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                                                                    EXHIBIT 10.1

                             CONFIDENTIAL SEPARATION
                              AGREEMENT AND RELEASE

         This Confidential Separation Agreement and Release (the "Agreement") is
made and entered into by and between Nora I. Serrano ("Employee") and Home
Interiors & Gifts, Inc. (the "Company"), herein collectively referred to as the
"Parties". This Agreement will become effective as of August 15, 2003 (the
"Effective Date").

                                    RECITALS

         WHEREAS, Employee has been employed by the Company as Senior Vice
President of Sales.

         WHEREAS, Employee and the Company have mutually agreed to terminate
Employee's employment with the Company; and

         WHEREAS, the Parties desire to settle fully and finally, in the manner
set forth herein, all differences between them which have arisen, or which may
arise, prior to, or at the time of, the execution of this Agreement, including
but not limited to, any and all claims and controversies arising out of the
employment relationship, including the termination thereof, between Employee and
the Company.

         NOW, THEREFORE, in consideration of the recitals and the mutual
promises, covenants and agreements set forth herein, the Parties covenant and
agree as follows:

         1.       Termination of Employment. Employee and the Company agree that
                  Employee's employment with the Company and any of its
                  affiliates (including, without limitation, in any position as
                  an officer of the Company and any of its affiliates) is
                  terminated effective as of August 15, 2003 (the "Termination
                  Date"). Effective as of the Termination Date, all benefits
                  under all Company plans, programs and/or arrangements shall
                  terminate, except as otherwise provided in this Agreement. The
                  Company may open and answer, and authorize others to open and
                  answer, all mail, communications, and other correspondence
                  addressed to Employee relating to the Company or any of its
                  subsidiaries or affiliates or to Employee's employment with
                  the Company or any of its subsidiaries, and Employee shall
                  promptly refer to the Company all inquiries, mail,
                  communications, and correspondence received by her relating to
                  the Company or any of it subsidiaries or affiliates or to
                  Employee's employment with the Company or any of its
                  subsidiaries or affiliates. The Company will promptly forward
                  to Employee all of Employee's personal mail, communications or
                  correspondence received by the Company, unopened to the extent
                  it is reasonably ascertained to be of a personal nature.

         2.       General Release. Employee, for and on behalf of herself, and
                  Employee's spouse, family, agents, assigns, successors, heirs,
                  executors, administrators, affiliates, associates, and legal
                  representatives does hereby IRREVOCABLY AND UNCONDITIONALLY
                  RELEASE, RELINQUISH, QUITCLAIM, ACQUIT,

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                  AND FOREVER DISCHARGE the Company, its predecessors,
                  successors, past and present parent companies, subsidiary
                  companies, affiliates, associates, partnerships, and its
                  respective current and former owners, partners, assigns,
                  successors, employees, agents, heirs, executors,
                  administrators, legal representatives, officers, directors,
                  shareholders and attorneys and insurers of said corporations,
                  firms, associations, partnerships, and entities (hereinafter
                  the "Releasees"), of and from any and all complaints, claims,
                  grievances, liabilities, suits, demands, causes of action,
                  obligations, promises, agreements, rights, damages, costs
                  (including court costs and attorney's fees), losses, expenses
                  and compensation of any nature whatsoever, KNOWN OR UNKNOWN,
                  past, present or future, fixed or contingent, liquidated or
                  unliquidated, ACCRUED OR CONTINGENT, including, but not
                  limited to, any and all known or unknown claims which have
                  resulted or may result from any alleged acts or omissions,
                  arising out of Employee's hiring, terms and conditions of
                  employment, employment benefits, treatment during employment,
                  and separation from employment, including but not limited to
                  any bonus plans, stock option plans (except to the extent
                  specifically provided below) or other compensation
                  arrangements and expressly including, but not limited to, any
                  and all claims or causes of action based on, related to or
                  arising out of any alleged discrimination, harassment or
                  retaliation based on age, race, sex, national origin, color,
                  religion, citizenship status, disability, or handicap under
                  any municipal, local, state, or federal law, common or
                  statutory; including Title VII of the Civil Rights Act of 1964
                  (as amended) or any similar law; the Age Discrimination in
                  Employment Act (as amended) or any similar law; the Americans
                  with Disabilities Act (as amended), the Federal Rehabilitation
                  Act or any similar law; the Fair Labor Standards Act or any
                  similar law; the Older Workers Benefit Protection Act and any
                  similar law; wages, compensation, or benefits of employment;
                  retirement benefits or compensation; severance pay or
                  benefits; future compensation, including bonuses or profit
                  sharing; wrongful discharge from employment; negligence;
                  intentional torts; personal injury; mental anguish or
                  emotional distress; exemplary damages; alleged retaliation
                  related to workers' compensation claims under chapter 451 or
                  the Texas Labor Code or any similar law or relating to
                  so-called "whistle-blowers" law; Texas Payday Act or any
                  similar law; defamation, libel or slander; fraud; or breach of
                  contract (including, without limitation, any and all claims or
                  causes of action based on, related to or arising out of that
                  certain Employment Agreement, dated as of November 1, 2001, as
                  amended by that certain Amendment to Employment Agreement,
                  entered into as of December 12, 2002 (the "Employment
                  Agreement") or any other agreement relating to employment,
                  written or oral), any of which existed or may have existed
                  prior to, or contemporaneously with the execution of this
                  Agreement.

                  By the signature below, Employee does hereby acknowledge that
                  upon payment of all the consideration recited herein this is
                  final, full and complete satisfaction, settlement and
                  discharge of any and all liability of the Releasees, if any,
                  to Employee whatsoever by reason of any manner, cause or thing
                  in any way connected with or arising out of the Employee's
                  employment and/or termination

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                  of employment and that Employee shall not receive any further
                  sums of money or other property, except as set forth in this
                  Agreement, from the Company.

                  Except as expressly provided in this Agreement, neither the
                  Company nor any of its predecessors, successors, assigns,
                  subsidiaries or affiliates shall have any further obligation
                  to Employee in connection with the Employment Agreement or
                  Employee's employment by the Company or any of its affiliates
                  or subsidiaries, including but not limited to severance,
                  compensation (including but not limited to deferred
                  compensation, employment contracts, stock options, bonuses and
                  commissions), health insurance, life insurance, disability
                  insurance, club dues, vehicle allowances, vacation pay, sick
                  pay and any similar obligations.

         3.       Covenant Not to Sue. Employee, for herself and on behalf of
                  Employee's attorneys, spouse, family, heirs, assigns,
                  successors, executors, and administrators, COVENANTS NOT TO
                  SUE, OR OTHERWISE CONSENT TO PARTICIPATE IN ANY ACTION
                  AGAINST, any of the Releasees based upon any of the claims
                  released in Paragraph 2 of this Agreement and represents that
                  no other person or entity has initiated or will initiate any
                  such proceedings on her behalf. A violation by Employee of
                  this Section 3 will result in indemnification obligations
                  under Section 9, below. EMPLOYEE AGREES, WARRANTS, AND
                  REPRESENTS TO THE COMPANY THAT EMPLOYEE HAS FULL EXPRESS
                  AUTHORITY TO SETTLE ALL CLAIMS AND DEMANDS THAT ARE THE
                  SUBJECT OF SECTION 2 OF THIS AGREEMENT AND THAT EMPLOYEE HAS
                  NOT GIVEN OR MADE ANY ASSIGNMENT TO ANYONE, INCLUDING
                  EMPLOYEE'S SPOUSE, FAMILY OR LEGAL COUNSEL, OF ANY CLAIMS
                  AGAINST ANY PERSON OR ENTITY ASSOCIATED WITH THE COMPANY OR
                  ANY RELEASEES. TO THE EXTENT THAT ANY CLAIM RELATED TO THIS
                  AGREEMENT MAY BE BROUGHT BY PERSONS OR ENTITIES CLAIMING BY,
                  THORUGH, OR UNDER EMPLOYEE, HER HEIRS, SUCCESSORS, OR ASSIGNS,
                  THEN EMPLOYEE FURTHER AGREES TO INDEMNIFY, DEFEND, AND HOLD
                  HARMLESS THE COMPANY OR ANY COMPANY PARTY, THEIR RESPECTIVE
                  AGENTS, AND THEIR RESPECTIVE SUCCESSORS FROM ANY LAWSUIT,
                  JUDGMENT, OR SETTLEMENT ARISING FROM SUCH CLAIMS. EMPLOYEE
                  FURTHER HEREBY ASSIGNS TO THE COMPANY ALL CLAIMS AND CAUSES OF
                  ACTION COVERED BY SECTION 2.

         4.       Non-Disclosure of Agreement. Employee agrees that she will
                  keep the terms, amount, and facts of this Agreement STRICTLY
                  AND COMPLETELY CONFIDENTIAL, and that she will not communicate
                  or otherwise disclose the terms, amount, or facts of this
                  Agreement to any employee of the Company (past, present, or
                  future), or to any other person, except (a) to Employee's
                  spouse, attorneys, accountants, financial advisors, and future
                  employers, provided that such individuals are advised of and
                  agree to maintain the confidentiality of such matters and (b)
                  as may be required by law or compulsory process. The Company
                  agrees to take reasonable action to keep the terms, amount,
                  and facts of this Agreement STRICTLY AND COMPLETELY
                  CONFIDENTIAL, and that it will

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                  take reasonable action to prevent any employee from
                  communicating or otherwise disclosing the terms, amount or
                  facts of this Agreement to any employee of the Company (past,
                  present or future) or to any other person, except (a) to the
                  Company's senior management, directors, attorneys,
                  accountants, financial advisors, lenders, and other persons
                  which senior management of the Company believes need to be
                  aware of such matters, provided that such individuals are
                  advised of and agree to maintain the confidentiality of such
                  matters, (b) as the Company may deem appropriate in connection
                  with any transactions involving the sale of securities of the
                  Company or of any material portion of the assets of the
                  Company or any transactions involving a merger of the Company
                  with any third party, (c) future employers of Employee as
                  referenced in Sections 5 and 6(e), and (d) as may be required
                  by law or compulsory process. In the event that a Party is
                  required or compelled by law or compulsory process to disclose
                  the existence and or contents of this Agreement, such Party
                  will use best efforts to provide the other Party with written
                  notice, at least seven (7) days in advance of any such
                  disclosure.

         5.       Confidentiality. Employee acknowledges that during the term of
                  employment with the Company, Employee received valuable
                  special training, had access to and became acquainted with
                  various displayer lists, customer lists, trade secrets and
                  other confidential information not ordinarily available to the
                  general public. Employee agrees that such special knowledge
                  received is included in the Company's proprietary confidential
                  information. Employee agrees that this confidential
                  information is valuable to the Company and that its protection
                  and maintenance constitutes a legitimate interest to be
                  protected by the enforcement of the covenants contained in
                  this Agreement.

                  Employee acknowledges that the Confidential Information (as
                  defined below) relating to the business of the Company, or any
                  of its affiliates, which has been obtained during her
                  employment with the Company, is the property of the Company.
                  Employee agrees that she will not disclose or use at any time,
                  any Confidential Information, without the prior written
                  consent of the Company. Employee agrees to destroy or deliver
                  to the Company, after the termination from employment, all
                  memoranda, notes, plans, records, reports, drawings, sketches,
                  specifications, diskettes, tapes and other storage media,
                  documentation and other materials (and copies thereof),
                  whether in written, printed or digital format, containing
                  Confidential Information, no matter where such material is
                  located and no matter what form the material may be in, which
                  Employee may then possess or have under her control. If
                  requested by the Company, Employee shall provide to the
                  Company written confirmation that all such materials have been
                  delivered to the Company or have been destroyed. Employee
                  shall take all appropriate steps to safeguard Confidential
                  Information and to protect it against disclosure, misuse,
                  espionage, loss and theft. Company shall be authorized to
                  disclose to any future employer of Employee that Employee's
                  use or disclosure of the Confidential Information is governed
                  by this Agreement and, at the Company's election, furnish such
                  new employer with a copy of this Agreement or relevant portion
                  thereof.

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 4

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                  For purpose of this Agreement, "Confidential Information"
                  shall mean trade secrets, confidential or proprietary
                  information and all other knowledge, know-how, information,
                  documents or materials owned, developed or possessed by the
                  Company or any of its affiliates, whether in tangible or
                  intangible form, pertaining to the business of the Company or
                  any of its affiliates, or any customer thereof, known or
                  intended to be known only to employees of the Company of any
                  of its affiliates or other persons in a confidential
                  relationship with the Company, or the confidentiality of which
                  the Company takes reasonable measure to protect, including,
                  but not limited to manufacturing processes, research and
                  development data, project data, assignments of individual
                  employees, testing and evaluation procedures, cost data and
                  techniques, data bases, designs, models, operation procedures,
                  knowledge of the organization (including pricing and sales
                  policies, techniques and concepts), trade shows (including
                  prices, costs, sales or content), details of joint venture or
                  sponsorship agreements, knowledge of strategic or marketing
                  plans for future products, events, processes, techniques,
                  contracts, financial information or measures, business
                  methods, future business plans, package design, retail design,
                  field marketing outsourcing, displayers and customers
                  (including identities and contact information of displayers
                  and customers and prospective displayers and customers, and
                  identities and contact information of individual contacts at
                  business entities, which are customers), suppliers, vendors,
                  business relationships and other information owned, developed
                  or possessed by the Company; provided however, that
                  Confidential Information shall not include (i) information
                  (other than the identities of displayers and customers) that
                  is in the public domain through no fault of Employee; (ii)
                  information approved for release by written authorization of
                  the Company; or (iii) information that may be required by law
                  or an order of any court, agency or proceeding to be publicly
                  disclosed.

         6.       Non-Solicitation and Non-Teaming.

                  (a)      The Employee acknowledges that: (i) the Company's
                           business is international in scope and its products
                           are marketed throughout the United States and the
                           world; (ii) the Company competes with other
                           businesses both within the United States and
                           internationally; and (iii) the provisions of this
                           Section 6 are reasonable and necessary to protect the
                           Company's business.

                  (b)      In consideration of the acknowledgments by the
                           Employee, and in consideration of the compensation
                           and benefits to be paid or provided to the Employee
                           by the Company under this Agreement, the Employee
                           agrees that she will not, directly or indirectly:

                           (i)      during the Post-Employment Period (as
                                    defined below), participate with two (2) or
                                    more individuals who were members of
                                    management or unit directors (or higher
                                    level directors) of the Company within the
                                    three (3) year period prior to the Effective
                                    Date in the ownership, management, or
                                    operation of any business

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 5

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                                    that involves direct sales or any business
                                    whose products, services or activities
                                    compete in whole or in part with the
                                    products, services or activities of the
                                    Company or its affiliates, anywhere within
                                    the United States or within any foreign
                                    country where the Company or its affiliates
                                    conduct or market their business or
                                    services, PROVIDED HOWEVER, that any
                                    violation of this Section 6(b)(i) shall not
                                    constitute a material breach under Section 9
                                    (giving rise to the remedies listed
                                    therein), if such violation is cured by
                                    Employee within ten (10) days following the
                                    giving of written notice by the Company to
                                    the Employee at the address set forth on the
                                    signature page of this Agreement;

                           (ii)     whether for the Employee's own account or
                                    for the account of any other person or
                                    entity, at any time during the
                                    Post-Employment Period, solicit business of
                                    the same or similar type being carried on by
                                    the Company or its affiliates, from any
                                    retail or wholesale customer of the Company
                                    or its affiliates in existence at any time
                                    during the year prior to the Effective Date,
                                    whether or not the Employee had personal
                                    contact with such customer during and by
                                    reason of the Employee's employment with the
                                    Company;

                           (iii)    whether for the Employee's own account or
                                    the account of any other person or entity,
                                    at any time during the Post-Employment
                                    Period, solicit, employ, or otherwise engage
                                    as an employee, independent contractor, or
                                    otherwise, any person who is or was at the
                                    time of such solicitation, employment or
                                    engagement an employee, displayer,
                                    consultant or independent contractor of the
                                    Company or its affiliates or in any manner
                                    induce or attempt to induce any employee of
                                    the Company or its affiliates to terminate
                                    his/her employment with the Company, or its
                                    affiliates or in any manner induce or
                                    attempt to induce any displayer of the
                                    Company or its affiliates to terminate
                                    his/her relationship with the Company or its
                                    affiliates; or

                           (iv)     whether for the Employee's own account or
                                    the account of any other person at any time
                                    during the Post-Employment Period, interfere
                                    with the Company's or any of its affiliates'
                                    relationship with any person, including any
                                    person who is or was at any time prior to or
                                    during the Post-Employment Period, an
                                    employee, displayer, contractor, supplier,
                                    or customer of the Company or its
                                    affiliates.

                  (c)      If any covenant in this Section 6 is held to be
                           unreasonable, arbitrary, or against public policy,
                           such covenant will be considered to be divisible with
                           respect to scope, time, and geographic area, and such
                           lesser scope, time, or geographic area, or all of
                           them, as a court of competent jurisdiction may
                           determine to be reasonable, not arbitrary,

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                           and not against public policy, will be effective,
                           binding, and enforceable against the Employee.

                  (d)      The period of time applicable to any covenant in this
                           Section 6 will be extended by the duration of any
                           violation by the Employee of such covenant.

                  (e)      The Employee will, while the covenant under this
                           Section 6 is in effect, give written notice to the
                           Company, within ten (10) days after accepting any
                           other employment or consulting arrangement, of the
                           identity of the Employee's new employer or contractor
                           and all of the material duties and services to be
                           provided by Employee in such employment or retention,
                           which shall not require disclosure by Employee of any
                           terms of compensation. The Company may notify such
                           new employer that the Employee is bound by this
                           Agreement and, at the Company's election, furnish
                           such new employer with a copy of this Agreement or
                           relevant portion thereof.

                  (f)      The term "Post-Employment Period" means the three (3)
                           year period following the Effective Date.

         7.       Severance Benefit Terms. The Company agrees to:

                  (a)      Pay to Employee within three (3) days following the
                           Effective Date cash in the amount of ONE MILLION
                           NINETY SIX THOUSAND SIX HUNDRED NINETY-ONE DOLLARS
                           ($1,096,691.00) (such amount representing three (3)
                           times Employee's 2002 year-end salary and 2002
                           bonus), less (A) payroll deductions and other
                           deductions required by law, and (B) taxes required to
                           be withheld by the Company with respect to the
                           transfer to Employee of the automobile described in
                           Section 7(d) of this Agreement.

                  (b)      Reimburse Employee for insurance premiums required to
                           maintain health coverage under COBRA, and for
                           supplemental life, accidental death and dismemberment
                           insurance policies, (or at the Company's election,
                           pay such premiums directly) through the earlier of
                           August 31, 2004 or the date on which Employee has
                           comparable coverage through a new employer.

                  (c)      Subject to Section 9, below, the Company shall amend
                           and restate (A) the terms of those certain
                           Non-Qualified Stock Option Agreements, dated November
                           1, 2000 (as amended as of March 18, 2002), and May 7,
                           2002, in accordance with the terms of an Amended and
                           Restated Non-Qualified Stock Option Agreement
                           substantially in the form of Exhibit A attached
                           hereto and (B) the terms of that certain
                           Non-Qualified Stock Option Agreement, dated September
                           27, 2002, in accordance with the terms of an Amended
                           and Restated Non-Qualified Stock Option Agreement
                           substantially in the form of Exhibit B attached
                           hereto.

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                  (d)      Transfer to Employee title to the 2003 Mercedes Benz
                           E320 currently being leased by the Company for use by
                           Employee.

                  (e)      Subject to Sections 5 and 6, above, waive any all
                           rights the Company may have to enforce the
                           non-competition covenant of Employee under Section
                           9(b)(i) of the Employment Agreement for actions taken
                           by Employee after the Termination Date.

                           The payments and benefits set forth in Section 7
                           shall be subject to applicable federal, state and
                           local withholding taxes and to any withholding that
                           would be applicable were Employee an employee of the
                           Company. EMPLOYEE AGREES THAT, TO THE EXTENT THAT ANY
                           INDIVIDUAL FEDERAL OR STATE TAXES OF ANY KIND MAY BE
                           DUE AS A RESULT OF ANY SUCH PAYMENT TO EMPLOYEE,
                           EMPLOYEE SHALL BE SOLELY RESPONSIBLE FOR SUCH TAXES
                           AND WILL INDEMNIFY, DEFEND, AND HOLD HARMLESS THE
                           COMPANY IN THE EVENT THERE IS ANY CLAIM AGAINST THE
                           COMPANY FOR SUCH TAXES. THIS SECTION SHALL NOT
                           RELEASE THE COMPANY OF ITS OBLIGATIONS WITH RESPECT
                           TO WITHHOLDING.

         8.       No Admission. This Agreement is not an admission of wrongdoing
                  or liability by either Employee or the Company. The Parties
                  hereto recognize that, by entering into this Agreement, the
                  Company does not admit any violation of any local, state, or
                  federal law, common or statutory. The Parties further
                  recognize that this Agreement has been entered into in release
                  and compromise of any claims that might be asserted by
                  Employee, in connection with Employee's employment with the
                  Company, or the termination thereof, and to avoid the expense
                  and burden of any litigation related thereto.

         9.       Breach by Employee. The Parties acknowledge and agree that in
                  the event Employee materially breaches any provision of this
                  Agreement: (a) the Company may suspend payments under this
                  Agreement and/or rescind the Agreement; (b) Employee will
                  indemnify and hold the Company harmless from and against any
                  and all resulting damages or loss incurred by the Company
                  (including attorneys' fees and expenses); (c) Employee will
                  immediately repay to the Company in full any payment made to
                  her under the provisions of this Agreement; and (d) the
                  Company will be entitled to recover from Employee any payment
                  not repaid to the Company, as required by subpart (c) of this
                  paragraph, as well as any and all other resulting actual or
                  consequential damages. Further, in the event Employee
                  materially breaches any provision of this Agreement all
                  options described under Section 7(c) shall be forfeited,
                  whether or not then vested or unvested. The Company may also
                  pursue any other available remedies for any breach of this
                  Agreement.

