Document:

SECOND SUPPLEMENTAL MASTER ISSUER TRUST DEED      EXHIBIT 4.6.1

                            DATED 21 NOVEMBER 2007

                          PERMANENT MASTER ISSUER PLC
                              (AS MASTER ISSUER)

                                      AND

                             THE BANK OF NEW YORK
                               (AS NOTE TRUSTEE)

                                 RELATING TO A

                        MORTGAGE BACKED NOTE PROGRAMME

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                                   CONTENTS

CLAUSE                                                                     PAGE

1.       Interpretation.......................................................1
2.       Amendment to the Terms and Conditions................................1
3.       Amendment to the Covenants of the Master Issuer......................1
4.       Supplemental.........................................................2
5.       Notices and Demands..................................................2
6.       Choice of Law........................................................2
7.       Counterparts.........................................................2
8.       Third Party Rights...................................................2
9.       Submission to Jurisdiction...........................................2

Signatories...................................................................4

APPENDIX

1.       Amended and Restated Terms and Conditions............................5

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THIS SECOND SUPPLEMENTAL MASTER ISSUER TRUST DEED (this DEED) is made on 21
November 2007

BETWEEN:

(1)      PERMANENT MASTER ISSUER PLC (registered number 5922774) whose
         registered office is at 35 Great St. Helen's, London EC3A 6AP (the
         MASTER ISSUER); and

(2)      THE BANK OF NEW YORK, a New York banking corporation whose London
         branch address is at 48th Floor, One Canada Square, London E14 5AL
         (acting in its capacity as NOTE TRUSTEE, which expression shall
         include such company and all other persons and companies for the time
         being acting as note trustee under this Deed).

WHEREAS:

(A)      This Deed is supplemental to the Master Issuer Trust Deed made between
         the parties hereto and dated the Programme Date as supplemented and
         amended by the First Supplemental Master Issuer Trust Deed between the
         parties hereto and dated 12 January 2007 (herein after referred to as
         the EXISTING MASTER ISSUER TRUST DEED).

(B)      The Master Issuer and the Note Trustee have agreed to enter into this
         Deed to, among other things, permit any consequential changes to the
         Terms and Conditions of the Notes set out in Schedule 3 of the
         Existing Master Issuer Trust Deed (the TERMS AND CONDITIONS) as are
         required and any other amendment as may be required to give effect to
         this Deed.

NOW THIS DEED WITNESSES as follows:

1.       INTERPRETATION

         The amended and restated master definitions and construction schedule
         signed by, amongst others, the parties to this Deed and dated 21
         November 2007 (as the same may be amended, varied or supplemented from
         time to time with the consent of the parties to this Deed) (the MASTER
         DEFINITIONS AND CONSTRUCTION SCHEDULE) and the master issuer master
         definitions and construction schedule signed by, amongst others, the
         parties to this Deed and dated 21 November 2007 (as the same may be
         amended, varied or supplemented from time to time with the consent of
         the parties to this Deed) (the MASTER ISSUER MASTER DEFINITIONS AND
         CONSTRUCTION SCHEDULE) are expressly and specifically incorporated
         into this Deed and, accordingly, the expressions defined in the Master
         Definitions and Construction Schedule and the Master Issuer Master
         Definitions and Construction Schedule (as so amended, varied or
         supplemented from time to time) shall, except where the context
         otherwise requires and save where otherwise defined herein, have the
         meanings in this Deed, including the Recitals hereto, and this Deed
         shall be construed in accordance with the interpretation provisions
         set out in Clause 3 (Interpretation and Construction) of the Master
         Definitions and Construction Schedule and the Master Issuer Master
         Definitions and Construction Schedule.

2.       AMENDMENT TO THE TERMS AND CONDITIONS

         The Master Issuer and the Note Trustee agree to amend and restate the
         Terms and Conditions in accordance with Appendix 1 hereto.

3.       AMENDMENT TO THE COVENANTS OF THE MASTER ISSUER

         The Master Issuer and the Note Trustee agree to amend the covenants of
         the Master Issuer in the Master Issuer Trust Deed by inserting the
         following additional clauses 13(ii), 13(jj) and 13(kk):

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         "(ii)   RETAINED AMOUNTS: ensure that any amounts retained by the
                 Master Issuer (other than those retained by way of profit)
                 will be reasonably required to provide for losses or expenses
                 arising from the Master Issuer's business or to maintain or
                 enhance its creditworthiness;

         (jj)    RECEIPTS AND PAYMENT OBLIGATIONS: ensure that (i) all receipts
                 that may be received by the Master Issuer and (ii) all of the
                 payment obligations of the Master Issuer, are accurately
                 reflected in Schedule 2 of the Master Issuer Cash Management
                 Agreement; and

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

4.       SUPPLEMENTAL

         This Deed is supplemental to the Original Master Issuer Trust Deed.
         Save as expressly amended by this Deed, the Original Master Issuer
         Trust Deed shall remain in full force and effect and the security
         created under the Original Master Issuer Trust Deed and all of the
         other rights, powers, obligations and immunities comprised therein and
         arising pursuant thereto shall remain in full force and effect
         notwithstanding this Deed. The Original Master Issuer Trust Deed and
         this Deed shall henceforth be read and construed as one document and
         references in the Original Master Issuer Trust Deed to "this Deed"
         shall be read as references to the Original Master Issuer Trust Deed
         as supplemented and amended by this Deed.

5.       NOTICES AND DEMANDS

         Any notice or communication under or in connection with this Deed or
         the Master Issuer Trust Deed shall be given in the manner and at the
         times set out in Clause 24 (Notices) of the Master Issuer Trust Deed
         or at such other address as the recipient may have notified to the
         other parties hereto and/or thereto in writing.

6.       CHOICE OF LAW

         This Deed is governed by and shall be construed in accordance with
         English law.

7.       COUNTERPARTS

         This Deed may be signed (manually or by facsimile) and delivered in
         more than one counterpart all of which, taken together, shall
         constitute one and the same Deed.

8.       THIRD PARTY RIGHTS

         This Deed does not create any right under the Contracts (Rights of
         Third Parties) Act 1999 which is enforceable by any person who is not
         a party to this Deed.

9.       SUBMISSION TO JURISDICTION

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

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DULY EXECUTED AND DELIVERED AS A DEED by each of the parties hereto or on its
behalf on the date appearing on page 1.

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                                  SIGNATORIES

THE MASTER ISSUER

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

Director                                   /S/ CLAUDIA WALLACE

Director/Secretary:                        /S/ HELENA WHITAKER

THE NOTE TRUSTEE

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

Witness: /S/ CHRISTOPHER WALL            )

Name:

Address: ALLEN & OVERY LLP
         LONDON E14 5DU

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                                  APPENDIX 1

                   AMENDED AND RESTATED TERMS AND CONDITIONS

      Schedule 3 of the Master Issuer Trust Deed shall be replaced in its
                          entirety by the following:

                                  SCHEDULE 3

                       TERMS AND CONDITIONS OF THE NOTES

The following are the terms and conditions (the CONDITIONS, and any reference
to a CONDITION shall be construed accordingly) of each Series and Class of the
Notes in the form (subject to amendment) which will be incorporated by
reference into each Global Note and each Definitive Note, in the latter case
only if permitted by the relevant stock exchange or other relevant authority
(if any) and agreed by Permanent Master Issuer PLC (referred to in the Base
Prospectus as the MASTER ISSUER or the ISSUING ENTITY) and the relevant
Dealer(s) and/or Manager(s) at the time of issue but, if not so permitted and
agreed, such Definitive Note will have endorsed thereon or attached thereto
such Conditions. The Final Terms in relation to the relevant Series and Class
of Notes may specify other terms and conditions which shall, to the extent so
specified or to the extent inconsistent with these Conditions, replace or
modify these Conditions for the purpose of such Series and Class of Notes. The
applicable Final Terms (or the relevant provisions thereof) will be endorsed
upon, or attached to, each Global Note and each Definitive Note.

The Notes are constituted by the Master Issuer Trust Deed. The security for the
Notes is created pursuant to, and on the terms set out in, the Master Issuer
Deed of Charge. By the Master Issuer Paying Agent and Agent Bank Agreement,
provision is made for, inter alia, the payment of principal and interest in
respect of the Notes.

References herein to the NOTES shall, unless the context otherwise requires, be
references to all the Notes issued by the Master Issuer and constituted by the
Master Issuer Trust Deed and shall mean:

(a)      in relation to any Notes of a Series and Class represented by a Global
         Note or Global Notes, units of the lowest Specified Denomination in
         the Specified Currency in each case of such Series and Class;

(b)      any Global Note; and

(c)      any Definitive Note issued in exchange for a Global Note.

Notes constituted by the Master Issuer Trust Deed are issued in series (each a
SERIES) and each Series comprises one or more classes of Notes (each a CLASS).
Each Series and Class of Notes is subject to the applicable Final Terms. The
Final Terms in relation to each Series and Class of Notes (or the relevant
provisions thereof) will be endorsed upon, or attached to, such Series and
Class of Notes and will supplement these Conditions in respect of such Series
and Class of Notes and may specify other terms and conditions which shall, to
the extent so specified or to the extent inconsistent with these Conditions,
replace or modify these Conditions for the purpose of such Series and Class of
Notes. References to the APPLICABLE FINAL TERMS are, in relation to a Series
and Class of Notes, to the Final Terms (or the relevant provisions thereof)
attached to or endorsed on such Series and Class of Notes.

The statements in these Conditions include summaries of, and are subject to,
the detailed provisions of the Master Issuer Trust Deed, the Master Issuer Deed
of Charge and the Master Issuer Paying Agent and Agent Bank Agreement.

Copies of the Master Issuer Trust Deed, the Master Issuer Deed of Charge, the
Master Issuer Paying Agent and Agent Bank Agreement and each of the other
Transaction Documents are available for inspection during

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normal business hours at the registered office of the Master Issuer, being 35
Great St. Helen's, London EC3A 6AP, United Kingdom and the specified office for
the time being of (a) the Principal Paying Agent, being at Citigroup Centre,
Canada Square, Canary Wharf, London E14 5LB, United Kingdom and (b) the US
Paying Agent, being at 14th Floor, 388 Greenwich Street, New York, New York
10013, United States. Copies of the Final Terms of each Series and Class of
Notes are obtainable by Noteholders during normal business hours at the
registered office of the Master Issuer and the specified office for the time
being of (i) the Principal Paying Agent and (ii) the US Paying Agent and any
Noteholder must produce evidence satisfactory to the relevant Paying Agent as
to its holding of Notes and identity.

The Holders of any Series and Class of Notes are entitled to the benefit of,
are bound by, and are deemed to have notice of all the provisions of, and
definitions contained or incorporated in, the Master Issuer Trust Deed, the
Master Issuer Deed of Charge, the Master Issuer Paying Agent and Agent Bank
Agreement, each of the other Transaction Documents and the applicable Final
Terms and to have notice of each other Final Terms relating to each other
Series and Class of Notes.

A glossary of definitions appears in CONDITION 19.

References herein to the Class A Noteholders, the Class B Noteholders, the
Class M Noteholders, the Class C Noteholders and the Class D Noteholders shall,
in each case and unless specified otherwise, be references to the Holders of
the Notes of all Series of the applicable Class.

References herein to the Class A Notes, the Class B Notes, the Class M Notes,
the Class C Notes or the Class D Notes shall, in each case and unless specified
otherwise, be references to the Notes of all Series of the applicable Class.

1.       FORM, DENOMINATION, REGISTER, TITLE AND TRANSFERS

1.1      FORM AND DENOMINATION

         The US Notes will initially be offered and sold pursuant to a
         registration statement filed with the United States Securities and
         Exchange Commission. The Reg S Notes will initially be offered and
         sold outside the United States to non-US persons pursuant to Reg S.

         Each Series and Class of Notes will be issued in the Specified
         Currency and in the Specified Denomination.

         Each Series and Class of US Notes will be initially represented by a
         US Global Note, which, in the aggregate, will represent the Principal
         Amount Outstanding from time to time of such Series and Class of US
         Notes. Each Series and Class of Reg S Notes will be initially
         represented by a Reg S Global Note which, in the aggregate, will
         represent the Principal Amount Outstanding from time to time of such
         Series and Class of the Reg S Notes.

         Each Reg S Global Note will be deposited with, and registered in the
         name of a nominee of, a common depositary for Euroclear and
         Clearstream, Luxembourg. Each US Global Note will be deposited with a
         custodian for, and registered in the name of Cede & Co. (or such other
         name as may be requested by an authorised representative of DTC) as
         nominee of, DTC. Each Global Note will be numbered serially with an
         identifying number which will be recorded on the relevant Global Note
         and in the Register.

         Each Series and Class of Notes may be Fixed Rate Notes, Floating Rate
         Notes, Zero Coupon Notes or a combination of any of the foregoing,
         depending upon the Interest Basis shown in the applicable Final Terms.

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         Each Series and Class of Notes may be Bullet Redemption Notes,
         Scheduled Redemption Notes, Pass-Through Notes or a combination of any
         of the foregoing, depending upon the Redemption/Payment Basis shown in
         the applicable Final Terms.

         Global Notes will be exchanged for notes in definitive registered form
         (DEFINITIVE NOTES) only under certain limited circumstances (as
         described in the relevant Global Note). If Definitive Notes are
         issued, they will be serially numbered and issued in an aggregate
         principal amount equal to the Principal Amount Outstanding of the
         relevant Global Note and in registered form only.

         The Reg S Notes (in either global or definitive form) will be issued
         in such denominations as specified in the applicable Final Terms, save
         that each Dollar Note will be issued in minimum denominations of
         $100,000 and in integral multiples of $1,000 in excess thereof, each
         Euro Note will be issued in minimum denominations of [EURO]50,000 and
         in integral multiples of [EURO]1,000 in excess thereof and each
         Sterling Note will be issued in minimum denominations of [POUND]50,000
         and in integral multiples of [POUND]1,000 in excess thereof (provided
         that Notes issued with a maturity of less than one year will be issued
         in minimum denominations of [POUND]100,000 (or such equivalent
         amount). No Note will be issued in a denomination of less than
         [EURO]50,000 (or its equivalent in the relevant currency).

         In the case of a Series and Class of Notes with more than one
         Specified Denomination, Notes of one Specified Denomination may not be
         exchanged for Notes of such Series and Class of another Specified
         Denomination.

1.2      REGISTER

         The Registrar will maintain the Register in respect of the Notes in
         accordance with the provisions of the Master Issuer Paying Agent and
         Agent Bank Agreement. In these Conditions, the HOLDER of a Note means
         the person in whose name such Note is for the time being registered in
         the Register (or, in the case of a joint holding, the first named
         thereof). A Note will be issued to each Noteholder in respect of its
         registered holding. Each Note will be numbered serially with an
         identifying number which will be recorded in the Register.

1.3      TITLE

         The Holder of each Note shall (to the fullest extent permitted by
         applicable law) be treated by the Master Issuer, the Note Trustee, the
         Master Issuer Security Trustee, the Agent Bank and any Agent as the
         absolute owner of such Note for all purposes (including the making of
         any payments) regardless of any notice of ownership, theft or loss or
         any trust or other interest therein or of any writing thereon (other
         than the endorsed form of transfer).

1.4      TRANSFERS

         Title to the Notes shall pass by and upon registration in the
         Register. Subject as provided otherwise in this CONDITION 1.4, a Note
         may be transferred upon surrender of the relevant Note, with the
         endorsed form of transfer duly completed, at the Specified Office of
         the Registrar or the Transfer Agent, together with such evidence as
         the Registrar or (as the case may be) such Transfer Agent may
         reasonably require to prove the title of the transferor and the
         authority of the individuals who have executed the form of transfer;
         provided, however, that a Note may only be transferred in the minimum
         denominations specified in the applicable Final Terms. Where not all
         the Notes represented by the surrendered Note are the subject of the
         transfer, a new Note in respect of the balance of the Notes will be
         issued to the transferor.

         Within five Business Days of such surrender of a Note, the Registrar
         will register the transfer in question and deliver a new Note of a
         like principal amount to the Notes transferred to each relevant Holder
         at its Specified Office or (as the case may be) the Specified Office
         of the Transfer Agent or

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         (at the request and risk of any such relevant Holder) by uninsured
         first class mail (and by airmail if the Holder is overseas) to the
         address specified for such purpose by such relevant Holder.

         The transfer of a Note will be effected without charge by the
         Registrar, but subject to payment of (or the giving of such indemnity
         as the Registrar may require for) any tax or other governmental
         charges which may be imposed in relation to it.

         Noteholders may not require transfers of Notes to be registered during
         the period of 15 days ending on the due date for any payment of
         principal or interest in respect of the Notes.

         All transfers of Notes and entries on the Register are subject to the
         detailed regulations concerning the transfer of Notes scheduled to the
         Master Issuer Paying Agent and Agent Bank Agreement. The regulations
         may be changed by the Master Issuer with the prior written approval of
         the Note Trustee and the Registrar. A copy of the current regulations
         will be mailed (free of charge) by the Registrar to any Noteholder who
         requests in writing a copy of such regulations.

         The Notes are not issuable in bearer form.

2.       STATUS, PRIORITY AND SECURITY

2.1      STATUS

         The Notes of each Series and Class are direct, secured and
         unconditional obligations of the Master Issuer.

         Subject to the provisions of CONDITIONS 4 and 5 and subject to the
         other payment conditions set out in the applicable Final Terms and the
         other Transaction Documents:

         (a)     the Class A Notes of each Series will rank pari passu without
                 any preference or priority among themselves and with the Class
                 A Notes of each other Series but in priority to the Class B
                 Notes, the Class M Notes, the Class C Notes and the Class D
                 Notes of any Series;

         (b)     the Class B Notes of each Series will rank pari passu without
                 any preference or priority among themselves and with the Class
                 B Notes of each other Series but in priority to the Class M
                 Notes, the Class C Notes and the Class D Notes of any Series;

         (c)     the Class M Notes of each Series will rank pari passu without
                 any preference or priority among themselves and with the Class
                 M Notes of each other Series but in priority to the Class C
                 Notes and the Class D Notes of any Series;

         (d)     the Class C Notes of each Series will rank pari passu without
                 any preference or priority among themselves and with the Class
                 C Notes of each other Series but in priority to the Class D
                 Notes of any Series; and

         (e)     the Class D Notes of each Series will rank pari passu without
                 any preference or priority among themselves and with the Class
                 D Notes of each other Series.

2.2      CONFLICT BETWEEN THE CLASSES OF NOTES

         The Master Issuer Trust Deed contains provisions requiring the Note
         Trustee to have regard to the interests of the Class A Noteholders,
         the Class B Noteholders, the Class M Noteholders, the Class C
         Noteholders and the Class D Noteholders equally as regards all powers,
         trusts, authorities, duties and discretions of the Note Trustee under
         these Conditions or any of the Transaction Documents (except

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         where expressly provided otherwise), but requiring the Note Trustee to
         have regard (except as expressly provided otherwise):

         (a)     for so long as there are any Class A Notes outstanding, only
                 to the interests of the Class A Noteholders if, in the opinion
                 of the Note Trustee, there is or may be a conflict between the
                 interests of the Class A Noteholders and the interests of the
                 Class B Noteholders and/or the interests of the Class M
                 Noteholders and/or the interests of the Class C Noteholders
                 and/or the interests of the Class D Noteholders;

         (b)     subject to (a) above and for so long as there are any Class B
                 Notes outstanding, only to the interests of the Class B
                 Noteholders if, in the opinion of the Note Trustee there is or
                 may be a conflict between the interests of the Class B
                 Noteholders and the interest of the Class M Noteholders and/or
                 the interests of the Class C Noteholders and/or the interests
                 of the Class D Noteholders;

         (c)     subject to (a) and (b) above and for so long as there are any
                 Class M Notes outstanding, only to the interests of the Class
                 M Noteholders if, in the opinion of the Note Trustee, there is
                 or may be a conflict between the interests of the Class M
                 Noteholders and the interests of the Class C Noteholders
                 and/or the interests of the Class D Noteholders; and

         (d)     subject to (a), (b) above and (c) above and for so long as
                 there are any Class C Notes outstanding, only to the interests
                 of the Class C Noteholders if, in the opinion of the Note
                 Trustee, there is or may be a conflict between the interests
                 of the Class C Noteholders and the Class D Noteholders.

         The Master Issuer Trust Deed also contains provisions:

         (i)     limiting the powers of the Class B Noteholders, the Class M
                 Noteholders, the Class C Noteholders and the Class D
                 Noteholders in each case, of any Series, inter alia, to
                 request or direct the Note Trustee to take any action or to
                 pass an effective Extraordinary Resolution according to the
                 effect thereof on the interests of the Class A Noteholders of
                 that Series or of any other Series. Except in certain
                 circumstances described in CONDITION 11, the Master Issuer
                 Trust Deed contains no such limitation on the powers of the
                 Class A Noteholders, the exercise of which will be binding on
                 the Class B Noteholders, the Class M Noteholders, the Class C
                 Noteholders and the Class D Noteholders in each case, of any
                 Series, irrespective of the effect thereof on their respective
                 interests;

         (ii)    limiting the powers of the Class M Noteholders, the Class C
                 Noteholders and the Class D Noteholders in each case, of any
                 Series, inter alia, to request or direct the Note Trustee to
                 take any action or to pass an effective Extraordinary
                 Resolution according to the effect thereof on the interests of
                 the Class B Noteholders of that Series or of any other Series.
                 Except in certain circumstances described above and in
                 CONDITION 11, the Master Issuer Trust Deed contains no such
                 limitation on the powers of the Class B Noteholders, the
                 exercise of which will be binding on the Class M Noteholders,
                 the Class C Noteholders and the Class D Noteholders, in each
                 case, of any Series, irrespective of the effect thereof on
                 their respective interests;

         (iii)   limiting the powers of the Class C Noteholders and the Class D
                 Noteholders in each case, of any Series, inter alia, to
                 request or direct the Note Trustee to take any action or to
                 pass an effective Extraordinary Resolution according to the
                 effect thereof on the interests of the Class M Noteholders of
                 that Series or of any other Series. Except in certain
                 circumstances described above and in CONDITION 11, the Master
                 Issuer Trust Deed contains no such limitation on the powers of
                 the Class M Noteholders, the exercise of which will be binding

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                 on the Class C Noteholders and the Class D Noteholders in each
                 case, of any Series, irrespective of the effect thereof on
                 their interests; and

         (iv)    limiting the powers of the Class D Noteholders of any Series,
                 inter alia, to request or direct the Note Trustee to take any
                 action or to pass an effective Extraordinary Resolution
                 according to the effect thereof on the interests of the Class
                 C Noteholders of that Series or of any other Series. Except in
                 certain circumstances described above and in CONDITION 11, the
                 Master Issuer Trust Deed contains no such limitation on the
                 powers of the Class C Noteholders, the exercise of which will
                 be binding on the Class D Noteholders of any Series,
                 irrespective of the effect thereof on their respective
                 interests.

         The Note Trustee shall be entitled to assume, for the purpose of
         exercising any right, power, trust, authority, duty or discretion
         under or in relation to these Conditions or any of the Transaction
         Documents, without further investigation or inquiry, that such
         exercise will not be materially prejudicial to the interests of the
         Noteholders (or any Series and Class thereof), if each of the Rating
         Agencies rating the relevant Series and Class has confirmed in writing
         that the then current ratings of the applicable Series and Class of
         Notes would not be reduced, withdrawn or qualified by such exercise.

2.3      SECURITY

         As security for, inter alia, the payment of all monies payable in
         respect of the Notes, the Master Issuer has entered into the Master
         Issuer Deed of Charge creating the Master Issuer Security in favour of
         the Master Issuer Security Trustee for itself and on trust for, inter
         alios, the Note Trustee and the Noteholders.

3.       COVENANTS

         Save with the prior written consent of the Note Trustee or unless
         provided in or contemplated under these Conditions or any of the
         Transaction Documents to which the Master Issuer is a party, the
         Master Issuer shall not, so long as any Note remains outstanding:

3.1      NEGATIVE PLEDGE

         create or permit to subsist any mortgage, standard security, pledge,
         lien, charge or other security interest whatsoever (unless arising by
         operation of law), upon the whole or any part of its assets (including
         any uncalled capital) or its undertakings, present or future except
         where the same is given in connection with the issue of a Series and
         Class of Notes or the advance of a Master Issuer Subordinated Loan;

3.2      DISPOSAL OF ASSETS

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

3.3      EQUITABLE INTEREST

         permit any person other than itself and the Master Issuer Security
         Trustee (as to itself and on behalf of the Master Issuer Secured
         Creditors) to have any equitable or beneficial interest in any of its
         assets or undertakings or any interest, estate, right, title or
         benefit therein;

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3.4      BANK ACCOUNTS

         have an interest in any bank account, other than the Master Issuer
         Bank Accounts, except in connection with the issue of a Series where
         such bank account is immediately charged in favour of the Master
         Issuer Security Trustee pursuant to the Master Issuer Deed of Charge;

3.5      RESTRICTIONS ON ACTIVITIES

         carry on any business other than as described in the Base Prospectus
         (as revised, supplemented and/or amended from time to time) relating
         to the issue of the Notes, the advancing of Loan Tranches under the
         Master Intercompany Loan Agreement to Funding 2 and the related
         activities described therein or as contemplated in the Transaction
         Documents relating to the issue of the Notes and the advancing of Loan
         Tranches under the Master Intercompany Loan Agreement to Funding 2;

3.6      BORROWINGS

         incur any indebtedness in respect of borrowed money whatsoever or give
         any guarantee or indemnity in respect of any indebtedness or
         obligation of any person, except where the same is incurred or given
         or the Master Issuer becomes so obligated in connection with the issue
         of a Series and Class of Notes or the advance of a Master Issuer
         Subordinated Loan or a Master Issuer Start-Up Loan;

3.7      MERGER

         consolidate or merge with any other person or convey or transfer
         substantially all of its properties or assets to any other person;

3.8      WAIVER OR CONSENT

         permit the validity or effectiveness of any of the Master Issuer Trust
         Deed or the Master Issuer Deed of Charge or the priority of the
         security interests created thereby to be amended, terminated,
         postponed, waived or discharged, or permit any other person whose
         obligations form part of the Master Issuer Security to be released
         from such obligations;

3.9      EMPLOYEES OR PREMISES

         have any employees or premises or subsidiaries;

3.10     DIVIDENDS AND DISTRIBUTIONS

         pay any dividend or make any other distribution to its shareholders or
         issue any further shares or alter any rights attaching to its shares
         as at the date of the Master Issuer Deed of Charge;

3.11     PURCHASE NOTES

         purchase or otherwise acquire any Note or Notes; or

3.12     UNITED STATES ACTIVITIES

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

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4.       INTEREST

4.1      INTEREST ON FIXED RATE NOTES

         Each Fixed Rate Note bears interest on its Principal Amount
         Outstanding from (and including) the Interest Commencement Date at the
         rate(s) per annum equal to the Rate(s) of Interest payable, subject as
         provided in these Conditions, in arrear on the Interest Payment
         Date(s) in each year specified for such Fixed Rate Note up to (and
         including) the Final Maturity Date.

         Except as provided in the applicable Final Terms, the amount of
         interest payable in respect of any Fixed Rate Note on each Interest
         Payment Date for a Fixed Interest Period ending on (but excluding)
         such date will amount to the Fixed Coupon Amount. Payments of interest
         on any Interest Payment Date will, if so specified for such Note in
         the applicable Final Terms, amount to the Broken Amount so specified.

         As used in these Conditions, FIXED INTEREST PERIOD means the period
         from and including an Interest Payment Date (or the Interest
         Commencement Date) to but excluding the next (or the first) Interest
         Payment Date.

         If interest is required to be calculated in respect of any Fixed Rate
         Note for a period other than a Fixed Interest Period, such interest
         shall be calculated by applying the Rate of Interest specified for
         such Note in the applicable Final Terms to the Principal Amount
         Outstanding on such Note, multiplying such sum by the applicable Day
         Count Fraction, and rounding the resultant figure to the nearest
         sub-unit of the relevant Specified Currency, half of any such sub-unit
         being rounded upwards or otherwise in accordance with applicable
         market convention and (in the case of a Global Note) apportioning the
         resulting total between the Noteholders in respect thereof pro rata
         and pari passu.

         DAY COUNT FRACTION means, in respect of the calculation of an amount
         of interest for any Fixed Rate Note in accordance with this CONDITION
         4.1:

         (a)     if "Actual/Actual (ICMA)" is specified for such Note in the
                 applicable Final Terms:

                 (i)     in the case of Fixed Rate Notes where the number of
                         days in the relevant period from (and including) the
                         most recent Interest Payment Date for such Fixed Rate
                         Notes (or, if none, the Interest Commencement Date) to
                         (but excluding) the relevant Interest Payment Date
                         (the ACCRUAL PERIOD) is equal to or shorter than the
                         Determination Period during which the Accrual Period
                         ends, the number of days in such Accrual Period
                         divided by the product of (A) the number of days in
                         such Determination Period and (B) the number of
                         Determination Dates (as specified in the applicable
                         Final Terms) that would occur in one calendar year; or

                 (ii)    in the case of Fixed Rate Notes where the Accrual
                         Period is longer than the Determination Period during
                         which the Accrual Period ends, the sum of:

                         (A)     the number of days in such Accrual Period
                                 falling in the Determination Period in which
                                 the Accrual Period begins divided by the
                                 product of (x) the number of days in such
                                 Determination Period and (y) the number of
                                 Determination Dates that would occur in one
                                 calendar year; and

                         (B)     the number of days in such Accrual Period
                                 falling in the next Determination Period
                                 divided by the product of (I) the number of
                                 days in such Determination Period and (II) the
                                 number of Determination Dates that would occur
                                 in one calendar year; and

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<PAGE>

         (b)     if "30/360" is specified for such Fixed Rate Note in the
                 applicable Final Terms, the number of days in the period from
                 (and including) the most recent Interest Payment Date for such
                 Fixed Rate Note (or, if none, the Interest Commencement Date)
                 to (but excluding) the relevant Interest Payment Date (such
                 number of days being calculated on the basis of a year of 360
                 days with twelve 30-day months) divided by 360.

         As used in these Conditions, DETERMINATION PERIOD means each period
         from and including a Determination Date (as defined in the applicable
         Final Terms) to but excluding the next Determination Date (including
         where either the Interest Commencement Date or the final Interest
         Payment Date is not a Determination Date, the period commencing on the
         first Determination Date prior to, and ending on the first
         Determination Date falling after, such date).

4.2      INTEREST ON FLOATING RATE NOTES

(a)      Interest Payment Dates

         Each Floating Rate Note bears interest on its Principal Amount
         Outstanding from (and including) the Interest Commencement Date and
         such interest will be payable in arrear on the Interest Payment
         Date(s) in each year specified for such Floating Rate Note. Such
         interest will be payable in respect of each Floating Interest Period.

         As used in these Conditions, FLOATING INTEREST PERIOD means the period
         from and including an Interest Payment Date (or the Interest
         Commencement Date) to but excluding the next (or the first) Interest
         Payment Date.

         If a Business Day Convention is specified for a Floating Rate Note in
         the applicable Final Terms and (x) if there is no numerically
         corresponding day in the calendar month in which a Interest Payment
         Date should occur or (y) if any Interest Payment Date would otherwise
         fall on a day which is not a Business Day, then, if the Business Day
         Convention specified is:

         (i)     the "Following Business Day Convention", the Interest Payment
                 Date for such Floating Rate Note shall be postponed to the
                 next day which is a Business Day; or

         (ii)    the "Modified Following Business Day Convention", the Interest
                 Payment Date for such Floating Rate Note shall be postponed to
                 the next day which is a Business Day unless it would thereby
                 fall into the next calendar month, in which event such
                 Interest Payment Date shall be brought forward to the
                 immediately preceding Business Day; or

         (iii)   the "Preceding Business Day Convention", the Interest Payment
                 Date for such Floating Rate Note shall be brought forward to
                 the immediately preceding Business Day.

         In these Conditions, BUSINESS DAY means a day which is both:

         (i)     a day on which commercial banks and foreign exchange markets
                 settle payments and are open for general business (including
                 dealing in foreign exchange and foreign currency deposits) in
                 London, New York and any Additional Business Centre specified
                 in the applicable Final Terms;

         (ii)    a day on which the Trans-European Automated Real-Time Gross
                 Settlement Express Transfer (TARGET) System (the TARGET
                 SYSTEM) is open; and

         (iii)   in relation to any sum payable in a Specified Currency other
                 than sterling, US dollar or euro a day on which commercial
                 banks and foreign exchange markets settle payments and are
                 open for general business (including dealing in foreign
                 exchange and foreign currency

                                      13

<PAGE>

                 deposits) in the principal financial centre of the country of
                 the relevant Specified Currency (if other than London, New
                 York and any Additional Business Centre).

