AMENDED AND RESTATED MASTER DEFINITIONS AND       EXHIBIT 10.6
                             CONSTRUCTION SCHEDULE

                               21 NOVEMBER 2007

                       PERMANENT FUNDING (NO. 1) LIMITED

                       PERMANENT FUNDING (NO. 2) LIMITED

                      PERMANENT MORTGAGES TRUSTEE LIMITED

<PAGE>

                                   CONTENTS

CLAUSE                                                                     PAGE

1.       Accession of New Parties.............................................1
2.       Definitions..........................................................1
3.       Interpretation and Construction.....................................80
4.       Amendments..........................................................82
5.       Counterparts........................................................82
6.       Incorporation of Terms..............................................82
7.       Governing Law.......................................................82

SCHEDULE

1.       Accession Agreement.................................................83

Signatories..................................................................84

<PAGE>

1.      ACCESSION OF NEW PARTIES

1.1     If, after the date hereof, an entity which is not party to this Master
        Definitions and Construction Schedule (each, a NEW PARTY) has agreed
        to enter into any Transaction Document which incorporates this Master
        Definitions and Construction Schedule, Funding 1 and Funding 2 shall
        procure (before that new Transaction Document becomes effective) that
        such New Party becomes a party to this Master Definitions and
        Construction Schedule by delivering to the Funding 1 and Funding 2
        Security Trustee on behalf of the parties to this Master Definitions
        and Construction Schedule (including any previous New Party) (each, an
        EXISTING PARTY) an Accession Agreement (in the form set out in
        Schedule 1 (Accession Agreement)) (an ACCESSION AGREEMENT) duly
        executed by that New Party.

1.2     Upon execution and delivery of an Accession Agreement, the New Party
        will become a party to this Master Definitions and Construction
        Schedule.

1.3     No Existing Party is responsible to a New Party for:

        (a)     the execution, genuineness, validity, enforceability or
                sufficiency of any Funding 1 or Funding 2 Transaction Document
                or any other document;

        (b)     the collectability of amounts payable under any Funding 1 or
                Funding 2 Transaction Document; or

        (c)     the accuracy of any statements (whether written or oral) made
                in or in connection with any Funding 1 or Funding 2
                Transaction Document.

1.4     Each New Party confirms to the Existing Parties that, upon execution
        and delivery of an Accession Agreement in accordance with Clause 1.1,
        it:

        (a)     has made its own independent investigation and assessment of
                the financial condition and affairs of the Mortgages Trustee,
                Funding 1 and Funding 2 (as applicable) in connection with the
                entry into the Funding 1 or Funding 2 Transaction Document
                referred to in Clause 1.1; and

        (b)     will continue to make its own independent investigation and
                assessment of the financial condition and affairs of the
                Mortgages Trustee, Funding 1 or Funding 2 (as applicable)
                whilst the Funding 1 or Funding 2 Transaction Document
                referred to in Clause 1.1 is in force.

2.      DEFINITIONS

        In any agreement, instrument or deed expressly and specifically
        incorporating by reference this Amended and Restated Master
        Definitions and Construction Schedule, the undersigned hereby agree
        that the following words and expressions shall, unless otherwise
        defined therein or unless the context otherwise requires, have the
        following meanings:

        AAA LOAN TRANCHE means a tranche of any Funding 2 Intercompany Loan
        which has been structured so as to reflect the payment obligations on
        the Notes of the relevant Funding 2 Issuer which are rated AAA by S&P,
        Aaa by Moody's and AAA by Fitch (or, in the case of the Money Market
        Notes, the corresponding relevant short-term ratings as specified in
        the relevant Final Terms) at their date of issue;

                                      1
<PAGE>

        AAA PRINCIPAL DEFICIENCY SUB-LEDGER means, as the context requires,
        (a) (in respect of Funding 1) one of four sub-ledgers of the Principal
        Deficiency Ledger corresponding to the Term AAA Advances of Funding 1,
        which will be established and maintained pursuant to Clause 4.3(b) of
        the Cash Management Agreement or (b) (in respect of Funding 2) one of
        six sub-ledgers of the Principal Deficiency Ledger corresponding to
        the AAA Loan Tranches of Funding 2, which will be established and
        maintained pursuant to Clause 4.4(b) of the Cash Management Agreement;

        AA LOAN TRANCHE means a tranche of any Funding 2 Intercompany Loan
        which has been structured so as to reflect the payment obligations on
        the Notes of the relevant Funding 2 Issuer which are rated AA by S&P,
        Aa2 by Moody's and AA by Fitch (or, in the case of the Money Market
        Notes, the corresponding relevant short-term ratings as specified in
        the relevant Final Terms) at their date of issue;

        AA PRINCIPAL DEFICIENCY SUB-LEDGER means, as the context requires, (a)
        (in respect of Funding 1) one of four sub-ledgers of the Principal
        Deficiency Ledger corresponding to the Term AA Advances of Funding 1,
        which will be established and maintained pursuant to Clause 4.3(b) of
        the Cash Management Agreement or (b) (in respect of Funding 2) one of
        six sub-ledgers of the Principal Deficiency Ledger corresponding to
        the AA Loan Tranches of Funding 2, which will be established and
        maintained pursuant to Clause 4.4(b) of the Cash Management Agreement;

        A LOAN TRANCHE means a tranche of any Funding 2 Intercompany Loan
        which has been structured so as to reflect the payment obligations on
        the Notes of the Master Issuer which are rated A by S&P, A2 by Moody's
        and A by Fitch (or, in the case of the Money Market Notes, the
        corresponding relevant short-term ratings as specified in the relevant
        Final Terms) at their date of issue;

        A PRINCIPAL DEFICIENCY SUB-LEDGER means, as the context requires, (a)
        (in respect of Funding 1) one of four sub-ledgers and (in respect of
        Funding 2) one of six sub-ledgers of, as the context requires, (a) of
        the Principal Deficiency Ledger corresponding to the Term A Advances
        of Funding 1, which will be established and maintained pursuant to
        Clause 4.3(b) of the Cash Management Agreement or (b) (in respect of
        Funding 2) one of six sub-ledgers of the Principal Deficiency Ledger
        corresponding to the A Loan Tranches of Funding 2, which (in each
        case) will be established and maintained pursuant to Clause 4.4(b) of
        the Cash Management Agreement;

        ACCESSION UNDERTAKING means the deed of accession to the Funding 1
        Deed of Charge substantially in the form set out in Schedule 2 to the
        Funding 1 Deed of Charge or the deed of accession to the Funding 2
        Deed of Charge substantially in the form set out in Schedule 2 to the
        Funding 2 Deed of Charge, as applicable;

        ACCOUNT BANK means the bank at which the Mortgages Trustee GIC
        Account, the Funding 1 GIC Account, the Funding 2 GIC Account, the
        Funding 1 Transaction Account, and the Funding 2 Transaction Account
        are maintained from time to time, being as at the date hereof, Bank of
        Scotland plc situated at 116 Wellington Street, Leeds LS1 4LT and
        thereafter such other Authorised Entity as Funding 1 or Funding 2, as
        applicable, may choose with the prior written approval of the Funding
        1 Security Trustee and/or the Funding 2 Security Trustee (as
        applicable) or as the Mortgages Trustee may choose with the prior
        written consent of the Beneficiaries;

        ACCRUED INTEREST means as at any date (the DETERMINATION DATE) on or
        after the date hereof and in relation to any Loan, interest on such
        Loan (not being interest which is currently payable on the
        determination date) which has accrued from and including the Monthly
        Payment Day immediately prior to the determination date to and
        including the determination date;

        ACT means the Data Protection Act 1998 as amended from time to time;

                                       2
<PAGE>

        ADDITIONAL FUNDING 1 LIQUIDITY FACILITY PROVIDER has the meaning given
        in clause 10.6(a) of the Funding 1 Deed of Charge;

        ADDITIONAL FUNDING 1 SECURITY means the security created under or
        pursuant to the Second Supplemental Funding 1 Deed of Charge;

        ADJUSTED FUNDING 1 RESERVE FUND LEVEL means the sum of:

        (a)     the amount standing to the credit of the General Reserve Fund;
                and

        (b)     the amount (if any) then outstanding in respect of item (b) of
                the relevant Funding 1 Pre-Enforcement Principal Priority of
                Payments.

        ADJUSTED FUNDING 2 RESERVE FUND LEVEL means the sum of:

        (a)     the amount standing to the credit of the Funding 2 General
                Reserve Fund; and

        (b)     the amount (if any) then outstanding in respect of item (a) of
                the relevant Funding 2 Pre-Enforcement Principal Priority of
                Payments;

        ADJUSTED RESERVE FUND LEVEL means, as the context requires, either (a)
        the Adjusted Funding 1 Reserve Fund Level (with respect to Funding 1
        and the General Reserve Fund) or (b) the Adjusted Funding 2 Reserve
        Fund Level (with respect to Funding 2 and the Funding 2 General
        Reserve Fund), as applicable;

        ADVANCE means the aggregate of

        (a)     the amount advanced by the First Start-up Loan Provider to
                Funding 1 on the Initial Closing Date pursuant to the First
                Start-up Loan Agreement;

        (b)     the amount advanced by the Second Start-up Loan Provider to
                Funding 1 on the Second Issuer Closing Date pursuant to the
                Second Start-up Loan Agreement;

        (c)     the amount advanced by the Third Start-up Loan Provider to
                Funding 1 on the Third Issuer Closing Date pursuant to the
                Third Start-up Loan Agreement;

        (d)     the amount advanced by the Fourth Start-up Loan Provider to
                Funding 1 on the Fourth Issuer Closing Date pursuant to the
                Fourth Start-up Loan Agreement;

        (e)     the amount advanced by the Fifth Start-up Loan Provider to
                Funding 1 on the Fifth Issuer Closing Date pursuant to the
                Fifth Start-up Loan Agreement;

        (f)     the amount advanced by the Sixth Start-up Loan Provider to
                Funding 1 on the Sixth Issuer Closing Date pursuant to the
                Sixth Start-up Loan Agreement;

        (g)     the amount advanced by the Seventh Start-up Loan Provider to
                Funding 1 on the Seventh Issuer Closing Date pursuant to the
                Seventh Start-up Loan Agreement;

        (h)     the amount advanced by the Eighth Start-Up Loan Provider to
                Funding 1 on the Eighth Issuer Closing Date pursuant to the
                Eighth Start-Up Loan Agreement;

        (i)     the amount advanced by the Ninth Start-Up Loan Provider to
                Funding 1 on the Ninth Issuer Closing Date pursuant to the
                Ninth Start-Up Loan Agreement;

                                       3
<PAGE>

        (j)     the amount advanced by the Funding 2 Start-Up Loan Provider to
                Funding 2 on the Programme Date pursuant to the Funding 2
                Start-Up Loan Agreement or such other amount advanced by the
                Funding 2 Start-Up Loan Provider or any new Funding 2 Start-Up
                Loan Provider to Funding 2 on each new issue of Notes by the
                Master Issuer pursuant to a Funding 2 Start-up Loan Agreement;
                and

        (k)     the amount advanced by the Start-up Loan Provider or any New
                Start-up Loan Provider on any New Issuer Closing Date pursuant
                to any New Start-up Loan Agreement, or such part of such
                amount as shall be outstanding from time to time;

        ADVANCE DATE means, in relation to a Master Issuer Subordinated Loan,
        the date on which such Master Issuer Subordinated Loan is advanced by
        the Master Issuer Subordinated Loan Provider;

        AGENT BANK means Citibank, N.A. in its capacity as agent bank;

        ALTERNATIVE INSURANCE RECOMMENDATIONS means the recommendations
        contained in the Offer Conditions provided by the Seller to Borrowers
        who elect to arrange independent buildings insurance for their
        Properties;

        AMENDED AND RESTATED MASTER DEFINITIONS AND CONSTRUCTION SCHEDULE,
        MASTER DEFINITIONS SCHEDULE and MASTER DEFINITIONS AND CONSTRUCTION
        SCHEDULE means this schedule as amended and restated from time to
        time;

        ANNUALISED CPR means the result of:

        1-((1-M)^(12))

        where "M" is expressed as a percentage and determined as at the most
        recent Normal Calculation Date as indicated in the definition of
        Anticipated Cash Accumulation Period;

        ANTICIPATED CASH ACCUMULATION PERIOD means, on any Normal Calculation
        Date, the anticipated number of months required to accumulate
        sufficient Principal Receipts to pay the Relevant Accumulation Amount
        in relation to the relevant Cash Accumulation Advance, which will be
        equal to:

        J+K+-L/Mx(NxO)

        calculated in months and rounded up to the nearest whole number,
        where:

        J =     the Relevant Accumulation Amount;

        K =     the aggregate principal amount outstanding on that Normal
                Calculation Date of:

        (a)     each Bullet Term Advance and Scheduled Amortisation Term
                Advance that was not fully repaid on its relevant Scheduled
                Repayment Date; and

        (b)     each other Bullet Term Advance and Scheduled Amortisation
                Instalment, the Scheduled Repayment Date of which falls on or
                before the Scheduled Repayment Date of the relevant Bullet
                Term Advance or Scheduled Amortisation Instalment;

        L =     the amount of any available cash already standing to the
                credit of the Cash Accumulation Ledger at the start of that
                Normal Calculation Date plus the aggregate amount of Cash

                                       4
<PAGE>

                Accumulation Requirement paid to Funding 1 since the previous
                Funding 1 Interest Payment Date;

        M =     means:

        (a)     on any date prior to or including the 12th Normal Calculation
                Date to occur following the Initial Closing Date, the sum of
                each Monthly CPR on the Normal Calculation Dates which have
                occurred since the Initial Closing Date divided by the number
                of those Calculation Dates; and

        (b)     on any subsequent date, the sum of each Monthly CPR on the 12
                most recent Normal Calculation Dates divided by 12 or (in the
                case of a Loan Tranche corresponding to Money Market Notes)
                any alternative CPR if specified in the applicable Loan
                Tranche Supplement and the corresponding Final Terms;

        N =     0.85; and

        O =     the aggregate Outstanding Principal Balance of the Loans
                comprising the Trust Property on the previous Normal
                Calculation Date (or, if none, the Initial Closing Date);

        APPROVED PURPOSE means, in England and Wales, an approved purpose in
        relation to the right-to-buy scheme governed by the Housing Act 1985
        (as amended by the Housing Act 2004) or, in Scotland, either of the
        purposes detailed in Sections 72(5)(a)(i) and (ii) of the Housing
        (Scotland) Act 1987;

        IN ARREARS or IN ARREARS means, in respect of a Mortgage Account, that
        one or more Monthly Payments in respect of such Mortgage Account have
        become due and is unpaid by a Borrower;

        ARREARS OF INTEREST means, in respect of a Loan on a given date,
        interest, principal (if applicable) and expenses which are due and
        payable and remain unpaid on that date;

        ASSET TRIGGER EVENT means the event that occurs when there is an
        amount being debited to the related AAA Principal Deficiency
        Sub-Ledger unless such debit is made when:

        (a)     (i) in the case of Funding 1, the aggregate principal amount
                outstanding of each of the Term AA Advances, the Term A
                Advances and the Term BBB Advances is equal to zero, or (ii)
                in the case of Funding 2, the aggregate principal amount
                outstanding of each of the AA Loan Tranches, the A Loan
                Tranches, the BBB Loan Tranches and the BB Loan Tranches is
                equal to zero; and

        (b)     (i) in the case of the Funding 1, the sum of (x) the amount
                standing to the credit of the Funding 1 General Reserve
                Ledger, (y) the amount standing to the credit of the Funding 1
                Liquidity Reserve Ledger (if any) and (z) the amount standing
                to the credit of the Funding 1 Revenue Ledger together with
                amounts determined and due to be credited to the Funding 1
                Revenue Ledger prior to the immediately following Funding 1
                Interest Payment Date after such debit is made, is greater
                than the amount necessary to pay the items in paragraphs (a)
                to (g) in the Funding 1 Pre-Enforcement Revenue Priority of
                Payments on the immediately following Funding 1 Interest
                Payment date after such debit is made or (ii) in the case of
                Funding 2, the sum of (x) the amount standing to the credit of
                the Funding 2 General Reserve Ledger, (y) the amount standing
                to the credit of the Funding 2 Liquidity Reserve Ledger (if
                any) and (z) the amount standing to the credit of the Funding
                2 Revenue Ledger together with amounts determined and due to
                be credited to the Funding 2 Revenue Ledger prior to the
                immediately following Funding 2 Interest Payment Date after
                such debit is made, is greater than the amount necessary to
                pay the items in paragraphs (a) to (e) in the

                                       5
<PAGE>

                Funding 2 Pre-Enforcement Revenue Priority of Payments on the
                immediately following Funding 2 Interest Payment date after
                such debit is made;

        ASSIGNMENT OF HALIFAX MORTGAGE RE LIMITED MIG POLICIES means an
        assignment of the Halifax Mortgage Re Limited MIG Policies
        substantially in the form set out in Schedule 8 to the Mortgage Sale
        Agreement;

        ASSIGNMENT OF THIRD PARTY RIGHTS means an assignment of Related
        Security and rights of action against third parties substantially in
        the form set out in Schedule 7 to the Mortgage Sale Agreement;

        AUDITORS means KPMG Audit Plc of 1 Canada Square, Canary Wharf, London
        E14 5AG or such other internationally independent firm of auditors
        selected from time to time by, (in the case of the Mortgages Trustee)
        the Mortgages Trustee, the Funding 1 Security Trustee and the Funding
        2 Security Trustee (in the case of Funding 1), Funding 1 and the
        Funding 1 Security Trustee or (in the case of Funding 2), Funding 2
        and the Funding 2 Security Trustee;

        AUTHORISED INVESTMENTS means:

        (a)     Sterling gilt-edged securities; and

        (b)     Sterling demand or time deposits, certificates of deposit and
                short-term debt obligations (including commercial paper)
                provided that in all cases such investments have a maturity
                date of 90 days or less and mature on or before the next
                following Funding 1 Interest Payment Date or Funding 2
                Interest Payment Date, as applicable, and the short-term
                unsecured, unguaranteed and unsubordinated debt obligations of
                the issuing or guaranteeing entity or the entity with which
                the demand or time deposits are made (being an authorised
                person under the Financial Services and Markets Act 2000) are
                rated at least A-1+ by Standard & Poor's, P-1 by Moody's and
                AA- and F1+ by Fitch or their equivalents by three other
                internationally recognised rating agencies or which are
                otherwise acceptable to the Rating Agencies (if they are
                notified in advance) to maintain the then current ratings of
                the related Notes;

        AUTHORISED SIGNATORY means any authorised signatory referred to in, as
        applicable, the Funding 1 Transaction Account Mandate, the Funding 2
        Transaction Account Mandate, the Funding 1 GIC Account Mandate, the
        Funding 2 GIC Account Mandate and the Mortgages Trustee GIC Account
        Mandate;

        AVERAGE FIXED RATE LOAN BALANCE has the meaning given in the Funding 1
        Swap Agreement;

        AVERAGE TRACKER RATE LOAN BALANCE has the meaning given in the Funding
        1 Swap Agreement;

        AVERAGE VARIABLE RATE LOAN BALANCE has the meaning given in the
        Funding 1 Swap Agreement;

        BACS means the Bankers' Automated Clearing Service as amended from
        time to time or any scheme replacing the same;

        BANK ACCOUNT AGREEMENT means the agreement entered into on the Initial
        Closing Date between the Account Bank, the Mortgages Trustee, Funding
        1, the Cash Manager and the Security Trustee, as amended and restated
        on the Programme Date, between the Account Bank, the Mortgages
        Trustee, Funding 1, Funding 2, the Cash Manager and the Security
        Trustees, which governs the operation of the Bank Accounts (excluding
        the Funding 1 Liquidity Facility Stand-by Account) (as amended,
        restated, supplemented, replaced and/or novated from time to time);

                                       6
<PAGE>

        BANK ACCOUNTS means the Mortgages Trustee GIC Account, the Funding 1
        GIC Account, the Funding 1 Transaction Account, the Funding 1
        Liquidity Facility Stand-by Account, the Funding 2 GIC Account, the
        Funding 2 Transaction Account and any additional or replacement bank
        accounts held in the name of either the Mortgages Trustee, Funding 1
        and/or Funding 2, as applicable, from time to time with the prior
        written consent of the Security Trustees and the Rating Agencies;

        BANK OF ENGLAND REPO RATE means the Bank of England's official dealing
        rate (the repo rate) as set by the UK Monetary Policy Committee and in
        the event that such rate ceases to exist or becomes inappropriate as
        an index, such alternative rate or index, not controlled by the
        Seller, that the Seller considers to be the most appropriate in the
        circumstances;

        BANK OF SCOTLAND means Bank of Scotland plc (formerly The Governor and
        Company of the Bank of Scotland) incorporated under the laws of
        Scotland and registered as a public company under the Companies Act
        1985 on the Reorganisation Date in accordance with the HBOS Group
        Reorganisation Act 2006;

        BBB LOAN TRANCHES means a tranche of any Funding 2 Intercompany Loan
        which has been structured so as to reflect the payment obligations on
        the Notes of the relevant Funding 2 Issuer which are rated BBB by S&P,
        Baa3 by Moody's and BBB by Fitch (or, in the case of the Money Market
        Notes, the corresponding relevant short-term ratings as specified in
        the relevant Final Terms) at their date of issue;

        BBB PRINCIPAL DEFICIENCY SUB-LEDGER means, as the context requires,
        (a) (in respect of Funding 1) one of four sub-ledgers of the Principal
        Deficiency Ledger corresponding to the Term BBB Advances of Funding 1,
        which will be established and maintained pursuant to Clause 4.3(b) of
        the Cash Management Agreement or (b) (in respect of Funding 2) one of
        six sub-ledgers of the Funding 2 Principal Deficiency Ledger
        corresponding to the BBB Loan Tranches of Funding 2, which will be
        established and maintained pursuant to Clause 4.4(b) of the Cash
        Management Agreement;

        BB LOAN TRANCHES means a tranche of any Funding 2 Intercompany Loan
        which has been structured so as to reflect the payment obligations on
        the Notes of the Master Issuer which are rated BB by S&P, Ba1 by
        Moody's and BB by Fitch (or, in the case of the Money Market Notes,
        the corresponding relevant short-term ratings as specified in the
        relevant Final Terms) at their date of issue;

        BB PRINCIPAL DEFICIENCY SUB-LEDGER means, as the context requires, (a)
        (in respect of Funding 1) one of four sub-ledgers of the Principal
        Deficiency Ledger corresponding to the Term BB Advances of Funding 1,
        which will be established and maintained pursuant to Clause 4.3(b) of
        the Cash Management Agreement or (b) (in respect of Funding 2) one of
        six sub-ledgers of the Funding 2 Principal Deficiency Ledger
        corresponding to the BB Loan Tranches of Funding 2, which will be
        established and maintained pursuant to Clause 4.4(b) of the Cash
        Management Agreement;

        BENEFICIARIES means Funding 1, Funding 2 and the Seller together, as
        beneficiaries of the Mortgages Trust, and shall include any other
        beneficiary of the Mortgages Trust from time to time pursuant to the
        terms of the Mortgages Trust Deed;

        BORROWER means, in relation to a Loan, the individual or individuals
        specified as such in the relevant Mortgage Terms together with the
        individual or individuals (if any) from time to time assuming an
        obligation to repay such Loan or any part of it;

        BUILDINGS POLICIES means:

        (a)     all buildings insurance policies relating to freehold or
                heritable Properties which have been taken out in the name of
                the relevant Borrower (and, in the case of the Halifax
                Policies, the

                                       7
<PAGE>

                Seller) in accordance with the applicable Mortgage Terms or
                the Alternative Insurance Recommendations; and

        (b)     all landlord's buildings insurance policies relating to
                leasehold Properties including Properties in Scotland held
                under a long lease;

        BULLET ACCUMULATION LIABILITY means, as the context requires, (a) with
        respect to Funding 1, on any Funding 1 Interest Payment Date prior to
        any payment under item (d) of the Funding 1 Pre-Enforcement Principal
        Priority of Payments, the aggregate of each Relevant Accumulation
        Amount at that time of each Bullet Term Advance which is within a Cash
        Accumulation Period and (b) with respect to Funding 2, on any Funding
        2 Interest Payment Date prior to any payment under item (c) of the
        Funding 2 Pre-Enforcement Principal Priority of Payments, the
        aggregate of each Relevant Accumulation Amount at that time of each
        Bullet Loan Tranche which is within a Cash Accumulation Period;

        BULLET ACCUMULATION SHORTFALL means, at any time, that the Cash
        Accumulation Ledger Amount is less than the Bullet Accumulation
        Liability;

        BULLET LOAN TRANCHE means any Rated Loan Tranche where the full amount
        of principal in respect of that Loan Tranche is scheduled for
        repayment on a single Funding 2 Interest Payment Date (being the
        Scheduled Repayment Date);

        BULLET TERM ADVANCE means any Term Advance where the full amount of
        principal in respect of that Term Advance is scheduled for repayment
        on a single Funding 1 Interest Payment Date (being the Scheduled
        Repayment Date);

        BUSINESS DAY means a day which is a London Business Day, a New York
        Business Day and a TARGET Business Day;

        CALCULATION DATE means the first day (or, if not a London Business
        Day, the next succeeding London Business Day) of each month or the
        date on which either Funding 1 and/or Funding 2 and/or the Seller (as
        applicable) acquires a further interest in the Trust Property or the
        Mortgages Trustee acquires New Loans from the Seller and the date on
        which the Mortgages Trust is terminated;

        CALCULATION PERIOD means the period from and including a Calculation
        Date to but excluding the next following Calculation Date and in
        respect of the first Calculation Date following the Programme Date ,
        the period from and including the Programme Date to but excluding the
        first Calculation Date following the Programme Date;

        CALENDAR YEAR means a year from the beginning of 1 January to the end
        of 31 December;

        CAPITALISED ARREARS means, in relation to a Loan at any date (the
        DETERMINATION DATE), the amount (if any) at such date of any Arrears
        of Interest in respect of which, at the determination date, each of
        the following conditions has been satisfied:

        (a)     the Seller has, by arrangement with the relevant Borrower,
                agreed to capitalise such Arrears of Interest; and

        (b)     such Arrears of Interest have been capitalised and added, in
                the accounts of the Seller (or, if the determination date
                occurs after the Initial Closing Date, the Mortgages Trustee),
                to the principal amount outstanding in respect of such Loan;

        CAPITALISED EXPENSES means, in relation to a Loan, the amount of any
        expense, charge, fee, premium or payment (excluding, however, any
        Arrears of Interest) capitalised and added to the

                                       8
<PAGE>

        principal amount outstanding in respect of such Loan in accordance
        with the relevant Mortgage Terms (including for the avoidance of
        doubt, any High Loan-to-Value Fee);

        CAPITALISED INTEREST means, in relation to a Loan, the amount of
        interest that would have been paid on a Loan if not for the Borrower
        under that Loan taking a Payment Holiday or making an Underpayment;

        CASH means cash and/or amounts standing to the credit of a bank
        account, as the context shall require;

        CASH ACCUMULATION ADVANCE means a Bullet Term Advance, a Bullet Loan
        Tranche or a Scheduled Amortisation Instalment which is within a Cash
        Accumulation Period;

        CASH ACCUMULATION LEDGER means, as the context requires, either (a)
        the Funding 1 Cash Accumulation Ledger or (b) the Funding 2 Cash
        Accumulation Ledger;

        CASH ACCUMULATION LEDGER AMOUNT means, as the context requires, either
        (a) the Funding 1 Cash Accumulation Ledger Amount or (b) the Funding 2
        Cash Accumulation Ledger Amount;

        CASH ACCUMULATION LIABILITY means, with respect to Funding 1, on any
        Funding 1 Interest Payment Date, prior to any payment under item (d)
        of the Funding 1 Pre-Enforcement Principal Priority of Payments, or,
        with respect to Funding 2, on any Funding 2 Interest Payment Date,
        prior to any payment under item (c) of the Funding 2 Pre-Enforcement
        Principal Priority of Payments, the sum of:

        (a)     the Bullet Accumulation Liability at that time; and

        (b)     the aggregate of each Relevant Accumulation Amount at that
                time of each Scheduled Amortisation Instalment which is within
                a Cash Accumulation Period;

        CASH ACCUMULATION PERIOD means the period beginning on the earlier of:

        (a)     the commencement of the Anticipated Cash Accumulation Period
                relating to the Relevant Accumulation Amount; and

        (b)     in respect of an Original Bullet Term Advance, six months (or
                three months, in the case of the Original Bullet Term Advance
                relating to the Series 2 Class A Ninth Issuer Notes) prior to
                the Scheduled Repayment Date of that Original Bullet Term
                Advance and, in respect of an Original Scheduled Amortisation
                Instalment, three months (or one month, in the case of the
                Scheduled Amortisation Instalments relating to the Series 2
                Class A Fifth Issuer Notes, the Series 2 Class A Sixth Issuer
                Notes, the Series 3 Class A Sixth Issuer Notes, the Series 3
                Class A Seventh Issuer Notes, the Series 5 Class A Seventh
                Issuer Notes, the Series 3 Class A Eighth Issuer Notes, the
                Series 4 Class A Eighth Issuer Notes, the Series 5 Class A2
                Eighth Issuer Notes, the Series 3 Class A Ninth Issuer Notes
                and the Series 4 Class A Ninth Issuer Notes) prior to the
                Scheduled Repayment Date of that Original Scheduled
                Amortisation Instalment,

        and ending when Funding 1 or Funding 2, as applicable, has fully
        repaid the Bullet Term Advance/Bullet Loan Tranche (respectively) or
        Scheduled Amortisation Instalment, as applicable;

        CASH ACCUMULATION REQUIREMENT means on a Calculation Date:

        (a)     the outstanding principal amounts in relation to each Cash
                Accumulation Advance;

                                       9
<PAGE>

        (b)     plus, as the context requires, (a) with respect to Funding 1,
                amounts due in paragraphs 2.2(a) and 2.2(b) of the Funding 1
                Pre-Enforcement Principal Priority of Payments and (b) with
                respect to Funding 2, amounts due in paragraphs 2.2(a) and
                2.2(b) of the Funding 2 Pre-Enforcement Principal Priority of
                Payments;

        (c)     less the amount standing to the credit of the Cash
                Accumulation Ledger, as the context requires, (a) with respect
                to Funding 1, at the last Funding 1 Interest Payment Date
                (which amount was not distributed on that Funding 1 Interest
                Payment Date to the Issuer with the relevant Cash Accumulation
                Requirement) and (b) with respect to Funding 2, at the last
                Funding 2 Interest Payment Date (which amount was not
                distributed on that Funding 2 Interest Payment Date to the
                Master Issuer with the relevant Cash Accumulation
                Requirement);

        (d)     less the sum of the Cash Accumulation Requirement paid to
                Funding 1 or Funding 2, as applicable, on a previous
                Distribution Date during the relevant Interest Period;

        CASH ACCUMULATION SHORTFALL means, at any time, that the Cash
        Accumulation Ledger Amount is less than the Cash Accumulation
        Liability;

        CASH MANAGEMENT AGREEMENT means the cash management agreement entered
        into on the Initial Closing Date between the Cash Manager, the
        Mortgages Trustee, Funding 1 and the Funding 1 Security Trustee, as
        amended and restated on the Programme Date between the Cash Manager,
        the Mortgages Trustee, Funding 1, Funding 2, the Funding 1 Security
        Trustee and the Funding 2 Security Trustee (as the same may be
        amended, restated, supplemented, replaced and/or novated from time to
        time);

        CASH MANAGEMENT SERVICES means the cash management services set out in
        the Cash Management Agreement;

        CASH MANAGER means initially Halifax and, as of the Reorganisation
        Date, Bank of Scotland acting, pursuant to the Cash Management
        Agreement, as agent for the Mortgages Trustee, Funding 1, Funding 2
        and the Security Trustees, inter alia, to manage all cash transactions
        and maintain certain ledgers on behalf of the Mortgages Trustee,
        Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
        Security Trustee (which expression shall include such other person as
        may be appointed from time to time as Cash Manager pursuant to the
        Cash Management Agreement);

        CASH MANAGER TERMINATION EVENT has the meaning given in Clause 13.1 of
        the Cash Management Agreement;

        CERTIFICATE OF TITLE means a solicitor's, licensed conveyancer's or
        (in Scotland) qualified conveyancer's report or certificate of title
        obtained by or on behalf of the Seller in respect of each Property
        substantially in the form of the pro-forma set out in the Standard
        Documentation;

        CLASS A NOTES means the Class A First Issuer Notes, the Class A Second
        Issuer Notes, the Class A Third Issuer Notes, the Class A Fourth
        Issuer Notes, the Class A Fifth Issuer Notes, the Class A Sixth Issuer
        Notes, the Class A Seventh Issuer Notes, the Class A Eighth Issuer
        Notes, the Class A Ninth Issuer Notes, any class A notes issued by the
        Master Issuer and any class A notes issued by any New Issuer;

        CLEARING AGENCY means an agency registered under the provisions of
        section 17A of the United States Securities Exchange Act of 1934;

        CLEARING CORPORATION means a corporation within the meaning of the New
        York Uniform Commercial Code;

                                      10
<PAGE>

        CLEARSTREAM, LUXEMBOURG means Clearstream Banking, societe anonyme;

        CLOSING DATE means the Initial Closing Date (or the First Issuer
        Closing Date), the Second Issuer Closing Date, the Third Issuer
        Closing Date, the Fourth Issuer Closing Date, the Fifth Closing Date,
        the Sixth Issuer Closing Date, the Seventh Issuer Closing Date, the
        Eighth Issuer Closing Date, the Ninth Issuer Closing Date, any Master
        Issuer Closing Date and any New Issuer Closing Date;

        COLLECTION ACCOUNT means the collection account in the name of the
        Servicer which is from time to time used for the purpose of
        collecting, directly or indirectly, monies due in respect of the Loans
        and/or the Related Security forming part of the Trust Property;

        COMMON DEPOSITORY means Citibank, N.A. in its capacity as the common
        depository;

        COMPLETION means the completion of the sale and purchase of the
        relevant Portfolio pursuant to and in accordance with clause 3 or 4
        (as applicable) of the Mortgage Sale Agreement;

        CONTRIBUTIONS means the consideration in the form of cash provided to
        the Mortgages Trustee by any Beneficiary in respect of the share of
        such Beneficiary in the Trust Property under the Mortgages Trust Deed,
        being any of an Initial Contribution, a Further Contribution or a
        Deferred Contribution;

        CONTROLLING BENEFICIARY DEED means the controlling beneficiary deed
        entered into on the Programme Date between Funding 1, Funding 2, the
        Funding 1 Security Trustee, the Funding 2 Security Trustee and the
        Seller (as the same may be amended, restated, supplemented, replaced
        and/or novated from time to time);

        CONTROLLING DIRECTIONS has the meaning given to it in the Controlling
        Beneficiary Deed;

        CONVENTION means the Modified Following Business Day Convention as
        defined in the 2000 ISDA Definitions published by the International
        Swaps and Derivatives Association;

        CORPORATE SERVICES AGREEMENT means in respect of Holdings, Funding 1
        and Funding 2, the agreement dated the Programme Date between the
        Corporate Services Provider, the Share Trustee, Holdings, Funding 1,
        Funding 2, Halifax, the Funding 1 Security Trustee and the Funding 2
        Security Trustee and to which Bank of Scotland became party to in
        place of Halifax as of the Reorganisation Date for the provision by
        the Corporate Services Provider of certain corporate services and
        personnel to Funding 2, Funding 1 and Holdings (as the same may be
        amended, restated, supplemented, replaced and/or novated from time to
        time);