                  One or more waivers of a breach of any covenant, term, or
                  provision of this Agreement by any of the Parties shall not be
                  construed as a waiver of a

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                  subsequent breach of the same covenant term, or provision, nor
                  shall it be considered a waiver of any other existing or
                  subsequent breach of a different covenant, term, or provision.

         10.      Severability. If any provision or term of this Agreement is
                  held to be illegal, invalid, or unenforceable, such provision
                  or term shall be fully severable; this Agreement shall be
                  construed and enforced as if such illegal, or unenforceable
                  provision had never comprised part of this Agreement; and the
                  remaining provisions of this Agreement shall remain in full
                  force and effect and shall not be affected by the illegal,
                  invalid, or unenforceable provision or by its severance from
                  this Agreement. However, the Parties agree that all payments
                  made under the Agreement shall remain full and final and the
                  occurrence of any event of inapplicability, invalidity,
                  illegality, unenforceability, or modification made to this
                  Agreement shall in no way (a) entitle the Employee to any
                  additional payment, compensation, or cost from the Company or
                  create any liability for the Company to the Employee under
                  this Agreement, or (b) revise, reinstate, or otherwise restore
                  any claims or causes of action being released hereby. The
                  Parties further agree that the occurrence of any such
                  inapplicability, invalidity, illegality, unenforceability, or
                  modification will not operate to reduce the consideration paid
                  to the Employee under this Agreement. Furthermore, in lieu of
                  such illegal, invalid, or unenforceable provision or term
                  there shall be added automatically as a part of this Agreement
                  another provision or term as similar to the illegal, invalid,
                  or unenforceable provisions, as may be possible and that is
                  legal, valid, and enforceable.

         11.      Remedies. The Parties agree that should one party sue the
                  other party for a breach of any provision of this Agreement,
                  the prevailing party shall be entitled to recover its
                  attorneys' fees and costs of court. The parties hereby agree
                  that each party shall have the right to sue for specific
                  performance of this Agreement, and for declaratory and
                  injunctive relief.

         12.      Entire Agreement. This Agreement (together with the stock
                  option agreements substantially in the form attached hereto as
                  Exhibits A and B) constitutes the entire Agreement of the
                  Parties, and supersedes all prior and contemporaneous
                  negotiations and agreements, oral or written. All such prior
                  and contemporaneous negotiations and agreements are deemed
                  incorporated and merged into this Agreement and are deemed to
                  have been abandoned if not so incorporated. No
                  representations, oral or written, are being relied upon by
                  either party in executing this Agreement other than the
                  express representations of this Agreement. This Agreement
                  cannot be changed or terminated without the express written
                  consent of the parties.

         13.      Reference. The Parties acknowledge and agree that Employee
                  will direct any request for employment references from the
                  Company to the Chief Executive Officer of the Company, and
                  that the Company will not be obligated to respond to any such
                  requests, or to any other inquiries from prospective employers
                  of

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                  Employee, except to disclose only a neutral reference that
                  discloses only Employee's job title and dates of employment.

         14.      Waiver. Employee waives and releases forever any right or
                  rights she might have to seek re-employment, or reinstatement
                  with the Company or any of the other Releasees.

         15.      Non-Disparagement. Employee agrees that she shall not,
                  directly or indirectly, in any way disparage the Company or
                  its affiliates or any of the shareholders, partners, members,
                  or other holders of equity in the Company or its current and
                  former officers, directors, and employees, or make to, or
                  solicit from, any third party, any comments, statements, and
                  the like that may be considered to be derogatory or
                  detrimental to the good name or business reputation of the
                  Company. The Company agrees that it shall take reasonable
                  action to prevent any employee of the Company from disparaging
                  the Employee or making any comments, statements and the like
                  that may be considered to be derogatory or detrimental to the
                  good name or business reputation of the Employee, and if the
                  Company becomes aware of any material violation of such
                  instruction to employees, the Company shall take reasonable
                  action to prevent the recurrence of such violation.

         16.      Statement of Understanding. By executing this Agreement,
                  Employee acknowledges that (a) Employee has been advised by
                  the Company in writing to consult with an attorney regarding
                  the terms of the Agreement; (b) Employee has consulted with an
                  attorney of her own choosing regarding the terms of the
                  Agreement; (c) any and all questions regarding the terms of
                  this Agreement have been asked and answered to Employee's
                  complete satisfaction; (d) Employee has read this Agreement
                  and fully understands its terms and their import; (e) except
                  as provided by this Agreement, Employee has no contractual
                  right or claim to the benefits described herein; (f) the
                  consideration provided for herein is good and valuable; (g)
                  Employee is entering into this Agreement voluntarily, of her
                  own free will, and without any coercion, undue influence,
                  threat, or intimidation of any kind or type whatsoever; and
                  (h) Employee is no longer an employee of the Company and its
                  subsidiaries effective on the Termination Date.

         17.      Controlling Law and Venue. This Agreement shall be subject to
                  and construed in accordance with the laws of the State of
                  Texas. Venue shall be in Dallas County, Texas for any disputes
                  arising out of the interpretation or enforcement of any of the
                  terms of this Agreement.

         18.      Binding Effect. This Agreement is binding on and inures to the
                  benefit of the Company, its successors and assigns, and on
                  Employee and Employee's heirs and assigns.

         19.      Cooperation and Further Assurances. In order to assist with
                  the transition following the termination of her employment
                  with the Company, Employee agrees to make herself available to
                  assist with such transition through and

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                  including August 31, 2003, in such manner as may be reasonably
                  requested by the Company. The Parties agree to execute and
                  deliver such other and further documents and take such other
                  action as may be reasonably necessary to more completely,
                  fully and/or correctly evidence or effect the intents and
                  purposes of this Agreement.

         20.      LEGAL COUNSEL. EMPLOYEE UNDERSTANDS THAT SHE IS WAIVING
                  IMPORTANT LEGAL RIGHTS BY SIGNING THIS AGREEMENT AND, FURTHER,
                  THAT EMPLOYEE HAS CONSULTED WITH AN ATTORNEY OF HER CHOOSING
                  BEFORE SIGNING THIS AGREEMENT.

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 11

<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this Agreement freely and
voluntarily intending to be legally bound by it.

ACCEPTED AND AGREED TO BY:

EMPLOYEE

/s/ Nora I. Serrano
-------------------
Nora I. Serrano

August 14, 2003
Date

Address for Notice:

         5648 Dunlap Court
         Plano, Texas 75093

STATE OF TEXAS                         )
                                       )
COUNTY OF                              )

         BEFORE ME, the undersigned, a Notary Public, on this day personally
appeared Nora I. Serrano known to me to be the person whose name is subscribed
to the foregoing instrument and acknowledged to me that she executed the same
for the purposes and consideration therein expressed.

         GIVEN UNDER MY HAND AND SEAL OF OFFICE this                      day of
                        .

                                       _________________________________________
                                       Notary Public, State of Texas
                                       My commission expires: __________________

[SEAL]

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 12

<PAGE>

HOME INTERIORS & GIFTS, INC.

By: /s/ Kenneth J. Cichocki
    -----------------------
Name:  Kenneth J. Cichocki
Title: Senior Vice President of Finance

Date August 14, 2003

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 13

<PAGE>

                                    EXHIBIT A

            FORM OF 1998 NON-QUALIFIED STOCK OPTION AGREEMENT

THE SHARES ISSUABLE PURSUANT TO THIS AGREEMENT ARE SUBJECT TO AN OPTION TO
REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE COMPANY'S 1998 STOCK OPTION PLAN
FOR KEY EMPLOYEES AND THIS AGREEMENT ENTERED INTO PURSUANT THERETO. A COPY OF
SUCH PLAN IS AVAILABLE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICES.

                          HOME INTERIORS & GIFTS, INC.
                             1998 STOCK OPTION PLAN

            AMENDED AND RESTATED NON-QUALIFIED STOCK OPTION AGREEMENT
                                FOR KEY EMPLOYEES

                                 August 15, 2003

Ms. Nora I. Serrano
5648 Dunlap Ct.
Plano, TX 75093

Re:      Grant of Stock Option

Dear Nora:

         The Board of Directors of Home Interiors & Gifts, Inc. (the "Company")
has adopted the Company's 1998 Stock Option Plan (the "Plan") for certain
individuals and key employees of the Company and its Related Entities. A copy of
the Plan is being furnished to you concurrently with the execution of this
Option Agreement and shall be deemed a part of this Option Agreement as if fully
set forth herein. Unless the context otherwise requires, all capitalized terms
used but not otherwise defined herein shall have the meanings given such terms
in the Plan.

         The Company granted to you an option to purchase 5,000 shares of the
Common Stock of the Company under that certain Non-Qualified Stock Option
Agreement for Key Employees, dated November 1, 2000 (as amended as of March 18,
2002), and the option to purchase an additional 5,000 shares of the Common Stock
of the Company under that certain Non-Qualified Stock Option Agreement dated May
7, 2002 (collectively, the "Old Agreements"). The Old Agreements are hereby
amended and restated in their entirety.

EXHIBIT A TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 14

<PAGE>

         1.       The Grant.

                  The Company granted to you, effective as of November 1, 2000
(the "2000 Grant Date"), the right and option to purchase (the "2000 Option"),
in accordance with the terms and conditions set forth herein and in the Plan, an
aggregate of 5,000 shares of Common Stock of the Company (the "2000 Option
Shares"), at the Exercise Price (as hereinafter defined). The Company granted to
you, effective as of May 7, 2002 (the "2002 Grant Date," each of the 2000 Grant
Date and the 2002 Grant Date being a "Grant Date"), the right and option to
purchase (the "2002 Option," and collectively with the 2000 Option, the
"Option"), in accordance with the terms and conditions set forth herein and in
the Plan, an aggregate of 5,000 shares of Common Stock of the Company (the "2002
Option Shares," and collectively with the 2000 Option Shares, the "Option
Shares"), at the Exercise Price. As used herein, the term "Exercise Price" shall
mean a price equal to $18.05 per share, subject to the adjustments and
limitations set forth herein and in the Plan. The Option is intended to
constitute a Non-Qualified Option within the meaning of the Plan; however, you
should consult with your tax advisor concerning the proper reporting of any
federal or state tax liability that may arise as a result of the grant or
exercise of the Option.

         2.       Exercise.

                  (a)      For purposes of this Option Agreement, all of the
Option Shares shall be deemed "Vested Shares." The Option shall not be subject
to any requirements in the Plan for vesting or exercise relating to continuing
employment with the Company.

                  (b)      Subject to the relevant provisions and limitations
contained herein and in the Plan, you may exercise the Option to purchase all or
a portion of the applicable number of Vested Shares at any time prior to the
termination of the Option pursuant to this Option Agreement. In no event shall
you be entitled to exercise the Option for a fraction of a Vested Share.

                  (c)      The unexercised portion of the Option, if any, will
automatically, and without notice, terminate and become null and void upon the
expiration of ten (10) years from the applicable Grant Date.

                  (d)      Any exercise by you of the Option shall be in writing
addressed to the Secretary of the Company at its principal place of business (a
copy of the form of exercise to be used will be available upon written request
to the Secretary), and shall be accompanied by a certified or bank check payable
to the order of the Company in the full amount of the Exercise Price of the
shares so purchased, or in such other manner as described in the Plan and
established by the Committee.

                  (e)      Notwithstanding any provisions herein or in the Plan
to the contrary, in the event of a material breach by you of either that certain
Employment Agreement, dated as of November 1, 2001, as amended by that certain
Amendment to Employment Agreement, entered into as of December 12, 2002, or that
certain Confidential Separation Agreement and Release, dated as of August 15,
2003, you shall immediately and automatically forfeit to the Company, for no
consideration, the Option and all Option Shares (regardless of the fact that
they are Vested Shares).

EXHIBIT A TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 15
<PAGE>

         3.       Transferability.

                  Except as otherwise provided in Section 4 hereof, the Option
and any rights or interests therein are not assignable or transferable by you
except by will or the laws of descent and distribution, and during your
lifetime, the Option shall be exercisable only by you or, in the event that a
legal representative has been appointed in connection with your Disability, such
legal representative.

         4.       Purchase Option.

                  (a)      The Company shall have the Purchase Option on the
Option and the Option Shares set forth in clause (ii) of Section 9(a) of the
Plan (relating to a Change in Control); provided, however, that the Company
expressly disclaims the Purchase Option on the Option and the Option Shares set
forth in clause (i) of Section 9(a) of the Plan (relating to the termination of
your employment with the Company). If in accordance with the immediately
preceding sentence, the Company shall exercise such Purchase Option, you (or
your executor or the administrator of your estate or the Person who acquired the
right to exercise the Option by bequest or inheritance in the event of your
death, or your legal representative in the event of your incapacity
(hereinafter, collectively with such optionee, the "Grantor")) shall sell to the
Company and/or its assignee(s), all or any portion (at the Company's option) of
the Option Shares and/or the Option held by the Grantor (such Option Shares and
Option collectively being referred to as the "Purchasable Shares").

                  (b)      The Company shall give notice in writing to the
Grantor of the exercise of the Purchase Option within one (1) year from the date
the Purchase Option arises under the terms of the Plan. Such notice shall state
the number of Purchasable Shares to be purchased and the determination of the
Board of Directors of the Fair Market Value per share of such Purchasable
Shares. If no notice is given within the time limit specified above, the
Purchase Option shall terminate.

                  (c)      The purchase price to be paid for the Purchasable
Shares purchased pursuant to the Purchase Option shall be, in the case of any
Option Shares, the Fair Market Value per share as of the date of notice of
exercise of the Purchase Option times the number of shares being purchased, and
in the case of the Option, the Fair Market Value per share times the number of
Vested Shares subject to such Option which are being purchased, less the
applicable per share Exercise Price. The purchase price shall be paid in cash.
The closing of such purchase shall take place at the Company's principal
executive offices within ten (10) days after the purchase price has been
determined. At such closing, the Grantor shall deliver to the purchaser(s) the
certificates or instruments evidencing the Purchasable Shares being purchased,
duly endorsed (or accompanied by duly executed stock powers) and otherwise in
good form for delivery, against payment of the purchase price by check of the
purchaser(s). In the event that, notwithstanding the foregoing, the Grantor
shall have failed to obtain the release of any pledge or other encumbrance on
any Purchasable Shares by the scheduled closing date, at the option of the
purchaser(s) the closing shall nevertheless occur on such scheduled closing
date, with the cash

EXHIBIT A TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 16

<PAGE>

purchase price being reduced to the extent of all unpaid indebtedness for which
such Purchasable Shares are then pledged or encumbered.

                  (d)      To assure the enforceability of the Company's rights
under this Section 4, each certificate or instrument representing Option Shares
subject to this Option Agreement shall bear a conspicuous legend in
substantially the following form:

                  "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
                  OPTION TO REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE
                  COMPANY'S 1998 STOCK OPTION PLAN FOR KEY EMPLOYEES AND A STOCK
                  OPTION AGREEMENT ENTERED INTO PURSUANT THERETO. A COPY OF SUCH
                  OPTION PLAN AND OPTION AGREEMENT ARE AVAILABLE UPON WRITTEN
                  REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES."

         5.       Registration.

                  The Company shall not in any event be obligated to file any
registration statement under the Securities Act or any applicable state
securities laws to permit exercise of the Option or to issue any Common Stock in
violation of the Securities Act or any applicable state securities laws. You (or
in the event of your death or, in the event a legal representative has been
appointed in connection with your Disability, the Person exercising the Option)
shall, as a condition to your right to exercise the Option, deliver to the
Company an agreement or certificate containing such representations, warranties
and covenants as the Company may deem necessary or appropriate to ensure that
the issuance of the Option Shares pursuant to such exercise is not required to
be registered under the Securities Act or any applicable state securities laws.

                  Certificates for the Option Shares, when issued, shall have
substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:

                  "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
                  BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
                  OR ANY STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED
                  FOR SALE, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF
                  UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE
                  ISSUER (WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN
                  OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH
                  OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT
                  VIOLATE APPLICABLE FEDERAL OR STATE LAWS."

EXHIBIT A TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 17

<PAGE>

                  The foregoing legend may not be required for Option Shares
issued pursuant to an effective registration statement under the Securities Act
and in accordance with applicable state securities laws.

         6.       Miscellaneous.

                  This Option Agreement is subject to all the terms, conditions,
limitations and restrictions contained in the Plan. In the event of any conflict
or inconsistency between the terms hereof and the terms of the Plan, the terms
of the Plan shall be controlling. The Old Agreements (being amended and restated
in their entirety hereby) shall be of no further force or effect.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

EXHIBIT A TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 18

<PAGE>

         Please indicate your acceptance of all the terms and conditions of the
Option and the Plan by signing and returning a copy of this Option Agreement.

                                              Very truly yours,

                                              HOME INTERIORS & GIFTS, INC.

                                              By: /s/ Donald J. Carter, Jr.
                                                  ------------------------------
                                                  Name: Donald J. Carter, Jr.
                                                  Title: Chief Executive Officer

 ACCEPTED:

/s/ Nora I. Serrano
------------------
 Nora I. Serrano

 Date: August 14, 2003

EXHIBIT A TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 19

<PAGE>

                                    EXHIBIT B

                FORM OF 2002 NON-QUALIFIED STOCK OPTION AGREEMENT

         THE SHARES ISSUABLE PURSUANT TO THIS AGREEMENT ARE SUBJECT TO AN OPTION
         TO REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE COMPANY'S 1998 STOCK
         OPTION PLAN FOR KEY EMPLOYEES AND THIS AGREEMENT ENTERED INTO PURSUANT
         THERETO. A COPY OF SUCH PLAN IS AVAILABLE UPON WRITTEN REQUEST TO THE
         COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.

                          HOME INTERIORS & GIFTS, INC.
                             2002 STOCK OPTION PLAN

                      NON-QUALIFIED STOCK OPTION AGREEMENT
                                FOR KEY EMPLOYEES

                                 August 15,2003

Ms. Nora I. Serrano
5648 Dunlap Ct.
Plano, TX 75093

Re:  Grant of Stock Option

Dear Nora:

         The Board of Directors of Home Interiors & Gifts, Inc., a Texas
corporation (the "Company") has adopted the Company's 2002 Stock Option Plan For
Key Employees (the "Plan") for certain individuals and key employees of the
Company and its Related Entities. A copy of the Plan is being furnished to you
concurrently with the execution of this Option Agreement and shall be deemed a
part of this Option Agreement as if fully set forth herein. Unless the context
otherwise requires, all capitalized terms used but no otherwise defined herein
shall have the meanings given such terms in the Plan.

         The Company granted to you an option to purchase 500,000 shares of the
Common Stock of the Company under that certain Non-Qualified Stock Option
Agreement for Key Employees, dated September 27, 2002 (the "Old Agreement"). The
Old Agreement is hereby amended and restated in its entirety.

         1.       The Grant.

                  The Company granted to you, effective as of September 27, 2002
(the "Grant Date"), the right and option to purchase (the "Option"), in
accordance with the terms and conditions set forth herein and in the Plan, an
aggregate of 500,000 shares of Common Stock of

EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 20

<PAGE>

the Company (the "Option Shares" at the Exercise Price (as hereinafter
defined)). As used herein, the term "Exercise Price" shall mean a price equal to
$19.42 per share, subject to the adjustment and limitations set forth herein and
in the Plan. The Option is intended to constitute a Non-Qualified Option within
the meaning of the Plan; however, you should consult with your tax advisor
concerning the proper reporting of any federal or state tax liability that may
arise as a result of the grant or exercise of the Option.

         2.       Exercise.

                  (a)      For purposes of this Option Agreement, the Option
Shares shall be deemed "Nonvested Shares" unless and until they have become
"Vested Shares." The Option shall not be subject to any requirements in the Plan
for vesting or exercise relating to continuing employment with the Company.
Notwithstanding the foregoing sentence and anything to the contrary contained in
Section 6(c) of the Plan, however, and subject to the provisions of Section 2(c)
hereof, the Option shares shall become Vested Shares and shall become
exercisable only upon the achievement of the annual performance targets set
forth on Exhibit A attached hereto. Twenty percent (20%) of the Option Shares
shall become Vested Shares in accordance with the terms of the Plan upon the
achievement of each annual performance target; provided, however, that if for
any annual period the Equity Value Target for such period is not met, the number
of Option Shares that would have become Vested Shares upon the achievement in
any subsequent period of such Equity Value Target. In addition, in the event
that any future Equity Value Target is met in any annual period, the number of
Option Shares that would have become Vested Shares upon the achievement of such
future Equity Value Target in such subsequent annual period shall become Vested
Shares upon the achievement of such future Equity Value Target in the earlier
annual period regardless of whether the Equity Value Target in the earlier
annual period regardless of whether the Equity Value Target for such future
annual period is actually achieved in such future annual period.

                  (b)      Determinations with respect to whether an applicable
annual Equity Value Target has been achieved (and the accompanying computations
of EBITDA and Net Consolidated Debt) shall be made by the Board of Directors or
the Option Committee within 30 days after approval by the Board of Directors (or
other appropriate committee thereof) of the Company's audited financial
statements for the applicable fiscal year, and shall be final and binding on the
Company and the Optionee absent manifest error. Until such determination has
been made, no Option Shares shall be deemed to be Vested Shares for any purposes
hereunder (including for purposes of determining whether any Options may be
exercised in connection with any termination of employment that occurred to the
date of determination).

