<PAGE>

                                                                    EXHIBIT 2(f)

                                                                  CONFORMED COPY


                              Dated 6 November 1998


                               SCOTTISH POWER plc
                                    as Issuer

                                       and

                   THE LAW DEBENTURE TRUST CORPORATION p.l.c.
                                   as Trustee

                             SUPPLEMENTAL TRUST DEED

                                   relating to

                               SCOTTISH POWER plc
                   U.S.$4,000,000,000 Debt Issuance Programme
                     Arranged by J.P. MORGAN SECURITIES LTD.
                 (other than for issues of Deutsche Mark Notes)
                                 J.P. MORGAN GmbH
                       (for issues of Deutsche Mark Notes)




                                   LINKLATERS
                                   & ALLIANCE

                               LINKLATERS & PAINES
                                 One Silk Street
                                 London EC2Y 8HQ

                               Tel: 0171 456 2000


                                Ref JALB/EXM/WAH
<PAGE>

        Contents

        ------------------------------------------------------------------------
Clause  Heading                                                             Page

   1    Definitions .........................................................  1

   2    Amendment ...........................................................  1

   3    Forms of Notes, Certificate, Coupon and Talon .......................  1

   4    Conditions ..........................................................  2

   5    Governing Law, Submission and Jurisdiction ..........................  2

        SCHEDULE 1
        Part A
        Form of Temporary Global Note .......................................  3

        SCHEDULE 1
        Part B
        Form of Permanent Global Note .......................................  8

        SCHEDULE 1
        Part C
        Form of Global Certificate .......................................... 16

        SCHEDULE 2
        Part A
        Form of Bearer Note ................................................. 20

        SCHEDULE 2
        Part B
        Form of Certificate ................................................. 23

        SCHEDULE 2
        Part C
        Terms and Conditions of the Notes ................................... 26

        SCHEDULE 2
        Part D
        Form of Coupon ...................................................... 45

        SCHEDULE 2
        Part E
        Form of Talon ....................................................... 47

        SCHEDULE 2
        Part F
        Form of Receipt ..................................................... 49


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                                       i
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      This Supplemental Trust Deed is made on 6 November 1998 between:

      (1)   SCOTTISH POWER plc (the "Issuer") and

      (2)   THE LAW DEBENTURE TRUST CORPORATION p.l.c. (the "Trustee", which
            expression, where the context so admits, includes any other trustee
            for the time being of this Trust Deed).

      Whereas:

      (A)   The parties to this Supplemental Trust Deed are parties to a Trust
            Deed dated 4 November 1997 (the "Trust Deed") relating to the
            U.S.$4,000,000,000 Debt Issuance Programme of the Issuers (the
            "Programme").

      (B)   The Issuer wishes to record that as a result of the sale by Morgan
            Guaranty Trust Company of New York of its Global Agency and Trust
            business to Citibank, N.A. on 26 June 1998 and by a letter of
            agreement dated 31 March 1998 between the Issuer, Morgan Guaranty
            Trust Company of New York, and Citibank, N.A., the Issuer (i)
            terminated the appointments of Morgan Guaranty Trust Company of New
            York, London office and Morgan Guaranty Trust Company of New York,
            Brussels office as Agents under the Agency Agreement and (ii)
            appointed Citibank, N.A., London as Issuing and Paying Agent, Paying
            Agent, Transfer Agent, Registrar and Calculation Agent and Citibank,
            N.A., Brussels as Paying Agents and Transfer Agents pursuant to the
            Agency Agreement for Notes which have been issued under the
            Programme and for all future issues of Notes under the Programme.
            Notice to Noteholders and the Trustee as required by Clause 18.8 of
            the Agency Agreement was given in accordance with the Conditions on
            3 July 1998.

      (C)   The parties to this Supplemental Trust Deed wish to amend the Trust
            Deed as set out herein.

      This deed witnesses and it is declared as follows:

1     Definitions

      Subject as provided herein and except as the context otherwise requires,
      terms defined in the Trust Deed shall have the same meaning in this
      Supplemental Trust Deed.

2     Amendment

2.1   The Trustee, being of the opinion that to do so is not materially
      prejudicial to the interests of the Noteholders, hereby agrees in exercise
      of the power conferred on it by Clause 12.1 of the Trust Deed to modify
      the Trust Deed by amending the Trust Deed in the form of this Supplemental
      Trust Deed.

2.2   The Trust Deed, as amended by this Supplemental Trust Deed shall
      henceforward in relation to Notes issued on or after 6 November 1998 have
      effect as so amended. For the avoidance of doubt the Trust Deed shall
      continue to have effect in relation to Notes issues prior to 6 November
      1998. Subject thereto, references herein to the "Trust Deed" shall be to
      the Trust Deed as amended by this Supplemental Trust Deed.

3     Forms of Notes, Certificate, Coupon and Talon

3.1   The forms of note set out in Schedule 1 Parts A and B and in Schedule 2
      Part A shall be replaced by those set out in Schedule 1 Parts A and B and
      in Schedule 2 Part A respectively hereto.

3.2   The forms of certificate set out in Schedule 1 Part C and Schedule 2 Part
      B shall be replaced by those set out in Schedule 1 Part C and Schedule 2
      Part B respectively hereto.


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3.3   The form of coupon set out in Schedule 2 Part D shall be replaced by that
      set out in Schedule 2 Part D hereto.

3.4   The form of talon set out in Schedule 2 Part E shall be replaced by that
      set out in Schedule 2 Part F hereto.

4     Conditions

      The form of the terms and conditions set out in Schedule 2 Part C shall be
      replaced by those set out in Schedule 2 Part C hereto.

5     Governing Law, Submission and Jurisdiction

5.1   Governing Law: This Supplemental Trust Deed shall be governed by and
      construed in accordance with English law.

5.2   Submission to Jurisdiction: The courts of England are to have jurisdiction
      to settle any disputes that may arise out of or in connection with this
      Supplemental Trust Deed, the Notes, the Receipts, the Coupons or the
      Talons and accordingly any legal action or proceedings arising out of or
      in connection with this Supplemental Trust Deed, the Notes, the Receipts,
      the Coupons or the Talons ("Proceedings") may be brought in such courts.
      The Issuer irrevocably submits to the jurisdiction of such courts and
      waives any objections to Proceedings in such courts on the ground of venue
      or on the ground that the Proceedings have been brought in an inconvenient
      forum. This submission is for the benefit of each of the Trustee, the
      Noteholders and the Couponholders and shall not limit the right of any of
      them to take Proceedings in any other court of competent jurisdiction nor
      shall the taking of Proceedings in any one or more jurisdictions preclude
      the taking of Proceedings in any other jurisdiction (whether concurrently
      or not).

5.3   Service of Process: The Issuer shall procure that its London office, whose
      address is at 54 Queen Anne Street, London W1M 9LA will act as its agent
      for service of process in any Proceedings in England. The Issuer
      undertakes that in the event of the agent of process appointed by it
      ceasing to so act, it will appoint such other person acceptable to the
      Trustee and shall immediately notify the Trustee of such appointment.
      Nothing shall affect the right to serve process in any other manner
      permitted by law.


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                                   SCHEDULE 1
                                     Part A
                          Form of Temporary Global Note

This Note constitutes [[commercial paper/a [shorter/longer] term debt security]
issued in accordance with regulations made under Section 4 of the Banking Act
1987. The Issuer of this Note is Scottish Power plc, which is not an authorised
institution or a European authorised institution (as such terms are defined in
the Banking Act 1987 (Exempt Transactions) Regulations 1997). Repayment of the
principal and the payment of any interest or premium in connection with this
Note has not been guaranteed](*) [(*) Delete if Note is not denominated in
Sterling or if issue proceeds are not accepted in the UK.]

                               SCOTTISH POWER plc
             (Incorporated in Scotland with limited liability under
                            registered number 117120)

                             DEBT ISSUANCE PROGRAMME

                              TEMPORARY GLOBAL NOTE

                          Temporary Global Note No. [.]

This temporary Global Note is issued in respect of the Notes (the "Notes") of
the Tranche and Series specified in the Second Schedule hereto of Scottish Power
plc (the "Issuer").

Interpretation and Definitions

References in this temporary Global Note to the "Conditions" are to the Terms
and Conditions applicable to the Notes (which are in the form set out in
Schedule 2 Part C to the Trust Deed (as amended or supplemented as at the Issue
Date, the "Trust Deed") dated 4 November 1997 between the Issuer and The Law
Debenture Trust Corporation p.l.c. as trustee, as such form is supplemented
and/or modified and/or superseded by the provisions of this temporary Global
Note (including the supplemental definitions and any modifications or additions
set out in the Second Schedule hereto), which in the event of any conflict shall
prevail). Other capitalised terms used in this temporary Global Note shall have
the meanings given to them in the Conditions or the Trust Deed. If the Second
Schedule hereto specifies that the applicable TEFRA exemption is either "C
Rules" or "not applicable", this temporary Global Note is a "C Rules Note",
otherwise this temporary Global Note is a "D Rules Note".

Aggregate Principal Amount

The aggregate principal amount from time to time of this temporary Global Note
shall be an amount equal to the aggregate principal amount of the Notes as shall
be shown by the latest entry in the fourth column of the First Schedule hereto,
which shall be completed by or on behalf of the Issuing and Paying Agent upon
(i) the issue of Notes represented hereby, (ii) the exchange of the whole or a
part of this temporary Global Note for a corresponding interest in a permanent
Global Note or, as the case may be, for Definitive Notes or Registered Notes,
(iii) the redemption or purchase and cancellation of Notes represented hereby
and/or (iv) in the case of Partly-paid Notes, the forfeiture of Notes
represented hereby in accordance with the Conditions relating to such
Partly-paid Notes, all as described below.

Promise to Pay

Subject as provided herein, the Issuer, for value received, promises to pay to
the bearer of this temporary Global Note, upon presentation and (when no further
payment is due in respect of this


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                                       3
<PAGE>

temporary Global Note) surrender of this temporary Global Note, on the Maturity
Date (or on such earlier date as the Redemption Amount may become repayable in
accordance with the Conditions) the Redemption Amount in respect of the
aggregate principal amount of Notes represented by this temporary Global Note
and (unless this temporary Global Note does not bear interest) to pay interest
in respect of such aggregate principal amount of Notes from the Interest
Commencement Date in arrear at the rates, in the amounts and on the dates for
payment provided for in the Conditions together with such other sums and
additional amounts (if any) as may be payable under the Conditions, in
accordance with the Conditions.

Exchange

If this temporary Global Note is an Exchangeable Bearer Note, this temporary
Global Note may be exchanged in whole or from time to time in part for one or
more Registered Notes in accordance with the Conditions on or after the Issue
Date but before the Exchange Date referred to below by its presentation to the
Issuing and Paying Agent. On or after the Exchange Date, the outstanding
principal amount of this temporary Global Note may be exchanged for Definitive
Notes and Registered Notes in accordance with the next paragraph.

Subject as provided in the Conditions applicable to Partly-paid Notes, on or
after the first day following the expiry of 40 days after the Issue Date (the
"Exchange Date"), this temporary Global Note may be exchanged (free of charge to
the holder) in whole or from time to time in part by its presentation and, on
exchange in full, surrender to or to the order of the Issuing and Paying Agent
for interests in a permanent Global Note or, if so specified in the Second
Schedule hereto, for Definitive Notes and (if this temporary Global Note is an
Exchangeable Bearer Note), in each case, for Registered Notes in an aggregate
principal amount equal to the principal amount of this temporary Global Note
submitted for exchange provided that, in the case of any part of this temporary
Global Note submitted for exchange for a permanent Global Note or Definitive
Notes, there shall have been Certification with respect to such principal amount
submitted for such exchange dated no earlier than the Exchange Date.

"Certification" means the presentation to the Issuing and Paying Agent of a
certificate or certificates with respect to one or more interests in this
temporary Global Note, signed by Euroclear or Cedel Bank, substantially to the
effect set out in Schedule 4 to the Agency Agreement to the effect that it has
received a certificate or certificates substantially to the effect set out in
Schedule 3 to the Agency Agreement with respect thereto and that no contrary
advice as to the contents thereof has been received by Euroclear or Cedel Bank,
as the case may be.

Upon the whole or a part of this temporary Global Note being exchanged for a
permanent Global Note, such permanent Global Note shall be exchangeable in
accordance with its terms for Definitive Notes or Registered Notes.

The Definitive Notes or the Certificates representing the Registered Notes for
which this temporary Global Note or a permanent Global Note may be exchangeable
shall be duly executed and authenticated, shall, in the case of Definitive
Notes, have attached to them all Coupons (and, where appropriate, Talons) in
respect of interest, and all Receipts in respect of Instalment Amounts, that
have not already been paid on this temporary Global Note or the permanent Global
Note, as the case may be, shall be security printed or, in the case of
Certificates, printed in accordance with applicable legal and stock exchange
requirements and shall be substantially in the form set out in the Schedules to
the Trust Deed as supplemented and/or modified and/or superseded by the terms of
the Second Schedule hereto. Certificates issued upon exchange for Registered
Notes shall not be Global Certificates unless the holder so requests and
certifies to the Issuing and Paying Agent that it is, or is acting as a nominee
for, Cedel Bank, Euroclear and/ or any other clearing system.


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                                       4
<PAGE>

On any exchange of a part of this temporary Global Note for an equivalent
interest in a permanent Global Note, for Definitive Notes or for Registered
Notes, as the case may be, the portion of the principal amount hereof so
exchanged shall be endorsed by or on behalf of the Issuing and Paying Agent in
Part I of the First Schedule hereto, whereupon the principal amount hereof shall
be reduced for all purposes by the amount so exchanged and endorsed.

Benefit of Conditions

Except as otherwise specified herein, this temporary Global Note is subject to
the Conditions and the Trust Deed and, until the whole of this temporary Global
Note is exchanged for equivalent interests in a permanent Global Note, for
Definitive Notes or for Registered Notes, as the case may be, the holder of this
temporary Global Note shall in all respects be entitled to the same benefits as
if it were the holder of the permanent Global Note (or the relevant part of it)
or the Definitive Notes, as the case may be, for which it may be exchanged as if
such permanent Global Note or Definitive Notes had been issued on the Issue
Date.

Payments

No person shall be entitled to receive any payment in respect of the Notes
represented by this temporary Global Note that falls due on or after the
Exchange Date unless, upon due presentation of this temporary Global Note for
exchange, delivery of (or, in the case of a subsequent exchange. due endorsement
of) a permanent Global Note or delivery of Definitive Notes or Certificates, as
the case may be, is improperly withheld or refused by or on behalf of the
Issuer.

Payments due before the Exchange Date shall only be made in relation to such
principal amount of this temporary Global Note with respect to which there shall
have been Certification dated no earlier than such due date for payment.

Any payments that are made in respect of this temporary Global Note shall be
made to its holder against presentation and (if no further payment falls to be
made on it) surrender of it at the specified office of the Issuing and Paying
Agent or of any other Paying Agent provided for in the Conditions. If any
payment in full of principal is made in respect of any Note represented by this
temporary Global Note, the portion of this temporary Global Note representing
such Note shall be cancelled and the amount so cancelled shall be endorsed by or
on behalf of the Issuing and Paying Agent in the First Schedule hereto (such
endorsement being prima facie evidence that the payment in question has been
made) whereupon the principal amount hereof shall be reduced for all purposes by
the amount so cancelled and endorsed. If any other payments are made in respect
of the Notes represented by this temporary Global Note, a record of each such
payment shall be endorsed by or on behalf of the Issuing and Paying Agent on an
additional schedule hereto (such endorsement being prima facie evidence that the
payment in question has been made).

Cancellation

Cancellation of any Note represented by this temporary Global Note that is
required by the Conditions to be cancelled (other than upon its redemption)
shall be effected by reduction in the principal amount of this temporary Global
Note representing such Note on its presentation to or to the order of the
Issuing and Paying Agent for endorsement in the First Schedule hereto, whereupon
the principal amount hereof shall be reduced for all purposes by the amount so
cancelled and endorsed.

Notices

Notices required to be given in respect of the Notes represented by this
temporary Global Note may be given by their being delivered (so long as this
temporary Global Note is held on behalf of Euroclear and Cedel Bank or any other
clearing system) to Euroclear, Cedel Bank or such other


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                                       5
<PAGE>

clearing system, as the case may be, or otherwise to the holder of this
temporary Global Note, rather than by publication as required by the Conditions.

No provision of this temporary Global Note shall alter or impair the obligation
of the Issuer to pay the principal and premium of and interest on the Notes when
due in accordance with the Conditions.

This temporary Global Note shall not be valid or become obligatory for any
purpose until authenticated by or on behalf of the Issuing and Paying Agent.

This temporary Global Note shall be governed by and construed in accordance with
English law.

In witness whereof the Issuer has caused this temporary Global Note to be duly
signed on its behalf.

Dated as of the Issue Date.

SCOTTISH POWER plc

By:




CERTIFICATE OF AUTHENTICATION

This temporary Global Note is authenticated by
or on behalf of the Issuing and Paying Agent.

CITIBANK, N.A.
as Issuing and Paying Agent

By:




Authorised Signatory
For the purposes of authentication only.
Without recourse, warranty or liability.

ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.