(b)      Rate of Interest

         The Rate of Interest payable from time to time in respect of a
         Floating Rate Note will be determined in the manner specified for such
         Note in the applicable Final Terms.

         (i)     ISDA Determination for Floating Rate Notes

                 Where "ISDA Determination" is specified for such Floating Rate
                 Note in the applicable Final Terms as the manner in which the
                 Rate of Interest is to be determined, the Rate of Interest for
                 each Floating Rate Interest Period will be the relevant ISDA
                 Rate plus or minus (as indicated for such Floating Rate Note
                 in the applicable Final Terms) the Margin (if any). For the
                 purposes of this subparagraph (i), ISDA RATE for an Interest
                 Period means a rate equal to the Floating Rate that would be
                 determined by the Agent Bank or other person specified in the
                 applicable Final Terms under an interest rate swap transaction
                 if the Agent Bank or that other person were acting as
                 Calculation Agent for that swap transaction under the terms of
                 an agreement incorporating the ISDA Definitions and under
                 which:

                 (A)     the Floating Rate Option is as specified for such
                         Floating Rate Note in the applicable Final Terms;

                 (B)     the Designated Maturity is the period specified for
                         such Floating Rate Note in the applicable Final Terms;
                         and

                 (C)     the relevant Reset Date is either (i) if the
                         applicable Floating Rate Option is based on LIBOR or
                         EURIBOR for a currency, the first day of that Interest
                         Period, or (ii) in any other case, as specified for
                         such Floating Rate Note in the applicable Final Terms.

                 For the purposes of this subparagraph (i), FLOATING RATE,
                 CALCULATION AGENT, FLOATING RATE OPTION, DESIGNATED MATURITY
                 and RESET DATE have the meanings given to those terms in the
                 ISDA Definitions.

         (ii)    Screen Rate Determination for Floating Rate Notes

                 Where SCREEN RATE DETERMINATION is specified for a Floating
                 Rate Note in the applicable Final Terms as the manner in which
                 the Rate of Interest is to be determined for such Floating
                 Rate Note, the Rate of Interest for each Interest Period will,
                 subject as provided below, be either:

                 (A)     the offered quotation (if there is only one quotation
                         on the Relevant Screen Page); or

                 (B)     the arithmetic mean (rounded if necessary to the fifth
                         decimal place, with 0.000005 being rounded upwards) of
                         the offered quotations,

                 (expressed as a percentage rate per annum) for the Reference
                 Rate which appears or appear, as the case may be, on the
                 Relevant Screen Page as at 11.00 a.m. (London time, in the
                 case of LIBOR, or Brussels time, in the case of EURIBOR) on
                 the Determination Date in question plus or minus the Margin
                 (if any), all as determined by the Agent Bank. If five or more
                 of such offered quotations are available on the Relevant
                 Screen Page, the highest (or, if there is more than one such
                 highest quotation, one only of such quotations) and the lowest
                 (or, if there is more than one such lowest quotation, one only
                 of such quotations) shall be

                                      14

<PAGE>

                 disregarded by the Agent Bank for the purpose of determining
                 the arithmetic mean (rounded as provided above) of such
                 offered quotations.

                 The Master Issuer Paying Agent and Agent Bank Agreement
                 contains provisions for determining the Rate of Interest
                 pursuant to this subparagraph (ii) in the event that the
                 Relevant Screen Page is not available or if, in the case of
                 (A) above, no such offered quotation appears or, in the case
                 of (B) above, fewer than three such offered quotations appear,
                 in each case as at the time specified in the preceding
                 paragraph.

                 If the Reference Rate from time to time in respect of a
                 Floating Rate Note is specified for such Floating Rate Note in
                 the applicable Final Terms as being other than LIBOR or
                 EURIBOR, the Rate of Interest in respect of such Floating Rate
                 Note will be determined as provided for such Note in the
                 applicable Final Terms.

(c)      Minimum Rate of Interest and/or Maximum Rate of Interest

         If the applicable Final Terms specifies a Minimum Rate of Interest for
         a Floating Rate Note for any Interest Period, then, in the event that
         the Rate of Interest for such Floating Rate Note in respect of such
         Interest Period determined in accordance with the provisions of
         paragraph (b) above is less than such Minimum Rate of Interest, the
         Rate of Interest for such Floating Rate Note for such Interest Period
         shall be such Minimum Rate of Interest.

         If the applicable Final Terms specifies a Maximum Rate of Interest for
         such Floating Rate Note for any Interest Period, then, in the event
         that the Rate of Interest for such Floating Rate Note in respect of
         such Interest Period determined in accordance with the provisions of
         paragraph (b) above is greater than such Maximum Rate of Interest, the
         Rate of Interest for such Floating Rate Note for such Interest Period
         shall be such Maximum Rate of Interest.

(d)      Determination of Rate of Interest and calculation of Interest Amounts

         The Agent Bank will at or as soon as practicable after each time at
         which the Rate of Interest is to be determined, determine the Rate of
         Interest for the relevant Interest Period.

         The Agent Bank will calculate the amount of interest payable on the
         Floating Rate Notes in respect of each Specified Denomination or (in
         the case of a Global Note) the Principal Amount Outstanding thereunder
         (each an INTEREST AMOUNT) for the relevant Interest Period. Each
         Interest Amount shall be calculated by applying the Rate of Interest
         to the Principal Amount Outstanding of each Floating Rate Note,
         multiplying such sum by the applicable Day Count Fraction, and
         rounding the resultant figure to the nearest sub-unit of the relevant
         Specified Currency, half of any such subunit being rounded upwards or
         otherwise in accordance with applicable market convention and (in the
         case of a Global Note) apportioning the resulting total between the
         Noteholders in respect thereof pro rata and pari passu.

         DAY COUNT FRACTION means, in respect of the calculation of an amount
         of interest for a Floating Rate Note in accordance with this CONDITION
         4.2(D) for any Interest Period:

         (a)     if ACTUAL/365 or ACTUAL/ACTUAL (ISDA) is specified for such
                 Floating Rate Note in the applicable Final Terms, the actual
                 number of days in the Interest Period divided by 365 (or, if
                 any portion of that Interest Period falls in a leap year, the
                 sum of (A) the actual number of days in that portion of the
                 Interest Period falling in a leap year divided by 366 and (B)
                 the actual number of days in that portion of the Interest
                 Period falling in a non-leap year divided by 365);

                                      15

<PAGE>

         (b)     if ACTUAL/365 (FIXED) is specified for such for such Floating
                 Rate Note in the applicable Final Terms, the actual number of
                 days in the Interest Period divided by 365;

         (c)     if ACTUAL/365 (STERLING) is specified for such Floating Rate
                 Note in the applicable Final Terms, the actual number of days
                 in the Interest Period divided by 365 or, in the case of a
                 Interest Payment Date falling in a leap year, 366;

         (d)     if ACTUAL/360 is specified for such Floating Rate Note in the
                 applicable Final Terms, the actual number of days in the
                 Interest Period divided by 360;

         (e)     if 30/360, 360/360 or BOND BASIS is specified for such
                 Floating Rate Note in the applicable Final Terms, the number
                 of days in the Interest Period divided by 360 (the number of
                 days to be calculated on the basis of a year of 360 days with
                 twelve 30-day months (unless (i) the last day of the Interest
                 Period is the 31st day of a month but the first day of the
                 Interest Period is a day other than the 30th or 31st day of a
                 month, in which case the month that includes that last day
                 shall not be considered to be shortened to a 30-day month, or
                 (ii) the last day of the Interest Period is the last day of
                 the month of February, in which case the month of February
                 shall not be considered to be lengthened to a 30-day month));
                 and

         (f)     if 30E/360 or EUROBOND BASIS is specified for such Floating
                 Rate Note in the applicable Final Terms, the number of days in
                 the Interest Period divided by 360 (the number of days to be
                 calculated on the basis of a year of 360 days with twelve
                 30-day months, without regard to the date of the first day or
                 last day of the Interest Period unless, in the case of the
                 final Interest Period, the Final Maturity Date is the last day
                 of the month of February, in which case the month of February
                 shall not be considered to be lengthened to a 30-day month).

         (g)     Notification of Rate of Interest and Interest Amounts

                 The Agent Bank will cause the Rate of Interest and each
                 Interest Amount for each Interest Period and the relevant
                 Interest Payment Date to be notified to the Note Trustee, the
                 Master Issuer Security Trustee, the Master Issuer Cash
                 Manager, the Paying Agents, the Registrar and to any stock
                 exchange or other relevant competent authority or quotation
                 system on which the relevant Floating Rate Notes are for the
                 time being listed, quoted and/or traded or by which they have
                 been admitted to listing and to be published in accordance
                 with CONDITION 14 as soon as possible after their
                 determination but in no event later than the fourth Business
                 Day thereafter. Each Interest Amount and Interest Payment Date
                 so notified may subsequently be amended (or appropriate
                 alternative arrangements made by way of adjustment) without
                 notice in the event of an extension or shortening of the
                 Interest Period. Any such amendment or alternative
                 arrangements will be promptly notified to the Note Trustee and
                 each stock exchange or other relevant authority on which the
                 relevant Floating Rate Notes are for the time being listed or
                 by which they have been admitted to listing and to Noteholders
                 in accordance with CONDITION 14.

         (h)     Determination or Calculation by Note Trustee

                 If for any reason at any relevant time, the Agent Bank or, as
                 the case may be, the Calculation Agent defaults in its
                 obligation to determine the Rate of Interest for a Floating
                 Rate Note or the Agent Bank defaults in its obligation to
                 calculate any Interest Amount for such Note in accordance with
                 SUBPARAGRAPH (i)(b) or (ii) above or as otherwise specified
                 for such Note in the applicable Final Terms, as the case may
                 be, and in each case in accordance with PARAGRAPH (d) above,
                 the Note Trustee shall determine the Rate of Interest at such
                 rate as, in its absolute discretion (having such regard as it
                 shall think fit to the foregoing provisions of this Condition,
                 but subject always to any Minimum Rate of Interest or Maximum
                 Rate of Interest specified for such Note in the applicable
                 Final Terms), it shall deem fair and

                                      16

<PAGE>

                 reasonable in all the circumstances or, as the case may be,
                 the Note Trustee shall calculate the Interest Amount(s) in
                 such manner as it shall deem fair and reasonable in all the
                 circumstances and each such determination or calculation shall
                 be deemed to have been made by the Agent Bank or the
                 Calculation Agent, as the case may be.

         (i)     Certificates to be final

                 All certificates, communications, opinions, determinations,
                 calculations, quotations and decisions given, expressed, made
                 or obtained for the purposes of the provisions of this
                 CONDITION 4.2, whether by the Agent Bank or the Calculation
                 Agent or the Note Trustee shall (in the absence of wilful
                 default, bad faith or manifest error) be binding on the Master
                 Issuer, the Master Issuer Cash Manager, the Principal Paying
                 Agent, the Calculation Agent, the other Paying Agents, the
                 Note Trustee and all Noteholders and (in the absence of wilful
                 default or bad faith) no liability to the Master Issuer or the
                 Noteholders shall attach to the Agent Bank or the Calculation
                 Agent or the Note Trustee in connection with the exercise or
                 non-exercise by it of its powers, duties and discretions
                 pursuant to such provisions.

4.3      ACCRUAL OF INTEREST

         Interest (if any) will cease to accrue on each Note (or in the case of
         the redemption of part only of a Note, that part only of such Note) on
         the due date for redemption thereof unless, upon due presentation
         thereof, payment of principal is improperly withheld or refused in
         which event, interest will continue to accrue until the earlier of:

         (a)     the date on which all amounts due in respect of such Note have
                 been paid; and

         (b)     the seventh day after notice is duly given by the Principal
                 Paying Agent or the US Paying Agent (as the case may be) to
                 the Holder thereof that such payment will be made, provided
                 that subsequently, payment is in fact made.

4.4      DEFERRED INTEREST

         To the extent that, subject to and in accordance with the relevant
         Master Issuer Priority of Payments, the funds available to the Master
         Issuer to pay interest on any Series and Class of Notes (other than
         any Series and Class of Notes if then the most senior Class of Notes
         then outstanding) on an Interest Payment Date (after discharging the
         Master Issuer's liabilities of a higher priority) are insufficient to
         pay the full amount of such interest, payment of the shortfall
         attributable to such Series and Class of Notes (DEFERRED INTEREST)
         will not then fall due but will instead be deferred until the first
         Interest Payment Date for such Notes thereafter on which sufficient
         funds are available (after allowing for the Master Issuer's
         liabilities of a higher priority and subject to and in accordance with
         the relevant Master Issuer Priority of Payments) to fund the payment
         of such Deferred Interest to the extent of such available funds.

         Such Deferred Interest will accrue interest (ADDITIONAL INTEREST) at
         the rate of interest applicable from time to time to the applicable
         Series and Class of Notes and payment of any Additional Interest will
         also be deferred until the first Interest Payment Date for such Notes
         thereafter on which funds are available (after allowing for the Master
         Issuer's liabilities of a higher priority subject to and in accordance
         with the relevant Master Issuer Priority of Payments) to the Master
         Issuer to pay such Additional Interest to the extent of such available
         funds.

         Amounts of Deferred Interest and Additional Interest shall not be
         deferred beyond the Final Maturity Date of the applicable Series and
         Class of Notes, when such amounts will become due and payable.

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<PAGE>

         Payments of interest due on an Interest Payment Date in respect of the
         most senior Class of Notes of any Series then outstanding will not be
         deferred. In the event of the delivery of a Note Acceleration Notice
         (as described in CONDITION 9), the amount of interest in respect of
         such Notes that was due but not paid on such Interest Payment Date
         will itself bear interest at the applicable rate until both the unpaid
         interest and the interest on that interest are paid as provided in the
         Master Issuer Trust Deed.

5.       REDEMPTION, PURCHASE AND CANCELLATION

5.1      FINAL REDEMPTION

         Unless previously redeemed in full as provided in this CONDITION 5,
         the Master Issuer shall redeem a Series and Class of Notes at their
         then Principal Amount Outstanding together with all accrued interest
         on the Final Maturity Date in respect of such Notes.

         The Master Issuer may not redeem such Notes in whole or in part prior
         to their Final Maturity Date except as provided in CONDITIONS 5.2,
         5.4, 5.5 or 5.6 below, but without prejudice to CONDITION 9.

5.2      MANDATORY REDEMPTION OF THE NOTES IN PART

         On each Interest Payment Date, other than a Interest Payment Date on
         which a Series and Class of Notes are to be redeemed under CONDITIONS
         5.1, 5.4, 5.5 or 5.6, the Master Issuer shall repay principal in
         respect of such Series and Class of Notes in an amount equal to the
         amount (if any) repaid on the corresponding Funding 2 Interest Payment
         Date in respect of the related Loan Tranche and pursuant to the Master
         Intercompany Loan Agreement converted, where the Specified Currency
         for such Notes is not Sterling, into the Specified Currency at the
         Specified Currency Exchange Rate for such Notes.

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

5.3      NOTE PRINCIPAL PAYMENTS AND PRINCIPAL AMOUNT OUTSTANDING

         The principal amount redeemable (the NOTE PRINCIPAL PAYMENT) in
         respect of each Note of a particular Series and Class on any Interest
         Payment Date under CONDITION 5.2 above shall be a proportion of the
         amount required as at that Interest Payment Date to be applied in
         redemption of such Series and Class of Notes on such date equal to the
         proportion that the Principal Amount Outstanding of the relevant Note
         bears to the aggregate Principal Amount Outstanding of such Series and
         Class of Notes rounded down to the nearest sub-unit of the Specified
         Currency; provided always that no such Note Principal Payment may
         exceed the Principal Amount Outstanding of the relevant Note.

         On each Note Determination Date the Master Issuer shall determine (or
         cause the Agent Bank to determine) (a) the amount of any Note
         Principal Payment payable in respect of each Note of the relevant
         Series and Class on the immediately following Interest Payment Date
         and (b) the Principal Amount Outstanding of each such Note which shall
         be the Specified Denomination less (in each case) the aggregate amount
         of all Note Principal Payments in respect of such Note that has been
         paid since the relevant Closing Date and on or prior to that Note
         Determination Date (the PRINCIPAL AMOUNT OUTSTANDING) and (c) the
         fraction expressed as a decimal to the fifth decimal point (the POOL
         FACTOR), of which the numerator is the Principal Amount Outstanding of
         that Note (as referred to in (b) above) and the denominator is the
         Specified Denomination. Each determination by or on

                                      18

<PAGE>

         behalf of the Master Issuer of Note Principal Payment of a Note, the
         Principal Amount Outstanding of a Note and the Pool Factor shall in
         each case (in the absence of wilful default, bad faith or manifest
         error) be final and binding on all persons.

         The Master Issuer will cause each determination of the Note Principal
         Payment and the Principal Amount Outstanding and the Pool Factor in
         respect of a Series and Class of Notes to be notified forthwith, and
         in any event not later than 1.00 p.m. (London time) on the Business
         Day immediately succeeding the Note Determination Date, to the
         Principal Paying Agent, who will then notify the Agent Bank, other
         Paying Agents, the Note Trustee, the Registrar and (for so long as
         such Notes are listed on one or more stock exchanges) the relevant
         stock exchanges, and will cause notice of each determination of the
         Note Principal Payment and the Principal Amount Outstanding to be
         given to Noteholders in accordance with CONDITION 14 by no later than
         the Business Day after the relevant Interest Payment Date.

         If the Master Issuer does not at any time for any reason determine (or
         cause the Agent Bank to determine) a Note Principal Payment, the
         Principal Amount Outstanding or the Pool Factor in accordance with the
         preceding provisions of this CONDITION 5.3, such Note Principal
         Payment and/or Principal Amount Outstanding and/or Pool Factor may be
         determined by the Note Trustee in accordance with this CONDITION 5.3
         in the manner the Note Trustee in its discretion considers fair and
         reasonable in the circumstances, having regard to this CONDITION 5.3,
         and each such determination or calculation shall be deemed to have
         been made by the Master Issuer. Any such determination shall (in the
         absence of wilful default, bad faith or manifest error) be binding on
         the Master Issuer, the Agent Bank and the Noteholders.

5.4      OPTIONAL REDEMPTION IN FULL

         Provided a Note Acceleration Notice has not been served and subject to
         the provisos below, upon giving not more than 60 nor less than 30
         days' prior written notice to the Note Trustee, the relevant Master
         Issuer Swap Provider(s) and the Noteholders in accordance with
         CONDITION 14, the Master Issuer may redeem a Series and Class of Notes
         at their aggregate Redemption Amount together with any accrued and
         unpaid interest in respect thereof on the following dates:

         (a)     the date specified as the Call Option Date (if any) for such
                 Series and Class of Notes in the applicable Final Terms and on
                 any Interest Payment Date for such Series and Class of Notes
                 thereafter; or

         (b)     the date specified as the Step-Up Date for such Series and
                 Class of Notes in the applicable Final Terms and on any
                 Interest Payment Date for such Series and Class of Notes
                 thereafter; and

         (c)     on such Interest Payment Date on which the aggregate Principal
                 Amount Outstanding of such Series and Class of Notes and all
                 other Classes of Notes of the same Series is less than 10% of
                 the aggregate Principal Amount Outstanding of such Series of
                 Notes as at the Closing Date on which such Series of Notes
                 were issued,

         PROVIDED THAT:

         (i)     (in any of the cases above), on or prior to giving any such
                 notice, the Master Issuer shall have provided to the Note
                 Trustee a certificate signed by two directors of the Master
                 Issuer to the effect that it will have the necessary funds to
                 pay all amounts due in respect of the relevant Series and
                 Class of Notes on the relevant Interest Payment Date and to
                 discharge all other amounts required to be paid by it on the
                 relevant Interest Payment Date in priority to or pari passu
                 with such Series and Class of Notes in accordance with the
                 applicable Master Issuer Priority of Payments; and

                                      19

<PAGE>

         (ii)    (in the cases of (a) and (b) above), (1) the amount standing
                 to the credit of the Funding 2 General Reserve Ledger is equal
                 to or greater than the Funding 2 Reserve Required Amount or
                 (2) each Rating Agency has provided written confirmation that
                 the redemption will not result in a reduction, qualification
                 or withdrawal of the then current ratings of the Notes then
                 outstanding.

5.5      OPTIONAL REDEMPTION FOR TAX AND OTHER REASONS

         Provided a Note Acceleration Notice has not been served, if the Master
         Issuer at any time satisfies the Note Trustee immediately prior to the
         giving of the notice referred to below that on the next Interest
         Payment Date:

         (a)     the Master Issuer would by virtue of a change in the law or
                 regulations of the United Kingdom or any other jurisdiction
                 (or the application or interpretation thereof) be required to
                 deduct or withhold from any payment of principal or interest
                 or any other amount under a Series and Class of Notes any
                 amount for or on account of any present or future taxes,
                 duties, assessments or governmental charges of whatever nature
                 (other than where the relevant Holder or beneficial owner has
                 some connection with the relevant jurisdiction other than the
                 holding of the Notes); or

         (b)     Funding 2 would be required to deduct or withhold from amounts
                 due in respect of the Loan Tranche under the Master
                 Intercompany Loan Agreement which was funded by such Series
                 and Class of Notes any amount for or on account of any present
                 or future taxes, duties, assessments or governmental charges
                 of whatever nature; or

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

         (d)     in relation to either the events described in (a), (b) and (c)
                 above, such obligation of the Master Issuer or Funding 2 (as
                 the case may be) or such ceasing to fall within the
                 Securitisation Tax Regime cannot be avoided by the Master
                 Issuer or Funding 2 (as the case may be) taking reasonable
                 measures available to the Master Issuer or Funding 2 (as the
                 case may be),

         then (in the case of any of the events described in (a) to (b) above)
         the Master Issuer shall use its reasonable endeavours to arrange the
         substitution of a company incorporated in another jurisdiction
         approved by the Note Trustee as principal debtor under such Notes,
         upon the Note Trustee being satisfied that (1) such substitution will
         not be materially prejudicial to the interests of the Noteholders of
         any Series and Class, and upon the Master Issuer Security Trustee
         being satisfied that (A) the position of the Master Issuer Secured
         Creditors will not thereby be adversely affected, and (B) such
         substitution would not require registration of any new security under
         United States securities laws or materially increase the disclosure
         requirements under United States law or the costs of issuance. Only if
         the Master Issuer is unable to arrange a substitution will the Master
         Issuer be entitled to redeem the Notes as described in this CONDITION
         5.5.

         Subject to the proviso below, if the Master Issuer is unable to
         arrange a substitution as described above and, as a result, one or
         more of the events described in (a) or (b) above (as the case may be)
         is continuing, or if the event described in (c) above is continuing,
         then the Master Issuer may, having given not more than 60 nor less
         than 30 days' notice to the Note Trustee, the relevant Master Issuer
         Swap Provider(s) and the Noteholders in accordance with CONDITION 14,
         redeem all (but not some only) of such Series and Class of Notes on
         the immediately succeeding Interest Payment Date for such Notes at
         their aggregate Redemption Amount together with any accrued and unpaid
         interest in respect thereof provided that (in either case), prior to
         giving any such notice, the Master Issuer shall have provided to the
         Note Trustee:

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         (i)     a certificate signed by two directors of the Master Issuer
                 stating the circumstances referred to in (a), (b) or (c) above
                 and (d) above prevail and setting out details of such
                 circumstances; and

         (ii)    an opinion in form and substance satisfactory to the Note
                 Trustee of independent legal advisors of recognised standing
                 to the effect that the Master Issuer has or will become
                 obliged to deduct or withhold such amounts as a result of such
                 change or amendment or, as the case may be, that the Master
                 Issuer or Funding 2, as the case may be, has or will cease to
                 fall within the Securitisation Tax Regime and that such
                 cessation would result in the Master Issuer and/or Funding 2
                 having to pay more tax than if the Master Issuer and Funding 2
                 remained within the Securitisation Tax Regime.

         The Note Trustee shall be entitled to accept such certificate and
         opinion as sufficient evidence of the satisfaction of the circumstance
         set out in (a), (b) or (c) above and (d) above in which event they
         shall be conclusive and binding on the Noteholders. The Master Issuer
         may only redeem such Series and Class of Notes as aforesaid, if on or
         prior to giving such notice, the Master Issuer shall have provided to
         the Note Trustee a certificate signed by two directors of the Master
         Issuer to the effect that (A) it will have the funds available to make
         the required payment of principal and interest due in respect of such
         Series and Class of Notes on the relevant Interest Payment Date and to
         discharge all other amounts required to be paid by it on the relevant
         Interest Payment Date in priority to or pari passu with such Series
         and Class of Notes in accordance with the applicable Master Issuer
         Priority of Payments.

         In addition to the foregoing, if at any time the Master Issuer
         delivers a certificate to Funding 2, the Note Trustee and the Master
         Issuer Security Trustee to the effect that it would be unlawful for
         the Master Issuer to make, fund or allow to remain outstanding a Rated
         Loan Tranche under the Master Intercompany Loan Agreement, then the
         Master Issuer may require Funding 2 to prepay the relevant Loan
         Tranche on a Funding 2 Interest Payment Date subject to and in
         accordance with the provisions of the Master Intercompany Loan
         Agreement to the extent necessary to cure such illegality and the
         Master Issuer may redeem all (but not some only) of the relevant
         Series and Class of Notes at their Redemption Amount together with any
         accrued interest upon giving not more than 60 nor less than 30 days'
         (or such shorter period as may be required under any relevant law)
         prior written notice to the Master Issuer Security Trustee, the Note
         Trustee, the relevant Master Issuer Swap Provider(s) and the
         Noteholders in accordance with CONDITION 14, provided that, prior to
         giving any notice, the Master Issuer shall have provided to the Note
         Trustee a certificate signed by two directors of the Master Issuer to
         the effect that it will have the funds, not subject to the interest of
         any other person, required to redeem the relevant Series and Class of
         Notes as provided above and any amount to be paid in priority to or
         pari passu with the relevant Series and Class of Notes. Such monies
         received by the Master Issuer shall be used to redeem the relevant
         Series and Class of Notes in full, together with any accrued and
         unpaid interest, on the equivalent Interest Payment Date.

5.6      OPTIONAL REDEMPTION OR PURCHASE FOR IMPLEMENTATION OF CAPITAL
         REQUIREMENTS DIRECTIVE

(a)      If:

         (i)     the Basel II Framework (as described in the document titled
                 "Basel II the International Convergence of Capital Measurement
                 and Capital Standards: A Revised Framework" published in June
                 2004 by the Basel Committee on Banking Supervision) has been
                 implemented in the United Kingdom, whether by rule of law,
                 recommendation of best practices or by any other regulation
                 (including pursuant to implementation in the United Kingdom of
                 the EU Capital Requirements Directive);

         (ii)    a Note Acceleration Notice has not been served on the relevant
                 interest payment date for the exercise of the Purchase Option
                 or Redemption Option, as the case may be;

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         (iii)   the Master Issuer has given not more than 60 days' and not
                 less than 30 days' (or such shorter period as may be required
                 by any relevant law) prior written notice to the Note Trustee,
                 the Master Issuer Swap Provider and the Noteholders, in
                 accordance with CONDITION 15 of the exercise of the Purchase
                 Option or Redemption Option, as the case may be;

         (iv)    prior to giving any such notice, the Master Issuer shall have
                 provided to the Note Trustee a certificate signed by two
                 directors of the Master Issuer to the effect that the Master
                 Issuer will have necessary funds to purchase or redeem, as the
                 case may be, the Called Notes in accordance with this
                 CONDITION 5.6 and to discharge all other amounts required to
                 be paid by it on the relevant Interest Payment Date in
                 priority to or pari passu with payments on the Called Notes on
                 the relevant Interest Payment Date in accordance with the
                 applicable Master Issuer Priority of Payments; and

         (v).....the FSA has approved the exercise of the Purchase Option or
                 Redemption Option (as defined below), as the case may be, if
                 such approval is required by rule of law, recommendations of
                 best practices or by any other regulation,

         then:

         (A)     the Master Issuer has the right (the PURCHASE OPTION) to
                 require holders of all but not some only of the Class B Notes
                 and/or the Class M Notes and/or the Class C Notes and/or the
                 Class D Notes, in each case, of any one or more Series issued
                 prior to 1 January 2008 (collectively, the CALLED NOTES) to
                 transfer the Called Notes to the Master Issuer on any Interest
                 Payment Date (prior to 31 December 2010 or such later date as
                 may be permitted by the FSA) falling on or after the Interest
                 Payment Date specified in the applicable Final Terms (if any)
                 for a price equal to the aggregate Redemption Amount, together
                 with any accrued interest on the Called Notes, or

         (B)     the Master Issuer may redeem (the REDEMPTION OPTION) the
                 Called Notes on any Interest Payment Date (prior to 31
                 December 2010 or such later date as may be permitted by the
                 FSA) falling on or after the Interest Payment Date specified
                 in the applicable Final Terms (if any) at the aggregate
                 Redemption Amount, together with any accrued interest on the
                 Called Notes.

(b)      The Called Notes transferred to the Master Issuer pursuant to the
         Purchase Option shall, subject as provided in (c) below, remain
         outstanding until the date on which they would otherwise be redeemed
         or cancelled in accordance with the Conditions.

(c)      The Note Trustee shall concur in, execute and do all such deeds,
         instruments, acts and things, and shall consent to any amendment,
         modification or waiver of the provisions of the Transaction Documents
         to which it is a party, which may be necessary or desirable to permit
         and give effect to the exercise of the Purchase Option and the
         transfer of the Called Notes to the Master Issuer, including any
         waiver of convents of the Master Issuer and any suspension or
         termination of the rights of the holders of the Called Notes from (and
         including) the interest payment date specified for the exercise of the
         Purchase Option, for as long as the Called Notes have been transferred
         to the Master Issuer, other than the right to receive the price
         payable for such transfer.

(d)      Each holder of Called Notes shall be deemed to have authorised and
         instructed DTC, Euroclear, or, as the case may be Clearstream,
         Luxembourg to effect the transfer of its Called Notes on the relevant
         Interest Payment Date to the Master Issuer, in accordance with the
         rules for the time being of DTC, Euroclear, or, as the case may be,
         Clearstream, Luxembourg.

(e)      For the avoidance of doubt, the exercise of the Purchase Option or the
         Redemption Option will be subject always to compliance with the
         applicable laws and rules of the relevant time.

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5.7      REDEMPTION AMOUNTS

         For the purposes of this CONDITION 5, REDEMPTION AMOUNT means, in
         respect of any Series and Class of Notes, the amount specified in
         relation to such Notes in the applicable Final Terms or, if not so
         specified:

         (a)     in respect of each Note (other than a Zero Coupon Note), the
                 Principal Amount Outstanding of such Note or such other amount
                 specified in the applicable Final Terms; and

         (b)     in respect of each Zero Coupon Note, an amount (the AMORTISED
                 FACE AMOUNT) calculated in accordance with the following
                 formula:

         Redemption Amount = RP x (1 + AY) y

         where:

         RP= the Reference Price;

         AY= the Accrual Yield expressed as a decimal; and

         y= the Day Count Fraction.

         If the amount payable in respect of any Zero Coupon Note upon
         redemption of such Zero Coupon Note pursuant to CONDITION 5.1, 5.2,
         5.4, 5.5 or 5.6 above or upon its becoming due and repayable as
         provided in CONDITION 9 is improperly withheld or refused, the amount
         due and repayable in respect of such Note shall be the amount
         calculated as provided in paragraph (b) above as though the reference
         therein to the date fixed for the redemption or, as the case may be,
         the date upon which such Note becomes due and payable were replaced by
         reference to the date which is the earlier of:

         (i)     the date on which all amounts due in respect of such Note have
                 been paid; and

         (ii)    the date on which the full amount of the monies payable in
                 respect of such Note has been received by the Principal Paying
                 Agent or the Note Trustee or the Registrar and notice to that
                 effect has been given to the Noteholders in accordance with
                 CONDITION 14.