                  (c)      Upon the occurrence of a Change of Control,
irrespective of whether the annual performance targets set forth on Exhibit A
were achieved prior to the Change of Control Date (as defined in Exhibit A),
your Nonvested Shares shall become exercisable only as follows: Twenty Percent
(20%) of the Nonvested Shares shall become Vested Shares for each fiscal year in
which the Change of Control Equity Value (as defined in Exhibit A) equals or
exceeds the Equity Value Target for such fiscal year. In addition, in the event
that the Change of Control Equity Value exceeds an Equity Value Target for a
particular fiscal year but does not equal the Equity Value Target for the next
succeeding fiscal year, an additional twenty percent (20%) of your Unvested
Shares shall become Vested Shares. For example, if (i) a Change of Control
occurs during the fiscal year ended December 31, 2004, (ii) the Change of
Control Equity Value on the Change of Control

EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 21

<PAGE>

Date was $750 million and (iii) none of your Option Shares had previously become
Vested Shares in accordance with Section 2(a) hereof, eighty percent (80%) of
your Option Shares would become Vested Shares and the remaining twenty percent
(20%) would constitute Unvested Shares.

                  (d)      Subject to the relevant provisions and limitations
contained herein and in the Plan, you may exercise the Option to purchase all or
a portion of the applicable number of Vested Shares at any time prior to the
termination of the Option pursuant to this Option Agreement. In no event shall
you be entitled to exercise the Option for a fraction of a Vested Share.

                  (e)      The unexercised portion of the Option, if any, will
automatically, and without notice, terminate and become null and void upon the
expiration of ten (10) years from the Grant Date.

                  (f)      Any exercise by you of the Option shall be in writing
addressed to the Secretary of the Company at its principal place of business (a
copy of the form of exercise to be used will be available upon written request
to the Secretary), and shall be accompanied by a certified or bank check payable
to the order of the Company in the full amount of the Exercise Price of the
shares so purchased, or in such other manner as described in the Plan and
established by the Committee.

                  (g)      Notwithstanding any provisions herein or in the Plan
to the contrary, in the event of a material breach by you of either that certain
Employment Agreement, dated as of November 1, 2001, as amended by that certain
Amendment to Employment Agreement, entered into as of December 12,2002, or that
certain Confidential Separation Agreement and Release, dated as of August 15,
2003, you shall immediately and automatically forfeit to the Company, for no
consideration, the Option and all Option Shares (regardless of whether they are
Vested Shares or Nonvested Shares).

         3.       Purchase Option.

                  (a)      The Company shall have the Purchase Option on the
Option and the Option Shares set forth in clause (ii) of Section 9(a) of the
Plan (relating to a Change in Control); provided, however, that the Company
expressly disclaims the Purchase Option on the Option and the Option Shares set
forth in clause (i) of Section 9(a) of the Plan (relating to the termination of
your employment with the Company). If, in accordance with the immediately
preceding sentence, the Company shall exercise such Purchase Option, you (or
your executor or the administrator of your estate or the Person who acquired the
right to exercise the Option by bequest or inheritance in the event of your
death, or your legal representative in the event of your incapacity
(hereinafter, collectively with such optionee, the "Grantor")) shall sell to the
Company and/or its assignee(s), all or any portion (at the Company's option) of
the Option Shares and/or the Option held by the Grantor (such Option Shares and
Option collectively being referred to as the "Purchasable Shares").

                  (b)      The Company shall give notice in writing to the
Grantor of the exercise of the Purchase Option within one (1) year from the date
the Purchase Option arises under the terms of the Plan. Such notice shall state
the number of Purchasable Shares to be purchased and the determination of the
Board of Directors of the Fair Market Value per share of such purchasable

EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 22

<PAGE>

Shares. If no notice is given within the time limit specified above, the
Purchase Option shall terminate.

                  (c)      The purchase price to be paid for the Purchasable
Shares purchased pursuant to the Purchase Option shall be, in the case of any
Option Shares, the Fair Market Value per share as of the date of notice of
exercise of the purchase Option times the number of shares being purchased, and
in the case of the Option, the Fair Market Value per share times the number of
Vested Shares subject to such Option which are being purchased, less the
applicable per share Exercise Price. The purchase price shall be paid in cash.
The closing of such purchase shall take place at the Company's principal
executive offices within ten (10) days after the purchase price has been
determined. At such closing, the Grantor shall deliver to the purchaser(s) the
certificates or instruments evidencing the Purchasable Shares being purchased,
duly endorsed (or accompanied by duly executed stock powers) and otherwise in
good form for delivery, against payment of the purchase price by check of the
purchase(s). In the event that, notwithstanding the foregoing, the Grantor shall
have failed to obtain the release of any pledge or other encumbrance on any
Purchasable Shares by the scheduled closing date, at the option of the
purchaser(s) the closing shall nevertheless occur on such scheduled closing
date, with the cash purchase price being reduced to the extent of all unpaid
indebtedness for which such Purchasable Shares are then pledged or encumbered.

                  (d)      To assure the enforceability of the Company's rights
under this Section 3, each certificate or instrument representing Option Shares
subject to this Option Agreement shall bear a conspicuous legend in
substantially the following form:

                  "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
                  OPTION TO REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE
                  COMPANY'S 2002 STOCK OPTION PLAN FOR KEY EMPLOYEES AND A STOCK
                  OPTION AGREEMENT ENTERED INTO PURSUANT THERETO. A COPY OF SUCH
                  OPTION PLAN AND OPTION AGREEMENT ARE AVAILABLE UPON WRITTEN
                  REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES."

         4.       Registration.

                  The Company shall not in any event be obligated to file any
registration statement under the Securities Act or any applicable state
securities laws to permit exercise of the Option or to issue any Common Stock in
violation of the Securities Act or any applicable sate securities laws. You (or
in the event of your death or, in the event a legal representative has been
appointed in connection with your Disability, the Person exercising the Option)
shall, as a condition to your right to exercise the Option, deliver to the
Company an agreement or certificate containing such representations, warranties
and covenants as the Company may deem necessary or appropriate to ensure that
the issuance of the Option Shares pursuant to such exercise is not required to
be registered under the Securities Act or any applicable state securities laws.

EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 23

<PAGE>

                  Certificates for the Option Shares, when issued, shall have
substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:

                  "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
                  BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
                  OR ANY STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED
                  FOR SALE, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF
                  UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE
                  ISSUER (WHICH, IN THE DISCRETION of THE ISSUER, MAY INCLUDE AN
                  OPTION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH OFFER,
                  SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT VIOLATE
                  APPLICABLE FEDERAL OR STATE LAWS."

                  The foregoing legend may not be required for Option Shares
issued pursuant to an effective registration statement under the Securities Act
and in accordance with applicable state securities laws.

         5.       Miscellaneous.

                  This Option Agreement is subject to all the terms, conditions,
limitations and restrictions contained in the Plan. In the event of any conflict
or inconsistency between the terms hereof and the Plan, the Plan shall be
controlling. The Old Agreement (being amended and restated in its entirety
hereby) shall be of no further force or effect.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 24

<PAGE>

         Please indicate your acceptance of all the terms and conditions of the
Option, and the Plan by signing and returning a copy of this Option Agreement.

                                            Very truly yours,

                                            HOME INTERIORS & GIFTS, INC.

                                            By: /s/ Donald J. Carter, Jr.
                                                --------------------------------
                                            Name:  Donald J. Carter, Jr.
                                            Title: Chief Executive Officer

ACCEPTED:

/s/ Nora I. Serrano
-------------------
Nora I. Serrano

Date: August 14, 2003

EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 25

<PAGE>

                                    Exhibit A

                                Vesting Schedule

<TABLE>
<CAPTION>
                     PERCENT OF ORIGINAL
FISCAL YEAR ENDED       OPTION SHARES        EQUITY VALUE TARGET(1)
-----------------    -------------------     ----------------------
<S>                  <C>                     <C>
December 31, 2002            20%                $   430 million

December 31, 2003            20%                $   555 million

December 31, 2004            20%                $   670 million

December 31, 2005            20%                $   885 million

December 31, 2006            20%                $ 1,090 million
</TABLE>

Definitions: The following definitions shall be used in calculating the Equity
Value Target.

"EBITDA" has the meaning given to such term in the Amended and Restated Credit
Agreement, dated June 30, 2001, among the Company, Bank of America, N.A., as
administrative agent, The Chase Manhattan Bank, as syndication agent, Citicorp,
USA, Inc. and Societe Generale, as co-agents, and the lenders from time to time
party thereto, as the same may be amended from time to time.

"EQUITY VALUE" means the product of EBITDA as of the end of the applicable
fiscal year times seven and one-half (7 1/2) less the average Net Consolidated
Debt outstanding at the end of such fiscal year. The calculation of Equity Value
shall be made by the Board of Directors or the Option Committee and shall be
final and binding on the Company and the Employee absent manifest error.

"INDEBTEDNESS" means, any indebtedness, whether or not contingent, in respect of
borrowed money determined in accordance with generally accepted accounting
principles.

"NET CONSOLIDATED DEBT" means the aggregate amount of Indebtedness of the
Company and its subsidiaries on a consolidated basis outstanding as of the end
of the applicable fiscal year less cash and cash equivalents of the Company and
its subsidiaries on a consolidated basis as of the end of the applicable fiscal
year.

/s/ Nora I. Serrano
-------------------
Nora I. Serrano

Date: August 14, 2003

---------------
(1) The Employee acknowledges and agrees that the Committee has the right to
amend the Equity Value Target for any annual period to reflect changes in the
Company's business, including, without limitation, to reflect the acquisition or
divestiture of a Related Entity) or for such other reasons as it deems
appropriate.

EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 26<PAGE>

SUPPLEMENTARY BOND TERMS NOTICE
SMHL GLOBAL FUND NO. 5
CLASS A NOTES AND CLASS B NOTES

[GRAPHIC OMITTED]

 MLC Centre Martin Place Sydney New South Wales 2000 Australia
 Telephone 61 2 9225 5000  Facsimile 61 2 9322 4000
 www.freehills.com  DX 361 Sydney

 SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE
 Correspondent Offices JAKARTA KUALA LUMPUR

 Liability limited by the Solicitors' Limitation of Liability
 Scheme, approved under the Professional Standards Act 1994
 (NSW)

 Reference PJSR:TEL:25E

<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Clause                                                                                            Page

<S>      <C>                                                                                      <C>
1        FUNCTION                                                                                    1

2        DEFINITIONS AND INTERPRETATION                                                              1

         2.1      Definitions                                                                        1
         2.2      Incorporation of Master Trust Deed Definitions                                    13
         2.3      Interpretation                                                                    13
         2.4      Payments                                                                          13

3        NOTES                                                                                      14

         3.1      Conditions of Notes                                                               14
         3.2      Issue of Notes                                                                    14
         3.3      Trustee's covenant to Noteholders and the Note Trustee                            14
         3.4      Final redemption                                                                  15
         3.5      Period during which interest accrues                                              15
         3.6      Calculation of interest                                                           15
         3.7      Aggregate receipts                                                                16
         3.8      Application of Principal Repayment Pool                                           17
         3.9      Repayment of Principal                                                            17
         3.10     Final Maturity Date                                                               17
         3.11     Reduction in Principal balance                                                    17
         3.12     Cancellation on repayment                                                         17
         3.13     Payments into US$ Account                                                         17
         3.14     Payments out of US$ Account                                                       17
         3.15     Rounding of amounts                                                               18
         3.16     Prescription                                                                      18
         3.17     Replacement of Currency Swap                                                      18
         3.18     Realised Losses on Mortgages                                                      19

4        NOTES CALLABLE AT OPTION OF TRUSTEE                                                        20

         4.1      Call -- Class A Notes                                                             20
         4.2      Tax event                                                                         20
         4.3      Call -- Class B Notes                                                             21

5        CASH-COLLATERAL                                                                            21

         5.1      Cash Collateral Account                                                           21
         5.2      Initial Cash Collateral and Liquidity Notes                                       21
         5.3      Investment of Cash Collateral                                                     22
         5.4      Use of Cash Collateral                                                            22
         5.5      Surplus Cash Collateral                                                           22

6        DISTRIBUTION OF COLLECTIONS                                                                22

         6.1      Distribution of Interest Collections                                              22
         6.2      Distribution of Principal Collections                                             24
         6.3      Rights of Liquidity Noteholder                                                    25
         6.4      Funding Loan Redraw Facilities                                                    25
</TABLE>

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                                                                          PAGE 1
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                 Supplementary Bond Terms Notice Class A Notes and Class B Notes

<TABLE>
<S>      <C>                                                                                      <C>
         6.5      Payment of Charge Offs                                                            26

7        SUBSTITUTION OF MORTGAGES                                                                  26

         7.1      Purchase of Substitute Mortgages                                                  26

8        NOTIFICATIONS OF CALCULATIONS                                                              27

9        AMENDMENTS TO MASTER TRUST DEED                                                            27

10       RATING AGENCY REQUIREMENTS                                                                 36

         10.1     Designated Rating Agencies                                                        36
         10.2     Designated Ratings                                                                36
         10.3     Minimum Rating Requirements                                                       36
         10.4     Banks                                                                             36
         10.5     Notifications to Designated Rating Agencies                                       36
         10.6     No other Requirements                                                             37
         10.7     Loan Redraw Facilities                                                            37

11       THRESHOLD RATE                                                                             37

12       BENEFICIARIES                                                                              38

13       NOTE TRUSTEE                                                                               39

         13.1     Capacity                                                                          39
         13.2     Exercise of rights                                                                39
         13.3     Representation and warranty                                                       39
         13.4     Payments                                                                          39

14       SECURITY TRUST DEED                                                                        39

15       MISCELLANEOUS                                                                              39

         15.1     Banking Day                                                                       39
         15.2     Provisions of the Master Trust Deed to Apply Other Than as Set Out Herein         40
         15.3     Limitation of Liability                                                           40
         15.4     Aggregate Outstanding Principal Balance of Notes                                  40
         15.5     Attorney                                                                          40

16       PRIVACY                                                                                    40

SCHEDULE 1                                                                                          44
</TABLE>

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                                                                          PAGE 2
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                 Supplementary Bond Terms Notice Class A Notes and Class B Notes

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

SUPPLEMENTARY BOND TERMS NOTICE SMHL GLOBAL FUND NO. 5
CLASS A NOTES AND CLASS B NOTES

TO:   PERPETUAL TRUSTEES AUSTRALIA LIMITED
      ABN 86 000 431 827
      as trustee of the SMHL Global Fund No. 5
      (TRUSTEE)

FROM: ME PORTFOLIO MANAGEMENT LIMITED
      ABN 79 005 964 134
      (MANAGER)

--------------------------------------------------------------------------------
1    FUNCTION

     This Supplementary Bond Terms Notice:

     (a)  accompanies a Securitisation Fund Bond Issue Direction dated
          November 2003, as the same may be amended from time to time, in
          relation to a proposed issue of Notes by the Trustee;

     (b)  sets out the Supplementary Bond Terms for the classes of Notes named
          in the Direction as "Class A Notes" and "Class B Notes"; and

     (c)  shall be entered into the Register by the Trustee pursuant to clause
          23.1(f) of the Master Trust Deed.

--------------------------------------------------------------------------------
2    DEFINITIONS AND INTERPRETATION

     2.1  DEFINITIONS

          In this Supplementary Bond Terms Notice (including clause 1) and in
          respect of the Securitisation Fund and the Master Trust Deed, unless
          the context indicates a contrary intention:

          A$ CLASS A INTEREST AMOUNT means, for any Payment Date in relation to
          a Confirmation for Class A Notes, the amount in Australian dollars
          which is calculated:

          (a)  on a daily basis at the applicable rate set out in that
               Confirmation (being AUD-BBR-BBSW, as defined in the ISDA
               Definitions, as at the first day of the Interest Period ending on
               (but excluding) that Payment Date with a designated maturity of
               90 days (or in the case of the first Interest Period, the rate
               will be determined by linear interpolation calculated by
               reference to the duration of that first Interest Period) plus the
               relevant Spread);

          (b)  on the A$ Equivalent of the aggregate of the Invested Amount of
               those Class A Notes as at the first day of the Interest Period
               ending on (but excluding) that Payment Date; and

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                                                                          PAGE 1
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                 Supplementary Bond Terms Notice Class A Notes and Class B Notes

          (c)  on the basis of the actual number of days in that Interest Period
               and a year of 365 days.

          A$ EQUIVALENT means:

          (a)  in relation to an amount denominated or to be denominated in US$,
               the amount converted to (and denominated in) A$ at the A$
               Exchange Rate; or

          (b)  in relation to an amount denominated in A$, the amount of A$.

          A$ EXCHANGE RATE means, on any date, the rate of exchange (set as at
          the commencement of a Currency Swap) applicable under that Currency
          Swap for the exchange of United States Dollars for Dollars.

          AUTHORISED SIGNATORY means:

          (a)  in relation to the Note Trustee, any duly authorised officer of
               the Note Trustee and any other duly authorised person of the Note
               Trustee;

          (b)  in relation to the Principal Paying Agent, any duly authorised
               officer of the Principal Paying Agent and any other duly
               authorised person of the Principal Paying Agent; and

          (c)  in relation to the Calculation Agent, any duly authorised officer
               of the Calculation Agent and any other duly authorised person of
               the Calculation Agent.

          BANK means:

          (a)  for the purposes of paragraph (a) of the definition of Banking
               Day and the definition of US$ Account:

               (1)  a corporation authorised under the Banking Act 1959 (Cth) to
                    carry on general banking business in Australia or a
                    corporation formed or incorporated under any Act of the
                    Parliament of an Australian Jurisdiction to carry on the
                    general business of banking;

               (2)  a person authorised under the Banking Act 1987 (UK) to carry
                    on a deposit taking business; or

               (3)  a banking institution or trust company organised or doing
                    business under the laws of the United States of America or
                    any of its states; and

          (b)  in any other case, a corporation authorised under the Banking Act
               1959 (Cth) to carry on general banking business in Australia or a
               corporation formed or incorporated under an Act of the Parliament
               of an Australian Jurisdiction to carry on the general business of
               banking.

          BANKING DAY means:

          (a)  in relation to the Note Trust Deed, any Class A Note (including
               any Condition), and any payment of US$ under a Currency Swap and
               the definition of "Cut-Off" in this clause 2.1, any day, other
               than a Saturday, Sunday or public holiday, on which Banks are
               open for business in London, Sydney, Melbourne and New York;

          (b)  in relation to any Class B Note, any other Transaction Document
               and any payments of A$, any day, other than a Saturday, Sunday or
               public holiday, on which Banks are open for business in Sydney
               and Melbourne.

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                                                                          PAGE 2
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                 Supplementary Bond Terms Notice Class A Notes and Class B Notes

          BENCHMARK RATE in relation to an Interest Period means the rate
          expressed as a percentage per annum calculated by taking the rates
          appearing on the Reuters Screen page BBSW at approximately 10.10 am
          Sydney time on (subject to this definition) the first Banking Day of
          that Interest Period for each Bank so quoting (being no fewer than 5)
          as being the mean buying and selling rate for a bill of exchange of
          the type specified for the purpose of quoting on the Reuters Screen
          page BBSW and having a tenor closest to the term of that Interest
          Period, eliminating the highest and lowest mean rates and taking the
          average of the remaining mean rates and then (if necessary) rounding
          the resultant figure upwards to 4 decimal places. If fewer than 5
          Banks quote on the Reuters Screen page BBSW the Benchmark Rate for
          that Interest Period shall be calculated as above by taking the rates
          otherwise quoted by 5 Banks or 5 institutions otherwise authorised to
          quote rates on the Reuters Screen page BBSW at or about 10.10 am
          (Sydney time) for a bill of exchange having a tenor closest to the
          term of that Interest Period, on application by the Manager for such a
          bill of the same tenor. If a rate cannot be determined in accordance
          with the foregoing procedures, then the Benchmark Rate shall mean such
          rate as is specified in good faith by the Manager at or around that
          time on that date, having regard, to the extent possible, to
          comparable indices then available as to the rates otherwise bid and
          offered for such bills of that tenor around that time.

          BENEFICIARIES means, in relation to the Fund, the Capital Beneficiary
          and the Income Beneficiary.

          BOND ISSUE DIRECTION means the Securitisation Fund Bond Issue
          Direction referred to in clause 1(a).

          BOOK-ENTRY NOTE means a book-entry note issued or to be issued by the
          Trustee in registered form under clause 3.1 of the Note Trust Deed
          representing Class A Notes substantially in the form of Schedule 1 to
          the Note Trust Deed.

          CALCULATION AGENT has the same meaning as in the Note Trust Deed.

          CALCULATION PERIOD means in relation to a Payment Date:

          (a)  in relation to a first Calculation Period:

               (1)  with respect of the principal under the Loans secured by
                    Mortgages comprised in Assets of the Securitisation Fund,
                    the period from and including the Cut-Off Date until the
                    close of business on the first Cut-Off; and

               (2)  with respect of all other amounts received or applied by the
                    Trustee, the period from and including the Closing Date
                    until the close of business on the first Cut-Off;

          (b)  in relation to the last Calculation Period, from but excluding
               the last day of the prior Calculation Period to and including the
               day on which all amounts due on the Notes are redeemed in full;
               and

          (c)  in relation to any other period, each period commencing
               immediately after one Cut-Off and ending at the next Cut-Off.

          CAPITAL BENEFICIARY means Origination Capital Pty Limited ACN 106 421
          765.

