hold the Trust
         Property as to both capital and income on trust absolutely for Funding
         1 (as to the Funding 1 Share), for Funding 2 (as to the Funding 2
         Share) and for the Seller (as to the Seller Share) as beneficial
         tenants in common upon, with and subject to all the trusts, powers and
         provisions of this Deed.

2.5      OTHER TRUST PROPERTY

         The Trust Property shall also include:

         (a)     any increase in the Outstanding Principal Balance of the Loans
                 in the Portfolio due to capitalisation of interest, expenses
                 or arrears, Borrowers taking Payment Holidays, or Borrowers
                 making any Flexible Loan Drawing, Retention Drawing, drawing
                 under a Delayed Cashback or Home Cash Reserve Drawing;

         (b)     any Revenue Receipts and Principal Receipts on the Loans in
                 the Portfolio;

         (c)     any other amounts received under or in respect of the Loans
                 and their Related Security on or after the relevant Sale Date
                 (excluding Third Party Amounts), including the proceeds of any
                 sale of the Loans and their Related Security and any other
                 proceeds of sale of any other Trust Property;

         (d)     rights under the insurance policies that are assigned to the
                 Mortgages Trustee or which the Mortgages Trustee has the
                 benefit of;

         (e)     amounts on deposit (and interest earned on those amounts) in
                 the Mortgages Trustee GIC Account; and

         (f)     any other property representing Initial Trust Property or (a)
                 to (e) ABOVE from time to time.

3.       CONDITIONS PRECEDENT

3.1      The Initial Trust Property is held by the Mortgages Trustee on the
         Mortgages Trust.

3.2      The Initial Closing Trust Property was held by the Mortgages Trustee
         on the Mortgages Trust upon the satisfaction of the following
         conditions precedent:

         (a)     due execution and delivery of the mortgage sale agreement
                 dated the Initial Closing Date by all parties to it;

         (b)     due execution and delivery of the mortgages trust deed dated
                 13 June 2002 by all parties to it; and

         (c)     in respect of the Funding 1 Share of the Trust Property only,
                 payment of the Purchase Price by Funding 1 to Halifax (then in
                 its capacity as the Seller) on the Initial Closing Date.

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3.3      The Initial Closing Trust Property is and any Future Trust Property
         which has or is to be sold shall be held by the Mortgages Trustee on
         the Mortgages Trust subject to satisfaction of the conditions set out
         in CLAUSE 4.1 of the Mortgage Sale Agreement for the sale of New Loans
         and their New Related Security to the Mortgages Trustee.

3.4      The requirement for the Mortgages Trustee to hold the Trust Property
         on trust for Funding 2 was conditional upon the payment of [POUND]100
         by Funding 2 to Halifax (then in its capacity as the Seller) for the
         acquisition by Funding 2, by way of assignment, from Halifax (then in
         its capacity as the Seller) of a portion of its beneficial interest in
         the Mortgages Trust in accordance with the terms of the Seller
         Mortgages Trust Assignment Agreement.

4.       ACQUISITION BY FUNDING 1 AND/OR FUNDING 2 OF AN INCREASED INTEREST IN
         THE TRUST PROPERTY

4.1      OFFER TO PAY

         On not more than 60 days' written notice nor less than 20 days'
         written notice:

         (a)     Funding 1 may offer to make a payment to the Seller or Funding
                 2 (as applicable) so as to increase the Funding 1 Share of the
                 Trust Property and to cause a corresponding decrease in the
                 Seller Share of the Trust Property or the Funding 2 Share of
                 the Trust Property (as the case may be) on the date specified
                 in that notice (and any such adjustments to the relevant
                 Beneficiaries' Shares to be calculated in accordance with
                 CLAUSE 8); and/or

         (b)     Funding 2 may offer to make a payment to the Seller or Funding
                 1 (as applicable) so as to increase the Funding 2 Share of the
                 Trust Property and to cause a corresponding decrease in the
                 Seller Share of the Trust Property or the Funding 1 Share of
                 the Trust Property (as the case may be) on the date specified
                 in that notice (and any such adjustments to the relevant
                 Beneficiaries' Shares to be calculated in accordance with
                 CLAUSE 8).

         Such offer may only be accepted if the following conditions precedent
         are satisfied on such date:

         (i)     in the case of an offer by Funding 1:

                 (A)     no deficiency is recorded on the Principal Deficiency
                         Ledger as at the most recent Funding 1 Interest
                         Payment Date;

                 (B)     no Note Event of Default (in respect of the Notes
                         issued by the Funding 1 Issuers) or Intercompany Loan
                         Event of Default (under an Intercompany Loan
                         Agreement) shall have occurred which is continuing or
                         unwaived as at the relevant date;

                 (C)     the Funding 1 Security Trustee is not aware that the
                         increase in the Funding 1 Share of the Trust Property
                         would adversely affect the then current credit ratings
                         by the Rating Agencies (or any of them) of the Notes
                         issued by the Funding 1 Issuers or the Master Issuer;

                                       4

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                 (D)     the Notes have been issued by the relevant Funding 1
                         Issuer, the subscription proceeds received on behalf
                         of the relevant Funding 1 Issuer and advanced by the
                         relevant Funding 1 Issuer to Funding 1 pursuant to an
                         Intercompany Loan Agreement, the proceeds of which
                         will be applied by Funding 1 and shall be sufficient
                         to make the payment referred to in the notice on the
                         relevant date;

                 (E)     Funding 1 has entered into, if necessary, a New
                         Start-up Loan and a New Funding 1 Swap and adjustments
                         have been made, if required, to the General Reserve
                         Fund;

                 (F)     receipt of a solvency certificate executed by an
                         authorised signatory of the Seller or Funding 2 (as
                         applicable) in form and content acceptable to the
                         Mortgages Trustee, Funding 1 and the Funding 1
                         Security Trustee;

                 (G)     as at the relevant date, the aggregate Outstanding
                         Principal Balance of Loans constituting the Trust
                         Property, in respect of which the aggregate amount in
                         arrears is more than three times the monthly payment
                         then due, is less than 5 per cent. of the aggregate
                         Outstanding Principal Balance of all Loans
                         constituting the Trust Property unless the Rating
                         Agencies have confirmed that the then current ratings
                         of the Notes of the Funding 1 Issuers or of the Master
                         Issuer will not be withdrawn, reduced or qualified;

                 (H)     where Funding 1 makes the offer to the Seller, the
                         Seller has not received written notice that the short
                         term, unsecured, unguaranteed and unsubordinated debt
                         obligations of the Seller are not rated at least P-1
                         by Moody's, A-1 by Standard & Poor's and F1 by Fitch
                         at the time of, and immediately following, the payment
                         made by Funding 1 on the relevant date;

                 (I)     the product of the WAFF and WALS for the Loans
                         constituting the Trust Property calculated on the
                         relevant date in the same way as for the Initial
                         Portfolio (or as agreed by the Servicer and the Rating
                         Agencies from time to time) does not exceed the
                         product of the WAFF and WALS (when tested by Fitch at
                         the "AAA level" as calculated in accordance with
                         Fitch's methodology) for the Loans constituting the
                         Trust Property calculated on the most recent previous
                         Closing Date, plus 0.25 per cent.;

                 (J)     the loan to value ratio of Loans in the Trust
                         Property, after application of the LTV Test on the
                         relevant date, does not exceed the loan to value ratio
                         (based on the LTV Test) of Loans in the Trust Property
                         on the most recent previous Closing Date, plus 0.25
                         per cent.; and

                 (K)     the General Reserve Fund has not been debited on or
                         before the relevant date for the purposes of curing a
                         Principal Deficiency in respect of the Term Advances
                         in circumstances where the General Reserve Fund has
                         not been replenished by a corresponding amount by the
                         relevant date.

                                       5

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                 Funding 1 may not make or offer to make a payment to the
                 Seller or Funding 2 in consideration of an increased share of
                 the Trust Property if, as at the relevant date, the Step-up
                 Date in respect of any Note issued by a Funding 1 Issuer has
                 been reached and the Funding 1 Issuer who issued that Note has
                 not exercised its option to redeem that Note as at the
                 relevant date in accordance with the Terms and Conditions of
                 that Note. For the avoidance of doubt, this prohibition on
                 Funding 1 making a payment to the Seller or Funding 2 in
                 consideration of an increased share of the Trust Property
                 shall remain in effect only so long as any such Note remains
                 outstanding and, upon, its redemption, Funding 1 may again
                 make a payment to the Seller or Funding 2 in consideration of
                 an increased share of the Trust Property; and

         (ii)    in the case of an offer by Funding 2:

                 (A)     no deficiency is recorded on the Funding 2 Principal
                         Deficiency Ledger (other than the Subordinated Loan
                         Principal Deficiency Ledger) as at the most recent
                         Funding 2 Interest Payment Date;

                 (B)     no Note Event of Default (in respect of Notes issued
                         by the Master Issuer) or Master Intercompany Loan
                         Event of Default (under the Master Intercompany Loan
                         Agreement) shall have occurred which is continuing or
                         unwaived as at the relevant date;

                 (C)     the Funding 2 Security Trustee is not aware that the
                         increase in the Funding 2 Share of the Trust Property
                         would adversely affect the then current credit ratings
                         by the Rating Agencies (or any of them) of the Notes
                         issued by the Funding 1 Issuers or by the Master
                         Issuer;

                 (D)     the Notes have been issued by the Master Issuer, the
                         subscription proceeds received on behalf of the Master
                         Issuer and advanced by the Master Issuer to Funding 2
                         pursuant to the Master Intercompany Loan Agreement,
                         the proceeds of which will be applied by Funding 2 and
                         shall be sufficient to make the payment referred to in
                         the notice on the relevant date;

                 (E)     Funding 2 has entered into, if necessary, a New
                         Funding 2 Start-up Loan and a New Funding 2 Swap and
                         adjustments have been made, if required, to the
                         Funding 2 General Reserve Fund;

                 (F)     receipt of a solvency certificate executed by an
                         authorised signatory of the Seller or Funding 1 (as
                         applicable) in form and content acceptable to the
                         Mortgages Trustee, Funding 2 and the Funding 2
                         Security Trustee;