         DAY COUNT FRACTION means, in respect of the calculation of the
         Redemption Amount for a Zero Coupon Note in accordance with this
         CONDITION 5.7 for any Zero Coupon Period:

         (i)     if ACTUAL/ACTUAL is specified for the relevant Series and
                 Class of Notes in the applicable Final Terms, the actual
                 number of days from (and including) the first Closing Date of
                 such Series and Class of Notes to (but excluding) the date
                 fixed for redemption (the ZERO COUPON PERIOD) or, as the case
                 may be, the date upon which such Series and Class of Notes
                 becomes due and payable divided by 365 (or, if any portion of
                 the Zero Coupon Period falls in one or more leap years, the
                 sum of (A) the actual number of days in the Zero Coupon Period
                 falling in a leap year divided by 366 and (B) the actual
                 number of days in the Zero Coupon Period falling in a non-leap
                 year divided by 365); or

         (ii)    if 30/360 is specified for the relevant Series and Class of
                 Notes in the applicable Final Terms, the number of days
                 (calculated on the basis of a 360-day year consisting of 12
                 months of 30 days each) during the Zero Coupon Period divided
                 by 360.

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5.8      MANDATORY TRANSFER OF REMARKETABLE NOTES

         (i)     Each Series and Class of Remarketable Notes shall, subject to
                 (iii) below, be transferred in accordance with (iii) below on
                 each relevant Mandatory Transfer Date prior to the occurrence
                 of a Mandatory Transfer Termination Event (as confirmed by the
                 relevant Remarketing Agent or the relevant Tender Agent by the
                 provision of a Conditional Purchaser Confirmation to the
                 Master Issuer and the Principal Paying Agent) in exchange for
                 payment of the relevant Mandatory Transfer Price, and the
                 Master Issuer will procure payment of the relevant Mandatory
                 Transfer Price to the holders of such Series and Class of
                 Remarketable Notes on the relevant Mandatory Transfer Date,
                 provided that the Master Issuer shall not be liable for the
                 failure to make payment of the relevant Mandatory Transfer
                 Price to the holders of such Series and Class of Remarketable
                 Notes to the extent that such failure is a result of the
                 failure of the Remarketing Agent or the Conditional Purchaser
                 to perform its obligations under the Remarketing Agreement.

         (ii)    Subject to (i) above and (iii) below, all the holders'
                 interests in a Series and Class of Remarketable Notes shall be
                 transferred on the relevant Mandatory Transfer Date to the
                 account of the relevant Remarketing Agent on behalf of the
                 relevant purchasers or as otherwise notified by or on behalf
                 of the relevant Remarketing Agent prior to such date or, if
                 Definitive Notes have been issued with respect to such Series
                 and Class of Remarketable Notes, such Series and Class of
                 Remarketable Notes will be registered in the name of the
                 relevant Remarketing Agent or as otherwise notified by or on
                 behalf of the relevant Remarketing Agent by the Registrar and
                 the Register will be amended accordingly with affect from the
                 relevant Mandatory Transfer Date.

         (iii)   Any holder of a Series and Class of Remarketable Notes may
                 exercise his rights to retain such Series and Class of
                 Remarketable Notes through the facilities of DTC at any time
                 prior to the commencement of the relevant Remarketing Period
                 that ends immediately before the relevant Mandatory Transfer
                 Date.

6.       PAYMENTS

6.1      PAYMENT OF INTEREST AND PRINCIPAL

         Payments of principal shall be made by cheque in the Specified
         Currency, drawn on a Designated Bank, or upon application by a Holder
         of the relevant Note to the Specified Office of the Principal Paying
         Agent not later than the fifth Business Day before the Record Date (as
         defined in CONDITION 6.7), by transfer to a Designated Account
         maintained by the payee with a Designated Bank and (in the case of
         final redemption) upon surrender (or, in the case of part payment
         only, endorsement) of the relevant Note at the Specified Office of any
         Paying Agent.

         Payments of interest shall be made by cheque in the Specified Currency
         drawn on a Designated Bank, or upon application by a Holder of the
         relevant Note to the Specified Office of the Principal Paying Agent
         not later than the fifth Business Day before the Record Date (as
         defined in CONDITION 6.7), by transfer to a Designated Account
         maintained by the payee with a Designated Bank and (in the case of
         interest payable on final redemption) upon surrender (or, in the case
         of part payment only, endorsement) of the relevant Note at the
         Specified Office of any Paying Agent.

6.2      LAWS AND REGULATIONS

         Payments of principal and interest in respect of the Notes are subject
         in all cases to any fiscal or other laws and regulations applicable
         thereto. Noteholders will not be charged commissions or expenses on
         payments.

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6.3      PAYMENT OF INTEREST FOLLOWING A FAILURE TO PAY PRINCIPAL

         If payment of principal is improperly withheld or refused on or in
         respect of any Note or part thereof, the interest which continues to
         accrue in respect of such Note in accordance with CONDITION 4 will be
         paid in accordance with this CONDITION 6.

6.4      CHANGE OF AGENTS

         The initial Principal Paying Agent, the Registrar, the Transfer Agent
         and the initial Paying Agents are listed in these Conditions. The
         Master Issuer reserves the right, subject to the prior written
         approval of the Note Trustee, at any time to vary or terminate the
         appointment of the Principal Paying Agent, the Registrar, the Transfer
         Agent and the US Paying Agent and to appoint additional or other
         Paying Agents. The Master Issuer will at all times maintain a Paying
         Agent with a Specified Office in London and a US Paying Agent with a
         Specified Office in New York and a Registrar. Except where otherwise
         provided in the Master Issuer Trust Deed, the Master Issuer will cause
         at least 30 days' notice of any change in or addition to the Paying
         Agents, the Transfer Agent or the Registrar or their Specified Offices
         to be given in accordance with CONDITION 14 and will notify the Rating
         Agencies of such change or addition. For as long as any Note is
         outstanding, the Master Issuer will endeavour to maintain a Paying
         Agent in a member state of the European Union that will not be obliged
         to withhold or deduct tax pursuant to European Council Directive
         2003/48/EC or any law implementing or complying with, or introduced in
         order to conform to such Directive.

6.5      NO PAYMENT ON NON-BUSINESS DAY

         Where payment is to be made by transfer to a Designated Account,
         payment instructions (for value the due date or, if the due date is
         not a Business Day, for value the next succeeding Business Day) will
         be initiated and, where payment is to be made by cheque, the cheque
         will be mailed (a) (in the case of payments of principal and interest
         payable on redemption) on the later of the due date for payment and
         the day on which the relevant Note is surrendered (or, in the case of
         part payment only, endorsed) at the Specified Office of a Paying Agent
         and (b) (in the case of payments of interest payable other than on
         redemption) on the due date for payment. A Holder of a Note shall not
         be entitled to any interest or other payment in respect of any delay
         in payment resulting from (i) the due date for a payment not being a
         Business Day or (ii) a cheque mailed in accordance with this CONDITION
         6.5 arriving after the due date for payment or being lost in the mail.

6.6      PARTIAL PAYMENT

         If a Paying Agent makes a partial payment in respect of any Note, the
         Master Issuer shall procure and the Registrar will ensure that the
         amount and date of such payment are noted on the Register and, in the
         case of partial payment upon presentation of a Note, that a statement
         indicating the amount and date of such payment is endorsed on the
         relevant Note.

6.7      RECORD DATE

         Each payment in respect of a Note will be made to the persons shown as
         the Holder in the Register at the opening of business in the place of
         the Registrar's Specified Office on the fifteenth day before the due
         date for such payment (the RECORD DATE). Where payment in respect of a
         Note is to be made by cheque, the cheque will be mailed to the address
         shown as the address of the Holder in the Register at the opening of
         business on the relevant Record Date.

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6.8      PAYMENT OF INTEREST

         Subject as provided otherwise in these Conditions, if interest is not
         paid in respect of a Note of any Class on the date when due and
         payable (other than because the due date is not a Business Day) or by
         reason of non-compliance with CONDITION 6.1, then such unpaid interest
         shall itself bear interest at the Rate of Interest applicable from
         time to time to such Note until such interest and interest thereon are
         available for payment and notice thereof has been duly given in
         accordance with CONDITION 14.

7.       PRESCRIPTION

         Claims against the Master Issuer for payment of interest and principal
         on redemption shall be prescribed and become void if the relevant
         Notes are not surrendered for payment within a period of ten years
         from the relevant date in respect thereof. After the date on which a
         payment under a Note becomes void in its entirety, no claim may be
         made in respect thereof. In this CONDITION 7, the RELEVANT DATE, in
         respect of a payment under a Note, is the date on which the payment in
         respect thereof first becomes due or (if the full amount of the monies
         payable in respect of those payments under all the Notes due on or
         before that date has not been duly received by the Principal Paying
         Agent, the US Paying Agent or the Note Trustee (as the case may be) on
         or prior to such date) the date on which the full amount of such
         monies having been so received, notice to that effect is duly given to
         Noteholders in accordance with CONDITION 14.

8.       TAXATION

         All payments in respect of the 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 Master Issuer or any
         relevant Paying Agent is required by applicable law to make any
         payment in respect of the Notes subject to any such withholding or
         deduction. In that event, the Master Issuer or such Paying Agent shall
         make such payment after such withholding or deduction has been made
         and shall account to the relevant authorities for the amount so
         required to be withheld or deducted. No Paying Agent nor the Master
         Issuer will be obliged to make any additional payments to Noteholders
         in respect of such withholding or deduction.

9.       EVENTS OF DEFAULT

9.1      CLASS A NOTEHOLDERS

         The Note Trustee in its absolute discretion may (and if so requested
         in writing by the Holders of not less than 25% in aggregate Principal
         Amount Outstanding of the Class A Notes (which for this purpose and
         the purpose of any Extraordinary Resolution referred to in this
         CONDITION 9.1 means the Class A Notes of all Series constituted by the
         Master Issuer Trust Deed) or if so directed by or pursuant to an
         Extraordinary Resolution passed at a meeting of the Holders of the
         Class A Notes shall), subject in each case to being indemnified and/or
         secured to its satisfaction, give notice (a CLASS A NOTE ACCELERATION
         NOTICE) to the Master Issuer, the Master Issuer Security Trustee and
         the Funding 2 Security Trustee of a Note Event of Default (as defined
         below) declaring (in writing) the Class A Notes and all other Notes to
         be due and repayable (and they shall forthwith become due and
         repayable) at any time after the happening of any of the following
         events which is continuing or unwaived:

         (a)     default being made for a period of three Business Days in the
                 payment of any amount of principal of the Class A Notes of any
                 Series when and as the same ought to be paid in accordance
                 with these Conditions or default being made for a period of
                 three Business Days in the payment of any amount of interest
                 on the Class A Notes of any Series when and as the same ought
                 to be paid in accordance with these Conditions; or

                                      26

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         (b)     the Master Issuer failing duly to perform or observe any other
                 obligation binding upon it under the Class A Notes of any
                 Series, the Master Issuer Trust Deed, the Master Issuer Deed
                 of Charge or any other Transaction Document and, in any such
                 case (except where the Note Trustee certifies that, in its
                 sole opinion, such failure is incapable of remedy, in which
                 case no notice will be required), such failure is continuing
                 unremedied for a period of 20 days following the service by
                 the Note Trustee on the Master Issuer of notice requiring the
                 same to be remedied and the Note Trustee has certified that
                 the failure to perform or observe is materially prejudicial to
                 the interests of the Holders of the Class A Notes of such
                 Series; or

         (c)     the Master Issuer, otherwise than for the purposes of such
                 amalgamation or reconstruction as is referred to in
                 SUBPARAGRAPH (d) below, ceases or threatens to cease to carry
                 on its business or a substantial part of its business or the
                 Master Issuer is deemed unable to pay its debts within the
                 meaning of section 123(1)(a), (b), (c) or (d) of the
                 Insolvency Act 1986 (as amended, modified or re-enacted) or
                 becomes unable to pay its debts as they fall due or the value
                 of its assets falls to less than the amount of its liabilities
                 (taking into account for both these purposes its contingent
                 and prospective liabilities) or otherwise becomes insolvent;
                 or

         (d)     an order being made or an effective resolution being passed
                 for the winding-up of the Master Issuer except a winding-up
                 for the purposes of or pursuant to an amalgamation,
                 restructuring or merger the terms of which have previously
                 been approved by the Note Trustee in writing or by an
                 Extraordinary Resolution of the Holders of the Class A Notes;
                 or

         (e)     proceedings being otherwise initiated against the Master
                 Issuer under any applicable liquidation, insolvency,
                 composition, reorganisation or other similar laws (including,
                 but not limited to, presentation of a petition for an
                 administration order, the filing of documents with the court
                 for an administration or the service of a notice of intention
                 to appoint an administrator) and (except in the case of
                 presentation of a petition for an administration order) such
                 proceedings are not, in the sole opinion of the Note Trustee,
                 being disputed in good faith with a reasonable prospect of
                 success, or an administration order being granted or the
                 appointment of an administrator takes effect or an
                 administrative receiver or other receiver, liquidator or other
                 similar official being appointed in relation to the Master
                 Issuer or in relation to the whole or any substantial part of
                 the undertaking or assets of the Master Issuer, or an
                 encumbrancer taking possession of the whole or any substantial
                 part of the undertaking or assets of the Master Issuer, or a
                 distress, execution, diligence or other process being levied
                 or enforced upon or sued out against the whole or any
                 substantial part of the undertaking or assets of the Master
                 Issuer and such possession or process (as the case may be) not
                 being discharged or not otherwise ceasing to apply within 30
                 days, or the Master Issuer initiating or consenting to the
                 foregoing proceedings relating to itself under applicable
                 liquidation, insolvency, composition, reorganisation or other
                 similar laws or making a conveyance or assignment for the
                 benefit of its creditors generally or a composition or similar
                 arrangement with the creditors or takes steps with a view to
                 obtaining a moratorium in respect of its indebtedness,
                 including without limitation, the filing of documents with the
                 court; or

         (f)     if a Master Intercompany Loan Acceleration Notice is served
                 under the Master Intercompany Loan Agreement while the Class A
                 Notes of any Series are outstanding.

9.2      CLASS B NOTEHOLDERS

         This CONDITION 9.2 shall have no effect if, and for as long as, any
         Class A Notes of any Series are outstanding. Subject thereto, for so
         long as any Class B Notes of any Series are outstanding, the Note
         Trustee in its absolute discretion may (and if so requested in writing
         by the Holders of not less than 25% in aggregate Principal Amount
         Outstanding of the Class B Notes (which for this purpose and the
         purpose of any Extraordinary Resolution referred to in this CONDITION
         9.2, means the

                                      27

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         Class B Notes of all Series constituted by the Master Issuer
         Trust Deed) or if so directed by or pursuant to an Extraordinary
         Resolution passed at a meeting of the Holders of the Class B Notes
         shall), subject in each case to it being indemnified and/or secured to
         its satisfaction, give notice (a CLASS B NOTE ACCELERATION NOTICE) to
         the Master Issuer, the Master Issuer Security Trustee and the Funding
         2 Security Trustee of a Note Event of Default (as defined below) and
         declaring (in writing) the Class B Notes and all other Notes to be due
         and repayable (and they shall forthwith become due and repayable) at
         any time after the happening of any of the following events:

         (a)     default being made for a period of three Business Days in the
                 payment of any amount of principal of the Class B Notes of any
                 Series when and as the same ought to be paid in accordance
                 with these Conditions or default being made for a period of
                 three Business Days in the payment of any amount of interest
                 on the Class B Notes of any Series when and as the same ought
                 to be paid in accordance with these Conditions; or

         (b)     the occurrence of any of the events in CONDITION 9.1(B), (C),
                 (D), (E) or (F) ABOVE provided that the references in
                 CONDITION 9.1(B), CONDITION 9.1(D) and CONDITION 9.1(F) to
                 Class A Notes shall be read as references to Class B Notes.

9.3      CLASS M NOTEHOLDERS

         This CONDITION 9.3 shall have no effect if, and for as long as, any
         Class A Notes or Class B Notes of any Series are outstanding. Subject
         thereto, for so long as any Class M Notes of any Series are
         outstanding, the Note Trustee in its absolute discretion may (and if
         so requested in writing by the Holders of not less than 25% in
         aggregate Principal Amount Outstanding of the Class M Notes (which for
         this purpose and the purpose of any Extraordinary Resolution referred
         to in this CONDITION 9.3, means the Class M Notes of all Series
         constituted by the Master Issuer Trust Deed) or if so directed by or
         pursuant to an Extraordinary Resolution passed at a meeting of the
         Holders of the Class M Notes shall), subject in each case to it being
         indemnified and/or secured to its satisfaction, give notice (a CLASS M
         NOTE ACCELERATION NOTICE) to the Master Issuer, the Master Issuer
         Security Trustee and the Funding 2 Security Trustee of a Note Event of
         Default (as defined below) and declaring (in writing) the Class M
         Notes and all other Notes to be due and repayable (and they shall
         forthwith become due and repayable) at any time after the happening of
         any of the following events:

         (a)     default being made for a period of three Business Days in the
                 payment of any amount of principal of the Class M Notes of any
                 Series when and as the same ought to be paid in accordance
                 with these Conditions or default being made for a period of
                 three Business Days in the payment of any amount of interest
                 on the Class M Notes of any Series when and as the same ought
                 to be paid in accordance with these Conditions; or

         (b)     the occurrence of any of the events in CONDITION 9.1(B), (C),
                 (D), (E) or (F) ABOVE provided that the references in
                 CONDITION 9.1(B), CONDITION 9.1(D) and CONDITION 9.1(F) to
                 Class A Notes shall be read as references to Class M Notes.

9.4      CLASS C NOTEHOLDERS

         This CONDITION 9.4 shall have no effect if, and for as long as, any
         Class A Notes, Class B Notes or Class M Notes of any Series are
         outstanding. Subject thereto, for so long as any Class C Notes of any
         Series are outstanding, the Note Trustee in its absolute discretion
         may (and if so requested in writing by the Holders of not less than
         25% in aggregate Principal Amount Outstanding of the Class C Notes
         (which for this purpose and the purpose of any Extraordinary
         Resolution referred to in this CONDITION 9.4, means the Class C Notes
         of all Series constituted by the Master Issuer Trust Deed) or if so
         directed by or pursuant to an Extraordinary Resolution passed at a
         meeting of the Holders of the Class C Notes shall), subject in each
         case to it being indemnified and/or secured to its satisfaction,

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         give notice (a CLASS C NOTE ACCELERATION NOTICE) to the Master Issuer,
         the Master Issuer Security Trustee and the Funding 2 Security Trustee
         of a Note Event of Default (as defined below) and declaring (in
         writing) the Class C Notes and all other Notes to be due and repayable
         (and they shall forthwith become due and repayable) at any time after
         the happening of any of the following events:

         (a)     default being made for a period of three Business Days in the
                 payment of any amount of principal of the Class C Notes of any
                 Series when and as the same ought to be paid in accordance
                 with these Conditions or default being made for a period of
                 three Business Days in the payment of any amount of interest
                 on the Class C Notes of any Series when and as the same ought
                 to be paid in accordance with these Conditions; or

         (b)     the occurrence of any of the events in CONDITION 9.1(B), (C),
                 (D), (E) or (F) ABOVE provided that the references in
                 CONDITION 9.1(B), CONDITION 9.1(D) and CONDITION 9.1(F) to
                 Class A Notes shall be read as references to Class C Notes.

9.5      CLASS D NOTEHOLDERS

         This CONDITION 9.5 shall have no effect if, and for as long as, any
         Class A Notes, Class B Notes, Class M Notes or Class C Notes of any
         Series are outstanding. Subject thereto, for so long as any Class D
         Notes of any Series are outstanding, the Note Trustee in its absolute
         discretion may (and if so requested in writing by the Holders of not
         less than 25% in aggregate Principal Amount Outstanding of the Class D
         Notes (which for this purpose and the purpose of any Extraordinary
         Resolution referred to in this CONDITION 9.5, means the Class D Notes
         of all Series constituted by the Master Issuer Trust Deed) or if so
         directed by or pursuant to an Extraordinary Resolution passed at a
         meeting of the Holders of the Class D Notes shall), subject in each
         case to it being indemnified and/or secured to its satisfaction, give
         notice (a CLASS D NOTE ACCELERATION NOTICE) to the Master Issuer, the
         Master Issuer Security Trustee and the Funding 2 Security Trustee of a
         Note Event of Default (as defined below) and declaring (in writing)
         the Class D Notes to be due and repayable (and they shall forthwith
         become due and repayable) at any time after the happening of any of
         the following events:

         (a)     default being made for a period of three Business Days in the
                 payment of any amount of principal of the Class D Notes of any
                 Series when and as the same ought to be paid in accordance
                 with these Conditions or default being made for a period of
                 three Business Days in the payment of any amount of interest
                 on the Class D Notes of any Series when and as the same ought
                 to be paid in accordance with these Conditions; or

         (b)     the occurrence of any of the events in CONDITION 9.1(B), (C),
                 (D), (E) or (F) ABOVE provided that the references in
                 CONDITION 9.1(B), CONDITION 9.1(D) and CONDITION 9.1(F) to
                 Class A Notes shall be read as references to Class D Notes.

9.6      FOLLOWING SERVICE OF A NOTE ACCELERATION NOTICE

         In these Conditions, a NOTE ACCELERATION NOTICE means any of the Class
         A Note Acceleration Notice, the Class B Note Acceleration Notice, the
         Class M Note Acceleration Notice, the Class C Note Acceleration Notice
         and the Class D Note Acceleration Notice. For the avoidance of doubt,
         upon any Note Acceleration Notice being given by the Note Trustee in
         accordance with CONDITION 9.1, 9.2, 9.3, 9.4 or 9.5 all Notes shall
         immediately become due, without further action, notice or formality at
         their Principal Amount Outstanding together with accrued interest (or,
         in the case of a Zero Coupon Note, at its Redemption Amount,
         calculated in accordance with CONDITION 5.7).

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10.      ENFORCEMENT OF NOTES

10.1     ENFORCEMENT

         The Note Trustee may, at its discretion and without notice at any time
         and from time to time, take such steps and institute such proceedings
         against the Master Issuer or any other person as it may think fit to
         enforce the provisions of the Notes, the Trust Deed (including these
         Conditions) or any of the other Transaction Documents to which it is a
         party and the Note Trustee may, at its discretion without notice, at
         any time after the Master Issuer Security has become enforceable
         (including after the service of a Note Acceleration Notice in
         accordance with CONDITION 9), instruct the Master Issuer Security
         Trustee to take such steps as it may think fit to enforce the Master
         Issuer Security. The Note Trustee shall not be bound to take such
         steps or institute such proceedings or give such instructions unless:

         (a)     (subject in all cases to restrictions contained in the Master
                 Issuer Trust Deed to protect the interests of any higher
                 ranking Class of Noteholders) it shall have been so directed
                 by an Extraordinary Resolution of the Class A Noteholders, the
                 Class B Noteholders, the Class M Noteholders, the Class C
                 Noteholders or the Class D Noteholders (which for this purpose
                 means the Holders of all Series of the Class A Notes, the
                 Class B Notes, the Class M Notes, the Class C Notes or the
                 Class D Notes (as applicable)) or so requested in writing by
                 the Holders of at least one quarter in aggregate Principal
                 Amount Outstanding of the Class A Notes, Class B Notes, Class
                 M Notes, Class C Notes or Class D Notes (as applicable) of all
                 Series; and

         (b)     it shall have been indemnified and/or secured to its
                 satisfaction.

                 The Master Issuer Security Trustee shall not, and shall not be
                 bound to, take such steps or take any such other action unless
                 it is so directed by the Note Trustee and indemnified and/or
                 secured to its satisfaction.

         Amounts available for distribution after enforcement of the Master
         Issuer Security shall be distributed in accordance with the terms of
         the Master Issuer Deed of Charge.

         No Noteholder may institute any proceedings against the Master Issuer
         to enforce its rights under or in respect of the Notes, the Master
         Issuer Trust Deed or the Master Issuer Deed of Charge unless (i) the
         Note Trustee or the Master Issuer Security Trustee, as applicable, has
         become bound to institute proceedings and has failed to do so within
         30 days of becoming so bound and (ii) such failure is continuing;
         provided that no Class B Noteholder, Class M Noteholder, Class C
         Noteholder or Class D Noteholder will be entitled to commence
         proceedings for the winding up or administration of the Master Issuer
         unless there are no outstanding Notes of a Class with higher priority,
         or if Notes of a Class with higher priority are outstanding, there is
         consent of Noteholders of not less than one quarter of the aggregate
         principal amount of the Notes outstanding (as defined in the Master
         Issuer Trust Deed) of the Class or Classes of Notes with higher
         priority or pursuant to an Extraordinary Resolution of the Holders of
         such Class of Notes. Notwithstanding the foregoing and notwithstanding
         any other provision of the Master Issuer Trust Deed, the right of any
         Noteholder to receive payment of principal and interest on its Notes
         on or after the due date for such principal or interest, or to
         institute suit for the enforcement of payment of that principal or
         interest, may not be impaired or affected without the consent of that
         Noteholder.

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10.2     POST ENFORCEMENT CALL OPTION

         In the event that:

         (a)     the Master Issuer Security is enforced and the Master Issuer
                 Security Trustee determines that (i) the proceeds of such
                 enforcement, after distribution of such proceeds to the
                 persons entitled thereto ranking in priority to the Notes
                 under the Master Issuer Deed of Charge and to the Noteholders
                 (to the extent entitled thereto), are insufficient to pay in
                 full all principal and interest and other amounts whatsoever
                 due in respect of the Notes and all other claims ranking pari
                 passu therewith (ii) such proceeds of enforcement have been so
                 distributed in accordance with the terms of the Master Issuer
                 Deed of Charge and (iii) there are no further assets available
                 to pay principal and interest and other amounts whatsoever due
                 in respect of the Notes; or

         (b)     within 20 days following the Final Maturity Date of the latest
                 maturing Note, the Master Issuer Security Trustee certifies
                 that there is no further amount outstanding under the Master
                 Intercompany Loan Agreement,

         then the Note Trustee is required, at the request of the
         Post-Enforcement Call Option Holder, for a nominal amount, to transfer
         or (as the case may be) procure transfer of all (but not some only) of
         the Notes to the Post-Enforcement Call Option Holder pursuant to the
         option granted to it by the Note Trustee (as agent for the
         Noteholders) under the terms of the Post Enforcement Call Option
         Agreement. Immediately upon such transfer, no such former Noteholder
         shall have any further interest in the Notes. Each of the Noteholders
         acknowledges that the Note Trustee has the authority and the power to
         bind the Noteholders in accordance with the terms and conditions set
         out in the Master Issuer Post-Enforcement Call Option Agreement and
         each Noteholder, by subscribing for or purchasing Notes, agrees to be
         so bound. The Note Trustee shall give notice of the exercise of such
         option to the Noteholders in accordance with CONDITION 14.

11.      MEETINGS OF NOTEHOLDERS, MODIFICATIONS AND WAIVER

11.1     MEETINGS OF NOTEHOLDERS

         The Master Issuer Trust Deed contains provisions for convening
         meetings of Noteholders of any Series and Class to consider any matter
         affecting their interests, including the sanctioning by Extraordinary
         Resolution of a modification of any provision of these Conditions or
         the provisions of any of the Transaction Documents.

         (a)     Class A Notes

                 In respect of the Class A Notes, the Master Issuer Trust Deed
                 provides that, subject to CONDITION 11.2:

                 (i)     a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of one
                         class only of the Class A Notes shall be deemed to
                         have been duly passed if passed at a meeting of the
                         Holders of that class of the Class A Notes;

                 (ii)    a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of any
                         two or more classes of the Class A Notes but does not
                         give rise to a conflict of interest between the
                         Holders of any such two or more Classes of Class A
                         Notes, shall be deemed to have been duly passed if
                         passed at a single meeting of the Holders of that
                         class of such two or more Classes of Class A Notes;
                         and

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<PAGE>

                 (iii)   a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of any
                         two or more classes of the Class A Notes and gives or
                         may give rise to a conflict of interest between the
                         Holders of any such two or more Classes of Class A
                         Notes, shall be deemed to have been duly passed only
                         if, in lieu of being passed at a single meeting of the
                         Holders of such two or more Classes of Class A Notes,
                         it shall be passed at separate meetings of the Holders
                         of each of such two or more Classes of Class A Notes.

         (b)     Class B Notes

                 In respect of the Class B Notes, the Master Issuer Trust Deed
                 provides that, subject to CONDITION 11.2:

                 (i)     a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of one
                         class only of the Class B Notes shall be deemed to
                         have been duly passed if passed at a meeting of the
                         Holders of that class of the Class B Notes;

                 (ii)    a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of any
                         two or more classes of the Class B Notes but does not
                         give rise to a conflict of interest between the
                         Holders of any such two or more Classes of Class B
                         Notes, shall be deemed to have been duly passed if
                         passed at a single meeting of the Holders of such two
                         or more Classes of Class B Notes; and

                 (iii)   a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of any
                         two or more classes of the Class B Notes and gives or
                         may give rise to a conflict of interest between the
                         Holders of any such two or more Classes of Class B
                         Notes, shall be deemed to have been duly passed only
                         if, in lieu of being passed at a single meeting of the
                         Holders of such two or more Classes of Class B Notes,
                         it shall be passed at separate meetings of the Holders
                         of each of such two or more Classes of Class B Notes.

         (c)     Class M Notes

                 In respect of the Class M Notes, the Master Issuer Trust Deed
                 provides that, subject to CONDITION 11.2:

                 (i)     a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of one
                         class only of the Class M Notes shall be deemed to
                         have been duly passed if passed at a meeting of the
                         Holders of that class of the Class M Notes;

                 (ii)    a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of any
                         two or more classes of the Class M Notes but does not
                         give rise to a conflict of interest between the
                         Holders of any such two or more Classes of Class M
                         Notes, shall be deemed to have been duly passed if
                         passed at a single meeting of the Holders of such two
                         or more Classes of Class M Notes; and

                 (iii)   a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of any
                         two or more classes of the Class M Notes and gives or
                         may give rise to a conflict of interest between the
                         Holders of any such two or more Classes of Class M
                         Notes, shall be deemed to have been duly passed only
                         if, in lieu of being passed at a single meeting of the
                         Holders of such two or more Classes of Class M Notes,
                         it shall be passed at separate meetings of the Holders
                         of each of such two or more Classes of Class M Notes.

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<PAGE>

         (d)     Class C Notes

                 In respect of the Class C Notes, the Master Issuer Trust Deed
                 provides that, subject to CONDITION 11.2:

                 (i)     a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of one
                         class only of the Class C Notes shall be deemed to
                         have been duly passed if passed at a meeting of that
                         class of the Holders of that class of the Class C
                         Notes;

                 (ii)    a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of any
                         two or more classes of the Class C Notes but does not
                         give rise to a conflict of interest between the
                         Holders of any such two or more Classes of Class C
                         Notes, shall be deemed to have been duly passed if
                         passed at a single meeting of the Holders of such two
                         or more Classes of Class C Notes; and

                 (iii)   a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of any
                         two or more classes of the Class C Notes and gives or
                         may give rise to a conflict of interest between the
                         Holders of any such two or more Classes of Class C
                         Notes, shall be deemed to have been duly passed only
                         if, in lieu of being passed at a single meeting of the
                         Holders of such two or more Classes of Class C Notes,
                         it shall be passed at separate meetings of the Holders
                         of each of such two or more Classes of Class C Notes.

         (e)     Class D Notes

                 In respect of the Class D Notes, the Master Issuer Trust Deed
                 provides that, subject to CONDITION 11.2:

                 (i)     a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of one
                         class only of the Class D Notes shall be deemed to
                         have been duly passed if passed at a meeting of the
                         Holders of that class of the Class D Notes;

                 (ii)    a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of any
                         two or more classes of the Class D Notes but does not
                         give rise to a conflict of interest between the
                         Holders of any such two or more Classes of Class D
                         Notes, shall be deemed to have been duly passed if
                         passed at a single meeting of the Holders of such two
                         or more Classes of Class D Notes; and

                 (iii)   a resolution which, in the sole opinion of the Note
                         Trustee, affects the interests of the Holders of any
                         two or more classes of the Class D Notes and gives or
                         may give rise to a conflict of interest between the
                         Holders of any such two or more Classes of Class D
                         Notes, shall be deemed to have been duly passed only
                         if, in lieu of being passed at a single meeting of the
                         Holders of such two or more Classes of Class D Notes,
                         it shall be passed at separate meetings of the Holders
                         of each of such two or more Classes of Class D Notes.