          CARRY OVER CLASS A CHARGE OFFS means, at any Cut-Off, in relation to a
          Class A Note, the aggregate of Class A Charge Offs in relation to that
          Class A Note prior to that Cut-Off which have not been reinstated
          under clauses 6.1(j) or 6.2(k).

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                                                                          PAGE 3
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                 Supplementary Bond Terms Notice Class A Notes and Class B Notes

          CARRY OVER CLASS B CHARGE OFFS means, at any Cut-Off, in relation to a
          Class B Note, the aggregate of Class B Charge Offs in relation to that
          Class B Note prior to that Cut-Off which have not been reinstated
          under clause 6.2(l).

          CARRY OVER REDRAW CHARGE OFFS means, at any Cut-Off, in relation to a
          Redraw Funding Facility, the aggregate Redraw Charge Offs in relation
          to that Redraw Funding Facility prior to that Cut-Off which have not
          been reinstated under clauses 6.1(j) or 6.2(k).

          CASH COLLATERAL means, at any time, the balance of the Cash Collateral
          Account at that time.

          CASH COLLATERAL ACCOUNT means the ledger account established and
          maintained by the Manager in accordance with clause 5.

          CHARGED PROPERTY has the same meaning as in the Security Trust Deed.

          CLASS includes each class constituted by the Class A Notes and the
          Class B Notes.

          CLASS A CHARGE OFFS means, in relation to a Class A Note, the amount
          of any reduction in the Outstanding Principal Balance of that Note
          under clause 3.18(b).

          CLASS A INTEREST means all interest accrued on the Class A Notes in
          respect of an Interest Period in accordance with clause 3.6.

          CLASS A NOTE means a Note issued as a Class A Note by the Trustee with
          the characteristics of a Class A Note under this Supplementary Bond
          Terms Notice and the Direction and includes any relevant Book-Entry
          Note (or any part or interest in) and any relevant Definitive Note.

          CLASS A NOTEHOLDER means a Noteholder of a Class A Note.

          CLASS A OUTSTANDING PRINCIPAL BALANCE means, in relation to a Class A
          Note, the Outstanding Principal Balance of the Class A Note.

          CLASS B CHARGE OFFS means in relation to a Class B Note, the amount of
          any reduction in the Outstanding Principal Balance of that Note under
          clause 3.18(a)

          CLASS B INTEREST means all interest accrued on the Class B Notes in
          respect of an Interest Period in accordance with clause 3.6.

          CLASS B NOTE means a Note issued as a Class B Note by the Trustee with
          the characteristics of a Class B Note under this Supplementary Bond
          Terms Notice and the Direction.

          CLASS B NOTEHOLDER means a Noteholder of a Class B Note.

          CLEARING AGENCY means DTC, an organisation registered as a clearing
          agency pursuant to Section 17A of the Exchange Act and appointed by
          the Manager and the Trustee to hold Notes (directly or through a
          Common Depository).

          CLOSING DATE means the Bond Issue Date in relation to the Notes and
          is, in relation to the Securitisation Fund, 21 November 2003 or such
          later date as may be agreed between the Trustee and the Manager.

          COLLECTIONS means, subject to clause 3.15, in relation to each
          Calculation Period, the aggregate of all moneys received by or on
          behalf of the Trustee or, in respect of amounts under clause 5.4 and
          clause 3(b)(1) of the Payment Funding Facility, which are to be
          applied towards Collections, in respect of the Securitisation Fund
          during that Calculation Period including:

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                                                                          PAGE 4
<PAGE>
                 Supplementary Bond Terms Notice Class A Notes and Class B Notes

          (a)  payments of interest, principal, fees and other amounts under the
               Loans;

          (b)  proceeds from the enforcement of the Loans;

          (c)  amounts received under the Relevant Mortgage Insurance Policies;

          (d)  amounts recovered from losses on Loans not previously received;

          (e)  amounts received from the Mortgage Manager for breaches of
               representations or undertakings which have not been designated by
               the Manager as Suspended Moneys;

          (f)  any interest income received during that Calculation Period in
               respect of Authorised Investments not being funds credited to the
               Cash Collateral Account or received under the Payment Funding
               Facility;

          (g)  any amounts received on termination of Interest Hedge or Currency
               Swap following default by the Interest Hedge Provider or the
               Currency Swap Provider respectively; and

          (h)  amounts (if any) held as collateral against default under
               Interest Hedge or Currency Swap following a default by the
               Interest Hedge Provider or the Currency Swap Provider
               respectively,

          but excluding:

          (a)  receipts (whether of an income nature or, upon sale or maturity,
               of a capital nature) in respect of Authorised Investments
               comprised in the Cash Collateral Account;

          (b)  receipts which the Trustee is obliged to pay to a Relevant
               Mortgage Insurer under a Relevant Mortgage Insurance Policy;

          (c)  receipts under any Redraw Funding Facility;

          (d)  receipts under or arising from any drawing under any Payment
               Funding Facility;

          (e)  to the extent that the Interest Hedge Provider has not defaulted
               under the relevant Interest Hedge, receipts from an Interest
               Hedge Provider which, as a consequence of a downgrade or
               withdrawal of the rating of the Interest Hedge Provider by a
               Designated Rating Agency, have been provided to the Trustee as
               collateral against default by the Interest Hedge Provider under
               the relevant Interest Hedge;

          (f)  to the extent that the Currency Swap Provider has not defaulted
               under the relevant Currency Swap, receipts from a Currency Swap
               Provider which, as a consequence of a downgrade or withdrawal of
               the rating of the Currency Swap Provider by a Designated Rating
               Agency, have been provided to the Trustee as collateral against
               default by the Currency Swap Provider under the relevant Currency
               Swap; and

          (g)  receipts that have been designated by the Manager as Suspended
               Moneys.

          COMMON DEPOSITORY means Cede & Co, as nominee for DTC, or any other
          common depository for DTC or any Clearing Agency appointed from time
          to time to hold any Book-Entry Note.

          CONDITIONS means the Conditions for the Class A Notes in the form set
          out in schedule 4 to the Note Trust Deed (but, so long as the Class A
          Notes are represented by Book-Entry Notes, with the deletion of any
          provisions which are

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                                                                          PAGE 5
<PAGE>
                 Supplementary Bond Terms Notice Class A Notes and Class B Notes

          applicable only to the Definitive Notes), as the same may from time to
          time be modified in accordance with this Supplementary Bond Terms
          Notice and the Note Trust Deed. Any reference in this Supplementary
          Bond Terms Notice to a particular numbered Condition shall be
          construed accordingly.

          CONFIRMATION means, in respect of the Currency Swap, any Confirmation
          (as defined in the Currency Swap).

          CORPORATIONS ACT means the Corporations Act 2001 (Cth).

          CSFB means Credit Suisse First Boston Corporation (ABN 17 061 700
          712).

          CURRENCY SWAP means, each master agreement dated on or about the date
          of this Supplementary Bond Terms Notice between the Trustee in its
          capacity as trustee of the Securitisation Fund, the Manager and the
          Currency Swap Provider, on the terms of the ISDA Master Agreement
          (with amendments thereto), each Transaction (as defined in that
          agreement) entered into in accordance with that agreement under which
          the Currency Swap Provider agrees to pay certain amounts in US$ to the
          Trustee or at the Trustee's direction in exchange for certain amounts
          in A$ or any other Hedge on similar terms which, if entered into, will
          not result in the downgrading of, or withdrawal of the ratings for,
          any Notes.

          CURRENCY SWAP PROVIDER means, initially, Westpac Banking Corporation
          (ABN 33 00 457 141) and thereafter any other person who is or becomes
          a party to a Currency Swap.

          CUT-OFF means, in relation to a Payment Date, the close of business on
          the day which is 7 Banking Days before that Payment Date.

          CUT-OFF DATE means the close of business, 28 October 2003.

          DEFINITIVE NOTE means a note in definitive form (whether bearer or
          registered) issued or to be issued in respect of any Class A Note
          under, and in the circumstances specified in, clause 3.3 of the Note
          Trust Deed, and includes any replacement for a Definitive Note issued
          under Condition 11.

          DESIGNATED RATING AGENCY means, Fitch Ratings, S&P or Moody's.

          DEUTSCHE BANK SECURITIES means Deutsche Bank Securities Inc.

          DIRECTION means the Securitisation Fund Bond Issue Direction referred
          to in clause 1(a).

          DTC means the Depository Trust Company.

          ENCUMBRANCE means an interest or power:

          (a)  reserved in or over an interest in any asset including, but not
               limited to, any retention of title; or

          (b)  created otherwise arising in or over any interest in any asset
               under a bill of sale, mortgage, change, lien, pledge, trust or
               power.

          by way of, or having similar commercial effect to, security for the
          payment of a debt, any other monetary obligation or the performance of
          any other obligation, and includes but is not limited to, any
          agreement to grant or create any of the above.

          EXCHANGE ACT means the United States Securities Exchange Act of 1934.

          FINAL MATURITY DATE means in respect of each Class the earlier of:

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                                                                          PAGE 6
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                 Supplementary Bond Terms Notice Class A Notes and Class B Notes

          (a)

               (1)  for Class A Notes - [*]; and

               (2)  for Class B Notes - [*],

               in each case, the date specified is subject to adjustment in
               accordance with the Modified Following Business Day
               Convention; and

          (b)  the date declared by the Trustee at the direction of the Manager
               in accordance with clause 4.

          FITCH RATINGS means Fitch, Inc.

          HEDGE in relation to the Fund includes any Interest Hedge and the
          Currency Swap.

          INCOME BENEFICIARY means ME Portfolio Management Limited.

          INITIAL PAYMENT FUNDING FACILITY means the Payment Funding Facility
          dated on or about the date of this Supplementary Bond Terms Notice.

          INTEREST means Class A Interest or Class B Interest.

          INTEREST COLLECTIONS means, in relation to a Calculation Period, all
          Collections for that Calculation Period other than Principal
          Collections.

          INTEREST HEDGE means each master agreement made between the Trustee
          and the Manager on one hand and Westpac Banking Corporation or any
          other person on the terms of the ISDA Master Agreement (with
          amendments thereto), each Transaction (as defined in that agreement)
          entered into in accordance with that agreement in relation to the
          interest rate risk arising from a Mortgage under which all or part of
          the interest payable is fixed.

          INTEREST HEDGE PROVIDER means in relation to an Interest Hedge, the
          person who has entered into that Interest Hedge with the Trustee other
          than the Manager.

          INTEREST PERIOD means:

          (a)  in relation to the first Interest Period of a Note, the period
               commencing on (and including) the Closing Date and ending on (but
               excluding) the first Payment Date;

          (b)  in relation to the final Interest Period, the period commencing
               on (and including) the Payment Date prior to the day on which all
               amounts due on such Notes are redeemed in full in accordance with
               the Transaction Documents and ending on (but excluding) such day;
               but if the Outstanding Principal Balance of any Note on the due
               date for redemption is not zero and payment of principal due is
               improperly withheld or refused, the final Interest Period ends on
               the day on which:

               (1)  the monies in respect of that Note have been received by the
                    Note Trustee or the Principal Paying Agent and notice to
                    that effect has been given in accordance with the relevant
                    Condition; or

               (2)  the Outstanding Principal Balance of that Note has been
                    reduced to zero provided that interest will thereafter begin
                    to accrue from (and including) any date on which the
                    Invested Amount of the Notes becomes greater than zero; and

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                                                                          PAGE 7
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                 Supplementary Bond Terms Notice Class A Notes and Class B Notes

          (c)  in relation to each other Interest Period, each period commencing
               on (and including) a Payment Date and ending on (but excluding)
               the next Payment Date.

          INTEREST RATE means, in relation to:

          (a)  a Class A Note and an Interest Period, LIBOR in relation to that
               Interest Period;

          (b)  Class B Note and an Interest Period, the Benchmark Rate for that
               Interest Period,

          plus, in all cases, the relevant Margin for the relevant Note.

          INVESTED AMOUNT means at any time in relation to a Note, an amount
          equal to:

          (a)  the Original Principal Balance of the Note; minus

          (b)  all repayments of principal made in relation to the Note.

          ISDA means the International Swaps and Derivatives Association, Inc.
          (formerly the International Swaps Dealers Association Inc).

          ISDA DEFINITIONS means the 2000 Definitions published by ISDA as
          amended from time to time.

          ISDA MASTER AGREEMENT means the June 1992 Multicurrency-Cross border
          edition of the Master Agreement published by ISDA, any schedule
          forming part of that Agreement and the relevant addenda to it.

          LEAD MANAGER means collectively, CSFB and Deutsche Bank Securities.

          LIBOR means, in relation to any Interest Period, the rate of interest
          determined by the Calculation Agent as follows:

          (a)  on the second Banking Day before the beginning of each Interest
               Period (each an INTEREST DETERMINATION DATE), the rate
               "USD-LIBOR-BBA" as the applicable Floating Rate Option under the
               ISDA Definitions being the rate applicable to any Interest Period
               for three-month (or in the case of the first Interest Period, the
               rate will be determined by linear interpolation calculated by
               reference to the duration of that first Interest Period) deposits
               in United States Dollars which appears on the Telerate Page 3750
               as of 11.00 am, London time, determined on the Interest
               Determination Date by the Calculation Agent;

          (b)  if such rate does not appear on the Telerate Page 3750, the rate
               for that Interest Period will be determined as if the Trustee and
               the Calculation Agent had specified "USD-LIBOR-Reference Banks"
               as the applicable Floating Rate Option under the ISDA
               Definitions. "USD-LIBOR-Reference Banks" means that the rate for
               an Interest Period will be determined on the basis of the rates
               at which deposits in US Dollars are offered by the Reference
               Banks (being four major banks in the London interbank market
               agreed to by the Calculation Agent and the Currency Swap
               Provider) at approximately 11.00 am, London time, on the Interest
               Determination Date to prime banks in the London interbank market
               for a period of three months (or in the case of the first
               Interest Period, the rate will be determined by linear
               interpolation calculated by reference to the duration of that
               first Interest Period) commencing on the first day of the
               Interest Period and in a Representative Amount (as defined in the
               ISDA

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                                                                          PAGE 8
<PAGE>
                 Supplementary Bond Terms Notice Class A Notes and Class B Notes

               Definitions). The Calculation Agent will request the principal
               London office of each of the Reference Banks to provide a
               quotation of its rate. If at least two such quotations are
               provided, the rate for that Interest Period will be the
               arithmetic mean of the quotations. If fewer than two quotations
               are provided as requested, the rate for that Interest Period will
               be the arithmetic mean of the rates quoted by not less than two
               major banks in New York City, selected by the Calculation Agent
               and the Currency Swap Provider, at approximately 11.00 am, New
               York City time, on that Interest Determination Date for loans in
               US Dollars to leading European banks for a period of three months
               (or in the case of the first Interest Period, the rate will be
               determined by linear interpolation calculated by reference to the
               duration of that first Interest Period) commencing on the first
               day of the Interest Period and in a Representative Amount;

          (c)  if no such rates are available in New York City, then the rate
               for such Interest Period will be the most recently determined
               rate in accordance with this paragraph.

          In this definition of LIBOR, Banking Day means any day on which
          commercial banks are open for business (including dealings in foreign
          exchange and foreign currency deposits) in London and New York City.

          LIQUIDITY NOTEHOLDER means initially, P.T. Limited and subsequently
          each person who is from time to time the holder of a Liquidity Note.

          LIQUIDITY NOTES means the liquidity notes issued by the Trustee to the
          Liquidity Noteholder in accordance with clauses 5.2(a) and 5.2(b).

          LOAN REDRAW FACILITY means, in relation to a Loan, any facility under
          which a Mortgagor may apply to redraw amounts under the Loan where the
          actual outstanding principal balance under the Loan is less than the
          scheduled principal balance of the Loan.

          MANAGER means ME Portfolio Management Limited.

          MARGIN means in respect of each Class:

          (a)  in respect of the Notes, up to but excluding 9 November 2009, the
               following percentage in respect of each Class:

               (1)  Class A Notes [*]% per annum; and

               (2)  Class B Notes [*]%per annum; and

          (b)  from and including 9 November 2009 the percentage per annum
               referred to in paragraph (a) plus the following percentage in
               respect of each Class:

               (1)  Class A Notes [*]% per annum; and

               (2)  Class B Notes [*]% per annum.

          MASTER TRUST DEED means the Master Trust Deed dated 4 July 1994 made
          between the Trustee and the Manager and providing for the
          establishment of a series of separate trusts known collectively as the
          Superannuation Members' Home Loans Trusts, as amended from time to
          time.

          MODIFIED FOLLOWING BUSINESS DAY CONVENTION has the meaning given to it
          in the ISDA Definitions.

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                                                                          PAGE 9
<PAGE>
                 Supplementary Bond Terms Notice Class A Notes and Class B Notes

          MORTGAGE TRANSFER PROPOSAL means a mortgage transfer proposal as that
          term is defined in the Master Trust Deed with such amendment as may be
          necessary to give effect to clause 7 of this deed.

          NOTE means a Bond being a Class A Note or a Class B Note referred to
          in this Supplementary Bond Terms Notice, and includes the Conditions
          relating to a Class A Note.

          NOTEHOLDER means, at any time, the person who:

          (a)  in relation to a Class B Note, is registered as the holder of
               that Note at that time;

          (b)  in relation to a Definitive Note, is the registered holder of
               that Note (in the case of registered Definitive Note) or bearer
               of that Note (in the case of bearer Definitive Notes) at that
               time; or

          (c)  in relation to a Note which is represented by a Book-Entry Note,
               unless the context requires otherwise, is noted on the register
               maintained under the Note Trust Deed as a noteholder.

          The words holder and holders shall (where appropriate) be construed
          accordingly.

          NOTE REGISTER means the register kept by the Note Registrar to provide
          for the registration and transfer of Class A Notes under the Note
          Trust Deed.

          NOTE REGISTRAR means The Bank of New York or any successor note
          registrar approved in writing by the Note Trustee and appointed under
          the Note Trust Deed.

          NOTE TRUST DEED means the deed so entitled dated on or about the date
          of this Supplementary Bond Terms Notice between The Bank of New York
          as Note Trustee, Principal Paying Agent, Calculation Agent and Note
          Registrar, the Trustee, the Manager and the Security Trustee.

          NOTE TRUSTEE means The Bank of New York or any successor note trustee
          appointed under the Note Trust Deed.

          ORIGINAL PRINCIPAL BALANCE means in relation to a Note, the initial
          Face Value of that Note.

          OUTSTANDING PRINCIPAL BALANCE means:

          (a)  at any time in relation to a Note, an amount equal to:

               (1)  the Original Principal Balance of the Note; minus

               (2)  all repayments of principal made in relation to that Note
                    (other than amounts applied under clauses 6.1(j), 6.2(k) or
                    6.2(l)); minus

               (3)  the Carry Over Class A Charge Offs or the Carry Over Class B
                    Charge Offs (if any and as the case requires) for the Note;
                    plus

               (4)  the amount to be applied, or available to be applied, under
                    clauses 6.1(j), 6.2(k) or 6.2(l) (if any and as the case
                    requires) in reinstating the Outstanding Principal Balance
                    of the Note; and

          (b)  at any time in relation to a Loan, the then outstanding principal
               under the Loan secured by the Mortgage.

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                                                                         PAGE 10
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                 Supplementary Bond Terms Notice Class A Notes and Class B Notes

          PAYMENT DATE means:

          (a)  in respect of Class A Notes, the ninth day of each February, May,
               August and November (New York time) after the Closing Date;

          (b)  in respect of Class B Notes, the ninth day of each February, May,
               August and November after the Closing Date,

          with the first Payment Date being 9 February 2004 and the last Payment
          Date being the Final Maturity Date, but, in each case if that day is
          not a Banking Day, the Payment Date shall be adjusted in accordance
          with the Modified Following Business Day Convention.

          PAYMENT FUNDING FACILITY means any facility provided to the Trustee to
          enable the Trustee to support or fund payments required or to be made
          by the Trustee in respect of any Enhancement or Interest Hedge or as
          otherwise provided in that facility and in a form approved by each
          Designated Rating Agency.

          PRINCIPAL COLLECTIONS means, in relation to a Calculation Period, the
          amount equal to the excess of the aggregate Unpaid Balance of the
          Loans secured by the Mortgages comprised in the Assets of the Fund as
          of the first day of that Calculation Period over the aggregate Unpaid
          Balance of the Loans secured by the Mortgages comprised in the Assets
          of the Fund as of the last day of that Calculation Period, plus in the
          case of the first Calculation Period only, an amount equal to:

          (a)  the aggregate Original Principal Balance of the Class A Notes and
               Class B Notes; minus

          (b)  the aggregate Unpaid Balance of the Loans secured by the
               Mortgages comprised in the Assets of the Fund as at the Bond
               Issue Date.

          PRINCIPAL ENTITLEMENT in relation to a Note for a Payment Date means
          the principal amount payable in respect of that Note on that Payment
          Date pursuant to clause 3.9.

          PRINCIPAL PAYING AGENT means The Bank of New York or any successor as
          Principal Paying Agent under the Note Trust Deed.

          PRINCIPAL REPAYMENT POOL means, on any Payment Date the amount
          required to be paid, and available for payment to, Noteholders in
          accordance with clause 6.2.

          REALISED LOSS means with respect to a Loan secured by the Mortgages
          comprised in the Assets of the Fund:

          (a)  the Outstanding Principal Balance of such Loan; minus

          (b)  the total amount recovered and recoverable under the Relevant
               Mortgage Insurance Policy; plus

          (c)  any damages or other amounts payable under or in respect of the
               Master Trust Deed, this Supplementary Bond Terms Notice or the
               Mortgage Origination and Management Agreement relating to such
               Loan.