        CORPORATE SERVICES AGREEMENTS means, together, the Funding 1 Corporate
        Services Agreement, the First Issuer Corporate Services Agreement, the
        Second Issuer Corporate Services Agreement, the Third Issuer Corporate
        Services Agreement, the Fourth Issuer Corporate Services Agreement,
        the Fifth Issuer Corporate Services Agreement, the Sixth Issuer
        Corporate Services Agreement, the Seventh Issuer Corporate Services
        Agreement, the Eighth Issuer Corporate Services Agreement, the Ninth
        Issuer Corporate Services Agreement, the Mortgages Trustee Corporate
        Services Agreement, the Corporate Services Agreement and the PECOH
        Corporate Services Agreement;

        CORPORATE SERVICES PROVIDER means Structured Finance Management
        Limited or such other person or persons for the time being acting as
        corporate services provider to Funding 1, Funding 2 and Holdings under
        the Corporate Services Agreement;

        CPR means, on any Normal Calculation Date, the annualised principal
        repayment rate of all the Loans comprised in the Trust Property during
        the previous Calculation Period calculated as follows:

                                      11
<PAGE>

        1-((1-R)^(12))

        where "R'' equals the result (expressed as a percentage) of the total
        Principal Receipts received during the period of one month ending on
        that Normal Calculation Date divided by the aggregate Outstanding
        Principal Balance of the Loans comprised in the Trust Property as at
        the first day of that period;

        CURRENT FUNDING 1 SHARE means the amount of Trust Property
        beneficially owned by Funding 1 from time to time, as determined in
        accordance with Clause 8 of the Mortgages Trust Deed;

        CURRENT FUNDING 1 SHARE PERCENTAGE means the percentage share of
        Funding 1 in the Trust Property from time to time, as determined in
        accordance with Clause 8 of the Mortgages Trust Deed;

        CURRENT FUNDING 2 SHARE means the amount of Trust Property
        beneficially owned by Funding 2 from time to time, as determined in
        accordance with Clause 8 of the Mortgages Trust Deed;

        CURRENT FUNDING 2 SHARE PERCENTAGE means the percentage share of
        Funding 2 in the Trust Property from time to time, as determined in
        accordance with Clause 8 of the Mortgages Trust Deed;

        CURRENT SELLER SHARE means the amount of Trust Property beneficially
        owned by the Seller from time to time, as determined in accordance
        with Clause 8 of the Mortgages Trust Deed;

        CURRENT SELLER SHARE PERCENTAGE means the percentage share of the
        Seller in the Trust Property from time to time, as determined in
        accordance with Clause 8 of the Mortgages Trust Deed;

        CURRENT SWAP EXCLUDED TERMINATION AMOUNT means, in relation to an
        Issuer Swap Agreement, an amount equal to:

        (a)     the amount of any termination payment due and payable to the
                relevant Issuer Swap Provider as a result of an Issuer Swap
                Provider Default or following an Issuer Swap Provider
                Downgrade Termination Event;

        less

        (b)     the amount, if any, received by the relevant Issuer from a
                replacement swap provider upon entry by that Issuer into an
                agreement with such replacement swap provider to replace such
                swap agreement which has terminated as a result of an Issuer
                Swap Provider Default or following an Issuer Swap Provider
                Downgrade Termination Event;

        CUSTOMER FILES means the file or files relating to each Loan
        containing, inter alia:

        (a)     all material correspondence relating to that Loan; and

        (b)     the completed mortgage documentation applicable to the Loan
                (other than the Title Deeds) including the Valuation Report
                and the Certificate of Title,

        whether original documentation, electronic form or otherwise;

        D.D. DATE means the date of delivery to the Account Bank or BACS (as
        the case may be) of such instructions as may be necessary from time to
        time for the debit of a Borrower's account in respect of which there
        is a direct debit mandate;

        DATA CONTROLLER means the Mortgages Trustee and the Beneficiaries;

                                      12
<PAGE>

        DATA PROCESSOR means the Servicer;

        DATA PROCESSOR AGREEMENT means the agreement entered into by, inter
        alios, the Data Controllers and the Data Processor dated 25 November
        2003 pursuant to which the Data Controllers appointed the Data
        Processor to process data on their respective behalf, as amended and
        restated on the Programme Date;

        DATA SUBJECT has the meaning given to it in the Act;

        DEED OF ACCESSION means, as applicable, the First Deed of Accession,
        the Second Deed of Accession, the Third Deed of Accession, the Fourth
        Deed of Accession, the Fifth Deed of Accession, the Sixth Deed of
        Accession, the Seventh Deed of Accession, the Eighth Deed of Accession
        and any New Deed of Accession;

        DEED OF ACCESSION AND RELEASE SUPPLEMENTAL TO THE FUNDING 1 DEED OF
        CHARGE means the deed so named dated 31 July 2002;

        DEED OF CONSENT means a deed whereby a person in or intended to be in
        occupation of a Property situated in England and Wales agrees with the
        Seller to postpone his or her interest (if any) in the Property so
        that it ranks after the interest created by the relevant Mortgage;

        DEED OF POSTPONEMENT means a deed or agreement whereby a mortgagee of
        or the heritable creditor in relation to a Property agrees with the
        Seller to postpone its mortgage or standard security (as applicable)
        over the Property so that the sums secured by it will rank for
        repayment after the sums secured by the relevant Mortgage;

        DEEDSTORE LOAN means a type of Loan product that gives the Borrower
        the option to leave a small balance owing on the loan account so that
        the relevant Title Deeds can continue to be lodged with the Seller;

        DEEMED AAA RATING means the deemed rating of a Term Advance Rating or
        a Loan Tranche Rating where the corresponding Notes are rated, on the
        Closing Date thereof, A-1+ by S&P, P-1 by Moody's and F1+ by Fitch;

        DEFERRED CONSIDERATION means the consideration payable by Funding 1
        and Funding 2 to the Seller pursuant to the Mortgage Sale Agreement in
        respect of the sale of the Initial Portfolio and any New Portfolio,
        which shall be:

        (a)     (in the case of Funding 1) an amount equal to the amount
                remaining after making payment of the items described in (a)
                to (s) (inclusive) of the Funding 1 Pre-Enforcement Revenue
                Priority of Payments on each Funding 1 Interest Payment Date
                and the amount remaining after making payment of the items
                described in (a) to (1) (inclusive) of the Funding 1
                Post-Enforcement Priority of Payments (as applicable); and

        (b)     (in the case of Funding 2) an amount equal to the amount
                remaining after making payment of the items described in (a)
                to (u) (inclusive) of the Funding 2 Pre-Enforcement Revenue
                Priority of Payments on each Funding 2 Interest Payment Date
                and the amount remaining after making payment of the items
                described in (a) to (1) (inclusive) of the Funding 2
                Post-Enforcement Priority of Payments (as applicable);

        DEFERRED PURCHASE PRICE means that portion of the Purchase Price for
        the sale and assignment of the Initial Portfolio or of any New
        Portfolio sold and assigned to the Mortgages Trustee which is not paid
        to the Seller, in the case of the Initial Portfolio, on the Initial
        Closing Date or, in the case of any New Portfolio, on the relevant
        Sale Date and which is to be paid by Funding 1 and Funding 2 to the

                                     13
<PAGE>

        Seller from time to time in accordance with the Funding 1 Deed of
        Charge and the Funding 2 Deed of Charge (respectively) and otherwise
        in accordance with the Mortgage Sale Agreement;

        DELAYED CASHBACK means, in relation to a Loan, the agreement by the
        Seller to pay an amount to the relevant Borrower after a specified
        period of time following completion of the relevant Loan;

        DESIGNATED INTEREST PERIOD has the meaning given to it in Clause 8.4
        of the Funding 1 Liquidity Facility Agreement;

        DIRECT DEBITING SCHEME means the scheme for the manual or automated
        debiting of bank accounts operated in accordance with the detailed
        rules of certain members of the Association for Payment Clearing
        Services;

        DISCLOSURE RULES means in the case of the Reg S Notes which are, or
        are to be, admitted to the Official List, the disclosure rules made
        under section 73A of the FSMA;

        DISTRIBUTION DATE means the date which is two London Business Days
        after each Calculation Date, being the date that the Mortgages Trustee
        shall distribute the Mortgages Trust Available Revenue Receipts and
        the Mortgages Trust Available Principal Receipts to Funding 1, Funding
        2 and the Seller;

        DISTRIBUTION PERIOD means the period from, and including, a
        Distribution Date to, but excluding, the next following Distribution
        Date or, in relation to the first Distribution Period, the period from
        and including the relevant Closing Date to, but excluding, the first
        Distribution Date;

        DOUBLE TAXATION TREATY means any convention between the government of
        the United Kingdom and any other government for the avoidance of
        double taxation;

        DRAWDOWN DATE means, in respect of:

        (a)     the First Issuer Intercompany Loan, the Initial Closing Date;

        (b)     the Second Issuer Intercompany Loan, the Second Issuer Closing
                Date;

        (c)     the Third Issuer Intercompany Loan, the Third Issuer Closing
                Date;

        (d)     the Fourth Issuer Intercompany Loan, the Fourth Issuer Closing
                Date;

        (e)     the Fifth Issuer Intercompany Loan, the Fifth Issuer Closing
                Date;

        (f)     the Sixth Issuer Intercompany Loan, the Sixth Issuer Closing
                Date;

        (g)     the Seventh Issuer Intercompany Loan, the Seventh Issuer
                Closing Date;

        (h)     the Eighth Issuer Intercompany Loan, the Eighth Issuer Closing
                Date;

        (i)     the Ninth Issuer Intercompany Loan, the Ninth Issuer Closing
                Date;

        (j)     a Loan Tranche pursuant to the Master Intercompany Loan, the
                relevant Master Issuer Closing Date on which the Loan Tranche
                is made available thereunder; and

        (k)     any New Intercompany Loan, the date on which the New Term
                Advances thereunder are made;

                                      14
<PAGE>

        DRAWDOWN NOTICE means, in respect of an Intercompany Loan, a notice
        delivered by Funding 1 to the Issuer and the Security Trustee
        requesting a drawing under that Intercompany Loan Agreement;

        DTC means The Depository Trust Company;

        EARLY REPAYMENT FEE means any fee (other than a Redemption Fee) which
        a Borrower is required to pay in the event that the Borrower is in
        default or his or her Loan becomes repayable for any other mandatory
        reason or he or she repays all or any part of the relevant Loan before
        a specified date;

        EIGHTH DEED OF ACCESSION means the eighth deed of accession to the
        Funding 1 Deed of Charge entered into on the Ninth Issuer Closing Date
        between Funding 1, the First Issuer, the Second Issuer, the Third
        Issuer, the Fourth Issuer, the Fifth Issuer, the Sixth Issuer, the
        Seventh Issuer, the Eighth Issuer, the Ninth Issuer, the Corporate
        Services Provider, the Account Bank, the Security Trustee, the Seller,
        the First Start-up Loan Provider, the Second Start-up Loan Provider,
        the Third Start-up Loan Provider, the Fourth Start-up Loan Provider,
        the Fifth Start-up Loan Provider, the Sixth Start-up Loan Provider,
        the Seventh Start-up Loan Provider, the Eighth Start-up Loan Provider,
        the Ninth Start-up Loan Provider, the Cash Manager, the Funding 1 Swap
        Provider and the Funding 1 Liquidity Facility Provider as
        supplemented, amended and/or restated from time to time;

        EIGHTH ISSUER means Permanent Financing (No. 8) PLC (registered number
        5434519), 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;

        EIGHTH ISSUER CLOSING DATE means 22 June 2005;

        EIGHTH ISSUER INTERCOMPANY LOAN AGREEMENT means the Eighth Issuer
        Intercompany Loan Confirmation and the Intercompany Loan Terms and
        Conditions together entered into on the Eighth Issuer Closing Date by
        the Eighth Issuer, Funding 1 and the Security Trustee (as the same may
        be amended, restated, supplemented, replaced and/or novated from time
        to time);

        EIGHTH ISSUER SECURITY means the security created by the Eighth Issuer
        pursuant to the Eighth Issuer Deed of Charge in favour of the Eighth
        Issuer Secured Creditors;

        EIGHTH START-UP LOAN means the start-up loan that the Eighth Start-up
        Loan Provider made available to Funding 1 pursuant to the Eighth
        Start-up Loan Agreement;

        EIGHTH START-UP LOAN AGREEMENT means the agreement entered into on the
        Eighth Issuer Closing Date between Funding 1, the Eighth Start-up Loan
        Provider and the Security Trustee relating to the provision of the
        Eighth Start-up Loan to Funding 1 (as the same may be amended,
        restated, supplemented, replaced and/or novated from time to time);

        EIGHTH START-UP LOAN PROVIDER means initially Halifax and as of the
        Reorganisation Date, Bank of Scotland, in its capacity as provider of
        the Eighth Start-up Loan;

        ELECTRONIC NOTIFICATION OF DISCHARGE means an electronic notification
        of the discharge of a mortgage or charge, sent to the Land Registry in
        lieu of a paper discharge;

        ELIGIBLE GENERAL RESERVE FUND PRINCIPAL REPAYMENTS means:

        (a)     prior to the occurrence of a Trigger Event:

                (i)     repayments of principal which are then due and payable
                        in respect of the Original Bullet Term Advances; and

                                     15
<PAGE>

                (ii)    repayments of principal in respect of Original
                        Scheduled Amortisation Term Advances on their
                        respective final maturity dates only; and

        (b)     on or after the occurrence of a Non-Asset Trigger Event but
                prior to the occurrence of an Asset Trigger Event, repayments
                of principal in respect of Original Bullet Term Advances and
                Original Scheduled Amortisation Term Advances on their
                respective final maturity dates only,

        in each case prior to the service of an Intercompany Loan Acceleration
        Notice on Funding 1 and taking into account any allocation of
        principal to meet any deficiency in Funding 1 Available Revenue
        Receipts;

        ELIGIBLE LIQUIDITY FACILITY PRINCIPAL REPAYMENTS means:

        (a)     prior to the occurrence of a Trigger Event:

                (i)     repayments of principal which are then due and payable
                        in respect of the Original Bullet Term Advances; and

                (ii)    repayments of principal in respect of Original
                        Scheduled Amortisation Term Advances on their
                        respective Final Repayment Dates only; and

        (b)     on or after the occurrence of a Non-Asset Trigger Event but
                prior to the occurrence of an Asset Trigger Event, repayments
                of principal in respect of Original Bullet Term Advances and
                Original Scheduled Amortisation Term Advances on their
                respective Final Repayment Dates only,

        in each case prior to the service of an Intercompany Loan Acceleration
        Notice on Funding 1 and taking into account any allocation of
        principal to meet any deficiency in Funding 1 Available Revenue
        Receipts.

        Following the occurrence of an Asset Trigger Event, the Funding 1
        Liquidity Facility will not be available to repay principal in respect
        of Original Bullet Term Advances or Original Scheduled Term Advances;

        ELIGIBLE LIQUIDITY RESERVE FUND PRINCIPAL REPAYMENTS means:

        (a)     prior to the occurrence of a Trigger Event:

                (i)     repayments of principal which are then due and payable
                        in respect of the Original Bullet Term Advances; and

                (ii)    repayments of principal in respect of Original
                        Scheduled Amortisation Term Advances on their
                        respective Final Repayment Dates only; and

        (b)     on or after the occurrence of a Non-Asset Trigger Event but
                prior to the occurrence of an Asset Trigger Event, repayments
                of principal in respect of Original Bullet Term Advances and
                Original Scheduled Amortisation Term Advances on their
                respective Final Repayment Dates,

        in each case prior to the service of an Intercompany Loan Acceleration
        Notice on Funding 1 and taking into account any allocation of
        principal to meet any deficiency in Funding 1 Available Revenue
        Receipts;

                                      16
<PAGE>

        ENCUMBRANCE has the same meaning as SECURITY INTEREST;

        ENFORCEMENT PROCEDURES means the procedures for the enforcement of
        Mortgages undertaken by the Servicer from time to time in accordance
        with the Seller's Policy;

        ENGLISH LOAN means a Loan secured by an English Mortgage;

        ENGLISH MORTGAGE means a Mortgage over a property in England or Wales;

        EUROCLEAR means Euroclear Bank S.A./N.V., as operator of the Euroclear
        System, and any successor to such business;

        EXCHANGE ACT means the United States Securities Exchange Act of 1934,
        as amended;

        EXHIBIT means the exhibit to the Original Mortgage Sale Agreement
        which sets out details of the Provisional Portfolio and the Standard
        Documentation;

        EXTENSION REQUEST has the meaning given in clause 2.3(a) of the
        Funding 1 Liquidity Facility Agreement;

        EXTRAORDINARY RESOLUTION has the meaning in respect of Notes as
        defined in the relevant Trust Deed;

        FACILITY OFFICE means the office through which the Funding 1 Liquidity
        Facility Provider will perform all or any of its obligations under the
        Funding 1 Liquidity Facility Agreement;

        FIFTH DEED OF ACCESSION means the fifth deed of accession to the
        Funding 1 Deed of Charge entered into on the Sixth Issuer Closing Date
        between Funding 1, the First Issuer, the Second Issuer, the Third
        Issuer, the Fourth Issuer, the Fifth Issuer, the Sixth Issuer, the
        Corporate Services Provider, the Account Bank, the Security Trustee,
        the Seller, the First Start-up Loan Provider, the Second Start-up Loan
        Provider, the Third Start-up Loan Provider, the Fourth Start-up Loan
        Provider, the Fifth Start-up Loan Provider, the Sixth Start-up Loan
        Provider, the Cash Manager, the Funding 1 Swap Provider and the
        Funding 1 Liquidity Facility Provider as amended, restated,
        supplemented, replaced and/or novated from time to time;

        FIFTH ISSUER means Permanent Financing (No. 5) PLC (registered number
        5114399), 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;

        FIFTH ISSUER CLOSING DATE means 22 July 2004;

        FIFTH ISSUER INTERCOMPANY LOAN AGREEMENT means the Fifth Issuer
        Intercompany Loan Confirmation and the Intercompany Loan Terms and
        Conditions together entered into on the Fifth Issuer Closing Date by
        the Fifth Issuer, Funding 1 and the Security Trustee (as the same may
        be amended, restated, supplemented, replaced and/or novated from time
        to time);

        FIFTH ISSUER SECURITY means the security created by the Fifth Issuer
        pursuant to the Fifth Issuer Deed of Charge in favour of the Fifth
        Issuer Secured Creditors;

        FIFTH START-UP LOAN means the start-up loan that the Fifth Start-up
        Loan Provider made available to Funding 1 pursuant to the Fifth
        Start-up Loan Agreement;

        FIFTH START-UP LOAN AGREEMENT means the agreement entered into on the
        Fifth Issuer Closing Date between Funding 1, the Fifth Start-up Loan
        Provider and the Security Trustee relating to the

                                      17
<PAGE>

        provision of the Fifth Start-up Loan to Funding 1 (as the same may be
        amended, restated, supplemented, replaced and/or novated from time to
        time);

        FIFTH START-UP LOAN PROVIDER means initially Halifax and as of the
        Reorganisation Date, Bank of Scotland, in its capacity as provider of
        the Fifth Start-up Loan;

        FINAL MATURITY DATE means the interest payment date falling in the
        month indicated for such class in the applicable Final Terms;

        FINAL REPAYMENT DATE means the final repayment date of each Term
        Advance or Loan Tranche, as specified in the relevant Issuer Master
        Definitions and Construction Schedule;

        FINANCIAL YEAR means the 12-month period ending on the last day of the
        calendar year;

        FIRST DEED OF ACCESSION means the first deed of accession to the
        Funding 1 Deed of Charge entered into on the Second Issuer Closing
        Date between Funding 1, the First Issuer, the Second Issuer, the
        Corporate Services Provider, the Account Bank, the Security Trustee,
        the Seller, the First Start-up Loan Provider, the Second Start-up Loan
        Provider, the Cash Manager, the Funding 1 Swap Provider and the
        Funding 1 Liquidity Facility Provider as amended, restated,
        supplemented, replaced and/or novated from time to time;

        FIRST DEED OF AMENDMENT TO THE INTERCOMPANY LOAN TERMS AND CONDITIONS
        means the first deed of amendment to the Intercompany Loan Terms and
        Conditions entered into on the Third Issuer Closing Date between
        Funding 1, the First Issuer, the Second Issuer, the Security Trustee
        and the Agent Bank;

        FIRST ISSUER means Permanent Financing (No. 1) PLC (registered number
        4416192), 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;

        FIRST ISSUER CLOSING DATE or INITIAL CLOSING DATE means 14 June 2002;

        FIRST ISSUER INTERCOMPANY LOAN AGREEMENT means the First Issuer
        Intercompany Loan Confirmation and the Intercompany Loan Terms and
        Conditions together entered into on the Initial Closing Date by the
        First Issuer, Funding 1 and the Security Trustee (as the same may be
        amended, restated, supplemented, replaced and/or novated from time to
        time);

        FIRST ISSUER MASTER DEFINITIONS SCHEDULE means, in respect of the
        First Issuer, the master definitions schedule signed for the purposes
        of identification by Sidley Austin LLP and Allen & Overy LLP on the
        Initial Closing Date (as amended, varied or supplemented from time to
        time);

        FIRST ISSUER NOTES has the meaning given to such term in the First
        Issuer Master Definitions Schedule;

        FIRST ISSUER SECURITY means the security created by the First Issuer
        pursuant to the First Issuer Deed of Charge in favour of the First
        Issuer Secured Creditors;

        FIRST START-UP LOAN means the start-up loan that the First Start-up
        Loan Provider made available to Funding 1 pursuant to the First
        Start-up Loan Agreement;

        FIRST START-UP LOAN AGREEMENT means the agreement entered into on the
        Initial Closing Date between Funding 1, the First Start-up Loan
        Provider and the Security Trustee relating to the provision of the
        First Start-up Loan to Funding 1 (as the same may be amended,
        restated, supplemented, replaced and/or novated from time to time);

                                      18
<PAGE>

        FIRST START-UP LOAN PROVIDER means initially Halifax and as of the
        Reorganisation Date, Bank of Scotland, in its capacity as provider of
        the First Start-up Loan;

        FITCH means Fitch Ratings Limited and includes any successor to its
        ratings business;

        FIXED RATE LOANS means those Loans to the extent that and for such
        period that their Mortgage Terms provide that the interest rate does
        not vary and is fixed by the Seller;

        FLEXIBLE DRAW CAPACITY means an amount equal to the excess of (a) the
        maximum amount that Borrowers may draw under Flexible Loans included
        in the Trust Property (whether or not drawn) over (b) the aggregate
        principal balance of actual Flexible Loan advances in the Trust
        Property on the relevant Calculation Date;

        FLEXIBLE LOAN means a type of Loan product that typically incorporates
        features that give the Borrower options to, among other things, make
        further drawings on the loan account and/or to overpay or underpay
        interest and principal in a given month;

        FLEXIBLE LOAN CONDITIONS means Mortgage Conditions applicable to any
        Flexible Loan;

        FLEXIBLE LOAN DRAWING means any further drawing of monies made by a
        Borrower under a Flexible Loan other than the Initial Advance;

        FOURTH DEED OF ACCESSION means the fourth deed of accession to the
        Funding 1 Deed of Charge entered into on the Fifth Issuer Closing Date
        between Funding 1, the First Issuer, the Second Issuer, the Third
        Issuer, the Fourth Issuer, the Fifth Issuer, the Corporate Services
        Provider, the Account Bank, the Security Trustee, the Seller, the
        First Start-up Loan Provider, the Second Start-up Loan Provider, the
        Third Start-up Loan Provider, the Fourth Start-up Loan Provider, the
        Fifth Start-up Loan Provider, the Cash Manager, the Funding 1 Swap
        Provider and the Funding 1 Liquidity Facility Provider as amended,
        restated, supplemented, replaced and/or novated from time to time;

        FOURTH ISSUER means Permanent Financing (No. 4) PLC (registered number
        4988201), 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;

        FOURTH ISSUER CLOSING DATE means 12 March 2004;

        FOURTH ISSUER INTERCOMPANY LOAN AGREEMENT means the Fourth Issuer
        Intercompany Loan Confirmation and the Intercompany Loan Terms and
        Conditions together entered into on the Fourth Issuer Closing Date by
        the Fourth Issuer, Funding 1 and the Security Trustee (as the same may
        be amended, restated, supplemented, replaced and/or novated from time
        to time);

        FOURTH ISSUER SECURITY means the security created by the Fourth Issuer
        pursuant to the Fourth Issuer Deed of Charge in favour of the Fourth
        Issuer Secured Creditors;

        FOURTH START-UP LOAN means the start-up loan that the Fourth Start-up
        Loan Provider made available to Funding 1 pursuant to the Fourth
        Start-up Loan Agreement;

        FOURTH START-UP LOAN AGREEMENT means the agreement entered into on the
        Fourth Issuer Closing Date between Funding 1, the Fourth Start-up Loan
        Provider and the Security Trustee relating to the provision of the
        Fourth Start-up Loan to Funding 1 (as the same may be amended,
        restated, supplemented, replaced and/or novated from time to time);

        FOURTH START-UP LOAN PROVIDER means initially Halifax and as of the
        Reorganisation Date, Bank of Scotland, in its capacity as provider of
        the Fourth Start-up Loan;

                                      19
<PAGE>

        FSA means the UK Financial Services Authority;

        FSMA 2000 or FSMA means the Financial Services and Markets Act 2000
        (as amended from time to time);

        FUNDING BENEFICIARY CONTROLLING DIRECTION has the meaning given in the
        Controlling Beneficiary Deed;

        FUNDING BENEFICIARIES means Funding 1 and Funding 2;

        FUNDING SECURITY TRUSTEE CONTROLLING DIRECTIONS has the meaning given
        in the Controlling Beneficiary Deed;

        FUNDING SECURITY TRUSTEES means the Funding 1 Security Trustee and the
        Funding 2 Security Trustee;

        FUNDING 1 means Permanent Funding (No. 1) Limited (registered number
        4267660), a limited company incorporated under the laws of England and
        Wales, whose registered office is at 35 Great St. Helen's, London EC3A
        6AP;

        FUNDING 1 AGREEMENTS or FUNDING 1 TRANSACTION DOCUMENTS means each of
        the Transaction Documents to which Funding 1 is a party (as the same
        may be amended, varied and/or supplemented from time to time)
        including (but not limited to) the Master Definitions and Construction
        Schedule, the Servicing Agreement, the Mortgages Trust Deed, the
        Controlling beneficiary Deed, the Funding 1 Deed of Charge (including,
        for the avoidance of doubt the Second Supplemental Funding 1 Deed of
        Charge), the Funding 1 Swap Agreement, the Funding 1 Corporate
        Services Agreement, the Funding 1 Liquidity Facility Agreement, each
        Intercompany Loan Agreement, the First Deed of Amendment to the
        Intercompany Loan Terms and Conditions, the Cash Management Agreement,
        the Bank Account Agreement, the Funding 1 Guaranteed Investment
        Contract, each Start-up Loan Agreement, the Mortgage Sale Agreement,
        each Scottish Declaration of Trust, the Seller Power of Attorney, the
        Insurance Acknowledgements, the Insurance Endorsements and all other
        agreements referred to therein or otherwise referred to as "Funding 1
        Agreements" in each Accession Undertaking entered into by, inter
        alios, Funding 1 and the Security Trustee, from time to time;

        FUNDING 1 AVAILABLE PRINCIPAL RECEIPTS means on the day falling four
        Business Days prior to each Funding 1 Interest Payment Date, an amount
        equal to the aggregate of:

        (a)     all Funding 1 Principal Receipts received by Funding 1 during
                the Interest Period ending on the relevant Funding 1 Interest
                Payment Date;

        (b)     all other Funding 1 Principal Receipts standing to the credit
                of the Cash Accumulation Ledger which are to be applied on the
                next Funding 1 Interest Payment Date to repay a Bullet Term
                Advance and/or, subject to Rule 1 as set out in paragraph
                2.2(a) of Part 2 of Schedule 3 to the Funding 1 Deed of
                Charge, a Scheduled Amortisation Instalment, or to make a
                payment under items (a), (b) or (c) of the Funding 1
                Pre-Enforcement Principal Priority of Payments and, if such
                Funding 1 Interest Payment Date occurs on or after a Trigger
                Event, the remainder of such receipts standing to the credit
                of the Cash Accumulation Ledger;

        (c)     the amounts (if any) to be credited to the Principal
                Deficiency Ledger pursuant to paragraphs (g), (i), (k) and (m)
                in the Funding 1 Pre-Enforcement Revenue Priority of Payments
                on the relevant Funding 1 Interest Payment Date;

                                     20
<PAGE>

        (d)     in so far as available for and needed to make Eligible
                Liquidity Facility Principal Repayments, any amounts available
                to be drawn under the Funding 1 Liquidity Facility (but less
                any amounts applied or to be applied on the relevant date in
                payment of interest and other revenue expenses as set out in
                paragraphs (a) to (f) inclusive, (h), (j) and (l) of the
                Funding 1 Pre-Enforcement Revenue Priority of Payments plus
                any amounts which will be repaid to the Funding 1 Liquidity
                Facility Provider under item (a) of the relevant priority of
                payments (relating to the allocation of Funding 1 Available
                Principal Receipts) on the next Funding 1 Interest Payment
                Date (i.e. occurring at the end of such period of four
                Business Days) to the extent that such repayment is available
                to be redrawn on that Funding 1 Interest Payment Date);

        (e)     in so far as available for and needed to make Eligible General
                Reserve Fund Principal Repayments, the amount that would then
                be standing to the credit of the General Reserve Ledger (but
                less any amounts applied or to be applied on the relevant date
                in payment of interest and other revenue expenses as set out
                in paragraphs (a) to (n) (inclusive) of the Funding 1
                Pre-Enforcement Revenue Priority of Payments) plus any amounts
                which will be credited to the General Reserve Ledger under
                item (b) of the relevant priority of payments (relating to the
                allocation of Funding 1 Available Principal Receipts) on the
                next Funding 1 Interest Payment Date (i.e. occurring at the
                end of such period of four Business Days);

        (f)     in so far as available for and needed to make Eligible
                Liquidity Reserve Fund Principal Repayments, the amount that
                would then be standing to the credit of the Liquidity Reserve
                Ledger (but less any amounts applied or to be applied on the
                relevant date in payment of interest and other revenue
                expenses as set out in paragraphs (a) to (f) (inclusive), (h),
                (j) and (l) of the Funding 1 Pre-Enforcement Revenue Priority
                of Payments plus) any amounts which will be credited to the
                Liquidity Reserve Ledger under item (c) of the relevant
                priority of payments (relating to the allocation of Funding 1
                Available Principal Receipts) on the next Funding 1 Interest
                Payment Date (i.e. occurring at the end of such period of four
                Business Days);

        less

        (g)     the amounts to be applied on the relevant Funding 1 Interest
                Payment Date to pay the items in paragraphs (a) to (f)
                (inclusive), (h), (j) and (l) of the Funding 1 Pre-Enforcement
                Revenue Priority of Payments;

        FUNDING 1 AVAILABLE REVENUE RECEIPTS means, for each Funding 1
        Interest Payment Date, an amount calculated by the Cash Manager on the
        day falling four Business Days prior to such Funding 1 Interest
        Payment Date, and equal to the aggregate of:

        (a)     all Mortgages Trust Available Revenue Receipts distributed or
                to be distributed to Funding 1 during the then current
                Interest Period;

        (b)     any amounts paid or to be paid by the Seller to Funding 1
                during the then current Interest Period in consideration of
                the Seller acquiring a further interest in the Trust Property;

        (c)     other net income of Funding 1 including all amounts of
                interest received on the Funding 1 GIC Account, the Funding 1
                Transaction Account and/or Authorised Investments and amounts
                received by Funding 1 under the Funding 1 Swap Agreement
                (other than any early termination amount received by Funding 1
                under the Funding 1 Swap Agreement), in each case to be
                received during the then current Interest Period;

        (d)     the amounts then standing to the credit of the General Reserve
                Ledger;

                                     21

<PAGE>

        (e)     if a Liquidity Reserve Fund Rating Event has occurred and is
                continuing, and there are no amounts standing to the credit of
                the General Reserve Ledger, the amounts then standing to the
                credit of the Liquidity Reserve Ledger and available to be
                drawn, to the extent necessary to pay the items in paragraphs
                (a) to (f) (inclusive), (h), (j) and (l) of the Funding 1
                Pre-Enforcement Revenue Priority of Payments;

        (f)     if a Liquidity Reserve Fund Rating Event has occurred but is
                no longer continuing due to an increase in the Seller's Rating
                since the preceding Funding 1 Interest Payment Date, and
                Funding 1 elects to terminate the Liquidity Reserve Fund, all
                amounts standing to the credit of the Liquidity Reserve
                Ledger; and

        (g)     any amounts standing to the credit of the Liquidity Reserve
                Ledger in excess of the Liquidity Reserve Fund Required Amount
                as a result of a reduction in the Liquidity Reserve Fund
                Required Amount,

        and, for the avoidance of doubt, Funding 1 Available Revenue Receipts
        does not include:

        (h)     any payment made by the Seller to Funding 1 during the then
                current Interest Period of the amount outstanding under an
                Intercompany Loan; and

        (i)     the proceeds of any New Intercompany Loan received by Funding
                1 during the then current Interest Period;

        FUNDING 1 AUTHORISED INVESTMENTS means the Authorised Investments
        applicable to Funding 1;

        FUNDING 1 BANK ACCOUNTS means the Funding 1 GIC Account, the Funding 1
        Transaction Account, the Funding 1 Liquidity Facility Stand-by Account
        and any additional or replacement bank accounts held in the name of
        Funding 1 from time to time with the prior written consent of the
        Security Trustee;

        FUNDING 1 CASH ACCUMULATION LEDGER means the ledger in respect of
        Funding 1 established and maintained by the Cash Manager pursuant to
        Clause 4.3(a) of the Cash Management Agreement;

        FUNDING 1 CASH ACCUMULATION LEDGER AMOUNT means, at any time, the
        amount standing to the credit of the Funding 1 Cash Accumulation
        Ledger at that time (immediately prior to any drawing to be applied on
        that Interest Payment Date and prior to any payment under item (h) of
        the Funding 1 Pre-Enforcement Principal Priority of Payments;

        FUNDING 1 CHARGED PROPERTY means the property charged by Funding 1
        pursuant to the Funding 1 Deed of Charge and includes, for the
        avoidance of doubt, the property charged by Funding 1 pursuant to the
        Second Supplemental Funding 1 Deed of Charge;

        FUNDING 1 CORPORATE SERVICES AGREEMENT means in respect of Holdings
        and Funding 1, the agreement dated the Initial Closing Date between
        the Corporate Services Provider, the Share Trustee, Holdings, Funding
        1, Halifax and the Funding 1 Security Trustee for the provision by the
        Corporate Services Provider of certain corporate services and
        personnel to Funding 1 and Holdings, as amended and restated on the
        Programme Date by the Corporate Services Agreement (as the same may be
        amended, restated, supplemented, replaced and/or novated from time to
        time);

        FUNDING 1 CORPORATE SERVICES FEE LETTER means the letter dated the
        date of the Funding 1 Corporate Services Agreement, as supplemented on
        the Eighth Issuer Closing Date, between, inter alios, Funding 1,
        PECOH, Holdings, PECOH Holdings, the Security Trustee, the Funding 1
        Corporate Services Provider and the PECOH Corporate Services Provider,
        setting out the amount of

                                      22
<PAGE>

        fees payable to the Funding 1 Corporate Services Provider and the
        PECOH Corporate Services Provider by Funding 1;

        FUNDING 1 CORPORATE SERVICES PROVIDER means Structured Finance
        Management Limited or such other person or persons for the time being
        acting as corporate services provider to Funding 1, Holdings and PECOH
        under the Funding 1 Corporate Services Agreement;