         The quorum for any meeting of the Holders of any Series and Class of
         Notes or of any Class of Notes of more than one Series convened to
         consider a resolution (except for the purpose of passing an
         Extraordinary Resolution or a Programme Resolution) will be one or
         more persons holding or representing not less than one-twentieth of
         the aggregate Principal Amount Outstanding of such Series and Class of
         Notes or such Class of Notes of more than one Series or, at any
         adjourned meeting, one or more persons being or representing
         Noteholders of such Series and Class of Notes or such Class of Notes
         of more than one Series, whatever the aggregate Principal Amount
         Outstanding

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<PAGE>

         of the relevant Notes so held or represented. A RESOLUTION means a
         resolution (excluding an Extraordinary Resolution or a Programme
         Resolution) passed at a meeting of Noteholders duly convened and held
         in accordance with the provisions of the Master Issuer Trust Deed by a
         simple majority of the persons voting thereat upon a show of hands or
         if a poll is duly demanded by a simple majority of the votes cast on
         such poll.

         Subject as provided in the following paragraph, the quorum at any
         meeting of the Holders of any Series and Class of Notes or of any
         Class of Notes of more than one Series of Notes convened to consider
         an Extraordinary Resolution will be one or more persons holding or
         representing not less than 50% of the aggregate Principal Amount
         Outstanding of such Series and Class of Notes or such Class of Notes
         of more than one Series or, at any adjourned meeting, one or more
         persons being or representing Noteholders of such Series and Class of
         Notes or such Class of Notes of more than one Series of Notes,
         whatever the aggregate Principal Amount Outstanding of the relevant
         Notes so held or represented.

         The quorum at any meeting of Noteholders for passing an Extraordinary
         Resolution which includes the sanctioning of a modification which
         would have the effect of altering the amount or timing of payments of
         principal on the Notes of such Series and Class or of such Class or
         the rate, the day or the timing of payments of interest thereon or of
         the currency of payment of the Notes of such Series and Class or of
         such Class or altering the priority of payments to the extent it
         affects such Series and Class or of such Class or altering the quorum
         or majority required in relation to any resolution (each a BASIC TERMS
         MODIFICATION, as more fully defined in the Master Issuer Trust Deed)
         shall be one or more persons holding or representing not less than 75%
         of the aggregate Principal Amount Outstanding of the Notes of the
         relevant Series and Class or of the Class of Notes of more than one
         Series of Notes or, at any adjourned and reconvened meeting, not less
         than 25% of the aggregate Principal Amount Outstanding of the Notes of
         the relevant Series and Class or of the Class of Notes of more than
         one Series of Notes.

         An Extraordinary Resolution passed at any meeting of Noteholders shall
         be binding on all of the Noteholders of the relevant Series and Class
         or of the Class of Notes of more than one Series of Notes whether or
         not they are present or represented at the meeting.

         In connection with any meeting of Noteholders where the relevant Notes
         (or any of them) are not denominated in Sterling, the Principal Amount
         Outstanding of any Note not denominated in Sterling shall be converted
         into Sterling at the relevant Specified Currency Exchange Rate.

         A resolution signed by or on behalf of all the Noteholders of the
         relevant Series and Class or of the relevant Class of more than one
         Series of Notes who for the time being are entitled to receive notice
         of a meeting under the Master Issuer Trust Deed shall for all purposes
         be as valid and effective as an Extraordinary Resolution passed at a
         meeting of Holders of such Series and Class or of the relevant Class
         of more than one Series of Notes.

11.2     PROGRAMME RESOLUTION

         Notwithstanding the provisions of CONDITION 11.1, any Extraordinary
         Resolution of the Noteholders of any Class to direct the Note Trustee
         to give a Note Acceleration Notice pursuant to CONDITION 9 or take any
         enforcement action or instruct the Master Issuer Security Trustee to
         enforce the Master Issuer Security pursuant to and CONDITION 10 (a
         PROGRAMME RESOLUTION) shall only be capable of being passed at a
         single meeting of the Noteholders of all Series of such Class of
         Notes. The quorum at any such meeting for passing a Programme
         Resolution shall be one or more persons holding or representing not
         less than 50% of the aggregate Principal Amount Outstanding of the
         Notes of such Class or, at any adjourned and reconvened meeting, one
         or more persons being or representing Noteholders of such Class of
         Notes, whatever the aggregate Principal Amount Outstanding of such
         Class of Notes so held or represented by them.

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         A Programme Resolution passed at any meeting of all Series of any
         Class of Notes shall be binding on all Noteholders of all Series of
         that Class of Notes, whether or not they are present or represented at
         the meeting.

11.3     LIMITATIONS ON NOTEHOLDERS

         Subject as provided in CONDITION 11.4:

         (a)     an Extraordinary Resolution of the Class A Noteholders of any
                 Series shall be binding on all Class B Noteholders, all Class
                 M Noteholders, all Class C Noteholders and all Class D
                 Noteholders in each case, of that Series or of any other
                 Series;

         (b)     no Extraordinary Resolution of the Class B Noteholders of any
                 Series shall take effect for any purpose while any Class A
                 Notes of that Series or of any other Series remain outstanding
                 unless it shall have been sanctioned by an Extraordinary
                 Resolution of the Class A Noteholders of each Series or the
                 Note Trustee is of the opinion that it would not be materially
                 prejudicial to the interests of the Class A Noteholders of any
                 Series as applicable and subject hereto and to CONDITION 11.4,
                 an Extraordinary Resolution of the Class B Noteholders of any
                 Series will be binding on the Class M Noteholders, the Class C
                 Noteholders and the Class D Noteholders in each case, of that
                 or any other Series irrespective of the effect upon them;

         (c)     no Extraordinary Resolution of the Class M Noteholders of any
                 Series shall take effect for any purpose while any Class A
                 Notes or Class B Notes in each case, of that Series or of any
                 other Series remain outstanding unless it shall have been
                 sanctioned by an Extraordinary Resolution of the Class A
                 Noteholders and an Extraordinary Resolution of the Class B
                 Noteholders, in each case of each Series or the Note Trustee
                 is of the opinion that it would not be materially prejudicial
                 to the respective interests of the Class A Noteholders and/or
                 the Class B Noteholders of any Series (as applicable) and
                 subject hereto and to CONDITION 11.4, an Extraordinary
                 Resolution of the Class M Noteholders of any Series will be
                 binding on the Class C Noteholders and the Class D Noteholders
                 in each case, of that or of any other Series irrespective of
                 the effect upon them;

         (d)     no Extraordinary Resolution of the Class C Noteholders of any
                 Series shall take effect for any purpose while any Class A
                 Notes, Class B Notes or Class M Notes in each case, of that
                 Series or of any other Series remain outstanding unless it
                 shall have been sanctioned by an Extraordinary Resolution of
                 the Class A Noteholders, an Extraordinary Resolution of the
                 Class B Noteholders and an Extraordinary Resolution of the
                 Class M Noteholders, in each case of each Series or the Note
                 Trustee is of the opinion that it would not be materially
                 prejudicial to the respective interests of the Class A
                 Noteholders, the Class B Noteholders and/or the Class M
                 Noteholders of any Series (as applicable) and subject hereto
                 and to CONDITION 11.4, an Extraordinary Resolution of the
                 Class C Noteholders of any Series will be binding on the Class
                 D Noteholders of that or any other Series irrespective of the
                 effect upon them; and

         (e)     no Extraordinary Resolution of Class D Noteholders of any
                 Series shall take effect for any purpose while any Class A
                 Notes, Class B Notes, Class M Notes or Class C Notes in each
                 case, of that Series or of any other Series remain outstanding
                 unless it shall have been sanctioned by an Extraordinary
                 Resolution of the Class A Noteholders, an Extraordinary
                 Resolution of the Class B Noteholders, an Extraordinary
                 Resolution of the Class M Noteholders and an Extraordinary
                 Resolution of the Class C Noteholders, in each case of each
                 Series or the Note Trustee is of the opinion that it would not
                 be materially prejudicial to the respective interests of the
                 Class A Noteholders, the Class B Noteholders, the Class M
                 Noteholders and/or the Class C Noteholders of any Series (as
                 applicable).

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11.4     APPROVAL OF MODIFICATIONS AND WAIVERS BY NOTEHOLDERS

         No Extraordinary Resolution of the Noteholders of any one or more
         Series of Class A Notes to sanction a modification of, or any waiver
         or authorisation of any breach or proposed breach of, any of the
         provisions of the Transaction Documents or the Conditions of the Notes
         shall take effect unless it has been sanctioned by an Extraordinary
         Resolution of the Class B Noteholders, an Extraordinary Resolution of
         the Class M Noteholders, an Extraordinary Resolution of the Class C
         Noteholders and an Extraordinary Resolution of the Class D
         Noteholders, in each case of each Series, or the Note Trustee is of
         the opinion that it would not be materially prejudicial to the
         respective interests of the Class B Noteholders, the Class M
         Noteholders, the Class C Noteholders and the Class D Noteholders of
         any Series.

         No Extraordinary Resolution of the Noteholders of any one or more
         Series of Class B Notes to sanction a modification of, or any waiver
         or authorisation of any breach or proposed breach of, any of the
         provisions of the Transaction Documents or the Conditions of the Notes
         shall take effect unless it has been sanctioned by an Extraordinary
         Resolution of the Class M Noteholders, an Extraordinary Resolution of
         the Class C Noteholders and an Extraordinary Resolution of the Class D
         Noteholders, in each case of each Series, or the Note Trustee is of
         the opinion that it would not be materially prejudicial to the
         respective interests of the Class M Noteholders, the Class C
         Noteholders and the Class D Noteholders of any Series.

         No Extraordinary Resolution of the Noteholders of any one or more
         Series of Class M Notes to sanction a modification of, or any waiver
         or authorisation of any breach or proposed breach of, any of the
         provisions of the Transaction Documents or the Conditions of the Notes
         shall take effect unless it has been sanctioned by an Extraordinary
         Resolution of the Class C Noteholders and an Extraordinary Resolution
         of the Class D Noteholders, in each case of each Series, or the Note
         Trustee is of the opinion that it would not be materially prejudicial
         to the respective interests of the Class C Noteholders and the Class D
         Noteholders of any Series.

         No Extraordinary Resolution of the Noteholders of any one or more
         Series of Class C Notes to sanction a modification of, or any waiver
         or authorisation of any breach or proposed breach of, any of the
         provisions of the Transaction Documents or the Conditions of the Notes
         shall take effect unless it has been sanctioned by an Extraordinary
         Resolution of the Class D Noteholders of each Series, or the Note
         Trustee is of the opinion that it would not be materially prejudicial
         to the interests of the Class D Noteholders of any Series.

11.5     MODIFICATIONS AND DETERMINATIONS BY NOTE TRUSTEE

         The Note Trustee, may, without the consent of the Noteholders:

         (a)     agree to any modification (other than a Basic Terms
                 Modification) of, or to the waiver or authorisation of any
                 breach or proposed breach of, the Conditions of any Series and
                 Class of Notes or any of the Transaction Documents which is
                 not, in the opinion of the Note Trustee, materially
                 prejudicial to the interests of the Noteholders of any Series
                 and Class of Notes; or

         (b)     determine that any Note Event of Default shall not be treated
                 as such provided that it is not in the opinion of the Note
                 Trustee materially prejudicial to the interests of the Holders
                 of the most senior Class of Notes then outstanding; or

         (c)     agree to any modification (including a Basic Terms
                 Modification) of these Conditions or any of the Transaction
                 Documents which, in the sole opinion of the Note Trustee, is
                 of a formal, minor or technical nature or is to correct a
                 manifest error or an error established as such to the
                 satisfaction of the Note Trustee or is to comply with the
                 mandatory provisions of law; or

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         (d)     agree to any modification of any of these Conditions or any
                 Transaction Documents as expressly provided for in the
                 Transaction Documents.

         For the avoidance of doubt, the Note Trustee shall be entitled to
         assume, without further investigation or inquiry, that such
         modification, waiver or authorisation, will not be materially
         prejudicial to the interests of the Noteholders if each of the Rating
         Agencies rating the relevant Series and Class of Notes has confirmed
         in writing that the then current ratings of the applicable Series and
         Class of Notes would not be reduced, withdrawn or qualified by such
         modification, waiver or authorisation. Any such modification, waiver,
         authorisation or determination shall be binding on the Noteholders
         and, unless the Note Trustee, agrees otherwise, any such modification
         shall be notified to the Noteholders and the Rating Agencies in
         accordance with CONDITION 14 as soon as practicable thereafter.

11.6     REDENOMINATION

         The Note Trustee may agree, without the consent of the Holders of the
         Sterling Notes on or after the Specified Date (as defined below), to
         such modifications to the Sterling Notes and the Master Issuer Trust
         Deed in respect of redenomination of such Notes in euro and associated
         reconventioning, renominalisation and related matters in respect of
         such Notes as may be proposed by the Master Issuer (and confirmed by
         an independent financial institution approved by the Note Trustee to
         be in conformity with then applicable market conventions) and to
         provide for redemption at the euro equivalent of the sterling
         principal amount of the Sterling Notes. For these purposes, SPECIFIED
         DATE means the date on which the United Kingdom participates in the
         third stage of European economic and monetary union pursuant to the
         Treaty establishing the European Community, as amended by the Treaty
         on European Union, or otherwise participates in European economic and
         monetary union in a manner with an effect similar to such third stage.

         Any such modification shall be binding on the Holders of the Sterling
         Notes and, unless the Note Trustee agrees otherwise, any such
         modification shall be notified to such Noteholders in accordance with
         CONDITION 14 as soon as practicable thereafter.

11.7     EXERCISE OF NOTE TRUSTEE'S FUNCTIONS

         Where the Note Trustee is required, in connection with the exercise of
         its powers, trusts, authorities, duties and discretions under these
         Conditions or any Transaction Document, to have regard to the
         interests of the Noteholders of any Class, it shall have regard to the
         interests of such Noteholders as a class and, in particular but
         without prejudice to the generality of the foregoing, the Note Trustee
         shall not have regard to, or be in any way liable for, the
         consequences of such exercise for individual Noteholders resulting
         from their being for any purpose domiciled or resident in, or
         otherwise connected with, or subject to the jurisdiction of, any
         particular territory. In connection with any such exercise, the Note
         Trustee shall not be entitled to require, and no Noteholder shall be
         entitled to claim, from the Master Issuer or any other person, any
         indemnification or payment in respect of any tax consequence of any
         such exercise upon individual Noteholders.

12.      INDEMNIFICATION OF THE NOTE TRUSTEE AND THE MASTER ISSUER SECURITY
         TRUSTEE

         The Master Issuer Trust Deed and the Master Issuer Deed of Charge set
         out certain provisions for the benefit of the Note Trustee and the
         Master Issuer Security Trustee. The following is a summary of such
         provisions and is subject to the more detailed provisions of the
         Master Issuer Trust Deed and the Master Issuer Deed of Charge.

         The Transaction Documents contain provisions governing the
         responsibility (and relief from responsibility) of the Note Trustee
         and the Master Issuer Security Trustee and providing for their
         indemnification in certain circumstances, including, among others,
         provisions relieving the Master

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         Issuer Security Trustee from taking enforcement proceedings or
         enforcing the Master Issuer Security unless indemnified to its
         satisfaction. The Note Trustee and the Master Issuer Security Trustee
         are also entitled to be paid their costs and expenses in priority to
         any interest payments to Noteholders.

         The Note Trustee and the Master Issuer Security Trustee and their
         related companies are entitled to enter into business transactions
         with the Master Issuer, Bank of Scotland, the Master Issuer Cash
         Manager and/or the related companies of any of them and to act as note
         trustee or security trustee for the holders of any new notes and/or
         any other person who is a party to any Transaction Document or whose
         obligations are comprised in the Master Issuer Security and/or any of
         its subsidiary or associated companies without accounting for any
         profit resulting therefrom.

         Neither the Note Trustee nor the Master Issuer Security Trustee will
         be responsible for any loss, expense or liability which may be
         suffered as a result of any assets comprised in the Master Issuer
         Security, or any deeds or documents of title thereto, being uninsured
         or inadequately insured or being held by clearing organisations or
         their operators or by intermediaries such as banks, brokers or other
         similar persons on behalf of the Note Trustee or the Master Issuer
         Security Trustee, as applicable.

         Furthermore, the Note Trustee and the Master Issuer Security Trustee
         will be relieved of liability for making searches or other inquiries
         in relation to the assets comprising the Master Issuer Security. The
         Note Trustee and the Master Issuer Security Trustee do not have any
         responsibility in relation to the legality and the enforceability of
         the trust arrangements and the related Master Issuer Security. Neither
         the Note Trustee nor the Master Issuer Security Trustee will be
         obliged to take any action that might result in its incurring personal
         liabilities. Neither the Note Trustee nor the Master Issuer Security
         Trustee is obliged to monitor or investigate the performance of any
         other person under the Transaction Documents and is entitled to
         assume, until it has actual knowledge to the contrary, that all such
         persons are properly performing their duties, unless it receives
         express notice to the contrary.

         Neither the Note Trustee nor the Master Issuer Security Trustee will
         be responsible for any deficiency that may arise because it is liable
         to tax in respect of the proceeds of any Master Issuer Security.

13.      REPLACEMENT OF NOTES

         If Definitive Notes are lost, stolen, mutilated, defaced or destroyed,
         the Noteholder can replace them at the Specified Office of any Paying
         Agent subject to all applicable laws and stock exchange requirements.
         The Noteholder will be required both to pay the expenses of producing
         a replacement and to comply with the Master Issuer's, the Registrar's
         and the Paying Agent's reasonable requests for evidence and indemnity.

         If a Global Note is lost, stolen, mutilated, defaced or destroyed, the
         Master Issuer will deliver a replacement Global Note to the registered
         holder upon receipt of satisfactory evidence and surrender of any
         defaced or mutilated Global Note. A replacement will only be made upon
         payment of the expenses for a replacement and compliance with the
         Master Issuer's, Registrar's and Paying Agents' reasonable requests as
         to evidence and indemnity.

         Defaced or mutilated Notes must be surrendered before replacements
         will be issued.

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14.      NOTICE TO NOTEHOLDERS

14.1     PUBLICATION OF NOTICE

         Any notice to Noteholders shall be validly given if such notice is:

         (a)     sent to them by first class mail (or its equivalent) or (if
                 posted to a non-UK address) by airmail at the respective
                 addresses on the Register; and

         (b)     published in The Financial Times; and

         (c)     for so long as amounts are outstanding on the US Notes, in a
                 daily newspaper of general circulation in New York (which is
                 expected to be The New York Times);

         or, if any of such newspapers set out above shall cease to be
         published or timely publication therein shall not be practicable, in a
         leading English language daily newspaper having general circulation in
         the United Kingdom or the United States (as applicable) provided that
         if, at any time, the Master Issuer procures that the information
         concerned in such notice shall be published on the Relevant Screen,
         publication in the newspapers set out above or such other newspaper or
         newspapers shall not be required with respect to such information.

14.2     DATE OF PUBLICATION

         Any notices so published shall be deemed to have been given on the
         fourth day after the date of posting, or as the case may be, on the
         date of such publication or, if published more than once on different
         dates, on the first date on which publication shall have been made in
         the newspaper or newspapers in which (or on the Relevant Screen on
         which) publication is required.

14.3     GLOBAL NOTES

         While the Notes are represented by Global Notes, any notice to
         Noteholders will be validly given if such notice is provided in
         accordance with CONDITION 14.1 or (at the option of the Master Issuer)
         if delivered to DTC (in the case of the US Notes) or Euroclear and/or
         Clearstream, Luxembourg (in the case of the Reg S Notes) or (if
         specified in the applicable Final Terms) if delivered through any
         ALTERNATIVE CLEARING SYSTEM specified therein. Any notice delivered to
         the DTC and/or Euroclear and/or Clearstream, Luxembourg and/or such
         Alternative Clearing System will be deemed to be given on the day of
         such delivery.

14.4     NOTE TRUSTEE'S DISCRETION TO SELECT ALTERNATIVE METHOD

         The Note Trustee shall be at liberty to sanction some other method of
         giving notice to the Noteholders or any Series or Class or category of
         them having regard to market practice then prevailing and to the
         requirements of the stock exchanges on which the Notes are then
         admitted for trading and provided that notice of such other method is
         given to the Noteholders in such manner as the Note Trustee shall
         require.

15.      NOTE ISSUES

         The Master Issuer shall be at liberty from time to time, without the
         consent of the Noteholders, to create and issue Notes, upon
         satisfaction of the following conditions:

         (a)     the Master Issuer obtaining a written confirmation from each
                 of the Rating Agencies that the then current ratings of the
                 outstanding Funding 1 Notes and the outstanding Notes will not
                 be withdrawn, qualified or reduced because of the new issue;

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<PAGE>

         (b)     the Master Issuer providing written certification to the
                 Funding 2 Security Trustee and the Master Issuer Security
                 Trustee that no Master Intercompany Loan Event of Default has
                 occurred which has not been remedied or waived and no Master
                 Intercompany Loan Event of Default will occur as a result of
                 the issue of the new Notes; and

         (c)     the Master Issuer providing written certification to the
                 Funding 2 Security Trustee and the Master Issuer Security
                 Trustee:

                 (i)     that no principal deficiency is recorded on the
                         Funding 2 Principal Deficiency Ledger in relation to
                         the Loan Tranches outstanding at that time; or

                 (ii)    where a Principal Deficiency is recorded on the
                         Funding 2 Principal Deficiency Ledger at that time,
                         that there will be sufficient Funding 2 Available
                         Revenue Receipts on the forthcoming Funding 2 Interest
                         Payment Date, when applied in accordance with the
                         Funding 2 Pre-Enforcement Revenue Priority of
                         Payments, to eliminate such Principal Deficiency.

16.      RATING AGENCIES

         If:

         (a)     a confirmation of rating or other response by a Rating Agency
                 is a condition to any action or step under any Transaction
                 Document (other than pursuant to CONDITION 15); and

         (b)     a written request for such confirmation or response is
                 delivered to each Rating Agency by the Master Issuer (copied
                 to the Note Trustee and/or the Master Issuer Security Trustee
                 and/or the Funding 2 Security Trustee, as applicable) and
                 either one or more Rating Agency (each a NON-RESPONSIVE RATING
                 AGENCY) indicates that it does not consider such confirmation
                 or response necessary in the circumstances; and

         (c)     at least one Rating Agency gives such a confirmation or
                 response based on the same facts,

         then such condition shall be deemed to be modified with respect to the
         facts set out in the request referred to in (b) so that there shall be
         no requirement for the confirmation or response from the
         Non-Responsive Rating Agency.

         The Note Trustee and/or the Master Issuer Security Trustee and/or the
         Funding 2 Security Trustee, as applicable, shall be entitled to treat
         as conclusive a certificate by any director, officer or employee of
         the Master Issuer, Funding 2, the Seller, any investment bank or
         financial adviser acting in relation to the Notes as to any matter
         referred to in (b) in the absence of manifest error or the Note
         Trustee and/or the Master Issuer Security Trustee and/or the Funding 2
         Security Trustee, as applicable, having facts contradicting such
         certificates specifically drawn to his attention and the Note Trustee
         and/or the Master Issuer Security Trustee and/or the Funding 2
         Security Trustee, as applicable, shall not be responsible for any
         loss, liability, costs, damages, expenses or inconvenience that may be
         caused as a result.

17.      GOVERNING LAW AND JURISDICTION

         The Transaction Documents and the Notes are governed by English law
         unless specifically stated to the contrary. Certain provisions in the
         Transaction Documents relating to property situated in Scotland are
         governed by Scots law. Unless specifically stated to the contrary:

         (a)     the courts of England are to have non-exclusive jurisdiction
                 to settle any disputes which may arise out of or in connection
                 with the Notes and the Transaction Documents; and

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<PAGE>

         (b)     the Master Issuer and the other parties to the Transaction
                 Documents irrevocably submit to the non-exclusive jurisdiction
                 of the courts of England.

18.      CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

         No person shall have any right to enforce any term or condition of the
         Notes under the Contracts (Rights of Third Parties) Act 1999, but this
         shall not affect any right or remedy of a third party which exists or
         is available apart from that Act.

19.      DEFINITIONS

         Unless otherwise defined in these Conditions or unless the context
         otherwise requires, in these Conditions the following words shall have
         the following meanings and any other capitalised terms used in these
         Conditions shall have the meanings ascribed to them or incorporated in
         the Master Issuer Trust Deed or the Master Definitions Schedule. The
         provisions of Clause 2 (Interpretation and Construction) of the Master
         Definitions Schedule are incorporated into and shall apply to these
         Conditions.

         A LOAN TRANCHES means the Loan Tranches made by the Master Issuer to
         Funding 2 under the Master Intercompany Loan Agreement from the
         proceeds of issue of the Class M Notes of any Series;

         AA LOAN TRANCHES means the Loan Tranches made by the Master Issuer to
         Funding 2 under the Master Intercompany Loan Agreement from the
         proceeds of issue of the Class B Notes of any Series;

         AAA LOAN TRANCHES means the Loan Tranches made by the Master Issuer to
         Funding 2 under the Master Intercompany Loan Agreement from the
         proceeds of issue of the Class A Notes of any Series;

         ACCRUAL YIELD means, in respect of any Series and Class of Notes, the
         yield specified as such for such Notes in the applicable Final Terms;

         ADDITIONAL BUSINESS CENTRE means, in respect of any Series and Class
         of Notes, each place specified as such for such Notes in the
         applicable Final Terms;

         AGENTS means the Paying Agents, the Transfer Agent, the Registrar and
         the Agent Bank;

         AGENT BANK means Citibank, N.A. in its capacity as agent bank at its
         Specified Office or such other person for the time being acting as
         agent bank under the Master Issuer Paying Agent and Agent Bank
         Agreement;

         BASE PROSPECTUS means the base prospectus of the Master Issuer from
         time to time, the first being the base prospectus dated 11 October
         2006;

         BB LOAN TRANCHE means the Loan Tranches made by the Master Issuer to
         Funding 2 under the Master Intercompany Loan Agreement from the
         proceeds of issue of the Class D Notes of any Series;

         BBB LOAN TRANCHES means the Loan Tranches made by the Master Issuer to
         Funding 2 under the Master Intercompany Loan Agreement from the
         proceeds of issue of the Class C Notes of any Series;

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         BROKEN AMOUNT means, in respect of any Series and Class of Notes, the
         amount specified as such (if any) for such Notes in the applicable
         Final Terms;

         CALL OPTION DATE means, in respect of any Series and Class of Notes,
         the date specified as such in the applicable Final Terms, being the
         Interest Payment Date on which the Master Issuer is entitled to redeem
         such Series and Class of Notes pursuant to CONDITION 5.4(A).

         CLASS or CLASS means, in relation to the Class A Notes, the Class B
         Notes, the Class M Notes, the Class C Notes and the Class D Notes and
         the holders thereof, each single class thereof as the context requires
         and except where otherwise specified, and the respective holders
         thereof;

         CLASS A NOTEHOLDERS means the Holders of the Class A Notes;

         CLASS A NOTES means Notes of any Series designated as such (or a
         sub-class of such) in the applicable Final Terms;

         CLASS B NOTEHOLDERS means the Holders of the Class B Notes;

         CLASS B NOTES means Notes of any Series designated as such (or a
         sub-class of such) in the applicable Final Terms;

         CLASS C NOTEHOLDERS means the Holders of the Class C Notes;

         CLASS C NOTES means Notes of any Series designated as such (or a
         sub-class of such) in the applicable Final Terms;

         CLASS D NOTEHOLDERS means the Holders of the Class D Notes;

         CLASS D NOTES means Notes of any Series designated as such (or a
         sub-class of such) in the applicable Final Terms;

         CLASS M NOTEHOLDERS means the Holders of the Class M Notes;

         CLASS M NOTES means Notes of any Series designated as such (or a
         sub-class of such) in the applicable Final Terms;

         CLEARSTREAM, LUXEMBOURG means Clearstream Banking, societe
         anonyme;

         CLOSING DATE has the meaning given to it in the relevant Final Terms;

         CONDITIONAL PURCHASER means, in respect of any Series and Class of
         Remarketable Notes, the person specified as such for such Series and
         Class of Remarketable Notes in the applicable Final Terms;

         CONDITIONAL PURCHASER CONFIRMATION means, in respect of any Series and
         Class of Remarketable Notes, the confirmation given by the Remarketing
         Agent or the Tender Agent to the Master Issuer and the Principal
         Paying Agent that the Conditional Purchaser has purchased an interest
         in or has had transferred to it or on its behalf an interest in all
         such Series and Class of Remarketable Notes;

         DEFINITIVE NOTES means the note certificates representing the Notes
         while in definitive form;

         DESIGNATED ACCOUNT means the account (which, in the case of a payment
         in Japanese Yen to a nonresident of Japan, shall be a non-resident
         account) maintained by a Holder with a Designated Bank and identified
         as such in the Register;

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<PAGE>

         DESIGNATED BANK means (in the case of payment in a Specified Currency
         other than euro) a bank in the principal financial centre of the
         country of such Specified Currency (which, if the Specified Currency
         is Australian dollars or New Zealand dollars, shall be Sydney and
         Auckland, respectively) and (in the case of a payment in euro) any
         bank which processes payments in euro;

         DETERMINATION DATE means, in respect of any Series and Class of Notes,
         the date(s) specified as such (if any) for such Notes in the
         applicable Final Terms;

         DETERMINATION PERIOD as defined in CONDITION 4.1;

         DOLLARS, US$, US DOLLARS or $ means the lawful currency for the time
         being of the United States of America;

         EURIBOR means the Euro-zone inter-bank offered rate;

         EURO, EURO or [EURO] means the currency of the member states of the
         European Union that adopt the single currency in accordance with the
         Treaty of Rome of 25 March 1957, establishing the European Community,
         as amended from time to time;

         EUROCLEAR means Euroclear Bank S.A./N.V., as operator of the Euroclear
         System;

         EXTRAORDINARY RESOLUTION means a resolution passed at a meeting of the
         Noteholders of a particular Class, Series or Series and Class duly
         convened and held in accordance with the provisions of the Master
         Issuer Trust Deed by a majority consisting of not less than
         three-fourths of the persons voting thereat upon a show of hands or if
         a poll is duly demanded by a majority consisting of not less than
         three-fourths of the votes cast on such poll;

         FINAL MATURITY DATE means, in respect of any Series and Class of
         Notes, the date specified as such for such Notes in the applicable
         Final Terms;

         FINAL TERMS means, in relation to any Series of Notes, the final terms
         issued in relation to such Series of Notes as a supplement to these
         Conditions and giving details of, inter alia, the amount and price of
         such Series of Notes and which forms a part of the Base Prospectus in
         relation to such Series of Notes;

         FIXED COUPON AMOUNT means, in respect of any Series and Class of
         Notes, the amount specified as such (if any) for such Notes in the
         applicable Final Terms;

         FUNDING 2 means Permanent Funding (No. 2) Limited;

         FUNDING 2 DEED OF CHARGE means the deed of charge entered into on the
         Programme Date, as amended and restated from time to time, between,
         among others, Funding 2, the Funding 2 Security Trustee, the Master
         Issuer and the Note Trustee and each deed of accession or supplement
         entered into in connection therewith;

         FUNDING 2 SECURITY TRUSTEE means The Bank of New York and its
         successors or any other security trustee under the Funding 2 Deed of
         Charge;

         GLOBAL NOTES means the US Global Notes and the Reg S Global Notes;

         HOLDER has the meaning indicated in CONDITION 1.2;

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<PAGE>

         INTEREST COMMENCEMENT DATE means, in respect of any Series and Class
         of Notes, the Closing Date of such Notes or such other date as may be
         specified as such for such Notes in the applicable Final Terms;

         INTEREST PAYMENT DATE means, in respect of a Series and Class of Notes
         (other than Money Market Notes), the Quarterly Interest Payment Dates
         and (in the case of Money Market Notes) the Monthly Interest Payment
         Dates, subject, in each case, to the terms and conditions of the
         Notes;

         ISDA DEFINITIONS means the 2000 ISDA Definitions, as published by the
         International Swaps and Derivatives Association, Inc. and as amended
         and updated as at the Closing Date of the first Series of Notes;

         LIBOR means the London inter-bank offered rate;