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                                       6
<PAGE>

                               THE FIRST SCHEDULE
       Principal amount of Notes represented by this temporary Global Note

The following (i) issue of Notes initially represented by this temporary Global
Note, (ii) exchanges of the whole or a part of this temporary Global Note for
interests in a permanent Global Note, for Definitive Notes or for Registered
Notes and/or (iii) cancellations or forfeitures of interests in this temporary
Global Note have been made, resulting in the principal amount of this temporary
Global Note specified in the latest entry in the fourth column below:

Date   Amount of        Reason for            Principal         Notation
       decrease in      decrease in           amount of this    made by or on
       principal        principal amount of   temporary         behalf of the
       amount of this   this temporary        Global Note on    Issuing and
       temporary        Global Note           issue or          Paying Agent
       Global Note      (exchange,            following such
                        cancellation or       decrease
                        forfeiture)

Issue  not applicable   not applicable
Date


[Insert the provisions of the relevant Pricing Supplement that relate to the
Conditions or the Global Notes as the Second Schedule]


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                                       7
<PAGE>

                                   SCHEDULE 1
                                     Part B
                         Form of Permanent Global Note

This Note constitutes [[commercial paper/a [shorter/longer] term debt security]
issued in accordance with regulations made under Section 4 of the Banking Act
1987. The Issuer of this Note is Scottish Power plc, which is not an authorised
institution or a European authorised institution (as such terms are defined in
the Banking Act 1987 (Exempt Transactions) Regulations 1997). Repayment of the
principal and the payment of any interest or premium in connection with this
Note has not been guaranteed](*) [(*) Delete if the Note is not denominated in
Sterling or if issue proceeds are not accepted in the UK.]

                               SCOTTISH POWER plc
             (Incorporated in Scotland with limited liability under
                            registered number 117120)

                             DEBT ISSUANCE PROGRAMME

                         Permanent Global Note No. [.]

This permanent Global Note is issued in respect of the Notes (the "Notes") of
the Tranche(s) and Series specified in the Third Schedule hereto of Scottish
Power plc (the "Issuer").

Interpretation and Definitions

References in this permanent Global Note to the "Conditions" are to the Terms
and Conditions applicable to the Notes (which are in the form set out in
Schedule 2 Part C to the Trust Deed (as amended or supplemented as at the Issue
Date, the "Trust Deed") dated 4 November 1997 between the Issuer and The Law
Debenture Trust Corporation p.l.c. as trustee, as such form is supplemented
and/or modified and/or superseded by the provisions of this permanent Global
Note (including the supplemental definitions and any modifications or additions
set out in the Third Schedule hereto), which in the event of any conflict shall
prevail). Other capitalised terms for used in this permanent Global Note shall
have the meanings given to them in the Conditions or the Trust Deed.

Aggregate Principal Amount

The aggregate principal amount from time to time of this permanent Global Note
shall be an amount equal to the aggregate principal amount of the Notes as shall
be shown by the latest entry in the fourth column of the First Schedule hereto,
which shall be completed by or on behalf of the Issuing and Paying Agent upon
(i) the exchange of the whole or a part of the temporary Global Note initially
representing the Notes for a corresponding interest herein (in the case of Notes
represented by a temporary Global Note upon issue), (ii) the issue of the Notes
represented hereby (in the case of Notes represented by this permanent Global
Note upon issue), (iii) the exchange of the whole or, where the limited
circumstances so permit, a part of this permanent Global Note for Definitive
Notes or Registered Notes, (iv) the redemption or purchase and cancellation of
Notes represented hereby and/or (v) in the case of Partly-paid Notes, the
forfeiture of Notes represented hereby in accordance with the Conditions
relating to such Partly-paid Notes, all as described below.

Promise to Pay

Subject as provided herein, the Issuer, for value received, hereby promises to
pay to the bearer of this permanent Global Note, upon presentation and (when no
further payment is due in respect of this permanent Global Note) surrender of
this permanent Global Note, on the Maturity Date (or on


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                                       8
<PAGE>

such earlier date as the Redemption Amount may become repayable in accordance
with the Conditions) the Redemption Amount in respect of the aggregate principal
amount of Notes represented by this permanent Global Note and (unless this
permanent Global Note does not bear interest) to pay interest in respect of such
aggregate principal amount of Notes from the Interest Commencement Date in
arrear at the rates, in the amounts and on the dates for payment provided for in
the Conditions together with such other sums and additional amounts (if any) as
may be payable under the Conditions, in accordance with the Conditions.

Exchange

This permanent Global Note is exchangeable (free of charge to the holder) on or
after the Exchange Date in whole but not, except as provided in the next
paragraph, in part for the Definitive Notes or (if this permanent Global Note is
an Exchangeable Bearer Note) Registered Notes represented by the Certificates
described below:

      (i)   by the Issuer giving notice to the Issuing and Paying Agent and the
            Noteholders of its intention to effect such exchange

      (ii)  if the Third Schedule hereto provides that this permanent Global
            Note is exchangeable for Definitive Notes at the request of the
            holder, by such holder giving notice to the Issuing and Paying Agent
            of its election for such exchange

      (iii) if this permanent Global Note is an Exchangeable Bearer Note, by the
            holder hereof giving notice to the Issuing and Paying Agent of its
            election to exchange the whole or a part of this permanent Global
            Note for Registered Notes or

      (iv)  otherwise, if this permanent Global Note is held on behalf of
            Euroclear or Cedel Bank or any other clearing system (an
            "Alternative Clearing System") and any such clearing system is
            closed for business for a continuous period of 14 days (other than
            by reason of holidays, statutory or otherwise) or announces an
            intention permanently to cease business or does in fact do so.

This permanent Global Note is exchangeable in part (provided, however, that if
this permanent Global Note is held by or on behalf of Euroclear and/or Cedel
Bank, the rules of Euroclear and/or Cedel Bank, as the case may be, so permit)
(i) if this permanent Global Note is an Exchangeable Bearer Note and the part
hereof submitted for exchange is to be exchanged for Registered Notes or (ii) if
so provided, and in accordance with, the Conditions relating to Partly-paid
Notes.

"Exchange Date" means a day falling not less than 60 days, or in the case of an
exchange for Registered Notes 5 days, after that on which the notice requiring
exchange is given and on which banks are open for business in the city in which
the specified office of the Issuing and Paying Agent is located and, except in
the case of exchange pursuant to (iv) above, in the cities in which Euroclear
and Cedel Bank or, if relevant, the Alternative Clearing System, are located.

Subject as provided in the Conditions applicable to Party-paid Notes, any such
exchange may be effected on or after an Exchange Date by the holder of this
permanent Global Note surrendering this permanent Global Note or, in the case of
a partial exchange, presenting it for endorsement to or to the order of the
Issuing and Paying Agent. In exchange for this permanent Global Note, or part
thereof to be exchanged, the Issuer shall deliver, or procure the delivery of,
duly executed and authenticated Definitive Notes and/or (if this permanent
Global Note is an Exchangeable Bearer Note) Certificates in an aggregate
principal amount equal to the principal amount of this permanent Global Note
submitted for exchange (if appropriate, having attached to them all Coupons
(and, where appropriate, Talons) in respect of interest, and all Receipts in
respect of Instalment Amounts, that have not already been paid on this permanent
Global Note), security printed or, in the case of Certificates, printed in
accordance with any applicable legal and stock


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                                       9
<PAGE>

exchange requirements and substantially in the form set out in Schedule 2 to the
Trust Deed as supplemented and/or modified and/or superseded by the terms of the
Third Schedule hereto. Certificates issued upon exchange for Registered Notes
shall not be Global Certificates unless the holder so requests and certifies to
the Issuing and Paying Agent that it is, or is acting as a nominee for, Cedel
Bank, Euroclear and/or an Alternative Clearing System.

On any exchange of a part of this permanent Global Note the portion of the
principal amount hereof so exchanged shall be endorsed by or on behalf of the
Issuing and Paying Agent in the First Schedule hereto, whereupon the principal
amount hereof shall be reduced for all purposes by the amount so exchanged and
endorsed.

Benefit of Conditions

Except as otherwise specified herein, this permanent Global Note is subject to
the Conditions and the Trust Deed and, until the whole of this permanent Global
Note is exchanged for Definitive Notes or Registered Notes, the holder of this
permanent Global Note shall in all respects be entitled to the same benefits as
if it were the holder of the Definitive Notes for which it may be exchanged and
as if such Definitive Notes had been issued on the Issue Date.

Payments

No person shall be entitled to receive any payment in respect of the Notes
represented by this permanent Global Note that falls due after an Exchange Date
for such Notes, unless upon due presentation of this permanent Global Note for
exchange, delivery of Definitive Notes or Certificates is improperly withheld or
refused by or on behalf of the Issuer or the Issuer does not perform or comply
with any one or more of what are expressed to be its obligations under any
Definitive Notes.

Payments in respect of this permanent Global Note shall be made to its holder
against presentation and (if no further payment falls to be made on it)
surrender of it at the specified office of the Issuing and Paying Agent or of
any other Paying Agent provided for in the Conditions. A record of each such
payment shall be endorsed on the First or Second Schedule hereto, as
appropriate, by the Issuing and Paying Agent or by the relevant Paying Agent,
for and on behalf of the Issuing and Paying Agent, which endorsement shall
(until the contrary is proved) be prima facie evidence that the payment in
question has been made.

Prescription

Claims in respect of principal and interest (as each is defined in the
Conditions) in respect of this permanent Global Note shall become void unless it
is presented for payment within a period of 10 years (in the case of principal)
and 5 years (in the case of interest) from the appropriate Relevant Date.

Meetings

The holder of this permanent Global Note shall be treated at any meeting of
Noteholders, as having one vote in respect of each principal amount of Notes
equal to the minimum Denomination of the Notes for which this permanent Global
Note may be exchanged.

Cancellation

Cancellation of any Note represented by this permanent Global Note that is
required by the Conditions to be cancelled (other than upon its redemption)
shall be effected by reduction in the principal amount of this permanent Global
Note representing such Note on its presentation to or to the order of the
Issuing and Paying Agent for endorsement in the First Schedule hereto, whereupon
the principal amount hereof shall be reduced for all purposes by the amount so
cancelled and endorsed.


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                                       10
<PAGE>

Purchase

Notes may only be purchased by the Issuer or any of its subsidiaries if they are
purchased together with the right to receive all future payments of interest and
Instalment Amounts (if any) thereon.

Issuer's Options

Any option of the Issuer provided for in the Conditions shall be exercised by
the Issuer giving notice to the Noteholders within the time limits set out in
and containing the information required by the Conditions, except that the
notice shall not be required to contain the serial numbers of Notes drawn in the
case of a partial exercise of an option and accordingly no drawing of Notes
shall be required.

Noteholders' Options

Any option of the Noteholders provided for in the Conditions may be exercised by
the holder of this permanent Global Note giving notice to the Issuing and Paying
Agent within the time limits relating to the deposit of Notes with a Paying
Agent set out in the Conditions substantially in the form of the notice
available from any Paying Agent, except that the notice shall not be required to
contain the certificate numbers of the Notes in respect of which the option has
been exercised, and stating the principal amount of Notes in respect of which
the option is exercised and at the same time presenting this permanent Global
Note to the Issuing and Paying Agent, or to a Paying Agent acting on behalf of
the Issuing and Paying Agent, for notation accordingly in the Fourth Schedule
hereto.

Notices

Notices required to be given in respect of the Notes represented by this
permanent Global Note may be given by their being delivered (so long as this
permanent Global Note is held on behalf of Euroclear, Cedel Bank or any other
clearing system) to Euroclear, Cedel Bank or such other clearing system, as the
case may be, or otherwise to the holder of this permanent Global Note, rather
than by publication as required by the Conditions.

Negotiability

This permanent Global Note is a bearer document and negotiable and accordingly:

      (i)   is freely transferable by delivery and such transfer shall operate
            to confer upon the transferee all rights and benefits appertaining
            hereto and to bind the transferee with all obligations appertaining
            hereto pursuant to the Conditions

      (ii)  the holder of this permanent Global Note is and shall be absolutely
            entitled as against all previous holders to receive all amounts by
            way of Redemption Amount interest or otherwise payable in respect of
            this permanent Global Note and the Issuer has waived against such
            holder and any previous holder of this permanent Global Note all
            rights of set-off or counterclaim that would or might otherwise be
            available to it in respect of the obligations evidenced by this
            Global Note and

      (iii) payment upon due presentation of this permanent Global Note as
            provided herein shall operate as a good discharge against such
            holder and all previous holders of this permanent Global Note.

No provision of this permanent Global Note shall alter or impair the obligation
of the Issuer to pay the principal and premium of and interest on the Notes when
due in accordance with the Conditions.

This permanent Global Note shall not be valid or become obligatory for any
purpose until authenticated by or on behalf of the Issuing and Paying Agent.


--------------------------------------------------------------------------------
                                       11
<PAGE>

This permanent Global Note shall be governed by and construed in accordance with
English law.

In witness whereof the Issuer has caused this permanent Global Note to be duly
signed on its behalf.

Dated as of the Issue Date.

SCOTTISH POWER plc

By:


CERTIFICATE OF AUTHENTICATION

This permanent Global Note is authenticated by or on behalf of the Issuing and
Paying Agent.

CITIBANK, N.A.
as Issuing and Paying Agent

By:

Authorised Signatory
For the purposes of authentication only.
Without recourse, warranty or liability.

ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.


--------------------------------------------------------------------------------
                                       12
<PAGE>

                               THE FIRST SCHEDULE
       Principal amount of Notes represented by this permanent Global Note

The following (i) issues of Notes initially represented by this permanent Global
Note, (ii) exchanges of interests in a temporary Global Note for interests in
this permanent Global Note, (iii) exchanges of the whole or a part of this
permanent Global Note for Definitive Notes or for Registered Notes, (iv)
cancellations or forfeitures of interests in this permanent Global Note and/ or
(v) payments of Redemption Amount in respect of this permanent Global Note have
been made, resulting in the principal amount of this permanent Global Note
specified in the latest entry in the fourth column:

Date   Amount of        Reason for increase/   Principal        Notation
       Increase/        decrease in            amount of this   made by or
       decrease in      principal amount of    permanent        on behalf
       principal        this permanent         Global Note      of the
       amount of this   Global Note (initial   following such   Issuing and
       permanent        issue, exchange,       increase/        Paying
       Global Note      cancellation,          decrease         Agent
                        forfeiture or
                        payment, stating
                        amount of payment
                        made)


--------------------------------------------------------------------------------
                                       13
<PAGE>

                               THE SECOND SCHEDULE
                              Payments of Interest

The following payments of interest or Interest Amount in respect of this
Permanent Global Note have been made:

Due date of   Date of payment   Amount of interest   Notation made by or on
payment                                              behalf of the Issuing
                                                     and Paying Agent


[Insert the provisions of the relevant Pricing Supplement that relate to the
Conditions or the Global Notes as the Third Schedule.]


--------------------------------------------------------------------------------
                                       14
<PAGE>

                               THE FOURTH SCHEDULE
                         Exercise of Noteholders' Option

The following exercises of the option of the Noteholders provided for in the
Conditions have been made in respect of the stated principal amount of this
permanent Global Note:

Date of    Principal amount of   Date of which         Notation made by
exercise   this permanent        exercise of such      or on behalf of the
           Global Note in        option is effective   Issuing and Paying
           respect of which                            Agent
           exercise is made


--------------------------------------------------------------------------------
                                       15
<PAGE>

                                   SCHEDULE 1
                                     Part C
                           Form of Global Certificate

This Note constitutes [[commercial paper/a [shorter/longer] term debt security]
issued in accordance with regulations made under Section 4 of the Banking Act
1987. The Issuer of this Note is SCOTTISH POWER plc, which is not an authorised
institution or a European authorised institution (as such terms are defined in
the Banking Act 1987 (Exempt Transactions) Regulations 1997). Repayment of the
principal and the payment of any interest or premium in connection with this
Note has not been guaranteed](*) [(*) Delete if Note is not denominated in
Sterling or if issue proceeds are not accepted in the UK.]

                               SCOTTISH POWER plc
             (Incorporated in Scotland with limited liability under
                            registered number 117120)

                             DEBT ISSUANCE PROGRAMME

                               GLOBAL CERTIFICATE

                           Global Certificate No. [.]

Registered Holder:

Address of Registered Holder:

Principal amount of Notes
represented by this Global
Certificate:

This Global Certificate is issued in respect of the principal amount specified
above of the Notes (the "Notes") of the Tranche and Series specified in the
Schedule hereto of Scottish Power plc (the "Issuer"). This Global Certificate
certifies that the Registered Holder (as defined above) is registered as the
holder of such principal amount of the Notes at the date hereof.

Interpretation and Definitions

References in this Global Certificate to the "Conditions" are to the Terms and
Conditions applicable to the Notes (which are in the form set out in Schedule 2
Part C to the Trust Deed (as amended or supplemented as at the Issue Date, the
"Trust Deed") dated 4 November 1997 between the Issuer and The Law Debenture
Trust Corporation p.l.c. as trustee, as such form is supplemented and/or
modified and/or superseded by the provisions of this Global Certificate
(including the supplemental definitions and any modifications or additions set
out in the Schedule hereto), which in the event of any conflict shall prevail).
Other capitalised terms used in this Global Certificate shall have the meanings
given to them in the Conditions or the Trust Deed.

Promise to Pay

The Issuer, for value received, promises to pay to the holder of the Notes
represented by this Global Certificate upon presentation and (when no further
payment is due in respect of the Notes represented by this Global Certificate)
surrender of this Global Certificate on the Maturity Date (or on such earlier
date as the Redemption Amount may become repayable in accordance with the
Conditions) the Redemption Amount in respect of the Notes represented by this
Global Certificate and (unless the Notes represented by this Certificate do not
bear interest) to pay interest in respect of such Notes from the Interest
Commencement Date in arrear at the rates, in


--------------------------------------------------------------------------------
                                       16
<PAGE>

the amounts and on the dates for payment provided for in the Conditions together
with such other sums and additional amounts (if any) as may be payable under the
Conditions, in accordance with the Conditions.

