AMENDED AND RESTATED MASTER INTERCOMPANY        EXHIBIT 4.1.1
                                LOAN AGREEMENT

                               21 NOVEMBER 2007

                       PERMANENT FUNDING (NO. 2) LIMITED
                                 AS FUNDING 2

                          PERMANENT MASTER ISSUER PLC
                               AS MASTER ISSUER

                             THE BANK OF NEW YORK
                         AS FUNDING 2 SECURITY TRUSTEE

                                      AND

                                CITIBANK, N.A.
                                 AS AGENT BANK

<PAGE>

                                   CONTENTS

CLAUSE                                                                     PAGE

1.       Definitions and Interpretation.......................................1
2.       The Facility.........................................................2
3.       Conditions Precedent.................................................2
4.       Purpose..............................................................3
5.       Limited Recourse.....................................................4
6.       Advance of Loan Tranches.............................................5
7.       Interest.............................................................6
8.       Repayment...........................................................10
9.       Prepayment..........................................................11
10.      Taxes...............................................................12
11.      Illegality..........................................................13
12.      Mitigation..........................................................13
13.      Representations and Warranties of Funding.2.........................13
14.      Covenants...........................................................15
15.      Default.............................................................18
16.      Default Interest and Indemnity......................................19
17.      Payments............................................................20
18.      Entrenched Provisions...............................................21
19.      Further Provisions..................................................21
20.      Redenomination......................................................22
21.      Notices.............................................................23
22.      Governing Law and Submission to Jurisdiction........................23

SCHEDULE

1.       Condi tions Precedent...............................................24
2.       Form of Loan Tranche Notice.........................................26
3.       Form of Loan Tranche Supplement.....................................27
4.       Solvency Certificate................................................33

Signatories..................................................................35

<PAGE>

THIS AMENDED AND RESTATED MASTER INTERCOMPANY LOAN AGREEMENT (this AGREEMENT)
is made as a deed on 21 November 2007

BETWEEN:

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

(2)      PERMANENT MASTER ISSUER PLC (registered number 5922774), a public
         limited company incorporated under the laws of England and Wales whose
         registered office is at 35 Great St. Helen's, London EC3A 6AP (the
         MASTER ISSUER);

(3)      THE BANK OF NEW YORK, a national association acting through its office
         at One Canada Square, London E14 5AL (acting in its capacity as the
         FUNDING 2 SECURITY TRUSTEE, which expression shall include such
         company and all other persons or companies for the time being acting
         as security trustee (or co-trustee) pursuant to the terms of the
         Funding 2 Deed of Charge); and

(4)      CITIBANK, N.A., acting through its office at Citigroup Centre, Canada
         Square, Canary Wharf, London E14 5LB (acting in its capacity as the
         AGENT BANK).

WHEREAS:

(A)      From time to time, the Master Issuer has issued and will issue Notes
         pursuant to the Programme.

(B)      From time to time after the date hereof, the Master Issuer
         Subordinated Loan Provider will make Master Issuer Subordinated Loans
         to the Master Issuer pursuant to the Master Issuer Subordinated Loan
         Agreements.

(C)      From time to time after the date hereof, the Master Issuer Start-up
         Loan Provider will advance Master Issuer Start-up Loans to the Master
         Issuer pursuant to the Master Issuer Start-up Loan Agreements.

(D)      The Master Issuer has agreed that it will lend the proceeds (or, as
         applicable, the sterling equivalent thereof) of any issue of Notes,
         any borrowings under the Master Issuer Subordinated Loan Agreements
         and any borrowings under the Master Issuer Start-up Loan Agreements to
         Funding 2.

(E)      The Master Intercompany Loan Agreement sets out the terms and
         conditions with respect to lending by the Master Issuer of the
         proceeds of the issue of Notes.

(F)      The parties to the Master Intercompany Loan Agreement have agreed to
         further amend and restate the terms of the Master Intercompany Loan
         Agreement as set out herein including to set out the terms and
         conditions with respect to lending by the Master Issuer of the
         proceeds of the borrowings under the Master Issuer Subordinated Loan
         Agreements and the Master Issuer Start-up Loan Agreements to Funding
         2.

1.       DEFINITIONS AND INTERPRETATION

1.1      The amended and restated master definitions and construction schedule
         signed by, amongst others, the parties to this Agreement and dated 21
         November 2007 (as the same may be amended, varied or supplemented from
         time to time with the consent of the parties to this Agreement) (the
         MASTER DEFINITIONS AND CONSTRUCTION SCHEDULE) is expressly and
         specifically incorporated into this Agreement and, accordingly, the
         expressions defined in the Master Definitions and Construction

                                       1

<PAGE>

         Schedule (as so amended, varied or supplemented from time to time)
         shall, except where the context otherwise requires and save where
         otherwise defined herein, have the same meanings in this Agreement
         (including the Recitals hereto) and this Agreement shall be construed
         in accordance with the interpretation provisions set out in Clause 3
         of the Master Definitions and Construction Schedule.

1.2      This Agreement amends and restates the Master Intercompany Loan
         Agreement made on 17 October 2006 as amended and restated on 1 March
         2007 (the PRINCIPAL AGREEMENT). As of the date of this Agreement, any
         future rights or obligations (excluding such obligations accrued to
         the date of this Agreement) of a party under the Principal Agreement
         shall be extinguished and shall instead be governed by this Agreement.

2.       THE FACILITY

         Subject to the terms of this Agreement, the Master Issuer agrees to
         make available to Funding 2 a facility (the MASTER INTERCOMPANY LOAN
         FACILITY). On the London Business Day prior to each Closing Date
         and/or each Advance Date (as applicable), the Master Issuer shall
         offer Loan Tranches to Funding 2 under the Master Intercompany Loan
         Facility that correspond to:

         (a)     each Series and Class of Notes to be issued by the Master
                 Issuer on the relevant Closing Date;

         (b)     each Master Issuer Subordinated Loan to be advanced to the
                 Master Issuer on the relevant Advance Date; and/or

         (c)     each Master Issuer Start-Up Loan to be advanced to the Master
                 Issuer on the relevant Advance Date.

         Each Loan Tranche shall be denominated in Sterling. Subject to the
         terms of this Agreement, on each Closing Date and/or each Advance Date
         (as applicable), Funding 2 shall accept the offer.

3.       CONDITIONS PRECEDENT

         Save as the Master Issuer, Funding 2 and the Funding 2 Security
         Trustee may otherwise agree, each Loan Tranche will not be available
         for utilisation on the relevant Closing Date and/or Advance Date (as
         applicable) unless:

         (a)     (with respect to all Rated Loan Tranches) the related Series
                 and Class of Notes has been issued by the Master Issuer on the
                 relevant Closing Date and the subscription proceeds thereof
                 have been received by or on behalf of the Master Issuer;

         (b)     (with respect to all Subordinated Loan Tranches) the related
                 Master Issuer Subordinated Loan has been advanced by the
                 Master Issuer Subordinated Loan Provider to the Master Issuer
                 on the relevant Advance Date and the proceeds thereof have
                 been received by or on behalf of the Master Issuer;

         (c)     (with respect to all Start-Up Loan Tranches) the related
                 Master Issuer Start-Up Loan has been advanced by the Master
                 Issuer Start-Up Loan Provider to the Master Issuer on the
                 relevant Advance Date and the proceeds thereof have been
                 received by or on behalf of the Master Issuer;

         (d)     the Funding 2 Security Trustee has confirmed to Funding 2 that
                 it or its advisers have received all the information and
                 documents listed in Schedule 1 hereto (Conditions Precedent)
                 in form and substance satisfactory to the Funding 2 Security
                 Trustee;

                                       2

<PAGE>

         (e)     Funding 2 and the Master Issuer have signed a Loan Tranche
                 Supplement (substantially in the form set out in Schedule 3
                 hereto (Form of Loan Tranche Supplement));

         (f)     Funding 2 has confirmed in the applicable Loan Tranche
                 Supplement that:

                 (i)     no Master Intercompany Loan Event of Default has
                         occurred and is continuing unremedied (if capable of
                         remedy) or unwaived or would result from the making of
                         such Loan Tranche;

                 (ii)    the representations set out in Clause 13 are true on
                         and as of the relevant Closing Date by reference to
                         the facts and circumstances then existing; and

                 (iii)   there will be no debit balance on the Funding 2
                         Principal Deficiency Ledger after the application of
                         the Funding 2 Available Revenue Receipts on the next
                         Funding 2 Interest Payment Date;

         (g)     Funding 2 has delivered a solvency certificate substantially
                 in the form set out in Schedule 4 hereto;

         (h)     the Master Issuer has confirmed in the applicable Loan Tranche
                 Supplement that no Note Event of Default has occurred and is
                 continuing unremedied (if capable of remedy) or unwaived or
                 would result from the making of such Loan Tranche;

         (i)     each of the Rating Agencies has confirmed in writing to the
                 Master Issuer Security Trustee and/or the Funding 2 Security
                 Trustee that there will not, as a result of the Master Issuer
                 issuing any Notes on the Closing Date, be any reduction,
                 qualification or withdrawal of the then current ratings by the
                 Rating Agencies of any then outstanding Notes of the Master
                 Issuer;

         (j)     one or more Deeds of Accession relating to the Funding 2 Deed
                 of Charge have been executed by any additional Funding 2
                 Secured Creditors and the parties to the Funding 2 Deed of
                 Charge; and

         (k)     all other conditions precedent as may be specified in the
                 applicable Loan Tranche Supplement have been satisfied.

4.       PURPOSE

4.1      PURPOSE AND APPLICATION OF RATED LOAN TRANCHES AND SUBORDINATED LOAN
         TRANCHES

(a)      The proceeds of each Loan Tranche (excluding any Start-Up Loan
         Tranche) may only be used by Funding 2:

         (i)     to pay the Seller the Purchase Price for the sale of any New
                 Portfolio to the Mortgages Trustee on the relevant Closing
                 Date (which payment shall increase the Funding 2 Share of the
                 Trust Property in accordance with the terms of the Mortgages
                 Trust Deed);

         (ii)    to acquire part of the Funding 1 Share and/or the Seller Share
                 of the Trust Property (such payment to be made to Funding 1
                 and/or the Seller, as the case may be, which shall increase
                 the Funding 2 Share of the Trust Property in accordance with
                 the terms of the Mortgages Trust Deed);

                                       3

<PAGE>

         (iii)   (in the case of Rated Loan Tranches only) to refinance the
                 existing debt of Funding 2, including any existing Loan
                 Tranche or of any New Issuer or New Beneficiary in order to
                 refinance a New Intercompany Loan (in whole or in part);
                 and/or

         (iv)    to fund or partly fund or replenish the Funding 2 General
                 Reserve Fund and/or (if any) the Funding 2 Liquidity Reserve
                 Fund (in whole or in part).

