and

                                                                  EXECUTION COPY


                              DATED 25TH JULY, 2003

                        PERMANENT FUNDING (NO. 1) LIMITED

                                       and

                         PERMANENT FINANCING (NO. 1) PLC

                                       and

                         PERMANENT FINANCING (NO. 2) PLC

                                       and

                       STATE STREET BANK AND TRUST COMPANY

                                       and

                         U.S. BANK NATIONAL ASSOCIATION

                                       and

                              THE BANK OF NEW YORK

                                       and

                                   HALIFAX PLC

                                       and

                               JPMORGAN CHASE BANK

                                       and

                      STRUCTURED FINANCE MANAGEMENT LIMITED

                                       and

                THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND

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

                   FIRST SUPPLEMENTAL FUNDING 1 DEED OF CHARGE

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

                                  XXXXX & XXXXX
                                     London






THIS FIRST SUPPLEMENTAL FUNDING 1 DEED OF CHARGE is made on 25th July, 2003

BETWEEN:

(1)    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 Xxxxxxxxx House,  Guildhall Yard, London EC2V 5AE
       (FUNDING 1);

(2)    PERMANENT  FINANCING (NO. 1) PLC (registered  number  4416192),  a public
       limited  company  incorporated  in England  and Wales,  whose  registered
       office is at Xxxxxxxxx House,  Guildhall Yard, London EC2V 5AE (the FIRST
       ISSUER);

(3)    PERMANENT  FINANCING (NO. 2) PLC (registered  number  4623188),  a public
       limited  company  incorporated  in England  and Wales,  whose  registered
       office is at Xxxxxxxxx House, Guildhall Yard, London EC2V 5AE (the SECOND
       ISSUER);

(4)    STATE STREET BANK AND TRUST COMPANY (STATE STREET), a Massachusetts trust
       company  organised under the  Commonwealth of Massachusetts of the United
       States of  America  acting  through  its office at 000  Xxxxxxxx  Xxxxxx,
       Xxxxxx,   Xxxxxxxxxxxxx  00000,  (acting  in  its  capacity  as  RETIRING
       CO-FUNDING 1 SECURITY TRUSTEE);

(5)    U.S. BANK NATIONAL  ASSOCIATION,  a national banking  association  formed
       under the laws of the United States of America, acting through its office
       situated at 0 Xxxxxxx Xxxxxx,  0xx Xxxxx,  Xxxxxx,  Xxxxxxxxxxxxx  00000,
       (U.S.  BANK)  (acting in its  capacity as RETIRING  CO-FUNDING 1 SECURITY
       TRUSTEE);

(6)    THE BANK OF NEW YORK  acting  through  its office at Xxx  Xxxxxx  Xxxxxx,
       Xxxxxx  X00  0XX  (acting  in its  capacity  as NEW  FUNDING  1  SECURITY
       TRUSTEE);

(7)    HALIFAX  PLC  (registered  number  2367076),  a  public  limited  company
       incorporated under the laws of England and Wales, whose registered office
       is at  Trinity  Road,  Halifax,  West  Yorkshire  HX1 2RG  acting  in its
       capacity as Cash Manager;

(8)    THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND,  established  by an Act
       of the  Parliament  of Scotland in 1695, as amended,  acting  through its
       office situated at 000 Xxxxxxxxxx  Xxxxxx,  Xxxxx XX0 0XX, Xxxxxxx acting
       in its capacity as Account Bank;

(9)    THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND,  established  by an Act
       of the  Parliament  of Scotland in 1695, as amended,  acting  through its
       office situated at 000 Xxxxxxxxxx  Xxxxxx,  Xxxxx XX0 0XX, Xxxxxxx acting
       in its capacity as Funding 1 GIC Provider;

(10)   HALIFAX  PLC  (registered  number  2367076),  a  public limited company
       incorporated  under the laws of  England  and Wales,  whose  registered
       office is at Trinity Road,  Halifax,  West  Yorkshire HX1 2RG acting in
       its capacity as Seller;