For the purposes of this Global Certificate, (a) the holder of the Notes
represented by this Global Certificate is bound by the provisions of the Agency
Agreement, (b) the Issuer certifies that the Registered Holder is, at the date
hereof, entered in the Register as the holder of the Notes represented by this
Global Certificate, (c) this Global Certificate is evidence of entitlement only,
(d) title to the Notes represented by this Global Certificate passes only on due
registration in the Register, and (e) only the holder of the Notes represented
by this Global Certificate is entitled to payments in respect of the Notes
represented by this Global Certificate.

Transfer of Notes represented by permanent Global Certificates

If the Schedule hereto states that the Notes are to be represented by a
permanent Global Certificate on issue, transfers of the holding of Notes
represented by this Global Certificate pursuant to Condition 2(b) may only be
made in part:

      (i)   if the Notes represented by this Global Certificate are held on
            behalf of Euroclear or Cedel Bank or any other clearing system (an
            "Alternative Clearing System") and any such clearing system is
            closed for business for a continuous period of 14 days (other than
            by reason of holidays, statutory or otherwise) or announces an
            intention permanently to cease business or does in fact do so or

      (ii)  with the consent of the Issuer

provided that, in the case of the first transfer of part of a holding pursuant
to (i) above, the holder of the Notes represented by this Global Certificate has
given the Registrar not less than 30 days' notice at its specified office of
such holder's intention to effect such transfer. Where the holding of Notes
represented by this Global Certificate is only transferable in its entirety, the
Certificate issued to the transferee upon transfer of such holding shall be a
Global Certificate. Where transfers are permitted in part, Certificates issued
to transferees shall not be Global Certificates unless the transferee so
requests and certifies to the Registrar that it is, or is acting as a nominee
for, Cedel Bank, Euroclear and/or an Alternative Clearing System.

Meetings

The holder of the Notes represented by this Global Certificate shall (unless
this Global Certificate represents only one Note) be treated as two persons for
the purposes of any quorum requirements of a meeting of Noteholders.

This Global Certificate shall not become valid for any purpose until
authenticated by or on behalf of the Registrar.

In witness whereof the Issuer has caused this Global Certificate to be signed on
its behalf.

Dated as of the Issue Date.

SCOTTISH POWER plc

By:


--------------------------------------------------------------------------------
                                       17
<PAGE>

CERTIFICATE OF AUTHENTICATION

This Global Certificate is authenticated by or on behalf of the Registrar.


CITIBANK, N.A.
as Registrar

By:




Authorised Signatory
For the purposes of authentication only.
Without recourse, warranty or liability.


--------------------------------------------------------------------------------
                                       18
<PAGE>

                                Form of Transfer

For value received the undersigned transfers to

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

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

           (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE)

[.] principal amount of the Notes represented by this Global Certificate, and
all rights under them.


Dated

Signed
      -------------------------------    ------------------------------------
                                         Certifying Signature

Notes:

      (i)   The signature of the person effecting a transfer shall conform to a
            list of duly authorised specimen signatures supplied by the holder
            of the Notes represented by this Global Certificate or (if such
            signature corresponds with the name as it appears on the face of
            this Global Certificate) be certified by a notary public or a
            recognised bank or be supported by such other evidence as a Transfer
            Agent or the Registrar may reasonably require.

      (ii)  A representative of the Noteholder should state the capacity in
            which he signs e.g. executor.


[Insert the provisions of the relevant Pricing Supplement that relate to the
Conditions or the Global Certificate as the Schedule.]


--------------------------------------------------------------------------------
                                       19
<PAGE>

                                   SCHEDULE 2
                                     Part A
                               Form of Bearer Note

On the front:

[Denomination]           [ISIN]         [Series]     [Certif. No.]


[Currency and denomination]

This Note constitutes [[commercial paper/a [shorter/longer] term debt security]
issued in accordance with regulations made under Section 4 of the Banking Act
1987. The Issuer of this Note is Scottish Power plc, which is not an authorised
institution or a European authorised institution (as such terms are defined in
the Banking Act 1987 (Exempt Transactions) Regulations 1997). Repayment of the
principal and the payment of any interest or premium in connection with this
Note has not been guaranteed](*) [(*) Delete if Note is not denominated in
Sterling or if issue proceeds are not accepted in the UK.]

                               SCOTTISH POWER plc
             (Incorporated in Scotland with limited liability under
                           registered number 117120)

                            DEBT ISSUANCE PROGRAMME

                                 Series No. [.]

                                [Title of issue]

This Note forms one of the Series of Notes referred to above (the "Notes") of
Scottish Power plc (the "Issuer") designated as specified in the title hereof.
The Notes are subject to the Terms and Conditions (the "Conditions") endorsed
hereon and are issued subject to, and with the benefit of, the Trust Deed
referred to in the Conditions. Expressions defined in the Conditions have the
same meanings in this Note.

The Issuer for value received promises to pay to the bearer of this Note, on
presentation and (when no further payment is due in respect of this Note)
surrender of this Note on the Maturity Date (or on such earlier date as the
Redemption Amount may become repayable in accordance with the Conditions) the
Redemption Amount and (unless this Note does not bear interest) to pay interest
from the Interest Commencement Date in arrear at the rates, in the amounts and
on the dates for payment provided for in the Conditions together with such other
sums and additional amounts (if any) as may be payable under the Conditions, in
accordance with the Conditions.

This Note shall not become valid or obligatory for any purpose until
authenticated by or on behalf of the Issuing and Paying Agent.

In witness whereof the Issuer has caused this Note to be signed on its behalf.

Dated as of the Issue Date.


--------------------------------------------------------------------------------
                                       20
<PAGE>

SCOTTISH POWER plc

By:




CERTIFICATE OF AUTHENTICATION

This Note is authenticated
by or on behalf of the Issuing and Paying Agent.

CITIBANK, N.A.
as Issuing and Paying Agent

By:




Authorised Signatory
For the purposes of authentication only.
Without recourse, warranty or liability.

ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.


--------------------------------------------------------------------------------
                                       21
<PAGE>

On the back:

                        Terms and Conditions of the Notes

[The Terms and Conditions that are set out in Schedule 2 Part C to the Trust
Deed as amended by and incorporating any additional provisions forming part of
such Terms and Conditions and set out in the relevant Pricing Supplement shall
be set out here.]


                            ISSUING AND PAYING AGENT

                                 CITIBANK, N.A.
                                 P.O. Box 18055
                               5 Carmelite Street
                                     London
                                    EC4Y 0PA


                                  PAYING AGENT

                         CITIBANK, N.A., BRUSSELS OFFICE
                                  Building 726
                                  1931 Brucargo
                                    Brussels


--------------------------------------------------------------------------------
                                       22
<PAGE>

                                   SCHEDULE 2
                                     Part B
                               Form of Certificate

On the front:

This Note constitutes [[commercial paper/a [shorter/longer] term debt security]
issued in accordance with regulations made under Section 4 of the Banking Act
1987. The Issuer of this Note is Scottish Power plc, which is not an authorised
institution or a European authorised institution (as such terms are defined in
the Banking Act 1987 (Exempt Transactions) Regulations 1997). Repayment of the
principal and the payment of any interest or premium in connection with this
Note has not been guaranteed](*) [(*) Delete if Note is not denominated in
Sterling or if issue proceeds are not accepted in the UK.]

                               SCOTTISH POWER plc
             (Incorporated in Scotland with limited liability under
                            registered number 117120)

                             DEBT ISSUANCE PROGRAMME

                                 Series No. [.]

                                [Title of issue]

This Certificate certifies that [.] of [.] (the "Registered Holder") is, as at
the date hereof, registered as the holder of [principal amount] of Notes of the
Series of Notes referred to above (the "Notes") of Scottish Power plc (the
"Issuer"), designated as specified in the title hereof. The Notes are subject to
the Terms and Conditions (the "Conditions") endorsed hereon and are issued
subject to, and with the benefit of, the Trust Deed referred to in the
Conditions. Expressions defined in the Conditions have the same meanings in this
Certificate.

The Issuer, for value received, promises to pay to the holder of the Note(s)
represented by this Certificate upon presentation and (when no further payment
is due in respect of the Note(s) represented by this Certificate) surrender of
this Certificate on the Maturity Date (or on such earlier date as the Redemption
Amount may become repayable in accordance with the Conditions) the Redemption
Amount in respect of the Notes represented by this Certificate and (unless the
Note(s) represented by this Certificate do not bear interest) to pay interest in
respect of such Notes from the Interest Commencement Date in arrear at the
rates, in the amounts and on the dates for payment provided for in the
Conditions together with such other sums and additional amounts (if any) as may
be payable under the Conditions, in accordance with the Conditions.

For the purposes of this Certificate, (a) the holder of the Note(s) represented
by this Certificate is bound by the provisions of the Agency Agreement, (b) the
Issuer certifies that the Registered Holder is, at the date hereof, entered in
the Register as the holder of the Note(s) represented by this Certificate, (c)
this Certificate is evidence of entitlement only, (d) title to the Note(s)
represented by this Certificate passes only on due registration in the Register,
and (e) only the holder of the Note(s) represented by this Certificate is
entitled to payments in respect of the Note(s) represented by this Certificate.

This Certificate shall not become valid for any purpose until authenticated by
or on behalf of the Registrar.


--------------------------------------------------------------------------------
                                       23
<PAGE>

In witness whereof the Issuer has caused this Certificate to be signed on its
behalf.

Dated as of the Issue Date.

SCOTTISH POWER plc

By:




CERTIFICATE OF AUTHENTICATION

This Certificate is authenticated
by or on behalf of the Registrar.

CITIBANK, N.A.
as Registrar

By:




Authorised Signatory
For the purposes of authentication only.
Without recourse, warranty or liability.


--------------------------------------------------------------------------------
                                       24
<PAGE>

On the back:

                        Terms and Conditions of the Notes

[The Terms and Conditions that are set out in Schedule 2 Part C to the Trust
Deed as amended by and incorporating any additional provisions forming part of
such Terms and Conditions and set out in the relevant Pricing Supplement shall
be set out here.]

                                Form of Transfer

For value received the undersigned transfers to

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

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

           (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE)

[.] principal amount of the Notes represented by this Certificate, and all
rights under them.


Dated

Signed
      -------------------------------           ------------------------------
                                                Certifying Signature

Notes:

      (i)   The signature of the person effecting a transfer shall conform to a
            list of duly authorised specimen signatures supplied by the holder
            of the Notes represented by this Certificate or (if such signature
            corresponds with the name as it appears on the face of this
            Certificate) be certified by a notary public or a recognised bank or
            be supported by such other evidence as a Transfer Agent or the
            Registrar may reasonably require.

      (ii)  A representative of the Noteholder should state the capacity in
            which he signs.

             ISSUING AND PAYING AGENT, TRANSFER AGENT AND REGISTRAR

                                 CITIBANK, N.A.
                                 P.O. Box 18055
                               5 Carmelite Street
                                     London
                                    EC4Y 0PA

                         PAYING AGENT AND TRANSFER AGENT

                         CITIBANK, N.A., BRUSSELS OFFICE
                                  Building 726
                                  1931 Brucargo
                                    Brussels


--------------------------------------------------------------------------------
                                       25
<PAGE>

                                   SCHEDULE 2
                                     Part C
                        Terms and Conditions of the Notes

The Notes are constituted by a Trust Deed (as amended or supplemented as at the
date of issue of the Notes (the "Issue Date"), the "Trust Deed") dated 4th
November 1997 between the Issuer and The Law Debenture Trust Corporation p.l.c.
(the "Trustee", which expression shall include all persons for the time being
the trustee or trustees under the Trust Deed) as trustee for the Noteholders (as
defined below). These terms and conditions include summaries of, and are subject
to, the detailed provisions of the Trust Deed, which includes the form of the
Bearer Notes, Certificates, Receipts, Coupons and Talons referred to below. An
Agency Agreement (as amended or supplemented as at the Issue Date, the "Agency
Agreement") dated 4th November 1997 has been entered into in relation to the
Notes between the Issuer, the Trustee, Citibank, N.A., London as initial issuing
and paying agent and the other agents named in it. The issuing and paying agent,
the paying agents, the registrar, the transfer agents and the calculation
agent(s) for the time being (if any) are referred to below respectively as the
"Issuing and Paying Agent", the "Paying Agents" (which expression shall include
the Issuing and Paying Agent), the "Registrar", the "Transfer Agents" (which
expression shall include the Registrar) and the "Calculation Agent(s)". Copies
of the relevant Pricing Supplement, Trust Deed and the Agency Agreement are
available for inspection during usual business hours at the registered office of
the Trustee (presently at Princes House, 93 Gresham Street, London EC2V 7LY) and
at the specified offices of the Paying Agents and the Transfer Agents.

The Noteholders, the holders of the interest coupons (the "Coupons")
appertaining to interest bearing Notes in bearer form and, where applicable in
the case of such Notes, talons for further Coupons (the "Talons") (the
"Couponholders") and the holders of the receipts for the payment of instalments
of principal (the "Receipts") relating to Notes in bearer form of which the
principal is payable in instalments are entitled to the benefit of, are bound
by, and are deemed to have notice of, all the provisions of the Trust Deed and
the relevant Pricing Supplement and are deemed to have notice of those
provisions applicable to them of the Agency Agreement.

1. Form, Denomination and Title

The Notes are issued in bearer form ("Bearer Notes", which expression includes
Notes that are specified to be Exchangeable Bearer Notes), in registered form
("Registered Notes") or in bearer form exchangeable for Registered Notes
("Exchangeable Bearer Notes") in each case in the Denomination(s) shown thereon.

All Registered Notes shall have the same Denomination. Where Exchangeable Bearer
Notes are issued, the Registered Notes for which they are exchangeable shall
have the same Denomination as the lowest denomination of Exchangeable Bearer
Notes.

Bearer Notes are serially numbered and are issued with Coupons (and, where
appropriate, a Talon) attached, save in the case of Notes that do not bear
interest in which case references to interest (other than in relation to
interest due after the Maturity Date), Coupons and Talons in these Conditions
are not applicable. Any Bearer Note the principal amount of which is redeemable
in instalments is issued with one or more Receipts attached.

Registered Notes are represented by registered certificates ("Certificates")
and, save as provided in Condition 2(c), each Certificate shall represent the
entire holding of Registered Notes by the same holder.

Title to the Bearer Notes and the Receipts, Coupons and Talons shall pass by
delivery. Title to the Registered Notes shall pass by registration in the
register that the Issuer shall procure to be kept by the Registrar in accordance
with the provisions of the Agency Agreement (the "Register"). Except as ordered
by a court of competent jurisdiction or as required by law, the holder (as
defined below) of any Note, Receipt, Coupon or Talon shall be deemed to be and
may be treated as its absolute owner for all purposes whether or not it is
overdue and regardless of any notice of ownership, trust or an interest in it,
any writing on it (or on the Certificate representing it) or its theft or loss
(or that of the related Certificate) and no person shall be liable for so
treating the holder.

In these Conditions, "Noteholder" means the bearer of any Bearer Note and the
Receipts relating to it or the person in whose name a Registered Note is
registered (as the case may be), "holder" (in relation to a Note, Receipt,
Coupon or Talon) means the bearer of any Bearer Note, Receipt, Coupon or Talon
or the person in whose name a Registered Note is registered (as the case may be)
and capitalised terms have the meanings given to them hereon, the absence of any
such meaning indicating that such term is not applicable to the Notes.

2. Exchanges of Exchangeable Bearer Notes and Transfers of Registered Notes

(a) Exchange of Exchangeable Bearer Notes

Subject as provided in Condition 2(f), Exchangeable Bearer Notes may be
exchanged for the same aggregate principal amount of Registered Notes at the
request in writing of the relevant Noteholder and upon surrender of each
Exchangeable Bearer Note to be exchanged, together with all unmatured Receipts.
Coupons and Talons relating to it, at the specified office of any Transfer
Agent: provided, however, that where an Exchangeable Bearer Note is surrendered
for exchange after the Record Date (as defined in Condition 7(b)) for any
payment of interest, the Coupon in respect of that payment of interest need not
be surrendered with it. Registered Notes may not be exchanged for Bearer Notes.
Bearer Notes of one Denomination may not be exchanged for Bearer Notes of
another Denomination. Bearer Notes that are not Exchangeable Bearer Notes may
not be exchanged for Registered Notes.
<PAGE>
(b) Transfer of Registered Notes

One or more Registered Notes may be transferred upon the surrender (at the
specified office of the Registrar or any Transfer Agent) of the Certificate
representing such Registered Notes to be transferred, together with the form of
transfer endorsed on such Certificate duly completed and executed and any other
evidence as the Registrar or Transfer Agent may reasonably require. In the case
of a transfer of part only of a holding of Registered Notes represented by one
Certificate, a new Certificate shall be issued to the transferee in respect of
the part transferred and a further new Certificate in respect of the balance of
the holding not transferred shall be issued to the transferor.

(c) Exercise of Options or Partial Redemption in Respect of Registered Notes

In the case of an exercise of an Issuer's or Noteholders' option in respect of,
or a partial redemption of, a holding of Registered Notes represented by a
single Certificate, a new Certificate shall be issued to the holder to reflect
the exercise of such option or in respect of the balance of the holding not
redeemed. In the case of a partial exercise of an option resulting in Registered
Notes of the same holding having different terms, separate Certificates shall be
issued in respect of those Notes of that holding that have the same terms. New
Certificates shall only be issued against surrender of the existing Certificates
to the Registrar or any Transfer Agent. In the case of a transfer of Registered
Notes to a person who is already a holder of Registered Notes, a new Certificate
representing the enlarged holding shall only be issued against surrender of the
Certificate representing the existing holding.