          REDRAW CHARGE OFF means, in relation to a Redraw Funding Facility, the
          amount of reduction of the Redraw Principal Outstanding under clause
          3.18(b).

          REDRAW FUNDING FACILITY means any facility provided to the Trustee to
          enable the Trustee to fund payments under a Loan Redraw Facility.

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                                                                         PAGE 11
<PAGE>

          REDRAW PRINCIPAL OUTSTANDING means at any time in respect of a Redraw
          Funding Facility, an amount equal to:

          (a)  all principal drawings under the Redraw Funding Facility which
               have been used to fund a payment of principal under a Loan Redraw
               Facility; minus

          (b)  all repayments of principal in respect of such principal drawing;
               minus

          (c)  the Carry Over Redraw Charge Offs for the Redraw Funding
               Facility; plus

          (d)  the amount to be applied or available to be applied under clause
               6.1(j), and (m) in repaying the Redraw Principal Outstanding
               under the Redraw Funding Facility.

          RELEVANT MORTGAGE INSURANCE POLICY means a Mortgage Insurance Policy
          issued to or held by the Trustee (in whole or in part) as trustee of
          the Securitisation Fund, or which covers Mortgages comprised in the
          Assets of the Securitisation Fund.

          RELEVANT MORTGAGE INSURER means a Mortgage Insurer under a Relevant
          Mortgage Insurance Policy.

          REQUIRED CASH COLLATERAL means, on a Payment Date, an amount equal to
          the higher of:

          (a)  0.25% of the aggregate Outstanding Principal Balance of the Loans
               secured by the Mortgages or such other amount as the Manager and
               the Designated Rating Agencies agree from time to time; and

          (b)  0.03% of the Total Original Principal Balance of the Notes or
               such other amount as the Manager and the Designated Rating
               Agencies agree from time to time,

          in each case disregarding payments and allocation of Realised Losses
          in respect of the Outstanding Principal Balance to be made on that
          Payment Date in accordance with clauses 3 and 6.

          SECURITIES ACT means the United States Securities Act of 1933, as
          amended.

          SECURITISATION FUND or FUND means the Securitisation Fund established
          under the Master Trust Deed known as SMHL Global Fund No. 5.

          SECURITY TRUST DEED means the deed so entitled dated on or about the
          date of this Supplementary Bond Terms Notice between the Trustee, the
          Manager, the Note Trustee and the Security Trustee.

          SPREAD has the meaning given in the Currency Swap in respect of
          payments by the Trustee under the Currency Swap.

          SUBSTITUTE MORTGAGES means any Mortgages purchased by the Trustee
          pursuant to clause 7.1(c).

          SURPLUS CASH COLLATERAL means, on any Payment Date, the amount by
          which the Cash Collateral exceeds the Required Cash Collateral.

          SUSPENDED MONEYS has the meaning given to it in clause 7.1(b).

          SWAP PROVIDER means, in relation to a Hedge, the counterparty which
          enters into that arrangement with the Trustee (other than the
          Manager).

          TOTAL ORIGINAL PRINCIPAL BALANCE means, as the context requires, the
          aggregate Original Principal Balance of all Notes or a Class of Notes.

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                                                                         PAGE 12
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                Supplementary Bond Terms Notice Class A Notes and Class B Notes

          TOTAL OUTSTANDING PRINCIPAL BALANCE means, at any time, the aggregate
          Outstanding Principal Balance at that time of all Notes or a Class of
          Notes.

          TRANSACTION has the meaning given to it under the relevant ISDA Master
          Agreement.

          TRANSACTION DOCUMENT means each Transaction Document (as defined in
          the Master Trust Deed) to the extent that it relates to the
          Securitisation Fund or the Notes.

          TRANSFER DATE has the meaning given to it in clause 10.9 of the Master
          Trust Deed.

          TRUSTEE means Perpetual Trustees Australia Limited, in its capacity as
          trustee of the Securitisation Fund.

          UNITED STATES DOLLARS, USD and US$ means the currency of the United
          States of America.

          UNPAID BALANCE means, at any time, an amount equal to:

          (a)  the aggregate initial Outstanding Principal Balance of Loans
               secured by Mortgages comprised in Assets of the Securitisation
               Fund; minus

          (b)  all repayments of principal in respect of such Loans which have
               not been redrawn.

          US$ ACCOUNT means, in relation to the Fund, the US$ account of the
          Principal Paying Agent for the Fund or any other account opened and
          maintained outside Australia, of the Principal Paying Agent for the
          Fund so long as the Principal Paying Agent is a Bank which complies
          with clause 10.4(a).

          US$ EXCHANGE RATE means, on any date, the rate of exchange (set as at
          the commencement of the Currency Swap) applicable under the Currency
          Swap for the exchange of Dollars for United States Dollars.

     2.2  INCORPORATION OF MASTER TRUST DEED DEFINITIONS

          Subject to clause 2.1, each expression used herein that is defined in
          the Master Trust Deed and is not defined herein shall have the same
          meaning herein as in the Master Trust Deed.

     2.3  INTERPRETATION

          The provisions of clause 1.2 of the Master Trust Deed shall be
          incorporated, mutatis mutandis, into this Supplementary Bond Terms
          Notice.

     2.4  PAYMENTS

          All payments of principal and interest:

          (a)  on the Class A Notes must be in United States Dollars; and

          (b)  on the Class B Notes must be in Dollars.

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                                                                         PAGE 13
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                Supplementary Bond Terms Notice Class A Notes and Class B Notes

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3    NOTES

     3.1  CONDITIONS OF NOTES

          (a)  The conditions of the Class A Notes will be as set out in the
               Master Trust Deed as supplemented and amended by this
               Supplementary Bond Terms Notice, the Conditions and the Note
               Trust Deed.

          (b)  The conditions of the Class B Notes will be as set out in the
               Master Trust Deed, as supplemented and amended by this
               Supplementary Bond Terms Notice.

     3.2  ISSUE OF NOTES

          (a)  Class A Notes must be issued in amounts, or on terms, such that
               their offer for subscription and their issue will comply with the
               Note Trust Deed and otherwise in a way that does not require
               disclosure to investors under Part 6D.2 of the Corporations Act,
               and will comply with:

               (1)  the Financial Services and Markets Act 2000 (UK) and all
                    regulations made under or in relation to that Act and the
                    Public Offers of Securities Regulations 1995, as amended;
                    and

               (2)  the Securities Act, the Exchange Act, all regulations made
                    under or in relation to them, and all other laws or
                    regulations of any jurisdiction of the United States of
                    America regulating the offer or issue of, or subscription
                    for, Class A Notes.

          (b)  Class B Notes must be issued in minimum parcels or subscriptions
               which have an aggregate Original Principal Balance of A$500,000,
               (disregarding any amount payable to the extent to which it is to
               be paid out of money lent by the person offering the Notes or an
               associate (as defined in Division 2 of Part 1.2 of the
               Corporations Act)) or otherwise in a way that does not require
               disclosure to investors under Part 6D.2 of the Corporations Act,
               and will comply with the Financial Services and Markets Act 2000
               (UK) and all regulations made under or in relation to that Act
               and the Public Offers of Securities Regulations 1995, as amended.

          (c)  No Class B Note has been or will be registered under the
               Securities Act and the Class B Notes may not be offered or sold
               within the United States or to, or for the account of benefit of,
               US persons except in accordance with Regulation S under the
               Securities Act or pursuant to an exemption from the registration
               requirements of the Securities Act. Terms used in this paragraph
               have the meanings given to them by Regulation S of the Securities
               Act.

     3.3  TRUSTEE'S COVENANT TO NOTEHOLDERS AND THE NOTE TRUSTEE

          Subject to the terms of the Master Trust Deed and this Supplementary
          Bond Terms Notice, the Trustee:

          (a)  acknowledges its indebtedness in respect of the Invested Amount
               of each Note and interest thereon;

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                                                                         PAGE 14
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

          (b)  covenants for the benefit of each Noteholder and the Note Trustee
               that it will (subject to receiving any directions required under
               and given in accordance with the Transaction Documents):

               (1)  make all payments on or in respect of the Notes held by that
                    Noteholder on the applicable Payment Date;

               (2)  comply with the terms of this Supplementary Bond Terms
                    Notice and the Transaction Documents to which it is a party;
                    and

               (3)  pay the Outstanding Principal Balance in relation to the
                    Notes held by that Noteholder on the Final Maturity Date and
                    accrued and unpaid interest on the Invested Amount.

     3.4  FINAL REDEMPTION

          Each Note must be finally redeemed, and the obligations of the Trustee
          with respect to the payment of the Outstanding Principal Balance of
          that Note must be finally discharged, on the first to occur of:

          (a)  the date upon which the Invested Amount of that Note is reduced
               to zero;

          (b)  the date upon which the Note is redeemed under clause 4;

          (c)  the date upon which the relevant Noteholder renounces in writing
               all of its rights to any amounts payable under or in respect of
               that Note;

          (d)  the date on which all amounts received by the Note Trustee with
               respect to the enforcement of the Security Trust Deed are paid to
               the Principal Paying Agent and all amounts payable to the Class B
               Noteholders with respect to the enforcement of the Security Trust
               Deed are paid to the Class B Noteholders;

          (e)  the Payment Date immediately following the date on which the
               Trustee completes a sale and realisation of all Assets of the
               Fund in accordance with the Master Trust Deed and this
               Supplementary Bond Terms Notice; and

          (f)  the Final Maturity Date.

     3.5  PERIOD DURING WHICH INTEREST ACCRUES

          Each Note bears interest calculated and payable in arrears in
          accordance with this Supplementary Bond Terms Notice from the Closing
          Date to the date upon which that Note is finally redeemed under clause
          3.4.

     3.6  CALCULATION OF INTEREST

          (a)  Subject to clause 3.6(b), interest payable on each Note in
               respect of each Interest Period is calculated as the product of:

               (1)  on a daily basis at the applicable Interest Rate;

               (2)  on the Invested Amount of that Note as at the first day of
                    that Interest Period, after giving effect to any payments of
                    principal made with respect to such Note on such day; and

               (3)  a fraction, the numerator of which is the actual number of
                    days in that Interest Period and the denominator of which is
                    365 days (in

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                                                                         PAGE 15
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

                    the case of Class B Notes) or 360 days (in the case of Class
                    A Notes).

          (b)  No interest will accrue on any Note for the period from and
               including:

               (1)  the date on which the Outstanding Principal Balance of that
                    Note is reduced to zero (provided that interest shall
                    thereafter begin to accrue from (and including) any date on
                    which the Outstanding Principal Balance of that Note becomes
                    greater than zero); or

               (2)  if the Outstanding Principal Balance of the Note on the due
                    date for redemption in full of the Note is not zero, unless
                    payment of principal due is improperly withheld or refused,
                    following which the Note will continue to earn interest on
                    the Invested Amount of the Note at the rate from time to
                    time applicable to the Note until the later of:

                    (A)  the date on which the moneys in respect of that Note
                         have been received by the Note Trustee or the Principal
                         Paying Agent and notice to that effect is given in
                         accordance with the relevant Conditions; or

                    (B)  the date on which the Outstanding Principal Balance of
                         that Note has been reduced to zero (provided that
                         interest shall thereafter begin to accrue from (and
                         including) any date on which the Outstanding Principal
                         Balance of that Note becomes greater than zero).

          (c)  If Interest is not paid in respect of a Note on the date when due
               and payable (other than because the due date is not a Banking
               Day) that unpaid Interest will itself bear interest at the
               Interest Rate applicable from time to time on that Note until the
               unpaid Interest, and interest on it, is available for payment
               and:

               (1)  in the case of the Class A Notes, notice of that
                    availability has been duly given in accordance with
                    Condition 12; or

               (2)  in the case of the Class B Notes, there is full satisfaction
                    of those amounts, to be determined in accordance with the
                    Master Trust Deed (as amended in accordance with this
                    Supplementary Bond Terms Notice).

     3.7  AGGREGATE RECEIPTS

          (a)  Notwithstanding anything in clause 6.2, no Noteholder will be
               entitled to receive aggregate principal under any Note at any
               time in excess of the Invested Amount for that Note at that time.

          (b)  The Trustee, the Manager, the Note Trustee, the Security Trustee
               and the Paying Agents may treat the Noteholder as the absolute
               owner of that Note (whether or not that Note is overdue and
               despite any notation or notice to the contrary or writing on it
               or any notice of previous loss or theft of it or of trust or
               other interest in it) for the purpose of making payment and for
               all other purposes.

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                                                                         PAGE 16
<PAGE>

     3.8  APPLICATION OF PRINCIPAL REPAYMENT POOL

          At all times prior to the making by the Security Trustee of a
          declaration in accordance with the Security Trust Deed that the charge
          created by the Security Trust Deed is immediately enforceable, the
          Principal Repayment Pool in relation to a Payment Date must be applied
          in or towards the repayment of principal on the Notes on that Payment
          Date in accordance with this clause 3 and clause 6 or the purchase of
          Substitute Mortgages in accordance with clause 7. Upon and after the
          making of such a declaration, the Notes will rank, and payments will
          be made in respect of the Notes, in accordance with the provisions of
          the Security Trust Deed and, in the case of the Class A Notes, the
          Note Trust Deed.

     3.9  REPAYMENT OF PRINCIPAL

          On each Payment Date, the Principal Repayment Pool must, subject to
          this clause 3 and clauses 6 and 7, be applied in or towards making
          repayments of principal on the Notes in accordance with clause 6 until
          the Invested Amount for each Note is reduced to zero.

     3.10 FINAL MATURITY DATE

          The Outstanding Principal Balance of each Note must be repaid in full
          on the Final Maturity Date.

     3.11 REDUCTION IN PRINCIPAL BALANCE

          Each payment of principal in respect of a Note under this clause 3
          reduces the Invested Amount of that Note by the amount of that
          payment. The Trustee has no obligation to make any payment of
          principal under this clause 3 in respect of a Note in excess of the
          Invested Amount of that Note immediately prior to that payment being
          made.

     3.12 CANCELLATION ON REPAYMENT

          Upon the reduction of the Invested Amount of a Note to zero by
          repayment of principal in accordance with this clause 3 and payment of
          all the Interest Amounts (and other interest payments) in relation to
          that Note, that Note is cancelled.

     3.13 PAYMENTS INTO US$ ACCOUNT

          (a)  The Trustee must direct the Currency Swap Provider to pay all
               amounts denominated in US$ payable to the Trustee by the Currency
               Swap Provider under the Currency Swap into the US$ Account or to
               the Principal Paying Agent under the Note Trust Deed on behalf of
               the Trustee.

          (b)  If the Trustee or the Manager receives any amount denominated in
               US$ from the Currency Swap Provider under the Currency Swap they
               must promptly pay that amount to the credit of the US$ Account or
               to the Principal Paying Agent.

     3.14 PAYMENTS OUT OF US$ ACCOUNT

          On each Payment Date, the Trustee must, on the direction of the
          Manager, or must require that the Principal Paying Agent on its
          behalf, distribute from the

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                                                                         PAGE 17
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

          US$ Account the relevant amounts of principal and interest due in
          respect of each Class A Notes in accordance with the Note Trust Deed
          and in the order of priority in clauses 6.1 and 6.2.

     3.15 ROUNDING OF AMOUNTS

          In making the calculations required or contemplated by this clause 3,
          the Manager shall round calculations to four decimal places, except
          that all monetary amounts shall be rounded down to the nearest cent or
          as otherwise required in this Supplementary Bond Terms Notice.

     3.16 PRESCRIPTION

          Despite any other provision of this Supplementary Bond Terms Notice
          and the Master Trust Deed, Condition 8 of the Class A Notes applies to
          all amounts payable in relation to any Class A Note.

     3.17 REPLACEMENT OF CURRENCY SWAP

          (a)  If the Currency Swap is terminated, the Trustee must at the
               direction of the Manager enter into one or more currency swaps
               which replace the Currency Swap (collectively a Replacement
               Currency Swap) but only on the condition:

               (1)  that the amount determined under section 6(e) of the ISDA
                    Master Agreement for the Currency Swap (CURRENCY SWAP
                    TERMINATION AMOUNT), if any, which is payable by the Trustee
                    to the Currency Swap Provider on termination of the Currency
                    Swap will be paid in full when due in accordance with this
                    Supplementary Bond Terms Notice and the Currency Swap;

               (2)  the ratings assigned to the Notes are not adversely
                    affected, which must be confirmed in writing by each
                    Designated Rating Agency;

               (3)  the liability of the Trustee under that Replacement Currency
                    Swap is limited to at least the same extent that its
                    liability is limited under the Currency Swap; and

               (4)  the terms of the Replacement Currency Swap are acceptable to
                    the Trustee acting reasonably and taking into account the
                    interests of the Noteholders.

          (b)  If the condition in clause 3.17(a) is satisfied, the Trustee must
               at the direction of the Manager enter into the Replacement
               Currency Swap and if it does so it must direct the provider of
               the Replacement Currency Swap to pay any upfront premium to enter
               into the Replacement Currency Swap due to the Trustee directly to
               the Currency Swap Provider in satisfaction of and to the extent
               of the Trustee's obligation to pay the Currency Swap Termination
               Amount to the Currency Swap Provider as referred to in clause
               3.17(a). If the Currency Swap Termination Amount (if any) is
               payable by the Currency Swap Provider to the Trustee, the Trustee
               shall direct the Currency Swap Provider to pay such amount
               directly to the Replacement Currency Swap Provider in
               satisfaction and to the extent of any upfront premium to enter
               into the Replacement Currency Swap.

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                                                                         PAGE 18
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

               Where the upfront premium payable upon entry into the Replacement
               Currency Swap is:

               (1)  payable by the Trustee to the Replacement Swap Provider,
                    then the:

                    (A)  excess of the Currency Swap Termination Amount over the
                         upfront premium will be included as Income Collection
                         for the relevant Calculation Period; and

                    (B)  excess of the upfront premium payable over the Currency
                         Swap Termination Amount will be satisfied by the
                         Trustee as an Expense; and

               (2)  payable by the Replacement Swap Provider to the Trustee,
                    then the:

                    (A)  excess of the Currency Swap Termination Amount over the
                         upfront premium will be satisfied by the Trustee as an
                         Expense; and

                    (B)  excess of the upfront premium over the Currency Swap
                         Termination Amount will be included as Income
                         Collection for the relevant Calculation Period.

     3.18 REALISED LOSSES ON MORTGAGES

          On each Payment Date on which the Manager determines that the
          aggregate amount of Realised Losses for the related Calculation Period
          exceeds funds available on such Payment Date to reimburse such
          Realised Losses under clause 6.1 the Manager must do the following on
          and with effect from such Payment Date:

          (a)  reduce pro-rata as between themselves the Outstanding Principal
               Balance of the Class B Notes by the amount of that excess until
               the Outstanding Principal Balance of the Class B Notes is zero
               (CLASS B CHARGE OFFS); and

          (b)  if the Outstanding Principal Balance of the Class B Notes is zero
               and any amount of that excess has not been applied under clause
               3.18(a), reduce pro-rata and rateably as between the Class A
               Notes and the Redraw Funding Facilities with respect to the
               balance of the deficiency:

               (1)  rateably as between such of the Class A Notes, the
                    Outstanding Principal Balance of the Class A Notes by amount
                    of the remaining deficiency until the Outstanding Principal
                    Balance of the Class A Notes is zero (CLASS A CHARGE OFFS);
                    and

               (2)  rateably as between each Redraw Funding Facility, the Redraw
                    Principal Outstanding of the Redraw Funding Facilities by
                    the amount of the remaining deficiency until the Redraw
                    Principal Outstanding under each Redraw Funding Facility is
                    zero (REDRAW CHARGE OFFS).

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                                                                         PAGE 19
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                Supplementary Bond Terms Notice Class A Notes and Class B Notes

--------------------------------------------------------------------------------
4    NOTES CALLABLE AT OPTION OF TRUSTEE

     4.1  CALL -- CLASS A NOTES

          The Trustee must, when so directed by the Manager (at the Manager's
          option), having given not more than 60 nor less than 45 days' notice
          to the Class A Noteholders, in the case of Class A Notes, in
          accordance with Condition 12, purchase or redeem all, but not some
          only, of the Notes by repaying the Outstanding Principal Balance of
          those Notes, together with accrued interest to (but excluding) the
          date of repurchase or redemption on any Payment Date falling on or
          after the earlier of:

          (a)  the Payment Date on which the Outstanding Principal Balance of
               all Notes is equal to or less than 10% of the Total Original
               Principal Balance; and

          (b)  in the case of Class A Notes, the Payment Date falling on 9
               February 2009,

               provided that:

          (c)  if the aggregate Outstanding Principal Balance of all Class A
               Notes on such date of redemption or repurchase has been reduced
               by Class A Charge Offs which have not been reinstated under
               clauses 6.1(j) and 6.1(k), the Noteholders owning at least 75% of
               the aggregate Invested Amount of the Class A Notes must consent
               to such repurchase or redemption; and

          (d)  the Trustee will be in a position on such Payment Date to
               discharge (and the Manager so certifies to the Trustee and the
               Note Trustee upon which the Trustee and the Note Trustee will
               rely conclusively) all its liabilities in respect of the Notes
               (at their Outstanding Principal Balance) and any amounts which
               would be required under the Security Trust Deed to be paid in
               priority or pari passu with the Notes if the security for the
               Notes were being enforced.