        FUNDING 1 DEED OF CHARGE means the deed of charge entered into on the
        Initial Closing Date between Funding 1, the First Issuer, the
        Corporate Services Provider, the Account Bank, the Security Trustee,
        the Seller, the First Start-up Loan Provider, the Cash Manager, the
        Funding 1 Swap Provider and the Funding 1 Liquidity Facility Provider,
        as supplemented and amended by the Deed of Accession and Release
        Supplemental to the Funding 1 Deed of Charge, the Second Supplemental
        Funding 1 Deed of Charge and as supplemented and amended by the First
        Deed of Accession, the Second Deed of Accession, the Third Deed of
        Accession, the Fourth Deed of Accession, the Fifth Deed of Accession,
        the Sixth Deed of Accession, the Seventh Deed of Accession, the Eighth
        Deed of Accession and as supplemented by the Third Supplemental
        Funding 1 Deed of Charge, and as the same may be further supplemented,
        amended and/or restated or varied from time to time;

        FUNDING 1 FINAL DEFERRED CONTRIBUTION has the meaning given to it in
        Clause 4.2 of the Mortgages Trust Deed;

        FUNDING 1 GENERAL RESERVE FUND means the fund established from the
        proceeds of the First Start-up Loan, the Second Start-up Loan, the
        Third Start-up Loan, the Fourth Start-up Loan, the Fifth Start-up
        Loan, the Seventh Start-up Loan, the Eighth Start-up Loan, the Ninth
        Start-up Loan and any New Start-up Loan with respect a Funding 1
        Issuer which may be used by Funding 1 to meet any deficit in Revenue
        Receipts or Principal Receipts;

        FUNDING 1 GENERAL RESERVE LEDGER means the ledger established and
        maintained by the Cash Manager in respect of Funding 1 pursuant to
        Clause 4.3(b) of the Cash Management Agreement;

        FUNDING 1 GENERAL RESERVE FUND REQUIRED AMOUNT means an amount equal
        to [POUND]445,000,000 or such lesser amount to which the Funding 1
        Liquidity Facility Provider, the Funding 1 Swap Provider and each of
        the Issuer Swap Providers consent to and as the Rating Agencies have
        confirmed will not cause the ratings of the Notes of any Funding 1
        Issuer to be reduced, withdrawn or qualified;

        FUNDING 1 GENERAL RESERVE FUND THRESHOLD means the lesser of:

        (a)     the General Reserve Fund Required Amount, and

        (b)     the highest amount which the Adjusted Reserve Fund Level has
                been since the first Interest Payment Date upon which interest
                is due and payable in respect of Term Advances made upon the
                Closing Date relating to the then most recent issue of Issuer
                Notes;

        FUNDING 1 GIC ACCOUNT means the account in the name of Funding 1 and
        the Security Trustee (sort code 12-24-55, account number 00998203)
        held at the Account Bank and maintained subject to the terms of the
        Funding 1 Guaranteed Investment Contract, the Bank Account Agreement
        and the Funding 1 Deed of Charge, or such additional or replacement
        bank account as may for the time being be in place with the prior
        consent of the Security Trustee and the Rating Agencies;

        FUNDING 1 GIC ACCOUNT AGREEMENT has the same meaning as FUNDING 1
        GUARANTEED INVESTMENT CONTRACT;

        FUNDING 1 GIC ACCOUNT MANDATE means the bank account mandate between
        Funding 1 and the Account Bank relating to the operation of the
        Funding 1 GIC Account;

                                     23
<PAGE>

        FUNDING 1 GIC BALANCE means, on any day during an Interest Period, the
        amount standing to the credit of the Funding 1 GIC Account as at the
        opening of business on such day;

        FUNDING 1 GIC PROVIDER means Bank of Scotland acting pursuant to the
        Funding 1 Guaranteed Investment Contract and/or such other person for
        the time being acting as provider of a guaranteed investment contract
        to Funding 1;

        FUNDING 1 GIC RATE means the rate of interest accruing on the balance
        standing to the credit of the Funding 1 GIC Account equal to a rate of
        three month LIBOR less 0.25% per annum;

        FUNDING 1 GUARANTEED INVESTMENT CONTRACT or FUNDING 1 GIC ACCOUNT
        AGREEMENT means the guaranteed investment contract entered into on the
        Initial Closing Date between Funding 1, the Funding 1 GIC Provider,
        the Cash Manager and the Security Trustee in relation to interest to
        be earned on the Funding 1 GIC Balance (as the same may be amended,
        restated, supplemented, replaced and/or novated from time to time);

        FUNDING 1 INCOME DEFICIT means the amount of the shortfall between
        Funding 1 Available Revenue Receipts and the amounts required to pay
        the items in paragraph (a) to (f) (inclusive), (h), (j), and (i) of
        the Funding 1 Pre-Enforcement Revenue Priority of Payments;

        FUNDING 1 INTERCOMPANY LOAN means the loan made available pursuant to
        a Funding 1 Intercompany Loan Agreement;

        FUNDING 1 INTERCOMPANY LOAN AGREEMENTS means the First Issuer
        Intercompany Loan Agreement, the Second Issuer Intercompany Loan
        Agreement, the Third Issuer Intercompany Loan Agreement, the Fourth
        Issuer Intercompany Loan Agreement, the Fifth Issuer Intercompany Loan
        Agreement, the Sixth Issuer Intercompany Loan Agreement, the Seventh
        Issuer Intercompany Loan Agreement, the Eighth Issuer Intercompany
        Loan Agreement, the Ninth Issuer Intercompany Loan Agreement and any
        New Intercompany Loan Agreement to which Funding 1 is party as
        Borrower;

        FUNDING 1 INTERCOMPANY LOAN LEDGER means the ledger on which the Cash
        Manager will record payments of interest and repayments of principal
        made under any Funding 1 Intercompany Loan;

        FUNDING 1 INTEREST PAYMENT DATE means the 10th day of September,
        December, March and June in each year (or, if such day is not a
        Business Day, the next succeeding Business Day);

        FUNDING 1 INTEREST RATE SHORTFALL has the meaning given to it in
        Clause 4.3 of the Servicing Agreement;

        FUNDING 1 ISSUER DEEDS OF CHARGE means the First Issuer Deed of
        Charge, the Second Issuer Deed of Charge, the Third Issuer Deed of
        Charge, the Fourth Issuer Deed of Charge, the Fifth Issuer Deed of
        Charge, the Sixth Issuer Deed of Charge, the Seventh Issuer Deed of
        Charge, the Eighth Issuer Deed of Charge and the Ninth Issuer Deed of
        Charge;

        FUNDING 1 ISSUER MASTER DEFINITIONS AND CONSTRUCTION SCHEDULE means,
        as the context so requires, the First Issuer Master Definitions and
        Construction Schedule dated the Initial Closing Date, the Second
        Issuer Master Definitions and Construction Schedule dated the Second
        Issuer Closing Date, the Third Issuer Master Definitions and
        Construction Schedule dated the Third Issuer Closing Date, the Fourth
        Issuer Master Definitions and Construction Schedule dated the Fourth
        Issuer Closing Date, the Fifth Issuer Master Definitions and
        Construction Schedule dated the Fifth Issuer Closing Date, the Sixth
        Issuer Master Definitions and Construction Schedule dated the Sixth
        Issuer Closing Date, the Seventh Issuer Master Definitions and
        Construction Schedule dated the Seventh Issuer Closing Date, the
        Eighth Issuer Master Definitions and Construction Schedule dated the
        Eighth Issuer Closing Date, the Ninth Issuer Master Definitions and
        Construction Schedule dated

                                      24
<PAGE>

        the Ninth Issuer Closing Date, each signed for the purposes of
        identification by Allen & Overy LLP and Sidley Austin LLP, and/or each
        other master definitions and construction schedule which relates to a
        New Issuer;

        FUNDING 1 ISSUER NOTES means the First Issuer Notes, the Second Issuer
        Notes, the Third Issuer Notes, the Fourth Issuer Notes, the Fifth
        Issuer Notes, the Sixth Issuer Notes, the Seventh Issuer Notes, the
        Eighth Issuer Notes, the Ninth Issuer Notes and/or any New Notes
        issued by any New Issuer the proceeds of which are on-lent to Funding
        1 pursuant to a Funding 1 Intercompany Loan Agreement;

        FUNDING 1 ISSUERS means the First Issuer, the Second Issuer, the Third
        Issuer, the Fourth Issuer, the Fifth Issuer, the Sixth Issuer, the
        Seventh Issuer, the Eighth Issuer, the Ninth Issuer and any New Issuer
        relating to Funding 1;

        FUNDING 1 ISSUERS SECURED OBLIGATIONS means the First Issuer Secured
        Obligation, the Second Issuer Secured Obligation, the Third Issuer
        Secured Obligation, the Fourth Issuer Secured Obligation, the Fifth
        Issuer Secured Obligation, the Sixth Issuer Secured Obligation, the
        Seventh Issuer Secured Obligation, the Eighth Issuer Secured
        Obligation and the Ninth Issuer Secured Obligation;

        FUNDING 1 LEDGERS means the Funding 1 Principal Ledger, the Funding 1
        Revenue Ledger, the Funding 1 General Reserve Ledger, the Funding 1
        Liquidity Reserve Ledger, the Funding 1 Principal Deficiency Ledger,
        the Funding 1 Intercompany Loan Ledger, the Funding 1 Cash
        Accumulation Ledger and the Funding 1 Liquidity Facility Ledger;

        FUNDING 1 LIQUIDITY DOCUMENTS means the Funding 1 Liquidity Facility
        Agreement, a Novation Certificate or any other document designated as
        such by the Funding 1 Liquidity Facility Provider and Funding 1;

        FUNDING 1 LIQUIDITY DRAWING means any draw on the Funding 1 Liquidity
        Facility;

        FUNDING 1 LIQUIDITY FACILITY means the sterling advances facility made
        in respect of certain of the payment obligations of Funding 1 arising
        out of the First Issuer Intercompany Loan Agreement and/or the Second
        Issuer Intercompany Loan Agreement and/or the Third Issuer
        Intercompany Loan Agreement and/or the Fourth Issuer Intercompany Loan
        Agreement and/or the Fifth Issuer Intercompany Loan Agreement and/or
        the Sixth Issuer Intercompany Loan Agreement and/or the Seventh Issuer
        Intercompany Loan Agreement and/or the Eighth Issuer Intercompany Loan
        Agreement and/or the Ninth Issuer Intercompany Loan Agreement made
        available by the Funding 1 Liquidity Facility Provider to Funding 1
        under the Funding 1 Liquidity Facility Agreement and drawable by way
        of Funding 1 Liquidity Facility Drawings and/or Funding 1 Liquidity
        Facility Stand-by Drawings;

        FUNDING 1 LIQUIDITY FACILITY AGREEMENT means the liquidity facility
        agreement made on the Initial Closing Date as amended and restated on
        the Second Issuer Closing Date, the Third Issuer Closing Date, the
        Fourth Issuer Closing Date, the Fifth Issuer Closing Date, the Sixth
        Issuer Closing Date, the Seventh Issuer Closing Date, the Eighth
        Issuer Closing Date and as further amended and restated on the Ninth
        Issuer Closing Date and from time to time between Funding 1, the
        Funding 1 Liquidity Facility Provider, the Cash Manager and the
        Security Trustee pursuant to which the Funding 1 Liquidity Facility
        Provider agreed to provide Funding 1, from time to time during the
        Funding 1 Liquidity Facility Commitment Period, with advances for the
        purposes specified therein, subject to and in accordance with the
        terms thereof (as the same may be further amended, restated,
        supplemented, replaced and/or novated from time to time);

                                      25
<PAGE>

        FUNDING 1 LIQUIDITY FACILITY COMMITMENT means, as at the Ninth Issuer
        Closing Date, the amount of [POUND]150,000,000, or such other amount
        as may be determined in accordance with clause 2.2 (Facility Limits)
        and/or Clause 7.2 (Voluntary cancellation) of the Funding 1 Liquidity
        Facility Agreement from time to time;

        FUNDING 1 LIQUIDITY FACILITY COMMITMENT PERIOD means, subject to
        Clause 2.3 of the Funding 1 Liquidity Facility Agreement, the period
        from and including the Initial Closing Date up to and excluding the
        Funding 1 Liquidity Facility Commitment Termination Date;

        FUNDING 1 LIQUIDITY FACILITY COMMITMENT TERMINATION DATE means,
        subject to being extended in accordance with Clause 2.3 of the Funding
        1 Liquidity Facility Agreement, the date falling 364 days after the
        Initial Closing Date or, if such date is not a Business Day, the
        preceding Business Day or, if earlier, the date on which the Funding 1
        Liquidity Facility Commitment is reduced to zero pursuant to the
        provisions of the Funding 1 Liquidity Facility Agreement;

        FUNDING 1 LIQUIDITY FACILITY DEFAULT means an event specified as such
        in clause 16.1 of the Funding 1 Liquidity Facility Agreement;

        FUNDING 1 LIQUIDITY FACILITY DOWNGRADE EVENT means the downgrade on
        any day of the Funding 1 Liquidity Facility Provider's short-term,
        unsecured, unguaranteed and unsubordinated debt obligations to below
        the Requisite Ratings;

        FUNDING 1 LIQUIDITY FACILITY DRAWDOWN DATE means the date of the
        advance of a Funding 1 Liquidity Facility Drawing or a Funding 1
        Liquidity Facility Stand-by Drawing which date shall be a Funding 1
        Interest Payment Date;

        FUNDING 1 LIQUIDITY FACILITY DRAWDOWN NOTICE means a notice
        substantially in the form set out in Schedule 3 to the Funding 1
        Liquidity Facility Agreement;

        FUNDING 1 LIQUIDITY FACILITY DRAWING means a drawing made under clause
        5.1 or clause 5.2(e) of the Funding 1 Liquidity Facility Agreement;

        FUNDING 1 LIQUIDITY FACILITY EXTENSION REFUSAL means the refusal by
        the Funding 1 Liquidity Facility Provider, to grant an extension of
        the Funding 1 Liquidity Facility Commitment Period, in accordance with
        Clause 2.3 of the Funding 1 Liquidity Facility Agreement;

        FUNDING 1 LIQUIDITY FACILITY INTEREST PERIOD means, with respect to a
        Funding 1 Liquidity Facility Loan, each successive period beginning on
        (and including) a Funding 1 Interest Payment Date and ending on (but
        excluding) the next following Funding 1 Interest Payment Date except
        that the first Funding 1 Liquidity Facility Interest Period shall
        start on the Funding 1 Liquidity Facility Drawdown Date for that
        Funding 1 Liquidity Facility Loan and end on the day before the next
        following Funding 1 Interest Payment Date;

        FUNDING 1 LIQUIDITY FACILITY LEDGER means a ledger to be maintained by
        the Cash Manager pursuant to Clause 4.3 of the Cash Management
        Agreement;

        FUNDING 1 LIQUIDITY FACILITY LOAN means a loan made under the Funding
        1 Liquidity Facility which is made as a result of a Funding 1
        Liquidity Facility Drawing;

        FUNDING 1 LIQUIDITY FACILITY MARGIN means nought point 5% (0.50%) per
        annum;

        FUNDING 1 LIQUIDITY FACILITY PROVIDER means JPMorgan Chase Bank, N.A.
        acting through its office at 125 London Wall, London EC2Y 5AJ and/or
        such other bank or banks with at least the

                                     26
<PAGE>

        Requisite Ratings which agrees to provide a liquidity facility to
        Funding 1 on substantially similar terms to the Funding 1 Liquidity
        Facility Agreement;

        FUNDING 1 LIQUIDITY FACILITY REQUEST means a request substantially in
        the form set out in Schedule 3 to the Funding 1 Liquidity Facility
        Agreement made by Funding 1 for a Funding 1 Liquidity Facility Drawing
        or a Funding 1 Liquidity Facility Stand-by Drawing pursuant to a
        Funding 1 Liquidity Drawdown Notice;

        FUNDING 1 LIQUIDITY FACILITY REPAYMENTS means any repayments made
        under the Funding 1 Liquidity Facility;

        FUNDING 1 LIQUIDITY FACILITY STAND-BY ACCOUNT means an account to be
        held in the name of Funding 1 with the Funding 1 Liquidity Facility
        Provider or, if the Funding 1 Liquidity Facility Provider ceases to
        have the Requisite Ratings, the Account Bank or, if the Account Bank
        ceases to have the Requisite Ratings, a bank which has the Requisite
        Ratings;

        FUNDING 1 LIQUIDITY FACILITY STAND-BY DEPOSIT means the amount
        standing to the credit of the Funding 1 Liquidity Facility Stand-by
        Account from time to time together with interest on such deposit;

        FUNDING 1 LIQUIDITY FACILITY STAND-BY DRAWING means a drawing made
        under clause 5.2(b) of the Funding 1 Liquidity Facility Agreement;

        FUNDING 1 LIQUIDITY FACILITY STAND-BY LOAN means a loan made under the
        Funding 1 Liquidity Facility which is made as a result of a Funding 1
        Liquidity Facility Stand-by Drawing;

        FUNDING 1 LIQUIDITY PRINCIPAL SHORTFALL means, subject to clause
        4.2(b) of the Funding 1 Liquidity Facility Agreement (and in respect
        of the First Issuer Intercompany Loan, the Second Issuer Intercompany
        Loan, the Third Issuer Intercompany Loan, the Fourth Issuer
        Intercompany Loan, the Fifth Issuer Intercompany Loan, the Sixth
        Issuer Intercompany Loan, the Seventh Issuer Intercompany Loan, the
        Eighth Issuer Intercompany Loan and the Ninth Issuer Intercompany Loan
        only), at any time, the amount by which Funding 1's obligation to
        repay when due:

        (a)     the principal amount due and payable in respect of the
                relevant Original Bullet Term Advances; and

        (b)     the principal amount due and payable in respect of the
                relevant Original Scheduled Amortisation Term Advances;

        exceeds the sum of:

        (i)     the Funding 1 Available Principal Receipts;

        less:

        (ii)    amounts (if any) ranking prior to the applicable payment
                described in paragraph (a) or (b) above in the Funding 1
                Pre-Enforcement Principal Priority of Payments at that date;

        FUNDING 1 LIQUIDITY RESERVE FUND means the fund established pursuant
        to the Funding 1 Deed of Charge in the event that a Liquidity Reserve
        Fund Rating Event in respect of Funding 1 occurs;

        FUNDING 1 LIQUIDITY RESERVE LEDGER means the ledger to be maintained
        by the Cash Manager pursuant to Clause 4.3 of the Cash Management
        Agreement relating to the Funding 1 Liquidity Reserve Fund;

                                     27
<PAGE>

        FUNDING 1 LIQUIDITY REVENUE SHORTFALL means, at any time, in respect
        of the First Issuer Intercompany Loan, the Second Issuer Intercompany
        Loan, the Third Issuer Intercompany Loan, the Fourth Issuer
        Intercompany Loan, the Fifth Issuer Intercompany Loan, the Sixth
        Issuer Intercompany Loan, the Seventh Issuer Intercompany Loan, the
        Eighth Issuer Intercompany Loan and the Ninth Issuer Intercompany
        Loan, the amount by which the aggregate of Funding 1's obligations in
        respect of items listed in paragraph 2.2 (a) to (f) (inclusive), (h)
        (j) and (l) of the Funding 1 Pre-Enforcement Revenue Priority of
        Payments exceeds the amount of Funding 1 Available Revenue Receipts;

        FUNDING 1 LIQUIDITY SHORTFALL means a Funding 1 Liquidity Revenue
        Shortfall and/or a Funding 1 Liquidity Principal Shortfall, as
        applicable;

        FUNDING 1 LIQUIDITY SUBORDINATED AMOUNTS means the sum of (a) any
        additional amounts due to any withholding taxes and increased costs on
        the provision of the Funding 1 Liquidity Facility and (b) any
        additional costs incurred by the Funding 1 Liquidity Facility Provider
        to comply with the requirements of the Bank of England, the Financial
        Services Authority and/or the European Central Bank and/or changes to
        the capital adequacy rules applicable to the Funding 1 Liquidity
        Facility Provider and Funding 1;

        FUNDING 1 NEW INTERCOMPANY LOAN means a loan of the proceeds of any
        issue of New Notes, such loan being advanced to Funding 1 by a New
        Issuer pursuant to the terms of a New Intercompany Loan Agreement;

        FUNDING 1 POST-ENFORCEMENT PRIORITY OF PAYMENTS means the order of
        priority in which the Security Trustee will apply all monies following
        an Intercompany Loan Event of Default and enforcement of the Funding 1
        Security (as set out in Part 3 of Schedule 3 to the Funding 1 Deed of
        Charge);

        FUNDING 1 POWER OF ATTORNEY has the same meaning as SECURITY POWER OF
        ATTORNEY;

        FUNDING 1 PRE-ENFORCEMENT PRINCIPAL PRIORITY OF PAYMENTS means the
        order of priority in which, prior to enforcement of the Funding 1
        Security, the Cash Manager will apply the Funding 1 Available
        Principal Receipts on each Funding 1 Interest Payment Date, as set out
        in Part 2 of Schedule 3 to the Funding 1 Deed of Charge;

        FUNDING 1 PRE-ENFORCEMENT REVENUE PRIORITY OF PAYMENTS means the order
        of priority in which Funding 1 Available Revenue Receipts will be
        applied by the Cash Manager prior to the enforcement of the Funding 1
        Security as set out in Part 1 of Schedule 3 to the Funding 1 Deed of
        Charge;

        FUNDING 1 PRINCIPAL DEFICIENCY LEDGER means the ledger of such name
        maintained by the Cash Manager pursuant to the Cash Management
        Agreement, comprising, as at the date hereof, four sub-ledgers, the
        AAA Principal Deficiency Sub-Ledger, the AA Principal Deficiency
        Sub-Ledger, the A Principal Deficiency Sub-Ledger and the BBB
        Principal Deficiency Sub-Ledger, but which may comprise additional
        principal deficiency sub-ledgers as required;

        FUNDING 1 PRINCIPAL LEDGER means the ledger on which receipts and
        payments of Funding 1 Principal Receipts will be recorded by the Cash
        Manager;

        FUNDING 1 PRINCIPAL DEFICIENCY SUB-LEDGER means singly or together (as
        the context may require) the AAA Principal Deficiency Sub-Ledger, the
        AA Principal Deficiency Sub-Ledger, the A Principal Deficiency
        Sub-Ledger, the BBB Principal Deficiency Sub-Ledger and/or such
        additional principal deficiency sub-ledgers that may be established
        from time to time after the Initial Closing Date;

                                     28
<PAGE>

        FUNDING 1 PRINCIPAL PRIORITY OF PAYMENTS means the order of priority
        for the application of Funding 1 Available Principal Receipts, prior
        to enforcement of the Funding 1 Security, set out in each Intercompany
        Loan Agreement and in Part 2 of Schedule 3 to the Funding 1 Deed of
        Charge;

        FUNDING 1 PRINCIPAL RECEIPTS means the Funding 1 Share of Principal
        Receipts received by Funding 1 from the Mortgages Trustee on each
        Distribution Date;

        FUNDING 1 PRIORITY OF PAYMENTS means, as applicable, the Funding 1
        Post-Enforcement Priority of Payments, the Funding 1 Pre-Enforcement
        Principal Priority of Payments, the Funding 1 Pre-Enforcement Revenue
        Priority of Payments and/or, as the case may be, the Funding 1
        Principal Priority of Payments;

        FUNDING 1 RESERVE REQUIRED AMOUNT means an amount equal to
        [POUND]445,000,000 or such lesser amount to which the Funding 1
        Liquidity Facility Provider, the Funding 1 Swap Provider and each of
        the Issuer Swap Providers consent to and as the Rating Agencies have
        confirmed will not cause the ratings of the Notes of any Funding 1
        Issuer to be reduced, withdrawn or qualified;

        FUNDING 1 REVENUE LEDGER means the ledger on which the Cash Manager
        will record all monies received by Funding 1 during an Interest Period
        other than the Funding 1 Principal Receipts;

        FUNDING 1 REVENUE RECEIPTS means the Funding 1 Share of Mortgages
        Trust Available Revenue Receipts received by Funding 1 from the
        Mortgages Trustee on each Distribution Date;

        FUNDING 1 SECURED CREDITORS means the Security Trustee, the Funding 1
        Swap Provider, the Cash Manager, the Funding 1 Liquidity Facility
        Provider, the Account Bank, the First Issuer, the Second Issuer, the
        Third Issuer, the Fourth Issuer, the Fifth Issuer, the Sixth Issuer,
        the Seventh Issuer, the Eighth Issuer, the Ninth Issuer, the Seller,
        the Corporate Services Provider, the First Start-up Loan Provider, the
        Second Start-up Loan Provider, the Third Start-up Loan Provider, the
        Fourth Start-up Loan Provider, the Fifth Start-up Loan Provider, the
        Sixth Start-up Loan Provider, the Seventh Start-up Loan Provider, the
        Eighth Start-up Loan Provider, the Ninth Start-up Loan Provider, the
        Funding 1 GIC Provider and such other creditors of Funding 1 who may
        accede to the Funding 1 Deed of Charge (including for the avoidance of
        doubt, the Second Supplemental Funding 1 Deed of Charge) from time to
        time pursuant to an Accession Undertaking (including, for the
        avoidance of doubt, any New Issuer);

        FUNDING 1 SECURED OBLIGATIONS means the monies and liabilities which
        Funding 1 covenants and undertakes in clause 2 of the Funding 1 Deed
        of Charge to pay or discharge and all claims, demands or damages for
        breach of any such covenant, and references to Funding 1 Secured
        Obligations includes references to any of them;

        FUNDING 1 SECURITY means the security granted by Funding 1 to the
        Security Trustee under and pursuant to the terms of the Funding 1 Deed
        of Charge (including, for the avoidance of doubt, the Additional
        Funding 1 Security);

        FUNDING 1 SECURITY TRUSTEE means The Bank of New York, acting through
        its office at 48th Floor, One Canada Square, London E14 5AL or such
        other persons or companies as may from time to time be appointed as
        Security Trustee (or co-trustee) pursuant to the Funding 1 Deed of
        Charge;

        FUNDING 1 SHARE means, only in respect of the period prior to the
        first Distribution Date, the Initial Funding 1 Share, and thereafter
        means the Current Funding 1 Share;

        FUNDING 1 SHARE PERCENTAGE means, only in respect of prior to the
        first Distribution Date, the Initial Funding 1 Share Percentage, and
        thereafter means the Current Funding 1 Share Percentage;

                                      29
<PAGE>

        FUNDING 1 SHARE/FUNDING 2 SHARE/SELLER SHARE LEDGER means the ledger
        to be maintained by the Cash Manager (in accordance with the Cash
        Management Agreement and the Mortgages Trust Deed), on behalf of the
        Mortgages Trustee and the Beneficiaries, to record the Current Funding
        1 Share, the Current Funding 1 Share Percentage, the Current Funding 2
        Share, the Current Funding 2 Share Percentage, the Current Seller
        Share and the Current Seller Share Percentage;

        FUNDING 1 SWAP means the swap documented under the Funding 1 Swap
        Agreement which enables Funding 1 to hedge against the possible
        variance between the Mortgages Trustee Variable Base Rate payable on
        the Variable Rate Loans, the fixed rates of interest payable on the
        Fixed Rate Loans and the rates of interest payable on the Tracker Rate
        Loans and a LIBOR based rate for three-month sterling deposits;

        FUNDING 1 SWAP AGREEMENT means the ISDA Master Agreement and schedule
        relating to the Funding 1 Swap entered into on the Initial Closing
        Date (as amended and restated on the Second Issuer Closing Date, on
        the Third Issuer Closing Date, on the Fourth Issuer Closing Date, on
        the Fifth Issuer Closing Date, on the Sixth Issuer Closing Date, on
        the Seventh Issuer Closing Date, on the Eighth Issuer Closing Date and
        as further amended and restated on the Ninth Issuer Closing Date and
        from time to time) and any confirmation documented thereunder from
        time to time, each between Funding 1, the Funding 1 Swap Provider and
        the Security Trustee (as the same may be further amended and/or
        restated from time to time);

        FUNDING 1 SWAP EXCLUDED TERMINATION AMOUNT means in relation to the
        Funding 1 Swap Agreement an amount equal to:

        (a)     the amount of any termination payment due and payable to the
                Funding 1 Swap Provider as a result of a Funding 1 Swap
                Provider Default or a Funding 1 Swap Provider Downgrade
                Termination Event;

        less

        (b)     the amount, if any, received by Funding 1 from a replacement
                swap provider upon entry by Funding 1 into an agreement with
                such replacement swap provider to replace the Funding 1 Swap
                Agreement which has terminated as a result of such Funding 1
                Swap Provider Default or following the occurrence of such
                Funding 1 Swap Provider Downgrade Termination Event;

        FUNDING 1 SWAP PROVIDER means, initially Halifax and as of the
        Reorganisation Date, Bank of Scotland acting in its capacity as the
        Funding 1 Swap Provider pursuant to the Funding 1 Swap Agreement;

        FUNDING 1 SWAP PROVIDER DEFAULT means the occurrence of an Event of
        Default (as defined in the Funding 1 Swap Agreement) where the Funding
        1 Swap Provider is the Defaulting Party (as defined in the Funding 1
        Swap Agreement);

        FUNDING 1 SWAP PROVIDER DOWNGRADE TERMINATION EVENT means the
        occurrence of an Additional Termination Event (as defined in the
        Funding 1 Swap Agreement) following the failure by the Funding 1 Swap
        Provider to comply with the requirements of the ratings downgrade
        provisions set out in the Funding 1 Swap Agreement;

        FUNDING 1 TRANSACTION ACCOUNT means the account in the name of Funding
        1 (sort code 12-24-55, account no. 00998318) held at the Account Bank
        and maintained subject to the terms of the Bank Account Agreement and
        the Funding 1 Deed of Charge, or such other additional or replacement
        bank account as may for the time being be in place with the prior
        consent of the Security Trustee and the Rating Agencies;

                                     30
<PAGE>

        FUNDING 1 TRANSACTION ACCOUNT MANDATE means the bank account mandate
        between Funding 1 and the Account Bank relating to the operation of
        the Funding 1 Transaction Account;

        FUNDING 1 TRANSACTION DOCUMENTS has the same meaning as FUNDING 1
        AGREEMENTS;

        FUNDING 2 means Permanent Funding (No. 2) Limited (registered number
        4441772), a 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 AAA PRINCIPAL DEFICIENCY SUB-LEDGER means the sub-ledger of
        the Funding 2 Principal Deficiency Ledger maintained by the Cash
        Manager in the name of Funding 2 which was established on the
        Programme Date corresponding to the AAA Loan Tranches;

        FUNDING 2 AA PRINCIPAL DEFICIENCY SUB-LEDGER means the sub-ledger of
        the Funding 2 Principal Deficiency Ledger maintained by the Cash
        Manager in the name of Funding 2 which was established on the
        Programme Date corresponding to the AA Loan Tranches;

        FUNDING 2 AGREEMENTS means each of the following documents:

        (a)     the Mortgages Trust Deed;

        (b)     the Mortgage Sale Agreement;

        (c)     each Scottish Declaration of Trust;

        (d)     the Servicing Agreement;

        (e)     the Funding 2 Deed of Charge;

        (f)     the Corporate Services Agreement;

        (g)     the Bank Account Agreement;

        (h)     the Funding 2 Guaranteed Investment Contract;

        (i)     the Funding 2 Swap Agreement;

        (j)     the Cash Management Agreement;

        (k)     the Master Intercompany Loan Agreement;

        (l)     each Loan Tranche Supplement entered into pursuant to the
                Master Intercompany Loan Agreement;

        (m)     the Controlling Beneficiary Deed;

        (n)     the Seller Mortgage Trust Assignment Agreement;

        (o)     each Funding 2 Start-up Loan Agreement;

        (p)     the Data Processor Agreement;

        (q)     Swap Disclosure Agreements;

        (r)     each other Transaction Document to which Funding 2 is a party;

                                     31
<PAGE>

        (s)     each other deed, document, agreement, instrument or
                certificate entered into or to be entered into by Funding 2
                (including each document under which Funding 2 assumes any
                obligations to the Master Issuer and/or any other Funding 2
                Issuer) under or in connection with any of the documents set
                out in paragraphs (a) through (r) above or the transactions
                contemplated in them; and

        (t)     each other agreement referred to as a "Funding 2 Agreement" in
                each Accession Undertaking to the Funding 2 Deed of Charge;

        FUNDING 2 A PRINCIPAL DEFICIENCY SUB-LEDGER means the sub-ledger of
        the Funding 2 Principal Deficiency Ledger maintained by the Cash
        Manager in the name of Funding 2 which was established on the
        Programme Date corresponding to the A Loan Tranches;

        FUNDING 2 AUTHORISED INVESTMENTS means Authorised Investments
        applicable to Funding 2;

        FUNDING 2 AVAILABLE PRINCIPAL RECEIPTS means, for each Funding 2
        Interest Payment Date, the amount calculated by the Cash Manager on
        the day falling four Business Days prior to each Funding 2 Interest
        Payment Date, equal to the sum of:

        (a)     all mortgages trust available principal receipts received by
                Funding 2 during the then current interest period;

        (b)     all other Funding 2 Principal Receipts standing to the credit
                of the Funding 2 Cash Accumulation Ledger which are to be
                applied on the next Funding 2 Interest Payment Date to repay a
                Bullet Loan Tranche and/or, subject to Rule (1) below, a
                Scheduled Amortisation Instalment in respect of a Scheduled
                Amortisation Loan Tranche, or to make a payment under items
                (A) or (B) of the Funding 2 Pre-enforcement Principal Priority
                of Payments and, if such Funding 2 Interest Payment Date
                occurs on or after a Trigger Event, the remainder of such
                receipts standing to the credit of the Funding 2 Cash
                Accumulation Ledger;

        (c)     the amount, if any, to be credited to the Funding 2 Principal
                Deficiency Ledger pursuant to items (E), (G), (I), (K) and (M)
                of the Funding 2 Pre-enforcement Revenue Priority of Payments
                on the relevant Funding 2 Interest Payment Date;

        (d)     in so far as available for and needed to make a Funding 2
                Reserve Principal Payment, the amount that would then be
                standing to the credit of the Funding 2 General Reserve
                Ledger, less any amounts applied or to be applied on the
                relevant date in payment of interest and other revenue
                expenses as set out in items (A) to (M) (inclusive) of the
                Funding 2 Pre-enforcement Revenue Priority of Payments, plus
                any amounts which will be credited to the Funding 2 General
                Reserve Ledger under item (A) of the relevant Funding 2
                Pre-enforcement Principal Priority of Payments on the next
                Funding 2 Interest Payment Date (i.e. occurring at the end of
                such period of four business days);

        (e)     in so far as available for and needed to make a Funding 2
                Reserve Principal Payment, the amount that would then be
                standing to the credit of the Funding 2 Liquidity Reserve
                Ledger, but less any amounts applied or to be applied on the
                relevant date in payment of interest and other revenue
                expenses as set out in items (A) to (D) (inclusive) and (F),
                (H), (J) and (L) of the Funding 2 Pre-Enforcement Revenue
                Priority Of Payments plus any amounts which will be credited
                to the Liquidity Reserve Ledger under item (B) of the relevant
                Funding 2 Pre-Enforcement Principal Priority Of Payments on
                the next Funding 2 Interest Payment Date (i.e. occurring at
                the end of such period of four business days);

        (f)     any other amount standing to the credit of the Funding 2
                principal ledger (without double counting the amounts
                described above); and

                                     32
<PAGE>

        (g)     any amount standing to the credit of the Funding 2 Transaction
                Account to the extent equal to the principal amount advanced
                to Funding 2 by either the Master Issuer by way of Start-up
                Loan Tranche or by the Funding 2 Start-up Loan Provider by way
                of a Funding 2 Start-up Loan and not required by Funding 2 to
                meet its costs and expenses, as certified by the Cash Manager
                on behalf of Funding 2 to the Funding 2 Security Trustee,

        less

        (h)     amounts to be applied on the relevant Funding 2 Interest
                Payment Date to pay items (A) to (D) (inclusive) and (F), (H),
                (J) and (L) of the Funding 2 Pre-Enforcement Revenue Priority
                Of Payments.