(d) Delivery of New Certificates

Each new Certificate to be issued pursuant to Conditions 2(a), (b) or (c) shall
be available for delivery within five business days of receipt of the request
for exchange, form of transfer or Exercise Notice or surrender of the
Certificate for exchange. Delivery of the new Certificate(s) shall be made at
the specified office of the Transfer Agent or of the Registrar (as the case may
be) to whom delivery or surrender of such request for exchange, form of
transfer, Exercise Notice or Certificate shall have been made or, at the option
of the holder making such delivery or surrender as aforesaid and as specified in
the relevant request for exchange, form of transfer, Exercise Notice or
otherwise in writing, be mailed by uninsured post at the risk of the holder
entitled to the new Certificate to such address as may be so specified, unless
such holder requests otherwise and pays in advance to the relevant Agent the
costs of such other method of delivery and/or such insurance as it may specify.
In this Condition 2(d), "business day" means a day, other than a Saturday or
Sunday, on which banks are open for business in the place of the specified
office of the relevant Transfer Agent or the Registrar.

(e) Exchange Free of Charge

Exchange and transfer of Notes and Certificates on registration, transfer,
exercise of an option or partial redemption shall be effected without charge by
or on behalf of the Issuer, the Registrar or the Transfer Agents, but upon
payment of any tax or other governmental charges that may be imposed in relation
to it (or the giving of such indemnity as the Registrar or the relevant Transfer
Agent may reasonably require).

(f) Closed Periods

No Noteholder may require the transfer of a Registered Note to be registered or
an Exchangeable Bearer Note to be exchanged for one or more Registered Note(s)
(i) during the period of 15 days ending on the due date for redemption of, or
payment of any Instalment Amount in respect of, that Note, (ii) during the
period of 15 days prior to any date on which Notes may be called for redemption
by the Issuer at its option pursuant to Condition 6(d), (iii) after any such
Note has been called for redemption or (iv) during the period of seven days
ending on (and including) any Record Date. An Exchangeable Bearer Note called
for redemption may, however, be exchanged for one or more Registered Note(s) in
respect of which the Certificate is simultaneously surrendered not later than
the relevant Record Date.

3. Status

The Notes and the Receipts and Coupons constitute (subject to Condition 4)
unsecured obligations of the Issuer and shall at all times rank pari passu and
without any preference among themselves. The payment obligations of the Issuer
under the Notes and the Receipts and Coupons shall, save for such exceptions as
may be provided by applicable legislation and subject to Condition 4, at all
times rank at least equally with all other unsecured and unsubordinated
indebtedness and monetary obligations of the Issuer, present and future.

4. Negative Pledge

So long as any of the Notes remains outstanding (as defined in the Trust Deed)
the Issuer will ensure that no Relevant Indebtedness of the Issuer or any
Relevant Subsidiary (as defined in Condition 6) or of any other person and no
guarantee by the Issuer or any Relevant Subsidiary of any Relevant Indebtedness
(as defined in Condition 6) of any person will be secured by a mortgage, charge,
lien, pledge or other security interest (each a "Security Interest") upon, or
with respect to, any of the present or future business, undertaking, assets or
revenues (including any uncalled capital) of the Issuer or any Relevant
Subsidiary unless the Issuer shall, before or at the same time as the creation
of the Security Interest, take any and all action necessary to ensure that:

(i) all amounts payable by it under the Notes, the Receipts, the Coupons and the
Trust Deed are secured equally and rateably with the Relevant Indebtedness or
guarantee, as the case may be, by the Security Interest to the satisfaction of
the Trustee; or
<PAGE>

(ii) such other Security Interest or guarantee or other arrangement (whether or
not including the giving of a Security Interest) is provided in respect of all
amounts payable by the Issuer under the Notes, the Receipts, the Coupons and the
Trust Deed either (i) as the Trustee shall in its absolute discretion deem not
materially less beneficial to the interests of the Noteholders or (ii) as shall
be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the
Noteholders,

save that the Issuer or any Relevant Subsidiary may create or have outstanding a
Security Interest in respect of any Relevant Indebtedness and/or any guarantees
given by the Issuer or any Relevant Subsidiary in respect of any Relevant
Indebtedness of any person (without the obligation to provide a Security
Interest or guarantee or other arrangement in respect of the Notes, the
Receipts, the Coupons and the Trust Deed as aforesaid) where (1) such Relevant
Indebtedness has an initial maturity of not less than twenty years and is of a
maximum aggregate amount outstanding at any time not exceeding the greater of
(pound)250,000,000 or 20% of the Capital and Reserves (as defined in Condition
6) or (2) such Security Interest is provided in respect of a company becoming a
Subsidiary of the Issuer after the date of the relevant Pricing Supplement and
where such Security Interest existed at the time that company becomes a
Subsidiary of the Issuer (provided that such Security Interest was not created
in contemplation of that company becoming a Subsidiary of the Issuer and the
principal amount secured at the time of that company becoming a Subsidiary of
the Issuer is not subsequently increased).

5. Interest and Other Calculations

(a) Interest Rate and Accrual

Each Note bears interest on its outstanding principal amount from the Interest
Commencement Date at the rate per annum (expressed as a percentage) equal to the
Interest Rate, such interest being payable in arrear on each Interest Payment
Date.

Interest shall cease to accrue on each Note on the due date for redemption
unless, upon due presentation, payment of principal is improperly withheld or
refused, in which event interest shall continue to accrue (as well after as
before judgment) at the Interest Rate in the manner provided in this Condition 5
to the Relevant Date (as defined in Condition 8).

(b) Business Day Convention

If any date referred to in these Conditions that is specified to be subject to
adjustment in accordance with a Business Day Convention would otherwise fall on
a day that is not a Business Day, then, if the Business Day Convention specified
is (i) the Floating Rate Business Day Convention, such date shall be postponed
to the next day that is a Business Day unless it would thereby fall into the
next calendar month, in which event (A) such date shall be brought forward to
the immediately preceding Business Day and (B) each subsequent such date shall
be the last Business Day of the month in which such date would have fallen had
it not been subject to adjustment, (ii) the Following Business Day Convention,
such date shall be postponed to the next day that is a Business Day; (iii) the
Modified Following Business Day Convention, such date shall be postponed to the
next day that is a Business Day unless it would thereby fall into the next
calendar month, in which event such date shall be brought forward to the
immediately preceding Business Day or (iv) the Preceding Business Day
Convention, such date shall be brought forward to the immediately preceding
Business Day.

(c) Interest Rate on Floating Rate Notes

Subject to paragraph (v) below, if the Interest Rate is specified in the Pricing
Supplement as being Floating Rate, the Interest Rate for each Interest Accrual
Period shall be determined by the Calculation Agent at or about the Relevant
Time on the Interest Determination Date in respect of each Interest Accrual
Period in accordance with the following

(i) if the Primary Source for the Floating Rate is a Page, subject as provided
below, the Interest Rate shall be:

(x) the Relevant Rate (where such Relevant Rate on such Page is a composite
quotation or is customarily supplied by one entity); or

(y) the arithmetic mean of the Relevant Rates of the persons whose Relevant
Rates appear on that Page,

in each case appearing on such Page at the Relevant Time on the Interest
Determination Date

(ii) if the Page specified in the Pricing Supplement as a Primary Source
permanently ceases to quote the Relevant Rate(s) but such quotation(s) is/are
available from another page, section or other part of such information service
selected by the Calculation Agent (the "Replacement Page"), the Replacement Page
shall be substituted as the Primary Source for Interest Rate Quotations and if
no Replacement Page exists but such quotation(s) is/are available from a page,
section or other part of a different information service selected by the
Calculation Agent and approved by the Issuer (the "Secondary Replacement Page"),
the Secondary Replacement Page shall be substituted as the Primary Source for
Interest Rate Quotations

(iii) if the Primary Source for the Floating Rate is Reference Banks (as defined
below) or if sub-paragraph (i)(x) applies and no Relevant Rate appears on the
Page at the Relevant Time on the Interest Determination Date or if sub-paragraph
(i)(y) above applies and fewer than two Relevant Rates appear on the Page at the
Relevant Time on the Interest Determination Date, subject as provided below, the
Interest Rate shall be the arithmetic mean of the Relevant Rates that each of
the Reference Banks is quoting to leading banks in the Relevant Financial Centre
at the Relevant Time on the Interest Determination Date, as determined by the
Calculation Agent

(iv) if paragraph (iii) above applies, and the Calculation Agent determines that
fewer than two Reference Banks are so quoting Relevant Rates, subject as
provided below, the Interest Rate shall be the arithmetic mean of the rates per
annum
<PAGE>
(expressed as a percentage) that the Calculation Agent determines to be the
rates (being the nearest equivalent to the Benchmark) in respect of a
Representative Amount of the Relevant Currency that at least two out of five
leading banks selected by the Calculation Agent in the principal financial
centre of the country of the Relevant Currency (the "Principal Financial
Centre") selected by the Calculation Agent are quoting at or about the Relevant
Time on the date on which such banks would customarily quote such rates for a
period commencing on the Effective Date for a period equivalent to the Specified
Duration (x) to leading banks carrying on business in Europe, or (if the
Calculation Agent determines that fewer than two of such banks are so quoting to
leading banks in Europe) (y) to leading banks carrying on business in the
Principal Financial Centre; except that, if fewer than two of such banks are so
quoting to leading banks in the Principal Financial Centre, the Interest Rate
shall be the Interest Rate determined on the previous Interest Determination
Date (after readjustment for any difference between any Margin, Rate Multiplier
or Maximum or Minimum Interest Rate applicable to the preceding Interest Accrual
Period and to the relevant Interest Accrual Period)

(v) where the Relevant Currency is Euro (provided that if the third stage of the
European economic and monetary union has not started, references to Euro as the
relevant currency shall mean ECU) and the Interest Rate is specified as being
Floating Rate, provisions relating to the calculation and determination of
interest will be specified in the relevant Pricing Supplement.

(d) Interest Rate on Zero Coupon Notes

Where a Note the Interest Rate of which is specified in the Pricing Supplement
to be Zero Coupon is repayable prior to the Maturity Date and is not paid when
due, the amount due and payable prior to the Maturity Date shall be the
Redemption Amount of such Note. As from the Maturity Date, the Interest Rate for
any overdue principal of such a Note shall be a rate per annum (expressed as a
percentage) equal to the Amortisation Yield (as defined in Condition 6(b)).

(e) Margin, Maximum/Minimum Interest Rates, Instalment Amounts and Redemption
    Amounts, Rate Multipliers and Rounding

(i) If any Margin or Rate Multiplier is specified in the Pricing Supplement
(either (x) generally, or (y) in relation to one or more Interest Accrual
Periods), an adjustment shall be made to all Interest Rates, in the case of (x),
or the Interest Rates for the specified Interest Accrual Periods, in the case of
(y), calculated in accordance with Condition 5(c) above by adding (if a positive
number) or subtracting the absolute value (if a negative number) of such Margin
or multiplying by such Rate Multiplier, subject always to the next paragraph.

(ii) If any Maximum or Minimum Interest Rate, Instalment Amount or Redemption
Amount is specified in the Pricing Supplement, then any Interest Rate,
Instalment Amount or Redemption Amount shall be subject to such maximum or
minimum, as the case may be.

(iii) For the purposes of any calculations required pursuant to these Conditions
(unless otherwise specified in the Pricing Supplement), (x) all percentages
resulting from such calculations shall be rounded, if necessary, to the nearest
one hundred-thousandth of a percentage point (with halves being rounded up), (y)
all figures shall be rounded to seven significant figures (with halves being
rounded up) and (z) all currency amounts that fall due and payable shall be
rounded to the nearest unit of such currency (with halves being rounded up),
save in the case of yen, which shall be rounded down to the nearest yen. For
these purposes "unit" means, with respect to any currency other than ECU, the
lowest amount of such currency that is available as legal tender in the country
of such currency and, (a) with respect to ECU, means 0.01 ECU and (b) with
respect to Euro, means 0.01 Euro.

(f) Calculations

The amount of interest payable in respect of any Note for any period shall be
calculated by multiplying the product of the Interest Rate and the outstanding
principal amount of such Note by the Day Count Fraction, unless an Interest
Amount (or a formula for its calculation) is specified in respect of such
period, in which case the amount of interest payable in respect of such Note for
such period shall equal such Interest Amount (or be calculated in accordance
with such formula). Where any Interest Period comprises two or more Interest
Accrual Periods, the amount of interest payable in respect of such Interest
Period shall be the sum of the amounts of interest payable in respect of each of
those Interest Accrual Periods.

(g) Determination and Publication of Interest Rates, Interest Amounts,
    Redemption Amounts and Instalment Amounts

As soon as practicable after the Relevant Time on each Interest Determination
Date or such other time on such date as the Calculation Agent may be required to
calculate any Redemption Amount or Instalment Amount, obtain any quote or make
any determination or calculation, it shall determine the Interest Rate and
calculate the amount of interest payable (the "Interest Amounts") in respect of
each Denomination of the Notes for the relevant Interest Accrual Period,
calculate the Redemption Amount or Instalment Amount, obtain such quote or make
such determination or calculation, as the case may be, and cause the Interest
Rate and the Interest Amounts for each Interest Period and the relevant Interest
Payment Date and, if required to be calculated, the Redemption Amount or any
Instalment Amount to be notified to the Trustee, the Issuer, each of the Paying
Agents, the Noteholders, any other Calculation Agent appointed in respect of the
Notes that is to make a further calculation upon receipt of such information
and, if the Notes are listed on a stock exchange and the rules of such exchange
so require, such exchange as soon as possible after their determination but in
no event later than (i) the commencement of the relevant Interest Period, if
determined prior to such time, in the case of notification to such exchange of
an Interest Rate and Interest
<PAGE>

Amount, or (ii) in all other cases, the fourth Business Day after such
determination. Where any Interest Payment Date or Interest Period Date is
subject to adjustment pursuant to Condition 5(b), the Interest Amounts and the
Interest Payment Date so published may subsequently be amended (or appropriate
alternative arrangements made with the consent of the Trustee by way of
adjustment) without notice in the event of an extension or shortening of the
Interest Period. If the Notes become due and payable under Condition 10, the
accrued interest and the Interest Rate payable in respect of the Notes shall
nevertheless continue to be calculated as previously in accordance with this
Condition but no publication of the Interest Rate or the Interest Amount so
calculated need be made unless the Trustee otherwise requires. The determination
of each Interest Rate, Interest Amount, Redemption Amount and Instalment Amount,
the obtaining of each quote and the making of each determination or calculation
by the Calculation Agent(s) shall (in the absence of manifest error) be final
and binding upon all parties.

(h) Determination or Calculation by Trustee

If the Calculation Agent does not at any time for any reason determine or
calculate the Interest Rate for an Interest Period or any Interest Amount,
Instalment Amount or Redemption Amount, the Trustee shall do so (or shall
appoint an agent on its behalf to do so) and such determination or calculation
shall be deemed to have been made by the Calculation Agent. In doing so, the
Trustee shall apply the foregoing provisions of this Condition, with any
necessary consequential amendments, to the extent that, in its opinion, it can
do so, and, in all other respects it shall do so in such manner as it shall deem
fair and reasonable in all the circumstances.

(i) Definitions

In these Conditions, unless the context otherwise requires, the following
defined terms shall have the meanings set out below

"Business Day" means:

(i) in the case of a specified currency other than Euro, a day (other than a
Saturday or Sunday) on which commercial banks and foreign exchange markets
settle payments in the principal financial centre for that currency; and/or

(ii) in the case of Euro, a day on which the TARGET system is operating; and/or

(iii) in the case of ECU, any day other than a Saturday, a Sunday or a day
designated as a non-settlement day for ECU on the Reuters Screen ISDE page on
the Reuter Monitor Money Rates Service ("Reuters") or a day so designated by the
ECU Banking Association if ECU non-settlement days do not appear on that page
or, if no days are so designated, a day on which ECU interbank payments cannot
be settled; and/or

(iv) in the case of a specified currency with one or more financial centres, a
day (other than a Saturday or Sunday) on which commercial banks and foreign
exchange markets settle payments in the specified currency in the specified
financial centre or, if no financial centre is specified, generally in each of
such financial centres.

"Day Count Fraction" means, in respect of the calculation of an amount of
interest on any Note for any period of time (whether or not constituting an
Interest Period, the "Calculation Period"):

(i) if "Actual/365" or "Actual/Actual" is specified in the Pricing Supplement,
the actual number of days in the Calculation Period divided by 365 (or, if any
portion of that Calculation Period falls in a leap year, the sum of (A) the
actual number of days in that portion of the Calculation Period falling in a
leap year divided by 366 and (B) the actual number of days in that portion of
the Calculation Period falling in a non-leap year divided by 365);

(ii) if "Actual/365 (Fixed)" is specified in the Pricing Supplement, the actual
number of days in the Calculation Period divided by 365;

(iii) if "Actual/360" is specified in the Pricing Supplement, the actual number
of days in the Calculation Period divided by 360;

(iv) if "30/360", "360/360" or "Bond Basis" is specified in the Pricing
Supplement, the number of days in the Calculation Period divided by 360 (the
number of days to be calculated on the basis of a year of 360 days with 12
30-day months (unless (a) the last day of the Calculation Period is the 31st day
of a month but the first day of the Calculation Period is a day other than the
30th or 31st day of a month, in which case the month that includes that last day
shall not be considered to be shortened to a 30-day month, or (b) the last day
of the Calculation Period is the last day of the month of February, in which
case the month of February shall not be considered to be lengthened to a 30-day
month)); and

(v) if "30E/360" or "Eurobond Basis" is specified in the Pricing Supplement, the
number of days in the Calculation Period divided by 360 (the number of days to
be calculated on the basis of a year of 360 days with 12 30-day months, without
regard to the date of the first day or last day of the Calculation Period
unless, in the case of a Calculation Period ending on the Maturity Date, the
Maturity Date is the last day of the month of February, in which case the month
of February shall not be considered to be lengthened to a 30-day month).