(b)      The proceeds of each Start-Up Loan Tranche may only be used by Funding
         2 either:

         (i)     to fund the Funding 2 General Reserve Fund and/or (if any) the
                 Funding 2 Liquidity Reserve Fund (in whole or in part);

         (ii)    to fund the payment of the fees, costs and expenses incurred
                 by or on behalf of Funding 2 in connection with the payment to
                 the Seller of part of the consideration for Loans (together
                 with their Related Security) sold to the Mortgages Trustee
                 and/or the acquisition of part of the Funding 1 Share of the
                 Trust Property and/or Seller Share of the Trust Property on
                 the relevant Closing Date and/or Advance Date; and/or

         (iii)   to fund the payment of the fees, costs and expenses payable or
                 incurred by or on behalf of Funding 2 under the Master
                 Intercompany Loan Agreement which relate to the costs of
                 issuance of the Notes on the relevant Closing Date and/or the
                 advance of a Master Issuer Subordinated Loan on the relevant
                 Advance Date.

4.2      APPLICATION OF AMOUNTS

         Without prejudice to the obligations of Funding 2 under this Clause 4,
         neither the Funding 2 Security Trustee nor any of the Funding 2
         Secured Creditors shall be obliged to concern themselves as to the
         application of amounts raised by Funding 2 under a Loan Tranche.

5.       LIMITED RECOURSE

5.1      RECOURSE LIMITED TO AVAILABLE FUNDS

         Subject to Clause 5.2 but notwithstanding the terms of any other
         provision in this Agreement or any other Transaction Document, each of
         the Master Issuer and the Funding 2 Security Trustee agree that the
         liability of Funding 2 in respect of its obligations to repay
         principal and pay interest or any other amounts due under this
         Agreement or for any breach of any representation, warranty, covenant
         or undertaking of Funding 2 under this Agreement shall be limited to
         amounts standing to the credit of the Funding 2 GIC Account and the
         Funding 2 Transaction Account from time to time (including, for the
         avoidance of doubt, amounts received by Funding 2 in respect of the
         Funding 2 Share of the Trust Property and from the Funding 2 Swap
         Provider) provided that the application of such amounts to the
         discharge of Funding 2's obligations under this Agreement shall be
         subject to the terms of the Funding 2 Deed of Charge and the relevant
         Funding 2 Priority of Payments in all cases.

5.2      SHORTFALL ON FINAL REPAYMENT DATE

         To the extent that on the Final Repayment Date of any Loan Tranche
         advanced under this Agreement there is a shortfall between all amounts
         (including interest and principal) payable on that Loan Tranche under
         this Agreement and the amounts available therefor, that shortfall
         shall not be due and payable to the Master Issuer until the time, if
         ever, when Funding 2 has enough money available to pay the shortfall
         on that Loan Tranche after making any other payments due that rank
         higher in priority to that Loan Tranche. Following enforcement of the
         Funding 2 Security and distribution of all enforcement proceeds in
         accordance with the Funding 2 Deed of Charge, all

                                       4

<PAGE>

         outstanding claims that the Master Issuer and the Funding 2 Security
         Trustee may otherwise have against Funding 2 will be extinguished.

6.       ADVANCE OF LOAN TRANCHES

6.1      NOTICE TO FUNDING 2

         Not later than 2:00 p.m. (London time) on the relevant Closing Date
         (or such later time as may be agreed in writing by Funding 2, the
         Master Issuer and the Funding 2 Security Trustee), Funding 2 shall
         give to the Master Issuer (copied to the Funding 2 Security Trustee) a
         Loan Tranche Notice (substantially in the form set out in Schedule 1
         hereto (Form of Loan Tranche Notice)) which shall request the drawing
         of a Loan Tranche and delivery of which shall (subject to the terms of
         this Agreement and (in the case of Rated Loan Tranches) to the issue
         of the relevant Series and Class of Notes by the Master Issuer, (in
         the case of Subordinated Loan Tranches) to the advance by the Master
         Issuer Subordinated Loan Provider of the relevant Master Issuer
         Subordinated Loan to the Master Issuer and (in the case of Start-Up
         Loan Tranches) to the advance by the Master Issuer Start-Up Loan
         Provider of the relevant Master Issuer Start-Up Loan to the Master
         Issuer) oblige Funding 2 to borrow the whole amount stated in the Loan
         Tranche Notice on the relevant Closing Date upon the terms and subject
         to the conditions contained in this Agreement and such Loan Tranche
         Notice will set out, inter alia:

         (a)     the amount and currency or currencies of the proposed issue of
                 each Series and Class of Notes under the Programme;

         (b)     (in the case of Rated Loan Tranches only) the Specified
                 Currency Exchange Rate(s) at which the Master Issuer will swap
                 the proceeds of each Series and Class of Notes that is not
                 denominated in Sterling into Sterling; and

         (c)     the principal amount of each Loan Tranche available for
                 drawing under the Master Intercompany Loan Facility on such
                 Closing Date.

6.2      LOAN TRANCHES CORRESPOND TO SERIES AND CLASSES OF NOTES, MASTER ISSUER
         SUBORDINATED LOAN OR MASTER ISSUER START-UP LOAN

         Each Loan Tranche shall be identified by reference to the relevant
         Series and Class of Notes, the Master Issuer Subordinated Loan or the
         Master Issuer Start-Up Loan that is used to fund it, as set out in the
         applicable Loan Tranche Supplement.

6.3      LOAN TRANCHE SUPPLEMENT

         The Loan Tranche Supplement to be signed on each Closing Date in
         accordance with Clause 3(e) shall record, amongst other things, the
         amount of each Loan Tranche to be made on such Closing Date or Advance
         Date (as applicable), which shall correspond to the principal amount
         of such Loan Tranche that is available for drawing which is notified
         to the Master Issuer in the applicable Loan Tranche Notice.

6.4      SINGLE DRAWING OF THE LOAN TRANCHE

         On satisfaction of the conditions set out in Clause 3 the Master
         Issuer shall make the applicable Loan Tranches available to Funding 2
         on the relevant Closing Date. Each Loan Tranche to be made on the
         relevant Closing Date or Advance Date (as applicable) will only be
         available for drawing by Funding 2 on the relevant Closing Date and
         will not be available for drawing on a later date.

                                       5

<PAGE>

6.5      REDEMPTION/PAYMENT BASIS

         Each Rated Loan Tranche may be a Bullet Loan Tranche, a Scheduled
         Amortisation Loan Tranche, a Pass-Through Loan Tranche or a
         combination of any of the foregoing, depending upon the
         Redemption/Payment Basis shown in the applicable Loan Tranche
         Supplement.

7.       INTEREST

7.1      LOAN TRANCHE INTEREST PERIODS

(a)      The first Loan Tranche Interest Period in respect of a Loan Tranche
         will commence on (and include) the Loan Tranche Interest Commencement
         Date relating to that Loan Tranche and end on (but exclude) the first
         Funding 2 Interest Payment Date falling thereafter. Each subsequent
         Loan Tranche Interest Period shall commence on (and include) a Funding
         2 Interest Payment Date and end on (but exclude) the next following
         Funding 2 Interest Payment Date.

(b)      Whenever it is necessary to compute an amount of interest in respect
         of a Loan Tranche for any period (including any Loan Tranche Interest
         Period), such interest shall be calculated on the basis of actual days
         elapsed in a 365 day year.

7.2      DETERMINATION OF LOAN TRANCHE INTEREST AMOUNT

         In relation to any Loan Tranche, the rate of interest payable (the
         LOAN TRANCHE RATE OF INTEREST) and the relevant Sterling interest
         amount (each a LOAN TRANCHE INTEREST AMOUNT) in respect of such Loan
         Tranche shall be determined on the basis of the provisions set out
         below:

         (a)     On the Loan Tranche Interest Determination Date in relation to
                 such Loan Tranche, the Agent Bank will determine the Relevant
                 Screen Rate in respect of such Loan Tranche at or about 11.00
                 am London time. If the Relevant Screen Rate is unavailable,
                 the Agent Bank will request the principal London office of
                 each of the Reference Banks to provide the Agent Bank with its
                 offered quotation to leading banks for three-month Sterling
                 deposits of [POUND]10,000,000 in the London inter-bank market
                 as at or about 11.00 a.m. London time on such Loan Tranche
                 Interest Determination Date.

         (b)     The Loan Tranche Rate of Interest for such Loan Tranche for
                 the Loan Tranche Interest Period relating to such Loan Tranche
                 shall be the aggregate of:

                 (i)     the Relevant Margin in respect of such Loan Tranche;
                         and

                 (ii)    the Relevant Screen Rate in respect of such Loan
                         Tranche or, if the Relevant Screen Rate is
                         unavailable, the arithmetic mean (or, in the case of
                         the initial Loan Tranche Interest Determination Date
                         for such Loan Tranche, the linear interpolation of the
                         arithmetic mean) of such offered quotations by the
                         Reference Banks (rounded upwards, if necessary, to
                         five decimal places).

         (c)     If on any Loan Tranche Interest Determination Date in relation
                 to such Loan Tranche, the Relevant Screen Rate in respect of
                 such Loan Tranche is unavailable and only two or three of the
                 Reference Banks provide offered quotations, the Loan Tranche
                 Rate of Interest for such Loan Tranche for the relevant Loan
                 Tranche Interest Period shall be determined in accordance with
                 the provisions of subparagraph (a) above on the basis of the
                 offered quotations of those Reference Banks providing such
                 quotations.

         (d)     If, on any such Loan Tranche Interest Determination Date, only
                 one or none of the Reference Banks provides the Agent Bank
                 with such an offered quotation, the Agent Bank

                                       6

<PAGE>

                 shall forthwith consult with the Funding 2 Security Trustee
                 for the purposes of agreeing two banks (or, where one only of
                 the Reference Banks provided such a quotation, one additional
                 bank) to provide such a quotation or quotations to the Agent
                 Bank (which bank or banks are in the opinion of the Funding 2
                 Security Trustee suitable for such purpose) and the Loan
                 Tranche Rate of Interest for such Loan Tranche for the Loan
                 Tranche Interest Period in question shall be determined, as
                 aforesaid, on the basis of the offered quotations of such
                 banks as so agreed (or, as the case may be, the offered
                 quotations of such bank as so agreed and the relevant
                 Reference Bank).