        FUNDING 2 AVAILABLE REVENUE RECEIPTS means, for each Funding 2
        Interest Payment Date, the amount calculated by the Cash Manager on
        the day falling four Business Days prior to such Funding 2 Interest
        Payment Date, equal to the sum of

        (a)     all Mortgages Trust Available Revenue Receipts distributed or
                to be distributed to Funding 2 during the then current
                Interest Period,

        (b)     any amounts paid or to be paid by the Seller to Funding 2
                during the then current Interest Period in consideration of
                the Seller acquiring a further interest in the Trust Property,

        (c)     other net income of Funding 2 including all amounts of
                interest received on the Funding 2 GIC Account, the Funding 2
                Transaction Account and/or Authorised Investments and amounts
                received by Funding 2 under the Funding 2 Swap Agreement
                (other than any early termination amount received by Funding 2
                under the Funding 2 Swap Agreement) and any amount received by
                Funding 2 in consideration for entering into a replacement
                Funding 2 Swap Agreement), in each case to be received during
                the then current Interest Period,

        (d)     the amounts then standing to the credit of the Funding 2
                General Reserve Ledger, subject to any limits or conditions on
                the purposes for which the Funding 2 General Reserve Fund may
                be utilised,

        (e)     if a Liquidity Reserve Fund Rating Event has occurred and is
                continuing, and there are no amounts standing to the credit of
                the Funding 2 General Reserve Ledger, the amounts then
                standing to the credit of the Funding 2 Liquidity Reserve
                Ledger and available to be drawn, to the extent necessary to
                pay the items in paragraphs (a) to (d), (f), (h), (j) and (l)
                in the Funding 2 Pre-Enforcement Revenue Priority of Payments;

        (f)     if a Liquidity Reserve Fund Rating Event has occurred but is
                no longer continuing due to an increase in the Seller's rating
                since the preceding Funding 2 Interest Payment Date, and
                Funding 2 elects to terminate the Funding 2 Liquidity Reserve
                Fund, all amounts standing to the credit of the Funding 2
                Liquidity Reserve Ledger; and

        (g)     any amounts standing to the credit of the Funding 2 Liquidity
                Reserve Ledger in excess of the Funding 2 Liquidity Reserve
                Fund Required Amount as a result of a reduction in the Funding
                2 Liquidity Reserve Fund Required Amount,

        and, for the avoidance of doubt, Funding 2 Available Revenue Receipts
        does not include:

        (h)     any payment made by the Seller and/or Funding 1 to Funding 2
                during the then current Interest Period of the amount
                outstanding under a Loan Tranche; and

                                     33
<PAGE>

        (i)     the proceeds of any New Loan Tranche received by Funding 2
                during the then current Interest Period and any proceeds of a
                new Funding 2 Intercompany Loan received by Funding 2 during
                the then current Interest Period;

        FUNDING 2 BANK ACCOUNT AGREEMENT means the agreement entered into on
        the Programme Date, between the Account Bank, the Mortgages Trustee,
        Funding 1, Funding 2, the Cash Manager, the Funding 1 Security Trustee
        and the Funding 2 Security Trustee, which governs the operation of the
        Funding 2 Bank Accounts (as amended, restated, supplemented, replaced
        and/or novated from time to time);

        FUNDING 2 BANK ACCOUNTS means the Funding 2 GIC Account, the Funding 2
        Transaction Account and any additional or replacement bank accounts
        held in the name of Funding 2 from time to time with the prior written
        consent of the Funding 2 Security Trustee and the Rating Agencies;

        FUNDING 2 BB PRINCIPAL DEFICIENCY SUB-LEDGER means the sub-ledger of
        the Funding 2 Principal Deficiency Ledger maintained by the Cash
        Manager in the name of Funding 2 which was established on the
        Programme Date corresponding to the BB Loan Tranches;

        FUNDING 2 BBB PRINCIPAL DEFICIENCY SUB-LEDGER means the sub-ledger of
        the Funding 2 Principal Deficiency Ledger maintained by the Cash
        Manager in the name of Funding 2 which was established on the
        Programme Date corresponding to the BBB Loan Tranches;

        FUNDING 2 CASH ACCUMULATION LEDGER means the ledger in respect of
        Funding 2 established and maintained by the Cash Manager pursuant to
        Clause 4.4(a) of the Cash Management Agreement;

        FUNDING 2 CASH ACCUMULATION LEDGER AMOUNT means, at any time, the
        amount standing to the credit of the Funding 2 Cash Accumulation
        Ledger at that time (immediately prior to any drawing to be applied on
        that Funding 2 Interest Payment Date and prior to any payment under
        item (h) of the Funding 2 Pre-Enforcement Principal Priority of
        Payments;

        FUNDING 2 CHARGED PROPERTY means the property charged by Funding 2
        pursuant to the Funding 2 Deed of Charge;

        FUNDING 2 DEED OF CHARGE means the deed of charge entered into on or
        about the Programme Date between Funding 2, the Master Issuer, the
        Corporate Services Provider, the Account Bank, the Funding 2 Security
        Trustee, the Seller, the Start-up Loan Provider, the Cash Manager and
        the Funding 2 Swap Provider and as the same may be further
        supplemented, amended and/or restated or varied from time to time and
        including all Deeds of Accession or supplements thereto;

        FUNDING 2 GENERAL RESERVE FUND means the fund established from the
        proceeds of the Funding 2 Start-up Loan and any New Start-up Loan with
        respect to a Funding 2 Issuer and standing to the credit of the
        Funding 2 General Reserve Ledger which may be used by Funding 2 to
        meet any deficit in Revenue Receipts or Principal Receipts;

        FUNDING 2 GENERAL RESERVE LEDGER means the ledger established and
        maintained by the Cash Manager in respect of Funding 2 pursuant to
        clause 4.4(b) of the Cash Management Agreement;

        FUNDING 2 GENERAL RESERVE FUND THRESHOLD means the lesser of:

        (a)     the Funding 2 General Reserve Fund Required Amount, and

        (b)     the highest amount which the Adjusted Funding 2 Reserve Fund
                Level has been since the first Funding 2 Interest Payment Date
                upon which interest is due and payable in respect of

                                      34
<PAGE>

                Loan Tranches made upon the Closing Date relating to the then
                most recent issue of Master Issuer Notes;

        FUNDING 2 GENERAL RESERVE FUND REQUIRED AMOUNT means the sum of
        [POUND]167,700,000;

        FUNDING 2 GIC ACCOUNT means the account in the name of Funding 2 (sort
        code 12-08-83, account number 06052751) held at the Account Bank and
        maintained subject to the terms of the Funding 2 Guaranteed Investment
        Contract, the Bank Account Agreement and the Funding 2 Deed of Charge,
        or such additional or replacement bank account as may for the time
        being be in place with the prior consent of the Funding 2 Security
        Trustee and the Rating Agencies;

        FUNDING 2 GIC ACCOUNT MANDATE means the bank account mandate between
        Funding 2 and the Account Bank relating to the operation of the
        Funding 2 GIC Account;

        FUNDING 2 GIC BALANCE means, on any day during an Interest Period, the
        amount standing to the credit of the Funding 2 GIC Account as at the
        opening of business on such day;

        FUNDING 2 GIC PROVIDER means prior to the Reorganisation Date, The
        Governor and Company of the Bank of Scotland and from the
        Reorganisation Date, Bank of Scotland acting pursuant to the Funding 2
        Guaranteed Investment Contract and/or such other person for the time
        being acting as provider of a guaranteed investment contract to
        Funding 2;

        FUNDING 2 GIC RATE means the rate of interest accruing on the balance
        standing to the credit of the Funding 2 GIC Account equal to a rate of
        three month LIBOR less 0.25% per annum;

        FUNDING 2 GUARANTEED INVESTMENT CONTRACT or FUNDING 2 GIC ACCOUNT
        AGREEMENT means the guaranteed investment contract entered into on or
        about the Programme Date between Funding 2, the Funding 2 GIC
        Provider, the Cash Manager and the Funding 2 Security Trustee in
        relation to interest to be earned on the Funding 2 GIC Balance (as the
        same may be amended, restated, supplemented, replaced and/or novated
        from time to time);

        FUNDING 2 INCOME DEFICIT means the amount of the shortfall between
        Funding 2 Available Revenue Receipts and the amounts required to pay
        the items in paragraph (a) to (e) (inclusive), (g), (i), (k) and (m)
        of the Funding 2 Pre-Enforcement Revenue Priority of Payments;

        FUNDING 2 INTERCOMPANY LOAN means the loan made available pursuant to
        the Master Intercompany Loan Agreement;

        FUNDING 2 INTERCOMPANY LOAN LEDGER means the ledger on which the Cash
        Manager will record payments of interest and repayments of principal
        made under any Funding 2 Intercompany Loan;

        FUNDING 2 INTEREST PAYMENT DATE means the 15th day of January, April,
        July and October of each year or, if such day is not a Business Day,
        the next succeeding Business Day;

        FUNDING 2 INTEREST RATE SHORTFALL has the meaning given to it in
        Clause 4.3 of the Servicing Agreement;

        FUNDING 2 ISSUER means the Master Issuer and/or any other New Issuer
        issuing Notes and entering into Intercompany Loan Agreements with
        Funding 2 from time to time;

        FUNDING 2 LEDGERS means the Funding 2 Principal Ledger, the Funding 2
        Revenue Ledger, the Funding 2 General Reserve Ledger, the Funding 2
        Principal Deficiency Ledger, the Funding 2 Intercompany Loan Ledger
        and the Funding 2 Cash Accumulation Ledger;

                                      35
<PAGE>

        FUNDING 2 LIQUIDITY RESERVE FUND means the fund established pursuant
        to the Funding 2 Deed of Charge in the event that a Liquidity Reserve
        Fund Rating Event in respect of Funding 2 occurs;

        FUNDING 2 LIQUIDITY RESERVE FUND REQUIRED AMOUNT means on any Funding
        2 Interest Payment Date, an amount equal to the excess (if any) of 3%
        of the aggregate outstanding balance of the Master Issuer Notes on
        that Funding 2 Interest Payment Date (taking into account any
        principal repayments to be made by the Master Issuer on such date)
        over the aggregate of amounts standing to the credit of the Funding 2
        General Reserve Fund on such Funding 2 Interest Payment Date (taking
        into account any amount credited to the Funding 2 General Reserve Fund
        Ledger on such date);

        FUNDING 2 LIQUIDITY RESERVE LEDGER means the ledger to be maintained
        by the Cash Manager pursuant to Clause 4.3 of the Cash Management
        Agreement relating to the Funding 2 Liquidity Reserve Fund;

        FUNDING 2 LIQUIDITY RESERVE PRINCIPAL PAYMENT means (a) prior to the
        occurrence of a Trigger Event, (i) repayments of principal which are
        then due and payable in respect of the original Bullet Loan Tranches
        and (ii) repayments of principal in respect of original Scheduled
        Amortisation Loan Tranches on their respective final payment dates
        only and (b) on or after the occurrence of a Trigger Event, repayments
        of principal in respect of original Bullet Loan Tranches and original
        Scheduled Amortisation Loan Tranches on the respective final payment
        dates only;

        FUNDING 2 PRE-ENFORCEMENT PRINCIPAL PRIORITY OF PAYMENTS means the
        order of priority in which, prior to enforcement of the Funding 2
        Security, the Cash Manager will apply the Funding 2 Available
        Principal Receipts on each Funding 2 Interest Payment Date, as set out
        in Part 2 of Schedule 4 to the Funding 2 Deed of Charge;

        FUNDING 2 POST-ENFORCEMENT PRIORITY OF PAYMENTS means the order of
        priority in which the Funding 2 Security Trustee will apply all monies
        following a Master Intercompany Loan Event of Default and enforcement
        of the Funding 2 Security (as set out in Part 3 of Schedule 4 to the
        Funding 2 Deed of Charge);

        FUNDING 2 PRE-ENFORCEMENT REVENUE PRIORITY OF PAYMENTS means the order
        of priority in which Funding 2 Available Revenue Receipts will be
        applied prior to the enforcement of the Funding 2 Security as set out
        in Part 1 of Schedule 4 to the Funding 2 Deed of Charge;

        FUNDING 2 PRINCIPAL DEFICIENCY LEDGER means the ledger of such name
        established and maintained by the Cash Manager pursuant to the Cash
        Management Agreement, comprising, as at the date hereof, six
        sub-ledgers, the AAA Principal Deficiency Sub-Ledger, the AA Principal
        Deficiency Sub-Ledger, the A Principal Deficiency Sub-Ledger, the BBB
        Principal Deficiency Sub-Ledger, the BB Principal Deficiency
        Sub-Ledger and the Subordinated Loan Principal Deficiency Sub-Ledger
        but which may comprise additional principal deficiency sub-ledgers as
        required;

        FUNDING 2 PRINCIPAL LEDGER means the ledger on which receipts and
        payments of Funding 2 Principal Receipts will be recorded by the Cash
        Manager;

        FUNDING 2 PRINCIPAL DEFICIENCY SUB-LEDGER means singly or together (as
        the context may require) the AAA Principal Deficiency Sub-Ledger, the
        AA Principal Deficiency Sub-Ledger, the A Principal Deficiency
        Sub-Ledger, the BBB Principal Deficiency Sub-Ledger, the BB Principal
        Deficiency Sub-Ledger, the Subordinated Loan Principal Deficiency
        Sub-Ledger and/or such additional principal deficiency sub-ledgers
        that may be established from time to time after the Initial Closing
        Date;

        FUNDING 2 PRINCIPAL RECEIPTS means the Funding 2 Share of Principal
        Receipts received by Funding 2 from the Mortgages Trustee on each
        Distribution Date;

                                      36
<PAGE>

        FUNDING 2 PRIORITY OF PAYMENTS means, as applicable, the Funding 2
        Post-Enforcement Priority of Payments, the Funding 2 Pre-Enforcement
        Principal Priority of Payments, the Funding 2 Pre-Enforcement Revenue
        Priority of Payments and/or, as the case may be, the Funding 2
        Principal Priority of Payments;

        FUNDING 2 REVENUE LEDGER means the ledger on which the Cash Manager
        will record all monies received by Funding 2 during an Interest Period
        other than the Funding 2 Principal Receipts;

        FUNDING 2 REVENUE RECEIPTS means the Funding 2 Share of Mortgages
        Trust Available Revenue Receipts received by Funding 2 from the
        Mortgages Trustee on each Distribution Date;

        FUNDING 2 SECURED CREDITORS means the Funding 2 Security Trustee, any
        receiver appointed by it, the Funding 2 Swap Provider, the Cash
        Manager, the Account Bank, the Master Issuer, the Seller, the
        Corporate Services Provider, the Funding 2 Start-up Loan Provider, the
        Funding 2 GIC Provider and such other creditors of Funding 2 who may
        accede to the Funding 2 Deed of Charge from time to time pursuant to
        an Accession Undertaking (including, for the avoidance of doubt, any
        New Issuer);

        FUNDING 2 SECURED LIABILITIES has the same meaning as the Funding 2
        Secured Obligations;

        FUNDING 2 SECURED OBLIGATIONS means all present and future obligations
        and liabilities (whether actual or contingent and whether owed jointly
        or severally or in any other capacity) of Funding 2 to the Funding 2
        Secured Creditors under the Funding 2 Agreements;

        FUNDING 2 SECURITY means the security granted by Funding 2 to the
        Funding 2 Security Trustee under and pursuant to the terms of the
        Funding 2 Deed of Charge;

        FUNDING 2 SECURITY PERIOD means the period beginning on the Programme
        Date and ending on the date on which all the Funding 2 Secured
        Obligations have been unconditionally and irrevocably paid and
        discharged in full;

        FUNDING 2 SECURITY POWER OF ATTORNEY the power of attorney granted by
        Funding 2 in favour of the Funding 2 Security Trustee under the
        Funding 2 Deed of Charge on the Programme Date substantially in the
        form set out in Schedule 5 to the Funding 2 Deed of Charge;

        FUNDING 2 SECURITY TRUSTEE means The Bank of New York, acting through
        its office at 48th Floor, One Canada Square, London E14 5AL or such
        other persons or companies as may from time to time be appointed as
        Security Trustee (or co-trustee) pursuant to the Funding 2 Deed of
        Charge;

        FUNDING 2 SHARE means, only in respect of the period prior to the
        first Distribution Date, the Initial Funding 2 Share, and thereafter
        means the Current Funding 2 Share;

        FUNDING 2 START-UP LOAN means a start-up loan that the Funding 2
        Start-up Loan Provider makes available to Funding 2 pursuant to a
        Funding 2 Start-up Loan Agreement;

        FUNDING 2 START-UP LOAN AGREEMENT means an agreement entered into on
        any Master Issuer Closing Date between Funding 2, the Funding 2
        Start-up Loan Provider and the Funding 2 Security Trustee relating to
        the provision of a Funding 2 Start-up Loan to Funding 2 (as the same
        may be amended, restated, supplemented, replaced and/or novated from
        time to time);

        FUNDING 2 START-UP LOAN PROVIDER means initially Halifax and, as of
        the Reorganisation Date, Bank of Scotland in its capacity as provider
        of the Funding 2 Start-up Loan;

                                      37
<PAGE>

        FUNDING 2 SWAP means the swap documented under the Funding 2 Swap
        Agreement which enables Funding 2 to hedge against the possible
        variance between the Mortgages Trustee Variable Base Rate payable on
        the Variable Rate Loans, the fixed rates of interest payable on the
        Fixed Rate Loans and the rates of interest payable on the Tracker Rate
        Loans and a LIBOR based rate for three-month sterling deposits;

        FUNDING 2 SWAP AGREEMENT means the ISDA Master Agreement and schedule
        relating to the Funding 2 Swap entered into on or about the Programme
        Date and any confirmation documented thereunder from time to time,
        each between Funding 2, the Funding 2 Swap Provider and the Funding 2
        Security Trustee (as the same may be further amended and/or restated
        from time to time);

        FUNDING 2 SWAP EXCLUDED TERMINATION AMOUNT means in relation to the
        Funding 2 Swap Agreement an amount equal to:

        (a)     the amount of any termination payment due and payable to the
                Funding 2 Swap Provider as a result of a Funding 2 Swap
                Provider Default or a Funding 2 Swap Provider Downgrade
                Termination Event;

        less

        (b)     the amount, if any, received by Funding 2 from a replacement
                swap provider upon entry by Funding 2 into an agreement with
                such replacement swap provider to replace the Funding 2 Swap
                Agreement which has terminated as a result of such Funding 2
                Swap Provider Default or following the occurrence of such
                Funding 2 Swap Provider Downgrade Termination Event;

        FUNDING 2 SWAP PROVIDER means initially Halifax and, as of the
        Reorganisation Date, Bank of Scotland acting in its capacity as the
        Funding 2 Swap Provider pursuant to the Funding 2 Swap Agreement;

        FUNDING 2 SWAP PROVIDER DEFAULT means the occurrence of an Event of
        Default (as defined in the Funding 2 Swap Agreement) where the Funding
        2 Swap Provider is the Defaulting Party (as defined in the Funding 2
        Swap Agreement);

        FUNDING 2 SWAP PROVIDER DOWNGRADE TERMINATION EVENT means the
        occurrence of an Additional Termination Event (as defined in the
        Funding 2 Swap Agreement) following the failure by the Funding 2 Swap
        Provider to comply with the requirements of the ratings downgrade
        provisions set out in the Funding 2 Swap Agreement;

        FUNDING 2 TRANSACTION ACCOUNT means the account in the name of Funding
        2 (sort code 12-08-83, account no. 06052778) held at the Account Bank
        and maintained subject to the terms of the Bank Account Agreement and
        the Funding 2 Deed of Charge, or such other additional or replacement
        bank account as may for the time being be in place with the prior
        consent of the Funding 2 Security Trustee and the Rating Agencies;

        FUNDING 2 TRANSACTION ACCOUNT MANDATE means the bank account mandate
        between Funding 2 and the Account Bank relating to the operation of
        the Funding 2 Transaction Account;

        FUNDING 2 TRANSACTION DOCUMENTS has the same meaning as FUNDING 2
        AGREEMENTS;

        FURTHER ADVANCE means, in relation to a Loan, any advance of further
        money following a request from an existing Borrower following the
        making of the Initial Advance which is secured by the same Mortgage as
        the Initial Advance where the Seller has a discretion as to whether to
        accept that request, but does not include the amount of any Retention
        Drawing to the relevant Borrower as part

                                      38
<PAGE>

        of the Initial Advance after completion of the Mortgage and does not
        include a Flexible Loan Drawing nor a Delayed Cashback nor a Home Cash
        Reserve Drawing;

        FURTHER CONTRIBUTION means the consideration in the form of cash
        payable to the Mortgages Trustee by any Beneficiary to increase the
        Funding 1 Share, the Funding 2 Share or, as the case may be, the
        Seller Share of the Trust Property pursuant to and in accordance with
        the Mortgages Trust Deed but excluding any Initial Contribution or
        Deferred Contribution paid by Funding 1 or by Funding 2 to the
        Mortgages Trustee;

        FUTURE TRUST PROPERTY means any or all New Portfolios that have been
        or will be sold to the Mortgages Trustee on any Sale Date;

        GENERAL RESERVE FUND means the Funding 1 General Reserve Fund;

        GENERAL RESERVE FUND REQUIRED AMOUNT means the Funding 1 General
        Reserve Fund Required Amount;

        GENERAL RESERVE FUND THRESHOLD means the Funding 1 General Reserve
        Fund Threshold;

        GENERAL RESERVE LEDGER means, as the context requires, either (a) the
        Funding 1 General Reserve Ledger or (b) the Funding 2 General Reserve
        Ledger;

        HALIFAX means Halifax plc (registered number 02367076), a public
        limited company incorporated under the laws of England and Wales,
        whose registered office is at Trinity Road, Halifax, West Yorkshire
        HX1 2RG and whose business was transferred to Bank of Scotland in
        accordance with the HBOS Group Reorganisation Act 2006 on the
        Reorganisation Date;

        HALIFAX COLLECTION ACCOUNT AMOUNTS means all amounts from time to time
        standing to the credit of the Collection Account to the extent that
        such amounts represent payments into the Collection Account of sums
        derived or resulting from mortgage loans originated by the Seller
        which have not been sold to the Mortgages Trustee pursuant to the
        Mortgage Sale Agreement;

        HALIFAX DEED AND POWER OF ATTORNEY means the deed and power of
        attorney made by Halifax in favour of Funding 1 and its successors and
        assigns, on the Initial Closing Date, pursuant to the Mortgages Trust
        Deed;

        HALIFAX FLEXIBLE VARIABLE RATE means the variable rate applicable to
        Flexible Loans originated by Halifax or since the reorganisation date
        Bank of Scotland under the Halifax brand.

        HALIFAX INSURANCE POLICIES means:

        (a)     the MIG Policies;

        (b)     the Properties in Possession Cover; and

        (c)     the Halifax Policies;

        HALIFAX INTERMEDIARY means Halifax General Insurance Services Limited
        and/or such other person as may be authorised to issue Buildings
        Policies to Borrowers on behalf of the Halifax Policies Insurer;

        HALIFAX POLICIES means those of the Buildings Policies which are
        issued to Borrowers by the Seller and/or a Halifax Intermediary on
        behalf of the Halifax Policies Insurer;

                                     39
<PAGE>

        HALIFAX POLICIES INSURER means in relation to policies issued before 1
        January 2004 Royal & Sun Alliance Insurance plc and in relation to
        policies or renewals issued on and after 1 January 2004, St Andrew's
        Insurance and/or any other insurer who agrees with the Seller to issue
        buildings insurance policies to Borrowers from time to time as a
        consequence of an introduction or intermediation by a Halifax
        Intermediary;

        HALIFAX VARIABLE BASE RATE means the standard variable rate of
        interest or, if the Seller has more than one standard variable rate of
        interest, the relevant standard variable rate of interest set by the
        Seller which applies to the Variable Rate Loans beneficially owned by
        the Seller on the Seller's residential mortgage book;

        HIGH LOAN-TO-VALUE FEE means any fee incurred by a Borrower as a
        result of taking out a loan with an LTV Ratio in excess of a certain
        percentage specified in the Offer Conditions;

        HOLDING COMPANY means a holding company as defined in section 736 of
        the Companies Act 1985;

        HOLDINGS means Permanent Holdings Limited (registered number 4267664),
        a limited company incorporated under the laws of England and Wales,
        whose registered office is at 35 Great St. Helen's, London EC3A 6AP;

        HOME CASH RESERVE ADVANCE means, in relation to a Loan, an advance of
        further money (which, for any Loan made before 31 October 2004, must
        be in a sum of not less than [POUND]25,005) to the relevant Borrower
        following the making of the Initial Advance which is secured by the
        same Mortgage as the Initial Advance and against which sum the
        Borrower can make drawings of not less than [POUND]1,000 at any time;

        HOME CASH RESERVE DRAWING means any drawing of monies in full or part
        made by a Borrower under a Home Cash Reserve Advance;

        HOME IMPROVEMENT LOAN means a type of Further Advance product that can
        only be used by the Borrower for the purposes of making repairs,
        alterations and/or improvements to the relevant Property;

        HOME OWNER LOAN means a type of Further Advance product that is a
        regulated agreement under section 8 of the Consumer Credit Act 1974
        and which can be used by the Borrower for any permitted purpose,
        including but not limited to, the purchase of a car;

        HVR 1 means the Variable Mortgage Rate set by the Seller which applies
        to certain loans beneficially owned by the Seller on the Seller's
        residential mortgage book;

        HVR 2 means the second Variable Base Rate that was made available to
        Borrowers between 1 March 2001 and 1 February 2002;

        ICOB means the FSA Insurance Conduct of Business Sourcebook;

        ICTA means the Income and Corporation Taxes Act 1988;

        INITIAL ADVANCE means, in relation to a Loan, the original principal
        amount advanced to the relevant Borrower including the amount of any
        retention advanced to the relevant Borrower after completion of the
        Mortgage and does not include any (a) High Loan-to-Value Fee, (b)
        Further Advance, (c) Flexible Loan Drawing, (d) Home Cash Reserve
        Drawing and (e) Early Repayment Fee;

                                     40
<PAGE>

        INITIAL CLOSING DATE means 14 June 2002;

        INITIAL CLOSING PURCHASE PRICE means the sum of [POUND]3,478,576,310
        paid by Funding 1 to the Seller in consideration of the Seller's sale
        of the Initial Portfolio (together with any Accrued Interest and
        Arrears of Interest as at the Initial Closing Date) to the Mortgages
        Trustee and the Funding 1 Share thereof;

        INITIAL CLOSING TRUST PROPERTY means the Initial Portfolio transferred
        by the Seller to the Mortgages Trustee on the Initial Closing Date;

        INITIAL CONTRIBUTION means, as the context requires, (a) the
        consideration in the form of cash payable by Funding 1 to the
        Mortgages Trustee in respect of the Funding Share of the Trust
        Property or (b) the consideration in the form of cash payable by
        Funding 2 to the Mortgages Trustee in respect of the Funding 2 Share
        of the Trust Property (in each case) pursuant to and in accordance
        with the Mortgages Trust Deed, which Contribution is to fund the
        payment to the Seller by the Mortgages Trustee of (and is equal to)
        the Initial Purchase Price in respect of the Initial Portfolio or (if
        any is payable) any New Portfolio sold and assigned to the Mortgages
        Trustee and is to be funded from the proceeds of an Intercompany Loan;

        INITIAL FUNDING 1 SHARE means the share of Funding 1 in the Trust
        Property on the Initial Closing Date, being an amount equal to
        [POUND]3,478,376,344.38;

        INITIAL FUNDING 1 SHARE PERCENTAGE means the percentage share of
        Funding 1 in the Trust Property on the Initial Closing Date, being
        34.38%;

        INITIAL FUNDING 2 SHARE means the share of Funding 2 in the Trust
        Property on the Programme Date, being an amount equal to
        [POUND]5,411,550,100;

        INITIAL FUNDING 2 SHARE PERCENTAGE means the percentage share of
        Funding 2 in the Trust Property on the Programme Date, being 11.76%;

        INITIAL LOANS means the portfolio of residential first mortgage loans
        sold by the Seller to the Mortgages Trustee on the Initial Closing
        Date pursuant to the Mortgage Sale Agreement;

        INITIAL PORTFOLIO means the Provisional Portfolio other than any Loan
        and its Related Security which has been redeemed in full on or before
        the Initial Closing Date;

        INITIAL PURCHASE PRICE means that portion of the purchase price paid
        by the Mortgages Trustee to the Seller on the Initial Closing Date in
        consideration for the assignment to the Mortgages Trustee of the
        Initial Portfolio or that portion of the purchase price (if any)
        payable by the Mortgages Trustee to the Seller on the relevant Sale
        Date in consideration for the assignment to the Mortgages Trustee of
        any New Portfolio, in each case in accordance with the provisions of
        the Mortgage Sale Agreement;

        INITIAL RELATED SECURITY means the Related Security sold by the Seller
        to the Mortgages Trustee on the Initial Closing Date pursuant to the
        Mortgage Sale Agreement;

        INITIAL RELEVANT SCREEN RATE has the meaning given in Condition 4(C);

        INITIAL SELLER SHARE means the share of the Seller in the Trust
        Property on the Initial Closing Date, being an amount equal to
        [POUND]6,638,679,574.44;

        INITIAL SELLER SHARE PERCENTAGE means the percentage share of the
        Seller in the Trust Property on the Initial Closing Date, being
        65.62%;

                                      41
<PAGE>

        INITIAL TRUST PROPERTY means the sum of [POUND]100 (one hundred
        pounds) that SFM Offshore Limited (as the Share Trustee of the
        Mortgages Trustee) settled on trust and is held on trust absolutely as
        to both capital and income by the Mortgages Trustee for the benefit of
        the Beneficiaries pursuant to the Mortgages Trust Deed;

        INSOLVENCY EVENT in respect of the Seller, the Servicer, the Cash
        Manager, or any Issuer Cash Manager (each, for the purposes of this
        definition, a RELEVANT ENTITY) means:

        (a)     an order is made or an effective resolution passed for the
                winding up, bankruptcy, liquidation or sequestration of the
                Relevant Entity;

        (b)     the Relevant Entity ceases or threatens to cease to carry on
                its business or stops payment or threatens to stop payment of
                its debts or is deemed unable to pay its debts within the
                meaning of section 123(1)(a), (b), (c) or (d) of the
                Insolvency Act 1986 (as amended) or becomes unable to pay its
                debts as they fall due or the value of its assets falls to
                less than the amounts of its liabilities (taking into account,
                for both these purposes, contingent and prospective
                liabilities) or otherwise becomes insolvent; and

        (c)     proceedings (including, but not limited to, presentation of an
                application for an administration order, the filing of
                documents with the court for the appointment of an
                administrator or the service of a notice of intention to
                appoint an administrator) are initiated against the Relevant
                Entity under any applicable liquidation, administration,
                winding up, sequestration, insolvency, bankruptcy,
                composition, reorganisation (other than a reorganisation where
                the Relevant Entity is solvent) or other similar laws, save
                where such proceedings are being contested in good faith; or
                an administrative or other receiver, administrator, trustee or
                other similar official is appointed in relation to the whole
                or any substantial part of the undertaking or assets of the
                Relevant Entity or the appointment of an administrator takes
                effect; or a distress, execution or diligence or other process
                shall be levied or enforced upon or sued out against the whole
                or any substantial part of the undertaking or assets of the
                Relevant Entity and in any of the foregoing cases it is not
                discharged within 15 London Business Days; or if the Relevant
                Entity initiates or consents to judicial proceedings relating
                to itself under any applicable liquidation, administration,
                winding up, sequestration, bankruptcy, composition,
                insolvency, reorganisation or other similar laws or makes a
                conveyance, assignment or assignation for the benefit of, or
                enters into any composition with, its creditors generally or
                takes steps with a view to obtaining a moratorium in respect
                of any indebtedness;

        INSURANCE ACKNOWLEDGEMENTS means a letter from the relevant insurer
        substantially in such form set out in Schedule 11 to the Mortgage Sale
        Agreement or such other form as the relevant insurer shall require in
        respect of (a) the MIG Policies numbers GECM-UK-003 and GECM-UK-004
        issued by GE Mortgage Insurance Limited and (b) the MIG Policies
        numbers 227001, 227001(A), 227002, 227003 and 227006;

        INSURANCE ENDORSEMENTS means an endorsement from the relevant insurer
        substantially in the form set out in Schedule 10 to the Mortgage Sale
        Agreement or such other form as the relevant insurer shall require in
        respect of (a) each of the MIG Policies excluding the Halifax Mortgage
        Re Limited MIG Policies and (b) the Halifax Policies;

        INSURANCE POLICIES means the Buildings Policies and the Halifax
        Insurance Policies and INSURANCE POLICY shall be construed
        accordingly;

        INTERCOMPANY LOAN means the aggregate of the outstanding principal
        balance of the Term Advances made by a Funding 1 Issuer to Funding 1
        under an Intercompany Loan Agreement;

                                      42
<PAGE>

        INTERCOMPANY LOAN ACCELERATION NOTICE means a notice served by the
        Funding 1 Security Trustee on Funding 1 following the occurrence of an
        Intercompany Loan Event of Default, pursuant to Clause 14.10 of the
        Intercompany Loan Terms and Conditions;

        INTERCOMPANY LOAN AGREEMENTS means the First Issuer Intercompany Loan
        Agreement, Second Issuer Intercompany Loan Agreement, Third Issuer
        Intercompany Loan Agreement, Fourth Issuer Intercompany Loan
        Agreement, Fifth Issuer Intercompany Loan Agreement, Sixth Issuer
        Intercompany Loan Agreement, Seventh Issuer Intercompany Loan
        Agreement, Eighth Issuer Intercompany Loan Agreement and Ninth Issuer
        Intercompany Loan Agreement and INTERCOMPANY LOAN AGREEMENT means any
        one of them;

        INTERCOMPANY LOAN CONFIRMATION means a document substantially in the
        form set out in Schedule 3 to the Intercompany Loan Terms and
        Conditions confirming the principal terms of each Intercompany Loan
        Agreement between Funding 1 and the relevant Issuer;

        INTERCOMPANY LOAN DETERMINATION DATE means the first day of the
        relevant Interest Period;

        INTERCOMPANY LOAN EVENT OF DEFAULT means the occurrence of an event of
        default as specified in Clause 14 of the Intercompany Loan Terms and
        Conditions with respect to Funding 1;

        INTERCOMPANY LOAN LEDGER means, as the context requires, (a) the
        Funding 1 Intercompany Loan ledger or (b) the Funding 2 Intercompany
        Loan ledger;

        INTERCOMPANY LOAN TERMS AND CONDITIONS means the standard terms and
        conditions incorporated into each Intercompany Loan Agreement, signed
        for the purposes of identification on the Initial Closing Date by
        Funding 1, the Security Trustee and the Agent Bank, as amended and
        restated on 17 October 2006 pursuant to the Deed of Amendment to
        Intercompany Loan Agreements;

        INTEREST PAYMENT DATE means, as the context requires, (a) a Funding 1
        Interest Payment Date in respect of Funding 1 or (b) a Funding 2
        Interest Payment Date in respect of Funding 2;

        INTEREST PERIOD means, as the context requires, (a) in relation to a
        series and class of Notes (i) with respect to the first Interest
        Payment Date, the period from (and including) the applicable interest
        commencement date to (but excluding) such first Interest Payment Date
        and (ii) thereafter, with respect to each Interest Payment Date, the
        period from (and including) the preceding Interest Payment Date to
        (but excluding) that Interest Payment Date, (b) in respect of a Loan
        Tranche (i) with respect to the first Funding 2 Interest Payment Date,
        the period from (and including) the applicable Loan Tranche Interest
        Commencement Date to (but excluding) such first Funding 2 Interest
        Payment Date and (ii) thereafter, the period from (and including) the
        preceding Funding 2 Interest Payment Date to (but excluding) that
        Funding 2 Interest Payment Date and (c) in respect of Funding 1, the
        period from (and including) a Funding 1 Interest Payment Date (or in
        respect of the first Interest Period, the relevant Closing Date) to
        (but excluding) the next following (or first) Funding 1 Interest
        Payment Date;