         LISTED NOTES means each Series and Class of Notes which is admitted to
         the official list maintained by the UK Listing Authority and admitted
         to trading on the London Stock Exchange's Gilt Edged and Fixed
         Interest Market;

         LOAN TRANCHES means the AAA Loan Tranches, the AA Loan Tranches, the A
         Loan Tranches, the BBB Loan Tranches and the BB Loan Tranches, being
         the advances made by the Master Issuer to Funding 2, pursuant to the
         Master Intercompany Loan Agreement, each being funded from proceeds
         received by the Master Issuer from the issue of a Series and Class of
         Notes;

         LONDON STOCK EXCHANGE means London Stock Exchange plc;

         MANDATORY TRANSFER DATE means, in respect of any Series and Class of
         Remarketable Notes, the Interest Payment Date specified as such for
         such Series and Class of Remarketable Notes in the applicable Final
         Terms;

         MANDATORY TRANSFER PRICE means, in respect of any Series and Class of
         Remarketable Notes, the Principal Amount Outstanding of such Series
         and Class of Remarketable Notes on the relevant Mandatory Transfer
         Date following the application of Note Principal Payments on such
         date;

         MANDATORY TRANSFER TERMINATION EVENT shall occur, in respect of any
         Series and Class of Remarketable Notes, if the Conditional Purchaser
         has purchased an interest in all such Series and Class of Remarketable
         Notes;

         MARGIN means, in respect of any Series and Class of Notes, the amount
         specified as such for such Series and Class of Notes in the applicable
         Final Terms;

         MASTER DEFINITIONS SCHEDULE means the master definitions schedule
         dated the Programme Date setting out, among other things, definitions
         which apply to certain Transaction Documents, as amended and restated
         from time to time;

         MASTER INTERCOMPANY LOAN means, at any time, the aggregate of all Loan
         Tranches advanced under the Master Intercompany Loan Agreement;

         MASTER INTERCOMPANY LOAN AGREEMENT means the loan agreement entered
         into the Programme Date between, among others, Funding 2, the Master
         Issuer and the Funding 2 Security Trustee, as amended and restated
         from time to time;

         MASTER ISSUER means Permanent Master Issuer plc;

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         MASTER ISSUER ACCOUNT BANK means Bank of Scotland or such other person
         for the time being acting as account bank to the Master Issuer under
         the Master Issuer Bank Account Agreement;

         MASTER ISSUER BANK ACCOUNTS means the Master Issuer Transaction
         Account and any other account opened and maintained by the Master
         Issuer with the Master Issuer Account Bank pursuant to the Transaction
         Documents;

         MASTER ISSUER BANK ACCOUNT AGREEMENT means the bank account agreement
         entered into on the Programme Date between the Master Issuer, the
         Master Issuer Cash Manager, the Master Issuer Account Bank and the
         Master Issuer Security Trustee, as amended and restated from time to
         time;

         MASTER ISSUER CASH MANAGEMENT AGREEMENT means the cash management
         agreement dated the Programme Date between, amongst others, the Master
         Issuer Cash Manager, the Master Issuer and the Master Issuer Security
         Trustee, as amended and restated from time to time;

         MASTER ISSUER CASH MANAGER means Bank of Scotland plc or such other
         person or persons for the time being acting, under the Master Issuer
         Cash Management Agreement, as agent, inter alia, for the Master
         Issuer;

         MASTER ISSUER DEED OF CHARGE means the deed of charge entered into on
         the Programme Date, as amended and restated from time to time,
         between, among others, the Master Issuer and the Master Issuer
         Security Trustee and each deed of accession or supplement entered into
         in connection therewith;

         MASTER ISSUER PAYING AGENT AND AGENT BANK AGREEMENT means the master
         issuer paying agent and agent bank agreement entered into on the
         Programme Date between, among others, the Master Issuer, the Paying
         Agents, the Transfer Agent, the Registrar, the Agent Bank and the
         Master Issuer Security Trustee;

         MASTER ISSUER POST-ENFORCEMENT CALL OPTION AGREEMENT means the master
         issuer post-enforcement call option agreement entered into on the
         Programme Date between the Master Issuer, the Post-Enforcement Call
         Option Holder and the Note Trustee;

         MASTER ISSUER PRIORITY OF PAYMENTS means the master issuer
         pre-enforcement revenue priority of payments, the master issuer
         pre-enforcement principal priority of payments or the master issuer
         post-enforcement priority of payments, as the case may be, each as set
         out in the Master Issuer Cash Management Agreement or the Master
         Issuer Deed of Charge (as the case may be);

         MASTER ISSUER SECURED CREDITORS means the Master Issuer Security
         Trustee (and any receiver appointed under the Master Issuer Deed of
         Charge), the Note Trustee, the Master Issuer Swap Providers, the
         Master Issuer Corporate Services Provider, the Master Issuer Account
         Bank, the Master Issuer Cash Manager, the Paying Agents, the Agent
         Bank, the Transfer Agent, the Registrar and the Noteholders and any
         new Master Issuer Secured Creditor who accedes to the Master Issuer
         Deed of Charge from time to time under a deed of accession or a
         supplemental deed;

         MASTER ISSUER SECURITY means the security created by the Master Issuer
         pursuant to the Master Issuer Deed of Charge;

         MASTER ISSUER SECURITY TRUSTEE means The Bank of New York and its
         successors or any other security trustee under the Master Issuer Deed
         of Charge;

         MASTER ISSUER SWAP AGREEMENTS means the ISDA master agreements,
         schedules thereto and confirmations thereunder relating to the
         currency and/or interest rate swaps to be entered into on each Closing
         Date, and any credit support annexes or other credit support documents
         entered into at

                                      45

<PAGE>

         any time, as amended from time to time, among the Master Issuer and
         the applicable Master Issuer Swap Provider and/or any credit support
         provider and includes any additional and/or replacement Master Issuer
         Swap Agreement entered into by the Master Issuer from time to time in
         connection with the Notes;

         MASTER ISSUER SWAP PROVIDERS means the institutions identified in
         respect of each Master Issuer Swap Agreement in the Final Terms
         related to the relevant Series and Class of Notes;

         MASTER ISSUER TRANSACTION ACCOUNT means the day to day bank account of
         the Master Issuer, held with the Master Issuer Account Bank as at the
         Programme Date pursuant to the terms of the Master Issuer Bank Account
         Agreement;

         MASTER ISSUER TRUST DEED means the master issuer trust deed entered
         into on the Programme Date as amended and restated from time to time
         between the Master Issuer and the Note Trustee, and each supplemental
         deed entered into in connection therewith;

         MAXIMUM RATE OF INTEREST means, in respect of any Series and Class of
         Notes, the rate of interest specified as such for such Notes in the
         applicable Final Terms;

         MAXIMUM RESET MARGIN means, in respect of any Series and Class of
         Remarketable Notes, the amount specified as such for such Series and
         Class of Remarketable Notes in the applicable Final Terms;

         MINIMUM RATE OF INTEREST means, in respect of any Series and Class of
         Notes, the rate of interest specified as such for such Notes in the
         applicable Final Terms;

         MONEY MARKET NOTES means Notes which will be "Eligible Securities"
         within the meaning of Rule 2a-7 under the Investment Company Act;

         MONTHLY INTEREST PAYMENT DATES means, in respect of any Money Market
         Notes, each monthly date specified in the Final Terms for the payment
         of interest and/or principal until the occurrence of a Pass-through
         Trigger Event and, following such occurrence, the Quarterly Interest
         Payment Dates as specified in the Final Terms for payment of interest
         and/or principal subject, in each case, to the appropriate Business
         Day Convention, if any, specified in the applicable Final Terms.

         NEW BASEL CAPITAL ACCORD means the document "International Convergence
         of Capital Measurement and Capital Standards: a Revised Framework"
         published in June 2004 by the Basel Committee;

         NOTE ACCELERATION NOTICE has the meaning indicated in CONDITION 9.6;

         NOTE DETERMINATION DATE means the date two Business Days prior to each
         Interest Payment Date;

         NOTE EVENT OF DEFAULT means the occurrence of an event of default by
         the Master Issuer as specified in CONDITION 9;

         NOTE PRINCIPAL PAYMENT has the meaning indicated in CONDITION 5.3;

         NOTE TRUSTEE means The Bank of New York and its successors or any
         further or other note trustee under the Master Issuer Trust Deed, as
         trustee for the Noteholders;

         NOTEHOLDERS means the Holders for the time being of the Notes;

                                      46

<PAGE>

         NOTES means the Class A Notes, the Class B Notes, the Class C Notes,
         the Class D Notes and/or the Class M Notes;

         PASS-THROUGH TRIGGER EVENT means any of the following events:

         (a)     a Trigger Event;

         (b)     the service of a Note Acceleration Notice by the Note Trustee
                 on the Master Issuer; or

         (c)     the service of a Master Intercompany Loan Acceleration Notice
                 by the Funding 2 Security Trustee on Funding 2;

         PAYING AGENTS means the Principal Paying Agent and the US Paying
         Agent, together with any further or other paying agents for the time
         being appointed under the Master Issuer Paying Agent and Agent Bank
         Agreement;

         POST-ENFORCEMENT CALL OPTION HOLDER means Permanent PECOH Limited;

         PRINCIPAL AMOUNT OUTSTANDING has the meaning indicated in CONDITION
         5.3;

         PRINCIPAL PAYING AGENT means Citibank, N.A. in its capacity as
         principal paying agent at its Specified Office or such other person
         for the time being acting as principal paying agent under the Master
         Issuer Paying Agent and Agent Bank Agreement;

         PROGRAMME DATE means 17 October 2006;

         QUARTERLY INTEREST PAYMENT DATES means, in respect of a Series and
         Class of Notes (other than Money Market Notes), each quarterly date
         specified in the Final Terms for the payment of interest and/or
         principal, subject to the appropriate Business Day Convention, if any,
         specified in the applicable Final Terms;

         RATE OF INTEREST and RATES OF INTEREST means, in respect of any Series
         and Class of Notes, the rate or rates (expressed as a percentage per
         annum) of interest payable in respect of such Notes specified in the
         applicable Final Terms or calculated and determined in accordance with
         the applicable Final Terms;

         RATING AGENCIES means Standard & Poor's Rating Services, a division of
         The McGraw-Hill Companies Inc., Moody's Investors Service Limited and
         Fitch Ratings Ltd.;

         REFERENCE PRICE means, in respect of any Series and Class of Notes,
         the price specified as such for such Notes in the applicable Final
         Terms;

         REFERENCE RATE means, in respect of any Series and Class of Notes, the
         rate specified as such for such Notes in the applicable Final Terms;

         REG S means Regulation S under the United States Securities Act of
         1933, as amended;

         REG S NOTES means each Series and Class of Notes that are not US
         Notes;

         REG S GLOBAL NOTES means the note certificates representing the Reg S
         Notes while in global form;

         REGISTER means the register of Noteholders kept by the Registrar and
         which records the identity of each Noteholder and the number of Notes
         that each Noteholder owns;

                                      47

<PAGE>

         REGISTRAR means Citibank, N.A. in its capacity as registrar at its
         Specified Office or such other person for the time being acting as
         registrar under the Master Issuer Paying Agent and Agent Bank
         Agreement;

         RELEVANT SCREEN means a page of the Reuters service or Bloomberg
         service, or any other medium for electronic display of data as may be
         previously approved in writing by the Note Trustee and has been
         notified to Noteholders in the manner set out in CONDITION 14;

         RELEVANT SCREEN PAGE means, in respect of any Series and Class of
         Notes, the screen page specified as such for such Notes in the
         applicable Final Terms (or such replacement page on the relevant
         service which displays the information);

         REMARKETING AGENT means, in respect of any Series and Class of
         Remarketable Notes, the Remarketing Agent specified in the applicable
         Final Terms or such other agent appointed to act as remarketing agent
         under the terms of the relevant Remarketing Agreement;

         REMARKETING AGREEMENT means, in respect of any Series and Class of
         Remarketable Notes, the agreement between the Master Issuer and the
         Remarketing Agent pursuant to which the Remarketing Agent agrees to
         use reasonable efforts to identity third party purchasers for such
         Series and Class of Remarketable Notes on each Mandatory Transfer Date
         prior to the occurrence of a Mandatory Transfer Termination Event;

         REMARKETABLE NOTES means any Series and Class of Notes identified as
         such in the applicable Final Terms;

         RESET MARGIN means, in respect of any Series and Class of Remarketable
         Notes, (i) for each Reset Period, a percentage not exceeding the
         Maximum Reset Margin determined by the Remarketing Agent in accordance
         with the Remarketing Agreement or (ii) if the Remarketing Agreement
         has been terminated, the Maximum Reset Margin;

         RESET PERIOD means, in respect of any Series and Class of Remarketable
         Notes, the period commencing on the first Mandatory Transfer Date
         specified in the applicable Final Terms up to (but excluding) the next
         Mandatory Transfer Date and thereafter the period from (and including)
         each Mandatory Transfer Date up to (but excluding) the next Mandatory
         Transfer Date;

         SECURITISATION TAX REGIME means the permanent regime for the taxation
         of securitisation companies established pursuant to the Finance Act
         2005 and the regulations made thereunder, in each case as amended from
         time to time;

         SERIES means, subject to CONDITION 15, in relation to the Notes, all
         Notes (of any Class) issued on a given day and designated as such;

         SERIES AND CLASS means, a particular Class of Notes of a given Series
         or, where such Class of such Series comprises more than one sub-class,
         SERIES AND CLASS means any sub-class of such Class;

         SPECIFIED CURRENCY means, in respect of any Series and Class of Notes,
         the currency or currencies specified as such for such Notes in the
         applicable Final Terms;

         SPECIFIED CURRENCY EXCHANGE RATE means, in relation to a Series and
         Class of Notes, the exchange rate specified in the Master Issuer Swap
         Agreement relating to such Series and Class of Notes or, if the Master
         Issuer Swap Agreement has been terminated, the applicable spot rate;

         SPECIFIED DATE has the meaning indicated in CONDITION 11.6;

                                      48

<PAGE>

         SPECIFIED DENOMINATION means, in respect of any Series and Class of
         Notes, the denomination specified as such for such Notes in the
         applicable Final Terms which shall be a minimum of [EURO]50,000 or
         more (or its equivalent in any other currency at the date of issue of
         such Notes);

         SPECIFIED OFFICE means, as the context may require, in relation to any
         of the Agents, the office specified against the name of such Agent in
         the Master Issuer Paying Agent and Agent Bank Agreement or such other
         specified office as may be notified to the Master Issuer and the Note
         Trustee pursuant to the Paying Agent and Agency Bank Agreement;

         STERLING, POUNDS STERLING or [POUND] means the lawful currency for the
         time being of the United Kingdom of Great Britain and Northern
         Ireland;

         STERLING NOTES means each Series and Class of Notes denominated in
         Sterling;

         SUB-UNIT means, with respect to any currency other than Sterling, the
         lowest amount of such currency that is available as legal tender in
         the country of such currency and, with respect to Sterling, one pence;

         TRANSACTION DOCUMENTS means the Master Issuer Corporate Services
         Agreement, the Master Intercompany Loan Agreement, the Funding 2 Deed
         of Charge, the Master Issuer Bank Account Agreement, the Master Issuer
         Deed of Charge, the Master Issuer Trust Deed, the Master Issuer Paying
         Agent and Agent Bank Agreement, the Master Issuer Cash Management
         Agreement, the Master Issuer Post-Enforcement Call Option Agreement,
         the Master Issuer Swap Agreements, the Master Issuer Master
         Definitions Schedule, the Mortgages Trustee Guaranteed Investment
         Contract, the Funding 2 Guaranteed Investment Contract and such other
         related documents which are referred to in the terms of the above
         documents;

         TRANSFER AGENT means Citibank, N.A. in its capacity as transfer agent
         at its Specified Office or such other person for the time being acting
         as transfer agent under the Master Issuer Paying Agent and Agent Bank
         Agreement;

         UK LISTING AUTHORITY means the Financial Services Authority in its
         capacity as competent authority for the purposes of Part VI of the
         Financial Services and Markets Act 2000, as amended;

         US GLOBAL NOTES means the note certificates representing the US Notes
         while in global form;

         US NOTES means each Series and Class of Notes which is registered with
         the United States Securities and Exchange Commission under the United
         States Securities Act of 1933, as amended;

         US PAYING AGENT means Citibank, N.A., acting in its capacity as US
         paying agent through its New York office or such other person for the
         time being acting as US paying agent under the Master Issuer Paying
         Agent and Agent Bank Agreement.

                                      49AMENDED AND RESTATED CASH MANAGEMENT            EXHIBIT 4.8
                                   AGREEMENT

                               21 NOVEMBER 2007

                             BANK OF SCOTLAND PLC
                         (AS CASH MANAGER AND SELLER)

                                      AND

                      PERMANENT MORTGAGES TRUSTEE LIMITED
                            (AS MORTGAGES TRUSTEE)

                                      AND

                       PERMANENT FUNDING (NO. 1) LIMITED
                                (AS FUNDING 1)

                                      AND

                       PERMANENT FUNDING (NO. 2) LIMITED
                                (AS FUNDING 2)

                                      AND

                             THE BANK OF NEW YORK
        (AS FUNDING 1 SECURITY TRUSTEE AND FUNDING 2 SECURITY TRUSTEE)

<PAGE>

                                   CONTENTS

CLAUSE                                                                     PAGE

1.       Definitions and Interpretation.......................................2
2.       Appointment of Cash Manager..........................................2
3.       The Services.........................................................3
4.       Payments, Accounts, Ledgers..........................................4
5.       Early Repayment Fees.................................................9
6.       Swaps................................................................9
7.       No Liability........................................................10
8.       Costs and Expenses..................................................10
9.       Information.........................................................11
10.      Remuneration........................................................13
11.      Covenants of Cash Manager...........................................14
12.      Services Non-Exclusive..............................................14
13.      Termination.........................................................15
14.      Further Assurance...................................................17
15.      Miscellaneous.......................................................18
16.      Confidentiality.....................................................19
17.      Notices.............................................................20
18.      No Partnership......................................................21
19.      Assignment..........................................................21
20.      Amendments and Consents.............................................21
21.      Exclusion of Third Party Rights.....................................21
22.      Counterparts........................................................22
23.      Severability........................................................22
24.      Governing Law and Submission to Jurisdiction........................22

SCHEDULE

1.       The Cash Management Services........................................23
2.       Cash Management and Maintenance of Ledgers..........................25
3.       Form of Funding 1 Quarterly Report..................................36
4.       Form of Funding 2 Quarterly Report..................................38

Signatories..................................................................40

<PAGE>

THIS AMENDED AND RESTATED CASH MANAGEMENT AGREEMENT (this AGREEMENT) is made as
a deed on 21 November 2007

BETWEEN:

(1)      BANK OF SCOTLAND PLC, (registered number SC327000) (formerly The
         Governor and Company of the Bank of Scotland), a public limited
         company incorporated under the laws of Scotland whose registered
         office is at The Mound, Edinburgh, EH1 1YZ (acting in its capacities
         as the CASH MANAGER, the SELLER and a BENEFICIARY);

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

(3)      PERMANENT FUNDING (NO. 1) LIMITED (registered number 4267660), a
         private limited company incorporated under the laws of England and
         Wales whose registered office is at 35 Great St. Helen's London EC3A
         6AP (acting in its capacities as FUNDING 1 and a BENEFICIARY);

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

(5)      THE BANK OF NEW YORK, a New York banking corporation acting through
         its offices at One Canada Square, London E14 5AL(acting in its
         capacities as the FUNDING 1 SECURITY TRUSTEE, which expression shall
         include such company and all other persons or companies for the time
         being acting as Funding 1 Security Trustee (or co-trustee) pursuant to
         the terms of the Funding 1 Deed of Charge and the FUNDING 2 SECURITY
         TRUSTEE, which expression shall include such company and all other
         persons or companies for the time being acting as Funding 2 Security
         Trustee (or co-trustee) pursuant to the terms of the Funding 2 Deed of
         Charge).

WHEREAS:

(A)      On the Initial Closing Date and on several subsequent dates, Halifax
         (then in its capacity as the Seller) agreed to sell and assign certain
         mortgage loans (together with their related security) it had
         originated to the Mortgages Trustee. The Mortgage Trustee has held the
         assigned mortgage loans as bare trustee for Funding 1 and the Seller
         and, as of the Programme Date, Funding 2 pursuant to the terms of the
         Mortgages Trust Deed.

(B)      On the Initial Closing Date and several subsequent Closing Dates,
         Funding 1 has used the proceeds of Funding 1 Intercompany Loans
         granted to it by Funding 1 Issuers to pay Halifax (then in its
         capacity as the Seller) for an increased share in the Mortgages Trust.
         As of the Programme Date, Funding 1 may continue to use the proceeds
         of Funding 1 Intercompany Loans and Funding 2 may use the proceeds of
         Loan Tranches advanced under the Master Intercompany Loan Agreement to
         pay the Mortgages Trustee for an increased share in the Mortgages
         Trust.

(C)      Halifax (then in its capacity as the Cash Manager) agreed to provide
         Cash Management Services to the Mortgages Trustee, Funding 1 and the
         Funding 1 Security Trustee and, as of the Programme Date, to Funding 2
         and the Funding 2 Security Trustee in relation to, inter alia, the
         Trust Property on the terms and subject to the conditions contained in
         the Cash Management Agreement.

(D)      On the Reorganisation Date, pursuant to the HBOS Group Reorganisation
         Act 2006, The Governor and Company of the Bank of Scotland was
         registered as a public company under the Companies Act

                                       1

<PAGE>

         1985 and changed its name to Bank of Scotland plc and the business and
         all property and liabilities of Halifax (including its cash management
         business and its rights and obligations under the Cash Management
         Agreement) were transferred to Bank of Scotland.

(E)      The parties to the Cash Management Agreement have agreed to further
         amend and restate the terms of the Cash Management Agreement on the
         date hereof as set out herein.

IT IS HEREBY AGREED as follows:

1.       DEFINITIONS AND INTERPRETATION

1.1      The amended and restated master definitions and construction schedule
         signed by, amongst others, the parties to this Agreement and dated 21
         November 2007 (as the same may be amended, varied or supplemented from
         time to time with the consent of the parties to this Agreement) (the
         MASTER DEFINITIONS AND CONSTRUCTION SCHEDULE) is expressly and
         specifically incorporated into this Agreement and, accordingly, the
         expressions defined in the Master Definitions and Construction
         Schedule (as so amended, varied or supplemented from time to time)
         shall, except where the context otherwise requires and save where
         otherwise defined herein, have the same meanings in this Agreement,
         including the Recitals hereto and this Agreement shall be construed in
         accordance with the interpretation provisions set out in clause 3 of
         the Master Definitions and Construction Schedule.

1.2      This Agreement amends and restates the Cash Management Agreement made
         on 14 June 2002 as amended and restated on 22 March 2006 and 17
         October 2006 (the PRINCIPAL AGREEMENT). As of the date of this
         Agreement, any future rights or obligations (excluding such
         obligations accrued to the date of this Agreement) of a party under
         the Principal Agreement shall be extinguished and shall instead be
         governed by this Agreement.

1.3      Any reference in this Agreement to any discretion, power or right on
         the part of the Mortgages Trustee shall be exercised by the Mortgages
         Trustee only as directed by the Beneficiaries but subject in each case
         to the provisions of Clause 16 of the Mortgages Trust Deed.

2.       APPOINTMENT OF CASH MANAGER

2.1      APPOINTMENT

         Until termination pursuant to Clause 13, the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee (according to their respective estates and interests)
         each hereby appoints the Cash Manager as its lawful agent to provide
         the Cash Management Services set out in this Agreement, including in
         relation to:

         (a)     the Mortgages Trust;

         (b)     Funding 1; and

         (c)     Funding 2,

         and the Cash Manager in each case hereby accepts such appointment on
         the terms and subject to the conditions of this Agreement.

2.2      DUTIES PRESCRIBED BY TRANSACTION DOCUMENTS

         For the avoidance of doubt and in connection with the powers conferred
         under Clause 2.1, save as expressly provided elsewhere in this
         Agreement, nothing herein shall be construed so as to give the

                                       2

<PAGE>

         Cash Manager any powers, rights, authorities, directions or
         obligations other than as specified in this Agreement or any of the
         other Transaction Documents.

2.3      APPOINTMENT CONDITIONAL UPON ISSUANCE OF FIRST ISSUER NOTES

         The appointment pursuant to Clause 2.1 is conditional upon the issue
         of the First Issuer Notes and the making of the First Issuer Term
         Advances under the First Issuer Intercompany Loan Agreement and shall
         take effect upon and from the Initial Closing Date automatically
         without any further action on the part of any person PROVIDED THAT if
         the issue of the First Issuer Notes by the First Issuer has not
         occurred by 14 June 2002, or such later date as the First Issuer and
         the Lead Manager may agree this Agreement shall cease to be of further
         effect.

2.4      APPOINTMENT CONDITIONAL UPON ACQUISITION OF A BENEFICIAL INTEREST

         The appointment pursuant to Clause 2.1 is conditional upon the
         acquisition by Funding 2 from the Seller of a portion of the Seller's
         beneficial interest in the Mortgages Trust pursuant to the Seller
         Trust Property Assignment Agreement and shall take effect upon and as
         of the Programme Date automatically without any further action on the
         part of any person PROVIDED THAT if Funding 2 has not acquired from
         the Seller a portion of the Seller's beneficial interest in the
         Mortgages Trust by 17 October 2006, or such later date as Funding 2
         and the Seller may agree, the appointment of the Cash Manager as agent
         of Funding 2 under Clause 2.1 shall not take effect.

3.       THE SERVICES

3.1      GENERAL

         The Cash Manager shall provide the services set out in this Agreement
         (including, without limitation, the Schedules to this Agreement) (the
         CASH MANAGEMENT SERVICES).

3.2      APPROVALS AND AUTHORISATIONS

         The Cash Manager shall maintain, or procure the maintenance of, the
         approvals, authorisations, consents and licences required in
         connection with the respective businesses of the Mortgages Trustee,
         Funding 1 and Funding 2 and shall prepare and submit, or procure the
         preparation and submission of, on behalf of the Mortgages Trustee,
         Funding 1 and Funding 2, all necessary applications and requests for
         any further approvals, authorisations, consents or licences which may
         be required in connection with the respective businesses of the
         Mortgages Trustee, Funding 1 and Funding 2 and shall, so far as it is
         reasonably able to do so, perform the Cash Management Services in such
         a way as not to prejudice the continuation of any such approvals,
         authorisations, consents or licences.

3.3      COMPLIANCE WITH TRANSACTION DOCUMENTS, ETC.

         The Cash Management Services shall include procuring (so far as the
         Cash Manager, using its reasonable endeavours, is able so to do)
         compliance by the Mortgages Trustee, Funding 1 and Funding 2 with all
         applicable legal requirements and with the terms of the Transaction
         Documents to which each of the Mortgages Trustee and/or Funding 1
         and/or Funding 2 is a party, PROVIDED ALWAYS THAT the Cash Manager
         shall not lend or provide any sum to the Mortgages Trustee, Funding 1
         or Funding 2 (other than as expressly contemplated by the Transaction
         Documents) and the Cash Manager shall have no liability whatsoever to
         the Mortgages Trustee, Funding 1, Funding 2, the Funding 1 Security
         Trustee, the Funding 2 Security Trustee or any other person for any
         failure by the Mortgages Trustee, Funding 1 or Funding 2 to make any
         payment due under any of the Transaction Documents (other than to the
         extent arising from (a) the Cash Manager failing to make a payment in
         its capacity as Servicer, Funding 1 Swap Provider, Funding 2 Swap
         Provider or

                                       3

<PAGE>

         in any other capacity under the Transaction Documents, or (b) the Cash
         Manager failing to perform any of its obligations under any of the
         Transaction Documents).

3.4      LIABILITY OF CASH MANAGER

(a)      The Cash Manager shall indemnify each of the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee on demand on an after Tax basis for any loss,
         liability, claim, expense or damage suffered or incurred by any of
         them in respect of the negligence, bad faith or wilful default of the
         Cash Manager in carrying out its functions as Cash Manager under this
         Agreement or under the other Transaction Documents or as a result of a
         breach by the Cash Manager of the terms and provisions of this
         Agreement or such other Transaction Documents to which the Cash
         Manager is a party (in its capacity as Cash Manager) in relation to
         such functions.

(b)      For the avoidance of doubt, the Cash Manager shall not be liable in
         respect of any loss, liability, claim, expense or damage suffered or
         incurred by the Mortgages Trustee, Funding 1, Funding 2, the Funding 1
         Security Trustee, the Funding 2 Security Trustee and/or any other
         person as a result of the proper performance of the Cash Management
         Services by the Cash Manager save to the extent that such loss,
         liability, claim, expense or damage is suffered or incurred as a
         result of any negligence, bad faith or wilful default of the Cash
         Manager or as a result of a breach by the Cash Manager of the terms
         and provisions of this Agreement or any of the other Transaction
         Documents to which the Cash Manager is a party (in its capacity as
         Cash Manager) in relation to such functions.

4.       PAYMENTS, ACCOUNTS, LEDGERS

4.1      BANK ACCOUNTS

(a)      The Cash Manager hereby confirms that the Mortgages Trustee GIC
         Account has been established on or before the date hereof pursuant to
         the Bank Account Agreement and the Mortgages Trustee Guaranteed
         Investment Contract and that the Mortgages Trustee GIC Account Mandate
         in the agreed form will apply thereto at the Initial Closing Date. The
         Cash Manager undertakes (to the extent to which the same is within its
         control) that at the Initial Closing Date the Mortgages Trustee GIC
         Account will be operative and that the Cash Manager will not create or
         permit to subsist any Security Interest in relation to the Mortgages
         Trustee GIC Account (but without prejudice to the Mortgages Trust).

(b)      The Cash Manager hereby confirms that the Funding 1 GIC Account has
         been established on or before the date hereof pursuant to the Bank
         Account Agreement and the Funding 1 Guaranteed Investment Contract and
         that the Funding 1 GIC Account Mandate in the agreed form will apply
         thereto at the Initial Closing Date. The Cash Manager undertakes (to
         the extent to which the same is within its control) that at the
         Initial Closing Date the Funding 1 GIC Account will be operative and
         that the Cash Manager will not knowingly create or permit to subsist
         any Security Interest in relation to the Funding 1 GIC Account other
         than as created under or permitted pursuant to the Funding 1 Deed of
         Charge.

(c)      The Cash Manager hereby confirms that the Funding 1 Transaction
         Account has been established on or before the date hereof and that the
         Funding 1 Transaction Account Mandate in the agreed form will apply
         thereto at the Initial Closing Date. The Cash Manager undertakes (to
         the extent to which the same is within its control) that at the
         Initial Closing Date the Funding 1 Transaction Account will be
         operative and that the Cash Manager will not knowingly create or
         permit to subsist any Security Interest in relation to the Funding 1
         Transaction Account other than as created under or permitted pursuant
         to the Funding 1 Deed of Charge.

                                       4

<PAGE>

(d)      The Cash Manager hereby confirms that the Funding 2 GIC Account has
         been established on or before the Programme Date pursuant to the Bank
         Account Agreement and the Funding 2 Guaranteed Investment Contract and
         that the Funding 2 GIC Account Mandate in the agreed form will apply
         thereto at the Programme Date. The Cash Manager undertakes (to the
         extent to which the same is within its control) that at the Programme
         Date the Funding 2 GIC Account will be operative and that the Cash
         Manager will not knowingly create or permit to subsist any Security
         Interest in relation to the Funding 2 GIC Account other than as
         created under or permitted pursuant to the Funding 2 Deed of Charge.

(e)      The Cash Manager hereby confirms that the Funding 2 Transaction
         Account has been established on or before the Programme Date and that
         the Funding 2 Transaction Account Mandate in the agreed form will
         apply thereto at the Programme Date. The Cash Manager undertakes (to
         the extent to which the same is within its control) that at the
         Programme Date the Funding 2 Transaction Account will be operative and
         that the Cash Manager will not knowingly create or permit to subsist
         any Security Interest in relation to the Funding 2 Transaction Account
         other than as created under or permitted pursuant to the Funding 2
         Deed of Charge.

4.2      MORTGAGES TRUSTEE LEDGERS

(a)      The Cash Manager shall open and maintain in the books of the Mortgages
         Trustee certain ledgers to be known as the Revenue Ledger and the
         Principal Ledger which shall together reflect the aggregate of all
         amounts of cash standing to the credit of the Mortgages Trustee GIC
         Account from time to time.