                 (G)     as at the relevant date, the aggregate Outstanding
                         Principal Balance of Loans constituting the Trust
                         Property, in respect of which the aggregate amount in
                         arrears is more than three times the monthly payment
                         then due, is less than 5 per cent. of the aggregate
                         Outstanding Principal Balance of all Loans
                         constituting the Trust Property unless the Rating
                         Agencies have confirmed that the then current ratings
                         of the Notes of the Master Issuer or of the Funding 1
                         Issuers will not be reduced, withdrawn or qualified;

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                 (H)     where Funding 2 makes the offer to the Seller, the
                         Seller has not received written notice that the short
                         term, unsecured, unguaranteed and unsubordinated debt
                         obligations of the Seller are not rated at least P-1
                         by Moody's, A-1 by Standard & Poor's and F1 by Fitch
                         at the time of, and immediately following, the payment
                         made by Funding 2 on the relevant date;

                 (I)     the product of the WAFF and WALS for the Loans
                         constituting the Trust Property calculated on the
                         relevant date in the same way as for the Initial
                         Portfolio (or as agreed by the Servicer and the Rating
                         Agencies from time to time) does not exceed the
                         product of the WAFF and WALS (when tested by Fitch at
                         the "AAA level" as calculated in accordance with
                         Fitch's methodology) for the Loans constituting the
                         Trust Property calculated on the most recent previous
                         Closing Date, plus 0.25 per cent.;

                 (J)     the loan-to-value ratio of Loans in the Trust
                         Property, after application of the LTV Test on the
                         relevant date, does not exceed the loan-to-value ratio
                         (based on the LTV Test) of Loans in the Trust Property
                         on the most recent previous Closing Date plus 0.25 per
                         cent.; and

                 (K)     the Funding 2 General Reserve Fund has not been
                         debited on or before the relevant date for the
                         purposes of curing a Principal Deficiency in respect
                         of the Rated Loan Tranches in circumstances where the
                         Funding 2 General Reserve Fund has not been
                         replenished by a corresponding amount by the relevant
                         date.

         Funding 2 may not make or offer to make a payment to the Seller or
         Funding 1 in consideration of an increased share of the Trust Property
         if, as at the relevant date, the Step-Up Date in respect of any Series
         and Class of Notes of the Master Issuer has been reached and the
         Master Issuer has not exercised its option to redeem such Series and
         Class of Notes as at the relevant date in accordance with the Terms
         and Conditions of such Series and Class of Notes. For the avoidance of
         doubt, this prohibition on Funding 2 making a payment to the Seller or
         Funding 1 in consideration of an increased share of the Trust Property
         shall remain in effect only so long as any such Note remains
         outstanding and, upon its redemption, Funding 2 may again make a
         payment to the Seller or Funding 1 in consideration of an increased
         share of the Trust Property.

         The Mortgages Trustee may vary or waive the conditions set out in this
         Clause 4.1 where it has (1) provided notification of such variation or
         waiver to Moody's and (2) received written confirmation from each of
         S&P and Fitch that such variation or waiver will not cause the ratings
         of the Notes of any Funding 1 Issuer or the Master Issuer to be
         reduced, withdrawn or qualified).

4.2      COMPLETION OF ASSIGNMENT

         If an offer is made by Funding 1 or Funding 2 (as applicable) in
         accordance with CLAUSE 4.1 above and that offer is accepted by the
         Seller, Funding 1 or Funding 2 (as applicable), Funding 1 or Funding 2
         (as applicable) shall, subject to satisfaction of the conditions
         precedent set out in Clause 4.1 above, pay to the Seller, Funding 1 or
         Funding 2 (as applicable) an amount equal to the increase in the
         Funding 1 Share of the Trust Property or the Funding 2 Share of the
         Trust Property (as applicable) and:

         (a)     in the case of such payment by Funding 1, the Funding 1 Share
                 of the Trust Property shall increase by a corresponding amount
                 and the Seller Share of the Trust Property

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                 or the Funding 2 Share of the Trust Property (as applicable)
                 shall decrease by the same amount; or

         (b)     in the case of such payment by Funding 2, the Funding 2 Share
                 of the Trust Property shall increase by a corresponding amount
                 and the Seller Share of the Trust Property or the Funding 1
                 Share of the Trust Property (as applicable) shall decrease by
                 the same amount.

4.3      AUDIT OF LOANS CONSTITUTING THE TRUST PROPERTY

         If the short term, unsecured, unguaranteed and unsubordinated debt
         obligations of the Seller fall below A-1 by Standard & Poor's, P-1 by
         Moody's and/or F1 by Fitch, then the Beneficiaries shall appoint a
         firm of independent auditors (approved by the Rating Agencies) to
         determine whether the Loans and their Related Security (or any part of
         them) constituting the Trust Property complied with the
         representations and warranties set out in SCHEDULE 1 of the Mortgage
         Sale Agreement as at the date such Loans were sold to the Mortgages
         Trustee. The costs of such independent auditors shall be borne by the
         Beneficiaries pro rata according to their respective current
         percentage shares in the Trust Property.

5.       INITIAL FUNDING 1 SHARE, INITIAL SELLER SHARE AND INITIAL FUNDING 2
         SHARE

5.1      INITIAL FUNDING 1 SHARE

         The Initial Funding 1 Share of the Trust Property was [POUND]34.38 as
         at 13 June 2002 and [POUND]3,478,376,344.38 as at the Initial Closing
         Date. The Initial Funding 1 Share Percentage was the Initial Funding 1
         Share expressed as a percentage of the Trust Property as at the
         Initial Closing Date, such percentage being 34.38 per cent.

5.2      INITIAL SELLER SHARE

         The Initial Seller Share of the Trust Property was the total amount of
         the Trust Property minus the Initial Funding 1 Share as at 13 June
         2002. As at the Initial Closing Date, the Initial Seller Share was
         [POUND]6,638,679,574.44 and the Initial Seller Share Percentage was
         equal to 100 per cent. minus the Initial Funding 1 Share Percentage,
         such percentage being 65.62 per cent.

5.3      INITIAL FUNDING 2 SHARE

         The Initial Funding 2 Share of the Trust Property was:

         (a)     [POUND]100 following the acquisition by Funding 2, by way of
                 assignment, from Halifax (then in its capacity as the Seller)
                 of a portion of its beneficial interest in the Mortgages Trust
                 on 17 October 2006 in accordance with the Seller Mortgages
                 Trust Assignment Agreement; and

         (b)     as at the Programme Date, [POUND]5,411,550,100 and the Initial
                 Funding 2 Share Percentage expressed as a percentage of the
                 Trust Property was at the Programme Date 11.76 per cent.

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6.       ACQUISITION BY SELLER OF AN INTEREST RELATING TO CAPITALISED INTEREST

6.1      Any increase in the Outstanding Principal Balance of a Loan due to
         Capitalised Interest will be allocated to the Funding 1 Share of the
         Trust Property, the Funding 2 Share of the Trust Property and the
         Seller Share of the Trust Property, based on respectively the Funding
         1 Share Percentage, the Funding 2 Share Percentage and the Seller
         Share Percentage in the Trust Property as calculated on the most
         recent Calculation Date.

6.2      Prior to an Insolvency Event occurring in respect of the Seller, on
         each Distribution Date the Seller shall make a cash payment to Funding
         1 and to Funding 2 in an amount equal to Funding 1's share and Funding
         2's share of the Capitalised Interest in respect of those Loans that
         are subject to Payment Holidays. As a result of making such payment
         the Seller Share of the Trust Property will increase by an amount
         equal to the amount paid to Funding 1 for Funding 1's share of the
         Capitalised Interest and Funding 2 for Funding 2's share of the
         Capitalised Interest and the Funding 1 Share of the Trust Property and
         the Funding 2 Share of the Trust Property (respectively) will decrease
         by a corresponding amount. The cash payment shall be made in
         accordance with CLAUSE 6.4 below.

6.3      If an Insolvency Event occurs in respect of the Seller, then the
         Seller may acquire from Funding 1 and Funding 2 each of their
         respective shares of the Capitalised Interest in the same manner as is
         contemplated in CLAUSE 6.2, but it is not obliged to do so.

6.4      In respect of the cash payment to be made by the Seller pursuant to
         CLAUSE 6.2, the Seller hereby directs the Mortgages Trustee to deduct
         from the Seller's Share of the Mortgages Trust Available Revenue
         Receipts (allocated to the Seller pursuant to CLAUSE 10.2 of this
         Deed) an amount equal to such cash payment and to pay the same to
         Funding 1 and Funding 2 in satisfaction of the Seller's obligations
         under CLAUSE 6.2. To the extent that the Seller's Share of the
         Mortgages Trust Available Revenue Receipts is less than the amount
         required to be paid by it pursuant to CLAUSE 6.2, then the Seller
         shall pay an amount equal to the shortfall directly to Funding 1 and
         Funding 2 from its own resources.

7.       PAYMENT BY THE SELLER, FUNDING 1 AND/OR FUNDING 2 TO FUNDING 1 OR
         FUNDING 2 OF THE AMOUNT OUTSTANDING UNDER AN INTERCOMPANY LOAN OR THE
         MASTER INTERCOMPANY LOAN

7.1      CONDITIONS PRECEDENT TO ACCEPTANCE OF OFFER

(a)      On each occasion that the Seller or Funding 2 (as applicable) offers
         to make a payment to Funding 1 of the amount outstanding under an
         Intercompany Loan (referred to in this CLAUSE 7.1(a) as the RELEVANT
         INTERCOMPANY LOAN), then Funding 1 may accept that offer but only if:

         (i)     the Funding 1 Security Trustee has received written
                 confirmation from each of the Rating Agencies that the then
                 current ratings of the Notes issued by a Funding 1 Issuer
                 would not be withdrawn, qualified or downgraded by Funding 1
                 accepting the offer;

         (ii)    Funding 1 would receive the payment from the Seller or Funding
                 2 (as applicable) on a Funding 1 Interest Payment Date; and

         (iii)   Funding 1 will apply the proceeds of the payment to repay the
                 relevant Intercompany Loan and the relevant Funding 1 Issuer
                 has confirmed to Funding 1 that on that

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                 Funding 1 Interest Payment Date it will use the proceeds of
                 the relevant payment to repay the corresponding classes of
                 Notes.