        IRRECOVERABLE VAT means any amount in respect of VAT incurred by a
        party to the Transaction Documents (for the purposes of this
        definition, a RELEVANT PARTY) as part of a payment in respect of which
        it is entitled to be indemnified under the relevant Transaction
        Documents to the extent that the Relevant Party does not or will not
        receive and retain a credit or repayment of such VAT as input tax (as
        that expression is defined in section 24(1) of the Value Added Tax Act
        1994) for the prescribed accounting period (as that expression is used
        in section 25(1) of the Value Added Tax Act 1994) to which such input
        tax relates;

                                      43
<PAGE>

        ISSUER means the First Issuer, the Second Issuer, the Third Issuer,
        the Fourth Issuer, the Fifth Issuer, the Sixth Issuer, the Seventh
        Issuer, the Eighth Issuer, the Ninth Issuer and/or the Master Issuer
        and/or, as the context may require, any New Issuer;

        ISSUER ACCOUNT BANK means the First Issuer Account Bank, the Second
        Issuer Account Bank, the Third Issuer Account Bank, the Fourth Issuer
        Account Bank, the Fifth Issuer Account Bank, the Sixth Issuer Account
        Bank, the Seventh Issuer Account Bank, the Eighth Issuer Account Bank,
        the Ninth Issuer Account Bank and/or, as the context may require, the
        bank at which the accounts of any New Issuer are maintained and/or the
        Master Issuer Account Bank;

        ISSUER ACCOUNTS means any of the First Issuer Accounts, the Second
        Issuer Accounts, the Third Issuer Accounts, the Fourth Issuer
        Accounts, the Fifth Issuer Accounts, the Sixth Issuer Accounts, the
        Seventh Issuer Accounts, the Eighth Issuer Accounts, the Ninth Issuer
        Accounts, the Master Issuer Accounts or, as the context may require,
        any accounts held by any New Issuer;

        ISSUER AGREEMENTS means those agreements to which any Issuer is party
        (including, for the avoidance of doubt, in the case of the First
        Issuer, the First Issuer Transaction Documents, in the case of the
        Second Issuer, the Second Issuer Transaction Documents, in the case of
        the Third Issuer, the Third Issuer Transaction Documents, in the case
        of the Fourth Issuer, the Fourth Issuer Transaction Documents, in the
        case of the Fifth Issuer, the Fifth Issuer Transaction Documents, in
        the case of the Sixth Issuer, the Sixth Issuer Transaction Documents,
        in the case of the Seventh Issuer, the Seventh Issuer Transaction
        Documents, in the case of the Eighth Issuer, the Eighth Issuer
        Transaction Documents, in the case of the Ninth Issuer, the Ninth
        Issuer Transaction Documents, the Master Issuer Transaction Documents,
        the Funding 1 Transaction Documents, the Funding 2 Transaction
        Documents and, in the case of any New Issuer, the New Issuer
        Transaction Documents);

        ISSUER CASH MANAGER means initially Halifax and, from the
        Reorganisation Date, Bank of Scotland acting, pursuant to each issuer
        cash management agreement, as agent for each Issuer and the Security
        Trustee to manage all cash transactions and maintain certain ledgers
        on behalf of each Issuer;

        ISSUER MASTER DEFINITIONS AND CONSTRUCTION SCHEDULE means, as the
        context requires, the relevant Funding 1 Issuer Master Definitions and
        Construction Schedule or the Master Issuer Master Definitions and
        Construction Schedule;

        ISSUER NOTES includes all of the First Issuer Notes, the Second Issuer
        Notes, the Third Issuer Notes, the Fourth Issuer Notes, the Fifth
        Issuer Notes, the Sixth Issuer Notes, Seventh Issuer Notes, the Eighth
        Issuer Notes, the Ninth Issuer Notes, the Master Issuer Notes and, as
        the context may require, any New Notes;

        ISSUER SECURED CREDITORS means any of the First Issuer Secured
        Creditors, the Second Issuer Secured Creditors, the Third Issuer
        Secured Creditors, the Fourth Issuer Secured Creditors, the Fifth
        Issuer Secured Creditors, the Sixth Issuer Secured Creditors, the
        Seventh Issuer Secured Creditors, the Eighth Issuer Secured Creditors,
        the Ninth Issuer Secured Creditors and the Master Issuer Secured
        Creditors and/or, as the context requires, any New Issuer Secured
        Creditors;

        ISSUER SECURITY means the security created by the First Issuer
        pursuant to the First Issuer Deed of Charge in favour of the First
        Issuer Secured Creditors, the security created by the Second Issuer
        pursuant to the Second Issuer Deed of Charge in favour of the Second
        Issuer Secured Creditors, the security created by the Third Issuer
        pursuant to the Third Issuer Deed of Charge in favour of the Third
        Issuer Secured Creditors, the security created by the Fourth Issuer
        pursuant to the Fourth Issuer Deed of Charge in favour of the Fourth
        Issuer Secured Creditors, the security created by the Fifth Issuer
        pursuant to the Fifth Issuer Deed of Charge in favour of the Fifth
        Issuer Secured Creditors, the security created by the Sixth Issuer
        pursuant to the Sixth Issuer Deed of Charge in favour of the Sixth
        Issuer Secured Creditors, the security created by the Seventh Issuer
        pursuant to

                                      44
<PAGE>

        the Seventh Issuer Deed of Charge in favour of the Seventh Issuer
        Secured Creditors, the security created by the Eighth Issuer pursuant
        to the Eighth Issuer Deed of Charge in favour of the Eighth Issuer
        Secured Creditors, the security created by the Ninth Issuer pursuant
        to the Ninth Issuer Deed of Charge in favour of the Ninth Issuer
        Secured Creditors , the security created by the Master Issuer pursuant
        to the Master Issuer Deed of Charge in favour of the Master Issuer
        Secured Creditors and/or, as the context may require, the security
        created by any other Funding 1 Issuer and/or the security created by
        any other Funding 2 Issuer pursuant to the related deed of charge in
        favour of the related Issuer Secured Creditors;

        ISSUER SWAP AGREEMENTS means, the First Issuer Swap Agreements and/or
        the Second Issuer Swap Agreements and/or the Third Issuer Swap
        Agreements and/or the Fourth Issuer Swap Agreements and/or the Fifth
        Issuer Swap Agreements and/or the Sixth Issuer Swap Agreements and/or
        the Seventh Issuer Swap Agreements and/or any New Issuer Swap
        Agreements and/or the Eighth Issuer Swap Agreements and/or the Ninth
        Issuer Swap Agreements and/or the Master Issuer Swap Agreements
        and/or, as the context requires, any New Issuer Swap Agreements and
        ISSUER SWAP AGREEMENT means any one of them;

        ISSUER SWAP PROVIDER means the First Issuer Swap Providers and/or the
        Second Issuer Swap Providers and/or the Third Issuer Swap Providers
        and/or the Fourth Issuer Swap Providers and/or the Fifth Issuer Swap
        Providers and/or the Sixth Issuer Swap Providers and/or the Seventh
        Issuer Swap Providers and/or the Eighth Issuer Swap Providers and/or
        the Ninth Issuer Swap Providers and/or the Master Issuer Swap
        Provider, and/or as the context requires, any New Issuer Swap
        Providers;

        ISSUER SWAP PROVIDER DEFAULT means the occurrence of an Event of
        Default (as defined in the relevant Issuer Swap Agreement) where the
        relevant Issuer Swap Provider is the Defaulting Party (as defined in
        the relevant Issuer Swap Agreement);

        ISSUER SWAP PROVIDER DOWNGRADE TERMINATION EVENT means the occurrence
        of an Additional Termination Event (as defined in the relevant Issuer
        Swap Agreement) following the failure by a First Issuer Swap Provider
        and/or a Second Issuer Swap Provider and/or a Third Issuer Swap
        Provider and/or a Fourth Issuer Swap Provider and/or a Fifth Issuer
        Swap Provider and/or a Sixth Issuer Swap Provider and/or the Seventh
        Issuer Swap Providers and/or the Eighth Issuer Swap Providers and/or
        the Ninth Issuer Swap Providers and/or, as the context requires, the
        Master Issuer Swap Provider to comply with the requirements of the
        ratings downgrade provisions set out in the relevant Issuer Swap
        Agreement;

        LAND REGISTRY means the body responsible for recording details of land
        in England and Wales;

        LARGE LOAN DISCOUNT means the discount which allows a Borrower to pay
        interest at a discretionary discount to the standard variable rate of
        interest charged on Variable Rate Loans in, or to be included in, the
        Mortgages Trust (other than the Tracker Rate Loans) based on the
        aggregate size of the Loans under the Mortgage Account (a) at
        origination or (b) when a Further Advance is made;

        LAW includes common or customary law and any constitution, decree,
        judgment, legislation, order, ordinance, regulation, statute, treaty
        or other legislative measure in any jurisdiction and any present or
        future directive, regulation, guideline, practice, concession, request
        or requirement whether or not having the force of law issued by any
        governmental body, agency or department or any central bank or other
        fiscal, monetary, taxation, regulatory, self-regulatory or other
        authority or agency;

        LENDING CRITERIA means the criteria contained in Schedule 4 to the
        Mortgage Sale Agreement or such other criteria as would be acceptable
        to a Reasonable, Prudent Mortgage Lender;

                                      45
<PAGE>

        LIBOR means:

        (a)     in relation to any Funding 1 Liquidity Facility Drawing or, as
                the case may be, Funding 1 Liquidity Facility Stand-by
                Drawing:

                (i)     the display rate per annum of the offered quotation
                        for deposits in the currency of the relevant Funding 1
                        Liquidity Facility Drawing or unpaid sum, for a period
                        equal to the required period which appears on
                        Moneyline Telerate Page 3750 or Moneyline Telerate
                        Page 3740 (as appropriate) at or about 11.00 a.m. on
                        the relevant Quotation Date; or

                (ii)    if the display rate cannot be determined under
                        paragraph (a)(i) above, the rate determined by the
                        Funding 1 Liquidity Facility Provider to be the
                        arithmetic mean (rounded, if necessary, to the nearest
                        five decimal places with the midpoint rounded upwards)
                        of the rates notified to the Funding 1 Liquidity
                        Facility Provider by each of the Reference Banks
                        quoting (provided that at least two Reference Banks
                        are quoting) as the rate at which such Reference Bank
                        is offering deposits in the required currency and for
                        the required period in an amount comparable to that
                        amount to prime banks in the London inter-bank market
                        at or about 11.00 a.m. on the relevant Quotation Date
                        for such period;

                for the purposes of this definition:

                QUOTATION DATE means, in relation to any Interest Period for
                which an interest rate is to be determined under the Funding 1
                Liquidity Facility Agreement, the day on which quotations
                would ordinarily be given by banks in the London inter-bank
                market for deposits in the relevant currency for delivery on
                the first day of that Interest Period; provided that if, for
                any such period, quotations would ordinarily be given on more
                than one date, the Quotation Date for that period shall be the
                last of those dates;

                REFERENCE BANKS means the principal London office of each of
                ABN AMRO Bank N.V., Barclays Bank PLC, Citibank, N.A. and The
                Royal Bank of Scotland plc or any bank that replaces any of
                them; and

                MONEYLINE TELERATE PAGE 3750 means the display designated as
                Page 3750; and MONEYLINE TELERATE PAGE 3740 means the display
                designated as Page 3740, in each case on the Moneyline
                Telerate Service (or such other pages as may replace Page 3750
                or Page 3740 on that service or such other service as may be
                nominated by the British Bankers' Association (including the
                Reuters Screen) as the information vendor for the purposes of
                displaying British Bankers' Association Interest Settlement
                Rates for deposits in the currency concerned); or

        (b)     in relation to the Mortgages Trustee GIC Rate, the Funding 1
                GIC Rate, the Funding 2 GIC Rate and the rate of interest
                payable on the Start-up Loans, LIBOR as determined in
                accordance with the Intercompany Loan Agreements and the
                Master Intercompany Loan Agreement (as applicable);

        LIQUIDITY RESERVE FUND means the Funding 1 Liquidity Reserve Fund;

        LIQUIDITY RESERVE FUND RATING EVENT means the Seller's long-term,
        unsecured, unguaranteed and unsubordinated debt obligations are rated
        below A- by S&P, A3 by Moody's or A- by Fitch (unless the relevant
        Rating Agency confirms that its then current ratings of the Notes will
        not be adversely affected as a consequence of a ratings downgrade of
        the Seller);

                                      46
<PAGE>

        LIQUIDITY RESERVE LEDGER means the Funding 1 Liquidity Reserve Ledger;

        LIQUIDITY RESERVE REQUIRED AMOUNT means, on any Interest Payment Date,
        an amount equal to 3% of the aggregate outstanding balance of the
        Ninth Issuer Notes on that date;

        LISTING RULES means:

        (a)     in the case of Reg S Notes which are, or are to be, admitted
                to the Official List, the listing rules made under section 73A
                of the FSMA; and

        (b)     in the case of Reg S Notes which are, or are to be, listed on
                a Stock Exchange other than the London Stock Exchange, the
                listing rules for the time being in force for that Stock
                Exchange;

        LOAN means each loan referenced by its loan identifier number and
        comprising the aggregate of all principal sums, interest, costs,
        charges, expenses and other monies (including all Further Advances,
        Flexible Loan Drawings, Home Cash Reserve Drawings and Retention
        Drawings) due or owing with respect to that loan under the relevant
        Mortgage Terms by a Borrower on the security of a Mortgage from time
        to time outstanding or, as the context may require, the Borrower's
        obligations in respect of the same;

        LOAN CONDITIONS has the same meaning as MORTGAGE CONDITIONS;

        LOAN PAYMENT DATE means, in respect of a Loan Tranche, the Funding 2
        Payment Dates specified in the Loan Tranche Supplement for the payment
        of principal, subject to the terms of the Master Intercompany Loan
        Agreement;

        LOAN REPURCHASE NOTICE means a notice substantially in the form set
        out in Schedule 6 to the Mortgage Sale Agreement;

        LOAN TRANCHE means the AAA Loan Tranches, the AA Loan Tranches, the A
        Loan Tranches, the BBB Loan Tranches, the BB Loan Tranches, the
        Subordinated Loan Tranches and the Start-up Loan Tranches (subject to
        certain conditions) being the advances made by the Master Issuer to
        Funding 2 pursuant to the Master Intercompany Loan Agreement, each
        being funded from proceeds received by the Master Issuer from the
        issue of a series and class of Notes, the borrowing by the Master
        Issuer of a Master Issuer Subordinated Loan or, the borrowing by the
        Master Issuer of a Master Issuer Start-up Loan (respectively);

        LOAN TRANCHE INTEREST COMMENCEMENT DATE means, in respect of a Loan
        Tranche, the Closing Date of the related Series and Class of Notes or
        the relevant Advance Date of the related Master Issuer Subordinated
        Loan or Master Issue Start-up Loan (as applicable) for such Loan
        Tranche specified as such in the applicable Loan Tranche Supplement;

        LOAN TRANCHE INTEREST DETERMINATION DATE means, in respect of a Loan
        Tranche, for any Loan Tranche Interest Period for which the applicable
        Loan Tranche Rate of Interest will apply, the first day of such Loan
        Tranche Interest Period;

        LOAN TRANCHE INTEREST PERIOD means, in relation to a Loan Tranche and
        any Loan Payment Date, the period from (and including) the immediately
        preceding Loan Payment Date for such Loan Tranche (or, in respect of
        the first Loan Tranche Interest Period, the Loan Tranche Interest
        Commencement Date) to (but excluding) the next following (or first)
        Loan Payment Date for such Loan Tranche;

                                     47
<PAGE>

        LOAN TRANCHE NOTICE means a document substantially in the form set out
        in Schedule 1 (Form of Loan Tranche Notice) to the Master Intercompany
        Loan Agreement setting out, amongst other things, the principal amount
        of each Loan Tranche available for drawing on the next Closing Date;

        LOAN TRANCHE RATE OF INTEREST in respect of a Loan Tranche, has the
        meaning given to it in Clause 7.2 (Determination of Loan Tranche
        Interest Amount) of the Master Intercompany Loan Agreement;

        LOAN TRANCHE RATING means the designated rating of each Rated Loan
        Tranche which reflects the rating assigned to the corresponding class
        of Notes used to fund each such Loan Tranche on the relevant Closing
        Date of that Loan Tranche;

        LOAN TRANCHE SUPPLEMENT means, in relation to any Loan Tranche, means
        the document between, amongst others, Funding 2 and applicable Funding
        2 Issuer substantially in the form set out in Schedule 3 (Form of Loan
        Tranche Supplement) to the Master Intercompany Loan Agreement entered
        into between Funding 2 and such Funding 2 Issuer recording the
        principal terms of such Loan Tranche;

        LOAN WARRANTIES means the Representations and Warranties;

        LONDON BUSINESS DAY means a day (other than a Saturday or a Sunday) on
        which banks are generally open for business in London;

        LONDON STOCK EXCHANGE means the London Stock Exchange plc;

        LOSS AMOUNT means the amount of any costs, expenses, losses or other
        claims suffered or incurred by, as applicable, the Mortgages Trustee
        and/or Funding 1 and/or Funding 2 in connection with any recovery of
        interest on the Loans to which the Seller, the Mortgages Trustee,
        Funding 1 or Funding 2 was not entitled to enforce or could not
        enforce as a result of any of the matters referred to in paragraphs
        (a), (b), (c) or (d) of clause 7.3 of the Mortgage Sale Agreement;

        LOSSES means all realised losses on the Loans;

        LOSSES LEDGER means the ledger of such name maintained by the Cash
        Manager pursuant to the Cash Management Agreement to record the
        Losses;

        LTV RATIO or LOAN-TO-VALUE RATIO means the ratio (expressed as a
        percentage) of the outstanding balance of a Loan to the value of the
        Mortgaged Property securing that Loan;

        LTV TEST means a test which assigns a credit enhancement value to each
        loan in the portfolio based on its current loan-to-value ratio and the
        amount of mortgage indemnity cover on that loan. The weighted average
        credit enhancement value for the portfolio is then determined;

        MANAGERS has the meaning given in the relevant Issuer Master
        Definitions and Construction Schedule;

        MANDATE means the Funding 1 Transaction Account Mandate, the Funding 1
        GIC Account Mandate, the Funding 2 Transaction Account Mandate, the
        Funding 2 GIC Account Mandate and/or the Mortgages Trustee GIC Account
        Mandate, as the case may be;

        MANDATORY LIQUID ASSET COST means the cost imputed to the Funding 1
        Liquidity Facility Provider of compliance with:

                                      48
<PAGE>

        (a)     cash and special deposit requirements of the Bank of England
                and/or the banking supervision or other costs imposed by the
                Financial Services Authority, as determined in accordance with
                Schedule 2 to the Funding 1 Liquidity Facility Agreement; and

        (b)     any reserve asset requirements of the European Central Bank;

        MASTER INTERCOMPANY LOAN means the loan made available to Funding 2
        pursuant to the Master Intercompany Loan Agreement;

        MASTER INTERCOMPANY LOAN ACCELERATION NOTICE means an acceleration
        notice served by the Funding 2 Security Trustee on Funding 2 in
        relation to the enforcement of the Funding 2 Security following the
        occurrence of a Master Intercompany Loan Event of Default;

        MASTER INTERCOMPANY LOAN AGREEMENT means the master intercompany loan
        agreement entered into on the Programme Date between Funding 2, the
        Master Issuer and the Funding 2 Security Trustee;

        MASTER INTERCOMPANY LOAN CONFIRMATION means a document substantially
        in the same form set out in Schedule 3 to the Master Intercompany Loan
        Terms and Conditions confirming the principal terms of each
        Intercompany Loan Agreement between Funding 2 and the Master Issuer;

        MASTER INTERCOMPANY LOAN EVENT OF DEFAULT has the meaning given to it
        in Clause 15.1 of the Master Intercompany Loan Agreement;

        MASTER ISSUER means Permanent Master Issuer plc;

        MASTER ISSUER ACCOUNT BANK means the bank at which the Master Issuer
        Accounts are maintained from time to time pursuant to the relevant
        Master Issuer Transaction Documents;

        MASTER ISSUER ACCOUNTS means the Master Issuer Bank Accounts as
        defined in the Master Issuer Master Definitions and Construction
        Schedule;

        MASTER ISSUER BANK ACCOUNT AGREEMENT means the Master Issuer Bank
        Account Agreement as defined in the Master Issuer Master Definitions
        and Construction Schedule;

        MASTER ISSUER CASH MANAGEMENT AGREEMENT means the Master Issuer Cash
        Management Agreement as defined in the Master Issuer Master
        Definitions and Construction Schedule;

        MASTER ISSUER CLOSING DATE means any date on which Master Issuer
        issues Notes;

        MASTER ISSUER CORPORATE SERVICES AGREEMENT means the Master Issuer
        Corporate Services Agreement as defined in the Master Issuer Master
        Definitions and Construction Schedule;

        MASTER ISSUER CORPORATE SERVICES PROVIDER means the Master Issuer
        Corporate Services Provider as defined in the Master Issuer Master
        Definitions and Construction Schedule;

        MASTER ISSUER DEED OF CHARGE means the deed of charge entered into by
        such Funding 2 Issuer with the Funding 2 Security Trustee;

        MASTER ISSUER DEFINITIONS AND CONSTRUCTION SCHEDULE means the relevant
        master definitions schedule;

        MASTER ISSUER NOTE EVENT OF DEFAULT means the Master Issuer Note Event
        of Default as defined in the Master Issuer Master Definitions and
        Construction Schedule;

                                     49
<PAGE>

        MASTER ISSUER PAYING AGENT AND AGENT BANK AGREEMENT means the Master
        Issuer Paying Agent and Agent Bank Agreement as defined in the Master
        Issuer Master Definitions and Construction Schedule;

        MASTER ISSUER PRE-ENFORCEMENT REVENUE PRIORITY OF PAYMENTS means the
        Master Issuer Pre-Enforcement Revenue Priority of Payments as defined
        in the Master Issuer Master Definitions and Construction Schedule;

        MASTER ISSUER START-UP LOAN means a loan to be advanced by the Master
        Issuer Start-Up Loan Provider to the Master Issuer on a Closing Date
        following the Reorganisation Date pursuant to the Master Issuer
        Start-Up Loan Agreement dated such Closing Date;

        MASTER ISSUER START-UP LOAN AGREEMENT means each agreement to be
        entered into on a Closing Date following the Reorganisation Date
        between, among others, the Master Issuer and the Master Issuer
        Start-Up Loan Provider pursuant to which the Master Issuer Start-Up
        Loan Provider will advance a Master Issuer Start-Up Loan to the Master
        Issuer on such Closing Date;

        MASTER ISSUER START-UP LOAN PROVIDER means Bank of Scotland, in its
        capacity as provider of each Master Issuer Start-Up Loan to be
        advanced to the Master Issuer on a Closing Date following the
        Reorganisation Date pursuant to a Master Issuer Start-Up Loan
        Agreement;

        MASTER ISSUER SUBORDINATED LOAN means a loan to be advanced by the
        Master Issuer Subordinated Loan Provider to the Master Issuer pursuant
        to a Master Issuer Subordinated Loan Agreement;

        MASTER ISSUER SUBORDINATED LOAN AGREEMENT means an agreement to be
        entered into between, among others, the Master Issuer and the Master
        Issuer Subordinated Loan Provider on an Advance Date following the
        Reorganisation Date pursuant to which the Master Issuer Subordinated
        Loan Provider will advance a Master Issuer Subordinated Loan to the
        Master Issuer;

        MASTER ISSUER SUBORDINATED LOAN PROVIDER means Bank of Scotland, in
        its capacity as provider of a Master Issuer Subordinated Loan to be
        advanced to the Master Issuer on a Closing Date following the
        Reorganisation Date;

        MASTER ISSUER SWAP AGREEMENT means the Master Issuer Swap Agreement as
        defined in the Master Issuer Master Definitions and Construction
        Schedule;

        MASTER ISSUER SWAP PROVIDER means the Master Issuer Swap Provider as
        defined in the Master Issuer Master Definitions and Construction
        Schedule;

        MASTER ISSUER TRANSACTION ACCOUNT means the Master Issuer Transaction
        Account (sort code: 12-08-83 and account number: 06052794) as defined
        in the Master Issuer Master Definitions Schedule;

        MASTER ISSUER TRANSACTION DOCUMENTS means the Master Issuer
        Transaction Documents as defined in the Master Issuer Master
        Definitions and Construction Schedule;

        MASTER ISSUER TRUST DEED means the Master Issuer Trust Deed as defined
        in the Master Issuer Master Definitions and Construction Schedule;

        MCOB means the FSA Mortgages and Home Finance Conduct of Business
        Sourcebook;

        MHA DOCUMENTATION means an affidavit, declaration, consent or
        renunciation granted in terms of the Matrimonial Homes (Family
        Protection) (Scotland) Act 1981 or (as applicable) the Civil
        Partnership Act 2004 in connection with a Scottish Mortgage or the
        Property secured thereby;

                                      50
<PAGE>

        MIG POLICIES means the mortgage indemnity guarantee policies written
        by General Accident Fire and Life Assurance Corporation PLC, GE
        Capital Mortgage (UK) Limited, Royal & Sun Alliance Insurance plc and
        Halifax Mortgage Re Limited in favour of the Seller, or any other
        mortgage indemnity guarantee policy as may be effected from time to
        time to cover the Seller in respect of New Loans and their Related
        Security, such other mortgage indemnity guarantee policy to provide
        such level of cover as would be acceptable to a Reasonable, Prudent
        Mortgage Lender at the date of such other policy;

        MINIMUM SELLER SHARE means an amount included in the Current Seller
        Share which is calculated in accordance with clause 9.2 of the
        Mortgages Trust Deed and which, as at the 2007-1 Issuer Closing Date,
        was [POUND]2,297,203,394.39;

        MONTHLY CPR on any Normal Calculation Date means the total Principal
        Receipts received during the period of one month (or, if shorter, from
        and including the Initial Closing Date) ending on that Normal
        Calculation Date divided by the aggregate Outstanding Principal
        Balance of the Loans comprised in the Trust Property as at the
        immediately preceding Normal Calculation Date;

        MONTHLY PAYMENT means the amount which the relevant Mortgage Terms
        require a Borrower to pay on each Monthly Payment Date in respect of
        that Borrower's Loan;

        MONTHLY PAYMENT DATE means the date on which interest (and principal
        in relation to a repayment mortgage) is due to be paid by a Borrower
        on a Loan or, if any such day is not a business day, the next
        following business day;

        MOODY'S means Moody's Investors Service Limited and includes any
        successor to its rating business;

        MORTGAGE ACCOUNT means all Loans secured on the same Property and
        thereby forming a single mortgage account;

        MORTGAGE CONDITIONS or LOAN CONDITIONS means the terms and conditions
        applicable to a Loan as contained in the Seller's "Mortgage
        Conditions" booklet for England and Wales or Scotland applicable from
        time to time;

        MORTGAGE SALE AGREEMENT means the mortgage sale agreement dated the
        Initial Closing Date and made between the Seller, Funding 1, the
        Mortgages Trustee and the Funding 1 Security Trustee in relation to
        the sale of the Initial Portfolio and the sale of any New Portfolio to
        the Mortgages Trustee from time to time, as amended and restated on
        the Second Issuer Closing Date, the Third Issuer Closing Date, the
        Fourth Issuer Closing Date, the Fifth Issuer Closing Date, the Sixth
        Issuer Closing Date, the Seventh Issuer Closing Date, the Eighth
        Issuer Closing Date and the Ninth Issuer Closing Date and as further
        amended and restated on the Programme Date and on 21 November 2007 by
        the Seller, Funding 1, Funding 2, the Mortgages Trustee, the Funding 1
        Security Trustee and the Funding 2 Security Trustee (as the same may
        be amended, restated, supplemented, replaced and/or novated from time
        to time);

        MORTGAGE TERMS means all the terms and conditions applicable to a
        Loan, including without limitation the applicable Mortgage Conditions
        and Offer Conditions;

        MORTGAGEE means the person for the time being entitled to exercise the
        rights of the mortgagee or heritable creditor (as applicable) under a
        Mortgage;

        MORTGAGES means first fixed charges by way of legal mortgage (in
        relation to English Loans) and first ranking standard securities (in
        relation to Scottish Loans) sold by the Seller to the Mortgages
        Trustee pursuant to the Mortgage Sale Agreement, which secure the
        repayment of the relevant Loans and MORTGAGE means any one of them;

                                     51
<PAGE>

        MORTGAGES TRUST means the trust of the Trust Property as to both
        capital and income, including the Initial Trust Property, held by the
        Mortgages Trustee on trust absolutely for Funding 1 (as to the Funding
        1 Share), Funding 2 (as to the Funding 2 Share) and the Seller (as to
        the Seller Share) pursuant to the Mortgages Trust Deed;

        MORTGAGES TRUST AVAILABLE PRINCIPAL RECEIPTS means the Principal
        Receipts available to the Mortgages Trustee to distribute in
        accordance with Clause 11 of the Mortgages Trust Deed;

        MORTGAGES TRUST AVAILABLE REVENUE RECEIPTS means an amount equal to
        the aggregate of the following amounts, as calculated on each
        Calculation Date:

        (a)     Revenue Receipts on the Loans (but excluding Principal
                Receipts); and

        (b)     interest payable to the Mortgages Trustee on the Mortgages
                Trustee GIC Account; less

        (c)     Third Party Amounts,

        which amounts may be paid daily from monies on deposit in the
        Mortgages Trustee GIC Account;

        MORTGAGES TRUST DEED means the mortgages trust deed made between the
        Mortgages Trustee, Funding 1, the Seller and SFM Offshore Limited on
        13 June 2002, as amended and restated on the Second Issuer Closing
        Date, the Third Issuer Closing Date, the Fourth Issuer Closing Date,
        the Fifth Issuer Closing Date, the Sixth Issuer Closing Date, the
        Seventh Issuer Closing Date, the Eighth Issuer Closing Date, the Ninth
        Issuer Closing Date and as further amended and restated on the
        Programme Date and on 21 November 2007 by the Mortgages Trustee,
        Funding 1, Funding 2, the Seller and SFM Offshore Limited (and as the
        same may be amended, restated and/or supplemented from time to time);

        MORTGAGES TRUST PRINCIPAL PRIORITY OF PAYMENTS means the order of
        priority in which the Cash Manager applies Principal Receipts on the
        Loans on each Distribution Date to each of Funding 1, Funding 2 and
        the Seller, depending on whether a Trigger Event has occurred, as set
        out in Clause 11 of the Mortgages Trust Deed;

        MORTGAGES TRUST PRIORITY OF PAYMENTS means, as applicable, the
        Mortgages Trust Revenue Priority of Payments or the Mortgages Trust
        Principal Priority of Payments;

        MORTGAGES TRUST REVENUE PRIORITY OF PAYMENTS means the order of
        priority in which the Cash Manager applies the Mortgages Trust
        Available Revenue Receipts on each Distribution Date, as set out in
        clause 10 of the Mortgages Trust Deed;

        MORTGAGES TRUSTEE means Permanent Mortgages Trustee Limited
        (registered number 83116), a private company with limited liability
        incorporated in Jersey, Channel Islands, whose registered office is at
        47 Esplanade, St. Helier, Jersey JE1 0BD, Channel Islands;

        MORTGAGES TRUSTEE COLLECTION ACCOUNT AMOUNTS means all amounts from
        time to time standing to the credit of the Collection Account to the
        extent that such amounts represent payments into the Collection
        Account of sums derived or resulting from mortgage loans originated by
        the Seller under the Halifax brand which have been sold to the
        Mortgages Trustee pursuant to the Mortgage Sale Agreement;

        MORTGAGES TRUSTEE CORPORATE SERVICES AGREEMENT means the agreement
        dated the Initial Closing Date, as amended from time to time, and made
        between the Mortgages Trustee Corporate Services Provider, the
        Mortgages Trustee and the Security Trustee for the provision by the
        Mortgages Trustee Corporate Services Provider of certain corporate
        services and personnel to the Mortgages Trustee;

                                     52
<PAGE>

        MORTGAGES TRUSTEE CORPORATE SERVICES FEE LETTER means the letter dated
        the date of the Mortgages Trustee Corporate Services Agreement between
        the Mortgages Trustee, the Mortgages Trustee Corporate Services
        Provider and the Security Trustee, setting out the amount of fees
        payable to the Mortgages Trustee Corporate Services Provider by the
        Mortgages Trustee;

        MORTGAGES TRUSTEE CORPORATE SERVICES PROVIDER means SFM Offshore
        Limited or such other person or persons for the time being acting as
        corporate services provider to the Mortgages Trustee under the
        Mortgages Trustee Corporate Services Agreement;

        MORTGAGES TRUSTEE GIC ACCOUNT means the account in the name of the
        Mortgages Trustee (sort code 12-24-55, account number 00998406) held
        at the Account Bank and maintained subject to the terms of the
        Mortgages Trustee Guaranteed Investment Contract and the Bank Account
        Agreement, or such additional or replacement bank account as may for
        the time being be in place with the prior consent of the Security
        Trustee and the Rating Agencies;

        MORTGAGES TRUSTEE GIC ACCOUNT AGREEMENT has the same meaning as
        MORTGAGES TRUSTEE GUARANTEED INVESTMENT CONTRACT;

        MORTGAGES TRUSTEE GIC ACCOUNT MANDATE means the bank account mandate
        between the Mortgages Trustee and the Account Bank relating to the
        operation of the Mortgages Trustee GIC Account;

        MORTGAGES TRUSTEE GIC BALANCE means, on any day during an Interest
        Period, the amount standing to the credit of the Mortgages Trustee GIC
        Account as at the opening of business on such day;

        MORTGAGES TRUSTEE GIC PROVIDER means initially The Governor and
        Company of the Bank of Scotland and from the Reorganisation Date, Bank
        of Scotland acting pursuant to the Mortgages Trustee Guaranteed
        Investment Contract and/or such other person for the time being acting
        as provider of a guaranteed investment contract to the Mortgages
        Trustee;

        MORTGAGES TRUSTEE GIC RATE means the rate of interest accruing on the
        balance standing to the credit of the Mortgages Trustee GIC Account
        equal to a rate of three month LIBOR less 0.25% per annum;

        MORTGAGES TRUSTEE GUARANTEED INVESTMENT CONTRACT or MORTGAGES TRUSTEE
        GIC ACCOUNT AGREEMENT means the guaranteed investment contract entered
        into on the Initial Closing Date between the Mortgages Trustee, the
        Mortgages Trustee GIC Provider, the Cash Manager and the Security
        Trustee in relation to interest to be earned on the Mortgages Trustee
        GIC Balance (as the same may be amended, restated, supplemented,
        replaced and/or novated from time to time);

        MORTGAGES TRUSTEE LEDGERS means the Principal Ledger, the Revenue
        Ledger, the Losses Ledger, and the Funding 1 Share/Funding 2
        Share/Seller Share Ledger;

        MORTGAGES TRUSTEE TRACKER RATE means the rate of interest applicable
        to Tracker Rate Loans in the Portfolio (before applying any cap or
        minimum rate) incorporating a margin set, other than in limited
        circumstances, by the Servicer from time to time pursuant to clause
        4.1 of the Servicing Agreement;

        MORTGAGES TRUSTEE VARIABLE BASE RATE means the variable base rate
        applicable to Variable Rate Loans in the Portfolio as set, other than
        in limited circumstances, by the Servicer from time to time pursuant
        to clause 4.1 of the Servicing Agreement;

        NEW BULLET TERM ADVANCE means any term advance made under a New
        Intercompany Loan Agreement where the full amount of principal in
        respect of that term advance is scheduled for repayment on a single
        interest payment date (other than the final repayment date);

                                     53
<PAGE>

        NEW DEED OF ACCESSION means, as the context requires, (a) with respect
        to any Funding 1 Issuer, any new deed of accession to the Funding 1
        Deed of Charge and the Second Supplemental Funding 1 Deed of Charge
        entered into on any New Issuer Closing Date between Funding 1, each
        such Issuer, the Corporate Services Provider, the Account Bank, the
        Security Trustee, the Seller, each Start-up Loan Provider, the Cash
        Manager, the Funding 1 Swap Provider and the Funding 1 Liquidity
        Facility Provider as supplemented, amended and/or restated from time
        to time and (b) with respect to any Funding 2 Issuer, any new deed of
        accession to the Funding 2 Deed of Charge entered into on any Closing
        Date or New Issuer Closing Date (as applicable) between Funding 2,
        each such Issuer, the Corporate Services Provider, the Account Bank,
        the Funding 2 Security Trustee, the Seller, each Start-up Loan
        Provider, the Cash Manager and the Funding 2 Swap Provider, (in each
        case) as supplemented, amended and/or restated from time to time;

        NEW FUNDING BENEFICIARY means an entity that has acceded to the
        Mortgages Trust Deed as a Beneficiary of the Mortgages Trust.