"Effective Date" means, with respect to any Floating Rate to be determined on an
Interest Determination Date, the date specified as such in the Pricing
Supplement or, if none is so specified, the first day of the Interest Accrual
Period to which such Interest Determination Date relates.
<PAGE>

"Interest Accrual Period" means the period beginning on (and including) the
Interest Commencement Date and ending on (but excluding) the first Interest
Period Date and each successive period beginning on (and including) an Interest
Period Date and ending on (but excluding) the next succeeding Interest Period
Date.

"Interest Commencement Date" means the Issue Date or such other date as may be
specified in the Pricing Supplement.

"Interest Determination Date" means, with respect to an Interest Rate and
Interest Accrual Period, the date specified as such in the Pricing Supplement
or, if none is so specified and the Relevant Currency is not Euro, the first day
of such Interest Accrual Period if the Relevant Currency is Sterling or the day
falling two Business Days in London for the Relevant Currency prior to the first
day of such Interest Accrual Period if the Relevant Currency is not Sterling.

"Interest Period" means the period beginning on (and including) the Interest
Commencement Date and ending on (but excluding) the first Interest Payment Date
and each successive period beginning on (and including) an Interest Payment Date
and ending on (but excluding) the next succeeding Interest Payment Date.

"Interest Period Date" means each Interest Payment Date unless otherwise
specified in the Pricing Supplement.

"Interest Rate" means the rate of interest payable from time to time in respect
of this Note and that is either specified or calculated in accordance with the
provisions in the Pricing Supplement.

"Page" means such page, section, caption, column or other part of a particular
information service (including, but not limited to, Reuters and the Dow Jones
Telerate Service ("Telerate")) as may be specified for the purpose of providing
a Relevant Rate, or such other page, section, caption, column or other part as
may replace it on that information service or on such other information service,
in each case as may be nominated by the person or organisation providing or
sponsoring the information appearing there for the purpose of displaying rates
or prices comparable to that Relevant Rate.

"Reference Banks" means the institutions specified as such in the Pricing
Supplement or, if none, four (or, if the Relevant Financial Centre is Helsinki,
five) major banks selected by the Calculation Agent in the interbank market (or,
if appropriate, money, swap or over-the-counter index options market) that is
most closely connected with the Benchmark.

"Relevant Currency" means the currency specified in the Pricing Supplement
or, if none is specified, the currency in which the Notes are denominated.

"Relevant Financial Centre" means, with respect to any Floating Rate to be
determined on an Interest Determination Date, the financial centre as may be
specified as such in the Pricing Supplement or, if none is so specified, the
financial centre with which the relevant Benchmark (which, in the case of Euro,
shall be as specified in the Pricing Supplement) is most closely connected or,
if none is so connected, London.

"Relevant Rate" means the Benchmark for a Representative Amount of the Relevant
Currency for a period (if applicable or appropriate to the Benchmark) equal to
the Specified Duration commencing on the Effective Date.

"Relevant Time" means, with respect to any Interest Determination Date, if the
Relevant Currency is not Euro, the local time in the Relevant Financial Centre
specified in the Pricing Supplement or, if none is specified, the local time in
the Relevant Financial Centre at which it is customary to determine bid and
offered rates in respect of deposits in the Relevant Currency in the interbank
market in the Relevant Financial Centre and, if the Relevant Currency is Euro,
the time specified in the relevant Pricing Supplement.

"Representative Amount" means, with respect to any Floating Rate to be
determined on an Interest Determination Date, the amount specified as such in
the Pricing Supplement or, if none is specified, an amount that is
representative for a single transaction in the relevant market at the time.

"Specified Duration" means, with respect to any Floating Rate to be determined
on an Interest Determination Date, the duration specified in the Pricing
Supplement or, if none is specified, a period of time equal to the relative
Interest Accrual Period, ignoring any adjustment pursuant to Condition 5(b).

(j) Calculation Agent and Reference Banks

The Issuer shall procure that there shall at all times be four Reference Banks
(or such other number as may be required) with offices in the Relevant Financial
Centre (or, if the Relevant Currency is Euro, in such place or places as are
specified in the relevant Pricing Supplement) and one or more Calculation Agents
if provision is made for them in the Pricing Supplement and for so long as any
Note is outstanding (as defined in the Trust Deed). If any Reference Bank
(acting through its relevant office) is unable or unwilling to continue to act
as a Reference Bank, then the Issuer shall (with the prior approval of the
Trustee) appoint another Reference Bank with an office in the Relevant Financial
Centre to act as such in its place. Where more than one Calculation Agent is
appointed in respect of the Notes, references in these Conditions to the
Calculation Agent shall be construed as each Calculation Agent performing its
respective duties under the Conditions. If the Calculation Agent is unable or
unwilling to act as such or if the Calculation Agent fails duly to establish the
Interest Rate for an Interest Period or Interest Accrual Period or to calculate
any Interest Amount, Instalment Amount or the Redemption Amount or to comply
with any other requirement, the Issuer shall (with the prior approval of the
Trustee) appoint a leading bank or investment
<PAGE>

banking firm engaged in the interbank market (or, if appropriate, money, swap or
over-the-counter index options market) that is most closely connected with the
calculation or determination to be made by the Calculation Agent (acting through
its principal London office or any other office actively involved in such
market) to act as such in its place. The Calculation Agent may not resign its
duties without a successor having been appointed as aforesaid.

(k) Certificates to be Final

All certificates, communications, opinions, determinations, calculations,
quotations and decisions given, expressed, made or obtained for the purposes of
the provisions of this Condition 5, whether by the Calculation Agent or the
Trustee, shall (in the absence of wilful default, bad faith or manifest error)
be binding on the Issuer, the Calculation Agent, the Trustee, the other Paying
Agents and all Noteholders, Receiptholders and Couponholders and (in the absence
as aforesaid) no liability to the Issuer, the Noteholders, the Receiptholders or
the Couponholders shall attach to the Calculation Agent or the Trustee in
connection with the exercise or non-exercise by them of their powers, duties and
discretions pursuant to such provisions.

6. Redemption, Purchase and Options

(a) Redemption by Instalments and Final Redemption

(i) Unless previously redeemed, purchased and cancelled as provided in this
Condition 6 or the relevant Instalment Date (being one of the dates so specified
hereon) is extended pursuant to the Issuer's or any Noteholder's option in
accordance with Condition 6(d) or 6(e), each Note that provides for Instalment
Dates and Instalment Amounts shall be partially redeemed on each Instalment Date
at the related Instalment Amount specified in the Pricing Supplement. The
outstanding principal amount of each such Note shall be reduced by the
Instalment Amount (or, if such Instalment Amount is calculated by reference to a
proportion of the principal amount of such Note, such proportion) for all
purposes with effect from the related Instalment Date, unless payment of the
Instalment Amount is improperly withheld or refused on presentation of the
related Receipt, in which case, such amount shall remain outstanding until the
Relevant Date relating to such Instalment Amount.

(ii) Unless previously redeemed, purchased and cancelled as provided below or
its maturity is extended pursuant to the Issuer's or any Noteholder's option in
accordance with Condition 6(d) or 6(e), each Note shall be finally redeemed on
the Maturity Date specified in the Pricing Supplement at its Redemption Amount
(which, unless otherwise provided in the Pricing Supplement, is its principal
amount) or, in the case of a Note falling within paragraph (i) above, its final
Instalment Amount.

(b) Early Redemption of Zero Coupon Notes

(i) The Redemption Amount payable in respect of any Note that does not bear
interest prior to the Maturity Date, the Redemption Amount of which is not
linked to an index and/or a formula, upon redemption of such Note pursuant to
Condition 6(c) or 6(f) or upon it becoming due and payable as provided in
Condition 10 shall be the Amortised Face Amount (calculated as provided below)
of such Note.

(ii) Subject to the provisions of sub-paragraph (iii) below, the Amortised Face
Amount of any such Note shall be the scheduled Redemption Amount of such Note on
the Maturity Date discounted at a rate per annum (expressed as a percentage)
equal to the Amortisation Yield (which, if none is shown in the Pricing
Supplement, shall be such rate as would produce an Amortised Face Amount equal
to the issue price of the Notes if they were discounted back to their issue
price on the Issue Date) compounded annually. Where such calculation is to be
made for a period of less than one year, it shall be made on the basis of the
Day Count Fraction shown hereon.

(iii) If the Redemption Amount payable in respect of any such Note upon its
redemption pursuant to Condition 6(c) or 6(f) or upon it becoming due and
payable as provided in Condition 10 is not paid when due, the Redemption Amount
due and payable in respect of such Note shall be the Amortised Face Amount of
such Note as defined in sub-paragraph (ii) above, except that such sub-paragraph
shall have effect as though the reference therein to the date on which the Note
becomes due and payable were replaced by a reference to the Relevant Date. The
calculation of the Amortised Face Amount in accordance with this sub-paragraph
shall continue to be made (as well after as before judgment) until the Relevant
Date, unless the Relevant Date falls on or after the Maturity Date, in which
case the amount due and payable shall be the scheduled Redemption Amount of such
Note on the Maturity Date together with any interest that may accrue in
accordance with Condition 5(d).

(c) Redemption for Taxation Reasons

If, as a result of any amendment to or change in the laws or regulations of the
United Kingdom or of any political subdivision thereof or any authority therein
or thereof having power to tax or any change in the official or generally
accepted interpretation or application of such laws or regulations which becomes
effective on or after the date of the Trust Deed, the Issuer has or will become
obliged to pay any additional amounts as described in Condition 8 (and such
amendment or change has been evidenced by the delivery by the Issuer to the
Trustee (who shall accept such certificate and opinion as sufficient evidence
thereof) of (i) a certificate signed by two directors of the Issuer on behalf of
the Issuer stating that such amendment or change has occurred (irrespective of
whether such amendment or change is then effective), describing the facts
leading thereto and stating that such requirement cannot be avoided by the
Issuer, taking reasonable measures available to it and (ii) an opinion of
independent legal advisers of recognised standing to the effect that such
amendment or change has occurred (irrespective of whether such amendment or
change is then effective)), the Issuer may (having given not less than 30 nor
more
<PAGE>

than 90 days' notice to the Trustee and to the holders in accordance with
Condition 16) redeem all, but not some only, of the Notes (other than Notes in
respect of which the Issuer shall have given a notice of redemption pursuant to
Condition 6(d) or in respect of which a Noteholder shall have given a Put Event
Notice in accordance with Condition 6(f), in each case prior to any notice being
given under this Condition 6(c)) at their Redemption Amount, together with
accrued interest to the date fixed for such redemption, provided that no such
notice of redemption shall be given earlier than 90 days prior to the earliest
date on which the Issuer would be required to pay such additional amounts were a
payment in respect of the Notes then due.

(d) Redemption at the Option of the Issuer and Exercise of Issuer's Options

If so provided in the Pricing Supplement, the Issuer may, on giving irrevocable
notice to the Noteholders falling within the Issuer's Option Period, redeem, or
exercise the Issuer's option in relation to, all or, if so provided, some of the
Notes (other than Notes in respect of which the Issuer shall have given a notice
of redemption pursuant to Condition 6(c) or in respect of which a Noteholder
shall have given a Put Event Notice in accordance with Condition 6(f), in each
case prior to any notice being given under this Condition 6(d)) in the principal
amount or integral multiples thereof and on the date or dates so provided. Any
such redemption of Notes shall be at their Redemption Amount together with
interest accrued to the date fixed for redemption.

All Notes in respect of which any such notice is given shall be redeemed, or the
Issuer's option shall be exercised, on the date specified in such notice in
accordance with this Condition.

In the case of a partial redemption or a partial exercise of the Issuer's
option, the notice to Noteholders shall also contain the certificate numbers of
the Notes to be redeemed or in respect of which such option has been exercised,
which shall have been drawn in such place as the Trustee may approve and in such
manner as it deems appropriate, subject to compliance with any applicable laws
and stock exchange requirements. So long as the Notes are listed on the London
Stock Exchange or any other stock exchange and the rules of the relevant stock
exchange so require, the Issuer shall, once in each year in which there has been
a partial redemption of the Notes, cause to be published in a leading newspaper
of general circulation in London or as specified by such other stock exchange, a
notice specifying the aggregate principal amount of Notes outstanding and a list
of the Notes drawn for redemption but not surrendered.

(e) Redemption at the Option of Noteholders and Exercise of Noteholders'
    Options

If so provided in the Pricing Supplement, the Issuer shall, at the option of the
holder of any such Note, redeem such Note on the date or dates so provided at
its Redemption Amount together with interest accrued to the date fixed for
redemption.

To exercise such option or any other Noteholders' option that may be set out
hereon the holder must deposit (in the case of Bearer Notes) such Note (together
with all unmatured Receipts and Coupons and unexchanged Talons) with any Paying
Agent or (in the case of Registered Notes) the Certificate representing such
Note(s) with the Registrar or any Transfer Agent at its specified office,
together with a duly completed option exercise notice ("Exercise Notice" which
expression shall include any Put Notice (as defined below)) in the form
obtainable from any Paying Agent, the Registrar or any Transfer Agent (as
applicable) within the Noteholders' Option Period (which expression shall, in
the case of the exercise of the option referred to in Condition 6(f) below, mean
the Put Period (as defined below)). No Note or Certificate so deposited and
option exercised may be withdrawn without the prior consent of the Issuer,
except that such Note or Certificate will be returned to the relevant Noteholder
by the Paying Agent, the Registrar or Transfer Agent with which it has been
deposited if, prior to the due date for its redemption or the exercise of the
option, the Note becomes immediately due and payable or if upon due presentation
payment of the redemption moneys is not made or exercise of the option is
denied.

(f) Redemption at the Option of the Noteholders on a Put Event

If so provided in the Pricing Supplement, if, at any time while any of the Notes
remains outstanding, a Restructuring Event occurs and prior to the commencement
of or during the Restructuring Period an Independent Financial Adviser shall
have certified in writing to the Trustee that such Restructuring Event will not
be or is not, in its opinion, materially prejudicial to the interests of the
Noteholders, the following provisions of this Condition 6(f) shall cease to have
any further effect in relation to such Restructuring Event.

If, at any time while any of the Notes remains outstanding, a Restructuring
Event occurs and (subject to this Condition 6(f)) within the Restructuring
Period, either:

(i) if at the time such Restructuring Event occurs there are Rated Securities, a
Rating Downgrade in respect of such Restructuring Event also occurs; or

(ii) if at such time there are no Rated Securities, a Negative Rating Event also
occurs; and

an Independent Financial Adviser shall have certified in writing to the Trustee
that such Restructuring Event is, in its opinion, materially prejudicial to the
interests of the Noteholders (a "Negative Certification"), then, unless at any
time the Issuer shall have given a notice under Condition 6(c) or 6(d), the
holder of each Note will, upon the giving of a Put Event Notice (as defined
below), have the option (the "Put Option") to require the Issuer to redeem or,
at the option of the Issuer, purchase (or procure the purchase of) that Note on
the Put Date (as defined below), at its principal amount together with (or,
where purchased, together with an amount equal to) interest (if any) accrued to
(but excluding) the Put Date.
<PAGE>

An event shall be deemed not to be a Restructuring Event if, notwithstanding the
occurrence of a Rating Downgrade or a Negative Rating Event, the rating assigned
to the Rated Securities by any Rating Agency is subsequently increased to, or,
as the case may be, there is assigned to the Notes or other unsecured and
unsubordinated debt of the Issuer or a Relevant Subsidiary (or of any Subsidiary
of the Issuer which is guaranteed on an unsecured and unsubordinated basis by
the Issuer or a Relevant Subsidiary) having an initial maturity of five years or
more by any Rating Agency, an investment grade rating (BBB-/Baa3 or their
respective equivalents for the time being) or better prior to any Negative
Certification being issued.

Any certification by an Independent Financial Adviser as aforesaid as to whether
or not, in its opinion any Restructuring Event is materially prejudicial to the
interests of the Noteholders shall, in the absence of manifest error, be
conclusive and binding on the Trustee, the Issuer and the Noteholders.

Promptly upon, and in any event within 14 days after, the Issuer becoming aware
that a Put Event has occurred, the Issuer shall, and at any time upon the
Trustee becoming similarly so aware the Trustee may, and if so requested by the
holders of at least one-quarter in principal amount of the Notes then
outstanding shall, give notice (a "Put Event Notice") to the Noteholders in
accordance with Condition 16 specifying the nature of the Put Event and the
procedure for exercising the Put Option.

To exercise the Put Option, the holder of a Note must deposit (in the case of a
Bearer Note) such Note with any Paying Agent or (in the case of Registered
Notes) the Certificate representing such Note(s) with the Registrar or any
Transfer Agent at its specified office, on a day which is a Business Day in the
City of London and in the place of such specified office falling within the
period (the "Put Period") of 45 days after that on which a Put Event Notice is
given, accompanied by a duly completed and signed notice of exercise in the form
(for the time being current) obtainable from any specified office of any Paying
Agent, the Registrar or any Transfer Agent (as applicable) (a "Put Notice") and
in which the holder may specify a bank account to which payment is to be made
under this Condition 6. Where any Bearer Note is delivered without all Coupons
relating to it which mature after the day (the "Put Date") being the fifteenth
day after the date of expiry of the Put Period, the exercise of the Put Option
in respect of such Note shall be subject to the provision of such indemnity as
the Issuer may reasonably require. The Paying Agent to which such Note and Put
Notice or, as the case may be, the Registrar or Transfer Agent to which the
Certificate and Put Notice are delivered shall issue to the Noteholder concerned
a non-transferable receipt in respect of the Note so delivered. Payment in
respect of any Note so delivered shall be made, if the holder duly specifies in
the Put Notice an account with a bank to which payment is to be made, on the Put
Date by transfer to that bank account and, in every other case, on or after the
Put Date in each case against presentation and surrender or (as the case may be)
endorsement of such receipt at any specified office of any Paying Agent. A Put
Notice, once given, shall be irrevocable. For the purposes of Conditions 9, 10,
11, 12, 14, 16 and 17 and for certain other purposes specified in the Trust
Deed, receipts issued pursuant to this Condition 6(f) shall be treated as if
they were Notes. The Issuer shall redeem or, at the option of the Issuer,
purchase (or procure the purchase of) the relevant Note on the applicable Put
Date unless previously redeemed or purchased.