(b)      On each occasion that the Seller or Funding 1 (as applicable) offers
         to make a payment to Funding 2 of the amount outstanding under a Loan
         Tranche (other than a Start-Up Loan Tranche) (referred to in this
         CLAUSE 7.1(b) as the RELEVANT LOAN TRANCHE), then Funding 2 may accept
         that offer but only if:

         (i)     the Funding 2 Security Trustee has received written
                 confirmation from each of the Rating Agencies that the then
                 current ratings of the Notes issued by the Master Issuer would
                 not be withdrawn, qualified or downgraded by Funding 2
                 accepting the offer;

         (ii)    (except in the case of a Subordinated Loan Tranche) Funding 2
                 would receive the payment from the Seller or Funding 1 (as
                 applicable) on a Funding 2 Interest Payment Date; and

         (iii)   Funding 2 will apply the proceeds of the payment to repay the
                 relevant Loan Tranche and the Master Issuer has confirmed to
                 Funding 2 that on that Funding 2 Interest Payment Date or (in
                 the case of a Subordinated Loan Tranche) such other applicable
                 London Business Day that it will use the proceeds of the
                 relevant payment to repay the corresponding Series and Class
                 of Notes or the relevant Master Issuer Subordinated Loan (as
                 applicable).

7.2      ADJUSTMENT TO SHARES IF OFFER ACCEPTED

(a)      If Funding 1 accepts the offer as described in CLAUSE 7.1(a) above,
         then the Funding 1 Share of the Trust Property shall decrease by an
         amount corresponding to the amount paid by the Seller or Funding 2 (as
         applicable) and the Seller Share of the Trust Property or the Funding
         2 Share of the Trust Property (as applicable) shall increase by the
         same amount.

(b)      If Funding 2 accepts the offer as described in CLAUSE 7.1(a) above,
         then the Funding 2 Share of the Trust Property shall decrease by an
         amount corresponding to the amount paid by the Seller or Funding 1 (as
         applicable) and the Seller Share of the Trust Property or the Funding
         1 Share of the Trust Property (as applicable) shall increase by the
         same amount.

8.       ADJUSTMENT OF FUNDING 1 SHARE PERCENTAGE, FUNDING 2 SHARE PERCENTAGE
         AND SELLER SHARE PERCENTAGE ON CALCULATION DATES

8.1      DISTRIBUTION

         On each Calculation Date and on the date that the Mortgages Trust
         terminates, excluding, for the avoidance of doubt, the Initial Closing
         Date and Programme Date, the Funding 1 Share Percentage, the Funding 2
         Share Percentage and the Seller Share Percentage will be recalculated
         by the Cash Manager (on behalf of the Mortgages Trustee and the
         Beneficiaries) based on the aggregate Outstanding Principal Balance of
         the Loans constituting the Trust Property (as adjusted from time to
         time) as at (i) the immediately preceding calendar month end or (ii)
         the close of business on the London Business Day immediately preceding
         that Calculation Date, whichever occurs later. On each Distribution
         Date, the Mortgages Trustee will distribute Principal Receipts and
         Revenue Receipts in accordance with CLAUSES 10 and 11 hereof.

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8.2      CURRENT FUNDING 1 SHARE PERCENTAGE AND CURRENT FUNDING 2 SHARE
         PERCENTAGE

         On each Calculation Date (the RELEVANT CALCULATION DATE) or on the
         date that the Mortgages Trust terminates, the Current Funding 1 Share
         Percentage and the Current Funding 2 Share Percentage will be
         recalculated and the recalculated amount will take effect from the
         next Distribution Date immediately succeeding the next following
         Calculation Date. The "CURRENT FUNDING 1 SHARE PERCENTAGE" and the
         "CURRENT FUNDING 2 SHARE PERCENTAGE" will in each case (as applicable)
         be an amount, expressed as a percentage (calculated to an accuracy of
         five decimal places (rounded upwards)), equal to:

                               A - B - C + D + E + F
                               --------------------- x 100
                                         G

         where,

         A =     the Current Funding 1 Share or the Current Funding 2 Share (as
                 applicable) as calculated on the immediately preceding
                 Calculation Date (or, in the case of the first Calculation
                 Date, the Initial Funding 1 Share as at the Initial Closing
                 Date and, in the case of the first Calculation Date following
                 the Programme Date, the Initial Funding 2 Share as at the
                 Programme Date) (as applicable);

         B =     the amount of any Principal Receipts to be distributed to
                 Funding 1 or Funding 2 (as applicable), on the Distribution
                 Date immediately following the relevant Calculation Date in
                 accordance with the provisions described in CLAUSE 11 below;

         C =     the amount of any Losses sustained on the Loans in the period
                 from the immediately preceding Calculation Period and the
                 amount of any reductions occurring in respect of the Loans as
                 described in paragraphs (i) of CLAUSE 8.4(a), in each case
                 allocated to Funding 1 or Funding 2 (as applicable) in the
                 immediately preceding Calculation Period;

         D =     an amount equal to any consideration to be paid by Funding 1
                 or Funding 2 (as applicable) to the Seller in relation to any
                 New Loans to be sold to the Mortgages Trustee on the relevant
                 Calculation Date;

         E =     an amount equal to any consideration to be paid by Funding 1
                 or Funding 2, (as applicable) to the Seller, Funding 2 or
                 Funding 1 (as applicable) in relation to any acquisition by
                 Funding 1 or Funding 2 (as applicable) from the Seller,
                 Funding 2 or Funding 1 (as applicable) on such Calculation
                 Date of an interest in the Trust Property;

         F =     an amount equal to any Capitalised Interest accruing on a Loan
                 due to Borrowers taking Payment Holidays and which has been
                 allocated to Funding 1 or Funding 2 (as applicable) since the
                 immediately preceding Calculation Date, less the amount to be
                 paid by the Seller to Funding 1 and Funding 2 on the relevant
                 Distribution Date to acquire an interest in the Trust Property
                 in accordance with CLAUSE 6 above; and

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<PAGE>

         G =     the aggregate Outstanding Principal Balance of all the Loans
                 constituting the Trust Property as at the relevant Calculation
                 Date including after making or provisioning for the
                 distributions, allocations and additions referred to in (B),
                 (C), (D), (E) and (F) above, and after taking account of any
                 distributions of Principal Receipts to Funding 1, Funding 2
                 and the Seller, the amount of any Losses allocated to Funding
                 1, Funding 2 and the Seller, the amount of any increase in the
                 balances of the Loans constituting the Trust Property due to
                 capitalisation of insurance premiums due by Borrowers or
                 Borrowers taking Payment Holidays under Loans, the adjustments
                 referred to in PARAGRAPHS (i) to (iv) (inclusive) of CLAUSE
                 8.4(a) below (or, if the Seller Share is zero, the adjustments
                 referred to in PARAGRAPH (i) only) and the amount of any other
                 additions or subtractions to the Trust Property since the
                 immediately preceding Calculation Date.

8.3      CURRENT FUNDING 1 SHARE AND CURRENT FUNDING 2 SHARE

         The "CURRENT FUNDING 1 SHARE" and the "CURRENT FUNDING 2 SHARE" will
         be an amount equal to:

                               A - B - C + D + E + F

         where "A", "B", "C", "D", "E" and "F" have the meanings specified in
         CLAUSE 8.2 above.

8.4      ADJUSTMENTS TO TRUST PROPERTY

(a)      On each relevant Calculation Date, the aggregate Outstanding Principal
         Balance of the Loans constituting the Trust Property shall be reduced
         or, as the case may be, deemed to be reduced for the purposes of the
         calculation set out in "G" in CLAUSE 8.2 above, if any of the
         following events has occurred during the Calculation Period
         immediately preceding the relevant Calculation Date:

         (i)     any Borrower exercises a right of set-off in relation to Loans
                 constituting part of the Trust Property so that the amount of
                 principal and/or interest owing under a Loan is reduced but no
                 corresponding amount is received by the Mortgages Trustee in
                 which event the total amount of Trust Property shall be
                 reduced by an amount equal to the amount set-off; and/or

         (ii)    a Loan or its Related Security (i) is in breach of the Loan
                 Warranties in the Mortgage Sale Agreement, (ii) is the subject
                 of a Further Advance or (iii) is the subject of a Product
                 Switch in the circumstances set out in CLAUSE 8.4 of the
                 Mortgage Sale Agreement or other obligation of the Seller to
                 repurchase, and if the Seller fails to repurchase the Loan or
                 Loans under the relevant Mortgage Account and their Related
                 Security as required by the terms of the Mortgage Sale
                 Agreement, then the Trust Property shall be deemed to be
                 reduced for the purposes of the calculation of "G" in CLAUSE
                 8.2 above by an amount equal to the Outstanding Principal
                 Balance of the relevant Loan or Loans under the relevant
                 Mortgage Account together with Arrears of Interest and Accrued
                 Interest; and/or

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<PAGE>

         (iii)   the Seller would be required by the Mortgages Trustee to
                 repurchase a Loan and its Related Security in accordance with
                 the terms of the Mortgage Sale Agreement, but such Loan and
                 its Related Security are not capable of repurchase, in which
                 case the Trust Property shall be deemed to be reduced for the
                 purposes of the calculation of "G" in CLAUSE 8.2 above by an
                 amount equal to the Outstanding Principal Balance of the
                 relevant Loan or Loans under the relevant Mortgage Account
                 together with Arrears of Interest and Accrued Interest; and/or

         (iv)    the Seller materially breaches any other material warranty
                 under the Mortgage Sale Agreement and/or (for so long as it is
                 the Servicer) the Servicing Agreement, in which event the
                 aggregate Outstanding Principal Balance of Loans constituting
                 the Trust Property shall be deemed for the purposes of the
                 calculation of "G" in CLAUSE 8.2 above to be reduced by an
                 amount equivalent to all losses, costs, liabilities, claims,
                 expenses and damages incurred by the Beneficiaries as a result
                 of such breach.