     4.2  TAX EVENT

          If the Manager satisfies the Trustee and the Note Trustee immediately
          prior to giving the notice referred to below that either:

          (a)  on the next Payment Date the Trustee would be required to deduct
               or withhold from any payment of principal or interest in respect
               of the Notes, the Currency Swap, the Payment Funding Facility or
               the Redraw Funding Facility any amount for or on account of any
               present or future taxes, duties, assessments or governmental
               charges of whatever nature imposed, levied, collected, withheld
               or assessed by the Commonwealth of Australia or any of its
               political sub-divisions or any of its authorities; or

          (b)  the total amount payable in respect of interest in relation to
               any of the Loans secured by the Mortgages comprised in the Assets
               of the Fund for a Calculation Period ceases to be receivable
               (whether or not actually received) by the Trustee during such
               Calculation Period,

          the Trustee must, when so directed by the Manager, at the Manager's
          option (provided that the Trustee will be in a position on such
          Payment Date to discharge and the Manager will so certify to the
          Trustee and the Note Trustee) all its liabilities in respect of the
          Notes (at their Invested Amount) and any amounts

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                                                                         PAGE 20
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

          which would be required under the Security Trust Deed to be paid in
          priority or pari passu with the Notes if the security for the Notes
          were being enforced), having given not more than 60 nor less than 45
          days notice to the Noteholders in accordance with Condition 12 redeem
          all, but not some only, of the Notes at their then Invested Amounts
          together with accrued interest to (but excluding) the date of
          redemption on any subsequent Payment Date, provided that the
          Noteholders may by Extraordinary Resolution elect, and must notify the
          Trustee and the Manager not less than 21 days before the next Payment
          Date following the receipt of notice of such proposed redemption, that
          they do not require the Trustee to redeem the Notes.

     4.3  CALL -- CLASS B NOTES

          The Trustee must, when so directed by the Manager (at the Manager's
          option), having given not more than 60 nor less than 45 days' notice
          to the Class B Noteholders, in the case of Class B Notes redeem all,
          but not some only, of the Class B Notes by repaying the Outstanding
          Principal Balance of those Notes, together with accrued interest to
          (but excluding) the date of redemption, on:

          (a)  the date of redemption, repurchase or final repayment of the
               Class A Notes; or

          (b)  (if directed by the Manager) any Payment Date falling after such
               date.

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5    CASH-COLLATERAL

     5.1  CASH COLLATERAL ACCOUNT

          On the Closing Date the Manager must establish and at all times until
          the Outstanding Principal Balance of all Notes is reduced to zero
          maintain a ledger account in the accounting records maintained by it
          pursuant to the Master Trust Deed designated "SMHL Global Fund No. 5
          Cash Collateral Account".

     5.2  INITIAL CASH COLLATERAL AND LIQUIDITY NOTES

          On the Closing Date, the Trustee must:

          (a)  subject to the terms of the Master Trust Deed, and in accordance
               with the Bond Issue Direction, issue to the Liquidity Noteholder
               (as nominee on behalf of the Trustee in its capacity as trustee
               of the Fund known as the Superannuation Members' Home Loans
               Securitisation Fund No. 12) liquidity notes (being Bonds as
               defined in the Master Trust Deed) having an initial Face Value of
               an amount equal to A$[*], being comprised in a Class named "SMHL
               Global No. 5 - Liquidity Notes", and being on the terms set out
               in the Schedule and the Master Trust Deed;

          (b)  in accordance with clauses 7.8(f) and 7.10 of the Master Trust
               Deed, hold an amount of the issue proceeds of the Notes equal to
               the Face Value of the Liquidity Notes as trustee of the
               Securitisation Fund; and

          (c)  credit that amount to the Cash Collateral Account.

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                                                                         PAGE 21
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                Supplementary Bond Terms Notice Class A Notes and Class B Notes

     5.3  INVESTMENT OF CASH COLLATERAL

          Amounts credited to the Cash Collateral Account must be invested in
          Authorised Investments:

          (a)  which are rated "AAA" or "A-1+" by S&P, "Prime-1" or "Aaa" by
               Moody's and "AAA" or "F1+" by Fitch Ratings, or such other rating
               as the Designated Rating Agency may approve from time to time;

          (b)  which mature (except in the case of call deposits with a Bank)
               not later than the day before the Payment Date immediately after
               the day on which they are made; and

          (c)  otherwise in accordance with the Master Trust Deed.

          Income from Authorised Investments comprised in the Cash Collateral
          does not constitute Collections, and must be credited to the Cash
          Collateral Account.

     5.4  USE OF CASH COLLATERAL

          If on any Payment Date, the Collections (other than Collections with
          respect to amounts applied from the Cash Collateral Account) for the
          relevant Calculation Period are less than the aggregate of the amounts
          referred to in paragraphs (a) - (f) of clause 6.1, the Manager must
          direct the Trustee to withdraw from the Cash Collateral Account the
          amount equal to the lesser of the amount of such deficiency and the
          Cash Collateral, which amount will then be applied to and become part
          of the Collections available for application on the relevant Payment
          Date in accordance with those paragraphs.

     5.5  SURPLUS CASH COLLATERAL

          If on any Payment Date after the making of all payments which the
          Trustee is obliged to make on that Payment Date there is Surplus Cash
          Collateral, the Trustee must (at the direction of the Manager) on that
          Payment Date apply the Surplus Cash Collateral in or towards payment
          to each Liquidity Noteholder of amounts payable under or in respect of
          the Liquidity Notes or interest payable in respect of each Liquidity
          Notes in accordance with the Liquidity Notes Supplementary Bond Terms.

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6    DISTRIBUTION OF COLLECTIONS

     6.1  DISTRIBUTION OF INTEREST COLLECTIONS

          Subject to the terms of the Security Trust Deed and these
          Supplementary Bond Terms, on each Payment Date (to the extent it has
          not already done so in accordance with this clause 6.1), the Trustee
          must apply the Interest Collections for the relevant Calculation
          Period as follows:

          (a)  first, in or toward payment of or allowance for Taxes in respect
               of the Securitisation Fund;

          (b)  secondly, pari passu and rateably in or toward payment of or
               allowance for the Trustee's Fee, the Manager's Fee and any
               Expenses (other than the Expenses referred to below in this
               clause 6.1) in respect of the Securitisation Fund;

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                                                                         PAGE 22
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                Supplementary Bond Terms Notice Class A Notes and Class B Notes

          (c)  thirdly, without duplication, in or toward any amounts payable
               under clause 6.1(d) on any previous Payment Date, if there had
               been sufficient Interest Collections, which have not been paid by
               the Trustee together with accrued interest thereon which in the
               case of a Note must be at the Interest Rate applicable to the
               relevant Note;

          (d)  fourthly, pari passu and rateably, in or toward payment of any
               interest due under any Redraw Funding Facility and in and toward
               payment to the Currency Swap Provider, in or toward payment of
               the A$ Class A Interest Amount payable under the Confirmation at
               that Payment Date which is thereafter to be applied to payment of
               interest on the Class A Notes;

          (e)  fifthly, without duplication, in or toward any amounts payable
               under clause 6.1(f) on any previous Payment Date, if there had
               been sufficient Interest Collections, which have not been paid by
               the Trustee with accrued interest thereon at the Interest Rate
               applicable to the relevant Note;

          (f)  sixthly, in or toward payment to Class B Noteholders of the Class
               B Interest due on the Class B Notes on that Payment Date;

          (g)  seventhly, in crediting to the Cash Collateral Account the amount
               (if any) by which the Required Cash Collateral exceeds the Cash
               Collateral;

          (h)  eighthly, in or toward payment toward any break costs payable on
               cancellation of any Interest Hedge to the extent that those
               amounts are not recovered under the relevant Loan secured by
               Mortgages comprised in the Assets of the Fund in the form of any
               applicable prepayment fees or a drawing has not been made under a
               Payment Funding Facility;

          (i)  ninthly, pari passu and rateably in or toward payment to the
               Liquidity Noteholder of interest payable in respect of the
               Liquidity Notes and in or towards payment of any interest in
               respect of any Payment Funding Facility;

          (j)  tenthly, in respect of the amount of any Class A Charge Offs and
               Redraw Charge Offs, in and towards reinstatement of in the books
               of the Fund pari passu and rateably to Class A Charge Offs and
               Redraw Charge Offs for that Calculation Period;

          (k)  eleventhly, in respect of the amount of any Carry Over Redraw
               Charge Offs and the A$ Equivalent of the Carry Over Class A
               Charge Offs allocated to each Class A Note, as the case may be,
               in and towards reinstatement of in the books of the Fund, pari
               passu and rateably (based on the Carry Over Redraw Charge Offs
               and the A$ Equivalent of the Carry Over Class A Charge Offs
               allocated to each Class A Note as the case may be):

               (1)  the A$ Equivalent of any Carry Over Class A Charge Offs; and

               (2)  any Carry Over Redraw Charge Offs;

          (l)  twelfthly, in respect of the amount of any Class B Charge Offs
               and any Carry Over Class B Charge Offs in and towards
               reinstatement of in the books of the Fund and in the following
               order:

               (1)  any Class B Charge Offs for that Calculation Period; and

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                                                                         PAGE 23
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

               (2)  pari passu and rateably the Invested Amount of the Class B
                    Notes to the extent of any Carry Over Class B Charge Offs;

          (m)  thirteenthly, (to the extent not paid under clause 6.2) pari
               passu and rateably, in or toward repayment of any principal due
               and payable under any Redraw Funding Facility and in or toward
               repayment of any principal due and payable under any Payment
               Funding Facility; and

          (n)  fourteenthly, in payment of or provision for amounts payable to
               the Income Beneficiary of the Securitisation Fund in accordance
               with clauses 22.1(d) and 22.3(d) of the Master Trust Deed.

     6.2  DISTRIBUTION OF PRINCIPAL COLLECTIONS

          Subject to the terms of the Security Trust Deed and these
          Supplementary Bond Terms, on each Payment Date (to the extent it has
          not already done so in accordance with this clause 6.2), the Trustee
          must apply the Principal Collections together with any amounts to be
          applied under this clause 6.2 pursuant to clause 6.5 for the relevant
          Calculation Period towards the following payments in the following
          order of priority:

          (a)  first, in or toward payment of or allowance for Taxes in respect
               of the Securitisation Fund (to the extent not paid or provided
               for under clause 6.1);

          (b)  secondly, pari passu and rateably in or toward payment of or
               allowance for the Trustee's Fee, the Manager's Fee and any
               Expenses (other than the Expenses referred to below in this
               clause 6.2) in respect of the Securitisation Fund (to the extent
               not paid or provided for under clauses 5.4 and 6.1);

          (c)  thirdly, in or toward payment of the amounts payable and the
               priority under clause 6.1(d) on the Class A Notes on that Payment
               Date (to the extent not paid under clauses 5.4 and 6.1);

          (d)  fourthly, in or toward payment of the amounts payable and the
               priority under clause 6.1(f) on the Class B Notes on that Payment
               Date (to the extent not paid under clauses 5.4 and 6.1);

          (e)  fifthly, in or toward repayment of any Redraw Principal
               Outstanding under a Redraw Funding Facility;

          (f)  sixthly, in or toward payments approved by the Manager under any
               Loan Redraw Facility;

          (g)  seventhly, in or toward payment to the Currency Swap Provider
               under a Confirmation relating to the Class A Notes, until the
               Outstanding Principal Balance of the Class A Notes is reduced to
               zero, of an amount equal to the lesser of:

               (1)  the amount available for distribution under this clause
                    6.2(g) after all payments which have priority under this
                    clause 6.2; and

               (2)  the A$ Equivalent of the Outstanding Principal Balance for
                    all Class A Notes;

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                                                                         PAGE 24
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

          (h)  eighthly, in or toward payment to the Class B Noteholders pari
               passu and rateably, until the Outstanding Principal Balance of
               the Class B Notes is reduced to zero, of an amount equal to the
               lesser of:

               (1)  the amount available for distribution under this paragraph
                    (h) after all payments which have priority under this clause
                    6.2; and

               (2)  the Outstanding Principal Balance for all Class B Notes;

          (i)  ninthly, pari passu and rateably (based on the Carry Over Redraw
               Charge Offs and A$ Equivalent of the Carry Over Class A Charge
               Offs allocated to each Class A Note, as the case may be):

               (1)  in or toward payment to the Currency Swap Provider under a
                    Confirmation relating to the Class A Notes, of the A$
                    Equivalent of any Carry Over Class A Charge Offs; and

               (2)  in or toward repaying the Redraw Principal Outstanding of
                    each Redraw Funding Facility to the extent of any Carry Over
                    Redraw Charge Offs;

          (j)  tenthly, in or toward repaying the Invested Amount of the Class B
               Notes to the extent of any Carry Over Class B Charge Offs;

          (k)  eleventhly, in or toward payment towards any break costs payable
               on cancellation of any Interest Hedge to the extent that those
               amounts are not recovered under the relevant Loan secured by
               Mortgages comprised in Assets of the Fund in the form of any
               applicable prepayment fees or a drawing has not been made under a
               Payment Funding Facility (to the extent not paid under clause
               6.1); and

          (l)  twelfthly, subject to clause 6.3, pari passu and rateably in or
               toward payment to the Liquidity Noteholder of the principal
               amount outstanding in respect of the Liquidity Notes and in or
               towards repayment of any principal in respect of any Payment
               Funding Facility.

     6.3  RIGHTS OF LIQUIDITY NOTEHOLDER

          On any Payment Date, the Trustee must not make any payments out of
          Principal Collections to the Liquidity Noteholder under clause 6.2
          unless the Invested Amount of all the Class A Notes and Class B Notes
          is zero, or will be zero following any payments made on the relevant
          Payment Date.

     6.4  FUNDING LOAN REDRAW FACILITIES

          (a)  The Trustee may only fund advances under Loan Redraw Facilities
               from Collections which represent prepayments of principal under
               Loans (PREPAYMENTS) and by drawings under Redraw Funding
               Facilities.

          (b)  The Trustee must not apply any Prepayments to making advances
               under a Loan Redraw Facility unless:

               (1)  all amounts specified in paragraphs (a) to (d) inclusive of
                    clause 6.2 which are due and payable have been paid; and

               (2)  the Trustee holds Collections equal to the sum of the
                    advance under the Loan Redraw Facility and all amounts
                    specified in

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                                                                         PAGE 25
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

                    paragraphs (a) to (d) inclusive of clause 6.2 which are
                    accrued but not due and payable.

     6.5  PAYMENT OF CHARGE OFFS

          The amount of any reinstatement under clauses 6.1(j), 6.1(k) and
          6.1(l) must be applied on the Payment Date of the reinstatement in
          accordance with clause 6.2 as if the amount reinstated formed part of
          Principal Collections.

--------------------------------------------------------------------------------
7    SUBSTITUTION OF MORTGAGES

     7.1  PURCHASE OF SUBSTITUTE MORTGAGES

          (a)  The Manager may, within 120 days after the issue of the Bond
               Issue Confirmation Certificate (as defined in the Mortgage
               Origination and Management Agreement), determine to suspend, to
               the extent necessary, the obligations of the Trustee to treat as
               Principal Collections so much of the payments in respect of
               principal received on the repurchase of Loans pursuant to either
               clause 10.4 of the Mortgage Origination and Management Agreement
               or clause 11.6 of the Master Trust Deed, to purchase substitute
               mortgages.

          (b)  Any payments of principal suspended in accordance with clause
               7.1(a) (SUSPENDED MONEYS) may only be used in the manner provided
               in clause 7.1(c).

          (c)  The Manager may only make a determination pursuant to clause
               7.1(a):

               (1)  for the purpose of directing the Trustee to apply the
                    Suspended Moneys in the purchase of Mortgages (SUBSTITUTE
                    MORTGAGES) from Origination Fund No. 3;

               (2)  if the final payment date of each Substitute Mortgage is at
                    least one year before the Final Maturity Date of the Notes;

               (3)  if the Manager has given the Designated Rating Agencies not
                    less than five Banking Days notice or such shorter period as
                    the Designated Rating Agencies may agree of its intention to
                    make the determination;

               (4)  if the Manager receives confirmation from the Designated
                    Rating Agencies that the purchase by the Trustee of the
                    Substitute Mortgages will not adversely affect the
                    Designated Rating of the Notes; and

               (5)  if

                    (A)  the Trustee receives from the Manager a completed
                         Mortgage Transfer Proposal in relation to the
                         Substitute Mortgage no later than two Banking Days
                         prior to the date referred to in the Mortgage Transfer
                         Proposal for the purchase of the Substitute Mortgage;

                    (B)  the Manager certifies to the Trustee that the proposed
                         Substitute Mortgage is a Mortgage for the purposes of
                         this

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                                                                         PAGE 26
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

                         agreement, and satisfies the requirements in this
                         clause 7, as at the Transfer Date;

                    (C)  prior to or on the Transfer Date the Trustee obtains,
                         or enters into arrangements to obtain with effect from
                         the Transfer Date, as Trustee of the Fund the benefit
                         of the Enhancements and Interest Hedge (if any)
                         referred to in the Mortgage Transfer Proposal.

                    If the provisions of this clause 7 are satisfied then the
                    Substitute Mortgage shall be acquired from Origination Fund
                    No. 3.

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8    NOTIFICATIONS OF CALCULATIONS

          (a)  The Manager must calculate the Collections for an immediately
               preceding Calculation Period no later than 6 Banking Days before
               each Payment Date.

          (b)  The Manager must, not later than two Banking Days before each
               Payment Date advise the Trustee and in respect of Class A Notes
               only, the Currency Swap Provider in writing of:

               (1)  all amounts payable or to be provided for under clause 6;

               (2)  reasonable details of the calculation of all such amounts;
                    and

               (3)  the Outstanding Principal Balance and Invested Amount of
                    each Note following the making of all payments to be made on
                    that Payment Date in accordance with clauses 3 and 6.

          (c)  The Manager must also notify the Trustee of all details of
               payments which are to be made by or on behalf of the Trustee on
               or by each Payment Date. The Manager must, not later than two
               Banking Days before each Payment Date also notify the Currency
               Swap Provider of all payments which are to be made by or on
               behalf of the Trustee on each Payment Date under clauses 6.1 and
               6.2 in respect of Class A Notes.

          (d)  In the absence of manifest error, each of the Trustee and the
               Currency Swap Provider is entitled to rely (and will rely on)
               conclusively on the Manager's calculations and notifications and
               is not required to investigate the accuracy of them.

--------------------------------------------------------------------------------
9    AMENDMENTS TO MASTER TRUST DEED

          The Master Trust Deed is amended for the purpose of the Fund as
          follows:

          (a)  Clause 1.1 -- Authorised Investment

               For the purposes of the definition of Authorised Investment in
               clause 1.1 of the Master Trust Deed, each investment must be of a
               type which does not adversely affect the 50% risk weighting
               attributed to the Notes by the Bank of England (as to which the
               Trustee may rely conclusively on advice from the Manager to that
               effect).

          (b)  Clause 1.1 -- Expenses

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                                                                         PAGE 27
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

               For the purpose of the definition of Expenses in clause 1.1 of
               the Master Trust Deed,

               (1)  words "subject to clauses 14 and 18," are added at the
                    beginning of paragraph (m); and

               (2)  a new paragraph (o) is inserted as follows and the existing
                    paragraphs (o), (p) and (q) become (p), (q) and (r)
                    respectively:

                    "(o) any fees and expenses payable to DTC, the Note Trustee,
                         the Paying Agents, the Note Registrar, the Calculation
                         Agents (for which the Trustee is not personally liable
                         under the Transaction Documents), Clearstream,
                         Luxembourg, Euroclear, and any Stock Exchange;".

          (c)  Clause 1.1 -- Financial Default

               For the purpose of the definition of Financial Default delete "3
               Banking Days" and insert "10 Banking Days".

          (d)  Clause 1.1 -- Fitch

               For the purposes of the Fund, the definition of Fitch in clause
               1.1 of the Master Trust Deed, is deleted and the following
               definition is inserted:

               "FITCH RATINGS means Fitch, Inc. and its successors and assigns".

          (e)  Clause 1.1 -- Manager's Default

               For the purposes of the definition of Manager's Default add "or
               any representation given by the Manager in any Transaction
               Document in relation to the Fund is or becomes not true" after
               the words "in relation to the Fund" in paragraph (a) of the
               definition.

          (f)  Clause 1.1 -- Rating Agency

               For the purpose of definition of Rating Agency in clause 1.1
               replace the word "Fitch" with the words "Fitch Ratings".

          (g)  Clause 1.1 -- Securities System

               For the purpose of the definition of Securities System in clause
               1.1 insert "or DTC" after "Euroclear".

          (h)  Clause 1.1 -- Termination Date

               For the purpose of the definition of "Termination Date" in clause
               1.1 of the Master Trust Deed, the words "and the Trustee and
               Manager agree that no further Notes are proposed to be issued by
               the Trustee in relation to that Fund" are inserted at the end of
               paragraph (c)(1) of that definition.

          (i)  Clause 5 -- Notes

               For the purpose of the Fund, clause 5 in the Master Trust Deed is
               deleted and the following clause 5 is inserted as follows:

               "5.  NOTES

               5.1  Acknowledgment of indebtedness

                    Subject to the terms of this Deed and the Supplementary Bond
                    Terms Notice:

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                                                                         PAGE 28
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

                    (a)  each entry in the Register for a Fund in respect of a
                         Class B Note relating to the Fund; and

                    (b)  in relation to each Class A Note relating to a Fund,
                         that Class A Note,

                    constitutes an independent and separate acknowledgment to
                    the relevant Noteholder by the Trustee of its indebtedness
                    as trustee of the Fund for the Outstanding Principal Balance
                    of that Note together with the other rights given to
                    Noteholders under this Deed, the Supplementary Bond Terms
                    Notice and the Security Trust Deed, and (in relation to a
                    Class A Note) the Note Trust Deed and the Conditions.