A Rating Downgrade or a Negative Rating Event or a non-investment grade rating
shall be deemed not to have occurred as a result or in respect of a
Restructuring Event if the Rating Agency making the relevant reduction in rating
or, where applicable, declining to assign a rating of at least investment grade
as provided in this Condition 6(f) does not announce or publicly confirm or
inform the Trustee in writing at its request that the reduction or, where
applicable, declining to assign a rating of at least investment grade was the
result, in whole or in part, of any event or circumstance comprised in or
arising as a result of the applicable Restructuring Event.

The Trust Deed provides that the Trustee is under no obligation to ascertain
whether a Restructuring Event, a Negative Rating Event or any event which could
lead to the occurrence of, or could constitute a, Restructuring Event has
occurred and until it shall have actual knowledge or express notice pursuant to
the Trust Deed to the contrary the Trustee may assume that no Restructuring
Event, Negative Rating Event or such other event has occurred. The Trust Deed
also provides that in determining whether or not a Restructuring Event has
occurred, the Trustee may rely solely on an opinion given in a certificate
signed by two directors of the Issuer.

In these Conditions

"Appointment" means the Instrument of Appointment dated August 1989 under
Section 11 of the Water Act 1989 (now Section 6 of the Water Industry Act) as in
effect on the date of the relevant Pricing Supplement, appointing SWSL as a
water undertaker and sewerage undertaker;

"Business Day" means, in relation to any place, a day on which commercial banks
and foreign exchange markets generally settle payments in that place;

"Capital and Reserves" means the aggregate of:

(i) the amount paid up or credited as paid up on the share capital of the
Issuer; and

(ii) the total of the capital, revaluation and revenue reserves of the Group,
including any share premium account, capital redemption reserve and credit
balance on the profit and loss account, but excluding sums set aside for
taxation and amounts attributable to minority interests and deducting any debit
balance on the profit and loss account,
<PAGE>

all as shown in the then latest audited consolidated balance sheet and profit
and loss account of the Group prepared in accordance with generally accepted
accounting principles in the United Kingdom, but adjusted as may be necessary in
respect of any variation in the paid up share capital or share premium account
of the Issuer since the date of that balance sheet and further adjusted as may
be necessary to reflect any change since the date of that balance sheet in the
Subsidiary Undertakings comprising the Group and/or as the Auditors (as defined
in the Trust Deed) may consider appropriate. A report by the Auditors as to the
amount of Capital and Reserves at any given time shall, in the absence of
manifest error, be conclusive and binding on all parties;

"Composite Licence" means the document dated 28th March 1990 containing the
Generation, Transmission and PES Licences granted to the Issuer by the Secretary
of State for Scotland under the Electricity Act;

"Electricity Act" means the Electricity Act 1989 as amended or re-enacted from
time to time and all subordinate legislation made pursuant thereto;

"Electricity Licence" means any licence granted or issued by any relevant
authority or person in the United Kingdom or by or pursuant to any primary or
secondary legislation which entitles the person holding such licence to generate
and/or transmit and/or distribute and/or supply electricity (other than a second
tier supply licence) in the United Kingdom or any part thereof;

"Excluded Subsidiary" means any Subsidiary of the Issuer:

(i) which is a single purpose company whose principal assets and business are
constituted by the ownership, acquisition, development and/or operation of an
asset;

(ii) none of whose indebtedness for borrowed money in respect of the financing
of such ownership, acquisition, development and/or operation of an asset is
subject to any recourse whatsoever to any member of the Group (other than such
Subsidiary or another Excluded Subsidiary) in respect of the repayment thereof,
except as expressly referred to in sub-paragraph (ii) of the definition of
Project Finance Indebtedness; and

(iii) which has been designated as such by the Issuer by written notice to
the Trustee,

provided that the Issuer may give written notice to the Trustee at any time that
any Excluded Subsidiary is no longer an Excluded Subsidiary, whereupon it shall
cease to be an Excluded Subsidiary;

"Generation Licence" means the electricity generation licence granted by the
Secretary of State for Scotland to the Issuer under the Electricity Act as
comprised in the Composite Licence as in effect on the date of the relevant
Pricing Supplement;

"Group" means the Issuer and its Subsidiary Undertakings and "member of the
Group" shall be construed accordingly;

"indebtedness for borrowed money" means any present or future indebtedness
(whether being principal, premium, interest or other amounts) for or in respect
of (i) money borrowed, (ii) liabilities under or in respect of any acceptance or
acceptance credit, or (iii) any notes, bonds, debentures, debenture stock, loan
stock or other securities offered, issued or distributed whether by way of
public offer, private placing, acquisition consideration or otherwise and
whether issued for cash or in whole or in part or for a consideration other than
cash;

"Independent Financial Adviser" means a financial adviser appointed by the
Issuer and approved by the Trustee (such approval not to be unreasonably
withheld or delayed) or, if the Issuer shall not have appointed such an adviser
within 21 days after becoming aware of the occurrence of a Restructuring Event
and the Trustee is indemnified to its satisfaction against the costs of such
adviser, appointed by the Trustee following consultation with the Issuer;

"Issuer Licences" means the Generation Licence, the Transmission Licence and the
PES Licence and, in any such case, and from time to time any other licence or
licences relating to the generation, transmission, distribution and/or supply of
electricity granted to the Issuer and/or any Relevant Subsidiary as contemplated
pursuant to paragraph (A) of "Restructuring Event" below and "Issuer Licence"
shall be construed accordingly;

"Manweb" means Manweb plc;

"Manweb PES Licence" means the public electricity supply licence granted by the
Secretary of State for Energy to Manweb under the Electricity Act (but for the
avoidance of doubt excluding for this purpose any second tier licence) as in
effect on the date of the relevant Pricing Supplement, and, from time to time,
any other licence or licences relating to the distribution and/or supply of
electricity granted to the Issuer and/or any Relevant Subsidiary as contemplated
pursuant to paragraph (A) of "Restructuring Event" below;

A "Negative Rating Event" shall be deemed to have occurred if (A) the Issuer
does not, either prior to or not later than 14 days after the date of a Negative
Certification in respect of the relevant Restructuring Event, seek, and
thereupon use all reasonable endeavours to obtain, a rating of the Notes or any
other unsecured and unsubordinated debt of the Issuer or a Relevant Subsidiary
(or of any Subsidiary of the Issuer which is guaranteed on an unsecured and
unsubordinated basis by the Issuer or a Relevant Subsidiary) having an initial
maturity of five years or more from a Rating Agency or (B) if it does so seek
and use such endeavours, it is unable, as a result of such Restructuring Event,
to obtain such a rating of at least investment grade (BBB-/Baa3, or their
respective equivalents for the time being);
<PAGE>

"PES Licence" means the public electricity supply licence granted by the
Secretary of State for Scotland to the Issuer under the Electricity Act (but for
the avoidance of doubt excluding for this purpose any second tier licence) as
comprised in the Composite Licence as in effect on the date of the relevant
Pricing Supplement;

"Pooling and Settlement Agreement" means the agreement dated 30th March 1990 (as
amended and restated as at 22nd April 1994) made by the Issuer and Manweb with
The National Grid Company plc and others setting out the rules and procedures
for the operation of an electricity trading pool and of a settlement system and,
while the same has effect, the Initial Settlement Agreement also dated 30th
March 1990 and made between the same parties, in each case as in force on the
date of the relevant Pricing Supplement;

"Principal Subsidiary" at any time shall mean:

(A) any Relevant Subsidiary; or

(B) any Subsidiary of the Issuer (not being an Excluded Subsidiary or any other
Subsidiary of the Issuer 90% in principal amount of whose indebtedness for
borrowed money is Project Finance Indebtedness):

(i) whose (a) profits on ordinary activities before tax or (b) net assets
represent 20% or more of the consolidated profits on ordinary activities before
tax of the Group or consolidated net assets of the Group respectively, in each
case as calculated by reference to the then latest audited financial statements
of such Subsidiary and the then latest audited consolidated financial statements
of the Group; or

(ii) to which is transferred all or substantially all of the business,
undertaking and assets of a Subsidiary of the Issuer which immediately prior to
such transfer is a Principal Subsidiary, whereupon the transferor Subsidiary
shall immediately cease to be a Principal Subsidiary and the transferee
Subsidiary shall cease to be a Principal Subsidiary under the provisions of this
sub-paragraph (ii) (but without prejudice to the provisions of sub-paragraph (i)
above), upon publication of its next audited financial statements,

all as more fully defined in the Trust Deed.

A Report by the Auditors that, in their opinion, a Subsidiary of the Issuer is
or is not or was or was not at any particular time or throughout any specified
period a Principal Subsidiary shall, in the absence of manifest error, be
conclusive and binding on the Issuer, the Trustee and the Noteholders;

"Project Finance Indebtedness" means any present or future indebtedness incurred
to finance the ownership, acquisition, development and/or operation of an asset,
whether or not an asset of a member of the Group:

(i) which is incurred by an Excluded Subsidiary; or

(ii) in respect of which the person or persons to whom any such indebtedness is
or may be owed by the relevant borrower (whether or not a member of the Group)
has or have no recourse whatsoever to any member of the Group (other than an
Excluded Subsidiary) for the repayment thereof other than:

(A) recourse for amounts limited to the cash flow or net cash flow (other than
historic cash flow or historic net cash flow) from such asset; and/or

(B) recourse for the purpose only of enabling amounts to be claimed in respect
of such indebtedness in an enforcement of any encumbrance given by such borrower
over such asset or the income, cash flow or other proceeds, deriving therefrom
(or given by any shareholder or the like in the borrower over its shares or the
like in the capital of the borrower) to secure such indebtedness, provided that
(aa) the extent of such recourse is limited solely to the amount of any
recoveries made on any such enforcement, and (bb) such person or persona is/are
not entitled, by virtue of any right or claim arising out of or in connection
with such indebtedness, to commence proceedings for the winding up or
dissolution of any member of the Group (other than an Excluded Subsidiary) or to
appoint or procure the appointment of any receiver, trustee or similar person or
officer in respect of any member of the Group (other than an Excluded
Subsidiary) or any of its assets (save for the assets the subject of such
encumbrance); and/or

(C) recourse under any form of assurance, undertaking or support, which recourse
is limited to a claim for damages (other than liquidated damages and damages
required to be calculated in a specified way) for breach of an obligation (not
being a payment obligation or an obligation to procure payment by another or an
indemnity in respect thereof or any obligation to comply or to procure
compliance by another with any financial ratios or other tests of financial
condition) by any member of the Group (other than an Excluded Subsidiary);

A "Put Event" occurs on the date of the last to occur of (aa) a Restructuring
Event, (bb) either a Rating Downgrade or, as the case may be, a Negative Rating
Event and (cc) the relevant Negative Certification;

"Rated Securities" means the Notes, if at any time and for so long as they have
a rating from a Rating Agency, and otherwise any other unsecured and
unsubordinated debt of the Issuer or a Relevant Subsidiary (or of any Subsidiary
of the Issuer which is guaranteed on an unsecured and unsubordinated basis by
the Issuer or a Relevant Subsidiary) having an initial maturity of five years or
more which is rated by a Rating Agency;
<PAGE>

"Rating Agency" means Standard & Poor's Rating Services, a division of the
McGraw-Hill Companies, Inc. or any of its Subsidiaries and their successors or
Moody's Investors Service, Inc. or any of its Subsidiaries and their successors
or any rating agency substituted for either of them (or any permitted substitute
of them) by the Issuer from time to time with the prior written approval of the
Trustee (such approval not to be unreasonably withheld or delayed);

A "Rating Downgrade" shall be deemed to have occurred in respect of a
Restructuring Event if the then current rating assigned to the Rated Securities
by any Rating Agency (whether provided by a Rating Agency at the invitation of
the Issuer or by its own volition) is withdrawn or reduced from an investment
grade rating (BBB-/Baa3, or their respective equivalents for the time being, or
better) to a non-investment grade rating (BB+/Ba1, or their respective
equivalents for the time being, or worse) or, if the Rating Agency shall then
have already rated the Rated Securities below investment grade (as described
above), the rating is lowered one full rating category (from BB+/Ba1 to BB/Ba2
or such similar lowering);

"Relevant Indebtedness" means any present or future indebtedness (whether being
principal, premium, interest or other amounts) in the form of or represented by
notes, bonds, debentures, debenture stock, loan stock or other securities,
whether issued for cash or in whole or in part for a consideration other than
cash, and which, with the agreement of the person issuing the same, are quoted,
listed or ordinarily dealt in on any stock exchange or recognised
over-the-counter or other securities market, but shall in any event not include
Project Finance Indebtedness;

"Relevant Group Member" means a member of the Group that holds a Relevant
Licence;

"Relevant Licence" means any Issuer Licence and the Manweb PES Licence;

"Relevant Subsidiary" means a wholly-owned Subsidiary of the Issuer or of
another Relevant Subsidiary which has granted a guarantee in respect of the
Notes as contemplated in paragraph (A) of "Restructuring Event" below;

"Restructuring Event" means the occurrence of any one or more of the
following events:

(A) (aa) the Secretary of State gives the Issuer or Manweb or any Relevant
Subsidiary written notice of revocation of any Relevant Licence (excluding, in
relation to the PES Licence or the Manweb PES licence any second tier supply
licence and provided that the giving of notice pursuant to paragraph 3 of Part 1
of the Manweb PES Licence or paragraph 3 of Part 1 of the PES Licence in each
case as in effect on the date of the relevant Pricing Supplement, or any other
similar provision in any other Manweb PES Licence or PES Licence, shall not be
deemed to constitute the revocation of the relevant Licence), or

(bb) the Issuer or Manweb or any Relevant Subsidiary agrees in writing with the
Secretary of State to any revocation or surrender of any Relevant Licence; or

(cc) any legislation (whether primary or subordinate) is enacted terminating or
revoking any Relevant Licence,

except in any such case in circumstances where (x) a licence or licences on
substantially not less favourable terms is or are granted to the Issuer or one
or more Relevant Subsidiaries or wholly-owned Subsidiaries (not being an
Excluded Subsidiary) of the Issuer or one or more Relevant Subsidiaries and (y)
in the case of the grant of a licence or licences to wholly-owned Subsidiaries
of the Issuer or one or more Relevant Subsidiaries, such Subsidiary or
Subsidiaries at the time of such grant executes in favour of the Trustee an
unconditional and irrevocable guarantee in respect of the Notes (jointly and
severally where appropriate) in such form as the Trustee may approve (such
approval not to be unreasonably withheld or delayed), or

(B) any modification (other than a modification which is of a formal, minor or
technical nature) is made to the terms and conditions of any Relevant Licence on
or after the date of the relevant Pricing Supplement, unless two directors of
the Issuer have certified in good faith to the Trustee that the modified terms
and conditions are not materially less favourable to the business of the Group
and to the business of the member of the Group holding the Relevant Licence; or

(C) (aa) the Pooling and Settlement Agreement is terminated under Clause 67.4
thereof and not replaced by one or more agreements, commercial arrangements or
open market mechanisms or frameworks, in each case on terms which two directors
of the Issuer certify in good faith to the Trustee to be not materially less
favourable to the business of the Group or to the business of the Relevant Group
Member or Members party to the Pooling and Settlement Agreement; or

(bb) any Relevant Group Member is given notice pursuant to Clause 67.3.2 of the
Pooling and Settlement Agreement requiring it to cease to be a party thereto; or

(cc) any notice declaring an event of default (as defined in the Pooling and
Settlement Agreement) is given to any Relevant Group Member under Clause 66.1.1
or 66.2 thereof and such default remains unremedied or unwaived; or

(dd) any modification (other than a modification which is of a formal, minor or
technical nature) is made to the Pooling and Settlement Agreement on or after
the date of the relevant Pricing Supplement, unless two directors of the Issuer
have certified in good faith to the Trustee that any such modification has not
had and will not have a materially adverse effect on the financial rights and
obligations of any Relevant Group Member under the Pooling and Settlement
Agreement or a materially adverse effect on the business of the Group or the
business of any Relevant Group Member party to the Pooling and Settlement
Agreement, provided that any such modification shall, to the extent it grants or
confers powers or discretions on the Director General of Electricity Supply (or
any successor) under or in respect of the Pooling and Settlement Agreement, be
<PAGE>

deemed not to have a materially adverse effect as aforesaid, but for the
avoidance of doubt any modification to the Pooling and Settlement Agreement made
by the Director General of Electricity Supply (or any successor) by virtue of or
pursuant to any such powers or discretions and which otherwise would have a
materially adverse effect as provided above shall not by virtue of this
sub-paragraph be deemed not to have such an effect; or

(ee) any Relevant Group Member ceases to be a party to the Pooling and
Settlement Agreement for any other reason (other than pursuant to (bb) and (cc)
above) except where a licence or licences is or are granted to one or more
Subsidiaries as contemplated by sub-paragraph (A) above and at or about the same
time all rights and obligations of the Relevant Group Member pursuant to the
Pooling of Settlement Agreement which are attributable to such licence(s) are
assigned and transferred to such Subsidiary and/or Subsidiaries in such manner
as the Trustee may approve (such approval not to be unreasonably withheld or
delayed) or such Subsidiary or Subsidiaries enters or enter into one or more
agreements, commercial arrangements or open market mechanisms or frameworks in
relation to such licence(s) which two directors of the Issuer certify to be not
materially less favourable to the business of the Group; or