(b)      The Cash Manager shall also open and maintain in the books of the
         Mortgages Trustee certain ledgers to be known as the Losses Ledger and
         the Funding 1 Share/Funding 2 Share/Seller Share Ledger.

(c)      The Cash Manager shall make credits and debits to the Mortgages
         Trustee Ledgers in the manner described in Schedule 2.

4.3      FUNDING 1 LEDGERS

(a)      The Cash Manager shall open and maintain in the books of Funding 1
         certain ledgers to be known as the Funding 1 Revenue Ledger, the
         Funding 1 Principal Ledger, the Funding 1 General Reserve Ledger, the
         Funding 1 Cash Accumulation Ledger and, if the Funding 1 Liquidity
         Reserve Fund is established, the Funding 1 Liquidity Reserve Ledger
         which shall together reflect the aggregate of all amounts of cash
         standing to the credit of the Funding 1 GIC Account and the Funding 1
         Transaction Account and all amounts invested in Authorised Investments
         purchased from amounts standing to the credit of the Funding 1 GIC
         Account and the Funding 1 Transaction Account from time to time.

(b)      The Cash Manager shall also open and maintain in the books of Funding
         1 certain ledgers to be known as (i) the Funding 1 Principal
         Deficiency Ledger, which comprised, on the Initial Closing Date, three
         sub-ledgers known as the AAA Principal Deficiency Sub Ledger, the AA
         Principal Deficiency Sub Ledger and the BBB Principal Deficiency Sub
         Ledger, and shall comprise on the Fourth Issuer Closing Date, four
         sub-ledgers known as the AAA Principal Deficiency Sub Ledger, the AA
         Principal Deficiency Sub Ledger, the A Principal Deficiency Sub
         Ledger, and the BBB Principal Deficiency Sub Ledger (ii) the Funding 1
         Intercompany Loan Ledger and (iii) the Funding 1 Liquidity Facility
         Ledger. If Funding 1 enters into New Intercompany Loan Agreements and
         the New Term Advances advanced thereunder have different Term Advance
         Ratings to the Term Advance Ratings assigned to the existing Term
         Advances (including the Fourth Issuer Term Advances), then the Cash
         Manager shall establish new sub-ledgers in respect of the Funding 1
         Principal Deficiency Ledger, which shall correspond to the Term
         Advance Ratings assigned to each such New Term Advance.

                                       5

<PAGE>

(c)      The Cash Manager shall make credits and debits to the Funding 1
         Ledgers in accordance with the provisions of Schedule 2.

4.4      FUNDING 2 LEDGERS

(a)      The Cash Manager shall open and maintain in the books of Funding 2
         certain ledgers to be known as the Funding 2 Revenue Ledger, the
         Funding 2 Principal Ledger, the Funding 2 General Reserve Ledger, the
         Funding 2 Cash Accumulation Ledger, the Start-Up Loan Revenue
         Contribution Ledger and, if the Funding 2 Liquidity Reserve Fund is
         established, the Funding 2 Liquidity Reserve Ledger which shall
         together reflect the aggregate of all amounts of cash standing to the
         credit of the Funding 2 GIC Account and the Funding 2 Transaction
         Account and all amounts invested in Authorised Investments purchased
         from amounts standing to the credit of the Funding 2 GIC Account and
         the Funding 2 Transaction Account from time to time.

(b)      The Cash Manager shall also open and maintain in the books of Funding
         2 certain ledgers to be known as (i) the Funding 2 Principal
         Deficiency Ledger, which comprises six sub-ledgers known as the AAA
         Principal Deficiency Sub Ledger, the AA Principal Deficiency Sub
         Ledger, the A Principal Deficiency Sub Ledger, the BBB Principal
         Deficiency Sub Ledger, the BB Principal Deficiency Sub Ledger and the
         Funding 2 Subordinated Loan Tranche Principal Deficiency Sub Ledger
         and (ii) the Master Intercompany Loan Ledger, to be divided into
         sub-ledgers each of which shall record payments made under each Loan
         Tranche.

(c)      The Cash Manager shall make credits and debits to the Funding 2
         Ledgers in accordance with the provisions of Schedule 2.

4.5      BANK ACCOUNTS

(a)      The Cash Manager shall procure that so far as it may be able in
         relation to all Loans comprised in the Portfolio, the following
         amounts are paid into the Mortgages Trustee GIC Account:

         (i)     all Monthly Payments, other interest received under and in
                 respect of the Loans and any costs or other amounts received
                 under the Loans (including in any such case amounts recovered
                 on enforcement of rights against any Borrower or guarantor of
                 the Borrower, any Property or any of the Borrower's or
                 guarantor's other property or assets);

         (ii)    all final releases and all repayments or prepayments of
                 principal under the Loans;

         (iii)   any amount received by or on behalf of the Mortgages Trustee
                 pursuant to any Halifax Insurance Policy or the Buildings
                 Policies; and

         (iv)    any other amounts whatsoever received by or on behalf of the
                 Mortgages Trustee after the Initial Closing Date,

         and the Cash Manager shall procure that all interest earned on the
         Mortgages Trustee GIC Account is credited to such account.

(b)      The Cash Manager shall procure that the following amounts are paid
         into the Funding 1 GIC Account:

         (i)     all Funding 1 Revenue Receipts;

         (ii)    all Funding 1 Principal Receipts;

         (iii)   all amounts received by Funding 1 pursuant to the Funding 1
                 Swap Agreement; and

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<PAGE>

         (iv)    any other amounts whatsoever received by or on behalf of
                 Funding 1 after the Initial Closing Date,

         and the Cash Manager shall procure that all interest earned on the
         Funding 1 Bank Accounts and all investment proceeds from Authorised
         Investments purchased from amounts standing to the credit of the
         Funding 1 GIC Account are credited to such account.

(c)      The Cash Manager shall procure that all Liquidity Drawings under the
         Funding 1 Liquidity Facility are paid into the Funding 1 Transaction
         Account.

(d)      The Cash Manager shall procure that all transfers and withdrawals of
         amounts standing to the credit of the Funding 1 Transaction Account
         and the Funding 1 GIC Account shall be made in accordance with the
         provisions of the Funding 1 Deed of Charge.

(e)      The Cash Manager shall procure that the following amounts are paid
         into the Funding 2 GIC Account:

         (i)     all Funding 2 Revenue Receipts;

         (ii)    all Funding 2 Principal Receipts;

         (iii)   all amounts received by Funding 2 pursuant to the Funding 2
                 Swap Agreement; and

         (iv)    any other amounts whatsoever received by or on behalf of
                 Funding 2 after the Programme Date,

         and the Cash Manager shall procure that all interest earned on the
         Funding 2 Bank Accounts and all investment proceeds from Authorised
         Investments purchased from amounts standing to the credit of the
         Funding 2 GIC Account are credited to such account.

(f)      The Cash Manager shall procure that all transfers and withdrawals of
         amounts standing to the credit of the Funding 2 Transaction Account
         and the Funding 2 GIC Account shall be made in accordance with the
         provisions of the Funding 2 Deed of Charge.

(g)      Each of the payments into the Mortgages Trustee GIC Account, the
         Funding 1 GIC Account, the Funding 1 Transaction Account, the Funding
         2 GIC Account and the Funding 2 Transaction Account referred to in
         Clauses 4.5(a), (b), (c), (d), (e) and (f) shall be made forthwith
         upon receipt by the Mortgages Trustee, Funding 1, Funding 2 or the
         Cash Manager, as the case may be, of the amount in question.

(h)      For the avoidance of doubt, as soon as reasonably practicable after
         becoming aware of the same, the Cash Manager may, and shall, withdraw
         Cash from, as the case may be, the Mortgages Trustee GIC Account, the
         Funding 1 Transaction Account, the Funding 1 GIC Account, the Funding
         2 Transaction Account and/or the Funding 2 GIC Account if, and to the
         extent that, such Cash was credited thereto in error and shall use its
         reasonable endeavours to ensure that such Cash is applied correctly
         thereafter.

(i)      The Cash Manager shall promptly notify each of the Mortgages Trustee,
         Funding 1 and/or the Funding 1 Security Trustee (in the case of
         Funding 1 Bank Accounts), Funding 2 and/or the Funding 2 Security
         Trustee (in the case of Funding 2 Bank Accounts) (as applicable) of
         any additional account which supplements or replaces any account
         specifically referred to in the definitions of the "Mortgages Trustee
         GIC Account", the "Funding 1 Transaction Account", the "Funding 1 GIC
         Account", the "Funding 2 Transaction Account" or the "Funding 2 GIC
         Account", as the case may be, in the Master Definitions and
         Construction Schedule.

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<PAGE>

(j)      Each of the Cash Manager, the Mortgages Trustee, Funding 1 (in the
         case of Funding 1 Bank Accounts) and Funding 2 (in the case of Funding
         2 Bank Accounts) undertakes that, so far as it is able to procure the
         same, the Mortgages Trustee GIC Account, the Funding 1 Transaction
         Account, the Funding 1 GIC Account, the Funding 2 Transaction Account
         and the Funding 2 GIC Account and all instructions and Mandates in
         relation thereto will continue to be operative and will not, save as
         provided in Clause 4.7 below or as permitted pursuant to the Bank
         Account Agreement be changed without the prior written consent of the
         Funding 1 Security Trustee and/or the Funding 2 Security Trustee (as
         applicable) (such consent not to be unreasonably withheld or delayed).
         For the avoidance of doubt, the Cash Manager may change the Authorised
         Signatories in respect of any instructions or Mandates relating to
         Funding 1, Funding 2 and/or the Mortgages Trustee, without the prior
         written consent of the Funding 1 Security Trustee and/or the Funding 2
         Security Trustee (as applicable), in accordance with Clause 4.2 of the
         Bank Account Agreement.

(k)      The Cash Manager and Funding 1 agree that the Cash Manager shall
         procure that (i) the tranche of the Advance being made available to
         Funding 1 pursuant to paragraph 2(a) of the First Start-Up Loan
         Agreement for the purposes of funding the Funding 1 General Reserve
         Fund and (ii) the tranche (if any) of any New Start-up Loan Agreement
         for the purposes of funding further the Funding 1 General Reserve Fund
         (or any other similar reserve fund) shall be credited to the Funding 1
         GIC Account promptly upon receipt of such amounts by Funding 1, and
         the Funding 1 General Reserve Ledger shall record such credit.

(l)      The Cash Manager and Funding 2 agree that the Cash Manager shall
         procure that (i) any Advance being made available to Funding 2
         pursuant to the Funding 2 Start-Up Loan Agreement dated the Programme
         Date for the purposes of funding the Funding 2 General Reserve Fund
         (or any other similar reserve fund), (ii) any Advance (if any) of any
         new Funding 2 Start-up Loan Agreement for the purposes of funding
         further the Funding 2 General Reserve Fund (or any other similar
         reserve fund) and (iii) any Start-Up Loan Tranche or part thereof made
         available to Funding 2 pursuant to the Master Intercompany Loan
         Agreement for the purposes of funding further the Funding 2 General
         Reserve Fund (or any other similar reserve fund) shall be credited to
         the Funding 2 GIC Account promptly upon receipt of such amounts by
         Funding 2, and the Funding 2 General Reserve Ledger shall record the
         amount to be credited for the purposes of funding the Funding 2
         General Reserve Fund.

(m)      The Cash Manager and Funding 2 agree that the Cash Manager shall
         procure that any Start-Up Loan Tranche or part thereof made available
         to Funding 2 pursuant to the Master Intercompany Loan Agreement for
         the purposes of contributing towards Funding 2 Available Revenue
         Receipts on the Funding 2 Interest Payment Date immediately following
         the relevant Closing Date shall be credited to the Funding 2 GIC
         Account promptly upon receipt of such amount by Funding 2 and the
         Start-Up Loan Revenue Contribution Ledger shall record such credit
         (and, for the avoidance of doubt, such amounts shall not be credited
         to the Funding 2 General Reserve Ledger).

(n)      The Cash Manager shall give all notices and make all determinations
         and withdrawals under the Funding 1 Liquidity Facility Agreement on
         behalf of Funding 1, as set out therein.

4.6      WITHDRAWALS

         The Cash Manager may make withdrawals:

         (a)     on behalf of the Mortgages Trustee from the Mortgages Trustee
                 GIC Account; and

         (b)     on behalf of Funding 1 from the Funding 1 GIC Account and the
                 Funding 1 Transaction Account, but only until receipt of an
                 Intercompany Loan Acceleration Notice served by the Funding 1
                 Security Trustee on Funding 1 (with a copy to the Cash Manager
                 and the Mortgages Trustee); and

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<PAGE>

         (c)     on behalf of Funding 2 from the Funding 2 GIC Account and the
                 Funding 2 Transaction Account, but only until receipt of a
                 Master Intercompany Loan Acceleration Notice served by the
                 Funding 2 Security Trustee on Funding 2 (with a copy to the
                 Cash Manager and the Mortgages Trustee),

         respectively as permitted by this Agreement, the Mortgages Trust Deed,
         the Bank Account Agreement, the Mortgages Trustee Guaranteed
         Investment Contract, the Funding 1 Guaranteed Investment Contract, the
         Funding 2 Guaranteed Investment Contract, the Funding 1 Liquidity
         Facility Agreement, the Funding 1 Deed of Charge and the Funding 2
         Deed of Charge, but shall not in carrying out its functions as Cash
         Manager under this Agreement otherwise make withdrawals from the
         Mortgages Trustee GIC Account, the Funding 1 Bank Accounts or the
         Funding 2 Bank Accounts.

4.7      CASH MANAGEMENT

         In administering the Mortgages Trustee GIC Account, the Funding 1 Bank
         Accounts and the Funding 2 Bank Accounts on behalf of the Mortgages
         Trustee, Funding 1, Funding 2, the Funding 1 Security Trustee and the
         Funding 2 Security Trustee (as applicable), the Cash Manager shall
         comply with the provisions of Schedule 2 prior to receipt by the Cash
         Manager of a copy of (in respect of the Funding 1 Bank Accounts) any
         Intercompany Loan Acceleration Notice served by the Funding 1 Security
         Trustee on Funding 1 and (in respect of the Funding 2 Bank Accounts)
         any Master Intercompany Loan Acceleration Notice served by the Funding
         2 Security Trustee on Funding 2.

5.       EARLY REPAYMENT FEES

         The Cash Manager shall withdraw any Early Repayment Fees paid into the
         Mortgages Trustee GIC Account and pay the same to the Seller, by
         telegraphic transfer to such account as may be specified by the Seller
         from time to time, promptly following a request for such withdrawal
         being received from the Seller. For the avoidance of doubt, the Cash
         Manager shall not record the receipt or withdrawal of Early Repayment
         Fees in any of the ledgers maintained under this Agreement.

6.       SWAPS

6.1      COMPUTATIONS UNDER FUNDING 1 SWAP

         On each Calculation Date, the Cash Manager shall determine, in
         accordance with the terms of the Funding 1 Swap, in respect of the
         relevant Calculation Period:

         (a)     the Average Fixed Rate Loan Balance, the Average Variable Rate
                 Loan Balance and the Average Tracker Rate Loan Balance (each
                 as defined in the Funding 1 Swap Agreement);

         (b)     the weighted average of the fixed rates of interest charged to
                 borrowers of Fixed Rate Loans;

         (c)     the Tracker Swap Rate; and

         (d)     the Variable Rate Swap SVR,

         and shall notify Funding 1 and the Funding 1 Security Trustee of such
         amounts, balances and rates.

6.2      TERMINATION OF FUNDING 1 SWAP

         If on or prior to the date of the earlier of either (a) the reduction
         of the aggregate principal amount outstanding of all Intercompany
         Loans to zero or (b) the service of an Intercompany Loan Acceleration
         Notice, the Funding 1 Swap is terminated, then the Cash Manager (on
         behalf of

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<PAGE>

         Funding 1 and the Funding 1 Security Trustee) shall purchase a new
         hedge against the possible variance between (i) the Mortgages Trustee
         Variable Base Rate payable on the Variable Rate Loans, the fixed rates
         of interest payable on the Fixed Rate Loans and the Tracker Swap Rate
         and (ii) a LIBOR-based rate for three-month sterling deposits, on
         terms acceptable to Funding 1 and the Rating Agencies with a new
         Funding 1 swap provider whom the Rating Agencies have previously
         confirmed in writing will not cause the then current rating of any
         Notes of the Funding 1 Issuers to be downgraded. The Cash Manager may
         apply any early termination payment received from the Funding 1 Swap
         Provider pursuant to the Funding 1 Swap for such purpose.

6.3      COMPUTATIONS UNDER FUNDING 2 SWAP

         On each Calculation Date, the Cash Manager shall determine, in
         accordance with the terms of the Funding 2 Swap, in respect of the
         relevant Calculation Period:

         (a)     the Average Fixed Rate Loan Balance, the Average Variable Rate
                 Loan Balance and the Average Tracker Rate Loan Balance (each
                 as defined in the Funding 2 Swap Agreement);

         (b)     the weighted average of the fixed rates of interest charged to
                 borrowers of Fixed Rate Loans;

         (c)     the Tracker Swap Rate; and

         (d)     the Variable Rate Swap SVR,

         and shall notify Funding 2 and the Funding 2 Security Trustee of such
         amounts, balances and rates.

6.4      TERMINATION OF FUNDING 2 SWAP

         If on or prior to the date of the earlier of either (a) the reduction
         of the aggregate principal amount outstanding of all Loan Tranches
         (other than the Start-Up Loan Tranches) under the Master Intercompany
         Loan Agreement to zero or (b) the service of a Master Intercompany
         Loan Acceleration Notice, the Funding 2 Swap is terminated, then the
         Cash Manager (on behalf of Funding 2 and the Funding 2 Security
         Trustee) shall purchase a new hedge against the possible variance
         between (i) the Mortgages Trustee Variable Base Rate payable on the
         Variable Rate Loans, the fixed rates of interest payable on the Fixed
         Rate Loans and the Tracker Swap Rate and (ii) a LIBOR-based rate for
         three-month sterling deposits, on terms acceptable to Funding 2 and
         the Rating Agencies with a new Funding 2 swap provider whom the Rating
         Agencies have previously confirmed in writing will not cause the then
         current rating of any Notes of the Master Issuer to be downgraded. The
         Cash Manager may apply any early termination payment received from the
         Funding 2 Swap Provider pursuant to the Funding 2 Swap for such
         purpose.

7.       NO LIABILITY

         Save as otherwise provided in this Agreement, the Cash Manager shall
         have no liability for the obligations of any of the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee or the Funding 2
         Security Trustee under any of the Transaction Documents or otherwise
         and nothing herein shall constitute a guarantee, or similar
         obligation, by the Cash Manager of either the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee or the Funding 2
         Security Trustee in respect of any of them.

8.       COSTS AND EXPENSES

8.1      Subject to and in accordance with the Funding 1 Priority of Payments
         and the Funding 2 Priority of Payments (as applicable), each of
         Funding 1 and Funding 2 will on each Funding 1 Interest Payment Date
         and Funding 2 Interest Payment Date (respectively) reimburse the Cash
         Manager a pro rata

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<PAGE>

         share (based on the principal amount outstanding on the previous
         Funding 1 Interest Payment Date and Funding 2 Interest Payment Date
         (respectively) under the Funding 1 Intercompany Loans and the Master
         Intercompany Loan (respectively) after any repayments of principal on
         such date) for all out-of-pocket costs, expenses and charges (together
         with any amounts in respect of Irrecoverable VAT due thereon) properly
         incurred by the Cash Manager in the performance of the Cash Management
         Services including any such costs, expenses or charges not reimbursed
         to the Cash Manager on any previous Funding 1 Interest Payment Date
         and Funding 2 Interest Payment Date (respectively) and the Cash
         Manager shall (if applicable) supply Funding 1 and Funding 2 with an
         appropriate VAT invoice issued by the Cash Manager or, if the Cash
         Manager has treated the relevant cost, expense or charge as a
         disbursement for VAT purposes, by the person making the supply.

8.2      Unless and until otherwise agreed by the Mortgages Trustee, Funding 1,
         Funding 2, the Funding 1 Security Trustee and the Funding 2 Security
         Trustee in writing (notified to the Cash Manager), the Mortgages
         Trustee shall not be responsible for reimbursing the Cash Manager for
         the out-of-pocket costs, expenses and charges (together with any
         amounts in respect of Irrecoverable VAT due thereon) referred to in
         Clause 8.1 above.

9.       INFORMATION

9.1      USE OF I.T. SYSTEMS

(a)      The Cash Manager represents and warrants that at the date hereof in
         respect of the software which is to be used by the Cash Manager in
         providing the Cash Management Services it has in place all necessary
         licences and/or consents from the respective licensor or licensors (if
         any) of such software.

(b)      The Cash Manager undertakes that it shall for the duration of this
         Agreement, use reasonable endeavours to:

         (i)     ensure that the licences and/or consents referred to in
                 paragraph (a) are maintained in full force and effect; and

         (ii)    except in so far as it would breach any other of its legal
                 obligations, grant to any person to whom it may sub-contract
                 or delegate the performance of all or any of its powers and
                 obligations under this Agreement and/or to such person as the
                 Mortgages Trustee and/or Funding 1 and Funding 2 elect as a
                 substitute cash manager in accordance with the terms of this
                 Agreement a licence to use any proprietary software together
                 with any updates which may be made thereto from time to time.

(c)      The Cash Manager shall use reasonable endeavours to maintain in
         working order the information technology systems used by the Cash
         Manager in providing the Cash Management Services.

(d)      The Cash Manager shall pass to any person to whom it may sub-contract
         or delegate the performance of all or any of its powers and
         obligations under this Agreement and/or to such person as the
         Mortgages Trustee and/or Funding 1 and Funding 2 elect as a substitute
         cash manager in accordance with the terms of this Agreement the
         benefit of any warranties in relation to the software insofar as the
         same are capable of assignment.

9.2      BANK ACCOUNT STATEMENTS

         The Cash Manager shall take all reasonable steps to ensure that it
         receives:

         (a)     a monthly bank statement in relation to the Mortgages Trustee
                 GIC Account (and any additional or supplemental bank account
                 of the Mortgages Trustee) and that it furnishes a

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<PAGE>

                 copy of such statement to the Mortgages Trustee, each of the
                 Beneficiaries, the Funding 1 Security Trustee and the Funding
                 2 Security Trustee;

         (b)     monthly bank statements in relation to each of the Funding 1
                 Transaction Account and the Funding 1 GIC Account (and any
                 additional or supplemental bank account of Funding 1) and that
                 it furnishes a copy of such statements to Funding 1 and the
                 Funding 1 Security Trustee; and

         (c)     monthly bank statements in relation to each of the Funding 2
                 Transaction Account and the Funding 2 GIC Account (and any
                 additional or supplemental bank account of Funding 2) and that
                 it furnishes a copy of such statements to Funding 2 and the
                 Funding 2 Security Trustee.

9.3      ACCESS TO BOOKS AND RECORDS

         Subject to all applicable laws, the Cash Manager shall permit the
         Auditors of the Mortgages Trustee, Funding 1 and Funding 2 and any
         other person nominated by the Funding 1 Security Trustee and/or
         Funding 2 Security Trustee or the Beneficiaries (to whom the Cash
         Manager has no reasonable objection) at any time during normal office
         hours upon reasonable notice to have access, or procure that such
         person or persons are granted access, to all books of record and
         account relating to the Cash Management Services provided by the Cash
         Manager and related matters in accordance with this Agreement.

9.4      STATUTORY OBLIGATIONS

         The Cash Manager will use its reasonable endeavours, on behalf of the
         Mortgages Trustee, Funding 1 and Funding 2, to prepare or procure the
         preparation of and file all reports, annual returns, financial
         statements, statutory forms and other returns which each of the
         Mortgages Trustee, Funding 1 and Funding 2 is required by law to
         prepare and file. Subject to approval thereof by the directors of the
         Mortgages Trustee, Funding 1 or Funding 2 (as appropriate), the Cash
         Manager shall cause such accounts to be audited by the Auditors and
         shall procure so far as it is able so to do that the Auditors shall
         make a report thereon as required by law and copies of all such
         documents shall be delivered to the Mortgages Trustee, the Funding 1
         Security Trustee, the Funding 2 Security Trustee, Funding 1 and
         Funding 2 (as appropriate) and the Rating Agencies as soon as
         practicable after the end of each accounting reference period of the
         Mortgages Trustee, Funding 1 or Funding 2 (as appropriate).

9.5      INFORMATION COVENANTS

(a)      The Cash Manager shall provide a quarterly report in, or substantially
         in, the form set out in Schedule 3 in respect of Funding 1 to any
         Funding 1 Issuer, Funding 1, the Funding 1 Security Trustee, the
         Seller and the Rating Agencies and a quarterly report in, or
         substantially in the form set out in Schedule 4 in respect of Funding
         2 to the Master Issuer, Funding 2, the Funding 2 Security Trustee, the
         Seller and the Rating Agencies.

(b)      The Cash Manager shall provide, or procure the provision of, to the
         Mortgages Trustee, Funding 1, Funding 2, the Funding 1 Security
         Trustee, the Funding 2 Security Trustee and the Rating Agencies copies
         of any annual returns or financial statements referred to in Clause
         9.4 as soon as reasonably practicable after the preparation thereof.

(c)      The Cash Manager shall notify the Rating Agencies in writing of the
         details of (i) any material amendment to the Transaction Documents,
         (ii) the occurrence of an Intercompany Loan Event of Default, Master
         Intercompany Loan Event of Default, Potential Intercompany Loan Event
         of Default or Potential Master Intercompany Loan Event of Default and
         (iii) any other information relating to

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<PAGE>

         the Cash Manager as the Rating Agencies and/or the Funding 1 Security
         Trustee and/or the Funding 2 Security Trustee may reasonably request
         in connection with its obligations under this Agreement, PROVIDED THAT
         neither the Funding 1 Security Trustee nor the Funding 2 Security
         Trustee shall make such a request more than once every three months
         unless, in the belief of the Funding 1 Security Trustee and/or the
         Funding 2 Security Trustee, an Intercompany Loan Event of Default or a
         Master Intercompany Loan Event of Default (respectively) and/or a Note
         Event of Default in respect of any Funding 1 Issuer or the Master
         Issuer (respectively) or Cash Manager Termination Event (as defined in
         Clause 13.1) shall have occurred and is continuing or a Potential
         Intercompany Loan Event of Default or Potential Master Intercompany
         Loan Event of Default (respectively) and/or a Potential Note Event of
         Default in respect of any Funding 1 Issuer or the Master Issuer
         (respectively) shall have occurred and is continuing PROVIDED FURTHER
         THAT such request does not adversely interfere with the Cash Manager's
         day to day provision of the Cash Management Services under the other
         terms of this Agreement.

(d)      The Cash Manager shall, at the request of the Funding 1 Security
         Trustee or the Funding 2 Security Trustee, furnish the Funding 1
         Security Trustee, the Funding 2 Security Trustee and the Rating
         Agencies with such other information relating to its business and
         financial condition as it may be reasonable for the Funding 1 Security
         Trustee and/or the Funding 2 Security Trustee to request in connection
         with this Agreement, PROVIDED THAT such request does not adversely
         interfere with the Cash Manager's day to day provision of the Cash
         Management Services under the other terms of this Agreement.

10.      REMUNERATION

10.1     FEE PAYABLE

         Funding 1 and Funding 2 shall pay to the Cash Manager for the Cash
         Management Services provided to it hereunder a cash management fee
         (the CASH MANAGEMENT FEE) (inclusive of VAT) which:

         (a)     in the case of Funding 1, shall be 0.025% per annum of the
                 aggregate principal amount outstanding under the Funding 1
                 Intercompany Loans on the previous Funding 1 Interest Payment
                 Date after any repayments of principal on such date;

         (b)     in the case of Funding 2, shall be 0.025% per annum of the
                 aggregate principal amount outstanding of the Rated Loan
                 Tranches and the Subordinated Loan Tranches under the Master
                 Intercompany Loan on the previous Funding 2 Interest Payment
                 Date after any repayment of principal on such date; and

         (c)     in each case, be calculated in relation to each Funding 1
                 Interest Period or Funding 2 Interest Period (as applicable)
                 on the basis of the number of days elapsed and a 365 day year.

10.2     PAYMENT OF FEE

         The cash management fee referred to in Clause 10.1 shall be paid to
         the Cash Manager in arrear:

         (a)     by Funding 1 on each Funding 1 Interest Payment Date in the
                 manner contemplated by and in accordance with the provisions
                 of the applicable Funding 1 Priority of Payments; and

         (b)     by Funding 2 on each Funding 2 Interest Payment Date in the
                 manner contemplated by and in accordance with the provisions
                 of the applicable Funding 2 Priority of Payments.

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<PAGE>

11.      COVENANTS OF CASH MANAGER

11.1     COVENANTS

         The Cash Manager hereby covenants with and undertakes to each of the
         Mortgages Trustee, Funding 1, Funding 2, the Funding 1 Security
         Trustee and the Funding 2 Security Trustee that without prejudice to
         any of its specific obligations hereunder:

         (a)     it will devote all due skill, care and diligence to the
                 performance of its obligations and the exercise of its
                 discretions hereunder;

         (b)     it will comply with any proper directions, orders and
                 instructions which the Mortgages Trustee, Funding 1, Funding
                 2, the Funding 1 Security Trustee or the Funding 2 Security
                 Trustee may from time to time give to it in accordance with
                 the provisions of this Agreement and, in the event of any
                 conflict, those of the Funding Security 1 Trustee and the
                 Funding 2 Security Trustee shall prevail;

         (c)     it will use its reasonable endeavours to keep in force all
                 licences, approvals, authorisations and consents which may be
                 necessary in connection with the performance of the Cash
                 Management Services and prepare and submit all necessary
                 applications and requests for any further approval,
                 authorisation, consent or licence required in connection with
                 the performance of the Cash Management Services;

         (d)     save as otherwise agreed with the Mortgages Trustee, Funding
                 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
                 Security Trustee, it will provide free of charge to the
                 Mortgages Trustee, Funding 1 and Funding 2 during normal
                 office hours office space, facilities, equipment and staff
                 sufficient to fulfil the obligations of the Mortgages Trustee,
                 Funding 1 and Funding 2 under this Agreement;

         (e)     it will not knowingly fail to comply with any legal
                 requirements in the performance of the Cash Management
                 Services;

         (f)     it will make all payments required to be made by it pursuant
                 to this Agreement on the due date for payment thereof for
                 value on such day without set-off (including, without
                 limitation, in respect of any fees owed to it) or
                 counterclaim; and

         (g)     it will not without the prior written consent of the Funding 1
                 Security Trustee and the Funding 2 Security Trustee amend or
                 terminate any of the Transaction Documents save in accordance
                 with their terms.

11.2     DURATION OF COVENANTS

         The covenants of the Cash Manager in Clause 11.1 shall remain in force
         until this Agreement is terminated but without prejudice to any right
         or remedy of the Mortgages Trustee and/or Funding 1 and/or Funding 2
         and/or the Funding 1 Security Trustee and/or the Funding 2 Security
         Trustee arising from breach of any such covenant prior to the date of
         termination of this Agreement.

12.      SERVICES NON-EXCLUSIVE

         Nothing in this Agreement shall prevent the Cash Manager from
         rendering or performing services similar to those provided for in this
         Agreement to or for itself or other persons, firms or companies or
         from carrying on business similar to or in competition with the
         business of the Mortgages Trustee, Funding 1, Funding 2, the Funding 1
         Security Trustee or the Funding 2 Security Trustee.

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<PAGE>

13.      TERMINATION

13.1     CASH MANAGER TERMINATION EVENTS

         If any of the following events (CASH MANAGER TERMINATION EVENTS) shall
         occur:

         (a)     default is made by the Cash Manager in the payment on the due
                 date of any payment due and payable by it under this Agreement
                 or in the performance of its obligations under Clauses 4.5 and
                 4.6 and such default continues unremedied for a period of
                 three London Business Days after the earlier of the Cash
                 Manager becoming aware of such default; or

         (b)     default is made by the Cash Manager in the performance or
                 observance of any of its other covenants and obligations under
                 this Agreement, which in the reasonable opinion of the Funding
                 1 Security Trustee and/or the Funding 2 Security Trustee (as
                 applicable) is materially prejudicial to the interests of the
                 Funding 1 Secured Creditors (in the case of Funding 1) or the
                 Funding 2 Secured Creditors (in the case of Funding 2) and
                 such default continues unremedied for a period of 20 London
                 Business Days after the earlier of the Cash Manager becoming
                 aware of such default and receipt by the Cash Manager of
                 written notice from the Funding 1 Security Trustee and/or the
                 Funding 2 Security Trustee (as applicable) requiring the same
                 to be remedied; or

         (c)     an Insolvency Event occurs,

         then Funding 1 and/or Funding 2 and/or the Funding 1 Security Trustee
         and/or the Funding 2 Security Trustee may at once or at any time
         thereafter while such default continues by notice in writing to the
         Cash Manager terminate its appointment as Cash Manager under this
         Agreement with effect from a date (not earlier than the date of the
         notice) specified in the notice.