               5.2  Legal nature of Notes

                    (a)  Class B Notes will be in the form of inscribed stock,
                         and the Trustee's obligations in relation to the Notes
                         and under this Deed and this Supplementary Bond Terms
                         Notice (including any obligation to pay interest or
                         principal) will become effective on inscription in the
                         Register for the Fund under this Deed and this
                         Supplementary Bond Terms Notice of the details for
                         those Class B Notes.

                    (b)  Class A Notes will be in registered form in respect of
                         Book-Entry Notes and will be in bearer or registered
                         form in respect of Definitive Notes, provided that
                         there will be no bearer notes issued in the United
                         States of America.

               5.3  Terms of Notes

                    (a)  All Notes issued by the Trustee as trustee of a Fund
                         shall be issued with the benefit of, and subject to,
                         this Deed, the relevant Supplementary Bond Terms Notice
                         and the relevant Security Trust Deed and, in relation
                         to Class A Notes, the Note Trust Deed and the
                         Conditions.

                    (b)  The documents referred to in paragraph (a) are binding
                         on the Manager, the Trustee, the Note Trustee, the
                         Security Trustee and the Noteholders.

               5.4  Interest and Principal Entitlement of Noteholders

                    Subject to this Deed, the relevant Supplementary Bond Terms
                    Notice and the Security Trust Deed and, in relation to Class
                    A Notes, the Note Trust Deed and the Conditions, the Trustee
                    as trustee of a Fund must, in respect of the Notes issued by
                    it in that capacity, pay or cause to be paid to the
                    Noteholders (as relevant) of those Notes:

                    (a)  (INTEREST) Interest on each Payment Date; and

                    (b)  (PRINCIPAL) their Principal Entitlement on each Payment
                         Date.

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                                                                         PAGE 29
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

               5.5  Notes not invalid if issued in breach

                    No Note shall be invalid or unenforceable on the ground that
                    it was issued in breach of this Deed, the relevant
                    Supplementary Bond Terms Notice or any other Transaction
                    Document.

               5.6  Location of Class B Notes

                    The property in Class B Notes shall for all purposes be
                    regarded as situated at the place where the Register on
                    which those Class B Notes are recorded is located.

               5.7  No discrimination between Noteholders

                    There shall not be any discrimination or preference between
                    Notes within the same Class, or the corresponding
                    Noteholders, in relation to a Fund by reason of the time of
                    issue of Notes or for any other reason, subject only to the
                    Supplementary Bond Terms relating to the Notes the terms of
                    the Security Trust Deed relating to the Fund and the Note
                    Trust Deed in relation to the Class A Notes.

               5.8  Note Register

                    In the event that any Definitive Notes are issued in
                    registered form, the Trustee (or if the Trustee fails to do
                    so, the Manager on behalf of the Trustee) must, on the
                    direction of the Manager, appoint a person to operate and
                    maintain a register of those notes in accordance with
                    standard United States practice and law."

          (j)  Clause 6.5 -- Ranking of interest of Beneficiary

               For the purposes of clause 6.5 of the Master Trust Deed, the
               Trustee may seek and rely upon a direction from the Note Trustee
               as to the interests of the Class A Noteholders.

          (k)  Clauses 7.1 and 7.7(a) -- Bond Issue Direction

               (1)  For the purposes of clause 7.1 of the Master Trust Deed, the
                    Securitisation Fund Bond Issue Direction for the Notes may
                    be issued by the Manager on or at any time prior to the Bond
                    Issue Date for the Notes.

               (2)  For the purposes of clause 7.7(a) of the Master Trust Deed,
                    the certification by the Manager may occur on or at any time
                    prior to the Bond Issue Date for the Notes.

          (l)  Clause 7.8 -- Issue of Bonds and Transfer of Benefit of Mortgages

               (1)  Clause 7.8(b) of the Master Trust Deed is amended by
                    inserting "in respect of Class B Notes only" after
                    "Applications for Bonds".

               (2)  Clause 7.8(c) of the Master Trust Deed is amended by
                    replacing paragraph (1) with the following:

                    "(1) (TRANSACTION DOCUMENTS): entered into the Transaction
                         Documents to which it is a party in its capacity as
                         trustee of the Fund;".

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                                                                         PAGE 30
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

          (m)  Clause 8 -- Transfer of Notes

               (1)  For the purposes of this Fund, clause 8 of the Master Trust
                    Deed applies in respect of the Class B Notes but, except for
                    clause 8.1(a), (b) and (c) does not apply to the Class A
                    Notes.

               (2)  For the purposes of this Fund, clause 8.1(a) of the Master
                    Trust Deed is amended by inserting the words "and (in
                    respect of the Class A Notes) the relevant Note Trust Deed
                    and Conditions" after the words subject to this Deed and the
                    corresponding Supplementary Bond Terms".

          (n)  Clause 9 -- Note Registration Confirmation

               For the purposes of this Fund, clause 9 applies to the Class B
               Notes and does not apply to the Class A Notes.

          (o)  Clause 10.12 -- Moneys Payable to Trustee

               For the purposes of the Fund, the words "and any moneys payable
               to the Principal Paying Agent under any Transaction Document" are
               inserted after the words "subject to this Deed."

          (p)  Clause 11 - Origination and Management of Mortgages

               A new clause 11.6 is inserted as follows:

               "11.6 REPURCHASE OF MORTGAGES

               (a)  If the Manager determines that any representation or
                    warranty by the Mortgage Manager under the Mortgage
                    Management Agreement with respect to a Mortgage forming part
                    of the Securitisation Fund is false or misleading, the
                    Trustee, as trustee of Origination Fund No. 3, will be
                    obliged at the request of the Manager made in accordance
                    with clause 10.4 to either (at the election of the Manager):

                    (1)  repurchase the Mortgage; or

                    (2)  repurchase and substitute or substitute a Mortgage in
                         which event the Trustee shall be obliged to comply with
                         provisions of clause 7 of the Supplementary Bond Terms
                         Notice with respect to the substitution of Mortgages,

                    within 120 days after the date of the relevant Bond Issue
                    Confirmation Certificate (as defined in the Mortgage
                    Management Agreement).

               (b)  For the avoidance of doubt, it is recorded that neither the
                    Trustee nor the Mortgage Manager shall be obliged to pay
                    damages to the Note Trustee or any Class A Noteholder as a
                    consequence of any breach of warranty on the part of the
                    Mortgage Manager contained in the Mortgage Management
                    Agreement.

--------------------------------------------------------------------------------
                                                                         PAGE 31
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

               (c)  The provisions of clauses 7.14 and 7.15 shall be
                    incorporated into this clause mutatis mutandis in relation
                    to any Mortgage repurchased and any substitute Mortgage.

          (q)  Clause 12.17 -- Additional Covenants by Manager

               For the purposes of clause 12.17 of the Master Trust Deed, the
               Manager must also:

               (1)  (STOCK EXCHANGE): comply with the rules and regulations of
                    the Stock Exchange;

               (2)  (FILING): make or cause the making of all filings which the
                    Manager is actually aware are required in connection with
                    the Fund or the Assets of the Fund with any Governmental
                    Agency in any jurisdiction;

               (3)  (COMPLY WITH OBLIGATIONS AND LAWS): promptly comply with all
                    other duties and obligations imposed on the Manager by the
                    Transaction Documents in relation to the Fund and comply
                    with all relevant material laws in the relevant jurisdiction
                    in carrying out such duties and obligations.

               (4)  (NOT MERGE): not merge or consolidate into another entity
                    unless the surviving entity assumes the obligations of the
                    Manager under the Transaction Documents.

               (5)  (ENHANCEMENTS): perform all obligations within its power to
                    ensure that all Enhancements and Hedges are maintained and
                    available for the Fund;

               (6)  (AGREED PROCEDURES): not agree to any amendment to the
                    Agreed Procedures (as defined in the Mortgage Origination
                    and Management Agreement) applicable to this Fund, unless
                    each Designated Rating Agency has confirmed that it will not
                    withdraw or downgrade the rating of the Notes as a result of
                    such amendment.

          (r)  Clause 14.1 -- Retirement for Cause

               For the purposes of the Fund, the following words are added at
               the end of clause 14.1:

                    "The costs of removal of the Manager in default must be
                    borne by the Manager. The Manager agrees to indemnify the
                    Trustee and the Fund for these costs."

          (s)  Clause 16.3 -- To act honestly, diligently and prudently

               Clause 16.3 of the Master Trust Deed is amended by:

               (1)  replacing "." at the end of paragraph (g) with ";"; and

               (2)  inserting new sub-clauses (i) and (j) as follows:

                    "(i) (REMOVAL OF THE TRUSTEE'S AGENTS OR DELEGATES): remove
                         any agent or delegate of the Trustee that breaches any
                         obligation or duty imposed on the Trustee under this
                         Deed or any other Transaction Document in relation to
                         the Fund where the Manager reasonably believes it will
                         adversely

--------------------------------------------------------------------------------
                                                                         PAGE 32
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

                         affect the rating of either or both of the Class A
                         Notes and the Class B Notes by the Designated Rating
                         Agencies within 45 days' notice from the Manager to the
                         Trustee to remove that agent or delegate; and

                    (j)  (AGREED PROCEDURES): not agree to any amendment to the
                         Agreed Procedures (as defined in the Mortgage
                         Origination and Management Agreement) applicable to
                         this Fund, unless each Designated Rating Agency has
                         confirmed that it will not withdraw or downgrade the
                         rating of the Notes as a result of such amendment."

          (t)  A new clause 16.10 inserted into the Master Trust Deed as
               follows:

                    "16.10 Compliance with laws

                    The Trustee must comply with all relevant material laws in
                    the relevant jurisdiction in performance of its duties and
                    in exercising its discretions under the Transaction
                    Documents."

          (u)  Clause 18.1 -- Retirement for Cause

               For the purposes of the Fund, the following words are added at
               the end of clause 18.1:

                    "The costs of removal of the Trustee in default must be
                    borne by the Trustee. The Trustee agrees to indemnify the
                    Manager and the Fund for these costs."

          (v)  Clause 19.1 -- Opening of bank accounts

               For the purposes of this Fund, insert after clause 19.1(c) of the
               Master Trust Deed as clause 19.1(d):

               "(d) (Change Bank Accounts): If a bank account for a Fund is held
                    with a Bank which ceases to have the ratings specified in a
                    Supplementary Bond Terms Notice in respect of the Fund, the
                    Manager must direct the Trustee to, and the Trustee shall,
                    as soon as practicable, and in any event, within 10 days of
                    receipt of actual notice of that cessation:

                    (1)  close that account; and

                    (2)  transfer all funds standing to the credit of that
                         account to another existing bank account for the Fund
                         with a Bank which has the specified rating, or if none,
                         open such an account, as nominated by the Manager."

          (w)  Clause 22 -- Payments

               For the purposes of the Fund, the Master Trust Deed is amended
               by:

               (1)  deleting clause 22.1(d) and replacing it with:

                    "fourthly, subject to clause 22.4, to the Income Beneficiary
                    in accordance with its instructions";

               (2)  by deleting clause 22.2(d) and replacing it with:

--------------------------------------------------------------------------------
                                                                         PAGE 33
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                Supplementary Bond Terms Notice Class A Notes and Class B Notes

                    "(d) fourthly, subject to clause 22.4, to the Capital
                    Beneficiary in accordance with its instructions"; and

               (3)  by deleting clause 22.3(d) and replacing it with:

                    "(d) Upon termination of the Fund, the surplus capital of
                    the Fund remaining after satisfaction by the Trustee of all
                    of its obligations in respect of the Fund shall be paid in
                    relation to the first $100 only to the Capital Beneficiary
                    and in relation to the balance to the Income Beneficiary".

          (x)  Clause 23 -- The Register

               For the purpose of this Fund paragraphs (g) to (m) inclusive of
               clause 23.1 and clauses 23.5, 23.6 and 23.7 of the Master Trust
               Deed do not apply to the Class A Notes.

          (y)  Clause 25 -- Payments generally

               For the purpose of the Fund clause 25 is amended as follows:

               (1)  By deleting "in Australia" from clause 25.1(b).

               (2)  By inserting as clause 25.5 the following:

                    "25.5 Class A Notes

                    (a)  Clause 25.1 to 25.3 inclusive apply to the Class B
                         Notes only and not to the Class A Notes and the
                         following provisions of this clause 25.5 apply to the
                         Class A Notes only and not to the Class B Notes.

                    (b)  Any payment made by or on behalf of the Trustee in
                         respect of any Class A Note must be made in accordance
                         with the relevant Supplementary Bond Terms Notice and
                         the relevant Note Trust Deed.

                    (c)  There is a full satisfaction of the moneys payable
                         under a Class A Note, and a good discharge to the
                         Trustee and the Manager (as the case may be) in
                         relation to that Class A Note, when so provided under
                         the Note Trust Deed."

               (3)  A new clause 25.6 inserted into the Master Trust Deed as
                    follows:

                    "25.6 Taxation

                    (a)  (NET PAYMENTS): Subject to this clause, payments in
                         respect of the Notes shall be made free and clear of,
                         and without deduction for, or by reference to, any
                         present or future Taxes of any Australian Jurisdiction
                         unless required by law.

                    (b)  (INTEREST WITHHOLDING TAX - CLASS B NOTES): All
                         payments in respect of the Class B Notes will be made
                         without withholding or deduction for, or on account of,
                         any present or future taxes, duties or charges of
                         whatsoever nature unless the Trustee or any person
                         making payments on behalf of the Trustee is required by
                         applicable law to make any such payment in respect of
                         the Class B Notes subject to any withholding or
                         deduction for, or on account of, any present or future
                         taxes, duties or charges of whatever nature.

--------------------------------------------------------------------------------
                                                                         PAGE 34
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

                         In that event the Trustee or any person making payments
                         on behalf of the Trustee (as the case may be) will make
                         such payment after such withholding or deduction has
                         been made and will account to the relevant authorities
                         for the amount so required to be withheld or deducted.
                         Neither the Trustee, any person making payments on
                         behalf of the Trustee or any note trustee will be
                         obliged to make any additional payments to Class B
                         Noteholders in respect of that withholding or
                         deduction.

                    (c)  (INTEREST WITHHOLDING TAX - CLASS A NOTES): Payments on
                         Class A Notes by or on behalf of the Trustee will be
                         made subject to deduction for any Interest Withholding
                         Tax and all other withholdings and deductions referred
                         to in Condition 7 of the Class A Notes.

                    (d)  (TAX FILE NUMBERS): The Trustee or any person making
                         payments on behalf of the Trustee will be required to
                         deduct tax-at-source on interest payments on any Class
                         A Note or Class B Note to each Class A Noteholder or
                         Class B Noteholder who has or is required to have a Tax
                         File Number at the highest personal marginal tax rate
                         unless the Trustee or any person making payments on
                         behalf of the Trustee receives from such Class A
                         Noteholder or Class B Noteholder the Tax File Number of
                         that Class A Noteholder or Class B Noteholder, or
                         evidence of any exemption the Class A Noteholder or
                         Class B Noteholder may have from the need to advise the
                         Trustee or any person making payments on behalf of the
                         Trustee of a Tax File Number. The Tax File Number or
                         appropriate evidence (as the case may be) must be
                         received by the Trustee or any person making payments
                         on behalf of the Trustee not less than ten Banking Days
                         prior to the relevant payment date. The Trustee, or any
                         person making any payments on behalf of the Trustee, is
                         entitled to deduct any such tax-at-source required to
                         be paid by it in relation to the Class A Notes or the
                         Class B Notes at that highest personal marginal tax
                         rate if no Tax File Number or exemption (as the case
                         may be) is provided."

          (z)  Clause 28 -- Amendment

               For the purposes of this Fund, the reference to prior consent of
               the Bondholders in clause 28.2 is a reference to the
               Extraordinary Resolution of Voting Secured Creditors passed in
               accordance with Schedule 1 of the Security Trust Deed.

          (aa) Schedule 9 -- Amendment

               For the purposes of this Fund, delete the word "15th September,
               December, March and June" in the definition of "Fee Payment
               Date"" in clause 1 and insert the word "9th of February, May,
               August and November" and delete the word "15th" in the definition
               of "Valuation Date" in clause 1 and insert the word "last".

--------------------------------------------------------------------------------
                                                                         PAGE 35
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

--------------------------------------------------------------------------------
10   RATING AGENCY REQUIREMENTS

     10.1 DESIGNATED RATING AGENCIES

          The Designated Rating Agencies for the Notes as at the Closing Date
          are Moody's, S&P and Fitch Ratings.

     10.2 DESIGNATED RATINGS

          The Designated Ratings for the Notes are as follows:

          (a)  For the Class A Notes:

               (1) In the case of Fitch Ratings -- "AAA";

               (2) in the case of Moody's - "Aaa";

               (3) in the case of S&P - "AAA"; and

          (b) For the Class B Notes:

               (1) In the case of Fitch Ratings -- "AA";

               (2) In the case of Moody's -- "Aa2"; and

               (3) In the case of S&P -- "AA".

     10.3 MINIMUM RATING REQUIREMENTS

          Subject to clauses 5.3 and 10.4, all Authorised Investments of the
          Fund other than cash and Mortgages must be rated "AAA" or "A-1+" by
          S&P, "Aaa" or "Prime-1" by Moody's and "AAA" or "F1+" by Fitch
          Ratings.

     10.4 BANKS

          (a)  Subject to clause 10.4(b), any bank account for the purposes of
               clause 19.1 and 19.11 of the Master Trust Deed must be with a
               Bank which has a short-term rating of at least P-1 (Moody's),
               A-1+ (S&P) and F1+ (Fitch Ratings).

          (b)  Subject to clause 5.3, the Assets of the Fund may be invested in
               deposits which mature or are callable within 30 days of being
               made with a Bank rated at least "A-1" by S&P, provided that the
               aggregate amount of such deposits does not at any time exceed 20%
               of the Total Outstanding Principal Balance.

     10.5 NOTIFICATIONS TO DESIGNATED RATING AGENCIES

          The Manager must give written notice to each Designated Rating Agency:

          (a)  of the occurrence of an Event of Default under the Security Trust
               Deed, promptly upon becoming aware of the same;

          (b)  prior to any amendment being made to any Transaction Document
               (including any change to any of the parties to any Transaction
               Document); and

          (c)  of a breach of a provision of a Transaction Document relating to
               the Securitisation Fund, promptly upon becoming aware of the
               same, which

--------------------------------------------------------------------------------
                                                                         PAGE 36
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

               breach is in the reasonable opinion of the Manager likely to have
               a material adverse effect on the ability of the Trustee to meet
               its obligations in respect of the Notes.

     10.6 NO OTHER REQUIREMENTS

          For the purposes of the Master Trust Deed, there are no minimum rating
          requirements in relation to the Fund, other than those expressly set
          out in this Supplementary Bond Terms Notice.

     10.7 LOAN REDRAW FACILITIES

          The Manager must:

          (a)  ensure that the form of documentation to provide Loan Redraw
               Facilities is approved by the Mortgage Insurer; and

          (b)  that the provision of any Loan Redraw Facility is made in
               accordance with any relevant terms of the Mortgage Insurance
               Policy.

--------------------------------------------------------------------------------
11   THRESHOLD RATE

          (a)  In exercising its powers and performing its obligations under the
               Master Trust Deed, the Manager must at all times ensure that, to
               the extent that the Trustee is entitled to do so under the terms
               of the Mortgages, the rate of interest payable on or in respect
               of Loans secured by Mortgages comprised in the Assets of the Fund
               is changed from time to time so that:

               (1)  on the assumption that all parties to all of the Transaction
                    Documents and all issuers of Authorised Investments from
                    time to time comprised in the Assets of the Fund have
                    complied and will at all times comply in full with their
                    respective obligations under those Transaction Documents and
                    Authorised Investments; and

               (2)  having regard to:

                    (A)  the terms of the Transaction Documents;

                    (B)  the terms of the Mortgages comprised in the Assets of
                         the Fund;

                    (C)  the anticipated Expenses of the Fund;

                    (D)  the amount of the Cash Collateral in the Cash
                         Collateral Account;

                    (E)  all other information available to the Manager;

                    (F)  the Benchmark Rate from time to time; and

                    (G)  any mismatch between the time at which the Benchmark
                         Rate is determined and the time at which the rate of
                         interest payable on or in respect of Loans secured by
                         the Mortgages comprised in the Assets of the Fund may
                         be reset,

                    the Trustee will have available to it at all times
                    sufficient funds to enable it to comply with all of its
                    obligations under the Transaction Documents relating to the
                    Fund as they fall due.

--------------------------------------------------------------------------------
                                                                         PAGE 37
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

          (b)  Without limiting the operation of clause 11(a), the interest rate
               applicable to each fixed interest period of the Loan secured by a
               Mortgage comprised in the Assets of the Fund must be equal to or
               greater than:

               (1)  for so long as the Outstanding Principal Balance of all such
                    Loans is equal to or less than 20% of the Outstanding
                    Principal Balance of all Loans secured by Mortgages
                    comprised in the Assets of the Fund, the rate, expressed as
                    a percentage, determined by the Manager to be the
                    fixed-floating swap rate for the period most closely
                    approximating the term of the fixed interest period of the
                    Loans secured by the Mortgages plus 0.80%; and

               (2)  for so long as the Outstanding Principal Balance of all such
                    Loans is greater than 20% of the Outstanding Principal
                    Balance of all Loans secured by Mortgages comprised in the
                    Assets of the Fund, such rate as agreed from time to time
                    between the Manager and each Designated Rating Agency.