        NEW FUNDING 1 SECURED CREDITOR means such other creditor of Funding 1
        who accedes to the Funding 1 Deed of Charge and the Second
        Supplemental Funding 1 Deed of Charge from time to time including
        pursuant to an Accession Undertaking;

        NEW FUNDING 1 START-UP LOAN means a loan issued to Funding 1 under a
        New Start-up Loan Agreement;

        NEW FUNDING 1 SWAP means a new swap under the existing Funding 1 Swap
        Agreement;

        NEW FUNDING 2 SECURED CREDITOR means such other creditor of Funding 2
        who accedes to the Funding 2 Deed of Charge from time to time
        including pursuant to an Accession Undertaking;

        NEW FUNDING 2 START-UP LOAN means a loan issued to Funding 2 under a
        New Start-up Loan Agreement;

        NEW FUNDING 2 SWAP means a new swap under the existing Funding 2 Swap
        Agreement;

        NEW INTERCOMPANY LOAN means a Loan under a New Intercompany Loan
        Agreement;

        NEW INTERCOMPANY LOAN AGREEMENT means a new intercompany loan
        agreement entered into between Funding 1 or Funding 2 and a New Issuer
        in relation to a New Intercompany Loan;

        NEW INTERCOMPANY LOAN CONFIRMATION means a new Intercompany Loan
        Confirmation confirming the principal terms of a New Intercompany Loan
        Agreement;

        NEW ISSUER means a new wholly-owned subsidiary of Holdings, which may
        be established to issue New Notes and to make a New Intercompany Loan
        to, as the context requires, Funding 1 or Funding 2;

        NEW ISSUER CLOSING DATE means the date of any new issue of New Notes
        by a New Issuer;

        NEW ISSUER LIQUIDITY FACILITY PROVIDER means a new liquidity facility
        provider to Funding 1 and/or, as the context may require, to a New
        Issuer;

        NEW ISSUER SECURED CREDITORS means the secured creditors of any New
        Issuer;

        NEW ISSUER SECURITY means security created by any New Issuer;

                                      54
<PAGE>

        NEW ISSUER SWAP PROVIDER means any entity who enters into a hedging
        arrangement with a New Issuer;

        NEW ISSUER TRANSACTION DOCUMENT means any document or agreement to
        which any New Issuer is a party (together the NEW ISSUER TRANSACTION
        DOCUMENTS);

        NEW LOANS means Loans, other than the Initial Loans, which the Seller
        may sell or has sold, to the Mortgages Trustee after the Initial
        Closing Date pursuant to the Mortgage Sale Agreement;

        NEW LOAN TRANCHE means any loan tranche entered into between a Funding
        2 Issuer and Funding 2 pursuant to a New Intercompany Loan Agreement;

        NEW LOAN TYPE means, on any date, a type of Loan:

        (a)     which has one or more features (including, without limitation,
                relating to the applicable lending criteria used to originate
                such type of Loan, the purpose of such type of Loan, the
                manner of calculating interest or fixing the interest rate in
                relation to such type of Loan and/or the terms for repayment
                of principal in relation to such type of Loan) which mean that
                such type of Loan is generally regarded as a distinct category
                of mortgage loan within the UK mortgage industry and/or by one
                of more of the Rating Agencies; and

        (b)     where no such type of Loan is at that date, or has previously
                been, comprised in the Mortgages Trust,

        (and such types include Flexible Loans, Home Owner Loans, Deedstore
        Loans, capped rate loans, buy-to-let loans, right-to-buy loans,
        limited recourse loans, equity release loans and drawdown loans as at
        the Initial Closing Date);

        NEW NOTES means the notes issued and/or to be issued by the New
        Issuers to investors;

        NEW PORTFOLIO means the portfolio of Loans and their Related Security
        (other than any Loan and its Related Security which has been redeemed
        in full on or before the Sale Date), particulars of which are set out
        in the relevant New Portfolio Notice or in a document stored upon
        electronic media (including, but not limited to, a CD-ROM), and all
        right, title, interest and benefit of the Seller in and to:

        (a)     all payments of principal and interest (including, for the
                avoidance of doubt, all Accrued Interest, Arrears of Interest,
                Capitalised Expenses and Capitalised Arrears) and other sums
                due or to become due in respect of such Loans and their
                Related Security including, without limitation, the right to
                demand, sue for, recover and give receipts for all principal
                monies, interest and costs and the right to sue on all
                covenants and any undertakings made or expressed to be made in
                favour of the Seller (or to which the Seller is entitled)
                under the applicable Mortgage Terms;

        (b)     subject where applicable to the subsisting rights of
                redemption of Borrowers, all Deeds of Consent, Deeds of
                Postponement, MHA Documentation and all third party guarantees
                and any other collateral security for the repayment of the
                relevant New Loans secured by the relevant New Mortgages;

        (c)     the right to exercise all the powers of the Seller in relation
                thereto;

        (d)     all the estate and interest in the relevant Properties vested
                in the Seller or heritable interest in respect of which the
                Seller is the uninfeft proprietor;

                                      55
<PAGE>

        (e)     each relevant Certificate of Title and Valuation Report and
                any right of action of the Seller against any solicitor,
                licensed conveyancer, qualified conveyancer, valuer, registrar
                or registry or other person in connection with any report,
                valuation, opinion, certificate or other statement of fact or
                opinion given or received in connection with all or part of
                any Loan and its Related Security or affecting the decision of
                the Seller to make or offer to make all or part of the
                relevant Loan;

        (f)     all right, title and interest of the Seller (including,
                without limitation, the proceeds of all claims) to which the
                Seller is entitled under the Buildings Policies and the
                Properties in Possession Cover;

        (g)     the MIG Policies, so far as they relate to the New Loans
                comprised in the relevant portfolio of Loans and their Related
                Security, including the right to receive the proceeds of any
                claims; and

        (h)     all proceeds from the enforcement of such Loans and their
                Related Security;

        NEW PORTFOLIO NOTICE means a notice substantially in the form set out
        in Schedule 12 to the Mortgage Sale Agreement served in accordance
        with the terms of the Mortgage Sale Agreement;

        NEW RELATED SECURITY means the Related Security for the New Loans
        (including any Mortgages) sold to the Mortgages Trustee by the Seller;

        NEW SCHEDULED AMORTISATION TERM ADVANCE means any Term Advance made
        under a New Intercompany Loan Agreement which is referred to as a
        Scheduled Amortisation Term Advance in the offering document or
        prospectus relating to any relevant New Issuer;

        NEW START-UP LOAN AGREEMENT means a loan agreement under which the
        Start-up Loan Provider or a New Start-up Loan Provider shall provide
        Funding 1 or Funding 2 with a New Start-up Loan for the purposes of
        meeting the costs of the issue of New Notes and/or further funding the
        Reserve Fund, if required;

        NEW START-UP LOAN PROVIDER means, as the context requires, (a) an
        entity who shall supply a New Start-up Loan to Funding 1 or (b) an
        entity who shall supply a New Start-Up Loan to Funding 2;

        NEW TERM ADVANCE means an advance of funds by a New Issuer to Funding
        1 under the terms of a New Intercompany Loan Agreement, which advance
        is funded by a corresponding class of New Notes;

        NEW YORK BUSINESS DAY means a day (other than a Saturday or a Sunday)
        on which banks are generally open for business (including dealings in
        foreign currency) in the city of New York;

        NINTH ISSUER means Permanent Financing (No. 9) PLC (registered number
        5711074), 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;

        NINTH ISSUER CLOSING DATE means 22 March 2006;

        NINTH ISSUER INTERCOMPANY LOAN AGREEMENT means the Ninth Issuer
        Intercompany Loan Confirmation and the Intercompany Loan Terms and
        Conditions together entered into on the Ninth Issuer Closing Date by
        the Ninth Issuer, Funding 1 and the Security Trustee (as the same may
        be amended, restated, supplemented, replaced and/or novated from time
        to time);

                                     56
<PAGE>

        NINTH ISSUER SECURITY means the security created by the Ninth Issuer
        pursuant to the Ninth Issuer Deed of Charge in favour of the Ninth
        Issuer Secured Creditors;

        NINTH START-UP LOAN means the start-up loan that the Ninth Start-up
        Loan Provider made available to Funding 1 pursuant to the Ninth
        Start-up Loan Agreement;

        NINTH START-UP LOAN AGREEMENT means the agreement entered into on the
        Ninth Issuer Closing Date between Funding 1, the Ninth Start-up Loan
        Provider and the Security Trustee relating to the provision of the
        Ninth Start-up Loan to Funding 1 (as the same may be amended,
        restated, supplemented, replaced and/or novated from time to time);

        NINTH START-UP LOAN PROVIDER means initially Halifax and as of the
        Reorganisation Date, Bank of Scotland in its capacity as provider of
        the Ninth Start-up Loan;

        NON-ASSET TRIGGER EVENT means the occurrence of any of the following
        events on a Calculation Date:

        (a)     an Insolvency Event occurs in relation to the Seller on or
                about that Calculation Date;

        (b)     the role of the Seller as Servicer under the Servicing
                Agreement is terminated and a new Servicer is not appointed
                within 30 days of such termination;

        (c)     as at the Calculation Date immediately preceding the relevant
                Calculation Date the Current Seller Share is equal to or less
                than the Minimum Seller Share; or

        (d)     on any Calculation Date, the aggregate outstanding principal
                balance of Loans comprising the Trust Property is less than
                the required loan balance amount specified in the most recent
                prospectus supplement or is less than the amount as may be
                required to be maintained as a result of any new Funding 1
                Issuers providing new Term Advances to Funding 1 and/or the
                Master Issuer advancing new Loan Tranches to Funding 2 which
                Funding 1 and/or Funding 2, as the case may be uses to pay to
                the Seller and/or Funding 1 or Funding 2, as the case may be,
                for an increase in its share of the Trust Property and/or to
                pay the Seller for the sale of new Loans for the Mortgages
                Trustee;

        NORMAL CALCULATION DATE means the first day (or, if not a London
        Business Day, the next succeeding London Business Day) of each month;

        NOTE ACCELERATION NOTICE means a First Issuer Note Acceleration
        Notice, a Second Issuer Note Acceleration Notice, a Third Issuer Note
        Acceleration Notice, a Fourth Issuer Note Acceleration Notice, a Fifth
        Issuer Note Acceleration Notice, a Sixth Issuer Note Acceleration
        Notice, a Seventh Issuer Note Acceleration Notice, an Eighth Issuer
        Note Acceleration Notice, a Ninth Issuer Note Acceleration Notice, a
        Master Intercompany Loan Acceleration Notice or such other
        acceleration notice served in relation to the Notes pursuant to the
        relevant terms and conditions thereof;

        NOTE DETERMINATION DATE means, as the context requires, two Business
        Days prior to (a) each Funding 1 Interest Payment Date or (b) each
        Funding 2 Interest Payment Date, as applicable;

        NOTE EVENT OF DEFAULT means the occurrence of an event of default by
        the relevant Issuer as specified in the relevant Conditions of the
        Notes (including a First Issuer Note Event of Default, a Second Issuer
        Note Event of Default, a Third Issuer Note Event of Default, a Fourth
        Issuer Note Event of Default, a Fifth Issuer Note Event of Default, a
        Sixth Issuer Note Event of Default, a Seventh Issuer Note Event of
        Default, an Eighth Issuer Note Event of Default, a Ninth Issuer Note
        Event of Default or a Master Issuer Note Event of Default);

                                      57
<PAGE>

        NOTE TRUSTEE means The Bank of New York, acting through its office at
        48th Floor, One Canada Square, London E14 5AL or such other persons or
        companies as may from time to time be appointed as Note Trustee (or
        co-trustee) pursuant to, as the context requires, (a) the First Issuer
        Trust Deed and/or the Second Issuer Trust Deed and/or the Third Issuer
        Trust Deed and/or the Fourth Issuer Trust Deed and/or the Fifth Issuer
        Trust Deed and/or the Sixth Issuer Trust Deed and/or the Seventh
        Issuer Trust Deed and/or the Eighth Issuer Trust Deed and/or the Ninth
        Issuer Trust Deed and/or (b) any Master Issuer Trust Deed;

        NOTES means, as the context requires, (a) the Funding 1 Issuer Notes
        and/or (b) the notes issued by the Master Issuer pursuant to Condition
        15 of the terms and conditions set out in the Master Issuer Trust
        Deed;

        NOTICE OF EXTENSION has the meaning given in Clause 2.3(c) of the
        Funding 1 Liquidity Facility Agreement;

        NOVATION CERTIFICATE means a certificate, to effect a novation of the
        Funding 1 Liquidity Facility under the Funding 1 Liquidity Facility
        Agreement, substantially in the form set out in Schedule 4 to the
        Funding 1 Liquidity Facility Agreement;

        OFFER CONDITIONS means the terms and conditions applicable to a
        specified Loan as set out in the relevant offer letter to the
        Borrower;

        ORIGINAL BULLET TERM ADVANCE means, as the context requires, (a) in
        respect of Funding 1, a Term Advance which at any time has been a
        Bullet Term Advance (even if such Term Advance has subsequently become
        a Pass-Through Term Advance) or (b) in respect of Funding 2, a Rated
        Loan Tranche which at any time has been a Bullet Loan Tranche (even if
        such Loan Tranche has subsequently become a Pass-Through Loan
        Tranche);

        ORIGINAL MORTGAGE SALE AGREEMENT means the Mortgage Sale Agreement
        dated the Initial Closing Date and made between the Seller, Funding 1,
        the Mortgages Trustee and the Funding 1 Security Trustee;

        ORIGINAL PASS-THROUGH TERM ADVANCE means, as the context requires, (a)
        in respect of Funding 1, a Term Advance which, at the time it was
        advanced, was a Pass-Through Term Advance or (b) in respect of Funding
        2, a Rated Loan Tranche which, at the time it was advanced, was a
        Pass-Through Loan Tranche;

        ORIGINAL SCHEDULED AMORTISATION INSTALMENT means, as the context
        requires, (a) that part of a Term Advance which at any time has been a
        Scheduled Amortisation Instalment (even if such Term Advance has
        subsequently become a Pass-Through Term Advance) or (b) that part of a
        Rated Loan Tranche which at any time has been a Scheduled Amortisation
        Instalment (even if such Rated Loan Tranche has subsequently become a
        Pass-Through Loan Tranche);

        ORIGINAL SCHEDULED AMORTISATION TERM ADVANCE means, as the context
        requires, (a) a Term Advance which at any time has been a Scheduled
        Amortisation Term Advance (even if such Term Advance has subsequently
        become a Pass-Through Term Advance) or (b) a Loan Tranche which at any
        time has been a Scheduled Amortisation Loan Tranche (even if such Loan
        Tranche has subsequently become a Pass-Through Loan Tranche);

        OUTSTANDING PRINCIPAL BALANCE:

        (a)     in relation to a Loan at any date (the DETERMINATION DATE),
                means the aggregate principal balance of the Loan at such date
                (but avoiding double counting) including:

                                     58
<PAGE>

                (i)     the Initial Advance;

                (ii)    Capitalised Expenses;

                (iii)   Capitalised Arrears; and

                (iv)    an increase in the principal amount due under that
                        Loan due to the Borrower making Flexible Loan
                        Drawings, Home Cash Reserve Drawings and/or taking
                        Payment Holidays or making Underpayments,

                in each case relating to such Loan less any prepayment,
                repayment or payment of the foregoing made on or prior to the
                determination date;

        (b)     in relation to an Intercompany Loan at any date, means the
                unpaid principal balance of that Intercompany Loan at that
                date (including any capitalised arrears) or, as the context so
                requires, (a) of a Term Advance made under that Intercompany
                Loan or (b) of a Loan Tranche made under that Intercompany
                Loan; and

        (c)     in relation to any Notes at any date, means the unpaid
                principal balance of those Notes, or, as the context so
                requires, any series and/or class of such Notes as at that
                date;

        OVERPAYMENT means a payment by a Borrower in an amount greater than
        the Monthly Payment then due on the Loan;

        PASS-THROUGH LOAN TRANCHE means, in relation to Funding 2, a Rated
        Loan Tranche which has no specified repayment dates other than the
        Final Repayment Date. If an event specified for a Bullet Loan Tranche,
        a Scheduled Repayment Loan Tranche or a Controlled Amortisation Loan
        Tranches in the applicable Loan Tranche Supplement occurs or if a
        Step-Up Date (if any) in relation to such Loan Tranche occurs or if a
        Pass-Through Trigger Event occurs, then that Loan Tranche will be
        deemed to be a Pass-Through Loan Tranche;

        PASS-THROUGH REPAYMENT RESTRICTIONS means, at any time on a Funding 1
        Interest Payment Date or, if the context requires, on a Funding 2
        Interest Payment Date, no amount may be applied in repayment of any
        Original Pass-Through Term Advance or Pass-Through Loan Tranche,
        respectively, unless:

        (a)     the sum of the Cash Accumulation Ledger Amount and the amount
                of Funding 1 Available Principal Receipts or Funding 2
                Available Principal Receipts, as applicable, after the
                application of items (a), (b) and (c) and before item (d) of
                the Funding 1 Pre-Enforcement Principal Priority of Payments
                or the Funding 2 Pre-Enforcement Principal Priority of
                Payment, as applicable,

        is greater than or equal to:

        (b)     the sum of the Cash Accumulation Liability and the aggregate
                amount of all Original Pass-Through Term Advances or Original
                Pass-Through Loan Tranches, as applicable, which are due and
                payable as at that time;

        PASS-THROUGH TERM ADVANCE means, as the context requires, (a) a Term
        Advance which has no Scheduled Repayment Date(s) other than a Final
        Repayment Date or, if a Trigger Event occurs or, the relevant Issuer
        Security and/or Funding 1 Security is enforced, the Bullet Term
        Advance or the Scheduled Amortisation Term Advance will be deemed to
        be a Pass-Through Term Advance or (b) a Loan Tranche which has no
        Scheduled Repayment Date(s) other than a Final Repayment Date or, if a
        Trigger Event occurs or, the Master Issuer Security and/or Funding 2
        Security is enforced, the

                                      59
<PAGE>

        Bullet Loan Tranche or the Scheduled Amortisation Loan Tranche will be
        deemed to be a Pass-Through Loan Tranche;

        PAYABLE PASS-THROUGH TERM ADVANCES in relation to the Intercompany
        Loan has the meaning given in Part 2 of Schedule 3 to the Funding 1
        Deed of Charge;

        PASS-THROUGH TRIGGER EVENT means any of the following events: (a) a
        Trigger Event, (b) the service of a Note Acceleration Notice by the
        Note Trustee on the Master Issuer; or (c) the service of a Master
        Intercompany Loan Enforcement Notice by the Funding 2 Security Trustee
        on the Master Issuer;

        PAYMENT HOLIDAY means the period of time that a Borrower under a Loan
        refrains from making payments of interest and principal on his Loan as
        expressly permitted by the terms of the Borrower's Loan;

        PECOH means Permanent PECOH Limited (registered number 4267666), a
        limited company incorporated under the laws of England and Wales,
        whose registered office is at 35 Great St. Helen's, London EC3A 6AP;

        PECOH CORPORATE SERVICES AGREEMENT means, in respect of PECOH Holdings
        and PECOH, the agreement dated the Eighth Issuer Closing Date and made
        between the PECOH Corporate Services Provider, the Share Trustee,
        PECOH Holdings, PECOH, Halifax and the Security Trustee for the
        provision by the PECOH Corporate Services Provider of certain
        corporate services and personnel for PECOH Holdings and PECOH (as the
        same may be amended, restated, supplemented, replaced and/or novated
        from time to time);

        PECOH CORPORATE SERVICES PROVIDER means Structured Finance Management
        Limited or such other person or persons for the time being acting as
        corporate services provider to PECOH and PECOH Holdings under the
        PECOH Corporate Services Agreement;

        PECOH HOLDINGS means Permanent PECOH Holdings Limited (registered
        number 5468381), a limited company incorporated under the laws of
        England and Wales, whose registered office is at 35 Great St. Helen's
        London EC3A 6AP;

        PERFECTION means the perfection of certain matters relating to the
        sale and purchase of the Portfolio as contemplated in, pursuant to and
        in accordance with Clause 6 of the Mortgage Sale Agreement;

        PERSONAL DATA means any information of whatever nature satisfying the
        definition of 'personal data' in the Act that, by whatever means, is
        provided to the Data Processor by the Data Controller, is accessed by
        the Data Processor on the authority of the Data Controller or is
        otherwise received by the Data Processor on the Data Controller's
        behalf, for the purposes of the Processing specified in clause 3.1(a)
        of the Data Processor Agreement;

        PORTFOLIO means the Initial Portfolio and any New Portfolio;

        POTENTIAL INTERCOMPANY LOAN EVENT OF DEFAULT means the occurrence of
        any event which with the giving of notice, any relevant certificate,
        the lapse of time or fulfilment of any other condition (or any
        combination of the foregoing) would become an Intercompany Loan Event
        of Default;

        POTENTIAL MASTER INTERCOMPANY LOAN EVENT OF DEFAULT means the
        occurrence of any event which with the giving of notice, any relevant
        certificate, the lapse of time or fulfilment of any other condition
        (or any combination of the foregoing) would become a Master
        Intercompany Loan Event of Default;

                                     60
<PAGE>

        POTENTIAL NOTE EVENT OF DEFAULT means the occurrence of any event
        which with the giving of notice, any relevant certificate, the lapse
        of time or fulfilment of any other conditions, (or any combination of
        the foregoing) would become a Note Event of Default;

        PRE-ENFORCEMENT PRINCIPAL PRIORITY OF PAYMENTS means the Funding 1
        Pre-Enforcement Principal Priority of Payments or the Funding 2
        Pre-Enforcement Principal Priority of Payments, as applicable;

        PRINCIPAL DEFICIENCY means any losses arising in relation to a Loan in
        the Portfolio which causes a shortfall in the amount available to pay
        principal on the Term Advances or Loan Tranches, as applicable;

        PRINCIPAL DEFICIENCY LEDGER means, as the context requires, (a) the
        Funding 1 Principal Deficiency Ledger in respect of Funding 1 or (b)
        the Funding 2 Principal Deficiency Ledger in respect of Funding 2, as
        applicable;

        PRINCIPAL DEFICIENCY SUB-LEDGER means, as the context requires, (a)
        the Funding 1 Principal Deficiency Sub-Ledger in respect of Funding 1
        or (b) the Funding 2 Principal Deficiency Sub-Ledger in respect of
        Funding 2, as applicable;

        PRINCIPAL ISSUERS has the meaning given in Clause 5.4 of the Funding 1
        Deed of Charge;

        PRINCIPAL LEDGER means, as the context requires either (a) the Funding
        1 Principal Ledger or (b) the Funding 2 Principal Ledger;

        PRINCIPAL PAYMENT RATE or PPR means the average monthly rolling
        principal payment rate on the Loans for the 12 months immediately
        preceding the relevant Distribution Date calculated on each such date
        by:

        (a)     dividing (i) the aggregate Principal Receipts received in
                relation to the Loans during the immediately preceding month
                on such calculation date by (ii) the aggregate Outstanding
                Principal Balance of the Loans on the previous calculation
                date;

        (b)     aggregating the result of the calculation in (a) above with
                the results of the equivalent calculation made on each of the
                eleven most recent calculation dates during the relevant 12
                month period; and

        (c)     dividing the result of the calculation in (b) above by 12;

        PRINCIPAL RECEIPTS means any payment in respect of principal received
        in respect of any Loan (including payments pursuant to any Insurance
        Policies), whether as all or part of a Monthly Payment in respect of
        such Loan, on redemption (including partial redemption) of such Loan,
        on enforcement of such Loan (including the proceeds of sale of the
        relevant Property) or on the disposal of such Loan plus on any Monthly
        Payment Date an amount equal to the amount (if any) by which arrears
        in respect of the Loans comprised in the Portfolio on the relevant
        Closing Date exceeds such arrears on such Monthly Payment Date
        (without double counting but including principal received or treated
        as received after completion of the enforcement procedures);

        PRINCIPAL TERM ADVANCES has the meaning given in Clause 5.4 of the
        Funding 1 Deed of Charge;

        PRINCIPAL LOAN TRANCHES has the meaning given in Clause 5.4 of the
        Funding 2 Deed of Charge;

        PROCESSING has the meaning given in the Act;

                                      61
<PAGE>

        PRODUCT SWITCH means a variation to the financial terms or conditions
        included in the Mortgage Terms applicable to a Loan other than:

        (a)     any variation agreed with a Borrower to control or manage
                arrears on a Loan;

        (b)     any variation to the interest rate as a result of Borrowers
                being linked to HVR2;

        (c)     any variation in the maturity date of a Loan unless, while, as
                the context requires, (a) any Funding 1 Intercompany Loan is
                outstanding, it is extended beyond June 2040 and/or (b) while
                any Loan Tranche is outstanding, it is extended beyond June
                2040;

        (d)     any variation imposed by statute;

        (e)     any variation of the rate of interest payable in respect of
                the Loan where that rate is offered to the Borrowers of more
                than 10% of the Outstanding Principal Balance of Loans in the
                Trust Property in any Interest Period; or

        (f)     any variation in the frequency with which the interest payable
                in respect of the Loan is charged;

        PROGRAMME means the Master Issuer mortgage backed note programme dated
        the Programme Date;

        PROGRAMME DATE means 17 October 2006;

        PROPERTIES IN POSSESSION COVER means in relation to policies issued
        before 1 January 2004, the properties in possession cover written by
        Royal & Sun Alliance Insurance plc and in relation to policies or
        renewals issued on or after 1 January 2004, the properties in
        possession cover written by St Andrew's Insurance, in favour of the
        Seller and any endorsements or extensions thereto as issued from time
        to time, or any such similar alternative or replacement policy or
        policies as may in future be issued in favour of the Seller;

        PROPERTY means a freehold, heritable or leasehold property (or in
        Scotland a property held under a long lease) which is subject to a
        Mortgage;

        PROVISIONAL PORTFOLIO means the portfolio of Loans and their Related
        Security, particulars of which are set out in Part 1 of the Exhibit to
        the Original Mortgage Sale Agreement or in a document stored upon
        electronic media (including, but not limited to, a CD-ROM), and all
        right, title, interest and benefit of the Seller in and to:

        (a)     all payments of principal and interest (including, for the
                avoidance of doubt, all Accrued Interest, Arrears of Interest,
                Capitalised Expenses and Capitalised Arrears) and other sums
                due or to become due in respect of such Loans and their
                Related Security including, without limitation, the right to
                demand, sue for, recover and give receipts for all principal
                monies, interest and costs and the right to sue on all
                covenants and any undertakings made or expressed to be made in
                favour of the Seller under the applicable Mortgage Terms;

        (b)     subject where applicable to the subsisting rights of
                redemption of Borrowers, all Deeds of Consent, Deeds of
                Postponement, MHA Documentation and all third party guarantees
                and any other collateral security for the repayment of the
                relevant Loans secured by the relevant Mortgages;

        (c)     the right to exercise all the powers of the Seller in relation
                thereto;

        (d)     all the estate and interest in the relevant Properties vested
                in the Seller;

                                     62
<PAGE>

        (e)     each relevant Certificate of Title and Valuation Report and
                any right of action of the Seller against any solicitor,
                licensed conveyancer, qualified conveyancer, valuer, registrar
                or registry or other person in connection with any report,
                valuation, opinion, certificate or other statement of fact or
                opinion given or received in connection with all or part of
                any Loan and its Related Security or affecting the decision of
                the Seller to make or offer to make all or part of the
                relevant Loan;

        (f)     all rights, title and interests of the Seller (including,
                without limitation, the proceeds of all claims) to which the
                Seller is entitled under the Buildings Policies and the
                Properties in Possession Cover;

        (g)     the MIG Policies, so far as they relate to the Loans comprised
                in the relevant portfolio of Loans and their Related Security,
                including the right to receive the proceeds of any claims; and

        (h)     all proceeds from the enforcement of such Loans and their
                Related Security;

        PURCHASE PRICE means (a) in respect of the Initial Portfolio, the
        amount payable therefor by the Mortgages Trustee pursuant to Clause
        3.3 (Purchase Price) of the Mortgage Sale Agreement; and (b) in
        respect of each New Mortgage Portfolio, the amount payable therefor by
        the Mortgages Trustee pursuant to Clause 4.4 (Purchase Price) of the
        Mortgage Sale Agreement;

        QUALIFYING LENDER means a lender which is (on a date that any payment
        of interest to it under the Funding 1 Liquidity Documents falls due):

        (a)     in respect of an advance made under a Funding 1 Liquidity
                Document by a person that was a bank (as defined in section
                991 of the Income Tax Act 2007 for the purpose of section 879
                of the Income Tax Act 2007) at the time that such advance was
                made, such bank or a person, which in either case is within
                the charge to United Kingdom corporation tax as regards any
                payments of interest received by it under the Funding 1
                Liquidity Documents and which is the beneficial owner of that
                interest at the time the interest is paid; or

        (b)     (i)     a company resident in the United Kingdom for United
                        Kingdom Tax purposes; or

                (ii)    a partnership each member of which is:

                        (A)  a company resident in the United Kingdom for
                             United Kingdom Tax purposes; or

                        (B)  a company not so resident in the United Kingdom
                             which carries on a trade in the United Kingdom
                             through a permanent establishment and which
                             brings into account in computing its chargeable
                             profits (within the meaning of section 11(2)
                             ICTA) the whole of any share of interest payable
                             under a Funding 1 Liquidity Document that falls
                             to it by reason by sections 114 and 115 ICTA;

                (iii)   a company not so resident in the United Kingdom which
                        carries on a trade in the United Kingdom through a
                        permanent establishment and which brings into account
                        in computing its chargeable profits (within the
                        meaning of section 11(2) ICTA) payments of interest
                        made to it under a Funding 1 Liquidity Document,

                which, in each case, is beneficially entitled to the relevant
                payment of interest made to it under the Funding 1 Liquidity
                Documents at the time the interest is paid; or

                                      63
<PAGE>

        (c)     a Treaty Lender; or

        (d)     a building society authorised under the Building Societies Act
                1986 and entitled to receive interest without deduction or
                withholding on account of United Kingdom Tax to which the
                Income Tax (Building Societies) (Dividends and Interest)
                Regulations 1990 (or other regulations made under section
                477A(1) of ICTA) apply;

        QUARTERLY CPR on any date means the average of the three most recent
        CPRs;

        RATED LOAN TRANCHE means a Loan Tranche that corresponds to a Series
        and Class of Notes;

        RATED LOAN TRANCHE REPAYMENT REQUIREMENT means the Repayment
        Requirement pursuant to which on a Calculation Date, the amount, if
        any, by which the aggregate of all amounts that will be payable by
        Funding 2 on the next Funding 2 Interest Payment Date as described in
        paragraphs 2.1 (d) to (f) (inclusive) of Part 2 of Schedule 3 to the
        Funding 2 Deed of Charge (in each case) on the basis:

        (a)     that there would be no deferral in relation to Loan Tranches
                pursuant to Rule (1) set out in paragraph 2.2(a) of Part 2 of
                Schedule 3;

        (b)     that where Rule (2) or Rule (3) as set out in paragraph 2.2(a)
                of Part 2 of Schedule 3 applies to an Intercompany Loan, the
                amount so payable by Funding 2 in respect of Loan Tranches
                (other than Bullet Loan Tranches and Scheduled Amortisation
                Instalments) under that Intercompany Loan shall be treated as
                the lesser of (i) the amount due and payable in respect of
                those Loan Tranches, and (ii) the product of (A) the Funding 2
                Share Percentage, as at the start of the most recently ended
                Calculation Period (provided that if, during the most recently
                ended Calculation Period, Loans and their Related Security are
                sold to the Mortgages Trustee or Funding 2 has acquired part
                of the Seller Share of the Trust Property from the Seller,
                then the Funding 2 Share Percentage will be calculated for
                purposes of this paragraph as the weighted average of Funding
                2 Share Percentages as of the first day of such Calculation
                Period and as of the date immediately after such sale or
                acquisition), (B) the aggregate amount of Principal Receipts
                received by the Mortgages Trustee during the most recently
                ended Calculation Period (C) the Outstanding Principal Balance
                of Intercompany Loan A (in the case of Rule (2)) or
                Intercompany Loan B (in the case of Rule (3)), or the Series A
                Rated Loan Tranches, divided by the aggregate Outstanding
                Principal Balance of all Intercompany Loans (excluding
                Subordinated Loan Tranches and Start-up Loan Tranches), each
                as of the most recent Funding 2 Interest Payment Date, as
                applicable;

        (c)     that Loan Tranches will be treated as due and payable if they
                are already due and payable, or would become due and payable
                on or before the next Funding 2 Interest Payment Date, as
                applicable, if all Principal Receipts were paid to Funding 2
                on that Calculation Date; and

        (d)     excluding amounts due and payable in respect of or Bullet Loan
                Tranches and Scheduled Amortisation Instalments,

        exceeds the sum of:

        (i)     the amounts standing to the credit of the Funding 2 Principal
                Ledger as at the last Funding 2 Interest Payment Date (which
                amount was not distributed on that Funding 2 Interest Payment
                Date to the Master Issuer); and

        (ii)    the sum of each Repayment Requirement amount paid to or
                Funding 2, as applicable, on a previous Distribution Date
                during the relevant interest period;

                                      64
<PAGE>

        RATING AGENCIES means Standard & Poor's, Moody's and Fitch;

        REASONABLE, PRUDENT MORTGAGE LENDER means a reasonably prudent prime
        residential mortgage lender lending to borrowers in England, Wales and
        Scotland who generally satisfy the lending criteria of traditional
        sources of residential mortgage capital;

        RECEIVER means any person or persons appointed (and any additional
        person or persons appointed or substituted) as an administrative
        receiver, receiver, manager, or receiver and manager of, as the
        context requires, (a) the Funding 1 Charged Property by the Funding 1
        Security Trustee pursuant to Clause 13.1 of the Funding 1 Deed of
        Charge or (b) the Funding 2 Charged Property by the Funding 2 Security
        Trustee pursuant to Clause 13.1 of the Funding 2 Deed of Charge;

        REDEMPTION FEE means the standard redemption fee charged to the
        Borrower by the Seller where the Borrower makes a repayment of the
        full outstanding principal of a Loan;

        REFERENCE BANKS means the principal London office of each of ABN AMRO
        Bank N.V., Barclays Bank PLC, Citibank, N.A. and the Royal Bank of
        Scotland plc and/or such other bank as may be appointed agent bank
        from time to time pursuant to the Ninth Issuer Paying Agent and Agent
        Bank Agreement or, as the context may require, the Eighth Issuer
        Paying Agent and Agent Bank, the Seventh Issuer Paying Agent and Agent
        Bank Agreement, the Sixth Issuer Paying Agent and Agent Bank
        Agreement, the Fifth Issuer Paying Agent and Agent Bank Agreement, the
        Fourth Issuer Paying Agent and Agent Bank Agreement, the Third Issuer
        Paying Agent and Agent Bank Agreement, the Second Issuer Paying Agent
        and Agent Bank Agreement or First Issuer Paying Agent and Agent Bank
        Agreement, or as the context may require, any Master Issuer Paying
        Agent and Agent Bank Agreement;