         (e)     If no such bank or banks is or are so agreed or such bank or
                 banks as so agreed does or do not provide such a quotation or
                 quotations, then the Loan Tranche Rate of Interest for such
                 Loan Tranche for the relevant Loan Tranche Interest Periods
                 shall be the Loan Tranche Rate of Interest in relation to such
                 Loan Tranche in effect for the immediately preceding Loan
                 Tranche Interest Period to which subparagraph (a) above shall
                 have applied but taking account of any change in the Relevant
                 Margin in relation to such Loan Tranche.

         (f)     There will be no minimum or maximum Loan Tranche Rate of
                 Interest for such Loan Tranche.

         (g)     The Agent Bank shall as soon as practicable after 11:00 a.m.
                 (London time) on each Loan Tranche Interest Determination
                 Date, determine and notify the Master Issuer, Funding 2, the
                 Cash Manager and the Funding 2 Security Trustee of: (i) the
                 Loan Tranche Rate of Interest applicable to such Loan Tranche
                 for the relevant Loan Tranche Interest Period and (ii) the
                 Loan Tranche Interest Amount payable in respect of each Rated
                 Loan Tranche for the relevant Loan Tranche Interest Period.
                 The Cash Manager shall determine the Loan Tranche Interest
                 Amount payable in respect of each Subordinated Loan Tranche
                 and each Start-Up Loan Tranche for the relevant Loan Tranche
                 Interest Period.

         (h)     The Loan Tranche Interest Amount for such Loan Tranche shall
                 be determined by applying the relevant Loan Tranche Rate of
                 Interest to the Outstanding Principal Balance of such Loan
                 Tranche, multiplying the sum by the day count fraction
                 described in Clause 7.1 and rounding the resultant figure to
                 the nearest penny (half a penny being rounded upwards).

         (i)     If the Agent Bank does not at any time for any reason
                 determine the Loan Tranche Rate of Interest for any Loan
                 Tranche and the Loan Tranche Interest Amount for any Rated
                 Loan Tranche in accordance with paragraphs 7.2(a) to (g)
                 above, the Funding 2 Security Trustee shall (subject to it
                 being indemnified to its satisfaction) determine the Loan
                 Tranche Rate of Interest for each Loan Tranche and Loan
                 Tranche Interest Amount for each Rated Loan Tranche and any
                 such determination shall be deemed to have been made by the
                 Agent Bank.

         (j)     All notifications, opinions, determinations, certificates,
                 calculations and decisions given, expressed, made or obtained
                 for the purposes of this Clause 7, whether by the Agent Bank
                 or the Funding 2 Security Trustee, shall (in the absence of
                 wilful default, bad faith or manifest error) be binding on
                 Funding 2, the Master Issuer, the Cash Manager, the Agent
                 Bank, the Funding 2 Security Trustee and (in such absence as
                 aforesaid) no liability to Funding 2 shall attach to the
                 Master Issuer, the Agent Bank, the Funding 2 Security Trustee
                 or the Cash Manager in connection with the exercise or
                 non-exercise by them or any of them of their powers, duties
                 and discretions hereunder.

7.3      PAYMENT ON FUNDING 2 INTEREST PAYMENT DATES

         Subject to Clause 5.1, Funding 2 shall pay interest in respect of each
         Loan Tranche on the Funding 2 Interest Payment Dates specified in the
         applicable Loan Tranche Supplement.

                                       7

<PAGE>

7.4      DEFERRED INTEREST

         Subject to Clause 5.2, to the extent that there are insufficient funds
         available to pay interest on a Loan Tranche on any Funding 2 Interest
         Payment Date, the shortfall in the interest amount payable will not
         then fall due but will instead be due on the following Funding 2
         Interest Payment Date on which sufficient funds are available to pay
         such interest, and pending such payment, will accrue interest at the
         rate specified for such Loan Tranche in the applicable Loan Tranche
         Supplement.

7.5      CERTAIN FEES

         In addition to the interest and principal payments to be made by
         Funding 2 in respect of each Loan Tranche under this Clause 7 and
         Clause 8, respectively, on each Funding 2 Interest Payment Date or on
         any other date on which the Master Issuer notifies Funding 2, but
         subject to Clause 5.1, Funding 2 shall pay to the Master Issuer for
         same day value to the Master Issuer Transaction Account a fee for the
         provision of the Master Intercompany Loan Facility (except that in the
         case of payments due under paragraphs (b), (d), (e) and (j) below,
         such payments shall be paid when due by the Master Issuer). Such fee
         shall be an amount or amounts in the aggregate equal to the following:

         (a)     the fees, costs, charges, liabilities and expenses and any
                 other amounts due and payable to the Note Trustee and the
                 Funding 2 Security Trustee pursuant to the Master Issuer Trust
                 Deed, the Master Issuer Deed of Charge or any other
                 Transaction Document, together with interest thereon as
                 provided therein;

         (b)     the reasonable fees and expenses of any legal advisers,
                 accountants and auditors appointed by the Master Issuer and
                 properly incurred in their performance of their functions
                 under the Transaction Documents which have fallen due;

         (c)     the fees, costs and expenses due and payable to the Paying
                 Agents, the Agent Bank, the Transfer Agent and the Registrar
                 pursuant to the Master Issuer Paying Agent and Agent Bank
                 Agreement;

         (d)     any amounts due and payable by the Master Issuer to HM Revenue
                 and Customs in respect of the Master Issuer's liability to
                 United Kingdom corporation tax (insofar as payment is not or
                 will not be capable of being satisfied by the surrender of
                 group relief or out of the profits, income or gains of the
                 Master Issuer and subject to the terms of the Master Issuer
                 Deed of Charge) or any other Taxes payable by the Master
                 Issuer;

         (e)     the fees, costs, charges, liabilities and expenses due and
                 payable to the Master Issuer Account Bank pursuant to the
                 Master Issuer Bank Account Agreement (if any);

         (f)     the fees, costs, charges, liabilities and expenses due and
                 payable to the Master Issuer Cash Manager pursuant to the
                 Master Issuer Cash Management Agreement;

         (g)     the fees, costs, charges, liabilities and expenses due and
                 payable to the Master Issuer Corporate Services Provider
                 pursuant to the Master Issuer Corporate Services Agreement;

         (h)     any termination payment due and payable by the Master Issuer
                 to a Master Issuer Swap Provider pursuant to a Master Issuer
                 Swap Agreement (which amount received by the Master Issuer
                 from Funding 2 by way of the Senior Fee, and any amount
                 received by the Master Issuer in consideration of it entering
                 into an agreement in replacement of such Master Issuer Swap
                 Agreement, shall be deemed to be received by the Master Issuer
                 in respect of the Loan Tranche corresponding to the Series and
                 Class of Notes to which such Master Issuer Swap Agreement
                 relates);

                                       8

<PAGE>

         (i)     an amount equal to 0.01% of the interest amounts paid by
                 Funding 2 to the Master Issuer on the Loan Tranches on Funding
                 2 Interest Payment Date, provided that the amount payable by
                 Funding 2 to the Master Issuer pursuant to this paragraph
                 (i)together with the amount payable by Funding 2 to the Master
                 Issuer pursuant to paragraph (d) above, in respect of each
                 accounting period of the Master Issuer, shall in aggregate not
                 exceed an amount equal to 0.01% of the interest amounts paid
                 by Funding 2 to the Master Issuer in respect of the Loan
                 Tranches in that accounting period; and

         (j)     any other amounts due or overdue by the Master Issuer to third
                 parties including the Rating Agencies and the amounts paid by
                 the Master Issuer under the Programme Agreement, each
                 Subscription Agreement, each Underwriting Agreement and in
                 consideration of the Master Issuer entering into any
                 replacement Master Issuer Swap Agreement to the extent not
                 paid or payable using any early termination amount received or
                 receivable by the Master Issuer pursuant to the Master Issuer
                 Swap Agreement it replaces and excluding, for the avoidance of
                 doubt, any amounts specified in paragraphs (d) to (i) above
                 and any amounts owing to the Noteholders,

         together with, (i) in respect of taxable supplies made to the Master
         Issuer, an amount in respect of any VAT or similar tax payable in
         respect thereof against production of a valid tax invoice; and (ii) in
         respect of taxable supplies made to a person other than the Master
         Issuer, any amount in respect of any VAT or Irrecoverable VAT or
         similar tax (as the case may be) payable in respect thereof as
         provided in the relevant agreement (against production of a copy of
         the relevant tax invoice), and to be applied subject to and in
         accordance with the provisions of the Master Issuer Pre-Enforcement
         Revenue Priority of Payments in the Master Issuer Cash Management
         Agreement. The parties acknowledge that the amount payable by Funding
         2 to the Master Issuer pursuant to this Clause 7.5 shall be paid in
         accordance with the Funding 2 Deed of Charge and the relevant Funding
         2 Priority of Payments (which prior to service of a Master
         Intercompany Loan Acceleration Notice shall be paragraph (a)(ii) of
         the Funding 2 Pre-Enforcement Revenue Priority of Payments in the case
         of the amount payable pursuant to paragraphs (a) to (g) and (j) above
         and paragraph (s)(ii) of the Funding 2 Pre-Enforcement Revenue
         Priority of Payments in the case of the amount payable pursuant to
         paragraphs (h) and (i) above) and (in each case) subject to the
         provisions of Clause 5.1 such that in the event of a shortfall
         resulting in any such amount not being paid on a Funding 2 Interest
         Payment Date then such amount shall not be paid until the next Funding
         2 Interest Payment Date (if any) on which Funding 2 has sufficient
         amounts standing to the credit of the Funding 2 GIC Account and the
         Funding 2 Transaction Account to pay such amount in accordance with
         the Funding 2 Deed of Charge and the relevant Funding 2 Priority of
         Payments.

7.6      SET-OFF

         Funding 2 and each of the other parties to this Agreement agree that
         the Master Issuer shall be entitled to set-off those amounts due and
         payable by Funding 2 pursuant to Clause 7.5 on the Closing Date for a
         Loan Tranche against the amount to be advanced by the Master Issuer to
         Funding 2 under such Loan Tranche on such Closing Date.