                                       4



(11)   HALIFAX  PLC  (registered  number  2367076),  a  public  limited  company
       incorporated under the laws of England and Wales, whose registered office
       is at  Trinity  Road,  Halifax,  West  Yorkshire  HX1 2RG  acting  in its
       capacity as Funding 1 Swap Provider;

(12)   HALIFAX  PLC  (registered  number  2367076),  a  public  limited  company
       incorporated under the laws of England and Wales, whose registered office
       is at  Trinity  Road,  Halifax,  West  Yorkshire  HX1 2RG  acting  in its
       capacity as the Start-Up Loan Provider;

(13)   JPMORGAN CHASE BANK acting through its office at 000 Xxxxxx Xxxx,  Xxxxxx
       XX0X 0XX in its capacity as Funding 1 Liquidity Facility Provider; and

(14)   STRUCTURED  FINANCE MANAGEMENT  LIMITED  (registered  number 3853947),  a
       private limited company incorporated under the laws of England and Wales,
       whose  registered  office is at Xxxxxxxxx House,  Guildhall Yard,  London
       EC2V 5AE  acting in its  capacity  as the  Funding 1  Corporate  Services
       Provider.

WHEREAS:

(A)    This Deed is  supplemental  to the  Funding 1 Deed of Charge  dated  14th
       June,  2002  (hereinafter  called the  PRINCIPAL  DEED) made  between the
       parties  hereto  (other  than the Second  Issuer,  U.S.  Bank and the New
       Funding 1 Security Trustee).

(B)    The Second  Issuer and U.S.  Bank  acceded to the terms of the  Principal
       Deed by executing a Deed of Accession to the Principal  Deed (the DEED OF
       ACCESSION)  dated 6th March,  2003 between,  inter alios,  Funding 1, the
       Second Issuer and U.S. Bank.

(C)    Pursuant  to the terms of the Deed of  Accession  and Clause  27.2 of the
       Principal Deed, U.S. Bank was appointed to act as a co-trustee  under the
       Principal Deed jointly with State Street.

(D)    The Retiring  Co-Funding 1 Security Trustees have given notice to Funding
       1  pursuant  to Clause 28 of the  Principal  Deed of their  intention  to
       retire from their respective roles as Funding 1 Security Trustee.

(E)    The power to appoint new Funding 1 Security Trustees is vested in Funding
       1 by Clause 27.1 of the Principal  Deed which  further  provides that (I)
       any such appointment is subject to the approval in writing of each of the
       Funding 1 Secured Creditors;  and (II) any new Funding 1 Security Trustee
       must meet certain requirements specified in sub-clause (b) thereof.

(F)    The First  Issuer and the Second  Issuer are Funding I Secured  Creditors
       and have  pursuant  to the First  Issuer  Deed of Charge  and the  Second
       Issuer Deed of Charge,  respectively,  assigned  their  rights  under the
       Principal Deed to the Funding 1 Security  Trustees under the First Issuer
       Deed of Charge and the Second Issuer Deed of Charge (as the case may be).
       In consequence,  the appointment of the New Funding 1 Security Trustee is
       also subject to the approval, by Extraordinary  Resolution, of each Class
       of the First  Issuer  Noteholders  and each  Class of the  Second  Issuer
       Noteholders (as defined in the First Issuer Master  Definitions  Schedule
       dated  13th June,  2002 and the  Second  Issuer  Master  Definitions  and
       Construction Schedule dated 5th March, 2003, respectively).


                                       5



(G)    Funding 1 wishes to appoint the New Funding 1 Security  Trustee to act as
       sole  Funding 1 Security  Trustee of the  Principal  Deed in place of the
       Retiring Co-Trustees.

(H)    The Funding 1 Secured Creditors have agreed in writing to the appointment
       of the New Funding 1 Security Trustee.