(b)      The reductions and deemed reductions set out in PARAGRAPH (i) to (iv)
         (inclusive) of CLAUSE 8.4(a) above shall be made on the relevant
         Calculation Date first to the Seller's Share (including the Minimum
         Seller Share) of the Trust Property only, and thereafter shall be made
         pro rata to the Funding 1 Share and the Funding 2 Share of the Trust
         Property.

(c)      If at any time after the Initial Closing Date the Mortgages Trustee
         holds, or there is held to its order, or it receives, or there is
         received to its order, any property, interest, right or benefit
         relating to any Loan and its Related Security which is or has been
         subject to any reduction or deemed reduction pursuant to PARAGRAPHS
         (i) to (iv) (inclusive) of CLAUSE 8.4(a) above, then such property,
         interest, right or benefit shall constitute a Revenue Receipt under
         the relevant Loan. Such Revenue Receipt shall belong pro rata to
         Funding 1 and Funding 2 (but only if and to the extent that the
         related reductions were applied against the Funding 1 Share and the
         Funding 2 Share of the Trust Property respectively) and thereafter
         shall belong to the Seller.

8.5      CURRENT SELLER SHARE PERCENTAGE

         On each Calculation Date, the CURRENT SELLER SHARE PERCENTAGE will be
         an amount calculated to the accuracy of five decimal places equal to:

         100% - (Current Funding 1 Share Percentage + Current Funding 2 Share
         Percentage (each as calculated on such Calculation Date)).

8.6      CURRENT SELLER SHARE

         The CURRENT SELLER SHARE will be an amount equal to:

         Outstanding Principal Balance of all the Loans in the Trust Property
         on the relevant Calculation Date - (Current Funding 1 Share + Current
         Funding 2 Share (each as calculated on such Calculation Date)).

8.7      FUNDING 1 SHARE/FUNDING 2 SHARE/SELLER SHARE

         None of the Funding 1 Share, the Funding 2 Share or the Seller Share
         may be reduced below zero. At all times the sum of the Funding 1 Share
         Percentage, the Funding 2 Share Percentage and the Seller Share
         Percentage shall be equal to 100 per cent. of the Trust Property (each
         as calculated on the most recent Calculation Date).

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9.       MINIMUM SELLER SHARE

9.1      INITIAL MINIMUM SELLER SHARE

         Subject to the provisions of Clause 12, the Seller Share of the Trust
         Property includes an amount equal to the Minimum Seller Share. Unless
         and until both the Funding 1 Share and the Funding 2 Share of the
         Trust Property are in an amount equal to zero or an Asset Trigger
         Event occurs, the Seller will not be entitled to receive Principal
         Receipts which would reduce the Seller Share of the Trust Property to
         an amount less than the Minimum Seller Share and the Seller consents
         and directs the Mortgages Trustee accordingly.

9.2      FLUCTUATION OF MINIMUM SELLER SHARE ON EACH CALCULATION DATE

         At the Initial Closing Date, the Minimum Seller Share was
         [POUND]505,862,790.74. The amount of the Minimum Seller Share will be
         recalculated on each Calculation Date in accordance with the following
         formula:

                                X + Y + Z

         where:

         X =     7.5% of the aggregate Outstanding Principal Balance of all
                 Loans comprised in the Trust Property;

         Y =     the product of: (p x q) x r where:

                 p =     8%;

                 q =     the sum of (a) the FLEXIBLE DRAW CAPACITY, being an
                         amount equal to the excess of (i) the maximum amount
                         that Borrowers are entitled to draw under Flexible
                         Loans included in the Trust Property (whether or not
                         drawn) over (ii) the aggregate principal balance of
                         Flexible Loans in the Trust Property on the relevant
                         Calculation Date, (b) the RETENTION DRAW CAPACITY,
                         being an amount equal to the excess of (i) the maximum
                         amount that Borrowers are entitled to draw under
                         Retention Loans included in the Trust Property
                         (whether or not drawn) over (ii) the aggregate
                         principal balance of Retention Loans in the Trust
                         Property on the relevant Calculation Date, (c) the
                         HOME CASH RESERVE DRAW CAPACITY, being an amount equal
                         to the excess of (i) the maximum amount that Borrowers
                         may draw under loans with a Home Cash Reserve included
                         in the Trust Property (whether drawn or not drawn)
                         over (ii) the aggregate principal balance of loans
                         with a Home Cash Reserve in the Trust Property on the
                         Relevant Calculation Date, and (d) the DELAYED
                         CASHBACK DRAW CAPACITY, being an amount equal to the
                         excess of (i) the maximum amount that Borrowers may
                         draw under loans with a Delayed Cashback included in
                         the Trust Property (whether drawn or not drawn) over
                         (ii) the aggregate principal balance of loans with a
                         Delayed Cashback in the Trust Property on the Relevant
                         Calculation Date; and

                 r =     3; and

         Z =     the aggregate sum of reductions deemed made (if any) in
                 accordance with PARAGRAPHS (ii), (iii) and (iv) of CLAUSE
                 8.4(a).

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<PAGE>

9.3      RECALCULATION OF MINIMUM SELLER SHARE FOLLOWING OCCURRENCE OF
         EXCEPTIONAL EVENTS

         Prior to the occurrence of a Trigger Event:

         (a)     the calculation of the Minimum Seller Share in accordance with
                 CLAUSE 9.2 above will be recalculated or increased (in
                 consultation with the relevant Rating Agencies) if the Seller
                 merges or otherwise combines its business with another bank or
                 other financial institution so as to increase the risks
                 associated with Borrowers holding deposits in Bank of Scotland
                 accounts and such merger or combination would adversely affect
                 the then current ratings of the Notes of the Funding 1 Issuers
                 and/or the Notes of the Master Issuer and such adverse effect
                 on the then current ratings of the Notes of the Funding 1
                 Issuers and/or the Notes of the Master Issuer would be avoided
                 if the Minimum Seller Share was so recalculated or increased;

         (b)     the calculation of the Minimum Seller Share in accordance with
                 CLAUSE 9.2 above will be recalculated or increased (in
                 consultation with the relevant Rating Agencies) if notice has
                 been received from one or more of the Rating Agencies that the
                 then current ratings of the Notes of the Funding 1 Issuers
                 and/or the Notes of the Master Issuer would be downgraded and
                 that such downgrade would be avoided if the Minimum Seller
                 Share was so recalculated or increased;

         (c)     the amount of the Minimum Seller Share as calculated in
                 accordance with CLAUSE 9.2 above will be decreased (and the
                 calculation thereof amended accordingly) from time to time at
                 the request of any of the Seller, Funding 1 or Funding 2
                 (acting reasonably) provided that the Funding 1 Security
                 Trustee has received written confirmation from each of the
                 Rating Agencies that there would be no adverse effect on the
                 then current ratings of the Notes of the Funding 1 Issuers as
                 a result thereof and the Funding 2 Security Trustee has
                 received written confirmation from each of the Rating Agencies
                 that there would be no adverse effect on the then current
                 ratings of the Notes of the Master Issuer as a result thereof;

         (d)     the amount of "X" in the calculation of the Minimum Seller
                 Share as calculated in accordance with CLAUSE 9.2 will be
                 recalculated to such amount as the Rating Agencies may require
                 in order that there is no adverse effect on the then current
                 ratings of the Notes of the Funding 1 Issuers as a result
                 thereof and the Funding 2 Security Trustee has received
                 written confirmation from each of the Rating Agencies that
                 there would be no adverse effect on the then current ratings
                 of the Notes of the Master Issuer as a result thereof in the
                 event that the Seller ceases to be assigned a long-term
                 unsecured, unsubordinated, unguaranteed debt obligation rating
                 by Moody's of at least Baa3, by S&P's of at least BBB- or by
                 Fitch of at least BBB-.

10.      ALLOCATION AND DISTRIBUTION OF REVENUE RECEIPTS

10.1     ALLOCATION AND DISTRIBUTION OF THIRD PARTY AMOUNTS

         Pursuant to the Cash Management Agreement, the Cash Manager (at the
         direction of the Mortgages Trustee on behalf of the Beneficiaries at
         their direction and with their consent) will deduct, as and when
         identified, Third Party Amounts from the Revenue Receipts standing to
         the credit of the Mortgages Trustee GIC Account, and pay over the same
         to the proper recipients thereof. The Mortgages Trustee and the
         Beneficiaries hereby consent to such deductions.

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<PAGE>

10.2     ALLOCATION AND DISTRIBUTION OF MORTGAGES TRUST AVAILABLE REVENUE
         RECEIPTS

         On each Distribution Date the Cash Manager (at the direction of the
         Mortgages Trustee and on behalf of the Beneficiaries at their
         direction and with their consent) will apply the Mortgages Trust
         Available Revenue Receipts to meet the following expenses and
         payments:

         (a)     first, in or towards satisfaction pari passu and pro rata
                 according to the respective amounts thereof of:

                 (i)     any costs, charges, liabilities and expenses then due
                         or to become due to the Mortgages Trustee under the
                         provisions of this Deed in the immediately succeeding
                         Calculation Period or any terms agreed by the
                         Mortgages Trustee with the Beneficiaries in writing
                         together with VAT thereon as provided herein (if
                         payable); and

                 (ii)    any amounts due and payable by the Mortgages Trustee
                         to third parties in respect of the Mortgages Trust and
                         incurred without breach by the Mortgages Trustee of
                         the documents to which it is a party and for which
                         payment has not been provided for elsewhere,
                         (including amounts due to H.M Revenue and Customs or
                         any other taxation authority which has jurisdiction
                         over the Trust Property or the Mortgages Trustee in
                         respect of any stamp, issue, registration, documentary
                         and other fees, duties and taxes (including interest
                         and penalties) payable by the Mortgages Trustee in
                         connection with (i) the execution and delivery of this
                         Deed; (ii) any action to be taken by or on behalf of
                         the Mortgages Trustee to enforce or to resolve any
                         doubt concerning or, for any other purpose in relation
                         to, the Mortgages Trust Deed; and (iii) any such tax
                         which is primarily due from any or all of the
                         Beneficiaries (and, for the avoidance of doubt, only
                         in such capacities) in circumstances where the
                         Mortgages Trustee has made a payment of such tax (or
                         part thereof) by reason of a failure by the relevant
                         Beneficiary to discharge their primary liability in
                         respect of such tax;