13.2     RESIGNATION OF CASH MANAGER

         The appointment of the Cash Manager under this Agreement may be
         terminated upon the expiry of not less than 12 months' notice of
         termination given by the Cash Manager to the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee PROVIDED THAT:

         (a)     the Mortgages Trustee, Funding 1, Funding 2, the Funding 1
                 Security Trustee and the Funding 2 Security Trustee consent in
                 writing to such termination;

         (b)     a substitute cash manager shall be appointed, such appointment
                 to be effective not later than the date of such termination;

         (c)     such substitute cash manager has cash management experience
                 and is approved by the Mortgages Trustee, Funding 1, Funding
                 2, the Funding 1 Security Trustee and the Funding 2 Security
                 Trustee;

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<PAGE>

         (d)     the substitute cash manager enters into an agreement
                 substantially on the same terms as the relevant provisions of
                 this Agreement and the Cash Manager shall not be released from
                 its obligations under the relevant provisions of this
                 Agreement until such substitute cash manager has entered into
                 such new agreement and the rights of the Mortgages Trustee,
                 Funding 1 and Funding 2 under such agreement are charged in
                 favour of the Funding 1 Security Trustee and the Funding 2
                 Security Trustee (as applicable) on terms satisfactory to the
                 Funding 1 Security Trustee and the Funding 2 Security Trustee;
                 and

         (e)     the then current ratings of the Notes are not adversely
                 affected as a result thereof, unless otherwise agreed by an
                 Extraordinary Resolution of the holders of each class of the
                 Notes of each Funding 1 Issuer or the Master Issuer, as
                 applicable.

13.3     EFFECT OF TERMINATION

(a)      On and after termination of the appointment of the Cash Manager under
         this Agreement pursuant to this Clause 13, all authority and power of
         the Cash Manager under this Agreement shall be terminated and be of no
         further effect and the Cash Manager shall not thereafter hold itself
         out in any way as the agent of the Mortgages Trustee, Funding 1,
         Funding 2, the Funding 1 Security Trustee or the Funding 2 Security
         Trustee pursuant to this Agreement.

(b)      Upon termination of the appointment of the Cash Manager under this
         Agreement pursuant to this Clause 13, the Cash Manager shall:

         (i)     forthwith deliver (and in the meantime hold on trust for, and
                 to the order of, the Mortgages Trustee, Funding 1, Funding 2,
                 the Funding 1 Security Trustee or the Funding 2 Security
                 Trustee, as the case may be) to the Mortgages Trustee, Funding
                 1, Funding 2, the Funding 1 Security Trustee or the Funding 2
                 Security Trustee, as the case may be or as it shall direct,
                 all books of account, papers, records, registers,
                 correspondence and documents in its possession or under its
                 control relating to the affairs of or belongings of the
                 Mortgages Trustee, Funding 1, Funding 2, the Funding 1
                 Security Trustee or the Funding 2 Security Trustee, as the
                 case may be (if practicable, on the date of receipt), any
                 monies then held by the Cash Manager on behalf of the
                 Mortgages Trustee, Funding 1, Funding 2, the Funding 1
                 Security Trustee or the Funding 2 Security Trustee and any
                 other assets of the Mortgages Trustee, Funding 1, Funding 2,
                 the Funding 1 Security Trustee and the Funding 2 Security
                 Trustee;

         (ii)    take such further action as the Mortgages Trustee, Funding 1,
                 Funding 2, the Funding 1 Security Trustee or the Funding 2
                 Security Trustee, as the case may be, may reasonably direct at
                 the expense of the Mortgages Trustee, Funding 1, Funding 2,
                 the Funding 1 Security Trustee or the Funding 2 Security
                 Trustee, as the case may be (including in relation to the
                 appointment of a substitute cash manager), provided that the
                 Mortgages Trustee, the Funding 1 Security Trustee or the
                 Funding 2 Security Trustee, as the case may be, shall not be
                 required to take or direct to be taken such further action
                 unless it has been indemnified to its satisfaction (and in the
                 event of a conflict between the directions of Funding 1,
                 Funding 2, the Funding 1 Security Trustee, the Funding 2
                 Security Trustee and the Mortgages Trustee, the directions of
                 the Funding 1 Security Trustee and the Funding 2 Security
                 Trustee shall prevail);

         (iii)   provide all relevant information contained on computer records
                 in the form of magnetic tape, together with details of the
                 layout of the files encoded on such magnetic tapes; and

         (iv)    co-operate and consult with and assist the Mortgages Trustee,
                 Funding 1, Funding 2, the Funding 1 Security Trustee or the
                 Funding 2 Security Trustee or its nominee, as the case may be
                 (which shall, for the avoidance of doubt, include any Receiver
                 appointed by it), for

                                      16

<PAGE>

                 the purposes of explaining the file layouts and the format of
                 the magnetic tapes generally containing such computer records
                 on the computer system to the Mortgages Trustee, Funding 1,
                 Funding 2, the Funding 1 Security Trustee or the Funding 2
                 Security Trustee or such nominee, as the case may be.

13.4     NOTICE OF EVENT OF DEFAULT

         The Cash Manager shall deliver to the Mortgages Trustee, Funding 1,
         Funding 2, the Funding 1 Security Trustee and the Funding 2 Security
         Trustee as soon as reasonably practicable but in any event within
         three London Business Days of becoming aware thereof a notice of any
         Cash Manager Termination Event or any event which with the giving of
         notice or expiry of any grace period or certification, as specified in
         such Cash Manager Termination Event would constitute the same or any
         Intercompany Loan Event of Default or Master Intercompany Loan Event
         of Default or any Potential Intercompany Loan Event of Default or
         Potential Master Intercompany Loan Event of Default.

13.5     GENERAL PROVISIONS RELATING TO TERMINATION

(a)      Termination of this Agreement or the appointment of the Cash Manager
         under this Agreement shall be without prejudice to the liabilities of
         the Mortgages Trustee, Funding 1, Funding 2, the Funding 1 Security
         Trustee and the Funding 2 Security Trustee to the Cash Manager or vice
         versa incurred before the date of such termination. The Cash Manager
         shall have no right of set-off or any lien in respect of such amounts
         against amounts held by it on behalf of the Mortgages Trustee, Funding
         1, Funding 2, the Funding 1 Security Trustee or the Funding 2 Security
         Trustee.

(b)      This Agreement shall terminate automatically at such time as Funding 1
         and Funding 2 have no further interest in the Trust Property and the
         Intercompany Loans and the Master Intercompany Loan have been fully
         repaid or Funding 1's obligations under the Intercompany Loans and
         Funding 2's obligations under the Master Intercompany Loan Agreement
         have been otherwise discharged.

(c)      On termination of the appointment of the Cash Manager under the
         provisions of this Clause 13, the Cash Manager shall be entitled to
         receive all fees and other monies accrued up to (but excluding) the
         date of termination but shall not be entitled to any other or further
         compensation. Such monies so receivable by the Cash Manager shall be
         paid by the Mortgages Trustee, on the dates on which they would
         otherwise have fallen due hereunder and under the terms of the Funding
         1 Deed of Charge. For the avoidance of doubt, such termination shall
         not affect the Cash Manager's rights to receive payment of all amounts
         (if any) due to it from the Mortgages Trustee, Funding 1 or Funding 2
         other than under this Agreement.

(d)      Any provision of this Agreement which is stated to continue after
         termination of the Agreement shall remain in full force and effect
         notwithstanding termination.

14.      FURTHER ASSURANCE

14.1     CO-OPERATION, ETC.

         The parties hereto agree that they will co-operate fully to do all
         such further acts and things and execute any further documents as may
         be necessary or desirable to give full effect to the arrangements
         contemplated by this Agreement.

14.2     POWERS OF ATTORNEY

         Without prejudice to the generality of Clause 14.1, the Mortgages
         Trustee, Funding 1, Funding 2, the Funding 1 Security Trustee and the
         Funding 2 Security Trustee shall upon request by the Cash Manager
         forthwith give to the Cash Manager such further powers of attorney or
         other written

                                      17

<PAGE>

         authorisations, mandates or instruments as are necessary to enable the
         Cash Manager to perform the Cash Management Services.

14.3     CHANGE OF THE FUNDING 1 SECURITY TRUSTEE OR THE FUNDING 2 SECURITY
         TRUSTEE

         In the event that there is any change in the identity of the Funding 1
         Security Trustee or the Funding 2 Security Trustee or an additional
         Funding 1 Security Trustee or an additional Funding 2 Security Trustee
         is appointed in accordance with the Funding 1 Deed of Charge or the
         Funding 2 Deed of Charge, as the case may be, the Cash Manager shall
         execute such documents with any other parties to this Agreement and
         take such actions as such new Funding 1 Security Trustee or such new
         Funding 2 Security Trustee may reasonably require for the purposes of
         vesting in such new Funding 1 Security Trustee or such new Funding 2
         Security Trustee the rights of the Funding 1 Security Trustee and the
         Funding 2 Security Trustee, as the case may be, under this Agreement
         and under the Funding 1 Deed of Charge and the Funding 2 Deed of
         Charge, as the case may be, and releasing the retiring Funding 1
         Security Trustee or the retiring Funding 2 Security Trustee from
         further obligations thereunder and while any of the Notes of any
         Funding 1 Issuer or the Master Issuer, as the case may be, remains
         outstanding shall give notice thereof to the Rating Agencies.

14.4     NO OBLIGATION ON THE FUNDING 1 SECURITY TRUSTEE OR THE FUNDING 2
         SECURITY TRUSTEE

         Nothing herein contained shall impose any obligation or liability on
         the Funding 1 Security Trustee or the Funding 2 Security Trustee to
         assume or perform any of the obligations of the Mortgages Trustee,
         Funding 1, Funding 2 or the Cash Manager hereunder or render either
         the Funding 1 Security Trustee or the Funding 2 Security Trustee
         liable for any breach thereof.

15.      MISCELLANEOUS

15.1     NO SET-OFF

         Each of the Seller and the Cash Manager agrees that it will not:

         (a)     set off or purport to set off any amount which any of the
                 Mortgages Trustee, Funding 1 or Funding 2 is or will become
                 obliged to pay to it under this Agreement against any amount
                 from time to time standing to the credit of or to be credited
                 to the Mortgages Trustee GIC Account, any Funding 1 Bank
                 Account or any Funding 2 Bank Account or any replacement or
                 additional bank account of any of the Mortgages Trustee,
                 Funding 1 or Funding 2; or

         (b)     make or exercise any claims or demands, any rights of
                 counterclaim or any other equities against or withhold payment
                 of any and all sums of money which may at any time and from
                 time to time be standing to the credit of the Mortgages
                 Trustee GIC Account, any Funding 1 Bank Account or any Funding
                 2 Bank Account or any replacement of additional bank accounts
                 of any of the Mortgages Trustee, Funding 1 or Funding 2.

15.2     NO PETITION

         The Cash Manager agrees that for so long as any Notes of any Funding 1
         Issuer or the Master Issuer are outstanding it will not petition or
         commence proceedings for the administration (including, for the
         avoidance of doubt, the filing of documents with the court or the
         service of a notice of intention to appoint an administrator) or
         winding up of the Mortgages Trustee, Funding 1, Funding 2 or any
         Funding 1 Issuer or the Master Issuer or participate in any ex parte
         proceedings with regard thereto.

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<PAGE>

15.3     NO RECOURSE

(a)      In relation to all sums due and payable by the Mortgages Trustee,
         Funding 1 or Funding 2 to the Cash Manager, the Cash Manager agrees
         that it shall have recourse only to sums paid to or received by (or on
         behalf of) the Mortgages Trustee, Funding 1 and Funding 2 pursuant to
         the provisions of the Transaction Documents.

(b)      For the avoidance of doubt, neither the Funding 1 Security Trustee nor
         the Funding 2 Security Trustee shall be liable to pay any amounts due
         under Clause 8, and without prejudice to the obligations of the
         Mortgages Trustee, Funding 1 or Funding 2, as the case may be, or any
         receiver appointed pursuant to the Funding 1 Deed of Charge or the
         Funding 2 Deed of Charge, as the case may be, in respect of such
         amounts.

(c)      Notwithstanding any other provisions of this Agreement, all
         obligations to, and rights of the Funding 1 Security Trustee and the
         Funding 2 Security Trustee under or in connection with this Agreement
         (other than their respective obligations under Clause 14) shall
         automatically terminate upon the discharge in full (in the case of the
         Funding 1 Security Trustee) of the Funding 1 Secured Obligations and
         (in the case of the Funding 2 Security Trustee) the Funding 2 Secured
         Obligations, PROVIDED THAT this shall be without prejudice to any
         claims in respect of such obligations and rights arising on or prior
         to such date.

16.      CONFIDENTIALITY

         During the continuance of this Agreement or after its termination,
         each of the Mortgages Trustee, the Cash Manager, the Seller, Funding
         1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee shall use its best endeavours not to disclose to any
         person, firm or company whatsoever any information relating to the
         business, finances or other matters of a confidential nature of any
         other party hereto of which it may exclusively by virtue of being
         party to the Transaction Documents have become possessed and shall use
         all reasonable endeavours to prevent any such disclosure as aforesaid,
         PROVIDED HOWEVER that the provisions of this Clause 16 shall not
         apply:

         (a)     to any information already known to the recipient otherwise
                 than as a result of entering into any of the Transaction
                 Documents;

         (b)     to any information subsequently received by the recipient
                 which it would otherwise be free to disclose;

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

         (d)     to any extent that the recipient is required to disclose the
                 same pursuant to any law or order of any court of competent
                 jurisdiction or pursuant to any direction, request or
                 requirement (whether or not having the force of law) of any
                 central bank or any governmental or other authority
                 (including, without limitation, any official bank examiners or
                 regulators);

         (e)     to the extent that the recipient needs to disclose the same
                 for determining the existence of, or declaring, a Note Event
                 of Default, an Intercompany Loan Event of Default, a Master
                 Intercompany Loan Event of Default or a Cash Manager
                 Termination Event, the protection or enforcement of any of its
                 rights under any of the Transaction Documents or in connection
                 herewith or therewith or for the purpose of discharging, in
                 such manner as it thinks fit, its duties under or in
                 connection with such agreements in each case to such persons
                 as require to be informed of such information for such
                 purposes; or

                                      19

<PAGE>

         (f)     in relation to any information disclosed to the professional
                 advisers of the recipient or (in connection with a prospective
                 rating of any debt issued or to be issued by any Funding 1
                 Issuer, any New Issuer or the Master Issuer) to any Rating
                 Agency or any prospective new cash manager or prospective new
                 security trustee.

17.      NOTICES

         Any notices to be given pursuant to this Agreement to any of the
         parties hereto shall be sufficiently served if sent by prepaid first
         class post, by hand or facsimile transmission and shall be deemed to
         be given (in the case of facsimile transmission) when despatched,
         (where delivered by hand) on the day of delivery if delivered before
         17.00 hours on a London Business Day or on the next London Business
         Day if delivered thereafter or on a day which is not a London Business
         Day or (in the case of first class post) when it would be received in
         the ordinary course of the post and shall be sent:

         (a)     in the case of the Cash Manager: to Bank of Scotland plc,
                 Halifax Division, Level 3, Lovell Park, 1 Lovell Park Road,
                 Leeds LS1 1NS (facsimile number +44 (0) 113 235 7511) for the
                 attention of the Head of Mortgage Securitisation with a copy
                 to Bank of Scotland plc, Treasury Division, 33 Old Broad
                 Street, London EC2N 1HZ (facsimile number +44 (0) 20 7574
                 8303) for the attention of Head of Mortgage Securitisation and
                 Covered Bonds;

         (b)     in the case of the Mortgages Trustee: to Permanent Mortgages
                 Trustee Limited, Esplanade, St Helier, Jersey JE1 OBD, Channel
                 Islands (facsimile number +44 (0) 1534 726391) for the
                 attention of the Secretary with a copy to Bank of Scotland
                 plc, Treasury Division, 33 Old Broad Street, London EC2N 1HZ
                 (facsimile number +44 (0) 20 7574 8303) for the attention of
                 Head of Mortgage and Securitisation and Covered Bonds;

         (c)     in the case of the Seller: to Bank of Scotland plc, Halifax
                 Division, Level 3, Lovell Park, 1 Lovell Park Road, Leeds LS1
                 1NS (facsimile number +44 (0) 113 235 7511) for the attention
                 of the Head of Mortgage Securitisation; with a copy to Bank of
                 Scotland plc, Treasury Division, 33 Old Broad Street, London
                 EC2N 1HZ (facsimile number +44 (0) 20 7574 8303) for the
                 attention of Head of Mortgage Securitisation and Covered
                 Bonds;

         (d)     in the case of Funding 1: to Permanent Funding (No. 1)
                 Limited, 35 Great St. Helen's, London EC3A 6AP (facsimile
                 number +44 (020) 7398 6325) for the attention of the
                 Secretary; with a copy to Bank of Scotland plc, Treasury
                 Division, 33 Old Broad Street, London EC2N 1HZ (facsimile
                 number +44 (020) 7574 8784) for the attention of Head of
                 Mortgage Securitisation and Covered Bonds;

         (e)     in the case of Funding 2: to Permanent Funding (No. 2)
                 Limited, 35 Great St. Helen's, London EC3A 6AP (facsimile
                 number +44 (020) 7398 6325) for the attention of the
                 Secretary; with a copy to Bank of Scotland plc, Treasury
                 Division, 33 Old Broad Street, London EC2N 1HZ (facsimile
                 number +44 (020) 7574 8784) for the attention of Head of
                 Mortgage Securitisation and Covered Bonds; and

         (f)     in the case of the Funding 1 Security Trustee and the Funding
                 2 Security Trustee: to The Bank of New York, One Canada
                 Square, London E14 5AL (facsimile number +44 (0) 20 7964 2533)
                 for the attention of Corporate Trust Administration - ABS/MBS,

         or to such other address or facsimile number or for the attention of
         such other person or entity as may from time to time be notified by
         any party to the others by written notice in accordance with the
         provisions of this Clause 17.

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<PAGE>

18.      NO PARTNERSHIP

         It is hereby acknowledged and agreed by the parties that nothing in
         this Agreement shall be construed as giving rise to any partnership
         between any of the parties.

19.      ASSIGNMENT

19.1     ASSIGNMENT BY THE MORTGAGES TRUSTEE, FUNDING 1 AND FUNDING 2

         None of the Mortgages Trustee, Funding 1 nor Funding 2 may assign or
         transfer any of its respective rights and obligations under this
         Agreement without the prior written consent of:

         (a)     in the case of the Mortgages Trustee, each of the
                 Beneficiaries, the Funding 1 Security Trustee and the Funding
                 2 Security Trustee;

         (b)     in the case of Funding 1, the Funding 1 Security Trustee and
                 the Cash Manager; and

         (c)     in the case of Funding 2, the Funding 2 Security Trustee and
                 the Cash Manager,

         except that Funding 1 may assign its respective rights hereunder
         without such consent pursuant to the Funding 1 Deed of Charge and
         Funding 2 may assign its respective rights hereunder without such
         consent pursuant to the Funding 2 Deed of Charge.

19.2     NO ASSIGNMENT BY CASH MANAGER

         The Cash Manager may not assign or transfer any of its rights and
         obligations under this Agreement without the prior written consent of
         the Mortgages Trustee, each of the Beneficiaries, the Funding 1
         Security Trustee and the Funding 2 Security Trustee.

20.      AMENDMENTS AND CONSENTS

20.1     Subject to Clause 2, Clause 3 and Clause 4 of the Controlling
         Beneficiary Deed (as applicable) and (in the case of Funding 1) Clause
         25 of the Funding 1 Deed of Charge and (in the case of Funding 2)
         Clause 12 of the Funding 2 Deed of Charge, no amendment or waiver of
         any provision of this Agreement shall be effective unless the same
         shall be in writing and signed by (or by some person duly authorised
         by) each of the parties to this Agreement. In the case of a waiver,
         such waiver shall be effective only in the specific instance and as
         against the party or parties giving it for the specific purpose for
         which it is given. No single or partial exercise of, or failure or
         delay in exercising, any right under this Agreement shall constitute a
         waiver or preclude any other or further exercise of that or any other
         right.

20.2     Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee will each exercise all rights, powers, benefits
         and/or discretions conferred on it under this Agreement (including,
         without limitation, in giving its consent, approval or authorisation
         to any event, matter or thing requested hereunder) in accordance with
         Clauses 2, 3 and 4 of the Controlling Beneficiary Deed (as applicable)
         and (in the case of Funding 1) Clause 25 of the Funding 1 Deed of
         Charge and (in the case of Funding 2) Clause 12 of the Funding 2 Deed
         of Charge.

21.      EXCLUSION OF THIRD PARTY RIGHTS

         The parties to this Agreement do not intend that any term of this
         Agreement should be enforced, by virtue of the Contracts (Rights of
         Third Parties) Act 1999, by any person who is not a party to this
         Agreement.

                                      21

<PAGE>

22.      COUNTERPARTS

         This Agreement may be executed in any number of counterparts (manually
         or by facsimile) each of which, when executed and delivered, shall
         constitute an original, but all the counterparts shall together
         constitute but one and the same instrument provided, however, that
         this Agreement shall have no force or effect until it is executed by
         the last party to execute the same and shall be deemed to have been
         executed and delivered in the place where such last party executed
         this Agreement.

23.      SEVERABILITY

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

24.      GOVERNING LAW AND SUBMISSION TO JURISDICTION

24.1     This Agreement is governed by, and shall be construed in accordance
         with, the laws of England.

24.2     Each party to this Agreement hereby irrevocably submits to the
         exclusive jurisdiction of the English courts in any action or
         proceeding arising out of or relating to this Agreement, and hereby
         irrevocably agrees that all claims in respect of such action or
         proceeding may be heard and determined by such courts. Each party to
         this Agreement hereby irrevocably waives, to the fullest extent it may
         possibly do so, any defence or claim that the English courts are an
         inconvenient forum for the maintenance or hearing of such action or
         proceeding. The Mortgages Trustee irrevocably appoints Structured
         Finance Management Limited at 35 Great St. Helen's, London EC3A 6AP as
         its agent for the service of process.

IN WITNESS whereof the parties have caused this Agreement to be executed and
delivered as a deed the day and year first before written.

                                      22

<PAGE>

                                  SCHEDULE 1

                         THE CASH MANAGEMENT SERVICES

The Cash Manager shall:

(a)      make the determinations set out in Schedule 2 hereto;

(b)      operate the Mortgages Trustee GIC Account, the Funding 1 GIC Account,
         the Funding 1 Transaction Account, the Funding 2 GIC Account, the
         Funding 2 Transaction Account or any other Bank Account and ensure
         that payments are made into and from such accounts in accordance with
         this Agreement, the Mortgages Trust Deed, the Funding 1 Deed of
         Charge, the Funding 2 Deed of Charge, the Bank Account Agreement, the
         Mortgages Trustee Guaranteed Investment Contract, the Funding 1
         Guaranteed Investment Contract, the Funding 2 Guaranteed Investment
         Contract and any other applicable Transaction Document PROVIDED
         HOWEVER THAT nothing herein shall require the Cash Manager to make
         funds available to the Mortgages Trustee, Funding 1 or Funding 2 to
         enable such payments to be made other than as expressly required by
         the provisions of this Agreement;

(c)      keep records for all taxation purposes (including, without limitation
         VAT);

(d)      assist the auditors of the Mortgages Trustee, Funding 1 and Funding 2
         and provide such information to them as they may reasonably request
         for the purpose of carrying out their duties as auditors;

(e)      make all filings, give all notices and make all registrations and
         other notifications required in the day-to-day operation of the
         respective businesses of the Mortgages Trustee, Funding 1 and Funding
         2 or required to be given by the Mortgages Trustee, Funding 1 or
         Funding 2 pursuant to the Transaction Documents;

(f)      arrange for all payments due to be made by the Mortgages Trustee
         and/or Funding 1 and/or Funding 2 under any of the Transaction
         Documents, PROVIDED THAT such monies are at the relevant time
         available to the Mortgages Trustee and/or Funding 1 and/or Funding 2
         and PROVIDED FURTHER that nothing herein shall constitute a guarantee
         by the Cash Manager of all or any of the obligations of the Mortgages
         Trustee, Funding 1 or Funding 2 under any of the Transaction
         Documents;

(g)      without prejudice to the role of and in conjunction with the relevant
         Corporate Services Provider under the relevant Corporate Services
         Agreement, keep general books of account and records of the Mortgages
         Trustee, Funding 1 and Funding 2; provide accounting services,
         including reviewing receipts and payments, supervising and assisting
         in the preparation of interim statements and final accounts and
         supervising and assisting in the preparation of Tax returns;

(h)      without prejudice to the role of and in conjunction with the relevant
         Corporate Services Provider under the relevant Corporate Services
         Agreement, provide or procure the provision of company secretarial and
         administration services to the Mortgages Trustee, Funding 1 and
         Funding 2 including the keeping of all registers and the making of all
         returns and filings required by applicable law or by US or UK
         regulatory authorities (including the Securities and Exchange
         Commission), co-operate in the convening of board and general meetings
         and provide registered office facilities;

(i)      itself on behalf of the Mortgages Trustee, Funding 1 and Funding 2,
         PROVIDED THAT such monies are at the relevant time available to the
         Mortgages Trustee, Funding 1 and Funding 2, pay all the out-of-pocket
         expenses of the Mortgages Trustee, Funding 1 and Funding 2, incurred
         by the Cash

                                      23

<PAGE>

         Manager on behalf of the Mortgages Trustee, Funding 1 and Funding 2,
         as the case may be, in the performance of the Cash Manager's duties
         hereunder including without limitation:

         (i)     all Taxes which may be due or payable by the Mortgages
                 Trustee, Funding 1 and Funding 2;

         (ii)    all registration, transfer, filing and other fees and other
                 charges payable in respect of the sale by the Seller of the
                 Portfolio to the Mortgages Trustee;

         (iii)   all fees payable to the London Stock Exchange plc;

         (iv)    all necessary filing and other fees in compliance with
                 regulatory requirements;

         (v)     all legal and audit fees and other professional advisory fees;

         (vi)    all communication expenses including postage, courier and
                 telephone charges; and

         (vii)   all premiums payable by the Mortgages Trustee in respect of
                 the Insurance Policies;

(j)      at the request of Funding 1 or Funding 2, as the case may be (but also
         with the prior written consent of the Funding 1 Security Trustee or
         the Funding 2 Security Trustee, as the case may be), invest monies
         standing from time to time to the credit of the Funding 1 GIC Account
         and the Funding 1 Liquidity Stand-by Account (if any) or the Funding 2
         GIC Account, as the case may be, in Authorised Investments, subject to
         the following provisions:

         (i)     any such Authorised Investment shall be made in the joint
                 names of the Funding 1 Security Trustee and Funding 1 or the
                 Funding 2 Security Trustee and Funding 2, as the case may be;

         (ii)    any costs properly and reasonably incurred in making and
                 changing Authorised Investments will be reimbursed to the Cash
                 Manager, the Funding 1 Security Trustee and the Funding 2
                 Security Trustee by Funding 1 or Funding 2, as the case may
                 be;

         (iii)   all income or other distributions arising on, or proceeds
                 following the disposal or maturity of, Authorised Investments
                 shall be credited to the Funding 1 GIC Account or the Funding
                 2 GIC Account, as the case may be; and

         (iv)    the Funding 1 Security Trustee, the Funding 2 Security Trustee
                 and the Cash Manager shall not be responsible (save where any
                 loss results from the Funding 1 Security Trustee's, the
                 Funding 2 Security Trustee's or the Cash Manager's, as the
                 case may be, own fraud, wilful default or negligence or that
                 of their respective officers or employees) for any loss
                 occasioned by reason of any such Authorised Investments
                 whether by depreciation in value or otherwise provided that
                 such Authorised Investments were made in accordance with the
                 above provisions;

(k)      determine the Loan Tranche Interest Amount payable in respect of each
         Subordinated Loan Tranche and each Start-Up Loan Tranche for the
         relevant Loan Tranche Interest Period in accordance with Clause 7.2 of
         the Master Intercompany Loan Agreement.

                                      24

<PAGE>

                                  SCHEDULE 2

                  CASH MANAGEMENT AND MAINTENANCE OF LEDGERS

1.       DETERMINATION

1.1      On each Calculation Date based on the amount of monies standing to the
         credit of the Mortgages Trustee GIC Account as at close of business on
         the London Business Day immediately preceding the relevant Calculation
         Date, the Cash Manager shall determine each of the following:

         (a)     the amount of Principal Receipts and Revenue Receipts received
                 during the preceding Calculation Period; and

         (b)     the amount of Mortgages Trust Available Revenue Receipts and
                 Mortgages Trust Available Principal Receipts to be distributed
                 to Funding 1, Funding 2 and to the Seller on the Distribution
                 Date immediately following the relevant Calculation Date.

1.2      On each Calculation Date, the Cash Manager shall determine each of the
         following:

         (a)     the amount of any Losses incurred on the Loans in the period
                 from the immediately preceding Calculation Date to the
                 relevant Calculation Date;

         (b)     the Funding 1 Share, the Seller Share, the Funding 2 Share,
                 the Funding 1 Share Percentage, the Funding 2 Share Percentage
                 and the Seller Share Percentage in accordance with clause 8 of
                 the Mortgages Trust Deed; and

         (c)     the Minimum Seller Share in accordance with clause 9.2 of the
                 Mortgages Trust Deed.

1.3      Four Business Days prior to each Funding 1 Interest Payment Date the
         Cash Manager shall determine each of the following:

         (a)     the amount of any Funding 1 Available Revenue Receipts to be
                 applied on the following Funding 1 Interest Payment Date in
                 accordance with the Funding 1 Pre-Enforcement Revenue Priority
                 of Payments;

         (b)     the amount of any Funding 1 Available Principal Receipts to be
                 applied on the following Funding 1 Interest Payment Date in
                 accordance with the Funding 1 Principal Priority of Payments;
                 and

         (c)     the amount of any Funding 1 Income Deficit.

1.4      Four Business Days prior to each Funding 2 Interest Payment Date the
         Cash Manager shall determine each of the following:

         (a)     the amount of any Funding 2 Available Revenue Receipts to be
                 applied on the following Funding 2 Interest Payment Date in
                 accordance with the Funding 2 Pre-Enforcement Revenue Priority
                 of Payments;

         (b)     the amount of any Funding 2 Available Principal Receipts to be
                 applied on the following Funding 2 Interest Payment Date in
                 accordance with the Funding 2 Principal Priority of Payments;
                 and

         (c)     the amount of any Funding 2 Income Deficit.

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1.5      The Cash Manager shall make all the determinations referred to in
         paragraphs 1.1 to 1.4 above on the basis of the following assumptions:

         (a)     that the amount of any Losses will not increase;

         (b)     that any debit balance on the Funding 1 Principal Deficiency
                 Ledger or the Funding 2 Principal Deficiency Ledger, as the
                 case may be, will not increase; and

         (c)     such other assumptions (including without limitation as to the
                 amount of any payments or provisions to be made in accordance
                 with the applicable Funding 1 Priority of Payments or the
                 Funding 2 Priority of Payments, as the case may be) as the
                 Cash Manager considers appropriate.

         The Cash Manager shall on request notify the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee in writing of any such other assumptions and shall
         take account of any representations made by the Mortgages Trustee,
         Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2
         Security Trustee (as the case may be) in relation thereto.

1.6      The Cash Manager shall, if necessary, perform all currency conversions
         free of charge, cost or expense at the relevant exchange rate (for the
         purposes of any calculations referred to above, ((a)) all percentages
         resulting from such calculations will be rounded, if necessary, to the
         nearest one hundred-thousandth of a percentage point (e.g. 9.876541%
         being rounded down to 9.87654%) and ((b)) any currency amounts used in
         or resulting from such calculations will be rounded in accordance with
         the relevant market practice).