        REG S PROSPECTUS means the Base Prospectus (including any
        supplementary prospectus) when read with the applicable Final Terms
        (which shall include any applicable Preliminary Final Terms) and, in
        the case of the 2006-1 Issue only, the Preliminary Base Prospectus;

        REGISTERED TRANSFER means a deed of transfer of a Mortgage or
        Mortgages over Registered Land substantially in the form set out in
        Schedule 2 to the Mortgage Sale Agreement with such modifications as
        may be required from time to time;

        RELATED SECURITY means, in relation to a Loan, the security for the
        repayment of that Loan including the relevant Mortgage and all other
        matters applicable thereto acquired as part of the Portfolio sold to
        the Mortgages Trustee pursuant to Clause 2.1 or Clause 4.1 of the
        Mortgage Sale Agreement including (without limitation):

        (a)      the benefit of all affidavits, consents, renunciations,
                 guarantees, indemnities, waivers and postponements
                 (including, without limitation, Deeds of Consent, Deeds of
                 Postponement and MHA Documentation) from occupiers and other
                 persons having an interest in or rights in connection with
                 the relevant Property;

        (b)      each right of action of the Seller against any person
                 (including, without limitation, any solicitor, licensed
                 conveyancer, qualified conveyancer, valuer, registrar or
                 registry or other person) in connection with any report,
                 valuation, opinion, certificate or other statement of fact or
                 opinion (including, without limitation, each Certificate of
                 Title and Valuation Report) given or received in connection
                 with all or part of any Loan and its Related Security or
                 affecting the decision of the Seller to make or offer to make
                 all or part of the relevant Loan; and

        (c)      the benefit of (including, without limitation, the rights as
                 the insured person under and as notations of interest on, and
                 returns of premium and proceeds of claims under) insurance
                 and

                                     65
<PAGE>

                assurance policies (including, the Buildings Policies and MIG
                Policies) deposited, charged, obtained, or held in connection
                with the relevant Loan, Mortgage and/or Property and Loan
                Files;

        RELEVANT ACCUMULATION AMOUNT means the amount of funds to be
        accumulated over a Cash Accumulation Period in order to repay a Bullet
        Term Advance or a Scheduled Amortisation Instalment on its Scheduled
        Repayment Date or, as the context may require, a Bullet Loan Tranche
        on its Scheduled Repayment Date;

        RELEVANT EVENT means, in relation to the Funding 1 Liquidity Facility
        Provider:

        (a)      the downgrade on any day of the Funding 1 Liquidity Facility
                 Provider's short-term, unsecured, unguaranteed and
                 unsubordinated debt obligations to below the Requisite
                 Ratings; or

        (b)      the refusal by the Funding 1 Liquidity Facility Provider, to
                 grant an extension of the Funding 1 Liquidity Facility
                 Commitment Period, in accordance with clause 2.3 of the
                 Funding 1 Liquidity Facility Agreement;

        RELEVANT LOANS has the meaning given to it is Clause 4.2(h) of the
        Mortgage Sale Agreement;

        RELEVANT MARGIN means, in respect of a Loan Tranche, the Relevant
        Margin for such Loan Tranche specified as such in the applicable Loan
        Tranche Supplement;

        RELEVANT SCREEN RATE in relation to each Intercompany Loan means (a)
        in respect of the first Interest Period, the Initial Relevant Screen
        Rate specified in the relevant Intercompany Loan Confirmation; and (b)
        in respect of subsequent Interest Periods, means the arithmetic mean
        of offered quotations for three-month Sterling deposits in the London
        inter-bank market displayed on the Dow-Jones/Telerate Monitor at
        Telerate Page No. 3750; in each case, displayed on the above mentioned
        page of the Dow-Jones/Telerate Monitor (or such replacement page on
        that service which displays the information) or, if that service
        ceases to display the information, such other screen service as may be
        determined by Funding 1 or Funding 2, as applicable, with the approval
        of the Funding 1 Security Trustee or the Funding 2 Security Trustee,
        respectively, (rounded upwards, if necessary, to five decimal places);

        RELEVANT SHARE CALCULATION DATE means the Calculation Date at the
        start of the most recently completed Calculation Period;

        REORGANISATION DATE means 17 September 2007;

        REPAYMENT DATE has the meaning given in clause 2.3(d) of the Funding 1
        Liquidity Facility Agreement;

        REPAYMENT REQUIREMENT means,

        (1)      in relation to amounts payable by Funding 2 on any
                 Calculation Date, the amount (if any) equal to the sum of:

                (a)     the Rated Loan Tranche Repayment Requirement; and

                (b)     the Subordinated Loan Tranche Repayment Requirement;

        (2)      in relation to amounts payable by Funding 1, on a Calculation
                 Date, the amount, if any, by which the aggregate of all
                 amounts that will be payable by Funding 1 on the next Funding
                 1

                                      66
<PAGE>

                Interest Payment Date as described in paragraphs 2.1 (d) to
                (f) (inclusive) of Part II of Schedule 3 to the Funding 1 Deed
                of Charge on the basis:

                (a)     that there would be no deferral in relation to Term
                        Advances pursuant to Rule (1) set out in paragraph
                        2.2(a) of Part II of Schedule 3;

                (b)     that where Rule (2) or Rule (3) as set out in
                        paragraph 2.2(a) of Part II of Schedule 3 applies to
                        an Intercompany Loan, the amount so payable by Funding
                        1 in respect of Term Advances (other than Bullet Term
                        Advances and Scheduled Amortisation Instalments) under
                        that Intercompany Loan shall be treated as the lesser
                        of (A) the amount due and payable in respect of those
                        Term Advances, and (B) the product of (i) the Funding
                        1 Share Percentage as at the start of the most
                        recently ended Calculation Period (provided that if,
                        during the most recently ended Calculation Period,
                        Loans and their Related Security are sold to the
                        Mortgages Trustee or Funding 1 has acquired part of
                        the Seller Share of the Trust Property from the
                        Seller, then the Funding 1 Share Percentage will be
                        calculated for purposes of this paragraph as the
                        weighted average of the Funding 1 Share Percentages as
                        of the first day of such Calculation Period and as of
                        the date immediately after such sale or acquisition),
                        (ii) the aggregate amount of Principal Receipts
                        received by the Mortgages Trustee during the most
                        recently ended Calculation Period (iii) the
                        Outstanding Principal Balance of Intercompany Loan A
                        (in the case of Rule (2)) or Intercompany Loan B (in
                        the case of Rule (3)), divided by the aggregate
                        Outstanding Principal Balance of all Intercompany
                        Loans, each as of the most recent Funding 1 Interest
                        Payment Date;

                (c)     that Term Advances will be treated as due and payable
                        if they are already due and payable, or would become
                        due and payable on or before the next Funding 1
                        Interest Payment Date if all Principal Receipts were
                        paid to Funding 1 on that Calculation Date; and

                (d)     excluding amounts due and payable in respect of Bullet
                        Term Advances and Scheduled Amortisation Instalments,

                exceeds the sum of:

                (e)     the amounts standing to the credit of the Funding 1
                        Principal Ledger as at the last Funding 1 Interest
                        Payment Date (which amount was not distributed on that
                        Funding 1 Interest Payment Date to the First Issuer);
                        and

                (f)     the sum of each Repayment Requirement amount paid to
                        Funding 1 on a previous Distribution Date during the
                        relevant interest period;

        REPRESENTATIONS AND WARRANTIES means the representations and
        warranties set out in Schedule 1 to the Mortgage Sale Agreement;

        REQUIRED SUBORDINATED LOAN TRANCHE PRINCIPAL AMOUNT OUTSTANDING means
        the amount as described in the most recent Final Terms;

        REQUISITE RATINGS means in respect of the Funding 1 Liquidity Facility
        Provider as provider of the Funding 1 Liquidity Facility, ratings of
        P-1 by Moody's, F1 by Fitch and A+ by S&P;

        RESERVE FUNDS means, as the context requires, (a) the Funding 2
        General Reserve Fund and Funding 2 Liquidity Reserve Fund or (b) the
        General Reserve Fund and the Liquidity Reserve Fund, as applicable;

                                      67
<PAGE>

        RETENTION means an amount of the original advance or a Further Advance
        that is retained by the Seller until certain conditions (such as
        repairs or construction) are completed and which the Seller is obliged
        to release to the Borrower provided such conditions have been met;

        RETENTION DRAWING means a drawdown in full or part by the Borrower
        under a Retention Loan;

        RETENTION LOAN means a loan subject to a Retention;

        REVENUE LEDGER means, as the context requires, either (a) the Funding
        1 Revenue Ledger or (b) the Funding 2 Revenue Ledger;

        REVENUE RECEIPTS means each payment received in respect of any Loan,
        whether as all or part of a Monthly Payment in respect of such Loan,
        on redemption (including partial redemption) of such Loan, on
        enforcement of such Loan (including the proceeds of sale of such
        Loan), on the disposal of such Loan or otherwise (including payments
        pursuant to any Insurance Policy) which in any such case is not a
        Principal Receipt in respect of such Loan;

        RIGHT-TO-BUY means the right-to buy schemes governed by the Housing
        Act 1985 (as amended by the Housing Act 2004) or (as applicable) the
        Housing (Scotland) Act 1987 (as amended by the Housing (Scotland) Act
        2001) in relation to the purchase by Borrowers of Properties from
        local authorities or certain other landlords;

        RTB DISPOSAL PERIOD means the period, being three years (or in the
        cases where the right to buy was exercised in relation to properties
        in England and Wales after 18 January 2005, five years), during which
        a purchaser under a right-to-buy scheme must, if he sells the
        property, repay a proportion of the discount he received, or in
        England or Wales only, the resale price;

        RTB LOANS means the Loans made to Borrowers in connection with the
        purchase by those Borrowers of Properties from local authorities or
        certain other landlords under the right-to-buy schemes;

        S&P and STANDARD & POOR'S means Standard & Poor's Rating Services, a
        division of The McGraw-Hill Companies, Inc. and includes any successor
        to its rating business;

        SALE DATE means the date on which any New Portfolio is sold to the
        Mortgages Trustee in accordance with Clause 4 of the Mortgage Sale
        Agreement;

        SASINE TRANSFER means, in relation to Properties situated in Scotland
        title to which is, or is required to be, recorded in the General
        Register of Sasines, each assignation of the relevant Scottish Loans
        and their related Scottish Mortgages substantially in the form set out
        in Schedule 14 to the Mortgage Sale Agreement with such modifications
        as may be required from time to time;

        SCHEDULED AMORTISATION INSTALMENT means, as the context requires, (a)
        that part of a Scheduled Amortisation Term Advance which is payable on
        each of the Scheduled Repayment Dates of that Term Advance or (b) that
        part of a Scheduled Amortisation Loan Tranche which is payable on each
        of the Scheduled Repayment Dates of that Loan Tranche;

        SCHEDULED AMORTISATION LOAN TRANCHE means, in relation to Funding 2,
        any Rated Loan Tranche which is scheduled to be repaid on two or more
        instalments on Scheduled Repayment Dates;

        SCHEDULED AMORTISATION REPAYMENT RESTRICTIONS means, as the context
        requires, (a) with respect to Funding 1, at any time on a Funding 1
        Interest Payment Date:

                                     68
<PAGE>

        (a)      where there is not a Bullet Accumulation Shortfall at that
                 time, the total amount withdrawn from the Funding 1 Cash
                 Accumulation Ledger on that Funding 1 Interest Payment Date
                 for repayment of the relevant Scheduled Amortisation
                 Instalments shall not exceed the Cash Accumulation Ledger
                 Amount less the Bullet Accumulation Liability at that time;
                 and

        (b)      where there is a Bullet Accumulation Shortfall at that time:

                (i)     no amount may be withdrawn from the Funding 1 Cash
                        Accumulation Ledger on that Funding 1 Interest Payment
                        Date to be applied in repayment of the relevant
                        Scheduled Amortisation Instalments; and

                (ii)    no amount may be applied in repayment of the relevant
                        Scheduled Amortisation Instalments unless:

                        (A)  the sum of the Funding 1 Cash Accumulation Ledger
                             Amount and the amount of Funding 1 Available
                             Principal Receipts after the application of items
                             (a), (b) and (c) and before item (d) of the
                             Funding 1 Pre-Enforcement Principal Priority of
                             Payments,

                        is greater than or equal to:

                        (B)  the sum of the Bullet Accumulation Liability and
                             the aggregate amount of Scheduled Amortisation
                             Instalments which are due and payable as at that
                             time;

        or (b) with respect to Funding 2, at any time on a Funding 2 Interest
        Payment Date:

        (c)     where there is not a Bullet Accumulation Shortfall at that
                time, the total amount withdrawn from the Funding 2 Cash
                Accumulation Ledger on that Funding 2 Interest Payment Date
                for repayment of the relevant Scheduled Amortisation
                Instalments shall not exceed the Cash Accumulation Ledger
                Amount less the Bullet Accumulation Liability at that time;
                and

        (d)      where there is a Bullet Accumulation Shortfall at that time:

                (i)     no amount may be withdrawn from the Funding 2 Cash
                        Accumulation Ledger on that Funding 2 Interest Payment
                        Date to be applied in repayment of the relevant
                        Scheduled Amortisation Instalments; and

                (ii)    no amount may be applied in repayment of the relevant
                        Scheduled Amortisation Instalments unless:

                        (A)  the sum of the Funding 2 Cash Accumulation Ledger
                             Amount and the amount of Funding 2 Available
                             Principal Receipts after the application of items
                             (a), (b) and (c) and before item (d) of the
                             Funding 2 Pre-Enforcement Principal Priority of
                             Payments,

                        is greater than or equal to:

                        (B)  the sum of the Bullet Accumulation Liability and
                             the aggregate amount of Scheduled Amortisation
                             Instalments which are due and payable as at that
                             time;

        SCHEDULED AMORTISATION TERM ADVANCE means the Second Issuer Series 3
        Term AAA Advance, the Third Issuer Series 3 Term AAA Advance, the
        Third Issuer Series 4 Term AAA Advance, the Fourth Issuer Series 3
        Term AAA Advance, the

                                      69
<PAGE>

        Fourth Issuer Series 4 Term AAA Advance, the Fifth Issuer Series 2
        Term AAA Advance, the Fifth Issuer Series 3 Term AAA Advance, the
        Fifth Issuer Series 4 Term AAA Advance, the Sixth Issuer Series 2 Term
        AAA Advance, the Sixth Issuer Series 3 Term AAA Advance, the Sixth
        Issuer Series 4 Term AAA Advance, the Seventh Issuer Series 3 Term AAA
        Advance, the Seventh Issuer Series 4 Term AAA Advance, the Seventh
        Issuer Series 5 Term AAA Advance, the Eighth Issuer Series 3 Term AAA
        Advance, the Eighth Issuer Series 4 Term AAA Advance, the Eighth
        Issuer Series 5A2 Term AAA Advance, the Ninth Issuer Series 3 Term AAA
        Advance, the Ninth Issuer Series 4 Term AAA Advance and any New
        Scheduled Amortisation Term Advance;

        SCHEDULED REPAYMENT DATE means, as the context requires, (a) in
        relation to a Term Advance, its Scheduled Repayment Date(s), as
        defined in the relevant Issuer Master Definitions and Construction
        Schedule relating to the corresponding class of Notes or (b) in
        relation to a Loan Tranche, its Scheduled Repayment Date(s), as
        defined in the relevant Master Issuer Master Definitions and
        Construction Schedule relating to the corresponding class of Notes;

        SCOTTISH DECLARATION OF TRUST means each declaration of trust entered
        into among the Seller, the Mortgages Trustee, and Funding 1 (and if
        the context requires) Funding 2 pursuant to Clause 4.5(a)(vii) of the
        Mortgage Sale Agreement substantially in the form set out in Schedule
        15 to the Mortgage Sale Agreement;

        SCOTTISH LOAN means a Loan secured by a standard security over a
        Property located in Scotland;

        SCOTTISH MORTGAGE means a Mortgage securing a Scottish Loan;

        SCOTTISH TRANSFERS means each Sasine Transfer and each SLR Transfer;

        SCOTTISH TRUST PROPERTY means the aggregate of all Scottish Trust
        Property as defined in each relevant Scottish Declaration of Trust;

        SEC or SECURITIES AND EXCHANGE COMMISSION means the United States
        Securities and Exchange Commission;

        SECOND DEED OF ACCESSION means the second deed of accession to the
        Funding 1 Deed of Charge entered into on the Third Issuer Closing Date
        between Funding 1, the First Issuer, the Second Issuer, the Third
        Issuer, the Corporate Services Provider, the Account Bank, the
        Security Trustee, the Seller, the First Start-up Loan Provider, the
        Second Start-up Loan Provider, the Third Start-up Loan Provider, the
        Cash Manager, the Funding 1 Swap Provider and the Funding 1 Liquidity
        Facility Provider as supplemented, amended and/or restated from time
        to time;

        SECOND ISSUER means Permanent Financing (No. 2) PLC (registered number
        4623188), 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;

        SECOND ISSUER CLOSING DATE means 6 March 2003;

        SECOND ISSUER INTERCOMPANY LOAN AGREEMENT means the Second Issuer
        Intercompany Loan Confirmation and the Intercompany Loan Terms and
        Conditions together entered into on the Second Issuer Closing Date by
        the Second Issuer, Funding 1 and the Security Trustee (as the same may
        be amended, restated, supplemented, replaced and/or novated from time
        to time);

        SECOND ISSUER SECURITY means the security created by the Second Issuer
        pursuant to the Second Issuer Deed of Charge in favour of the Second
        Issuer Secured Creditors;

                                     70
<PAGE>

        SECOND START-UP LOAN means the start-up loan that the Second Start-up
        Loan Provider made available to Funding 1 pursuant to the Second
        Start-up Loan Agreement;

        SECOND START-UP LOAN AGREEMENT means the agreement entered into on the
        Second Issuer Closing Date between Funding 1, the Second Start-up Loan
        Provider and the Security Trustee relating to the provision of the
        Second Start-up Loan to Funding 1 (as the same may be amended,
        restated, supplemented, replaced and/or novated from time to time);

        SECOND START-UP LOAN PROVIDER means initially Halifax and as of the
        Reorganisation Date, Bank of Scotland in its capacity as provider of
        the Second Start-up Loan;

        SECOND SUPPLEMENTAL FUNDING 1 DEED OF CHARGE means the second
        supplemental Funding 1 deed of charge entered into on the Fourth
        Issuer Closing Date between Funding 1, the First Issuer, the Second
        Issuer, the Third Issuer, the Fourth Issuer, the Security Trustee, the
        Mortgages Trustee, the Cash Manager, the Account Bank, the Funding 1
        GIC Provider, the Funding 1 Swap Provider, the First Start-up Loan
        Provider, the Second Start-up Loan Provider, the Third Start-up Loan
        Provider and the Fourth Start-up Loan Provider, the Funding 1
        Liquidity Facility Provider, the Funding 1 Corporate Services Provider
        and the Seller;

        SECURED AMOUNTS means any and all of the monies and liabilities which
        an Issuer covenants to pay or discharge under the relevant Deed of
        Charge and all other amounts owed by it to the Beneficiaries under and
        pursuant to the relevant Transaction Documents;

        SECURITIES ACT means the United States Securities Act of 1933, as
        amended;

        SECURITISATION RELATED ACCOUNTS means the Funding 1 GIC Account, the
        Funding 1 Transaction Account, the Funding 2 GIC Account, the Funding
        2 Transaction Account, the Mortgages Trustee GIC Account, the First
        Issuer Accounts, the Second Issuer Accounts, the Third Issuer
        Accounts, the Fourth Issuer Accounts, the Fifth Issuer Accounts, the
        Sixth Issuer Accounts, the Seventh Issuer Accounts, the Eighth Issuer
        Accounts, the Ninth Issuer Accounts and the Master Issuer Accounts;

        SECURITISATION TAX REGIME means the permanent regime for the taxation
        of securitisation companies established pursuant to the Finance Act
        2005 and the regulations made thereunder;

        SECURITY INTEREST or ENCUMBRANCE means any mortgage, sub-mortgage,
        standard security, charge, sub-charge, pledge, lien (other than a lien
        arising in the ordinary course of business or by operation of law),
        assignation in security or other encumbrance or security interest
        howsoever created or arising;

        SECURITY POWER OF ATTORNEY or FUNDING 1 POWER OF ATTORNEY the power of
        attorney granted by Funding 1 in favour of the Funding 1 Security
        Trustee under the Funding 1 Deed of Charge on the Initial Closing Date
        substantially in the form set out in Schedule 1 to the Funding 1 Deed
        of Charge;

        SECURITY TRUSTEE means, as the context requires, the Funding 1
        Security Trustee or the Funding 2 Security Trustee;

        SECURITY TRUSTEES means the Funding 1 Security Trustee, the Funding 2
        Security Trustee or the Bank of New York (or any successor thereto) as
        security trustee pursuant to the First Issuer Deed of Charge, Second
        Issuer Deed of Charge, Third Issuer Deed of Charge, Fourth Issuer Deed
        of Charge, Fifth Issuer Deed of Charge, Sixth Issuer Deed of Charge,
        Seventh Issuer Deed of Charge, Eighth Issuer Deed of Charge and Ninth
        Issuer Deed of Charge;

        SELLER means initially Halifax and, as of the Reorganisation Date,
        Bank of Scotland;

                                      71
<PAGE>

        SELLER BANK ACCOUNTS means the bank account(s) of the Seller into
        which monies may be paid from time to time pursuant to the terms of
        the Mortgages Trust Deed, details of which will be given to the
        Mortgages Trustee, Funding 2 and Funding 1;

        SELLER MORTGAGES TRUST ASSIGNMENT AGREEMENT means the assignment
        agreement entered into on or before the Programme Date between the
        Seller, Funding 2, Funding 1, the Security Trustees, the Mortgages
        Trustee and the Note Trustees in respect of the existing Issuers;

        SELLER POWER OF ATTORNEY means, as the context requires, (a) the power
        of attorney granted by the Seller in favour of Funding 1, the
        Mortgages Trustee and the Funding 1 Security Trustee on the Initial
        Closing Date and on the Fourth Issuer Closing Date substantially in
        the form set out in Schedule 5 to the Mortgage Sale Agreement and (b)
        the power of attorney granted by the Seller in favour of Funding 1,
        Funding 2, the Mortgages Trustee, the Funding 1 Security Trustee and
        the Funding 2 Security Trustee on the Programme Date and on 21
        November 2007 substantially in the form set out in Schedule 5 to the
        Mortgage Sale Agreement;

        SELLER SHARE means, only in respect of the period prior to the first
        Distribution Date, the Initial Seller Share, and thereafter means the
        Current Seller Share;

        SELLER SHARE PERCENTAGE means, only in respect of the period prior to
        the first Distribution Date, the Initial Seller Share Percentage, and
        thereafter means the Current Seller Share Percentage;

        SELLER'S POLICY means the originating, underwriting, administration,
        arrears and enforcement policy applied by the Seller from time to time
        to loans and the security for their repayment which are beneficially
        owned solely by the Seller;

        SENIOR FEE means the fee (inclusive of VAT, if any) paid by Funding 2
        to the Master Issuer prior to enforcement of the Funding 2 Security on
        each Funding 2 Interest Payment Date or otherwise when required
        pursuant to Clause 7.5 of the Master Intercompany Loan Agreement;

        SERVICER means initially Halifax and, as of the Reorganisation Date,
        Bank of Scotland, or such other person as may from time to time be
        appointed as servicer of the Portfolio pursuant to the Servicing
        Agreement;

        SERVICER TERMINATION EVENT means any of the events listed in Clause 21
        of the Servicing Agreement;

        SERVICES has the meaning given in Clause 3.1(a) of the Servicing
        Agreement;

        SERVICING AGREEMENT means the agreement entered into on the Initial
        Closing Date between the Servicer, the Mortgages Trustee, the Funding
        1 Security Trustee, Funding 1 and the Seller (as amended and restated
        on the Second Issuer Closing Date, the Third Issuer Closing Date, the
        Fourth Issuer Closing Date, the Fifth Issuer Closing Date, the Sixth
        Issuer Closing Date, the Seventh Issuer Closing Date, the Eighth
        Issuer Closing Date and the Ninth Issuer Closing Date and as further
        amended and restated on the Programme Date and 21 November 2007 by the
        Servicer, the Mortgages Trustee, the Funding 1 Security Trustee, the
        Funding 2 Security Trustee, Funding 1, Funding 2 and the Seller) (as
        the same may be further amended, restated, supplemented, replaced
        and/or novated from time to time) pursuant to which the Servicer
        agrees to administer the Loans and their Related Security comprised in
        the Portfolio;

        SEVENTH DEED OF ACCESSION means the seventh deed of accession to the
        Funding 1 Deed of Charge entered into on the Eighth Issuer Closing
        Date between Funding 1, the First Issuer, the Second Issuer, the Third
        Issuer, the Fourth Issuer, the Fifth Issuer, the Sixth Issuer, the
        Seventh Issuer, the Eighth Issuer, the Corporate Services Provider,
        the Account Bank, the Security Trustee, the Seller,

                                      72
<PAGE>

        the First Start-up Loan Provider, the Second Start-up Loan Provider,
        the Third Start-up Loan Provider, the Fourth Start-up Loan Provider,
        the Fifth Start-up Loan Provider, the Sixth Start-up Loan Provider,
        the Seventh Start-up Loan Provider, the Eighth Start-up Loan Provider,
        the Cash Manager, the Funding 1 Swap Provider and the Funding 1
        Liquidity Facility Provider as supplemented, amended and/or restated
        from time to time;

        SEVENTH ISSUER means Permanent Financing (No. 7) PLC (registered
        number 5330776), 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;

        SEVENTH ISSUER CLOSING DATE means 23 March 2005;

        SEVENTH ISSUER INTERCOMPANY LOAN AGREEMENT means the Seventh Issuer
        Intercompany Loan Confirmation and the Intercompany Loan Terms and
        Conditions together entered into on the Seventh Issuer Closing Date by
        the Seventh Issuer, Funding 1 and the Security Trustee (as the same
        may be amended, restated, supplemented, replaced and/or novated from
        time to time);

        SEVENTH ISSUER SECURITY means the security created by the Seventh
        Issuer pursuant to the Seventh Issuer Deed of Charge in favour of the
        Seventh Issuer Secured Creditors;

        SEVENTH START-UP LOAN means the start-up loan that the Seventh
        Start-up Loan Provider has made available to Funding 1 pursuant to the
        Seventh Start-up Loan Agreement;

        SEVENTH START-UP LOAN AGREEMENT means the agreement entered into on
        the Seventh Issuer Closing Date between Funding 1, the Seventh
        Start-up Loan Provider and the Security Trustee relating to the
        provision of the Seventh Start-up Loan to Funding 1 (as the same may
        be amended, restated, supplemented, replaced and/or novated from time
        to time);

        SEVENTH START-UP LOAN PROVIDER means initially Halifax and as of the
        Reorganisation Date, Bank of Scotland, in its capacity as provider of
        the Seventh Start-up Loan;

        SHARE TRUSTEE means, in respect of Holdings, SFM Corporate Services
        Limited of 35 Great St. Helen's, London EC3A 6AP; in respect of the
        Mortgages Trustee, SFM Offshore Limited of 47 Esplanade, St. Helier,
        Jersey JE1 0BD, Channel Islands; and in respect of PECOH Holdings,
        Structured Finance Management Investments Limited of 35 Great St.
        Helen's, London EC3A 6AP;

        SIXTH DEED OF ACCESSION means the sixth deed of accession to the
        Funding 1 Deed of Charge entered into on the Seventh Issuer Closing
        Date between Funding 1, the First Issuer, the Second Issuer, the Third
        Issuer, the Fourth Issuer, the Fifth Issuer, the Sixth Issuer, the
        Seventh Issuer, the Corporate Services Provider, the Account Bank, the
        Security Trustee, the Seller, the First Start-up Loan Provider, the
        Second Start-up Loan Provider, the Third Start-up Loan Provider, the
        Fourth Start-up Loan Provider, the Fifth Start-up Loan Provider, the
        Sixth Start-up Loan Provider, the Seventh Start-up Loan Provider, the
        Cash Manager, the Funding 1 Swap Provider and the Funding 1 Liquidity
        Facility Provider as supplemented, amended and/or restated from time
        to time;

        SIXTH ISSUER means Permanent Financing (No. 6) PLC (registered number
        5232464), 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;

        SIXTH ISSUER CLOSING DATE means 18 November 2004;

        SIXTH ISSUER INTERCOMPANY LOAN AGREEMENT means the Sixth Issuer
        Intercompany Loan Confirmation and the Intercompany Loan Terms and
        Conditions together entered into on the Sixth

                                      73
<PAGE>

        Issuer Closing Date by the Sixth Issuer, Funding 1 and the Security
        Trustee (as the same may be amended, restated, supplemented, replaced
        and/or novated from time to time);

        SIXTH ISSUER SECURITY means the security created by the Sixth Issuer
        pursuant to the Sixth Issuer Deed of Charge in favour of the Sixth
        Issuer Secured Creditors;

        SIXTH START-UP LOAN means the start-up loan that the Sixth Start-up
        Loan Provider has made available to Funding 1 pursuant to the Sixth
        Start-up Loan Agreement;

        SIXTH START-UP LOAN AGREEMENT means the agreement entered into on the
        Sixth Issuer Closing Date between Funding 1, the Sixth Start-up Loan
        Provider and the Security Trustee relating to the provision of the
        Sixth Start-up Loan to Funding 1 (as the same may be amended,
        restated, supplemented, replaced and/or novated from time to time);

        SIXTH START-UP LOAN PROVIDER means initially Halifax and as of the
        Reorganisation Date, Bank of Scotland, in its capacity as provider of
        the Sixth Start-up Loan;

        SLR TRANSFER means, in relation to Properties situated in Scotland
        title to which is registered or is in the course of being registered
        in the Land Register of Scotland, each assignation of the relevant
        Scottish Loans and their related Scottish Mortgages in the relevant
        form set out in Schedule 13 to the Mortgage Sale Agreement with such
        modifications as may be required from time to time;

        SPECIAL DISTRIBUTION means a payment made by the Mortgages Trustee (a)
        to the Seller (excluding any payment of Initial Purchase Price) which
        is funded by a Further Contribution made to the Mortgages Trustee by
        Funding 1 or by Funding 2; or (b) to Funding 1, which is funded by a
        Further Contribution made to the Mortgages Trustee by Funding 2;

        SPECIFIED CURRENCY EXCHANGE RATE means, in relation to a series and
        class of Notes, the exchange rate specified in the Master Issuer Swap
        Agreement relating to such series and class of Notes or, if the Master
        Issuer Swap Agreement has been terminated, the applicable spot rate;

        ST ANDREW'S INSURANCE means St Andrew's Insurance plc, a non-life
        insurance company incorporated on 15 September 2003 whose office is at
        St Andrew's House, Portsmouth Road, Esher, Surrey KT10 9SA;

        STANDARD DOCUMENTATION means the standard documentation, a list of
        which is set out in Part 2 of the Exhibit to the Original Mortgage
        Sale Agreement and copies of which have been initialled on behalf of
        the parties thereto for the purposes of identification, or any update
        or replacement therefor as the Seller may from time to time introduce
        acting in accordance with the standards of a Reasonable, Prudent
        Mortgage Lender;

        STANDARD SECURITY or STANDARD SECURITY means a standard security as
        defined in Part 2 of the Conveyancing and Feudal Reform (Scotland) Act
        1970;

        START-UP LOAN AGREEMENTS means the First Start-up Loan Agreement, the
        Second Start-up Loan Agreement, the Third Start up Loan Agreement, the
        Fourth Start-up Loan Agreement, the Fifth Start-up Loan Agreement, the
        Sixth Start-up Loan Agreement, the Seventh Start-up Loan Agreement,
        the Eighth Start-up Loan Agreement, the Ninth Start-up Loan Agreement,
        the Funding 2 Start-up Loan Agreements and, as the context requires,
        any New Start-Up Loan Agreement and START-UP LOAN AGREEMENT means any
        of them;

        START-UP LOAN PROVIDERS means the First Start-up Loan Provider, the
        Second Start-up Loan Provider, the Third Start-up Loan Provider, the
        Fourth Start-up Loan Provider, the Fifth Start-up Loan Provider, the
        Sixth Start-up Loan Provider, the Seventh Start-up Loan Provider, the
        Eighth Start-up Loan Provider, the Ninth Start-up Loan Provider, the
        Funding 2 Start-Up Loan Provider and as the context requires, any New
        Start-up Loan Provider and START-UP LOAN PROVIDER means any of them;

                                      74
<PAGE>

        START-UP LOAN REVENUE CONTRIBUTION LEDGER means the Ledger of such
        name established and maintained by the Cash Manager on behalf of
        Funding 2 pursuant to Clause 4.4 (Funding 2 Ledgers) of the Cash
        Management Agreement;

        START-UP LOAN TRANCHE means a Loan Tranche made by the Master Issuer
        to Funding 2 under the Master Intercompany Loan Agreement from the
        proceeds of the advance by the Master Issuer Start-Up Loan Provider or
        a new Master Issuer Start-Up Loan Provider to the Master Issuer of a
        Master Issuer Start-Up Loan;

        START-UP LOANS means the First Start-up Loan, the Second Start-up
        Loan, the Third Start-up Loan, the Fourth Start-up Loan, the Fifth
        Start-up Loan, the Sixth Start-up Loan, the Seventh Start-up Loan, the
        Eighth Start-up Loan, the Ninth Start-up Loan, each Funding 2 Start-up
        Loan and any New Start-up Loan;

        STEP-UP DATE means:

        (a)     in respect of a Rated Loan Tranche, the Funding 2 Interest
                Payment Date on which the interest rate on the relevant Loan
                Tranche under the Master Intercompany Loan Agreement increases
                by a pre-determined amount;

        (b)     in respect of any Intercompany Loan, the Funding 1 Interest
                Payment Date on which the interest rate payable in respect of
                the relevant Term Advances made thereunder increases by a
                pre-determined amount; and

        (c)     in respect of any Notes, the date on which the interest rate
                payable by the Issuer in respect of those Notes increases by a
                pre-determined amount;

        SUBORDINATED LOAN TRANCHE means a Loan Tranche made by the Master
        Issuer to Funding 2 under the Master Intercompany Loan Agreement from
        the proceeds of the advance by the Master Issuer Subordinated Loan
        Provider or a new Master Issuer Subordinated Loan Provider to the
        Master Issuer of a Master Issuer Subordinated Loan;

        SUBORDINATED LOAN TRANCHE REPAYMENT REQUIREMENT means the aggregate of
        all amounts that will be payable by Funding 2 on the next Funding 2
        Interest Payment Date as described in item (i) of the Funding 2
        Pre-Enforcement Principal Priority of payments on the basis that the
        Subordinated Loan Tranches will equal or exceed the Required
        Subordinated Loan Tranche Principal Amount Outstanding;

        SUBSIDIARY means a subsidiary as defined in section 736 of the
        Companies Act 1985;

        TARGET BUSINESS DAY means a day on which the Trans-European Automated
        Real-time Gross settlement Express Transfer (TARGET) system is open;

        TAX CREDIT means a credit against Tax obtained on the Funding 1
        Liquidity Facility Provider's overall net income which the Funding 1
        Liquidity Facility Provider is able to identify as attributable to a
        specific Tax Payment;

        TAX PAYMENT means a payment made by Funding 1 to the Funding 1
        Liquidity Facility Provider pursuant to clause 10.1 of the Funding 1
        Liquidity Facility Agreement;

                                     75
<PAGE>

        TAXES means all present and future taxes, levies, imposts, duties
        (other than stamp duty), fees, deductions, withholdings or charges of
        any nature whatsoever and wheresoever imposed, including, without
        limitation, income tax, corporation tax, value added tax or other tax
        in respect of added value and any franchise, transfer, sales, gross
        receipts, use, business, occupation, excise, personal property, real
        property or other tax imposed by any national, local or supranational
        taxing or fiscal authority or agency together with any penalties,
        fines or interest thereon and TAX and TAXATION shall be construed
        accordingly;

        TERM AAA ADVANCES means the First Issuer Term AAA Advances, the Second
        Issuer Term AAA Advances, the Third Issuer Term AAA Advances, the
        Fourth Issuer Term AAA Advances, the Fifth Issuer Term AAA Advances,
        the Sixth Issuer Term AAA Advances, the Seventh Issuer Term AAA
        Advances, the Eighth Issuer Term AAA Advances, the Ninth Issuer Term
        AAA Advances and any term AAA advances made by any New Issuer that is
        a Funding 1 Issuer;

        TERM ADVANCE RATING means the designated rating of each Term Advance
        which reflects the rating assigned to the corresponding class of Notes
        used to fund each such Term Advance on the relevant Closing Date of
        that Term Advance;

        TERM ADVANCES has the meaning given in each Issuer Master Definitions
        and Construction Schedule as prefixed by the definition of each
        respective Issuer;

        THIRD DEED OF ACCESSION means the third deed of accession to the
        Funding 1 Deed of Charge entered into on the Fourth Issuer Closing
        Date between Funding 1, the First Issuer, the Second Issuer, the Third
        Issuer, the Fourth Issuer, the Corporate Services Provider, the
        Account Bank, the Security Trustee, the Seller, the First Start-up
        Loan Provider, the Second Start-up Loan Provider, the Third Start-up
        Loan Provider, the Fourth Start-up Loan Provider, the Cash Manager,
        the Funding 1 Swap Provider and the Funding 1 Liquidity Facility
        Provider as supplemented, amended and/or restated from time to time;

        THIRD ISSUER means Permanent Financing (No. 3) PLC (registered number
        4907355), 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;

        THIRD ISSUER CLOSING DATE means 25 November 2003;

        THIRD ISSUER INTERCOMPANY LOAN AGREEMENT means the Third Issuer
        Intercompany Loan Confirmation and the Intercompany Loan Terms and
        Conditions together entered into on the Third Issuer Closing Date by
        the Third Issuer, Funding 1 and the Security Trustee (as the same may
        be amended, restated, supplemented, replaced and/or novated from time
        to time);

        THIRD ISSUER SECURITY means the security created by the Third Issuer
        pursuant to the Third Issuer Deed of Charge in favour of the Third
        Issuer Secured Creditors;

        THIRD PARTY AMOUNTS includes:

        (a)     amounts under a direct debit which are repaid to the bank
                making the payment if such a bank is unable to recoup that
                amount itself from the customer's account;

        (b)     payments by Borrowers of any fees and other charges which are
                due to the Seller.