         (b)     second, in or towards satisfaction pari passu and pro rata
                 according to the respective amounts thereof of:

                 (i)     any amounts then due and payable by the Mortgages
                         Trustee to the Servicer and any costs, charges,
                         liabilities and expenses then due or to become due to
                         the Servicer from the Mortgages Trustee in the
                         immediately succeeding Calculation Period under the
                         provisions of the Servicing Agreement, together with
                         VAT thereon as provided therein (if payable);

                 (ii)    any amounts then due and payable by the Mortgages
                         Trustee to the Account Bank and any costs, charges,
                         liabilities and expenses then due or to become due to
                         the Account Bank from the Mortgages Trustee in the
                         immediately succeeding Calculation Period under the
                         provisions of the Bank Account Agreement, together
                         with VAT thereon as provided therein (if payable); and

                 (iii)   any amounts then due and payable by the Mortgages
                         Trustee to the Mortgages Trustee Corporate Services
                         Provider and any costs, charges, liabilities and
                         expenses then due or to become due to the Mortgages
                         Trustee Corporate Services Provider from the Mortgages
                         Trustee in the immediately succeeding Calculation
                         Period under the provisions of the Mortgages Trustee
                         Corporate Services Agreement, together with VAT
                         thereon as provided therein (if payable);

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<PAGE>

         (c)     third, to allocate to the Beneficiaries and pay such amounts
                 pari passu and pro rata according to the respective amounts
                 due:

                 (i)     to Funding 1 an amount equal to the amount determined
                         by multiplying the total amount of the remaining
                         Mortgages Trust Available Revenue Receipts by the
                         Funding 1 Share Percentage of the Trust Property (as
                         determined on the Relevant Share Calculation Date);
                         and

                 (ii)    to Funding 2 an amount equal to the amount determined
                         by multiplying the total amount of the remaining
                         Mortgages Trust Available Revenue Receipts by the
                         Funding 2 Share Percentage of the Trust Property (as
                         determined on the Relevant Share Calculation Date);

         (d)     fourth, to allocate and distribute to the Mortgages Trustee
                 and/or Funding 1 and/or Funding 2 (as applicable), an amount
                 equal to any Loss Amount suffered or incurred by it or them
                 (as applicable); and

         (e)     fifth, to allocate and distribute to the Seller an amount (if
                 positive) which shall equal to the Mortgages Trust Available
                 Revenue Receipts less the amount of such Mortgages Trust
                 Available Revenue Receipts applied and/or allocated under
                 PARAGRAPHS (a) to (d) above.

11.      ALLOCATION AND DISTRIBUTION OF PRINCIPAL RECEIPTS

11.1     ALLOCATION AND DISTRIBUTION OF PRINCIPAL RECEIPTS

(a)      On each Calculation Date (the RELEVANT CALCULATION DATE), prior to
         distributing any Principal Receipts, the Cash Manager shall ascertain:

         (i)     the amount of Mortgages Trust Available Principal Receipts;

         (ii)    whether the Distribution Date immediately succeeding the
                 relevant Calculation Date is within a Cash Accumulation Period
                 relating to a Bullet Term Advance (in the case of Funding 1),
                 a Bullet Loan Tranche (in the case of Funding 2) or a
                 Scheduled Amortisation Instalment (in the case of Funding 1
                 and/or Funding 2) (the Cash Accumulation Period being
                 calculated separately for each Bullet Term Advance, Bullet
                 Loan Tranche and Scheduled Amortisation Instalment); and

         (iii)   the Cash Accumulation Requirement and Repayment Requirement
                 for each of Funding 1 and Funding 2.

(b)      On each Distribution Date, the Cash Manager (at the direction of the
         Mortgages Trustee acting on behalf of the Beneficiaries at their
         direction and with their consent) shall then allocate and distribute
         Principal Receipts as provided in this CLAUSE 11.

11.2     ALLOCATION AND DISTRIBUTION OF PRINCIPAL RECEIPTS PRIOR TO THE
         OCCURRENCE OF A TRIGGER EVENT

         On each Distribution Date where no Trigger Event has occurred on or
         before the immediately preceding Calculation Date, the Cash Manager
         shall allocate the Mortgages Trust Available Principal Receipts to the
         Beneficiaries and distribute such amounts as follows:

         (a)     first, pari passu and pro rata according to the respective
                 amounts due:

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<PAGE>

                 (i)     to Funding 1 an amount equal to the lesser of:

                         (A)     an amount determined by multiplying the total
                                 amount of the Mortgages Trust Available
                                 Principal Receipts by the Funding 1 Share
                                 Percentage of the Trust Property (as
                                 determined on the Relevant Share Calculation
                                 Date); and

                         (B)     an amount up to but not exceeding Funding 1's
                                 Cash Accumulation Requirement on that
                                 Distribution Date;

                 (ii)    to Funding 2 an amount equal to the lesser of:

                         (A)     an amount determined by multiplying the total
                                 amount of the Mortgages Trust Available
                                 Principal Receipts by the Funding 2 Share
                                 Percentage of the Trust Property (as
                                 determined on the Relevant Share Calculation
                                 Date); and

                         (B)     an amount up to but not exceeding Funding 2's
                                 Cash Accumulation Requirement on that
                                 Distribution Date;

         (b)     second, pari passu and pro rata according to the respective
                 amounts due, to Funding 1 and Funding 2, to the extent not
                 already paid pursuant to item (a) above, up to the amounts set
                 forth in items (a)(i)(B) and (a)(ii)(B) above, respectively;

         (c)     third, pari passu and pro rata according to the respective
                 amounts due:

                 (i)     to Funding 1 an amount equal to the lesser of:

                         (A)     an amount determined by multiplying the total
                                 amount of the remaining Mortgages Trust
                                 Available Principal Receipts by the Funding 1
                                 Share Percentage of the Trust Property (as
                                 determined on the Relevant Share Calculation
                                 Date); and

                         (B)     an amount up to but not exceeding Funding 1's
                                 Repayment Requirement on that Distribution
                                 Date;

                 (ii)    to Funding 2 an amount equal to the lesser of:

                         (A)     an amount determined by multiplying the total
                                 amount of the remaining Mortgages Trust
                                 Available Principal Receipts by the Funding 2
                                 Share Percentage of the Trust Property (as
                                 determined on the Relevant Share Calculation
                                 Date); and

                         (B)     an amount up to but not exceeding Funding 2's
                                 Repayment Requirement on that Distribution
                                 Date;

         (d)     fourth, pari passu and pro rata according to the respective
                 amounts due, to Funding 1 and Funding 2, to the extent not
                 already paid pursuant to item (c) above, up to the amounts set
                 forth in items (c)(i)(B) and (c)(ii)(B) above, respectively;

         (e)     fifth, to allocate the remainder of the Mortgages Trust
                 Available Principal Receipts, if any, to the Seller until the
                 Seller Share of the Trust Property (as calculated on the
                 Relevant Share Calculation Date) is equal to the Minimum
                 Seller Share.

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<PAGE>

         PROVIDED THAT, in relation to items (a) through (e) above, the
         following rules will apply:

         (1)     The amount of Mortgages Trust Available Principal Receipts to
                 be allocated and paid to:

                 (i)     Funding 1 on a Distribution Date will be reduced by an
                         amount equal to (a) the aggregate of Funding 1
                         Available Revenue Receipts which are to be applied on
                         the immediately succeeding Funding 1 Interest Payment
                         Date in reduction of deficiencies on the Principal
                         Deficiency Ledger less (b) the amount by which any
                         Mortgages Trust Available Principal Receipts
                         previously allocated to Funding 1 in the current
                         Interest Period have been reduced in accordance with
                         (1)(i)(a) above; and

                 (ii)    Funding 2 on a Distribution Date will be reduced by an
                         amount equal to (a) the aggregate of Funding 2
                         Available Revenue Receipts which are to be applied on
                         the immediately succeeding Funding 2 Interest Payment
                         Date in reduction of deficiencies on the Funding 2
                         Principal Deficiency Ledger less (b) the amount by
                         which any Mortgages Trust Available Principal Receipts
                         previously allocated to Funding 2 in the current
                         Interest Period have been reduced in accordance with
                         (1)(ii)(a) above;

         (2)     Neither Funding 1 nor Funding 2 will be entitled to have
                 allocated to it (nor will have allocated to it or receive) in
                 aggregate an amount of Mortgages Trust Available Principal
                 Receipts on a Distribution Date which is in excess of the
                 Funding 1 Share or the Funding 2 Share of the Trust Property
                 (as applicable) on that Distribution Date;

         (3)     If on any Calculation Date prior to the occurrence of a
                 Trigger Event, the Seller Share of the Trust Property is equal
                 to or less than the Minimum Seller Share, the Mortgages
                 Trustee will make provision for that amount which would have
                 been payable to the Seller if the Seller Share of the Trust
                 Property had been greater than the Minimum Seller Share and
                 the Seller will not have allocated to it or receive that
                 amount until such time as the Seller Share of the Trust
                 Property is greater than the Minimum Seller Share and provided
                 that (i) the Seller will not receive nor have allocated to it
                 any such amount if a Non-Asset Trigger Event occurs and is
                 occurring and (ii) if an Asset Trigger Event occurs and is
                 occurring, the Seller will have allocated to it and will be
                 paid such amount but only to the extent permitted by the rules
                 governing distribution of Principal Receipts after the
                 occurrence of an Asset Trigger Event.

11.3     DISTRIBUTION OF PRINCIPAL RECEIPTS ON OR AFTER THE OCCURRENCE OF A
         NON-ASSET TRIGGER EVENT BUT PRIOR TO THE OCCURRENCE OF AN ASSET
         TRIGGER EVENT

         On each Distribution Date where a Non-Asset Trigger Event has occurred
         on or before the immediately preceding Calculation Date and an Asset
         Trigger Event has not occurred on or before that Calculation Date, all
         Mortgages Trust Available Principal Receipts shall be allocated to the
         Beneficiaries and distributed in the following order by the Cash
         Manager:

         (a)     first, to Funding 1 and Funding 2 pari passu and pro rata
                 according to the Funding 1 Share Percentage and the Funding 2
                 Share Percentage of the Trust Property (each as determined on
                 the Relevant Share Calculation Date) until the Funding 1 Share
                 and the Funding 2 Share of the Trust Property (each as
                 determined on the Relevant Share Calculation Date) have been
                 reduced to zero; and

         (b)     then, the remainder, if any, shall be allocated and paid to
                 the Seller.