1.7      Each determination made in accordance with this paragraph 1 shall (in
         the absence of bad faith, wilful default, negligence and manifest
         error) be final and binding on all persons.

2.       PRIORITY OF PAYMENTS FOR MORTGAGES TRUST AVAILABLE REVENUE RECEIPTS

         The Cash Manager shall (unless the intended recipient of the relevant
         payment agrees otherwise) on each Distribution Date withdraw Cash from
         the Mortgages Trustee GIC Account and/or, in the case of sums to be
         provided for, retain Cash in the amounts required (to the extent that
         such withdrawal does not cause the Mortgages Trustee GIC Account to
         become overdrawn or, if any amounts are retained by way of provision
         for the relevant liability and are thus not withdrawn, to the extent
         that withdrawal of those amounts that are withdrawn would not, if such
         retained amounts were also to be withdrawn, cause the balance on the
         Mortgages Trustee GIC Account to become overdrawn) in an aggregate
         amount equal to the Mortgages Trust Available Revenue Receipts on each
         Distribution Date. The withdrawal shall be used to make the payments
         and provisions in the order of priority set out in clause 10.2 of the
         Mortgages Trust Deed (in each case only if and to the extent that
         payments or provisions of a higher priority have been made in full).

3.       PRIORITY OF PAYMENTS FOR MORTGAGES TRUST AVAILABLE PRINCIPAL RECEIPTS

         The Cash Manager shall (unless the intended recipient of the relevant
         payment agrees otherwise) on each Distribution Date, withdraw Cash
         from the Mortgages Trustee GIC Account (to the extent only that such
         withdrawal does not cause the Mortgages Trustee GIC Account to become
         overdrawn) in an aggregate amount equal to the Mortgages Trust
         Available Principal Receipts on each Distribution Date to make the
         payments in the order of priority set out in clause 11 of the
         Mortgages Trust Deed.

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4.       PRIORITY OF PAYMENTS FOR FUNDING 1 AVAILABLE REVENUE RECEIPTS

         Funding 1 Available Revenue Receipts will be applied by the Cash
         Manager on each Funding 1 Interest Payment Date until enforcement of
         the Funding 1 Security pursuant to the Funding 1 Deed of Charge or
         until such time as there are no amounts outstanding under any
         Intercompany Loan Agreement, in making such payments and provisions in
         the order of priority set out in the Funding 1 Pre-Enforcement Revenue
         Priority of Payments (in each case only if and to the extent that
         payments or provisions of a higher priority have been made in full) as
         set out in Part 1 of Schedule 3 to the Funding 1 Deed of Charge (as
         the same may be amended, varied or restated from time to time).

5.       PRIORITY OF PAYMENTS FOR FUNDING 1 AVAILABLE PRINCIPAL RECEIPTS

         Funding 1 Available Principal Receipts will be applied by the Cash
         Manager on each Funding 1 Interest Payment Date until enforcement of
         the Funding 1 Security pursuant to the Funding 1 Deed of Charge or
         until such time as there are no amounts outstanding under any
         Intercompany Loan Agreement, in making such payments and provisions in
         the order of priority (in each case only if and to the extent that
         payments or provisions of a higher priority have been made in full)
         set out in Part 2 of Schedule 3 to the Funding 1 Deed of Charge.

6.       FUNDING 1 INCOME DEFICIT/FUNDING 1 LIQUIDITY FACILITY

6.1      If the Cash Manager determines four Business Days prior to a Funding 1
         Interest Payment Date that there will be a Funding 1 Income Deficit,
         then the Cash Manager, on behalf of Funding 1, shall pay or provide
         for such Funding 1 Income Deficit by applying Funding 1 Principal
         Receipts (plus any part of the balance of the Funding 1 Cash
         Accumulation Ledger which is not comprised in Funding 1 Available
         Principal Receipts) to make good such Funding 1 Income Deficit, and
         the Cash Manager shall make a corresponding entry in the relevant
         Funding 1 Ledgers as described in paragraphs 13 and 18 below.

6.2      If the Cash Manager determines there are no (or insufficient) amounts
         standing to the credit of the Funding 1 Principal Ledger and the Cash
         Accumulation Ledger to cure the Funding 1 Income Deficit then on the
         London Business Day immediately preceding a Funding 1 Interest Payment
         Date the Cash Manager will, subject to paragraph 6.3 below, direct
         Funding 1 to request a drawing pursuant to Clause 5.1 of the Funding 1
         Liquidity Facility Agreement to apply towards such Funding 1 Income
         Deficit.

6.3      A Funding 1 Liquidity Drawing may not be used to pay interest or
         principal (as applicable) on the Term Advances if and to the extent
         that there are funds standing to the credit of the Funding 1 Liquidity
         Reserve Fund that are available to cure such Funding 1 Income Deficit
         on such Funding 1 Interest Payment Date.

7.       PRIORITY OF PAYMENTS FOR FUNDING 2 AVAILABLE REVENUE RECEIPTS

         Funding 2 Available Revenue Receipts will be applied by the Cash
         Manager on each Funding 2 Interest Payment Date until enforcement of
         the Funding 2 Security pursuant to the Funding 2 Deed of Charge or
         until such time as there are no amounts outstanding under the Master
         Intercompany Loan Agreement, in making such payments and provisions in
         the order of priority set out in the Funding 2 Pre-Enforcement Revenue
         Priority of Payments (in each case only if and to the extent that
         payments or provisions of a higher priority have been made in full) as
         set out in Part 1 of Schedule 3 to the Funding 2 Deed of Charge (as
         the same may be amended, varied or restated from time to time).

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8.       PRIORITY OF PAYMENTS FOR FUNDING 2 AVAILABLE PRINCIPAL RECEIPTS

         Funding 2 Available Principal Receipts will be applied by the Cash
         Manager on each Funding 2 Interest Payment Date until enforcement of
         the Funding 2 Security pursuant to the Funding 2 Deed of Charge or
         until such time as there are no amounts outstanding under the Master
         Intercompany Loan Agreement, in making such payments and provisions in
         the order of priority (in each case only if and to the extent that
         payments or provisions of a higher priority have been made in full)
         set out in Part 2 of Schedule 3 to the Funding 2 Deed of Charge.

9.       FUNDING 2 INCOME DEFICIT

         If the Cash Manager determines four Business Days prior to a Funding 2
         Interest Payment Date that there will be a Funding 2 Income Deficit,
         then the Cash Manager, on behalf of Funding 2, shall pay or provide
         for such Funding 2 Income Deficit by applying Funding 2 Principal
         Receipts (plus any part of the balance of the Funding 2 Cash
         Accumulation Ledger which is not comprised in Funding 2 Available
         Principal Receipts) to make good such Funding 2 Income Deficit, and
         the Cash Manager shall make a corresponding entry in the relevant
         Funding 2 Ledgers as described in paragraphs 13 and 25 below.

10.      OTHER PAYMENTS

         Each of the Beneficiaries and the Cash Manager agrees, and the
         Mortgages Trustee concurs, that (save as otherwise specified below)
         the following payments may be made from the Mortgages Trustee GIC
         Account (to the extent that withdrawal of those amounts would not
         cause the balance of the Mortgages Trustee GIC Account to become
         overdrawn) on any date:

         (a)     if any amount has been received from a Borrower for the
                 express purpose of payment being made to a third party for the
                 provision of a service (including giving insurance cover) to
                 either that Borrower or the Seller or the Mortgages Trustee,
                 to pay such amount when due to such third party or, in the
                 case of the payment of an insurance premium, where such third
                 party and the Cash Manager have agreed that payment of
                 commission should be made by deduction from such insurance
                 premium, to pay such amount less such commissions when due to
                 such third party and to pay such commission to the Cash
                 Manager and to pay any premiums in respect of any Insurance
                 Policy or other insurance policy relating to any Loan
                 comprised in the Portfolio;

         (b)     to pay to any person (including the Cash Manager) any amounts
                 due arising from any overpayment by any person or arising from
                 any reimbursement by any person of any such overpayment
                 (including, for the avoidance of doubt, where arising from the
                 failure of a direct debit);

         (c)     to pay when due (but subject to any right to refuse or
                 withhold payment or of set-off that has arisen by reason of
                 the Borrower's breach of the terms of the relevant Mortgage or
                 Loan) any amount payable to a Borrower under the terms of the
                 Mortgage or the Loan to which that Borrower is a party, and to
                 pay when due any amount payable by the Mortgages Trustee to
                 the Seller pursuant to clauses 3.3, 4.4 and 5.2 of the
                 Mortgage Sale Agreement;

         (d)     to pay to the Seller any amounts (including, for the avoidance
                 of doubt, any Early Repayment Fees) received and held by the
                 Mortgages Trustee on trust for the Seller pursuant to clause 5
                 of the Mortgage Sale Agreement;

         (e)     to pay when due and payable any amounts due and payable by the
                 Mortgages Trustee to third parties and incurred without breach
                 by the Mortgages Trustee of the Mortgages Trust Deed and not
                 provided for payment elsewhere in this paragraph 7;

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<PAGE>

         (f)     to refund any amounts due arising from the rejection of any
                 payments in respect of a Loan and any other amounts which have
                 not been received by the Mortgages Trustee as cleared funds;
                 and

         (g)     to refund to the Seller any amounts which represent amounts
                 received from Borrowers but which do not form part of the
                 Mortgage Account balance or comprise unpaid interest as at the
                 relevant date and which are amounts owed by such Borrowers in
                 respect of the period prior to the date on which the Mortgage
                 Loan (together with its Related Security) relating to such
                 Mortgage Account was transferred to the Mortgages Trustee as
                 and when identified by the Cash Manager and if a Borrower
                 fails to pay the full amount that it owes, the Cash Manager
                 shall be obliged to refund to the Seller only such portion of
                 the amount which relates to any period prior to such transfer.

11.      USE OF LEDGERS

         The Cash Manager shall forthwith record monies received or payments
         made by it on behalf of the Mortgages Trustee, Funding 1 or Funding 2
         in the ledgers in the manner set out in this Agreement. If, at any
         time, the Cash Manager is in any doubt as to which ledger a particular
         amount should be credited or debited, it shall consult with the
         Funding 1 Security Trustee and the Funding 2 Security Trustee (as
         applicable) thereon.

         Except in the case of the Funding 1 Principal Deficiency Ledger or the
         Funding 2 Principal Deficiency Ledger, a debit item shall only be made
         in respect of any of the Mortgages Trustee Ledgers, the Funding 1
         Ledgers and the Funding 2 Ledgers and the corresponding payment or
         transfer (if any) may only be made from the Mortgages Trustee GIC
         Account, the Funding 1 GIC Account, the Funding 1 Transaction Account,
         the Funding 2 GIC Account or the Funding 2 Transaction Account, as the
         case may be, to the extent that such entry does not cause the relevant
         ledger to have a debit balance. In the case of the Funding 1 Principal
         Deficiency Ledger, each Funding 1 Principal Deficiency Sub-Ledger, the
         Funding 2 Principal Deficiency Ledger and each Funding 2 Principal
         Deficiency Sub-Ledger, a credit item shall only be made to the extent
         that such entry does not cause such ledger to have a credit balance.

12.      REVENUE LEDGER

         The Cash Manager shall ensure that:

         (a)     the following amounts shall be credited to the Revenue Ledger:

                 (i)     all Revenue Receipts; and

                 (ii)    all interest received by the Mortgages Trustee on the
                         Mortgages Trustee GIC Account; and

         (b)     any payment or provision made under paragraph 2 above shall be
                 debited to the Revenue Ledger.

13.      PRINCIPAL LEDGER

         The Cash Manager shall ensure that:

         (a)     all Principal Receipts shall be credited to the Principal
                 Ledger; and

         (b)     any payment or provision made under paragraph 3 above shall be
                 debited to the Principal Ledger.

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14.      LOSSES LEDGER

         The Cash Manager shall ensure that all Losses shall be recorded in the
         Losses Ledger.

15.      FUNDING 1 SHARE/FUNDING 2 SHARE/SELLER SHARE LEDGER

         The Cash Manager shall ensure that the Current Funding 1 Share and the
         Current Funding 1 Share Percentage of the Trust Property, the Current
         Funding 2 Share and the Current Funding 2 Share Percentage of the
         Trust Property and the Current Seller Share and the Current Seller
         Share Percentage of the Trust Property are recorded in the Funding 1
         Share/Funding 2 Share/Seller Share Ledger on the Initial Closing Date
         (in the case of Funding 1 and the Seller) and on the Programme Date
         (in the case of Funding 2) and thereafter on each Distribution Date.

16.      FUNDING 1 REVENUE LEDGER

         The Cash Manager shall ensure that:

         (a)     the following amounts shall be credited to the Funding 1
                 Revenue Ledger:

                 (i)     all Funding 1 Revenue Receipts;

                 (ii)    all interest received by Funding 1 in respect of the
                         Funding 1 Bank Accounts;

                 (iii)   all amounts received by Funding 1 representing income
                         on any Funding 1 Authorised Investments;

                 (iv)    all amounts (other than any early termination payment
                         which is to be used to acquire, if necessary, a new
                         swap) received by Funding 1 under the Funding 1 Swap
                         Agreement; and

                 (v)     any amount debited to the Funding 1 Principal Ledger
                         under paragraph 18(b)(ii) below; and

         (b)     any payment or provision made under paragraph 4 above shall be
                 debited to the Funding 1 Revenue Ledger.

17.      FUNDING 1 LIQUIDITY FACILITY LEDGER

         The Cash Manager shall ensure that:

         (a)     all Funding 1 Liquidity Facility Drawings shall be credited to
                 the Funding 1 Liquidity Facility Ledger; and

         (b)     all Funding 1 Liquidity Facility Repayments shall be noted on
                 the Funding 1 Liquidity Facility Ledger.

18.      FUNDING 1 PRINCIPAL LEDGER

         Without prejudice to paragraph 19 below, the Cash Manager shall ensure
         that:

         (a)     the following amounts shall be credited to the Funding 1
                 Principal Ledger:

                 (i)     all Funding 1 Principal Receipts; and

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<PAGE>

                 (ii)    amounts credited to the Funding 1 Principal Deficiency
                         Ledger under paragraph 4 above and paragraph 19 below;
                         and

         (b)     the following amounts shall be debited to the Funding 1
                 Principal Ledger:

                 (i)     the aggregate amount paid pursuant to paragraph 5
                         above (other than any remainder to be credited to the
                         Funding 1 Principal Ledger); and

                 (ii)    on each Funding 1 Interest Payment Date, an amount
                         equal to the Funding 1 Income Deficit on such Funding
                         1 Interest Payment Date.

19.      FUNDING 1 PRINCIPAL DEFICIENCY LEDGER

19.1     Without prejudice to paragraph 4 above, the Cash Manager shall ensure
         that there shall be debited to the Funding 1 Principal Deficiency
         Ledger:

         (a)     deficiencies arising from Losses which have been allocated to
                 the Funding 1 Share; and

         (b)     any amount required to be debited to the Funding 1 Principal
                 Ledger under paragraph 18(b)(ii) above.

19.2     The Cash Manager shall ensure that there shall be credited to the
         Funding 1 Principal Deficiency Ledger any amount to be credited in
         accordance with paragraph 4 above.

19.3     Amounts to be debited to the Funding 1 Principal Deficiency Ledger
         shall be debited in the following order:

         (a)     first, to the Funding 1 Principal Deficiency Sub-Ledger
                 corresponding to the Term Advance with the lowest ranking Term
                 Advance Rating until the debit balance thereon is equal to the
                 then principal amount outstanding of the corresponding Term
                 Advance(s); and

         (b)     secondly, to the Funding 1 Principal Deficiency Sub-Ledger
                 corresponding to the Term Advance with the next lowest Term
                 Advance Rating until the debit balance thereon is equal to the
                 then principal amount outstanding of corresponding Term
                 Advance(s),

         and so on until amounts are debited to the AAA Principal Deficiency
         Sub Ledger, at which point there will be an Asset Trigger Event.

         Losses on the Loans and/or the application of Funding 1 Available
         Principal Receipts to pay interest on the Term Advances will not be
         recorded on the Funding 1 Principal Deficiency Ledger to the extent
         that the Funding 1 Share of the Trust Property together with amounts
         standing to the credit of the Funding 1 Cash Accumulation Ledger and
         the Funding 1 Principal Ledger, in aggregate, is greater than or equal
         to the aggregate Outstanding Principal Balance of the Intercompany
         Loans on the relevant Funding 1 Interest Payment Date, after taking
         account of such Losses or the relevant application of Principal
         Receipts.

19.4     Amounts to be credited to the Funding 1 Principal Deficiency Ledger
         shall be credited in the following order:

         (a)     first, to the Funding 1 Principal Deficiency Sub-Ledger
                 corresponding to the Term Advance with the highest ranking
                 Term Advance Rating until the debit balance thereon is reduced
                 to zero;

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<PAGE>

         (b)     secondly, to the Funding 1 Principal Deficiency Sub-Ledger
                 corresponding to the Term Advance with the next highest
                 ranking Term Advance Rating until the debit balance thereon is
                 reduced to zero; and

         (c)     thirdly, to the Funding 1 Principal Deficiency Sub-Ledger
                 corresponding to the Term Advance with the next highest
                 ranking Term Advance Rating until the debit balance thereon is
                 reduced to zero,

         and so on until the balance of the Funding 1 Principal Deficiency
         Ledger is zero.

20.      FUNDING 1 GENERAL RESERVE LEDGER

20.1     A tranche (if any) drawn down on a relevant Closing Date by Funding 1
         pursuant to a Start-Up Loan Agreement for the purposes of funding the
         Funding 1 General Reserve Fund (or any other similar reserve fund)
         will be credited to the Funding 1 General Reserve Ledger.

20.2     Amounts shall be credited to the Funding 1 General Reserve Ledger in
         accordance with the Funding 1 Priority of Payments above.

20.3     Amounts shall be debited to the Funding 1 General Reserve Ledger on
         each Funding 1 Interest Payment Date in order to be applied in
         accordance with the order of priority of payments set out in Schedule
         3 to the Funding 1 Deed of Charge.

21.      FUNDING 1 LIQUIDITY RESERVE LEDGER

21.1     Amounts shall be credited to the Funding 1 Liquidity Reserve Ledger in
         accordance with the Funding 1 Priority of Payments above.

21.2     Amounts shall be debited to the Funding 1 Liquidity Reserve Ledger to
         the extent permitted on each relevant Funding 1 Interest Payment Date
         in order to be applied in accordance with the priority of payments set
         out in Schedule 3 to the Funding 1 Deed of Charge.

22.      INTERCOMPANY LOAN LEDGER

         The Cash Manager shall ensure that all payments of interest and
         repayments of principal on each of the Term Advances are recorded in
         the Intercompany Loan Ledger.

23.      FUNDING 1 CASH ACCUMULATION LEDGER

         The Cash Manager shall ensure that all Funding 1 Principal Receipts
         reserved by Funding 1 to pay the relevant Bullet Term Advances are
         recorded on the Funding 1 Cash Accumulation Ledger.

24.      FUNDING 2 REVENUE LEDGER

         The Cash Manager shall ensure that:

         (a)     the following amounts shall be credited to the Funding 2
                 Revenue Ledger:

                 (i)     all Funding 2 Revenue Receipts;

                 (ii)    all interest received by Funding 2 in respect of the
                         Funding 2 Bank Accounts;

                 (iii)   all amounts received by Funding 2 representing income
                         on any Funding 2 Authorised Investments;

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                 (iv)    all amounts (other than any early termination payment
                         which is to be used to acquire, if necessary, a new
                         swap) received by Funding 2 under the Funding 2 Swap
                         Agreement; and

                 (v)     any amount debited to the Funding 2 Principal Ledger
                         under paragraph 25(b)(ii) below; and

         (b)     any payment or provision made under paragraph 7 above shall be
                 debited to the Funding 2 Revenue Ledger.

25.      FUNDING 2 PRINCIPAL LEDGER

         Without prejudice to paragraph 26 below, the Cash Manager shall ensure
         that:

         (a)     the following amounts shall be credited to the Funding 2
                 Principal Ledger:

                 (i)     all Funding 2 Principal Receipts; and

                 (ii)    amounts credited to the Funding 2 Principal Deficiency
                         Ledger under paragraph 7 above and paragraph 26 below;
                         and

         (b)     the following amounts shall be debited to the Funding 2
                 Principal Ledger:

                 (i)     the aggregate amount paid pursuant to paragraph 8
                         above (other than any remainder to be credited to the
                         Funding 2 Principal Ledger); and

                 (ii)    on each Funding 2 Interest Payment Date, an amount
                         equal to the Funding 2 Income Deficit on such Funding
                         2 Interest Payment Date.

26.      FUNDING 2 PRINCIPAL DEFICIENCY LEDGER

26.1     Without prejudice to paragraph 7 above, the Cash Manager shall ensure
         that there shall be debited to the Funding 2 Principal Deficiency
         Ledger:

         (a)     deficiencies arising from Losses which have been allocated to
                 the Funding 2 Share;

         (b)     Funding 2 Available Principal Receipts allocated to fund the
                 Funding 2 Liquidity Reserve Fund up to the Funding 2 Liquidity
                 Reserve Required Amount pursuant to the applicable Funding 2
                 Pre-Enforcement Principal Priority of Payments; and

         (c)     any amount required to be debited to the Funding 2 Principal
                 Ledger under paragraph 25(b)(ii) above.

26.2     The Cash Manager shall ensure that there shall be credited to the
         Funding 2 Principal Deficiency Ledger any amount to be credited in
         accordance with paragraph 7 above.

26.3     Amounts to be debited to the Funding 2 Principal Deficiency Ledger
         shall be debited in the following order:

         (a)     first, on the Funding 2 Subordinated Loan Tranche Principal
                 Deficiency Sub Ledger until the balance of the Funding 2
                 Subordinated Loan Tranche Principal Deficiency Sub Ledger is
                 equal to the aggregate principal amount outstanding of all
                 Subordinated Loan Tranches;

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<PAGE>

         (b)     second, on the Funding 2 BB Principal Deficiency Sub-Ledger
                 until the balance of the Funding 2 BB Principal Deficiency
                 Sub-Ledger is equal to the aggregate principal amount
                 outstanding of all BB Loan Tranches;

         (c)     third, on the Funding 2 BBB Principal Deficiency Sub-Ledger
                 until the balance of the Funding 2 BBB Principal Deficiency
                 Sub-Ledger is equal to the aggregate principal amount
                 outstanding of all BBB Loan Tranches;

         (d)     fourth, on the Funding 2 A Principal Deficiency Sub-Ledger
                 until the balance of the Funding 2 A Principal Deficiency
                 Sub-Ledger is equal to the aggregate principal amount
                 outstanding of all A Loan Tranches;

         (e)     fifth, on the Funding 2 AA Principal Deficiency Sub-Ledger
                 until the balance of the Funding 2 AA Principal Deficiency
                 Sub-Ledger is equal to the aggregate principal amount
                 outstanding of all AA Loan Tranches;

         (f)     sixth, on the Funding 2 AAA Principal Deficiency Sub-Ledger,
                 at which point there will be an Asset Trigger Event (unless
                 such losses are recorded when ((i)) the aggregate principal
                 amount outstanding of all Subordinated Loan Tranches, BB Loan
                 Tranches, BBB Loan Tranches, A Loan Tranches and AA Loan
                 Tranches is equal to zero and ((ii)) the sum of (A) the amount
                 standing to the credit of the Funding 2 General Reserve Ledger
                 and (B) the amount standing to the credit of the Funding 2
                 Revenue Ledger together with amounts determined and due to be
                 credited to the Funding 2 Revenue Ledger prior to the
                 immediately following Funding 2 Interest Payment Date after
                 such debit is made, is greater than the amount necessary to
                 pay the items in paragraphs (A) to (E) in the Funding 2
                 Pre-Enforcement Revenue Priority of Payments on the
                 immediately following Funding 2 Interest Payment Date after
                 such debit is made);

         Losses on the Loans and/or the application of amounts standing to the
         credit of the Funding 2 Principal Ledger and/or the Funding 2 Cash
         Accumulation Ledger to pay interest and fees on the Master
         Intercompany Loan will not be recorded on the Funding 2 Principal
         Deficiency Ledger to the extent that the Funding 2 Share of the Trust
         Property together with amounts standing to the credit of the Funding 2
         Cash Accumulation Ledger and the Funding 2 Principal Ledger, in
         aggregate, is greater than or equal to the aggregate Outstanding
         Principal Balance of the Rated Loan Tranches and Subordinated Loan
         Tranches under the Master Intercompany Loan Agreement on the relevant
         Funding 2 Interest Payment Date, after taking account of such Losses
         or the relevant application of Principal Receipts.

26.4     Amounts to be credited to the Funding 2 Principal Deficiency Ledger
         shall be credited in the following order:

         (a)     first, in an amount necessary to reduce to zero the balance on
                 the Funding 2 AAA Principal Deficiency Sub-Ledger;

         (b)     second, provided that interest due on the AA Loan Tranches has
                 been paid, in an amount necessary to reduce to zero the
                 balance on the Funding 2 AA Principal Deficiency Sub-Ledger;

         (c)     third, provided that interest due on the A Loan Tranches has
                 been paid, in an amount to reduce to zero the balance on the
                 Funding 2 A Principal Deficiency Sub-Ledger;

         (d)     fourth, provided that interest due on the BBB Loan Tranches
                 has been paid, in an amount necessary to reduce to zero the
                 balance on the Funding 2 BBB Principal Deficiency Sub-Ledger;

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<PAGE>

         (e)     fifth, provided that interest due on the BB Loan Tranches has
                 been paid, in an amount necessary to reduce to zero the
                 balance on the BB Principal Deficiency Sub-Ledger; and

         (f)     sixth, provided that interest due on the Subordinated Loan
                 Tranches has been paid, in an amount necessary to reduce to
                 zero the balance on the Funding 2 Subordinated Loan Tranche
                 Principal Deficiency Sub Ledger.

27.      FUNDING 2 GENERAL RESERVE LEDGER

27.1     An amount drawn down on a relevant Closing Date by Funding 2 pursuant
         to a Funding 2 Start-Up Loan Agreement or of a Start-Up Loan Tranche
         under the Master Intercompany Loan Agreement for the purposes of
         funding the Funding 2 General Reserve Fund (or any other similar
         reserve fund) will be credited to the Funding 2 General Reserve
         Ledger.

27.2     Amounts shall be credited to the Funding 2 General Reserve Ledger in
         accordance with the Funding 2 Priority of Payments above.

27.3     Amounts shall be debited to the Funding 2 General Reserve Ledger on
         each Funding 2 Interest Payment Date in order to be applied in
         accordance with the order of priority of payments set out in Schedule
         3 to the Funding 2 Deed of Charge.

28.      FUNDING 2 LIQUIDITY RESERVE LEDGER

28.1     Amounts shall be credited to the Funding 2 Liquidity Reserve Ledger in
         accordance with the Funding 2 Priority of Payments above.

28.2     Amounts shall be debited to the Funding 2 Liquidity Reserve Ledger to
         the extent permitted on each relevant Funding 2 Interest Payment Date
         in order to be applied in accordance with the priority of payments set
         out in Schedule 3 to the Funding 2 Deed of Charge.

29.      MASTER INTERCOMPANY LOAN LEDGER

         The Cash Manager shall ensure that all payments of interest and
         repayments of principal on each of the Loan Tranches are recorded in
         the Master Intercompany Loan Ledger.

30.      FUNDING 2 CASH ACCUMULATION LEDGER

         The Cash Manager shall ensure that all Funding 2 Principal Receipts
         reserved by Funding 2 to pay the relevant Bullet Loan Tranches are
         recorded on the Funding 2 Cash Accumulation Ledger.

31.      START-UP LOAN REVENUE CONTRIBUTION LEDGER

31.1     The Cash Manager shall ensure that all amounts received by Funding 2
         under a Funding 2 Start-Up Loan Agreement or a Start-Up Loan Tranche
         under the Master Intercompany Loan Agreement or part thereof for the
         purposes of contributing towards Funding 2 Available Revenue Receipts
         on the Funding 2 Interest Payment Date immediately following the
         relevant Closing Date are credited to the Start-Up Loan Revenue
         Contribution Ledger.

31.2     The Cash Manager shall ensure that all amounts referred to in
         paragraph 31.1 above are debited to the Start-Up Loan Revenue
         Contribution Ledger on the Funding 2 Interest Payment Date immediately
         following the Closing Date on which they were advanced for the purpose
         described in paragraph 31.1 above.

                                      35

<PAGE>

                                  SCHEDULE 3

                      FORM OF FUNDING 1 QUARTERLY REPORT

INTERCOMPANY LOANS BALANCES

[Balances]

Last quarter closing balance
Repayments
New Term Advances
CR to Cash Accumulation Ledger in period
CR to Principal Ledger in period
Closing balance

CASH ACCUMULATION LEDGER
Opening balance
Principal received
Principal paid
Closing balance

PRINCIPAL LEDGER
Opening balance
Principal received
CR from Principal Deficiency Ledger
Principal paid
Closing balance

AVAILABLE CREDIT ENHANCEMENT

General Reserve Fund at closing

Last quarter closing General Reserve Fund

Drawings to make a bullet repayment
Other drawings
Closing of balance of General Reserve Fund
Target of balance General Reserve Fund

                                      36

<PAGE>

PRINCIPAL DEFICIENCY LEDGER                        AAA    AA    BBB

Opening Principal Deficiency Ledger Balance
Losses this Quarter

Principal Deficiency Ledger top up from Revenue
Income
Closing Principal Deficiency Ledger Balance

SUBORDINATED LOAN OUTSTANDING

[Balances]

Last quarter closing outstanding
Accrued interest
Repayments Made
Closing balance

                                      37

<PAGE>

                                  SCHEDULE 4

                      FORM OF FUNDING 2 QUARTERLY REPORT

MASTER INTERCOMPANY LOANS BALANCE

[Balance]

Last quarter closing balance
Repayments
New Loan Tranche
CR to Cash Accumulation Ledger in period
CR to Principal Ledger in period
Closing balance

CASH ACCUMULATION LEDGER
Opening balance
Principal received
Principal paid
Closing balance

PRINCIPAL LEDGER
Opening balance
Principal received
CR from Principal Deficiency Ledger
Principal paid
Closing balance

AVAILABLE CREDIT ENHANCEMENT
Funding 2 General Reserve Fund at Programme Date
Last quarter closing Funding 2 General Reserve Fund
Drawings to make a bullet repayment
Other drawings
Closing balance of Funding 2 General Reserve Fund
Target balance of Funding 2 General Reserve Fund

                                      38

<PAGE>

PRINCIPAL DEFICIENCY LEDGER                        AAA    AA    BBB

Opening Principal Deficiency Ledger balance
Losses this quarter

Principal Deficiency Ledger top up from Revenue
Receipts
Closing Principal Deficiency Ledger balance

SUBORDINATED LOANS OUTSTANDING

[Balances]

Last quarter closing outstanding
Accrued interest
Repayments made
Closing balance

                                      39

<PAGE>

                                  SIGNATORIES

CASH MANAGER AND SELLER

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

Witness's signature: /s/ CHRIS WALL

Name:

Address: ALLEN & OVERY LLP
         LONDON
         E14 5DU

MORTGAGES TRUSTEE

EXECUTED as a DEED on behalf of             )
PERMANENT MORTGAGES                         )    /s/ ABU KAPADIA
TRUSTEE LIMITED,                            )
a company incorporated in Jersey,           )
Channel Islands, by                         )
being a person who,                         )
in accordance with the laws of that         )
territory is acting under the authority of  )
the company in the presence of:             )

Witness's signature: /s/ CHRIS WALL

Name:

Address: ALLEN & OVERY LLP
         LONDON
         E14 5DU

FUNDING 1

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

FUNDING 2

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

                                      40

<PAGE>

FUNDING 1 SECURITY TRUSTEE

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

Witness's signature: /s/ CHRIS WALL

Name:

Address: ALLEN & OVERY LLP
         LONDON
         E14 5DU

FUNDING 2 SECURITY TRUSTEE

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

Witness's signature: /s/ CHRIS WALL

Name:

Address: ALLEN & OVERY LLP
         LONDON
         E14 5DU

                                      41

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