(D) any legislation (whether primary or subordinate) is enacted which removes,
qualifies or amends (other than an amendment which is of a formal, minor or
technical nature) the duties of the Secretary of State and/or the Director
General of Electricity Supply under Section 3 of the Electricity Act as in force
on the date of the relevant Pricing Supplement, unless two directors of the
Issuer have certified in good faith to the Trustee that such removal,
qualification or amendment is unlikely to have a materially adverse effect on
the financial condition of the Group or any Relevant Group Member; or

(E) (aa) the Appointment is terminated; or

(bb) any material rights, benefits or obligations of SWSL as a water undertaker
or sewerage undertaker arising under the Appointment or the Water Industry Act
as in force on the date of the relevant Pricing Supplement or any material terms
of the Appointment are modified (whether or not with the consent of SWSL and
whether pursuant to the Water Industry Act or otherwise) unless two directors of
the Issuer have certified in good faith to the Trustee that such modified
rights, benefits, obligations or terms are not materially less favourable to the
business of the Group and to the business of SWSL; or

(F) any legislation (whether primary or subordinate) is enacted removing,
reducing or qualifying the duties or powers of the Secretary of State for the
Environment (or any successor) and/or the Director General of Water Services (or
any successor) (including without limitation any such legislation removing,
reducing or qualifying such duties or powers under or pursuant to Sections 2, 9
or 24 of the Water Industry Act) in each case as compared to those in force on
the date of the relevant Pricing Supplement, unless two directors of the Issuer
have certified in good faith to the Trustee that such removal, reduction or
qualification is unlikely to have a material adverse effect on the financial
condition of the Group or SWSL;

"Restructuring Period" means:

(A) if at any time a Restructuring Event occurs there are Rated Securities, the
period of 90 days starting from and including the day on which that
Restructuring Event occurs; or

(B) if at the time a Restructuring Event occurs there are no Rated Securities,
the period starting from and including the day on which that Restructuring Event
occurs and ending on the day 90 days following the later of (aa) the date on
which the Issuer shall seek to obtain a rating as contemplated in the definition
of Negative Rating prior to the expiry of the 14 days referred to in that
definition and (bb) the date on which a Negative Certification shall have been
given to the Issuer in respect of that Restructuring Event;

"Secretary of State" means the Secretary of State for Trade and Industry (or
any successor) or, as the case may be, the Secretary of State for Scotland
(or any successor);

"Subsidiary" means a subsidiary within the meaning of Section 736 of the
Companies Act 1985;

"Subsidiary Undertaking" shall have the meaning given to it by Section 258 of
the Companies Act 1985 (but, in relation to the Issuer, shall exclude any
undertaking (as defined in the Companies Act 1985) whose accounts are not
included in the then latest published audited consolidated accounts of the
Issuer, or (in the case of an undertaking which has first become a subsidiary
undertaking of a member of the Group since the date as at which any such audited
accounts were prepared) would not have been so included or consolidated if it
had become so on or before that date);

"SWSL" means Southern Water Services Limited;

"Transmission Licence" means the electricity transmission licence granted by the
Secretary of State for Scotland to the Issuer under the Electricity Act as
comprised in the Composite Licence as in effect on the date of the relevant
Pricing Supplement; and

"Water Industry Act" means the Water Industry Act 1991 as amended or re-enacted
from time to time and all subordinate legislation made pursuant thereto.

Any reference to an obligation being guaranteed shall include a reference to an
indemnity being given in respect of the obligation.
<PAGE>

(g) Purchases

The Issuer and any of its Subsidiaries may to the extent permitted by applicable
law, at any time purchase Notes (provided that all unmatured Receipts and
Coupons and unexchanged Talons relating thereto are attached thereto or
surrendered therewith) in the open market or otherwise at any price.

(h) Cancellation

All Notes purchased by or on behalf of the Issuer or any of its Subsidiaries
shall be surrendered for cancellation, in the case of Bearer Notes, by
surrendering each such Note together with all unmatured Receipts and Coupons and
all unexchanged Talons to the Issuing and Paying Agent and, in the case of
Registered Notes, by surrendering the Certificate representing such Notes to the
Registrar and, in each case, if so surrendered, shall, together with all Notes
redeemed by the Issuer, be cancelled forthwith (together with all unmatured
Receipts and Coupons and unexchanged Talons attached thereto or surrendered
therewith). Any Notes so surrendered for cancellation may not be reissued or
resold.

7. Payments and Talons

(a) Bearer Notes

Payments of principal and interest in respect of Bearer Notes shall, subject as
mentioned below, be made against presentation and surrender of the relevant
Receipts (in the case of payments of Instalment Amounts other than on the due
date for redemption and provided that the Receipt is presented for payment
together with its relative Note), Notes (in the case of all other payments of
principal and, in the case of interest, as specified in Condition 7(f)(vi)) or
Coupons (in the case of interest, save as specified in Condition 7(f)(ii)), as
the case may be, at the specified office of any Paying Agent outside the United
States by a cheque payable in the currency in which such payment is due drawn
on, or, at the option of the holder, by transfer to an account denominated in
that currency with, a bank in the principal financial centre for that currency;
provided that (i) in the case of Euro, the transfer may be to, or the cheque
drawn on, an Euro account with a bank in Europe and (ii) until the start of the
third stage of European economic and monetary union, all payments in respect of
Notes which are expressed to be payable in Euro will be payable in ECU at the
rate of one ECU for one Euro by transfer to or cheque drawn on, an account
specified by the payee in London, Luxembourg, Paris or Brussels.

(b) Registered Notes

(i) Payments of principal (which for the purposes of this Condition 7(b) shall
include final Instalment Amounts but not other Instalment Amounts) in respect of
Registered Notes shall be made against presentation and surrender of the
relevant Certificates at the specified office of any of the Transfer Agents or
of the Registrar and in the manner provided in paragraph (ii) below.

(ii) Interest (which for the purpose of this Condition 7(b) shall include all
Instalment Amounts other than final Instalment Amounts) on Registered Notes
shall be paid to the person shown on the Register at the close of business on
the fifteenth day before the due date for payment thereof (the "Record Date").
Payments of interest on each Registered Note shall be made in the currency in
which such payments are due by cheque drawn on a bank in the principal financial
centre of the country of the currency concerned and mailed to the holder (or to
the first named of joint holders) of such Note at its address appearing in the
Register. Upon application by the holder to the specified office of the
Registrar or any Transfer Agent before the Record Date and subject as provided
in paragraph (a) above, such payment of interest may be made by transfer to an
account in the relevant currency maintained by the payee with a bank in the
principal financial centre of the country of that currency.

(c) Payments in the United States

Notwithstanding the foregoing, if any Bearer Notes are denominated in U.S.
dollars, payments in respect thereof may be made at the specified office of any
Paying Agent in New York City in the same manner as aforesaid if (i) the Issuer
shall have appointed Paying Agents with specified offices outside the United
States with the reasonable expectation that such Paying Agents would be able to
make payment of the amounts on the Notes in the manner provided above when due,
(ii) payment in full of such amounts at all such offices is illegal or
effectively precluded by exchange controls or other similar restrictions on
payment or receipt of such amounts and (iii) such payment is then permitted by
United States law, without involving, in the opinion of the Issuer, any adverse
tax consequence to the Issuer.

(d) Payments Subject to Fiscal Laws

All payments are subject in all cases to any applicable fiscal or other laws,
regulations and directives, but without prejudice to the provisions of Condition
8. No commission or expenses shall be charged to the Noteholders or
Couponholders in respect of such payments.

(e) Appointment of Agents

The Issuing and Paying Agent, the Paying Agents, the Registrar, the Transfer
Agents and the Calculation Agent initially appointed by the Issuer and their
respective specified offices are listed below. The Issuing and Paying Agent, the
Paying Agents, the Registrar, the Transfer Agents and the Calculation Agent act
solely as agents of the Issuer and do not assume any obligation or relationship
of agency or trust for or with any Noteholder or Couponholder. The Issuer
reserves the right at any time with the approval of the Trustee to vary or
terminate the appointment of the Issuing and Paying Agent, any other Paying
<PAGE>

Agent, the Registrar, any Transfer Agent or the Calculation Agent and to appoint
additional or other Paying Agents or Transfer Agents, provided that the Issuer
shall at all times maintain (i) an Issuing and Paying Agent, (ii) a Registrar in
relation to Registered Notes, (iii) a Transfer Agent in relation to Registered
Notes, (iv) one or more Calculation Agent(s) where the Conditions so require,
(v) Paying Agents having specified offices in at least two major European cities
(including London so long as the Notes are listed on the London Stock Exchange
and (vi) such other agents as may be required by any other stock exchange on
which the Notes may be listed, in each case, as approved by the Trustee.

In addition, the Issuer shall forthwith appoint a Paying Agent in New York City
in respect of any Bearer Notes denominated in U.S. dollars in the circumstances
described in paragraph (c) above.

Notice of any such change or any change of any specified office shall promptly
be given to the Noteholders.

(f) Unmatured Coupons and Receipts and Unexchanged Talons

(i) Unless the Pricing Supplement provides that the relative Coupons are to
become void upon the due date for redemption of those Notes, Bearer Notes should
be surrendered for payment together with all unmatured Coupons (if any)
appertaining thereto, failing which an amount equal to the face value of each
missing unmatured Coupon (or, in the case of payment not being made in full,
that proportion of the amount of such missing unmatured Coupon that the sum of
principal so paid bears to the total principal due) shall be deducted from the
Redemption Amount due for payment. Any amount so deducted shall be paid in the
manner mentioned above against surrender of such missing Coupon within a period
of 10 years from the Relevant Date for the payment of such principal (whether or
not such Coupon has become void pursuant to Condition 9).

(ii) If the Pricing Supplement so provides, upon the due date for redemption of
any Bearer Note, unmatured Coupons relating to such Note (whether or not
attached) shall become void and no payment shall be made in respect of them.

(iii) Upon the due date for redemption of any Bearer Note, any unexchanged Talon
relating to such Note (whether or not attached) shall become void and no Coupon
shall be delivered in respect of such Talon.

(iv) Upon the due date for redemption of any Bearer Note that is redeemable in
instalments, all Receipts relating to such Note having an Instalment Date
falling on or after such due date (whether or not attached) shall become void
and no payment shall be made in respect of them.

(v) Where any Bearer Note that provides that the relative unmatured Coupons are
to become void upon the due date for redemption of those Notes is presented for
redemption without all unmatured Coupons and any unexchanged Talon relating to
it, and where any Bearer Note is presented for redemption without all unmatured
Coupons and any unexchanged Talon relating to it, redemption shall be made only
against the provision of such indemnity as the Issuer may require.

(vi) If the due date for redemption of any Note is not a due date for payment of
interest, interest accrued from the preceding due date for payment of interest
or the Interest Commencement Date, as the case may be, shall only be payable
against presentation (and surrender if appropriate) of the relevant Bearer Note
or Certificate representing it, as the case may be. Interest accrued on a Note
that only bears interest after its Maturity Date shall be payable on redemption
of such Note against presentation of the relevant Note or Certificate
representing it, as the case may be.

(g) Talons

On or after the Interest Payment Date for the final Coupon forming part of a
Coupon sheet issued in respect of any Bearer Note, the Talon forming part of
such Coupon sheet may be surrendered at the specified office of the Issuing and
Paying Age, in exchange for a further Coupon sheet (and if necessary another
Talon for a further Coupon sheet) (but excluding any Coupons that may have
become void pursuant to Condition 9).

(h) Non-Business Days

If any date for payment in respect of any Note, Receipt or Coupon is not a
business day, the holder shall not be entitled to payment until the next
following business day nor to any interest or other sum in respect of such
postponed payment. In this paragraph, "business day" means a day (other than a
Saturday or a Sunday) on which banks and foreign exchange markets are open for
business in the relevant place of presentation, in such jurisdictions as shall
be specified as "Business Day Jurisdictions" hereon and:

(i) (in the case of a payment in a currency other than Euro) where payment is to
be made by transfer to an account maintained with a bank in the relevant
currency, on which foreign exchange transactions may be carried on in the
relevant currency in the principal financial centre of the country of such
currency or

(ii) (in the case of a payment in Euro, or, until the start of the third stage
of European economic and monetary union, the ECU) on which banks are open for
business and carrying out transactions in Euro (or ECU, as the case may be) in
the jurisdiction in which the Euro account (or ECU account, as the case may be)
specified by the payee is located.

(i) Euro and ECU Notes

(i) Definition of Euro and the ECU

References in these Conditions to the Euro are to the currency which is to be
introduced at the start of the third stage of the European economic and monetary
union pursuant to Article 1091(4) of the Treaty establishing the European
Communities as
<PAGE>

amended by the Treaty on European Union (the "Treaty"). References to the ECU
("ECU") are to ECU as referred to in Article 109(g) of the Treaty as defined in
Council Regulation (EC) No. 3320/94, that is from time to time used as the unit
of account of the EC. Changes to the ECU may be made by the EC, in which event
the ECU shall change accordingly.

(ii) Redenomination

Notes denominated in a currency that may, after the start of the third stage of
European economic and monetary union, be converted into Euros, may be subject to
redenomination, renominalisation and/or consolidation with other Notes then
denominated in Euros, as specified in the relevant Pricing Supplement.

8. Taxation

All payments of principal and interest in respect of the Notes, the Receipts and
the Coupons (other than payments of interest in respect of Registered Notes
which will be made subject to the deduction of any United Kingdom income tax
required to be withheld or deducted at source) shall be made free and clear of,
and without withholding or deduction for, any taxes, duties, assessments or
governmental charges of whatever nature imposed, levied, collected, withheld or
assessed by or within the United Kingdom or any authority therein or thereof
having power to tax, unless such withholding or deduction is required by law. In
that event, the Issuer shall pay such additional amounts as shall result in
receipt by the Noteholders and Couponholders of such amounts as would have been
received by them had no such withholding or deduction been required, except that
no such additional amounts shall be payable with respect to any Note, Receipt or
Coupon:

(a) to, or to a third party on behalf of, a holder who is liable to such taxes,
duties, assessments or governmental charges in respect of such Note, Receipt or
Coupon by reason of his having some connection with the United Kingdom other
than the mere holding of the Note, Receipt or Coupon; or

(b) presented (or in respect of which the Certificate representing it is
presented) for payment more than 30 days after the Relevant Date except to the
extent that the holder of it would have been entitled to such additional amounts
on presenting it for payment on the thirtieth day; or

(c) presented for payment in the United Kingdom.*

As used in these Conditions, "Relevant Date" in respect of any Note, Receipt or
Coupon means the date on which payment in respect of it first becomes due or (if
any amount of the money payable is improperly withheld or refused) the date on
which payment in full of the amount outstanding is made or (if earlier) the date
seven days after that on which notice is duly given to the Noteholders that,
upon further presentation of the Note (or relative Certificate), Receipt or
Coupon being made in accordance with the Conditions, such payment will be made,
provided that payment is in fact made upon such presentation. References in
these Conditions to (i) "principal" shall be deemed to include any premium
payable in respect of the Notes, all Instalment Amounts, Redemption Amounts,
Amortised Face Amounts and all other amounts in the nature of principal payable
pursuant to Condition 6 or any amendment or supplement to it, (ii) "interest"
shall be deemed to include all Interest Amounts and all other amounts payable
pursuant to Condition 5 or any amendment or supplement to it and (iii)
"principal" and/or "interest" shall be deemed to include any additional amounts
that may be payable under this Condition or any undertaking given in addition to
or in substitution for it under the Trust Deed.

9. Prescription

Claims against the Issuer for payment in respect of the Notes, Receipts and
Coupons (which, for this purpose, shall not include Talons) shall be prescribed
and become void unless made within 10 years (in the case of principal) or five
years (in the case of interest) from the appropriate Relevant Date in respect of
them.