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11.4     DISTRIBUTION OF PRINCIPAL RECEIPTS ON OR AFTER THE OCCURRENCE OF AN
         ASSET TRIGGER EVENT

         On each Distribution Date where an Asset Trigger Event has occurred on
         or before the immediately preceding Calculation Date, all Mortgages
         Trust Available Principal Receipts shall be allocated to the
         Beneficiaries and distributed pari passu and pro rata by the Cash
         Manager between Funding 1, Funding 2 and the Seller according to the
         Current Funding 1 Share Percentage, the Current Funding 2 Share
         Percentage and the Current Seller Share Percentage of the Trust
         Property (each as calculated on the Relevant Share Calculation Date)
         respectively until, the Funding 1 Share and the Funding 2 Share of the
         Trust Property are zero (and, for the avoidance of doubt, such
         payments may reduce the Current Seller Share to an amount less than
         the Minimum Seller Share). When the Funding 1 Share and the Funding 2
         Share of the Trust Property are zero, the remaining Mortgages Trust
         Available Principal Receipts (if any) shall be allocated to the
         Seller.

12.      ALLOCATION OF LOSSES

         Subject as provided in this Deed (and in particular, CLAUSE 8), all
         Losses sustained on the Loans during a Calculation Period shall be
         applied in reducing pro rata the Funding 1 Share, the Funding 2 Share
         and the Seller Share of the Trust Property. Funding 1's share, Funding
         2's share and the Seller's share of the Losses shall be determined by
         multiplying the Losses in the relevant Calculation Period by the
         Current Funding 1 Share Percentage, the Current Funding 2 Share
         Percentage and the Current Seller Share Percentage (each as calculated
         on the Relevant Share Calculation Date), the product of which shall be
         allocated to Funding 1, Funding 2 and the Seller, on each Calculation
         Date, in each case prior to calculating the allocation of Mortgages
         Trustee Available Principal Receipts on that Calculation Date.

13.      NEW BENEFICIARY OF THE MORTGAGES TRUST

         On not more than 60 days' written notice nor less than 20 days'
         written notice to the Mortgages Trustee, Funding 1, Funding 2 and the
         Seller may direct the Mortgages Trustee to add a New Beneficiary to
         the Mortgages Trust. The Mortgages Trustee shall include such
         designated entity as a beneficiary of the Mortgages Trust if Funding 1
         (or the Funding 1 Security Trustee) and/or Funding 2 (or the Funding 2
         Security Trustee) notifies the Mortgages Trustee in writing that the
         following conditions precedent are satisfied on the date of such
         inclusion:

         (a)     that the Funding 1 Security Trustee and the Funding 2 Security
                 Trustee has received written confirmation from each of the
                 Rating Agencies that the inclusion of the New Beneficiary of
                 the Mortgages Trust would not have an adverse effect on the
                 then current ratings of any outstanding Notes of the Funding 1
                 Issuers and the Master Issuer (respectively);

         (b)     no deficiency is recorded on the Principal Deficiency Ledger
                 or the Funding 2 Principal Deficiency Ledger as at the most
                 recent Funding 1 Interest Payment Date and Funding 2 Interest
                 Payment Date (respectively);

         (c)     no Note Event of Default or Intercompany Loan Event of Default
                 or Master Intercompany Loan Event of Default shall have
                 occurred which is continuing or unwaived as at the relevant
                 Distribution Date;

         (d)     requisite amendments have been made to the Transaction
                 Documents to enable the inclusion of the New Beneficiary to
                 the Mortgages Trust (including, without limitation, changes to
                 the way in which the Mortgages Trustee will allocate

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                 Mortgages Trust Revenue Receipts and Mortgages Trust Principal
                 Receipts under this Deed); and

         (e)     neither the General Reserve Fund nor the Funding 2 General
                 Reserve Fund has been debited on or before the relevant
                 Distribution Date for the purposes of curing a Principal
                 Deficiency in respect of the Term Advances (in the case of
                 Funding 1) or a Principal Deficiency in respect of a Loan
                 Tranche (in the case of Funding 2) in circumstances where the
                 General Reserve Fund or the Funding 2 General Reserve Fund
                 (respectively) has not been replenished by a corresponding
                 amount by the date; and

         (f)     the New Beneficiary, the Mortgages Trustee, Funding 1, Funding
                 2, the Funding 1 Security Trustee and/or the Funding 2
                 Security Trustee (as applicable) have entered into an
                 assignment agreement to provide for the assignment from the
                 Seller, Funding 1 and/or Funding 2 (as applicable) of a
                 portion of their beneficial interest in the Mortgages Trust to
                 the New Beneficiary.

14.      LEDGERS

         The Mortgages Trustee shall maintain, or shall procure that there are
         maintained, the following Mortgages Trustee Ledgers:

         (a)     the Principal Ledger, which shall record all receipts of
                 Principal Receipts and distribution of the same to Funding 1,
                 Funding 2 and the Seller;

         (b)     the Revenue Ledger, which shall record all receipts of Revenue
                 Receipts and distribution of the same to Funding 1, Funding 2
                 and the Seller;

         (c)     the Losses Ledger, which shall record Losses in relation to
                 the Loans; and

         (d)     the Funding 1 Share/Funding 2 Share/Seller Share Ledger which
                 shall record the Current Funding 1 Share, the Current Funding
                 2 Share, the Current Seller Share of the Trust Property, the
                 Current Funding 1 Share Percentage, the Current Funding 2
                 Share Percentage and the Current Seller Share Percentage.

15.      COSTS AND EXPENSES OF THE MORTGAGES TRUSTEE

         The Mortgages Trustee shall be entitled to charge and be remunerated
         for the work undertaken by it as trustee of the trusts created by this
         Deed. The remuneration shall be on such terms (if any) as the
         Mortgages Trustee may from time to time agree with the Beneficiaries
         in writing. The Beneficiaries shall indemnify the Mortgages Trustee
         from time to time with such regularity as is reasonably agreed between
         the parties, for the documentable costs and expenses directly and
         properly incurred by the Mortgages Trustee in performing its
         obligations hereunder together with any amounts in respect of
         Irrecoverable VAT incurred in respect of such costs and expenses. The
         cost of such indemnity shall be paid in accordance with the priority
         of payments set out in CLAUSE 10.2 of this Deed.

16.      DIRECTIONS FROM BENEFICIARIES

16.1     On the Initial Closing Date, the Mortgages Trustee entered into the
         Servicing Agreement, the Cash Management Agreement, the Mortgage Sale
         Agreement, the Mortgages Trustee Guaranteed Investment Contract and
         the Bank Account Agreement.

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16.2     Subject to CLAUSES 16.3 and 16.4 below and to the Controlling
         Beneficiary Deed and any other agreement between the Beneficiaries,
         the Beneficiaries direct the Mortgages Trustee to, and the Mortgages
         Trustee covenants with the Beneficiaries that the Mortgages Trustee
         shall, take all necessary steps and do everything which the
         Beneficiaries (acting together) may reasonably request or direct it to
         do in order to give effect to the terms of this Deed or the other
         Transaction Documents to which the Mortgages Trustee is a party,
         provided that at any time after the Funding 1 Share or the Funding 2
         Share of the Trust Property have been reduced to zero the Mortgages
         Trustee shall be required to act in accordance with the directions of
         those of the Beneficiaries (acting together) with a share of the Trust
         Property greater than zero.

16.3     Each of Funding 1, Funding 2 and the Seller covenant with each other
         that none of them shall direct or request the Mortgages Trustee to do
         any act or thing which breaches the terms of, or is otherwise
         expressly dealt with (such that the Mortgages Trustee has no
         discretion) by, any of the Transaction Documents.

16.4     Subject to the Controlling Beneficiary Deed and any other agreement
         between the Beneficiaries, in the event of any conflict between the
         directions of the Funding Beneficiaries or the directions of the
         Funding Beneficiaries and of the Seller, then each Beneficiary
         irrevocably agrees that the Controlling Directions (as defined in the
         Controlling Beneficiary Deed) shall apply and that the Mortgages
         Trustee will be bound to follow the Controlling Directions as if the
         Controlling Directions were the direction of all of the Beneficiaries
         but if there are no Controlling Directions the Mortgages Trustee will
         not be bound to accept the directions of one Beneficiary over the
         other.

16.5     The Mortgages Trustee will not be bound and shall have no power to
         take any proceedings, actions or steps under or in connection with any
         of this Deed or the other Transaction Documents to which it is a party
         unless:

         (a)     it shall have been directed to do so by the Beneficiaries or
                 it is required to do so under any express provision of this
                 Deed or the other Transaction Documents (but subject to
                 CLAUSES 16.2 and 16.4 in respect of conflict of directions);
                 and

         (b)     it shall have been indemnified to its satisfaction against all
                 liabilities, proceedings, claims and demands to which it may
                 be or become liable and all costs, charges and expenses which
                 may be incurred by it in connection therewith and the terms of
                 such indemnity may include the provision of a fighting fund,
                 non-recourse loan or other similar arrangement.

16.6     COVENANT OF THE MORTGAGES TRUSTEE

         Subject to CLAUSES 16.2 and 16.4, the Mortgages Trustee covenants with
         each of the Seller, Funding 1 and Funding 2 to exercise all of its
         rights arising under the Trust Property (including without limitation
         any rights of enforcement) for the benefit of and on behalf of the
         Beneficiaries.