                                       9

<PAGE>

8.       REPAYMENT

8.1      REPAYMENT OF RATED LOAN TRANCHES

         Subject to Clause 5, on each Loan Payment Date, other than a Loan
         Payment Date on which a Rated Loan Tranche is to be repaid under
         Clause 9, Funding 2 shall repay principal in respect of such Rated
         Loan Tranche in an amount equal to:

         (a)     prior to the occurrence of a Trigger Event, service on Funding
                 2 of a Master Intercompany Loan Acceleration Notice or the
                 service on the Master Issuer of a Note Acceleration Notice,
                 the lower of:

                 (i)     the amount due to be paid on such Loan Payment Date as
                         specified for such Rated Loan Tranche in the
                         applicable Loan Tranche Supplement; and

                 (ii)    the amount which is available, under the terms of the
                         Funding 2 Deed of Charge and the Cash Management
                         Agreement, to repay principal in respect of such Rated
                         Loan Tranche as set out in Part 2 of Schedule 4 of the
                         Funding 2 Deed of Charge,

                 provided that, in the case of any Pass-Through Loan Tranche,
                 the amount of principal to be repaid by Funding 2 in respect
                 of such Rated Loan Tranche on any applicable Loan Payment Date
                 occurring on or following its Step-Up Date shall be calculated
                 in accordance with subparagraph (ii) above; or

         (b)     following the occurrence of a Non-Asset Trigger Event but
                 prior to the occurrence of an Asset Trigger Event, service on
                 Funding 2 of a Master Intercompany Loan Acceleration Notice or
                 service on the Master Issuer of a Note Acceleration Notice,
                 the amount which is available under the terms of the Funding 2
                 Deed of Charge and the Cash Management Agreement to repay
                 principal in respect of such Loan Tranche in such
                 circumstances as set out in Part 2 of Schedule 4 of the
                 Funding 2 Deed of Charge; or

         (c)     following the occurrence of an Asset Trigger Event but prior
                 to service on Funding 2 of a Master Intercompany Loan
                 Acceleration Notice or service on the Master Issuer of a Note
                 Acceleration Notice, the amount which is available under the
                 terms of the Funding 2 Deed of Charge and the Cash Management
                 Agreement to repay principal in respect of such Rated Loan
                 Tranche in such circumstances as set out in Part 2 of Schedule
                 4 of the Funding 2 Deed of Charge; or

         (d)     following service on Funding 2 of a Master Intercompany Loan
                 Acceleration Notice but prior to service on the Master Issuer
                 of a Note Acceleration Notice, the amount which is available
                 under the terms of the Funding 2 Deed of Charge and the Cash
                 Management Agreement to repay principal in respect of such
                 Rated Loan Tranche in such circumstances as set out in Part 2
                 of Schedule 4 of the Funding 2 Deed of Charge; or

         (e)     following service on the Master Issuer of a Note Acceleration
                 Notice, the amount which is available under the terms of the
                 Funding 2 Deed of Charge and the Cash Management Agreement to
                 repay principal in respect of such Loan Tranche in such
                 circumstances as set out in Part 3 of Schedule 4 of the
                 Funding 2 Deed of Charge.

8.2      REPAYMENT OF SUBORDINATED LOAN TRANCHES

(a)      Funding 2 shall make repayments of all or any part of a Subordinated
         Loan Tranche on each Funding 2 Interest Payment Date if, and to the
         extent that, there are Funding 2 Available Principal Receipts
         available therefor after making the payments and provisions referred
         to in paragraphs (a) to (p) of the

                                      10

<PAGE>

         Funding 2 Pre-Enforcement Principal Priority of Payments, until such
         Subordinated Loan Tranche has been reduced to the Required
         Subordinated Loan Principal Outstanding Amount.

8.3      REPAYMENT OF START-UP LOAN TRANCHES

(a)      Funding 2 shall make repayments of all or any part of a Start-Up Loan
         Tranche on each Funding 2 Interest Payment Date if, and to the extent
         that, there are Funding 2 Available Revenue Receipts available
         therefor after making the payments and provisions referred to in
         paragraphs (a) to (t) of the Funding 2 Pre-Enforcement Revenue
         Priority of Payments, until such Start-Up Loan Tranche and any accrued
         but unpaid interest thereon has been fully repaid.

8.4      DEFERRAL OF PRINCIPAL ON LOAN TRANCHES

         To the extent that there are insufficient funds available to Funding 2
         to repay the amount due to be paid on such Loan Payment Date, Funding
         2 will be required to repay the shortfall, to the extent that it
         receives funds therefor (and subject to the terms of the Funding 2
         Deed of Charge and the Cash Management Agreement) on subsequent
         Funding 2 Payment Dates in respect of such Loan Tranche.

8.5      RATED LOAN TRANCHE RATINGS

         Unless otherwise specified for any Rated Loan Tranche in the
         applicable Loan Tranche Supplement, such Rated Loan Tranche shall be
         repaid (as to both interest and principal) in the priority according
         to the Loan Tranche Rating of that Rated Loan Tranche. The Loan
         Tranche Rating for a Rated Loan Tranche will be specified for such
         Rated Loan Tranche in the applicable Loan Tranche Supplement.

8.6      SUBORDINATION OF SUBORDINATED LOAN TRANCHES AND START-UP LOAN TRANCHES
         TO RATED LOAN TRANCHES

         Each Rated Loan Tranche shall be paid (as to interest) and repaid (as
         to principal) in priority to each Subordinated Loan Tranche and each
         Start-Up Loan Tranche.

8.7      SUBORDINATION OF START-UP LOAN TRANCHES TO SUBORDINATED LOAN TRANCHES

         Each Subordinated Loan Tranche shall be paid (as to interest) and
         repaid (as to principal) in priority to each Start-Up Loan Tranche.

8.8      PAYMENT SUBJECT TO TERMS OF THE FUNDING 2 DEED OF CHARGE

         The terms and conditions of Clause 7 and this Clause 8 are to be read
         in conjunction with the provisions of the Funding 2 Deed of Charge, as
         the same may be amended or varied from time to time in accordance with
         the provisions thereof.

9.       PREPAYMENT

9.1      PREPAYMENT FOR TAXATION OR OTHER REASONS

         If:

         (a)     Funding 2 is required to withhold or deduct from any payment
                 of principal or interest in respect of any Loan Tranche any
                 amount for or on account of Tax; or

         (b)     the Master Issuer is required to withhold or deduct from any
                 payment of principal, interest or premium in respect of its
                 Notes any amount for or on account of Tax; or

                                      11

<PAGE>

         (c)     the Master Issuer or Funding 2, as the case may be, falls
                 within the Securitisation Tax Regime but subsequently ceases
                 to fall within the Securitisation Tax Regime; or

         (d)     a Loan Tranche becomes illegal as described in Clause 11,

         then, without prejudice to the obligations of Funding 2 under Clause
         11 and subject to Clause 12, Funding 2 may prepay, in the case of (a)
         to (c) above, subject to the Master Issuer satisfying the requirements
         of Condition 5(E) of the related Notes, on any Funding 2 Interest
         Payment Date, having given not more than 60 days' and not less than 30
         days' (or such shorter period as may be required by any relevant law
         in the case of any Loan Tranche which becomes illegal pursuant to
         Clause 11) prior written notice to the Master Issuer and the Note
         Trustee (or on or before the latest date permitted by the relevant law
         in the case of Clause 11) so long as the relevant circumstances
         continue, the applicable Loan Tranches (which in the case of (c)
         above, shall include all outstanding Loan Tranches) without penalty or
         premium but subject to Clause 16, provided that (in the case of a
         Rated Loan Tranche) the Master Issuer is able to repay the related
         Notes used to fund such Rated Loan Tranche on such Funding 2 Interest
         Payment Date from funds received from repayment of such Rated Loan
         Tranche.

9.2      PREPAYMENT AT OPTION OF MASTER ISSUER

         The Master Issuer, at its option, may require Funding 2 to prepay the
         outstanding principal amount of a Rated Loan Tranche (together with
         any accrued interest) on any Funding 2 Interest Payment Date on which
         the Master Issuer has decided to exercise its option, if any, to
         redeem in full the Notes used to fund such Rated Loan Tranche. The
         Master Issuer shall give Funding 2 not more than 60 days' and not less
         than 30 days' prior written notice of the Master Issuer's decision to
         exercise its option to require Funding 2 to prepay the relevant Loan
         Tranche. Any prepayment by Funding 2 will be made without penalty or
         premium but will be subject to Clause 16.

9.3      APPLICATION OF MONIES

(a)      The Master Issuer hereby agrees to apply any amounts received by way
         of prepayment of a Rated Loan Tranche pursuant to Clause 9.1 or Clause
         9.2 in making prepayments under the relevant Series and Class of
         Notes.

(b)      The Master Issuer hereby agrees to apply any amounts received by way
         of prepayment of a Subordinated Loan Tranche pursuant to Clause 9.1 in
         making prepayments under the relevant Master Issuer Subordinated Loan
         Agreement.

(c)      The Master Issuer hereby agrees to apply any amounts received by way
         of prepayment of a Start-Up Loan Tranche pursuant to Clause 9.1 in
         making prepayments under the relevant Master Issuer Start-Up Loan
         Agreement.

10.      TAXES

10.1     NO GROSS UP

         All payments by Funding 2 under this Agreement shall be made without
         any deduction or withholding for or on account of, and free and clear
         of, any Taxes, except to the extent that Funding 2 is required by law
         to make payment subject to such deduction or withholding.

10.2     TAX RECEIPTS

         All Taxes required by law to be deducted or withheld by Funding 2 from
         any amounts paid or payable under this Agreement shall be paid by
         Funding 2 when due and Funding 2 shall, within 30

                                      12

<PAGE>

         days of the payment being made, deliver to the Master Issuer evidence
         satisfactory to the Master Issuer (including all relevant Tax
         receipts) that the payment has been duly remitted to the appropriate
         authority.

11.      ILLEGALITY

         If, at any time, it is unlawful for the Master Issuer to make, fund or
         allow to remain outstanding a Loan Tranche made by it under this
         Agreement, then the Master Issuer shall, promptly after becoming aware
         of the same, deliver to Funding 2, the Funding 2 Security Trustee and
         the Rating Agencies a legal opinion to that effect from reputable
         counsel and if the Master Issuer so requires, Funding 2 shall promptly
         to the extent necessary to cure such illegality prepay such Loan
         Tranche subject to and in accordance with the provisions of Clause
         9.1.