10. Events of Default

The Trustee at its discretion may, and if so requested in writing by the holders
of at least one-quarter in principal amount of the Notes then outstanding or if
so directed by an Extraordinary Resolution of the Noteholders shall, subject to
being indemnified to its satisfaction, (but, in the case of the happening of any
of the events mentioned in sub-paragraphs (b), (c), (e), (f), (g) and (h) below,
only if the Trustee shall have certified in writing to the Issuer that such
event is, in its opinion, materially prejudicial to the interests of the
Noteholders), give notice to the Issuer that the Notes are, and they shall
accordingly thereby forthwith become, immediately due and repayable at their
principal amount together with accrued interest (as provided in the Trust Deed)
if any of the following events (each an "Event of Default") shall have occurred
(unless such Event of Default has been remedied to the satisfaction of the
Trustee):

(a) if default is made for a period of 14 days or more in the payment of any
principal or the purchase price due in respect of any Notes pursuant to
Condition 6 or 21 days or more in the payment of any interest due in respect of
the Notes or any of them; or
<PAGE>

(b) if the Issuer fails to perform or observe any of its other obligations under
the Notes or the Trust Deed and (except where the Trustee shall have certified
to the Issuer in writing that it considers such failure to be incapable of
remedy in which case no such notice or continuation as is hereinafter mentioned
will be required) such failure continues for the period of 60 days (or such
longer period as the Trustee may in its absolute discretion permit) next
following the service by the Trustee of notice on the Issuer requiring the same
to be remedied; or

(c) if (i) any other indebtedness for borrowed money of the Issuer or any
Principal Subsidiary becomes due and repayable prior to its stated maturity by
reason of an event of default or (ii) any such indebtedness for borrowed money
is not paid when due or, as the case may be, within any applicable grace period
(as originally provided) or (iii) the Issuer or any Principal Subsidiary fails
to pay when due (or, as the case may be, within any originally applicable grace
period) any amount payable by it under any present or future guarantee for, or
indemnity in respect of, any indebtedness for borrowed money of any person or
(iv) any security given by the Issuer or any Principal Subsidiary for any
indebtedness for borrowed money of any person or for any guarantee or indemnity
of indebtedness for borrowed money of any person becomes enforceable by reason
of default in relation thereto and steps are taken to enforce such security,
save in any such case where there is a bona fide dispute as to whether the
relevant indebtedness for borrowed money or any such guarantee or indemnity as
aforesaid shall be due and payable, provided that the aggregate amount of the
relevant indebtedness for borrowed money in respect of which any one or more of
the events mentioned above in this sub-paragraph (c) has or have occurred equals
or exceeds whichever is the greater of (Pounds)20,000,000 or its equivalent in
other currencies (as determined by the Trustee) or 2% of Capital and Reserves,
and for the purposes of this sub-paragraph (c), "indebtedness for borrowed
money" shall exclude Project Finance Indebtedness; or

(d) if any order shall be made by any competent court or any resolution shall be
passed for the winding up or dissolution of the Issuer, save for the purpose of
amalgamation, merger, consolidation, reorganisation, reconstruction or other
similar arrangement on terms previously approved in writing by the Trustee (such
approval not to be unreasonably withheld or delayed having regard to the
interests of the Noteholders) or by an Extraordinary Resolution of the
Noteholders; or

(e) if (i) any order shall be made by any competent court or any resolution
shall be passed for the winding up or dissolution of a Principal Subsidiary,
save for the purposes of amalgamation, merger, consolidation, reorganisation,
reconstruction or other similar arrangement (A) not involving or arising out of
the insolvency of such Principal Subsidiary and under which all the surplus
assets of such Principal Subsidiary are transferred to the Issuer or any of its
other Subsidiaries (other than an Excluded Subsidiary) or (B) the terms of which
have previously been approved in writing by the Trustee (such approval not to be
unreasonably withheld or delayed having regard to the interests of Noteholders)
or by an Extraordinary Resolution of the Noteholders or (ii) a petition is
presented under Section 24 of the Water Industry Act (and is not dismissed
within 60 days) or a special administration order is made under Section 24 of
the Water Industry Act in respect of SWSL; or

(f) if the Issuer or any Principal Subsidiary shall cease to carry on the whole
or substantially the whole of its business, save in each case for the purposes
of amalgamation, merger, consolidation, reorganisation, reconstruction, or other
similar arrangement (i) not involving or arising out of the insolvency of the
Issuer or such Principal Subsidiary and under which all or substantially all of
its assets are transferred to another member or members of the Group (other than
an Excluded Subsidiary) or to a transferee or transferees which is or are, or
immediately upon such transfer become(s), a Principal Subsidiary or Principal
Subsidiaries, or (ii) under which all or substantially all of its assets are
transferred to a third party or parties (whether associates or not) for full
consideration by the Issuer or a Principal Subsidiary on an arm's length basis
or (iii) the terms of which have previously been approved in writing by the
Trustee or by an Extraordinary Resolution of the Bondholders, provided that if
neither the Issuer nor any Relevant Subsidiary holds an Electricity Licence, the
Issuer shall be deemed to have ceased to carry on the whole or substantially the
whole of its business (and neither of exceptions (i) and (ii) shall apply); or

(g) if the Issuer or any Principal Subsidiary shall suspend or announce its
intention to suspend payment of its debts generally or shall be declared or
adjudicated by a competent court to be unable, or shall admit in writing its
inability, to pay its debts generally (within the meaning of Section 123(1) or
(2) of the Insolvency Act 1986) as they fall due, or shall be adjudicated or
found insolvent by a competent court or shall enter into any composition or
other similar arrangement with its creditors generally under Section 1 of the
Insolvency Act 1986; or

(h) if a receiver, administrative receiver, administrator or other similar
official shall be appointed in relation to the Issuer or any Principal
Subsidiary or in relation to the whole or a substantial part of the undertaking
or assets of any of them or a distress, execution or other process shall be
levied or enforced upon or sued out against, or any encumbrancer shall take
possession of, the whole or a substantial part of the assets of any of them and
in any of the foregoing cases it or he shall not be paid out or discharged
within 90 days (or such longer period as the Trustee may in its absolute
discretion permit).

For the purposes of sub-paragraph (g) above, Section l23(1)(a) of the Insolvency
Act 1986 shall have effect as if for "(Pounds)750" there was substituted
"(Pounds)250,000". Neither the Issuer nor any Principal Subsidiary shall be
deemed to be unable to pay its debts for the purposes of sub-paragraph (g) above
if any such demand as is mentioned in Section 123(1)(a) of the Insolvency Act
1986 is being contested in good faith by the Issuer or the relevant Principal
Subsidiary with recourse to all appropriate measures and procedures or if any
such demand is satisfied before the expiration of such period as may be stated
in any notice given by the Trustee under this Condition.
<PAGE>

11. Meetings of Noteholders, Modification, Waiver and Substitution

(a) Meetings of Noteholders

The Trust Deed contains provisions for convening meetings of Noteholders to
consider matters affecting their interests, including the modification of any of
the terms and conditions of the Notes or any provisions of the Trust Deed. Any
such modification may be made if sanctioned by an Extraordinary Resolution. The
quorum for any meeting convened to consider an Extraordinary Resolution will be
one or more persons holding or representing a clear majority in principal amount
of the Notes for the time being outstanding, or at any adjourned meeting, one or
more persons being or representing Noteholders whatever the principal amount of
the Notes held or represented, unless the business of such meeting includes
consideration of proposals, inter alia (i) to postpone the maturity or
redemption of the Notes, any Instalment Date or any date for payment of any
interest or Interest Amount on the Notes, (ii) to reduce or cancel the principal
amount of, or any Instalment Amount of, or any premium payable on redemption of,
the Notes, (iii) to reduce the rate or rates of interest in respect of the Notes
or to vary the method or basis of calculating the rate or rates or amount of
interest or the basis for calculating any Interest Amount in respect of the
Notes, (iv) if a Minimum and/or a Maximum Interest Rate, Instalment Amount or
Redemption Amount is shown hereon to reduce any such Minimum and/or Maximum,
(v) to vary any method of, or basis for, calculating the Redemption Amount,
including the method of calculating the Amortised Face Amount, (vi) to vary the
currency or currencies of payment or denomination of the Notes, (vii) to take
any steps that as specified hereon may only be taken following approval by an
Extraordinary Resolution to which the special quorum provisions apply, or (viii)
to modify the provisions concerning the quorum required at any meeting of
Noteholders or the majority required to pass the Extraordinary Resolution, in
which case the necessary quorum shall be one or more persons holding or
representing not less than two-thirds, or at any adjourned meeting not less than
one-third, in principal amount of the Notes for the time being outstanding. Any
Extraordinary Resolution duly passed shall be binding on Noteholders (whether or
not they were present at the meeting at which such resolution was passed) and on
all Couponholders.

These Conditions may be amended, modified or varied in relation to any Series of
Notes by the terms of the relevant Pricing Supplement in relation to such
Series.

(b) Modification of the Trust Deed

The Trustee may agree, without the consent of the Noteholders or Couponholders,
to (i) any modification of any of the provisions of the Trust Deed, the Notes or
the Coupons that is of a formal, minor or technical nature or is made to correct
a manifest error, and (ii) any other modification (except as mentioned in the
Trust Deed), and any waiver or authorisation of any breach or proposed breach,
of any of the provisions of the Trust Deed that is in the opinion of the Trustee
not materially prejudicial to the interests of the Noteholders. Any such
modification, authorisation or waiver shall be binding on the Noteholders and
the Couponholders and, if the Trustee so requires, such modification shall be
notified to the Noteholders as soon as practicable.

(c) Substitution

The Trust Deed contains provisions permitting the Trustee to agree, subject to
such amendment of the Trust Deed and such other conditions as the Trustee may
require, but without the consent of the Noteholders or the Couponholders, to the
substitution of any other company in place of the Issuer, or of any previous
substituted company, as principal debtor under the Trust Deed and the Notes. In
the case of such a substitution the Trustee may agree, without the consent of
the Noteholders or the Couponholders, to a change of the law governing the
Notes, the Receipts, the Coupons, the Talons and/or the Trust Deed provided that
such change would not in the opinion of the Trustee be materially prejudicial to
the interests of the Noteholders.

(d) Entitlement of the Trustee

In connection with the exercise of its functions (including but not limited to
those referred to in this Condition) the Trustee shall have regard to the
interests of the Noteholders as a class and shall not have regard to the
consequences of such exercise for individual Noteholders or Couponholders and
the Trustee shall not be entitled to require, nor shall any Noteholder or
Couponholder be entitled to claim, from the Issuer any indemnification or
payment in respect of any tax consequence of any such exercise upon individual
Noteholders or Couponholders.

12. Replacement of Notes, Certificates, Receipts, Coupons and Talons

If a Note, Certificate, Receipt, Coupon or Talon is lost, stolen, mutilated,
defaced or destroyed, it may be replaced, subject to applicable laws,
regulations and stock exchange regulations, at the specified office of the
Issuing and Paying Agent (in the case of Bearer Notes, Receipts, Coupons or
Talons) and of the Registrar (in the case of Certificates) or such other Paying
Agent or Transfer Agent, as the case may be, as may from time to time be
designated by the Issuer for the purpose and notice of whose designation is
given to Noteholders, in each case on payment by the claimant of the fees and
costs incurred in connection therewith and on such terms as to evidence,
security and indemnity (which may provide, inter alia, that if the allegedly
lost, stolen or destroyed Note, Certificate, Receipt, Coupon or Talon is
subsequently presented for payment or, as the case may be, for exchange for
further Coupons, there shall be paid to the Issuer on demand the amount payable
by the Issuer in respect of such Notes, Certificates, Receipts, Coupons or
further Coupons) and otherwise as the Issuer may reasonably require. Mutilated
or defaced Notes, Certificates, Receipts, Coupons or Talons must be surrendered
before replacements will be issued.
<PAGE>

13. Further Issues

The Issuer may from time to time without the consent of the Noteholders or
Couponholders create and issue further securities either having the same terms
and conditions as the Notes in all respects (or in all respects except for the
first payment of interest on them) and so that such further issue shall be
consolidated and form a single series with the outstanding securities of any
series (including the Notes) or upon such terms as the Issuer may determine at
the time of their issue. References in these Conditions to the Notes include
(unless the context requires otherwise) any other securities issued pursuant to
this Condition and forming a single series with the Notes. Any further
securities forming a single series with the outstanding securities of any series
(including the Notes) constituted by the Trust Deed or any deed supplemental to
it shall, and any other securities may (with the consent of the Trustee), be
constituted by the Trust Deed. The Trust Deed contains provisions for convening
a single meeting of the Noteholders and the holders of securities of other
series where the Trustee so decides.

14. Enforcement

At any time after the Notes become due and payable, the Trustee may, as its
discretion and without further notice, institute such proceedings against the
Issuer as it may think fit to enforce the terms of the Trust Deed, but it need
not take any such proceedings unless (a) it shall have been so directed by an
Extraordinary Resolution or so requested in writing by holders of at least
one-fifth in principal amount of the Notes outstanding, and (b) it shall have
been indemnified to its satisfaction. No Noteholder, Receiptholder or
Couponholder may proceed directly against the Issuer unless the Trustee, having
become bound so to proceed fails to do so within a reasonable time and such
failure is continuing.

15. Indemnification of the Trustee

The Trust Deed contains provisions for the indemnification of the Trustee and
for its relief from responsibility. The Trustee is entitled to enter into
business transactions with the Issuer and any entity related to the Issuer
without accounting for any profit.

16. Notices

Notices to the holders of Registered Notes shall be mailed to them at their
respective addresses in the Register and deemed to have been given on the fourth
weekday (being a day other than a Saturday or a Sunday) after the date of
mailing. Notices to the holders of Bearer Notes shall be valid if published in a
daily newspaper of general circulation in London (which is expected to be the
Financial Times). The Issuer shall also ensure that notices are duly published
in a manner which complies with the rules and regulations of any other stock
exchange on which the Notes are, for the time being, listed. Any such notice
shall be deemed to have been given on the date of such publication or, if
published more than once or on different dates, on the first date on which
publication is made, as provided above.

Couponholders shall be deemed for all purposes to have notice of the contents of
any notice given to the holders of Bearer Notes in accordance with this
Condition.

17. Governing Law and Jurisdiction

(a) Governing Law

The Trust Deed, the Notes, the Receipts, the Coupons and the Talons are governed
by, and shall be construed in accordance with, English law.

(b) Jurisdiction

The courts of England are to have jurisdiction to settle any disputes that may
arise out of or in connection with any Notes, Receipts, Coupons or Talons and
accordingly any legal action or proceedings arising out of or in connection with
any Notes, Receipts, Coupons or Talons ("Proceedings") may be brought in such
courts. The Issuer has in the Trust Deed irrevocably submitted to the
jurisdiction of such courts.

(c) Service of Process

The Issuer, in accordance with the Trust Deed, will appoint its London office,
whose address is at 54 Queen Anne Street, London W1M 9LA to act as its agent in
England to receive, for it and on its behalf, service of process in any
Proceedings in England.
<PAGE>

                                   SCHEDULE 2
                                     Part D
                                 Form of Coupon

On the front:

SCOTTISH POWER plc

DEBT ISSUANCE PROGRAMME

Series No. [.]

[Title of issue]

Coupon for [[set out amount due, if known]/the amount] due on [the Interest
Payment Date falling in]* [.], [.].

[Coupon relating to Note in the principal amount of [.]]**

This Coupon is payable to bearer (subject to the Conditions endorsed on the Note
to which this Coupon relates, which shall be binding upon the holder of this
Coupon whether or not it is for the time being attached to such Note) at the
specified offices of the Issuing and Paying Agent and the Paying Agents set out
on the reverse hereof (or any other Issuing and Paying Agent or further or other
Paying Agents or specified offices duly appointed or nominated and notified to
the Noteholders).

[If the Note to which this Coupon relates shall have become due and payable
before the maturity date of this Coupon, this Coupon shall become void and no
payment shall be made in respect of it.]***

ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.

Scottish Power plc

By:


[Cp. No.]       [Denomination]       [ISIN]     [Series]       [Certif. No.]


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                                       45
<PAGE>

On the back:

CITIBANK, N.A.

P.O. Box 18055
5 Carmelite Street
London
EC4Y 0PA

PAYING AGENT
CITIBANK, N.A., BRUSSELS OFFICE
Building 726
1931 Brucargo
Brussels

[*Only necessary where Interest Payment Dates are subject to adjustment in
accordance with a Business Day Convention otherwise the particular Interest
Payment Date should be specified.]

[**Only required for Coupons relating to Floating Rate or Variable Coupon Amount
Notes that are issued in more than one denomination.]

[***Delete if Coupons are not to become void upon early redemption of Note.]


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                                       46
<PAGE>

                                   SCHEDULE 2
                                     Part E
                                  Form of Talon

On the front:

SCOTTISH POWER plc

DEBT ISSUANCE PROGRAMME

Series No. [.]

[Title of issue]

Talon for further Coupons falling due on [the Interest Payment Dates falling
in]*[.] [.].

[Talon relating to Note in the principal amount of [.]]**

After all the Coupons relating to the Note to which this Talon relates have
matured, further Coupons (including if appropriate a Talon for further Coupons)
shall be issued at the specified office of the Issuing and Paying Agent set out
on the reverse hereof (or any other Issuing and Paying Agent or specified office
duly appointed or nominated and notified to the Noteholders) upon production and
surrender of this Talon.

If the Note to which this Talon relates shall have become due and payable before
the original due date for exchange of this Talon, this Talon shall become void
and no exchange shall be made in respect of it.

ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.

SCOTTISH POWER plc

By:

[Talon No.]         [ISIN]          [Series]            [Certif. No.]


On the back:

ISSUING AND PAYING AGENT
CITIBANK, N.A.
P.O. Box 18055
5 Carmelite Street
London
EC4Y 0PA

PAYING AGENT
CITIBANK, N.A., BRUSSELS OFFICE
1931 Brucargo
Brussels


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                                       47
<PAGE>

[* The maturity dates of the relevant Coupons should be set out if known,
otherwise reference should be made to the months and years in which the Interest
Payment Dates fall due.]

[** Only required where the Series comprises Notes of more than one
denomination.]


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                                       48
<PAGE>

                                   SCHEDULE 2
                                     Part F
                                 Form of Receipt

SCOTTISH POWER plc

DEBT ISSUANCE PROGRAMME

Series No. [.]

Receipt for the sum of [*] being the instalment of principal payable in
accordance with the Terms and Conditions endorsed on the Note to which this
Receipt relates (the "Conditions") on [.].

This Receipt is issued subject to and in accordance with the Conditions which
shall be binding upon the holder of this Receipt (whether or not it is for the
time being attached to such Note) and is payable at the specified office of any
of the Paying Agents set out on the reverse of the Note to which this Receipt
relates (and/or any other or further Paying Agents and/or specified offices as
may from time to time be duly appointed and notified to the Noteholders).

This Receipt must be presented for payment together with the Note to which it
relates. If the Note to which this Receipt appertains shall have become due and
payable on or before the maturity date of this Receipt, this Receipt shall
become void and no payment shall be made in respect of it. The Issuer shall have
no obligation in respect of this Receipt if it is presented without the Note to
which it relates.

ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.

SCOTTISH POWER plc

By:


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                                       49
<PAGE>

In witness whereof this Supplemental Trust Deed has been executed as a deed on
the date stated at the beginning.

SCOTTISH POWER plc

By:

    ADRIAN COATS                DUNCAN WHYTE


THE COMMON SEAL OF THE LAW DEBENTURE TRUST CORPORATION p.l.c.
was affixed in the presence of:

STEPHEN W.S. NORTON             C.S.

CLIVE RAKESTROW


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                                       50