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<PAGE>

17.      TRANSFERS

17.1     FUNDING 1 SHALL NOT ASSIGN

         Subject to the terms of the Transaction Documents (including for the
         avoidance of doubt, the Funding 1 Deed of Charge, the Deed of
         Accession and Release Supplemental to the Funding 1 Deed of Charge,
         the Second Supplemental Funding 1 Deed of Charge and each Deed of
         Accession) and the right of Funding 1 (or the Funding 1 Security
         Trustee or a Receiver on its behalf) to sell the Funding 1 Share of
         the Trust Property following the service of an Intercompany Loan
         Acceleration Notice (which right is hereby conferred), Funding 1
         covenants with each of the Seller and Funding 2 that it shall not, and
         shall not purport to, sell, assign, transfer, convey, charge, declare
         a trust over, create any beneficial interest in, or otherwise dispose
         of the Funding 1 Share in the Trust Property and/or its rights under
         this Deed, or any of Funding 1's rights, title and interest or benefit
         in the Trust Property and/or this Deed to or in favour of a third
         party.

17.2     FUNDING 2 SHALL NOT ASSIGN

         Subject to the terms of the Transaction Documents (including for the
         avoidance of doubt, the Funding 2 Deed of Charge) and the right of
         Funding 2 (or the Funding 2 Security Trustee or a Receiver on its
         behalf) to sell the Funding 2 Share of the Trust Property following
         the service of a Master Intercompany Loan Acceleration Notice (which
         right is hereby conferred), Funding 2 covenants with each of the
         Seller and Funding 1 that it shall not, and shall not purport to,
         sell, assign, transfer, convey, charge, declare a trust over, create
         any beneficial interest in, or otherwise dispose of the Funding 2
         Share in the Trust Property and/or its rights under this Deed, or any
         of Funding 2's rights, title and interest or benefit in the Trust
         Property and/or this Deed to or in favour of a third party.

17.3     SELLER SHALL NOT ASSIGN

         Subject to the terms of the Transaction Documents, the Seller
         covenants with each of Funding 1 and Funding 2 that it shall not, and
         shall not purport to, sell, assign, transfer, convey, charge, declare
         a trust over, create any beneficial interest in, or otherwise dispose
         of the Seller Share in the Trust Property and/or its rights under this
         Deed or any of the Seller's rights, title and interest or benefit in
         the Trust Property and/or this Deed to or in favour of a third party,
         without the prior consent of Funding 1 and Funding 2 (such consent not
         to be unreasonably withheld).

17.4     TRANSFERS TO NEW BENEFICIARY

         Subject to CLAUSE 13, the parties hereby acknowledge that a designated
         entity approved by the Beneficiaries may become a beneficiary to the
         Mortgages Trust after the Programme Date and if such entity is to
         become such a beneficiary then the Beneficiaries covenant with each
         other that the Seller and/or Funding 1 and/or Funding 2 shall be
         entitled to sell, assign, transfer, convey, charge, declare a trust
         over, create a beneficial interest in, or otherwise dispose of all or
         part of their respective shares in the Trust Property to such entity
         or, as the case may be, Funding 1, Funding 2 or the Seller.

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<PAGE>

18.      COVENANTS OF THE MORTGAGES TRUSTEE

         Save with the prior written consent of each of the Beneficiaries or as
         provided in or envisaged by this Deed and the other Transaction
         Documents to which the Mortgages Trustee is a party, the Mortgages
         Trustee shall not, so long as it is acting as Mortgages Trustee
         hereunder:

         (a)     NEGATIVE PLEDGE

                 create or permit to subsist any mortgage, standard security,
                 pledge, lien, charge, assignation in security or other
                 security interest whatsoever (unless arising by operation of
                 law), upon the whole or any part of its assets (including any
                 uncalled capital) or its undertakings, present or future;

         (b)     DISPOSAL OF ASSETS

                 transfer, sell, lend, part with or otherwise dispose of, or
                 deal with, or grant any option or present or future right to
                 acquire any of its assets or undertakings or any interest,
                 estate, right, title or benefit therein or thereto or agree or
                 attempt or purport to do so;

         (c)     EQUITABLE INTEREST

                 permit any person other than the Beneficiaries to have any
                 equitable or beneficial interest in any of its assets or
                 undertakings or any interest, estate, right, title or benefit
                 therein;

         (d)     BANK ACCOUNTS

                 have an interest in any bank account, other than as set out in
                 the Transaction Documents;

         (e)     RESTRICTIONS ON ACTIVITIES

                 carry on any business other than as described in this Deed and
                 the Mortgage Sale Agreement;

         (f)     BORROWINGS

                 incur any indebtedness in respect of borrowed money whatsoever
                 or give any guarantee or indemnity in respect of any such
                 indebtedness;

         (g)     MERGER

                 consolidate or merge with any other person or convey or
                 transfer its properties or assets substantially as an entirety
                 to any other person;

         (h)     EMPLOYEES OR PREMISES

                 have any employees or premises or subsidiaries;

         (i)     FURTHER SHARES

                 issue any further shares;

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<PAGE>

         (j)     ACQUISITIONS

                 acquire any assets other than pursuant to the terms of the
                 Mortgage Sale Agreement and this Mortgages Trust Deed (whereby
                 any New Portfolio shall be held by the Mortgages Trustee
                 subject to the Mortgages Trust); or

         (k)     UNITED STATES ACTIVITIES

                 engage in any activities in the United States (directly or
                 through agents) or derive any income from United States
                 sources as determined under United States income tax
                 principles or hold any property if doing so would cause it to
                 be engaged or deemed to be engaged in a trade or business
                 within the United States as determined under United States tax
                 principles.

19.      POWER TO DELEGATE

19.1     POWER TO DELEGATE

         Subject to CLAUSE 19.2, the Mortgages Trustee may (notwithstanding any
         rule of law or equity to the contrary) delegate (revocably or
         irrevocably and for a limited or unlimited period of time) the
         performance of all or any of its obligations and the exercise of all
         or any of its powers under this Deed or imposed or conferred on it by
         law or otherwise to any person or body of persons fluctuating in
         number selected by it and any such delegation may be by power of
         attorney or in such other manner as the Mortgages Trustee may think
         fit and may be made upon such terms and conditions (including the
         power to sub-delegate) as the Mortgages Trustee may think fit.

19.2     NO FURTHER APPOINTMENTS

         Notwithstanding the provisions of CLAUSE 19.1, the Mortgages Trustee
         shall not appoint any agent, attorney or other delegate having power
         to act in respect of the Trust Property unless it is directed in
         writing to do so by the Beneficiaries. The appointment of any agent,
         attorney or other delegate shall terminate immediately upon the
         occurrence of a Trigger Event.

20.      POWERS OF INVESTMENT

         Save as expressly provided for in this Deed, the Mortgages Trustee
         Guaranteed Investment Contract and the Bank Account Agreement, the
         Mortgages Trustee shall have no further or other powers of investment
         with respect to the Trust Property and neither the Trustee Act 2000
         nor any other provision relating to trustee powers of investment
         implied by statute or general law shall apply to the Mortgages Trust
         and, for the avoidance of doubt, the statutory power to accumulate
         income conferred on trustees by Section 31 of the Trustee Act 1925 is
         expressly excluded.

21.      OTHER PROVISIONS REGARDING THE MORTGAGES TRUSTEE

21.1     NO ACTION TO IMPAIR TRUST PROPERTY

         Except for actions expressly authorised by this Deed, the Mortgages
         Trustee shall take no action reasonably likely to impair the interests
         of the Beneficiaries in any Trust Property now existing or hereafter
         created or to impair the value of any Loan or its Related Security
         subject to the Mortgages Trust.

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<PAGE>

21.2     LITIGATION

         The Mortgages Trustee must not prosecute or defend any legal or other
         proceedings anywhere in the world (at the cost of the Trust Property)
         unless it obtains legal or other advice that it is in the interests of
         the Beneficiaries to do so.

21.3     NO IMPLIED DUTIES

         The duties and obligations of the Mortgages Trustee under the
         Mortgages Trust shall be determined solely by the express provisions
         of this Deed (but without prejudice to the duties and obligations of
         the Mortgages Trustee under any of the other Transaction Documents).
         The Mortgages Trustee shall not be liable under this Deed except for
         the performance of such duties and obligations as shall be
         specifically set forth in this Deed. No implied covenants or
         obligations shall be read into this Deed against the Mortgages
         Trustee, and the permissible right of the Mortgages Trustee to do
         things set out in this Deed shall not be construed as a duty.

21.4     NO LIABILITY

         None of the Mortgages Trustee, Funding 1 (in its capacity as a
         Beneficiary hereunder), Funding 2 (in its capacity as a Beneficiary
         hereunder) or the Seller (in its capacity as a Beneficiary hereunder)
         shall be liable to any other such party, in the absence of wilful
         default, negligence or breach of the terms of this Deed, in respect of
         any loss or damage which arises out of the exercise or attempted or
         purported exercise or failure to exercise any of their respective
         powers.

21.5     RELIANCE ON CERTIFICATES

         The Mortgages Trustee may rely on and shall be protected in acting on,
         or in refraining from acting in accordance with, any resolution,
         officer's certificate, certificate of auditors or any other
         certificate, statement, instrument, opinion, report, notice, request,
         consent, order, appraisal, bond or other paper or document believed by
         it to be genuine and to have been signed or presented to it pursuant
         to the Transaction Documents by the proper party or parties.

21.6     RELIANCE ON THIRD PARTIES

         The Mortgages Trustee may, in relation to these presents, act on the
         opinion or advice of or a certificate or any information obtained from
         any lawyer, banker, valuer, broker, accountant, financial adviser,
         securities dealer, merchant bank, computer consultant or other expert
         in the United Kingdom or elsewhere and shall not, provided that it
         shall not have acted fraudulently or in breach of any of the
         provisions of the Transaction Documents, be responsible for any loss
         occasioned by so acting. Any such opinion, advice, certificate or
         information may be sent or obtained by letter, telemessage, telex,
         cable or facsimile device and the Mortgages Trustee shall not be
         liable for acting on any opinion, advice, certificate or information
         purporting to be so conveyed although the same shall contain some
         error or shall not be authentic, provided that such error or lack of
         authenticity shall not be manifest.

22.      NO RETIREMENT OF MORTGAGES TRUSTEE

22.1     NO RETIREMENT

         The Mortgages Trustee shall not, and shall not purport to, retire as
         the trustee of the Mortgages Trust or appoint any additional trustee
         of the Mortgages Trust and shall have no power to retire or appoint
         any additional trustee under the Trustee Act 1925 or otherwise.