12.      MITIGATION

         If circumstances arise in respect of the Master Issuer which would, or
         would upon the giving of notice, result in:

         (a)     the prepayment of the Loan Tranches pursuant to Clause 11; or

         (b)     a withholding or deduction from the amount to be paid by
                 Funding 2 for or on account of Taxes pursuant to Clause 10,

         then, without in any way limiting, reducing or otherwise qualifying
         the obligations of Funding 2 under this Agreement, the Master Issuer
         shall:

         (i)     promptly upon becoming aware of the circumstances, notify the
                 Funding 2 Security Trustee, Funding 2 and the Rating Agencies;
                 and

         (ii)    upon written request from Funding 2, take such reasonable
                 steps as may be practical to mitigate the effects of those
                 circumstances including (without limitation) the assignment of
                 the Master Issuer's rights under this Agreement to, and
                 assumption of all the Master Issuer's obligations under this
                 Agreement by, another company satisfactory to the Funding 2
                 Security Trustee, which is willing to participate in the Loan
                 Tranches in its place and which is not subject to (a) and/or
                 (b) above,

         provided that no such transfer or assignment and transfer of such
         rights and obligations may be permitted unless the Rating Agencies
         confirm in writing to Funding 2 and the Funding 2 Security Trustee
         that there will be no downgrading of the then current rating of the
         Notes issued by the Master Issuer as a result and Funding 2
         indemnifies the Master Issuer for any reasonable costs and expenses
         properly incurred as a result of such transfer or assignment.

13.      QREPRESENTATIONS AND WARRANTIES OF FUNDING 2

13.1     REPRESENTATIONS AND WARRANTIES

         Funding 2 makes the representations and warranties set out in this
         Clause 13 to the Master Issuer and the Funding 2 Security Trustee (as
         trustee for each of the Funding 2 Secured Creditors).

13.2     STATUS

         (a)     It is a limited liability company duly incorporated, validly
                 existing and registered under the laws of the jurisdiction in
                 which it is incorporated, capable of being sued in its own
                 right and not subject to any immunity from any proceedings;
                 and

                                      13

<PAGE>

         (b)     it has the power to own its property and assets and to carry
                 on its business as it is being conducted.

13.3     POWERS AND AUTHORITY

         It has the power to enter into, perform and deliver, and has taken all
         necessary corporate and other action to authorise the execution,
         delivery and performance by it of, each of the Transaction Documents
         to which it is a party.

13.4     LEGAL VALIDITY

         Each Transaction Document to which it is or will be a party
         constitutes or when executed in accordance with its terms will
         constitute, a legal, valid and binding obligation of Funding 2.

13.5     NON-CONFLICT

         The execution by it of each of the Transaction Documents to which it
         is a party and the exercise by it of its rights and the performance of
         its obligations under such Transaction Documents including, without
         limitation, borrowing pursuant to the terms of this Agreement or
         granting any security contemplated by the Transaction Documents will
         not:

         (a)     result in the existence or imposition of, nor oblige it to
                 create, any Security Interest in favour of any person (other
                 than the Funding 2 Secured Creditors or as otherwise
                 contemplated in the Transaction Documents) over all or any of
                 its present or future revenues or assets;

         (b)     conflict with any document which is binding upon it or any of
                 its assets;

         (c)     conflict with its constitutional documents; or

         (d)     conflict with any law, regulation or official or judicial
                 order of any government, governmental body or court, domestic
                 or foreign, having jurisdiction over it.

13.6     NO LITIGATION

         No litigation, arbitration or administrative proceedings are current
         or, to its knowledge, pending or threatened.

13.7     NO DEFAULT

         No Master Intercompany Loan Event of Default is continuing unremedied
         (if capable of remedy) or unwaived or would result from the making of
         any Loan Tranche.

13.8     AUTHORISATIONS

         All consents, licences, approvals, notices and authorisations required
         or desirable in connection with the entry into, performance, validity
         and enforceability of, and the transactions contemplated by, the
         Transaction Documents have been obtained or effected (as appropriate)
         and are in full force and effect.

13.9     REGISTRATION REQUIREMENTS

         Except for due registration of the Funding 2 Deed of Charge under
         Section 395 of the Companies Act 1985, it is not necessary that the
         Funding 2 Deed of Charge or this Agreement be filed, recorded or
         enrolled with any authority or that, except for registration fees
         payable to the Registrar of

                                      14

<PAGE>

         Companies in respect of the Funding 2 Deed of Charge, any stamp,
         registration or similar tax be paid on or in respect thereof.

13.10    RANKING OF SECURITY

         The security conferred by the Funding 2 Deed of Charge constitutes a
         first priority security interest of the type described, and over the
         security assets referred to, in the Funding 2 Deed of Charge and the
         Funding 2 Charged Property is not subject to any prior or pari passu
         Security Interests.

13.11    NO OTHER BUSINESS

(a)      It has not traded or carried on any business since its date of
         incorporation or engaged in any activity whatsoever that is not
         incidental to or necessary in connection with any of the activities in
         which the Transaction Documents provide or envisage that it will
         engage; and

(b)      it is not party to any material agreements other than the Transaction
         Documents.

13.12    OWNERSHIP

(a)      Its entire issued share capital is legally and beneficially owned and
         controlled by Holdings; and

(b)      its shares are fully paid.

13.13    GOOD TITLE AS TO ASSETS

         Subject to the Security Interests created under the Funding 2 Deed of
         Charge, it is and will remain the absolute beneficial owner of the
         Funding 2 Share and absolute legal and beneficial owner of all other
         assets charged or assigned by the Funding 2 Deed of Charge to which it
         is a party.

13.14    TAX

(a)      It is a resident for tax purposes and legally domiciled in its
         jurisdiction of incorporation;

(b)      it has no branch, business establishment or other fixed establishment
         outside the United Kingdom; and

(c)      no part of its purpose or objects in being party to the Transaction
         Documents and the transactions contemplated by them has been, is or
         will be an 'unallowable purpose' within the meaning of paragraph 13 of
         Schedule 9 to the Finance Act 1996, paragraph 23 of Schedule 26 to the
         Finance Act 2002 or Regulation 12 of the Taxation of Securitisation
         Companies Regulations 2006.

13.15    REPETITION

         The representations in this Clause 13 shall survive the execution of
         this Agreement and the making of each Loan Tranche under this
         Agreement, and shall be repeated by Funding 2 on each Closing Date
         relating to the making of each Loan Tranche by reference to the facts
         and circumstances then existing.

14.      COVENANTS

14.1     DURATION

         The undertakings in this Clause 14 shall remain in force from the date
         of this Agreement for so long as any amount is or may be outstanding
         under this Agreement.

                                      15

<PAGE>

14.2     INFORMATION

         Funding 2 shall supply to the Funding 2 Security Trustee and the
         Rating Agencies:

         (a)     as soon as the same are available its audited accounts for
                 that Financial Year; and

         (b)     promptly, such other information in connection with the
                 matters contemplated by the Transaction Documents, as the
                 Funding 2 Security Trustee or the Rating Agencies may
                 reasonably request.

14.3     NOTIFICATION OF DEFAULT

         Funding 2 shall notify the Master Issuer and the Funding 2 Security
         Trustee of any Master Intercompany Loan Event of Default (and the
         steps, if any, being taken to remedy it) promptly upon Funding 2
         becoming aware of its occurrence.

14.4     AUTHORISATIONS

         Funding 2 shall promptly:

         (a)     obtain, maintain and comply with the terms of; and

         (b)     upon request, supply certified copies to the Master Issuer and
                 the Funding 2 Security Trustee of,

         any authorisation required under any law or regulation to enable it to
         perform its obligations under, or for the validity or enforceability
         of, any Transaction Document to which it is a party.

14.5     PARI PASSU RANKING

         Funding 2 shall procure that its obligations under the Transaction
         Documents do and will rank at least pari passu with all its other
         present and future unsecured obligations, except for obligations
         mandatorily preferred by law.

14.6     NEGATIVE PLEDGE

         Funding 2 shall not create or permit to subsist any Security Interest
         over or in respect of any of its assets (unless arising by operation
         of law) other than as provided pursuant to the Transaction Documents.

14.7     DISPOSALS

         Funding 2 shall not, either in a single transaction or in a series of
         transactions, whether related or not and whether voluntarily or
         involuntarily, sell, lend, assign, transfer, lease, part with or
         otherwise dispose of or grant any option over all or any part of its
         assets, properties or undertakings or any interest, estate, right,
         title or benefit therein, other than as provided for pursuant to the
         Transaction Documents.

14.8     MERGERS AND ACQUISITIONS

(a)      Funding 2 shall not enter into any amalgamation, demerger, merger or
         reconstruction.

(b)      Funding 2 shall not acquire any assets or business or make any
         investments other than as contemplated in the Transaction Documents.

                                      16

<PAGE>

14.9     LENDING AND BORROWING

(a)      Except as provided or contemplated under the Transaction Documents,
         Funding 2 shall not make any loans or provide any other form of credit
         to any person.

(b)      Funding 2 shall not give any guarantee or indemnity to or for the
         benefit of any person in respect of any obligation of any other person
         or enter into any document under which Funding 2 assumes any liability
         of any other person.

(c)      Funding 2 shall not incur any indebtedness in respect of any borrowed
         money other than under the Transaction Documents.

14.10    SHARES AND DIVIDENDS

         Funding 2 shall not:

         (a)     declare or pay any dividend or make any other distribution in
                 respect of any of its shares other than in accordance with the
                 Funding 2 Deed of Charge;

         (b)     issue any further shares or alter any rights attaching to its
                 issued shares as at the date hereof; or

         (c)     repay or redeem any of its share capital.

14.11    CHANGE OF BUSINESS

(a)      Funding 2 shall not carry on any business or engage in any activity
         other than as contemplated by the Transaction Documents or which is
         not incidental to or necessary in connection with any of the
         activities in which the Transaction Documents provide or envisage that
         Funding 2 will engage.

(b)      Funding 2 shall not have any subsidiaries or subsidiary undertakings
         as defined in the Companies Act 1985, as amended.

(c)      Funding 2 shall not have any employees or own any premises.

14.12    TAX

(a)      Funding 2 shall not apply to become part of any group for the purposes
         of sections 43A-D of the Value Added Tax Act 1994 (including any other
         legislative provisions supplementing the same) with the Master Issuer
         unless required to do so by law.

(b)      If Funding 2 falls within the Securitisation Tax Regime, Funding 2
         shall take reasonable steps to ensure that it does not fall outside
         the Securitisation Tax Regime.

14.13    UNITED STATES ACTIVITIES

         Funding 2 will not engage in any activities in the United States
         (directly or through agents), will not derive any income from United
         States sources as determined under United States income tax principles
         and will not 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.