          (c)  For the purposes of clause 11(a) it is acknowledged that if there
               is any shortfall under any determination under clause 11(a), the
               Manager may direct the Trustee to make a drawing under the
               Payment Funding Facility in respect of that shortfall (to the
               extent it has not already done so in respect of the shortfall)
               provided that:

               (1)  such a drawing must be made in accordance with clause
                    5.5(b)(2) of the Initial Payment Funding Facility; and

               (2)  if such a drawing is not made the Manager must comply with
                    clauses 11(a) and 11(b).

--------------------------------------------------------------------------------
12   BENEFICIARIES

          (a)  The Beneficiaries hold the beneficial interest in the Fund in
               accordance with the Master Trust Deed and this Supplementary Bond
               Terms Notice.

          (b)  The beneficial interest held by each Beneficiary is limited to
               the Fund and each Asset of the Fund subject to and in accordance
               with the Master Trust Deed and this Supplementary Bond Terms
               Notice.

          (c)  Subject to clause 12(d), no Beneficiary has any right to receive
               distributions in respect of the Fund other than the right to
               receive on the termination of the Fund the entire beneficial
               interest of the Fund.

          (d)  The Income Beneficiary has the right to receive distributions in
               respect of the Fund under the Master Trust Deed and this
               Supplementary Bond Terms Notice to the extent that Net Income is
               available for distribution under the Master Fund Deed and this
               Supplementary Bond Terms Notice.

          (e)  The Beneficiaries may not assign, or create or allow to exist any
               Encumbrance over, its rights or interests in respect of the Fund
               if to do so might have an adverse tax consequence in respect of
               the Fund.

--------------------------------------------------------------------------------
                                                                         PAGE 38
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

13   NOTE TRUSTEE

     13.1 CAPACITY

          The Note Trustee is a party to this Supplementary Bond Terms Notice in
          its capacity as trustee for the Class A Noteholders from time to time
          under the Note Trust Deed and, for the purposes of clause 16 in its
          capacity as the Principal Paying Agent, the Calculation Agent and the
          Note Registrar.

     13.2 EXERCISE OF RIGHTS

          (a)  The rights, remedies and discretions of the Class A Noteholders
               under the Transaction Documents including all rights to vote or
               give instructions to the Security Trustee and to enforce
               undertakings or warranties under the Transaction Documents,
               except as otherwise provided in the Note Trust Deed or the
               Security Trust Deed, may only be exercised by the Note Trustee on
               behalf of the Class A Noteholders in accordance with the Note
               Trust Deed.

          (b)  The Class A Noteholders, except as otherwise provided in the Note
               Trust Deed or the Security Trust Deed, may only exercise
               enforcement rights in respect of the Charged Property through the
               Note Trustee and only in accordance with the Transaction
               Documents.

     13.3 REPRESENTATION AND WARRANTY

          The Note Trustee represents and warrants to each other party to this
          Supplementary Bond Terms Notice that it has the corporate power under
          the Note Trust Deed to enter into the Transaction Documents to which
          it is a party and to exercise the rights, remedies and discretions of,
          and to vote on behalf of the Class A Noteholders, in accordance with
          the Note Trust Deed and the Security Trust Deed.

     13.4 PAYMENTS

          Any payment to be made to the Class A Noteholders under the
          Transaction Documents may be made to the Principal Paying Agent or the
          Note Trustee (as the case may be) in accordance with the Note Trust
          Deed.

--------------------------------------------------------------------------------
14   SECURITY TRUST DEED

          The parties to this Supplementary Bond Terms Notice agree to comply
          with clause 12.12 of the Security Trust Deed.

--------------------------------------------------------------------------------
15   MISCELLANEOUS

     15.1 BANKING DAY

          Except where this Supplementary Bond Terms Notice expressly provides
          to the contrary, where any determination, date, payment, matter or
          thing falls under this Supplementary Bond Terms Notice on a day which
          is not a Banking Day, then

--------------------------------------------------------------------------------
                                                                         PAGE 39
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

          such determination, date, payment, matter or thing shall be done or
          extended to the first Banking Day thereafter.

     15.2 PROVISIONS OF THE MASTER TRUST DEED TO APPLY OTHER THAN AS SET OUT
          HEREIN

          Other than as expressly set out herein, or inconsistent with this
          Supplementary Bond Terms Notice, but subject to clause 15.4, the
          provisions of the Master Trust Deed shall apply to all Notes and to
          all Noteholders.

     15.3 LIMITATION OF LIABILITY

          Without derogating from the generality of clause 15.2 nothing in this
          Supplementary Bond Terms Notice shall, nor shall it be construed as,
          limiting or in any way affecting the full operation of clause 26 of
          the Master Trust Deed.

     15.4 AGGREGATE OUTSTANDING PRINCIPAL BALANCE OF NOTES

          For the purposes of clause 7.9 of the Master Trust Deed, the aggregate
          Outstanding Principal Balance of Notes created on the Bond Issue Date
          may exceed the then aggregate Outstanding Principal Balance of the
          Portfolio of Mortgages attached to the Bond Issue Direction.

     15.5 ATTORNEY

          Each of the Attorneys executing this notice states that the Attorney
          has no notice of alteration to, or revocation or suspension of, the
          power of attorney appointing that Attorney.

--------------------------------------------------------------------------------
16   PRIVACY

          (a)  Each party to this Supplementary Bond Terms Notice acknowledges
               that Personal Information may be exchanged between the parties
               pursuant to the terms of this Supplementary Bond Terms Notice.

          (b)  If Personal Information is exchanged between the parties, the
               party which provides the Personal Information must ensure that it
               obtains such consents, if any, as are required by the Privacy Act
               1988 (as amended by the Privacy Amendment (Private Sector Act)
               2000 to be obtained by that party in relation to the collection,
               use or disclosure of the Personal Information.

          (c)  Each party to this Supplementary Bond Terms Notice undertakes to
               use its best endeavours to ensure that at all times during the
               term of this Supplementary Bond Terms Notice:

               (1)  Personal Information provided to it (the receiving party) by
                    another party (the providing party):

                    (A)  unless otherwise required by law, will be used only for
                         the purpose of fulfilling the receiving party's
                         obligations under the Transaction Documents; and

                    (B)  except as expressly provided pursuant to the
                         Transaction Documents, will not be disclosed to any
                         third party unless

--------------------------------------------------------------------------------
                                                                         PAGE 40
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

                         express consent in writing is obtained from the
                         providing party; and

               (2)  in addition to the obligation under clause 16(b) above, it
                    will comply with the Privacy Act 1988 (as amended by the
                    Privacy Amendment (Private Sector Act) 2000 and all
                    applicable regulations, principles, standards, codes of
                    conduct or guidelines concerning the handling of Personal
                    Information under that Act or with any request or direction
                    arising directly from or in connection with the proper
                    exercise of the functions of the Privacy Commissioner.

          (d)  In this clause 16, "Personal Information" has the same meaning as
               in the Privacy Act 1988.

          (e)  Notwithstanding anything else contained in this clause 16,
               paragraphs (a) to (c) above do not apply to the Note Trustee, the
               Principal Paying Agent, the Calculation Agent or the Note
               Registrar. Each of the Note Trustee, the Principal Paying Agent,
               the Calculation Agent and the Note Registrar agrees to comply
               with all privacy legislation applicable to it.

--------------------------------------------------------------------------------
                                                                         PAGE 41
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

Dated:    November 2003

TRUSTEE

SIGNED BY

PERPETUAL TRUSTEES AUSTRALIA LIMITED

by its attorney under Power of Attorney

dated

<TABLE>
<S>                                                              <C>
in the presence of:
                   -----------------------------                 ------------------------------

------------------------------------------------                 --------------------------------------------------
Witness                                                          Attorney

------------------------------------------------                 --------------------------------------------------
Name (please print)                                              Name (please print)

MANAGER

SIGNED BY

ME PORTFOLIO MANAGEMENT LIMITED

by its attorney under Power of Attorney

dated

in the presence of:

------------------------------------------------                 --------------------------------------------------
Witness                                                          Attorney

------------------------------------------------                 --------------------------------------------------
Name (please print)                                              Name (please print)
</TABLE>

--------------------------------------------------------------------------------
                                                                         PAGE 42
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

SECURITY TRUSTEE

SIGNED BY

PERPETUAL TRUSTEE COMPANY LIMITED

by its attorney under Power of Attorney

dated

<TABLE>

<S>                                                             <C>
in the presence of:

------------------------------------------------                 --------------------------------------------------
Witness                                                          Attorney

------------------------------------------------                 --------------------------------------------------
Name (please print)                                              Name (please print)

NOTE TRUSTEE

SIGNED BY

THE BANK OF NEW YORK

by its Authorised Signatory in the

presence of:

------------------------------------------------                 --------------------------------------------------
Witness                                                          Authorised Signatory

------------------------------------------------                 --------------------------------------------------
Name (please print)                                              Name (please print)
</TABLE>

--------------------------------------------------------------------------------
                                                                         PAGE 43
<PAGE>

                Supplementary Bond Terms Notice Class A Notes and Class B Notes

--------------------------------------------------------------------------------
SCHEDULE 1

--------------------------------------------------------------------------------
SUPPLEMENTARY BOND TERMS NOTICE
SMHL GLOBAL FUND NO. 5 - LIQUIDITY NOTES

TO:           PERPETUAL TRUSTEES AUSTRALIA LIMITED
              ABN 86 000 431 827
              as trustee of the SMHL Global Fund No. 5 (TRUSTEE)

FROM:         ME PORTFOLIO MANAGEMENT LIMITED
              ABN 79 005 964 134
              (MANAGER)

--------------------------------------------------------------------------------
1    FUNCTION

     This Supplementary Bond Terms Notice:

     (a)  accompanies a Securitisation Fund Bond Issue Direction dated November
          2003 as the same may be amended from time to time, in relation to a
          proposed issue of Notes by the Trustee;

     (b)  sets out the Supplementary Bond Terms for the Notes comprised in the
          Class named in the Bond Issue Direction as the "SMHL Global Fund No. 5
          - Liquidity Notes"; and

     (c)  shall be entered into the Register by the Trustee pursuant to clause
          23.1(f) of the Master Trust Deed.

--------------------------------------------------------------------------------
2    DEFINITIONS AND INTERPRETATION

     2.1  DEFINITIONS

          In this Supplementary Bond Terms Notice (including clause 1), unless
          the context indicates a contrary intention:

          BOND ISSUE DIRECTION means the Securitisation Fund Bond Issue
          Direction referred to in clause 1(a).

          FINAL MATURITY DATE means the earlier of:

          (a)  [*]; and

          (b)  the date declared to be the Final Maturity Date in accordance
               with clause 5.

          INTEREST AMOUNT means, in relation to a Liquidity Note and an Interest
          Period, interest on that Liquidity Note for that Interest Period
          calculated in accordance with clause 3.2.

--------------------------------------------------------------------------------
                                                                         PAGE 44
<PAGE>
                Supplementary Bond Terms Notice Class A Notes and Class B Notes

          INTEREST PERIOD has the same meaning as in the SMHL Global Fund No. 5
          Bond Terms for the Class B Notes.

          INTEREST RATE has, in relation to an Interest Period, the same meaning
          as in the SMHL Global Fund No. 5 Bond Terms for Class B Notes.

          ISSUE DATE means the Bond Issue Date relating to the Liquidity Notes.

          SMHL GLOBAL FUND NO. 5 BOND TERMS means the Supplementary Bond Terms
          Notice dated on or about the date of this Supplementary Bond Terms
          Notice in respect of the Securitisation Fund and providing terms of
          issue for the Class A Notes and Class B Notes.

          LIQUIDITY NOTES means the Bonds (as defined in the Master Trust Deed)
          comprised in the Class named in the Bond Issue Direction as "SMHL
          Global Fund No. 5 -Liquidity Notes", issued by the Trustee pursuant to
          the Bond Issue Direction and in accordance with the Master Trust Deed.

          LIQUIDITY NOTEHOLDER means initially P.T. Limited (as nominee for
          Perpetual Trustees Australia Limited as Trustee for SMHL SF12), and
          thereafter each person who is from time to time entered in the
          Register as the holder of a Liquidity Note.

          MANAGER means ME Portfolio Management Limited.

          MASTER TRUST DEED means the Master Trust Deed dated 4 July 1994 made
          between the Trustee and the Manager and providing for the
          establishment of a series of separate trusts known collectively as the
          Superannuation Members' Home Loans Trusts, as amended from time to
          time.

          ORIGINAL PRINCIPAL BALANCE means, in relation to a Liquidity Note, the
          initial Face Value of the Liquidity Note.

          OUTSTANDING PRINCIPAL BALANCE means, at any time in relation to a
          Liquidity Note, the Original Principal Balance of the Liquidity Note
          minus all repayments of principal made in relation to the Liquidity
          Note.

          PAYMENT DATE has the same meaning as in the SMHL Global Fund No. 5
          Bond Terms for Class B Notes.

          PRINCIPAL COLLECTIONS has the same meaning as in the SMHL Global Fund
          No. 5 Bond Terms.

          SECURITISATION FUND means the Securitisation Fund established under
          the Master Trust Deed known as the SMHL Global Fund No. 5.

          SECURITY TRUST DEED means the Security Trust Deed for the
          Securitisation Fund.

          TRUSTEE means Perpetual Trustees Australia Limited, in its capacity as
          trustee of the Securitisation Fund.

     2.2  INCORPORATION OF MASTER TRUST DEED DEFINITIONS

          Subject to clause 2.1, each term or expression used herein that is
          defined in the Master Trust Deed (as amended by the SMHL Global Bond
          Terms) and is not defined herein shall have the same meaning herein
          unless the context otherwise requires or unless otherwise defined
          herein.

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                                                                         Page 45

<PAGE>

     2.3  INTERPRETATION

          The provisions of clause 1.2 of the Master Trust Deed shall be
          incorporated, mutatis mutandis, into this Supplementary Bond Terms
          Notice, except that references to the SMHL Global Fund No. 5 Bond
          Terms are to the SMHL Global Fund No. 5 Bond Terms as at the Bond
          Issue Date.

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3    INTEREST ON THE LIQUIDITY NOTE

     3.1  INTEREST

          Each Liquidity Note bears interest calculated, and payable in arrears,
          in accordance with this clause 3 and clause 7 until the Final Maturity
          Date or the date on which the Outstanding Principal Balance of the
          Liquidity Note is reduced to zero (whichever is the earlier).

     3.2  CALCULATION OF INTEREST

          Interest on each Liquidity Note is calculated for each Interest
          Period:

          (a)  on the daily Outstanding Principal Balance of the Liquidity Note
               during that Interest Period;

          (b)  at the Interest Rate for the Liquidity Note for that Interest
               Period; and

          (c)  on the actual number of days in that Interest Period and assuming
               a year of 365 days.

     3.3  PAYMENT OF INTEREST

          On each Payment Date, the Manager must direct the Trustee to pay, and
          the Trustee must subject to clause 7, pay the Interest Amount for each
          Liquidity Note for the Interest Period to which that Payment Date
          relates.

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4    PAYMENT OF PRINCIPAL ON THE NOTES

     4.1  FINAL MATURITY DATE

          The Outstanding Principal Balance of each Liquidity Note must, subject
          to clause 7, be repaid in full on the Final Maturity Date.

     4.2  REDUCTION IN PRINCIPAL BALANCE

          On each Payment Date, the Trustee must (at the direction of the
          Manager) comply with clause 5.5 of the SMHL Global Fund No. 5 Bond
          Terms and each repayment of principal of the Liquidity Notes must be
          applied as between each Liquidity Note as the Manager may from time to
          time determine until the Outstanding Principal Balance for each
          Liquidity Note is reduced to zero. Each payment of principal in
          respect of a Liquidity Note under this Supplementary Bond Terms Notice
          reduces the Outstanding Principal Balance of the Liquidity Note by the
          amount of that payment. The Trustee has no obligation to make any
          payment under this clause 4 in respect of the Liquidity Notes in
          excess of the Outstanding

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                                                                         Page 46

<PAGE>

          Principal Balance of the Liquidity Notes immediately prior to that
          payment being made.

     4.3  CANCELLATION ON REPAYMENT

          Upon the reduction of the Outstanding Principal Balance of the
          Liquidity Notes to zero by repayment of principal in accordance with
          this Supplementary Bond Terms Notice and payment of all the Interest
          Amounts in relation to that Liquidity Bond, the Liquidity Note is
          cancelled.

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5    NOTES CALLABLE AT OPTION OF TRUSTEE

     If the Trustee declares a date to be the Final Maturity Date of the Notes
     issued pursuant to the SMHL Global Fund No. 5 Bond Terms in accordance with
     the SMHL Global Fund No. 5 Bond Terms, the Trustee must declare, and the
     Manager must direct the Trustee to declare, by giving not less than 5
     Banking Day's notice to the Liquidity Noteholder, that same date to be the
     Final Maturity Date for the Liquidity Notes.

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6    CASH COLLATERAL

     The Trustee and Manager must:

     (a)  comply with the terms of clause 5 of the SMHL Global Fund No. 5 Bond
          Terms; and

     (b)  not make any variation or amendment to the SMHL Global Fund No. 5 Bond
          Terms without the consent of the Liquidity Noteholder.

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7    DISTRIBUTION OF COLLECTIONS

     7.1  DISTRIBUTION OF COLLECTIONS

          Subject to the terms of the Security Trust Deed, on each Payment Date,
          the Trustee must apply the Interest Collections and the Principal
          Collections for the relevant Calculation Period in accordance with the
          SMHL Global Fund No. 5 Bond Terms.

     7.2  RIGHTS FOR REPAYMENT OF PRINCIPAL

          The rights of the Liquidity Noteholder to receive payment of or
          towards the Outstanding Principal Balance are subject to clause 6.3 of
          the SMHL Global Fund No. 5 Bond Terms.

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8    NOTIFICATIONS OF CALCULATIONS ETC

     The Manager must, not later than two Banking Days before each Payment Date
     advise the Trustee in writing of the Outstanding Principal Balance of all
     Liquidity Notes following the making of all payments to be made on that
     Payment Date in accordance

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                                                                         Page 47

<PAGE>

     with the SMHL Global Fund No. 5 Bond Terms and this Supplementary Bond
     Terms Notice.

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9    NOTICE TO NOTEHOLDERS

     (a)  (NOTICES): The Manager shall from time to time advise the Liquidity
          Noteholder of the Interest Amount, Principal Entitlement and
          Outstanding Principal Balance on the Liquidity Notes.

     (b)  (METHOD OF NOTICES): A notice to the Liquidity Noteholder pursuant to
          clause 9(a) must be given in writing sent to the address or facsimile
          number of the Liquidity Noteholder then appearing in the Register.

     (c)  (NON-RECEIPT): The Manager shall not be liable for the accidental
          omission to give to, or the non-receipt or late receipt by, the
          Liquidity Noteholder of a notice pursuant to this clause 9.

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10   RESTRICTION ON TRANSFER

     For the purposes of clause 8.1 of the Master Trust Deed the Liquidity
     Noteholder may not transfer any Liquidity Note without the prior written
     consent of the trustee for the time being of the Fund on whose behalf it
     holds Liquidity Notes, the Security Trustee and provided the Manager
     receives from each Designated Rating Agency a confirmation that there will
     be no adverse change to the rating of the Notes.

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11   RATING AGENCY REQUIREMENTS

     11.1 DESIGNATED RATING AGENCIES

          The Designated Rating Agencies for the Liquidity Notes are Fitch
          Ratings, Moody's and S&P.

     11.2 DESIGNATED RATINGS

          The Liquidity Notes are not rated and have no Designated Rating.

     11.3 INVESTMENT OF FUND

          The Trustee and the Manager must comply with the SMHL Global Fund No.
          5 Bond Terms insofar as they relate to:

          (a)  the investment of the Assets of the Fund in Authorised
               Investments; and

          (b)  the exercise of their respective powers under the Master Trust
               Deed with respect to the setting of the rate of interest payable
               on or in respect of Loans secured by Mortgages comprised in the
               Assets of the Fund.

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                                                                         Page 48

<PAGE>

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12   MISCELLANEOUS

     12.1 BANKING DAY

          Where any determination, date, payment, matter or thing falls under
          this Supplementary Bond Terms Notice on a day which is not a Banking
          Day, then such determination, date, payment, matter or thing shall be
          done or extended to the first Banking Day thereafter.

     12.2 PROVISIONS OF THE MASTER TRUST DEED TO APPLY OTHER THAN AS SET OUT
          HEREIN

          Other than as expressly set out herein, or inconsistent with this
          Supplementary Bond Terms Notice, but subject to clause 12.3, the
          provisions of the Master Trust Deed shall apply to all Notes and to
          all Noteholders.

     12.3 LIMITATION OF LIABILITY

          Without derogating from the generality of clause 12.2 nothing in this
          Supplementary Bond Terms Notice shall, nor shall it be construed as,
          limiting or in any way affecting the full operation of clause 26 of
          the Master Trust Deed.

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13   FINANCIAL DEFAULT

     For the purposes of the Securitisation Fund and all Transaction Documents
     relating to the Securitisation Fund, any failure by the Trustee to pay all
     or part of any Interest Amount on any Payment Date other than the Final
     Maturity Date does not constitute a Financial Default or an Event of
     Default for the purposes of the Security Trust Deed.

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14   ATTORNEY

     The attorney executing this notice states that he or she has no notice of,
     alteration to, or revocation or suspension of, the power of attorney
     appointing that attorney.

DATED:               November 2003

For and on behalf of
ME PORTFOLIO MANAGEMENT LIMITED
by its attorney in the presence of:

<TABLE>
<S>                                                            <C>

------------------------------------------------                 --------------------------------------------------
Witness                                                          Attorney

------------------------------------------------                 --------------------------------------------------
Name (please print)                                              Name (please print)

</TABLE>

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                                                                         Page 49

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