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22.2     NO REPLACEMENT

         None of the Seller, Funding 1 or Funding 2 shall at any time remove or
         purport to remove and/or replace the Mortgages Trustee as the trustee
         of the Mortgages Trust.

22.3     NO TERMINATION

         Prior to the payment by Funding 1 and Funding 2 of all amounts owing
         under the Intercompany Loan Agreements or the Master Intercompany Loan
         Agreement (respectively) and any other Transaction Documents, none of
         the Beneficiaries shall at any time, except in accordance with the
         provisions of CLAUSES 16 and 23 hereof, terminate or purport to
         terminate the Mortgages Trust and, in particular, but without
         prejudice to the generality of the foregoing, none of the
         Beneficiaries shall in reliance on their absolute beneficial interests
         in the Trust Property call for the transfer to them or vesting in them
         of the legal estate in all or any part of the Trust Property.

23.      TERMINATION

         The Mortgages Trust shall terminate in respect of the Trust Property
         (if any then remains) upon the later to occur of:

         (a)     the date upon which all amounts due from Funding 1 and Funding
                 2 to the Funding 1 Secured Creditors and the Funding 2 Secured
                 Creditors (respectively) have been paid in full; and

         (b)     any other date agreed in writing by the Beneficiaries.

24.      FURTHER ASSURANCES

         The parties 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 Deed.

25.      AMENDMENTS

25.1     AMENDMENTS, WAIVERS AND CONSENTS

         Subject to CLAUSE 3 of the Controlling Beneficiary Deed and (in the
         case of Funding 1) CLAUSE 25.8 of the Funding 1 Deed of Charge and (in
         the case of Funding 2) CLAUSE 24.8 of the Funding 2 Deed of Charge no
         amendment or waiver of any provision of this Deed nor consent to any
         departure by any of the parties therefrom shall in any event be
         effective unless the same shall be in writing and signed by each of
         the parties to this Deed. In the case of a waiver or consent, such
         waiver or consent 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.

25.2     ENTIRE AGREEMENT

         This Deed contains a final and complete integration of all prior
         expressions by the parties with respect to the subject matter of this
         Deed and constitutes the entire agreement among the parties with
         respect to the subject matter of this Deed superseding all prior oral
         or written understandings other than the other Transaction Documents.

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26.      NON PETITION COVENANT

         Each of the parties hereto hereby agrees that it shall not institute
         against either Funding 1, Funding 2 or the Mortgages Trustee any
         winding-up, administration, insolvency or similar proceedings so long
         as any sum is outstanding under any Funding 1 Intercompany Loan
         Agreement (in the case of Funding 1 and the Mortgages Trustee) or the
         Master Intercompany Loan Agreement (in the case of Funding 2 and the
         Mortgages Trustee) for the duration of one year plus one day since the
         last day on which any such sum was outstanding.

27.      NO PARTNERSHIP OR AGENCY

         Nothing in this Deed shall be taken to constitute or create a
         partnership between any of the parties to this Deed or to make or
         appoint the Seller the agent of Funding 1 (or vice versa) or the agent
         of Funding 2 (or vice versa) or Funding 1 the agent of Funding 2 (or
         vice versa).

28.      CALCULATIONS

         In the absence of manifest error, any determination or calculation
         made by or on behalf of the Mortgages Trustee in connection with the
         provisions of this Deed shall be deemed to be conclusive.

29.      NO WAIVER; REMEDIES

         No failure on the part of any party to this Deed to exercise, and no
         delay in exercising, any right hereunder shall operate as a waiver
         thereof, nor shall any single or partial exercise of any right or
         remedy preclude any other or further exercise thereof or the exercise
         of any other right or remedy. The remedies in this Deed are cumulative
         and not exclusive of any remedies provided by law.

30.      EXECUTION IN COUNTERPARTS/SEVERABILITY

30.1     This Deed may be executed in any number of counterparts (manually or
         by facsimile) and by different parties hereto in separate
         counterparts, each of which when so executed shall be deemed to be an
         original and all of which when taken together shall constitute one and
         the same instrument.

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

31.      TAX

31.1     Any payment by Funding 1 or Funding 2 to the other or to the Seller to
         increase its share of the Trust Property shall be inclusive of VAT (if
         any).

31.2     Any payment by the Seller to Funding 1 or Funding 2 which would
         increase its share of the Trust Property shall be exclusive of VAT (if
         any).

31.3     Any stamp duty or stamp duty reserve tax in respect of any increase in
         the Funding 1 Share or the Funding 2 Share of the Trust Property shall
         be payable by the Seller.

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32.      CONFIDENTIALITY

32.1     GENERAL OBLIGATION OF CONFIDENTIALITY

         Unless otherwise required by applicable law, and subject to CLAUSE
         32.2 below, each of the parties agrees not to disclose to any person
         any information relating to the business, finances or other matters of
         a confidential nature of or relating to any other party to this Deed
         or any of the Transaction Documents which it may have obtained as a
         result of having entered into this Deed or otherwise.

32.2     EXCEPTIONS

         The provisions of CLAUSE 32.1 above shall not apply:

         (a)     to the disclosure of any information to any person who is a
                 party to any of the Transaction Documents as expressly
                 permitted by the Transaction Documents;

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

         (c)     to the extent that the recipient is required to disclose the
                 same pursuant to any law or order of any court or pursuant to
                 any direction or requirement (whether or not having the force
                 of law) of any central bank or any governmental or other
                 regulatory or Taxation authority;

         (d)     to the disclosure of any information to professional advisers
                 who receive the same under a duty of confidentiality;

         (e)     to the disclosure of any information with the consent of the
                 parties to this Deed;

         (f)     to the disclosure to the Rating Agencies or any of them of
                 such information as may be requested by any of them for the
                 purposes of setting or reviewing the rating assigned to the
                 Notes of any of the Funding 1 Issuers or of the Master Issuer
                 (or any of them), provided that no information which would
                 disclose the identity of a Borrower shall be disclosed to the
                 Rating Agencies or any of them;

         (g)     to the disclosure of any information disclosed to a
                 prospective assignee of Funding 1 or Funding 2 (provided that
                 it is disclosed on the basis that the recipient will hold it
                 confidential); or

         (h)     to any disclosure for the purposes of collecting in or
                 enforcing the Trust Property or any of it.

33.      EXCLUSION OF THIRD PARTY RIGHTS

         Except in the case of the Funding 1 Security Trustee and the Funding 2
         Security Trustee as expressly provided hereunder, the parties to this
         Deed do not intend that any term of this Deed should be enforced, by
         virtue of the Contracts (Rights of Third Parties) Act 1999, by any
         person who is not a party to this Deed.

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34.      ADDRESSES FOR NOTICES

         Any notices to be given pursuant to this Deed will be sufficiently
         served if sent by prepaid first class post, by hand or facsimile
         transmission and will 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 (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 Seller: to Bank of Scotland plc, Halifax
                 Division, at Level 3, Lovell Park, 1 Lovell Park Road, Leeds
                 LS1 1NS (facsimile number +44 (020) 1132 357511) 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, 47 Esplanade, St Helier, Jersey JE1 0BD,
                 Channel Islands (facsimile number +44 (0) 1534 726391) for the
                 attention of the Company 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 Securitisation and Covered
                 Bonds;

         (c)     in the case of Funding 1: to Permanent Funding (No. 1)
                 Limited, 35 Great St. Helen's, London EC3A 6AP (facsimile
                 number +44 (0) 20 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 (0)20 7574 8303) for the attention of Head of
                 Mortgage Securitisation and Covered Bonds;

         (d)     in the case of Funding 2: to Permanent Funding (No. 2)
                 Limited, 35 Great St. Helen's, London EC3A 6AP (facsimile
                 number +44 (0) 20 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 (0)20 7574 8303) for the attention of Head of
                 Mortgage Securitisation and Covered Bonds;

         (e)     in the case of the Share Trustee: to 47 Esplanade, St Helier,
                 Jersey JE1 0BD, Channel Islands (facsimile number +44 (0) 1534
                 726391) for the attention of the Company 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 Securitisation and
                 Covered Bonds; and

         (f)     in each 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 34.

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35.      GOVERNING LAW AND SUBMISSION TO JURISDICTION

35.1     GOVERNING LAW

         This Deed is governed by English law.

35.2     SUBMISSION TO JURISDICTION

         Each party to this Deed hereby irrevocably submits to the exclusive
         jurisdiction of the English courts in any action or proceeding arising
         out of or relating to this Deed, 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 Deed 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 service of
         process.

36.      EXCLUSION OF TRUSTEE ACT 2000

         The Trustee Act 2000 is hereby excluded to the maximum extent
         permissible, to the intent that it shall not apply to the trusts
         constituted by this Deed and that the parties shall be in the same
         position as they would be had that Act not come into force.

IN WITNESS of which this Deed has been executed by the parties hereto as a deed
which has been delivered on the date first appearing on page one.

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                                  SIGNATORIES

SELLER, CASH MANAGER AND BENEFICIARY

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

Witness's Signature: /S/ CHRIS WALL

Name:

Address: ALLEN & OVERY LLP
         40 BANK STREET
         LONDON E14 5DU

FUNDING 1

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

FUNDING 2

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

MORTGAGES TRUSTEE

EXECUTED as a DEED on behalf of                         )
PERMANENT MORTGAGES TRUSTEE                             )
LIMITED, a company incorporated in Jersey,              )
Channel Islands, by                                     )
being a person who, in                                  ) /S/ ABU KAPADIA
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
         40 BANK STREET
         LONDON E14 5DU

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<PAGE>

SHARE TRUSTEE OF THE MORTGAGES TRUSTEE

EXECUTED as a DEED by                                   ) /S/ ABU KAPADIA
SFM OFFSHORE                                            )
LIMITED                                                 )
acting by its attorney                                  )
in the presence of:                                     )

Witness's Signature: /S/ CHRIS WALL

Name:

Address: ALLEN & OVERY LLP
         40 BANK STREET
         LONDON E14 5DU

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