                                      17

<PAGE>

15.      DEFAULT

15.1     MASTER INTERCOMPANY LOAN EVENTS OF DEFAULT

         Each of the events set out in Clause 15.2 to Clause 15.8 (inclusive)
         is a MASTER INTERCOMPANY LOAN EVENT OF DEFAULT (whether or not caused
         by any reason whatsoever outside the control of Funding 2 or any other
         person).

15.2     NON-PAYMENT

         Subject to Clause 5.1, Funding 2 does not pay on the due date or such
         failure to pay continues for a period of three London Business Days
         after such due date any amount payable by it under this Agreement or
         any other loan agreement entered into by Funding 2 at the place at and
         in the currency in which it is expressed to be payable.

15.3     BREACH OF OTHER OBLIGATIONS

         Funding 2 does not comply in any material respect (in the opinion of
         the Funding 2 Security Trustee) with any of its obligations under the
         Transaction Documents to which it is a party (other than those
         referred to in Clause 15.2) and such non-compliance, if capable of
         remedy, is not remedied promptly and in any event within twenty London
         Business Days of Funding 2 becoming aware of the non-compliance or
         receipt of a written notice from the Funding 2 Security Trustee
         requiring Funding 2's non-compliance to be remedied.

15.4     MISREPRESENTATION

         A representation, warranty or statement made or repeated in or in
         connection with any Transaction Document or in any document delivered
         by or on behalf of Funding 2 under or in connection with any
         Transaction Document is incorrect in any material respect (in the
         opinion of the Funding 2 Security Trustee) when made or deemed to be
         made or repeated.

15.5     INSOLVENCY

         Any corporate action is taken by Funding 2, or any legal proceedings
         are started, for the winding-up, dissolution, administration or
         appointment of a liquidator, receiver, administrator, administrative
         receiver, trustee or similar officer of Funding 2 or of any or all of
         Funding 2's revenues and assets or any application is made or petition
         is lodged for the making of an administration order in relation to
         Funding 2.

15.6     CREDITORS' PROCESS

         Any attachment, sequestration, distress or execution affects any asset
         of Funding 2 and is not discharged within twenty London Business Days.

15.7     UNLAWFULNESS

         It is or becomes unlawful for Funding 2 to perform any of its
         obligations under any Transaction Document.

15.8     THE FUNDING 2 DEED OF CHARGE

         The Funding 2 Deed of Charge is no longer binding on or enforceable
         against Funding 2 or effective to create the security intended to be
         created by it.

                                      18

<PAGE>

15.9     OWNERSHIP

         The entire issued share capital of Funding 2 ceases to be legally and
         beneficially owned and controlled by Holdings.

15.10    ACCELERATION OF MASTER INTERCOMPANY LOAN

         Upon the occurrence of a Master Intercompany Loan Event of Default
         which is continuing unremedied and/or has not been waived, the Funding
         2 Security Trustee may by written notice to Funding 2 (a MASTER
         INTERCOMPANY LOAN ACCELERATION NOTICE) which is copied to each of the
         Funding 2 Secured Creditors and the Mortgages Trustee:

         (a)     declare all Loan Tranches made under this Agreement to be
                 immediately due and payable, whereupon the same shall, subject
                 to Clause 15.11, become so payable together with accrued
                 interest thereon and any other sums then owed by Funding 2
                 under this Agreement; and/or

         (b)     declare the Loan Tranches to be due and payable on demand of
                 the Funding 2 Security Trustee.

15.11    REPAYMENT OF MASTER INTERCOMPANY LOAN ON ACCELERATION

         Upon the Funding 2 Security Trustee declaring the Loan Tranches to be
         immediately due and payable pursuant to Clause 15.10, the amount due
         and payable in respect of each Loan Tranche shall be paid by Funding 2
         without penalty or premium but subject to Clause 16.

16.      DEFAULT INTEREST AND INDEMNITY

16.1     DEFAULT LOAN INTEREST PERIODS

         If any sum due and payable by Funding 2 under this Agreement is not
         paid on the due date for payment in accordance with this Agreement or
         if any sum due and payable by Funding 2 under any judgment or decree
         of any court in connection with this Agreement is not paid on the date
         of such judgment or decree, the period beginning on such due date or,
         as the case may be, the date of such judgment or decree and ending on
         the date upon which the obligation of Funding 2 to pay such sum (the
         balance thereof for the time being unpaid being herein referred to as
         an UNPAID SUM) is discharged shall be divided into successive periods,
         each of which (other than the first) shall start on (and include) a
         Funding 2 Interest Payment Date and end on (but exclude) the next
         Funding 2 Interest Payment Date unless the Funding 2 Security Trustee
         otherwise provides having regard to when such unpaid sum is likely to
         be paid.

16.2     DEFAULT INTEREST

         During each such period relating to an unpaid sum as is mentioned in
         this Clause 16 an unpaid sum shall bear interest at the rate per annum
         which the Master Issuer, acting reasonably, determines and certifies
         to Funding 2 and the Funding 2 Security Trustee will be sufficient to
         enable it to pay interest and other costs and indemnities on or in
         respect of any amount which the Master Issuer does not pay as a result
         of Funding 2's non-payment under this Agreement, as a result of such
         unpaid sum not being paid to it.

16.3     PAYMENT OF DEFAULT INTEREST

         Any interest which shall have accrued under Clause 16.2 in respect of
         an unpaid sum shall be due and payable and shall be paid by Funding 2
         at the end of the period by reference to which it is calculated.

                                      19

<PAGE>

16.4     BROKEN PERIODS

         Funding 2 shall forthwith on demand indemnify the Master Issuer
         against any loss or liability that the Master Issuer incurs as a
         consequence of any payment of principal being received from any source
         otherwise than on a Funding 2 Interest Payment Date or an overdue
         amount being received otherwise than on its due date.

16.5     FUNDING 2'S PAYMENT INDEMNITY

         Funding 2 undertakes to indemnify the Master Issuer:

         (a)     against any cost, claim, loss, expense (including legal fees)
                 or liability together with any amount in respect of
                 Irrecoverable VAT thereon (other than by reason of the
                 negligence or wilful default by the Master Issuer) which it
                 may sustain or incur as a consequence of the occurrence of any
                 Master Intercompany Loan Event of Default or any default by
                 Funding 2 in the performance of any of the obligations
                 expressed to be assumed by it in any of the Transaction
                 Documents (other than by reason of negligence or wilful
                 default on the part of the Master Issuer or prior breach by
                 the Master Issuer of the terms of any of the Transaction
                 Documents to which it is a party);

         (b)     against any loss it may suffer as a result of its funding a
                 Loan Tranche requested by Funding 2 under the Master
                 Intercompany Loan Agreement but not made; and

         (c)     against any other loss or liability (other than by reason of
                 the negligence or default of the Master Issuer or breach by
                 the Master Issuer of the terms of any of the Transaction
                 Documents to which it is a party (except where such breach is
                 caused by the prior breach of Funding 2) or loss of profit) it
                 may suffer by reason of having made a Loan Tranche available
                 or entering into this Agreement or enforcing any security
                 granted pursuant to the Funding 2 Deed of Charge.

17.      PAYMENTS

17.1     PAYMENT

(a)      Subject to Clause 5, all amounts of interest and principal to be paid
         to the Master Issuer under this Agreement shall be paid in Sterling
         for value by Funding 2 to the Master Issuer Transaction Account.

(b)      On each date on which this Agreement requires any amount other than
         the amounts specified in Clause 17.1 to be paid by Funding 2, Funding
         2 shall, save as provided otherwise herein, make the same available to
         the Master Issuer by payment in Sterling in immediately available,
         freely transferable, cleared funds to the Master Issuer Transaction
         Account.

17.2     ALTERNATIVE PAYMENT ARRANGEMENTS

         If, at any time, it shall become impracticable (by reason of any
         action of any governmental authority or any change in law, exchange
         control regulations or any similar event) for Funding 2 to make any
         payments under this Agreement in the manner specified in Clause 17.1,
         then Funding 2 shall make such alternative arrangements for the
         payment direct to the Master Issuer of amounts due under this
         Agreement as are acceptable to the Funding 2 Security Trustee.

                                      20

<PAGE>

17.3     NO SET-OFF

         All payments required to be made by Funding 2 under this Agreement
         shall be calculated without reference to any set-off or counterclaim
         and shall be made free and clear of, and without any deduction for or
         on account of, any set-off or counterclaim.

18.      ENTRENCHED PROVISIONS

         Each of Funding 2, the Master Issuer and the Funding 2 Security
         Trustee acknowledge and agree that Funding 2 may from time to time
         enter into New Funding 2 Loan Agreements and that the obligation of
         Funding 2 to repay the Loan Tranches made under this Agreement will
         rank pari passu with the obligations of Funding 2 to repay any such
         other loans made under such New Funding 2 Loan Agreements. If Funding
         2 intends to enter into a New Funding 2 Loan Agreement then the
         provisions of this Agreement may be varied (with the consent of the
         parties to this Agreement to the extent necessary to reflect the terms
         of such New Funding 2 Loan Agreement) in accordance with Clause 18 of
         the Funding 2 Deed of Charge PROVIDED THAT no variation shall be made
         to any of the following terms without the prior written consent of the
         Funding 2 Secured Creditors and the Rating Agencies:

         (a)     the determination of the Loan Tranche Rates of Interest;

         (b)     Clause 5 (Limited Recourse);

         (c)     Clause 10 (Taxes); and

         (d)     Clause 19.5 (Funding 2 Security Trustee).

19.      FURTHER PROVISIONS

19.1     EVIDENCE OF INDEBTEDNESS

         In any proceeding, action or claim relating to a Loan Tranche a
         statement as to any amount due to the Master Issuer under such Loan
         Tranche which is certified as being correct by an officer of the
         Funding 2 Security Trustee shall, unless otherwise provided in this
         Agreement, be prima facie evidence that such amount is in fact due and
         payable.

19.2     ENTIRE AGREEMENT, AMENDMENTS AND WAIVER AND RIGHTS CUMULATIVE

(a)      This Agreement sets out the entire agreement and understanding between
         the parties with respect to the subject matter of this Agreement
         superseding all prior oral or written understandings other than the
         other Transaction Documents.

(b)      Subject to Clause 18, no amendment or waiver of any provision of this
         Agreement 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 hereto. 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.

(c)      The respective rights of each of the parties to this Agreement are
         cumulative and may be exercised as often as they consider appropriate.
         No failure on the part of any party 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 such right preclude any
         other or further exercise thereof or the exercise of any other right.
         The remedies in this Agreement are cumulative and not exclusive of any
         remedies provided by law.