        THIRD PARTY COLLECTION AGENT means an entity that shall act as
        collection agent for the Mortgages Trustee and the Beneficiaries under
        the Direct Debiting Scheme or any successor to that scheme pursuant to
        Clause 5.1(a)(i) of the Servicing Agreement;

                                     76
<PAGE>

        THIRD START-UP LOAN means the start-up loan that the Third Start-up
        Loan Provider made available to Funding 1 pursuant to the Third
        Start-up Loan Agreement;

        THIRD START-UP LOAN AGREEMENT means the agreement entered into on the
        Third Issuer Closing Date between Funding 1, the Third Start-up Loan
        Provider and the Security Trustee relating to the provision of the
        Third Start-up Loan to Funding 1 (as the same may be amended,
        restated, supplemented, replaced and/or novated from time to time);

        THIRD START-UP LOAN PROVIDER means initially Halifax and as of the
        Reorganisation Date, Bank of Scotland, in its capacity as provider of
        the Third Start-up Loan;

        THIRD SUPPLEMENTAL FUNDING 1 DEED OF CHARGE means the supplemental
        deed to the Funding 1 Deed of Charge made on the Programme Date
        between Funding 1, the First Issuer, the Second Issuer, the Third
        Issuer, the Fourth Issuer, the Fifth Issuer, the Sixth Issuer, the
        Seventh Issuer, the Eighth Issuer, the Ninth Issuer, the Mortgages
        Trustee, the Funding 1 Security Trustee, the Funding 1 GIC Provider,
        the Account Bank, the Funding 1 Liquidity Facility Provider, PECOH
        Corporate Services Provider, the Cash Manager, the Seller, the Funding
        1 Swap Provider, the First Start-up Loan Provider, the Second Start-up
        Loan Provider, the Third Start-up Loan Provider, the Fourth Start-up
        Loan Provider, the Fifth Start-up Loan Provider, the Sixth Start-up
        Loan Provider, the Seventh Start-up Loan Provider, the Eighth Start-up
        Loan Provider, the Ninth Start-up Loan Provider and the Funding 1
        Corporate Services Provider;

        TITLE DEEDS means, in relation to each Loan and its Related Security
        and the Property relating thereto, all conveyancing deeds, MHA
        Documentation and all other documents which make up the title to the
        Property and the security for the Loan and all searches and enquiries
        undertaken in connection with the grant by the Borrower of the related
        Mortgage;

        TOTAL PROPERTY means at any time the aggregate amount standing to the
        credit of the Collection Account and held by Bank of Scotland on trust
        for Funding 1, Funding 2, the Mortgages Trustee and Bank of Scotland,
        subject to and in accordance with the Bank Account Agreement;

        TRACKER RATE means the rate of interest applicable to a Tracker Rate
        Loan (before applying any cap or minimum rate);

        TRACKER RATE LOAN means those Loans to the extent that and for such
        period that their Mortgage Terms provide that they are subject to an
        interest rate which is linked to a variable interest rate other than
        the Variable Base Rates. For example, the rate on a Tracker Rate Loan
        may be set at a margin above sterling LIBOR or above rates set by the
        Bank of England;

        TRACKER SWAP RATE means a rate linked to the Bank of England repo
        rate, as shall be determined by the Cash Manager in accordance with
        the provisions of the Cash Management Agreement;

        TRANSACTION DOCUMENTS means the Funding 1 Agreements, the Funding 2
        Agreements, the First Issuer Transaction Documents, the Second Issuer
        Transaction Documents, the Third Issuer Transaction Documents, the
        Fourth Issuer Transaction Documents, the Fifth Issuer Transaction
        Documents, the Sixth Issuer Transaction Documents, the Seventh Issuer
        Transaction Documents, the Eighth Issuer Transaction Documents, the
        Ninth Issuer Transaction Documents, the Master Issuer Transaction
        Documents and any documents and agreements to which any New Issuer is
        a party, the Mortgages Trustee Guaranteed Investment Contract and all
        other documents and agreements referred to therein;

        TREATY LENDER means a person who is resident (as such term is defined
        in the appropriate Double Taxation Treaty) in a country with which the
        United Kingdom has a Double Taxation Treaty giving residents of that
        country complete exemption from United Kingdom taxation on interest
        and does not

                                     77
<PAGE>

        carry on business in the United Kingdom through a permanent
        establishment with which any payment under the Funding 1 Liquidity
        Documents is effectively connected;

        TRIGGER EVENT means an Asset Trigger Event and/or a Non-Asset Trigger
        Event, as the case may be;

        TRUST CORPORATION means a corporation entitled by rules made under the
        Public Trustee Act 1906 to carry out the functions of a custodian
        trustee;

        TRUST DEEDS means the First Issuer Trust Deed and/or the Second Issuer
        Trust Deed and/or the Third Issuer Trust Deed and/or the Fourth Issuer
        Trust Deed and/or the Fifth Issuer Trust Deed and/or the Sixth Issuer
        Trust Deed and/or the Seventh Issuer Trust Deed and/or the Eighth
        Issuer Trust Deed and/or the Ninth Issuer Trust Deed and/or any Master
        Issuer Trust Deed;

        TRUST INDENTURE ACT means the United States Trust Indenture Act of
        1939, as amended;

        TRUST PROPERTY means:

        (a)     the Initial Trust Property, the Initial Closing Trust Property
                and any Future Trust Property (together with the proceeds of
                sale of any of them) including, without limitation, the
                Mortgages Trustee's whole right, title and beneficial interest
                in and to all Scottish Trust Property pursuant to any relevant
                Scottish Declaration of Trust; but excludes any Loans that
                have been repaid or which have been repurchased by the Seller
                pursuant to the Mortgage Sale Agreement or other actual
                adjustments and, for the avoidance of doubt, which are not
                deemed adjustments to the Trust Property as set out in the
                Mortgages Trust Deed;

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

        (c)     any interest and principal paid by Borrowers on their Loans
                prior to distribution under the Mortgages Trust Deed;

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

        (e)     rights under the Insurance Policies that are sold to the
                Mortgages Trustee or which the Mortgages Trustee has the
                benefit of;

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

        (g)     any other Initial Trust Property or interest in the Trust
                Property referred to in Clause 2.5 of the Mortgages Trust
                Deed;

        less

        (h)     any actual losses in relation to Loans and any actual
                reductions (and for the avoidance of doubt, not deemed
                reductions) occurring in respect of the Loans as set out in
                Clause 8.4(a) of the Mortgages Trust Deed; and

                                     78
<PAGE>

         (i)     allocations of Mortgages Trust Available Principal Receipts to
                 the Beneficiaries in accordance with Clause 11 of the
                 Mortgages Trust Deed;

         UK NON-BANK LENDER means a lender within the meaning of paragraph (b)
         of the definition of QUALIFYING LENDER;

         UNCURED FUNDING 1 REVENUE SHORTFALL has the meaning given in Part 1 of
         Schedule 3 to the Funding 1 Deed of Charge;

         UNCURED FUNDING 2 REVENUE SHORTFALL has the meaning given in Part 1 of
         Schedule 3 to the Funding 2 Deed of Charge;

         UNDERPAYMENT means a payment by a Borrower in an amount less than the
         Monthly Payment then due on the Loan, being a sum not exceeding the
         aggregate of any previous Overpayments;

         UNITED KINGDOM means The United Kingdom of Great Britain and Northern
         Ireland;

         UNITED STATES means The United States of America;

         UNREGISTERED LAND means land in England and Wales title to which is
         not, and is not required to be, registered at the Land Registry;

         UNREGISTERED TRANSFER means a deed of transfer of a Mortgage or
         Mortgages over Unregistered Land substantially in the form set out in
         Schedule 3 to the Mortgage Sale Agreement with such modifications as
         may be required from time to time;

         VALUATION REPORT means the valuation report or reports for mortgage
         purposes, in the form of the pro-forma contained in the Standard
         Documentation, obtained by the Seller from a Valuer in respect of each
         Property or a valuation report in respect of a valuation made using a
         methodology which would be acceptable to a Reasonable, Prudent
         Mortgage Lender and which has been approved by the Director of Group
         Property and Survey of the Seller (or his successor);

         VALUER means an Associate or Fellow of the Royal Institution of
         Chartered Surveyors or the Incorporated Society of Valuers and
         Auctioneers who was at the relevant times either a member of a firm
         which was on the list of Valuers approved by or on behalf of the
         Seller from time to time or an Associate or Fellow of the Royal
         Institute of Chartered Surveyors or the Incorporated Society of
         Valuers and Auctioneers employed in-house by the Seller acting for the
         Seller in respect of the valuation of a Property;

         VARIABLE BASE RATES means HVR 1, HVR 2, Halifax Flexible Variable Rate
         or the Mortgages Trustee Variable Base Rate, as applicable and
         VARIABLE BASE RATE means any one of them;

         VARIABLE MORTGAGE RATE means the rate of interest which determines the
         amount of interest payable each month on a Variable Rate Loan;

         VARIABLE RATE LOANS means those Loans to the extent that and for such
         period that their Mortgage Terms provide that they are subject to an
         interest rate which may at any time be varied in accordance with the
         relevant Mortgage Terms (and shall, for the avoidance of doubt,
         exclude Loans during the period that they are Fixed Rate Loans or
         Tracker Rate Loans);

         WAFF means the weighted average repossession frequency in respect of
         the Portfolio; and

         WALS means the weighted average loss severity in respect of the
         Portfolio.

                                      79
<PAGE>

3        INTERPRETATION AND CONSTRUCTION

         Any reference in any Transaction Document, or in any document to which
         this Amended and Restated Master Definitions and Construction Schedule
         is expressed to be incorporated or apply, to:

         AFFILIATE of any person shall be construed as a reference to the
         ultimate holding company of that person or an entity of which that
         person or its ultimate holding company (a) has direct or indirect
         control or (b) owns directly or indirectly more than fifty per cent.
         (50%) of the share capital or similar rights of ownership;

         the ASSETS of any person shall be construed as a reference to the
         whole or any part of its business, undertakings, property,
         intellectual property, shares, securities, debts, accounts, revenues
         (including any right to receive revenues), goodwill, shareholdings and
         uncalled capital including premium whether now or hereafter acquired
         and any other assets whatsoever;

         an AUTHORISATION includes an authorisation, consent, approval,
         resolution, licence, exemption, filing or registration;

         DISPOSAL shall be construed as any sale, lease, transfer, conveyance,
         assignment, assignation, licence, sublicence or other disposal and
         DISPOSE shall be construed accordingly;

         a GUARANTEE means any guarantee, bond, indemnity, letter of credit,
         third party security or other legally binding assurance against
         financial loss granted by one person in respect of any indebtedness of
         another person, or any agreement to assume any indebtedness of any
         other person or to supply funds or to invest in any manner whatsoever
         in such other person by reason of, or otherwise in relation to,
         indebtedness of such other person;

         INDEBTEDNESS shall be construed so as to include any obligation
         (whether incurred as principal or as surety or guarantor) for the
         payment or repayment of money, whether present or future, actual or
         contingent;

         a MONTH is a reference to a period starting on one day in a calendar
         month and ending on the numerically corresponding day in the next
         calendar month save that, where any such period would otherwise end on
         a day which is not a business day, it shall end on the next business
         day, unless that day falls in the calendar month succeeding that in
         which it would otherwise have ended, in which case it shall end on the
         preceding business day Provided that, if a period starts on the last
         business day in a calendar month or if there is no numerically
         corresponding day in the month in which that period ends, that period
         shall end on the last business day in that later month (and references
         to MONTHS shall be construed accordingly);

         a REGULATION includes any regulation, rule, official directive,
         request or guideline (whether or not having the force of law) of any
         governmental, inter-governmental or supranational body, agency,
         department or regulatory, self-regulatory or other authority or
         organisation;

         SET-OFF shall be deemed to include analogous rights in other relevant
         jurisdictions;

         VAT means value added tax imposed by the United Kingdom as referred to
         in the Value Added Tax Act 1994 and legislation (whether delegated or
         otherwise) replacing the same or supplemental thereto or in any
         primary or subordinate legislation promulgated by the European Union
         or any official body or agency thereof, and any similar turnover tax
         replacing or introduced in addition to any of the same;

         a WHOLLY-OWNED SUBSIDIARY of a company or corporation shall be
         construed as a reference to any company or corporation which has no
         other members except that other company or corporation and

                                      80
<PAGE>

         that other company's or corporation's wholly-owned subsidiaries or
         persons acting on behalf of that other company or corporation or its
         wholly-owned subsidiaries; and

         the WINDING-UP, DISSOLUTION or ADMINISTRATION of a company or
         corporation shall be construed so as to include any equivalent or
         analogous proceedings under the law of the jurisdiction in which such
         company or corporation is incorporated or any jurisdiction in which
         such company or corporation carries on business including the seeking
         of liquidation, winding-up, bankruptcy, reorganisation, dissolution,
         administration, arrangement, adjustment, protection or relief of
         debtors.

3.1      [POUND], STERLING or POUNDS STERLING denotes the lawful currency for
         the time being of the United Kingdom and [EURO], EURO or EURO denotes
         the single currency introduced at the start of the third stage of
         European Economic Monetary Union pursuant to the Treaty of Rome of 25
         March 1957, as amended by, inter alia, the Single European Act of 1986
         and the Treaty of European Union of 7 February 1992 and the Treaty of
         Amsterdam of 2 October 1997 establishing the European Community, as
         further amended from time to time.

3.2      In this Amended and Restated Master Definitions and Construction
         Schedule and in any of the Transaction Documents in which this Amended
         and Restated Master Definitions and Construction Schedule is expressed
         to be incorporated or to which this Amended and Restated Master
         Definitions and Construction Schedule is expressed to apply:

         (a)     words denoting the singular number only shall include the
                 plural number also and vice versa;

         (b)     words denoting one gender only shall include the other
                 genders;

         (c)     words denoting persons only shall include firms and
                 corporations and vice versa;

         (d)     references to any statutory provision shall be deemed also to
                 refer to any statutory modification or re-enactment thereof or
                 any statutory instrument, order or regulation made thereunder
                 or under any such re-enactment;

         (e)     references to any agreement or other document (including any
                 of the Transaction Documents) shall be deemed also to refer to
                 such agreement or document as amended, varied, supplemented or
                 novated from time to time;

         (f)     clause, paragraph and schedule headings are for ease of
                 reference only;

         (g)     reference to a statute shall be construed as a reference to
                 such statute as the same may have been, or may from time to
                 time be, amended or re-enacted to the extent such amendment or
                 re-enactment is substantially to the same effect as such
                 statute on the date hereof;

         (h)     reference to a time of day shall be construed as a reference
                 to London time (unless otherwise specified); and

         (i)     references to any person shall include references to his
                 successors, transferees and assigns and assignees and any
                 person deriving title under or through him.

3.3      Any capitalised term that appears in this Amended and Restated Master
         Definitions and Construction Schedule or in the Funding 1 Agreements,
         the Funding 2 Agreements, the Issuer Swap Agreements or the Mortgages
         Trustee Guarantee Investment Contract that is not defined in this
         Amended and Restated Master Definitions and Construction Schedule
         shall have the meaning given in the relevant Issuer Master Definitions
         and Construction Schedule or each Issuer Master Definitions and

                                      81
<PAGE>

         Construction Schedule or the Master Issuer Master Definitions and
         Construction Schedule, as applicable, as the context so requires.

3.4      Terms used in any Transaction Document which incorporate this Amended
         and Restated Master Definitions and Construction Schedule and/or an
         Issuer Master Definitions and Construction Schedule, unless otherwise
         defined therein or unless the context otherwise requires, shall, in
         the event of conflict between this Amended and Restated Master
         Definitions and Construction Schedule and the relevant Issuer Master
         Definitions and Construction Schedule, be construed in accordance with
         the relevant Issuer Master Definitions and Construction Schedule.

4.       AMENDMENTS

         Subject to Clause 25 of the Funding 1 Deed of Charge, Clause 12 of the
         Funding 2 Deed of Charge and Clauses 2, 3 and 4 of the Controlling
         Beneficiary Deed, any amendments to this Amended and Restated Master
         Definitions and Construction Schedule will be made only with the prior
         written consent of each party to this Amended and Restated Master
         Definitions and Construction Schedule.

5.       COUNTERPARTS

         This Amended and Restated Master Definitions and Construction Schedule
         may be signed in any number of counterparts each of which, when
         signed, shall constitute one and the same instrument.

6.       INCORPORATION OF TERMS

         Each defined term or reference in this Amended and Restated Master
         Definitions and Construction Schedule shall apply to each Transaction
         Document or document the parties to which have signed this Amended and
         Restated Master Definitions and Construction Schedule notwithstanding
         that all the parties to this Amended and Restated Master Definitions
         and Construction Schedule have not signed below.

7.       GOVERNING LAW

         This Amended and Restated Master Definitions and Construction Schedule
         is governed by the laws of England (provided that any terms of this
         Amended and Restated Master Definitions and Construction Schedule
         which are particular to Scots law shall be construed in accordance
         with the laws of Scotland).

                                      82
<PAGE>

                                  SCHEDULE 1

                              ACCESSION AGREEMENT

To:      The existing parties to the Master Definitions and Construction
         Schedule (the EXISTING PARTIES)

From:    [Name of Company] (the NEW PARTY)

                                                                       Date:[ ]

      MASTER DEFINITIONS AND CONSTRUCTION SCHEDULE DATED 1 MARCH 2007 AND
                   AMENDED AND RESTATED ON 21 NOVEMBER 2007

              (the MASTER DEFINITIONS AND CONSTRUCTION SCHEDULE)

We refer to Clause 1 (Accession of New Parties) of the Master Definitions and
Construction Schedule.

We, [name of company] of [registered office] (registered no. [ ]) agree to
become a party to the Master Definitions and Construction Schedule and to be
bound by the terms of the Master Definitions and Construction Schedule in
accordance with Clause 1 (Accession of New Parties) thereof.

This Accession Agreement is entered into by way of deed and is governed by
English law.

[EXECUTED as a DEED by                )
                                      )
[NEW PARTY]                           )     Director
                                      )
acting by [NAME of DIRECTOR]          )
                                      )
and [NAME of DIRECTOR/SECRETARY]]     )     Director/Secretary

                                      83
<PAGE>

                                  SIGNATORIES

FUNDING 1 LIQUIDITY FACILITY PROVIDER

SIGNED by                             )
for and on behalf of                  )     /s/ CLARE JOHNS
JPMORGAN CHASE BANK, N.A.             )

SELLER, SERVICER, BENEFICIARY, CASH MANAGER, ISSUER CASH MANAGER, FUNDING 1
SWAP PROVIDER, FUNDING 2 SWAP PROVIDER AND START-UP LOAN PROVIDERS

SIGNED by                             )
for and on behalf of                  )     /s/ IAN STEWART
BANK OF SCOTLAND PLC                  )     /s/ DAVID WILKINSON

FUNDING 1 AND BENEFICIARY

SIGNED by                             )
for and on behalf of                  )     /s/ CLAUDIA WALLACE
PERMANENT FUNDING (NO. 1) LIMITED     )

FUNDING 2 AND BENEFICIARY

SIGNED by                             )
for and on behalf of                  )     /s/ CLAUDIA WALLACE
PERMANENT FUNDING (NO. 2) LIMITED     )

MORTGAGES TRUSTEE

SIGNED by                             )
for and on behalf of                  )     /s/ ABU KAPADIA
PERMANENT MORTGAGES                   )
TRUSTEE LIMITED                       )

SHARE TRUSTEE IN RESPECT OF THE MORTGAGES TRUSTEE AND MORTGAGES TRUSTEE
CORPORATE SERVICES PROVIDER

SIGNED by                             )
for and on behalf of                  )     /s/ ABU KAPADIA
SFM OFFSHORE LIMITED                  )

                                      84
<PAGE>

SHARE TRUSTEE IN RESPECT OF HOLDINGS

SIGNED by                             )
for and on behalf of                  )     /s/ CLAUDIA WALLACE
SFM CORPORATE SERVICES LIMITED        )

SHARE TRUSTEE IN RESPECT OF PECOH HOLDINGS

SIGNED by                             )
for and on behalf of                  )
STRUCTURED FINANCE                    )     /s/ CLAUDIA WALLACE
MANAGEMENT INVESTMENTS                )
LIMITED                               )

MASTER ISSUER

SIGNED by                             )
for and on behalf of                  )     /s/ CLAUDIA WALLACE
PERMANENT MASTER ISSUER PLC           )

NINTH ISSUER

SIGNED by                             )
for and on behalf of                  )     /s/ CLAUDIA WALLACE
PERMANENT FINANCING (NO. 9) PLC       )

EIGHTH ISSUER

SIGNED by                             )
for and on behalf of                  )     /s/ CLAUDIA WALLACE
PERMANENT FINANCING (NO. 8) PLC       )

SEVENTH ISSUER

SIGNED by                             )
for and on behalf of                  )     /s/ CLAUDIA WALLACE
PERMANENT FINANCING (NO. 7) PLC       )

SIXTH ISSUER

SIGNED by                             )
for and on behalf of                  )     /s/ CLAUDIA WALLACE
PERMANENT FINANCING (NO. 6) PLC       )

                                      85
<PAGE>

FIFTH ISSUER

SIGNED by                             ) /S/ CLAUDIA WALLACE
for and on behalf of                  )
PERMANENT FINANCING (NO. 5) PLC       )

FOURTH ISSUER

SIGNED by                             ) /S/ CLAUDIA WALLACE
for and on behalf of                  )
PERMANENT FINANCING (NO. 4) PLC       )

THIRD ISSUER

SIGNED by                             ) /S/ CLAUDIA WALLACE
for and on behalf of                  )
PERMANENT FINANCING (NO. 3) PLC       )

SECOND ISSUER

SIGNED by                             ) /S/ CLAUDIA WALLACE
for and on behalf of                  )
PERMANENT FINANCING (NO. 2) PLC       )

FIRST ISSUER

SIGNED by                             ) /S/ CLAUDIA WALLACE
for and on behalf of                  )
PERMANENT FINANCING (NO. 1) PLC       )

FUNDING 1 CORPORATE SERVICES PROVIDER, FUNDING 2 CORPORATE SERVICES PROVIDER,
MASTER ISSUER CORPORATE SERVICES PROVIDER, FIRST ISSUER CORPORATE SERVICES
PROVIDER, SECOND ISSUER CORPORATE SERVICES PROVIDER, THIRD ISSUER CORPORATE
SERVICES PROVIDER, FOURTH ISSUER CORPORATE SERVICES PROVIDER, FIFTH ISSUER
CORPORATE SERVICES PROVIDER, SIXTH ISSUER CORPORATE SERVICES PROVIDER, SEVENTH
ISSUER CORPORATE SERVICES PROVIDER, EIGHTH ISSUER CORPORATE SERVICES PROVIDER
AND NINTH ISSUER CORPORATE SERVICES PROVIDER AND PECOH CORPORATE SERVICES
PROVIDER

SIGNED by                             ) /S/ CLAUDIA WALLACE
for and on behalf of                  )
STRUCTURED FINANCE                    )
MANAGEMENT LIMITED                    )

                                      86
<PAGE>

PERMANENT HOLDINGS LIMITED

SIGNED by                             ) /S/ CLAUDIA WALLACE
for and on behalf of                  )
PERMANENT HOLDINGS LIMITED            )

PERMANENT PECOH LIMITED

SIGNED by                             ) /S/ CLAUDIA WALLACE
for and on behalf of                  )
PERMANENT PECOH LIMITED               )

PERMANENT PECOH HOLDINGS LIMITED

SIGNED by                             ) /S/ CLAUDIA WALLACE
for and on behalf of                  )
PERMANENT PECOH HOLDINGS              )
LIMITED                               )

THE FIRST ISSUER SECURITY TRUSTEE, THE SECOND ISSUER SECURITY TRUSTEE, THE
THIRD ISSUER SECURITY TRUSTEE, THE FOURTH ISSUER SECURITY TRUSTEE, THE FIFTH
ISSUER SECURITY TRUSTEE, THE SIXTH ISSUER SECURITY TRUSTEE, THE SEVENTH ISSUER
SECURITY TRUSTEE, THE EIGHTH ISSUER SECURITY TRUSTEE, THE NINTH ISSUER SECURITY
TRUSTEE, THE MASTER ISSUER SECURITY TRUSTEE, THE FUNDING 1 SECURITY TRUSTEE AND
THE FUNDING 2 SECURITY TRUSTEE

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

THE FIRST ISSUER NOTE TRUSTEE, THE SECOND ISSUER NOTE TRUSTEE, THE THIRD ISSUER
NOTE TRUSTEE, THE FOURTH ISSUER NOTE TRUSTEE, THE FIFTH ISSUER NOTE TRUSTEE,
THE SIXTH ISSUER NOTE TRUSTEE, THE SEVENTH ISSUER NOTE TRUSTEE, THE EIGHTH
ISSUER NOTE TRUSTEE, THE NINTH ISSUER NOTE TRUSTEE AND THE NOTE TRUSTEE

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

AGENT BANK, PRINCIPAL PAYING AGENT, REGISTRAR AND TRANSFER AGENT FOR THE FIRST
ISSUER NOTES THE SECOND ISSUER NOTES, THE THIRD ISSUER NOTES, THE FOURTH ISSUER
NOTES, THE FIFTH ISSUER NOTES, THE SIXTH ISSUER NOTES, THE SEVENTH ISSUER
NOTES, THE EIGHTH ISSUER NOTES, THE NINTH ISSUER NOTES AND THE MASTER ISSUER
NOTES

SIGNED by                             ) /S/ GEORGIA MITCHELL
for and on behalf of                  )
CITIBANK, N.A., LONDON BRANCH         )
by its authorised signatory           )

                                      87
<PAGE>

ACCOUNT BANK, FIRST ISSUER ACCOUNT BANK, SECOND ISSUER ACCOUNT BANK, THIRD
ISSUER ACCOUNT BANK, FOURTH ISSUER ACCOUNT BANK, FIFTH ISSUER ACCOUNT BANK,
SIXTH ISSUER ACCOUNT BANK, SEVENTH ISSUER ACCOUNT BANK, EIGHTH ISSUER ACCOUNT
BANK AND NINTH ISSUER ACCOUNT BANK, MASTER ISSUER ACCOUNT BANK, MORTGAGES
TRUSTEE GIC PROVIDER, FUNDING 1 GIC PROVIDER AND FUNDING 2 GIC PROVIDER

SIGNED by                             ) /S/ IAN STERWART
for and on behalf of                  )
BANK OF SCOTLAND PLC                  ) /S/ DAVID WILKINSON

U.S. PAYING AGENT FOR THE FIRST ISSUER NOTES, THE SECOND ISSUER NOTES, THE
THIRD ISSUER NOTES, THE FOURTH ISSUER NOTES, THE FIFTH ISSUER NOTES, THE SIXTH
ISSUER NOTES, THE SEVENTH ISSUER NOTES, THE EIGHTH ISSUER NOTES, THE NINTH
ISSUER NOTES AND THE MASTER ISSUER NOTES

SIGNED by                             ) /S/ GEORGIA MITCHELL
for and on behalf of                  )
CITIBANK, N.A., NEW YORK BRANCH       )

2007-1 SERIES 3 CLASS A MASTER ISSUER SWAP PROVIDER

EXECUTED for and on behalf of         ) /S/ KOSTAS VASSILADIS
CITIBANK N.A., LONDON                 )
BRANCH                                )
acting by it attorney                 )

2007-1 SERIES 1 MASTER ISSUER SWAP PROVIDER AND 2007-1 SERIES 2 MASTER ISSUER
SWAP PROVIDER

EXECUTED for and on behalf of         ) /S/ ULRIKE SCHEFE
CREDIT SUISSE, LONDON                 ) /S/ PARMINDER BAINS
BRANCH                                )
acting by                             )

2007-1 SERIES 4 MASTER ISSUER SWAP PROVIDER

EXECUTED for and on behalf of         ) /S/ MEGAN WALLIS
DEUTSCHE BANK AG, LONDON              ) /S/ DAVID BUNTING
BRANCH                                )
acting by                             )

2006-1 SERIES 1 MASTER ISSUER SWAP PROVIDER, 2006-1 SERIES 2 MASTER ISSUER SWAP
PROVIDER AND 2006-1 SERIES 5 MASTER ISSUER SWAP PROVIDER

SIGNED by                             ) /S/ MEGAN WALLIS
for and on behalf of                  ) /S/ DAVID BUNTING
DEUTSCHE BANK AG, LONDON              )
BRANCH                                )

2006-1 SERIES 4 MASTER ISSUER SWAP PROVIDER

SIGNED by                             ) /S/ STEWART BROWN
for and on behalf of                  )
BARCLAYS BANK PLC                     )

                                      88
<PAGE>

2006-1 SERIES 1 MASTER ISSUER SWAP PROVIDER, 2006-1 SERIES 2 MASTER ISSUER SWAP
PROVIDER, 2006-1 SERIES 3 MASTER ISSUER SWAP PROVIDER AND THE SERIES 4 CLASS A1
FIRST ISSUER SWAP PROVIDER

SIGNED by                             ) /S/ ULRIKE SCHEFE
for and on behalf of                  ) /S/ PARMINDER BAINS
CREDIT SUISSE                         )
INTERNATIONAL                         )

SERIES 3 FIRST ISSUER SWAP PROVIDER, THE SERIES 4 SECOND ISSUER DOLLAR SWAP
PROVIDER, THE SERIES 4 SECOND ISSUER EURO SWAP PROVIDER, THE SERIES 3 THIRD
ISSUER SWAP PROVIDER, THE SERIES 5 THIRD ISSUER CURRENCY SWAP PROVIDER, THE
SERIES 3 FOURTH ISSUER SWAP PROVIDER, THE SERIES 3 FIFTH ISSUER SWAP PROVIDER
AND THE SERIES 2 SIXTH ISSUER SWAP PROVIDER

SIGNED by                             ) /S/ RICHARD EVELYN
for and on behalf of                  )
BANQUE AIG, LONDON BRANCH             )

SERIES 1 FIRST ISSUER SWAP PROVIDER, THE SERIES 2 FIRST ISSUER SWAP PROVIDER,
THE SERIES 2 SECOND ISSUER SWAP PROVIDER AND THE SERIES 4 THIRD ISSUER SWAP
PROVIDER

SIGNED by                             ) /S/ CLARE JOHNS
for and on behalf of                  )
JPMORGAN CHASE BANK, N.A.             )

THE SERIES 3 EIGHTH ISSUER SWAP PROVIDER AND THE SERIES 3 NINTH ISSUER SWAP
PROVIDER

SIGNED by                             ) /S/ G. CAZALS
for and on behalf of                  ) /S/ YAN GINDRE
IXIS CORPORATE & INVESTMENT           )
BANK                                  )

INTEREST RATE SWAP PROVIDER FOR THE SERIES 5 CLASS A THIRD ISSUER NOTES, THE
SERIES 5 CLASS A1 FOURTH ISSUER NOTES AND THE SERIES 5 CLASS A1 FIFTH ISSUER
NOTES

SIGNED by                             )
for and on behalf of                  ) /S/ IAN STEWART
BANK
OF SCOTLAND PLC                       ) /S/ DAVID WILKINSON

SERIES 2 FOURTH ISSUER SWAP PROVIDER, THE SERIES 4 FOURTH ISSUER SWAP PROVIDER,
THE SERIES 4 SIXTH ISSUER SWAP PROVIDER, SERIES 3 SEVENTH ISSUER SWAP PROVIDER
AND SERIES 4 NINTH ISSUER SWAP PROVIDER

SIGNED by                             )
for and on behalf of                  )
CITIBANK, N.A., LONDON BRANCH         ) /S/ STEPHANE CARRIER

                                      89
<PAGE>

SERIES 5 CLASS A1 FOURTH ISSUER SWAP PROVIDER, THE SERIES 4 FIFTH ISSUER SWAP
PROVIDER AND SERIES 2 SEVENTH ISSUER SWAP PROVIDER

SIGNED by                             ) /S/ FRANK RONAN
for and on behalf of                  )
SWISS RE FINANCIAL PRODUCTS           )
CORPORATION                           )

SERIES 2 FIFTH ISSUER SWAP PROVIDER

SIGNED by                             ) /S/ KATE BINIONS
for and on behalf of                  )
UBS LIMITED                           ) /S/ FLEUR DOWNARD

SERIES 2 EIGHTH ISSUER SWAP PROVIDER AND SERIES 4 EIGHTH ISSUER SWAP PROVIDER

SIGNED by                             ) /S/ MICAHEL GALLGHER
for and on behalf of                  )
ABN AMRO BANK N.V.                    ) /S/ SHALINI SHARMA

SERIES 1 NINTH ISSUER SWAP PROVIDER AND SERIES 2 NINTH ISSUER SWAP PROVIDER

SIGNED by                             ) /S/ JOVAN ATKINSON
for and on behalf of                  )
DANSKE BANK A/S LONDON BRANCH         )

                                      90