                                      21
<PAGE>

19.3     ASSIGNMENT

         Neither the Master Issuer nor Funding 2 may assign or transfer any of
         its respective rights and obligations under this Agreement PROVIDED
         THAT:

         (a)     the Master Issuer may assign its rights, title, interest or
                 benefit hereunder to the Master Issuer Security Trustee
                 pursuant to the Master Issuer Deed of Charge; and

         (b)     Funding 2 may assign its rights hereunder to the Funding 2
                 Security Trustee pursuant to the Funding 2 Deed of Charge.

19.4     SEVERABILITY

         If a provision of this Agreement is or becomes illegal, invalid or
         unenforceable in any jurisdiction, that shall not affect:

         (a)     the validity or enforceability in that jurisdiction of any
                 other provision of this Agreement; or

         (b)     the validity or enforceability in other jurisdictions of that
                 or any other provision of this Agreement.

19.5     FUNDING 2 SECURITY TRUSTEE

         The Funding 2 Security Trustee shall have no responsibility for any of
         the obligations of the Master Issuer or any other party to this
         Agreement (other than itself). For the avoidance of doubt, the parties
         to this Agreement acknowledge that the rights and obligations of the
         Funding 2 Security Trustee under this Agreement are governed by the
         Funding 2 Deed of Charge.

19.6     COUNTERPARTS

         This Agreement 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.

19.7     THIRD PARTY RIGHTS

         A person who is not a party to this Agreement may not enforce any of
         its terms under the Contracts (Rights of Third Parties) Act 1999, but
         this shall not affect any right or remedy of a third party which
         exists or is available apart from that Act.

20.      REDENOMINATION

         Each obligation under this Agreement which has been denominated in
         Sterling shall be redenominated in Euro in accordance with applicable
         legislation passed by the European Monetary Union upon such
         redenomination of the Notes.

                                      22

<PAGE>

21.      NOTICES

         Any notices to be given pursuant to this Agreement to any of the
         parties hereto shall be sufficiently served if sent by prepaid first
         class post, by hand or facsimile transmission and shall be deemed to
         be given (in the case of facsimile transmission) when despatched,
         (where delivered by hand) on the day of delivery if delivered before
         5.00 p.m. 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 Master Issuer: to Permanent Master Issuer
                 PLC, 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;

         (b)     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;

         (c)     in the case of 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); and

         (d)     in the case of Agent Bank, to Citibank, N.A., Citigroup
                 Centre, Canada Square, Canary Wharf, London E14 5LB,
                 (facsimile number 020 7508 3881) for the attention of Rate
                 Fixing,

         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 21. All notices served under this Agreement
         shall be simultaneously copied to the Funding 2 Security Trustee by
         the person serving the same.

22.      GOVERNING LAW AND SUBMISSION TO JURISDICTION

22.1     This Agreement is governed by the laws of England.

22.2     Each party to this Agreement hereby irrevocably submits to the
         exclusive jurisdiction of the English courts in any action or
         proceeding arising out of or relating to this Agreement, and hereby
         irrevocably agrees that all claims in respect of such action or
         proceeding may be heard and determined by such courts. Each party to
         this Agreement hereby irrevocably waives, to the fullest extent it may
         possibly do so, any defence or claim that the English courts are an
         inconvenient forum for the maintenance or hearing of such action or
         proceeding.

IN WITNESS WHEREOF the parties have executed and delivered this Agreement as a
deed on the day and year first before written.

                                      23

<PAGE>

                                  SCHEDULE 1

                             CONDITIONS PRECEDENT

1.       AUTHORISATIONS

1.1      A copy of the memorandum and articles of association and certificate
         of incorporation of Funding 2.

1.2      A copy of a resolution of the board of directors of Funding 2
         authorising the entry into, execution and performance of the Loan
         Tranche Supplement and each of the relevant Transaction Documents
         related to the relevant Loan Tranche Supplement to which Funding 2 is
         a party and authorising specified persons to execute those on its
         behalf.

1.3      A certificate of a director of Funding 2 certifying:

         (a)     that each document delivered under this paragraph 1 of
                 Schedule 1 is correct, complete and in full force and effect
                 as at a date no later than the date of the Loan Tranche
                 Supplement and undertaking to notify the Funding 2 Security
                 Trustee if that position should change prior to the relevant
                 Closing Date; and

         (b)     as to the identity and specimen signatures of the directors
                 and signatories of Funding 2.

2.       LEGAL OPINION

         Legal opinions of:

         (a)     Allen & Overy LLP, English and U.S. legal advisers to the
                 Seller, the Master Issuer and Funding 2, addressed to the
                 Funding 2 Security Trustee; and

         (b)     Shepherd and Wedderburn LLP, Scottish legal advisers to the
                 Seller, the Master Issuer and Funding 2, addressed to the
                 Funding 2 Security Trustee.

3.       TRANSACTION DOCUMENTS

         Duly executed copies of:

3.1      Bank Account Agreement;

3.2      Cash Management Agreement;

3.3      Controlling Beneficiary Deed;

3.4      Corporate Services Agreement;

3.5      Data Processor Agreement;

3.6      Funding 2 Deed of Charge;

3.7      Funding 2 Guaranteed Investment Contract;

3.8      Funding 2 Start-Up Loan Agreements (if applicable);

3.9      Funding 2 Swap Agreement;

                                      24

<PAGE>

3.10     Master Definitions and Construction Schedule;

3.11     Master Intercompany Loan Agreement;

3.12     Master Issuer Bank Account Agreement;

3.13     Master Issuer Cash Management Agreement;

3.14     Master Issuer Corporate Services Agreement;

3.15     Master Issuer Deed of Charge;

3.16     Master Issuer Master Definitions Schedule;

3.17     Master Issuer Paying Agent and Agent Bank Agreement;

3.18     Master Issuer Post-Enforcement Call Option Agreement;

3.19     Master Issuer Start-up Loan Agreement (dated the relevant Closing
         Date) (if applicable);

3.20     Master Issuer Subordinated Loan Agreement (dated the relevant Advance
         Date) (if applicable);

3.21     Master Issuer Swap Agreements;

3.22     Master Issuer Trust Deed;

3.23     Mortgage Sale Agreement;

3.24     Mortgages Trust Deed;

3.25     Mortgages Trustee Guaranteed Investment Contract;

3.26     Seller Mortgages Trust Assignment Agreement; and

3.27     Servicing Agreement.

                                      25

<PAGE>

                                  SCHEDULE 2

                          FORM OF LOAN TRANCHE NOTICE

From:    Permanent Funding (No. 2) Limited (FUNDING 2)

To:      Permanent Master Issuer plc (the MASTER ISSUER)

Copy:    The Bank of New York (the FUNDING 2 SECURITY TRUSTEE)

Dear Sirs,

1.       We refer to the agreement between, inter alios, ourselves, the Master
         Issuer and the Funding 2 Security Trustee (as from time to time
         amended, varied, novated or supplemented (the MASTER INTERCOMPANY LOAN
         AGREEMENT)) dated 17 October 2006 whereby a Master Intercompany Loan
         Facility was made available to us. Terms defined in the Master
         Intercompany Loan Agreement shall have the same meaning in this
         notice.

2.       We hereby give you notice that, pursuant to the Master Intercompany
         Loan Agreement and upon the terms and subject to the conditions
         contained therein, we wish the following Loan Tranches to be made
         available to us on [specify Closing Date]:

         (a)     Issue [*] [*] [AAA/AA/A/BBB/BB/Subordinated/Start-Up] Loan
                 Tranche to be funded by the Series [*] [Class [*] Notes/Master
                 Issuer Subordinated Loan/Master Issuer Start-Up Loan on the
                 [Closing Date:/Advance Date]

                 (i)     principal amount and currency of [*];

                 (ii)    specified Currency Exchange Rate of GBP 1.00/[*];

                 (iii)   Principal amount (in Sterling) available to be drawn
                         in respect of such Loan Tranche of [POUND][*];

         [repeat for all applicable Loan Tranches]

3.       The interest rate(s) applicable to each Loan Tranche will be as
         follows:

         (a)     Issue [*] [*] [AAA/AA/A/BBB/BB/Master Issuer
                 Subordinated/Master Issuer Start-Up] Loan Tranche: [*] [Set
                 out relevant interest rate(s)]

         [repeat for all applicable Loan Tranches]

Yours faithfully,

For and on behalf of
PERMANENT FUNDING (NO. 2) LIMITED

                                      26

<PAGE>

                                  SCHEDULE 3

                        FORM OF LOAN TRANCHE SUPPLEMENT

                        FORM OF LOAN TRANCHE SUPPLEMENT

                                   [*] - [*]

                       PERMANENT FUNDING (NO. 2) LIMITED
                                 as Funding 2

                          PERMANENT MASTER ISSUER PLC
                               as Master Issuer

                             THE BANK OF NEW YORK
                         as Funding 2 Security Trustee

                                      and

                                CITIBANK, N.A.
                                 as Agent Bank

                                      27

<PAGE>

THIS LOAN TRANCHE SUPPLEMENT is dated [*]

BETWEEN:

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

(2)      PERMANENT MASTER ISSUER PLC (registered number 5922774), a public
         limited company incorporated under the laws of England and Wales whose
         registered office is at 35 Great St. Helen's, London EC3A 6AP (as
         MASTER ISSUER);

(3)      THE BANK OF NEW YORK, acting through its office at One Canada Square,
         London E14 5AL (in its capacity as FUNDING 2 SECURITY TRUSTEE which,
         expression shall include such company and all other persons or
         companies for the time being acting as security trustee (or
         co-trustee) pursuant to the terms of the Funding 2 Deed of Charge);
         and

(4)      CITIBANK, N.A., acting through its office at Citigroup Centre, Canada
         Square, Canary Wharf, London E14 5LB (in its capacity as AGENT BANK).

This document constitutes the Loan Tranche Supplement relating to the Loan
Tranches described herein. Terms used herein shall be deemed to be defined as
such for the purposes of the Master Intercompany Loan Agreement entered into
between the parties hereto on 17 October 2006 as amended and restated on 1
March 2007 and [*] November 2007. This Loan Tranche Supplement contains the
final terms of the Loan Tranches identified and described herein, is
supplemental to and must be read in conjunction with the Master Intercompany
Loan Agreement.

[TO BE REPEATED FOR EACH LOAN TRANCHE FUNDED BY A SERIES AND CLASS OF NOTES A
MASTER ISSUER SUBORDINATED LOAN AND/OR A START-UP LOAN DATED THE SAME CLOSING
DATE AND/OR ADVANCE DATE]

LOAN TRANCHE: The Series [*] [Class [*] Notes/Master Issuer Subordinated Loan
Advance/Master Issuer Start-Up Loan] will fund the [[*]-[*]
[AAA/AA/A/BBB/BB/Master Issuer Subordinated/Master Issuer Start-Up]] Loan
Tranche which shall have the following terms:

1.       Borrower:                           Permanent Funding (No. 2) Limited

2.       Lender:                             Permanent Master Issuer plc

3.       (a)     Loan Tranche Rating:        [Not Applicable/l]

         (b)     Series Number:              [*]

4.       Initial Outstanding Principal
         Balance:                            [*]

5.       (a)     [Closing Date/Advance
                 Date]:                      [*]

         (b)     Loan Tranche Interest
                 Commencement Date:          [*]

         (c)     Loan Tranche Interest
                 Determination Dates:        [*]

6.       Final Repayment Date:               [*]

                                      28

<PAGE>

7.       Loan Payment Dates:                 [*]

8.       Relevant Margin:                    [*]

9.       Relevant Screen Rate:               [*]

10.      Call Option Date:                   [Not Applicable/The Funding 2
                                             Payment Date occurring in (specify
                                             date)]

11.      Step-Up Date:                       [Not Applicable/The Funding 2
                                             Payment Date occurring in [specify
                                             date]]

12.      Relevant Margin following
         Step-Up Date:                       [Not Applicable/[*]]

13.      Redemption/Payment Basis:           [Bullet Redemption]
                                             [Scheduled Amortisation]
                                             [Pass-through]
                                             [Not Applicable]

14.      Change of Redemption/Payment
         Basis:                              [Specify details of any provision
                                             for change of Loan Tranches into
                                             another Redemption/Payment Basis

15.      Details relating to Bullet
         Loan Tranche:                       [Applicable/Not Applicable]

                                             [if not applicable, delete the
                                             remaining subparagraphs of this
                                             paragraph]

         (a)     Relevant Accumulation
                 Amount:                     [*]

         (b)     Bullet Redemption
                 Date:                       [*]

16.      Details relating to Scheduled       [Applicable/Not Applicable]
         Amortisation Loan Tranche:

                                             [if the Scheduled Amortisation
                                             Loan Tranche is applicable,
                                             specify the Scheduled Amortisation
                                             Dates and Scheduled Amortisation
                                             Instalments below]

                                             [if not applicable, delete the
                                             remaining subparagraphs of this
                                             paragraph]

         (a)     Scheduled
                 Amortisation Dates:         Funding 2 Payment Dates occurring
                                             in [*]

         (b)     Relevant Accumulation
                 Amounts:                    [*]

17.      Details relating to                 [Applicable/Not Applicable]
         Pass-through Loan Tranches:

                                             [If the Pass-through Loan Tranche
                                             is applicable, specify the Funding
                                             2 Interest Payment Date following
                                             which the Pass-Through Loan
                                             Tranches will be due]

                                      29

<PAGE>

18.      Other terms and special
         conditions:                         [Not Applicable/give details]

                                      30

<PAGE>

CONFIRMATIONS:

Funding 2 confirms that:

(a)      no Master Intercompany Loan Event of Default has occurred and is
         continuing which has not been waived, or would result from the making
         of such Loan Tranche;

(b)      the representations and warranties set out in Clause 13 of the Master
         Intercompany Loan Agreement are true on and as of the Closing Date
         specified in this Loan Tranche Supplement by reference to the facts
         and circumstances then existing; and

(c)      as of the Closing Date specified in this Loan Tranche Supplement,
         there will be no debit balance on the Funding 2 Principal Deficiency
         Ledger after the application of the Funding 2 Available Revenue
         Receipts on the next Funding 2 Interest Payment Date.

The Master Issuer confirms that no Note Event of Default has occurred and is
continuing which has not been waived, or would result from the making of such
Loan Tranche.

                                      31

<PAGE>

                                EXECUTION PAGE
                          FOR LOAN TRANCHE SUPPLEMENT

FUNDING 2

EXECUTED as a DEED by                       )
PERMANENT FUNDING (NO. 2) LIMITED           )
acting by two directors                     )

MASTER ISSUER

EXECUTED as a DEED by                       )
PERMANENT MASTER ISSUER PLC                 )
acting by two directors                     )

FUNDING 2 SECURITY TRUSTEE

EXECUTED as a DEED for and on behalf of:    )
                                            )
THE BANK OF NEW YORK                        )
by its authorised signatory                 )

Authorised Signatory                        )

Witness's signature                         )

Name:

Address:

AGENT BANK

EXECUTED as a DEED by an authorised
signatory for                               )
and on behalf of:                           )
CITIBANK, N.A.                              )

Authorised Signatory                        )

Witness's signature                         )

Name:

Address:

                                      32

<PAGE>

                                  SCHEDULE 4

                             SOLVENCY CERTIFICATE

                PERMANENT FUNDING (NO. 2) LIMITED (THE COMPANY)

To:      Permanent Master Issuer plc (the MASTER ISSUER)

Copy:    The Bank of New York (the FUNDING 2 SECURITY TRUSTEE)

We the undersigned HEREBY CERTIFY, that (i) having made all appropriate
searches and investigations of the Company's books and records and the
Company's accounts (both management and those required by law); and (ii) the
officers of the Company having duly considered the provisions of the insolvency
laws of the United Kingdom (including, without limitation, the provisions of
sections 123 and 238 to 243 and 423 of the Insolvency Act 1986, as amended (the
ACT) and the provisions of the equivalent common law of Scotland regarding
gratuitous alienations and fraudulent preferences) we have determined that:

(a)      the Company is not unable to pay its debts within the meaning of
         section 123 of the Act and would not become unable to do so in
         consequence of entering into the Transaction Documents to which it is
         a party or making any drawing or granting any security under the
         Transaction Documents to which it is a party, and the Company's assets
         currently exceed its liabilities (taking into account its actual,
         contingent and prospective liabilities) and will continue to do so
         notwithstanding the entry into by it of the Transaction Documents and
         the making of any drawing or the granting of any security under the
         Transaction Documents to which it is a party;

(b)      no execution or other process issued on a judgment, decree or order of
         any court in favour of a creditor of the Company remains unsatisfied
         in whole or in part;

(c)      to the best of our knowledge and belief no corporate action has been
         taken or is pending, no other steps have been taken and no legal
         proceedings have been commenced or are threatened or are pending for
         (i) the winding-up, liquidation, dissolution, administration or
         reorganisation of the Company; or (ii) the Company to enter into any
         composition or arrangement with its creditors generally; or (iii) the
         appointment of a receiver, administrator, administrative receiver,
         trustee or similar officer in respect of the Company or any of its
         property, undertaking or assets. No event equivalent to any of the
         foregoing has occurred in or under the laws of any relevant
         jurisdiction;

(d)      neither the entry into of the Transaction Documents to which it is a
         party nor the making of any drawing nor granting of security under the
         Transaction Documents to which it is a party would be a transaction at
         an undervalue within the meaning of section 238 of the Act, since the
         value of any consideration received by the Company as a result of such
         drawing and/or grant of security would not be significantly less than
         the value of any consideration provided by the Company under the
         Transaction Documents to which it is a party;

(e)      the entry into of the Transaction Documents to which it is a party,
         any drawing made by the Company under or pursuant to the Transaction
         Documents to which it is a party, and any security granted by the
         Company under or pursuant to the Transaction Documents to which it is
         a party will be entered into or made, as the case may be, by the
         Company, in good faith and for the purpose of carrying on its
         business, and there are reasonable grounds for believing that such
         entry into of such Transaction Documents, such drawings and grants of
         security would benefit the Company;

(f)      neither the entry into the Transaction Documents to which it is a
         party nor the making of any drawing nor the granting of any security
         under the Transaction Documents to which it is a party

                                      33

<PAGE>

         would be a gratuitous alienation under section 242 of the Act (and
         equivalent provisions of common law of Scotland), since such drawing
         and/or grant of security was made for adequate consideration;

(g)      in entering into the Transaction Documents to which it is a party,
         making a drawing under or pursuant to the Transaction Documents to
         which it is a party and/or granting security under or pursuant to the
         Transaction Documents to which it is a party the Company has no desire
         to give a preference to any person as contemplated by section 239 of
         the Act nor is it the purpose of the Company to put assets beyond the
         reach of a person who is making, or may at some time make, a claim
         against the Company or of otherwise prejudicing the interests of such
         a person in relation to the claim which he is making or may make;

(h)      in entering into the Transaction Documents to which it is a party,
         making a drawing under or pursuant to the Transaction Documents to
         which it is a party and/or granting security under or pursuant to the
         Transaction Documents to which it is a party, the Company has not and
         will not breach any provision or exceed any powers contained in its
         Memorandum and Articles of Association; and

(i)      the transaction contemplated by the Transaction Documents constitute
         reciprocal obligations of the Company with the other parties thereto
         for the purposes of section 243 of the Act (and equivalent provisions
         of common law of Scotland) and neither the entry into the Transaction
         Documents to which it is a party nor the making of any drawing nor the
         granting of any security under or pursuant to the Transaction
         Documents to which it is a party is or will be collusive for the
         purposes of prejudicing the general body of creditors of the Company.

Terms defined in the amended and restated master definitions and construction
schedule signed by, amongst others, the Master Issuer and the Funding 2
Security Trustee and dated [*] November 2007 (as the same may be amended,
varied or supplemented from time to time) shall have the same respective
meanings when used in this Certificate.

DATED [*]

Signed for and on behalf of Permanent Funding (No. 2) Limited

.......................................
Director

.......................................
Director/Secretary

                                      34

<PAGE>

                                  SIGNATORIES

FUNDING 2

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

MASTER ISSUER

EXECUTED as a DEED by                       ) /S/ CLAUDIA WALLACE
PERMANENT MASTER ISSUER PLC                 )
acting by two directors                     ) /S/ HELENA WHITAKER

FUNDING 2 SECURITY TRUSTEE

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

Authorised Signatory                        )

Witness's signature /S/ CHRIS WALL

Name:

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

AGENT BANK

EXECUTED as a DEED by an authorised
signatory for                               )
and on behalf of:
CITIBANK, N.A.                              )

Authorised Signatory                        ) /S/ GEORGIA MITCHELL

Witness's signature /S/ CHRIS WALL

Name:

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

                                      35