(I)    The New Funding 1 Security Trustee has by a letter to Xxxxx & Xxxxx dated
       23rd June, 2003 confirmed that it satisfies the  requirements  set out in
       Clause 27.1(b) of the Principal Deed.

(J)    At separate  Meetings of the holders of each Class of First  Issuer Notes
       and  Second  Issuer  Notes  duly  convened  and held on 25th  July,  2003
       Resolutions  in the form set out in the Schedule  hereto were duly passed
       as Extraordinary Resolutions and the draft supplemental funding 1 deed of
       charge referred to in each such Resolution was a draft of this Deed.

NOW THIS DEED WITNESSES AS FOLLOWS:

1.     INTERPRETATION

1.1    DEFINITIONS

       The Amended and Restated  Master  Definitions and  Construction  Schedule
       signed for the  purposes  of  identification  by Xxxxx & Xxxxx and Xxxxxx
       Xxxxxx  Xxxxx & Xxxx on 5th  March,  2003 (as the  same  may be  amended,
       varied or supplemented  from time to time with the consent of the parties
       hereto) are expressly and specifically  incorporated  into this Deed and,
       accordingly,  the expressions  defined in the Amended and Restated Master
       Definitions  and  Construction   Schedule  (as  so  amended,   varied  or
       supplemented) shall, except where the context otherwise requires and save
       where  otherwise  defined  herein,  have the same  meanings in this Deed,
       including  the  recitals  hereto  and this  Deed  shall be  construed  in
       accordance with the interpretation  provisions set out in Clause 2 of the
       Amended and Restated Master Definitions and Construction Schedule.

1.2    CONSTRUCTION

       In this Deed,  except where the context otherwise  requires,  "THIS DEED"
       means this First  Supplemental  Funding 1 Deed of Charge and the Schedule
       hereto (as from time to time modified  and/or  supplemented in accordance
       with the provisions set out in the Principal Deed).

2.     APPOINTMENT

       In exercise of the power  conferred on it by Clause 27.1 of the Principal
       Deed, Funding 1 HEREBY APPOINTS with effect from and including 25th July,
       2003  the  New  Funding  1  Security  Trustee  (who  hereby  accepts  the
       appointment)  to be the sole Funding 1 Security  Trustee of the Principal
       Deed in place of the  Retiring  Co-Funding  1 Security  Trustees  who are
       hereby  discharged  from the  trusts of the same and each of the  parties
       hereto HEREBY  ACKNOWLEDGES (I) that this Deed constitutes express notice
       to it in  accordance  with


                                       6



       Section  136 of the Law of  Property  Act 1925 of the  vesting in the New
       Funding 1 Security  Trustee of all the property  subject to the trusts of
       the Principal  Deed; and (II) that the New Funding 1 Security  Trustee is
       the Funding 1 Security  Trustee for all purposes of and  accordingly  has
       all the rights, powers, privileges,  obligations,  duties and discretions
       conferred  upon or vested  in the  Funding 1  Security  Trustee  under or
       pursuant to the Principal Deed.

3.     MODIFICATIONS

       The  provisions  of Clause  30.2(k) of the  Principal  Deed are hereby by
       modified by the deletion  therefrom  of the words "State  Street Bank and
       Trust Company, 0 Xxxxxx Xxxxxx,  Xxxxxx Xxxxx,  Xxxxxx X00 0XX (facsimile
       number x00(0) 00 0000 0000) for the attention of Corporate Trust" and the
       substitution therefor of the words "The Bank of New York, 48th Floor, Xxx
       Xxxxxx Xxxxxx,  Xxxxxx X00 0XX (facsimile number x00(0) 00 0000 0000) for
       the attention of Global Trust Services".

4.     US INVESTMENT COMPANY ACT OF 1940

4.1    By its execution of this Deed the New Funding 1 Security Trustee confirms
       that it is a bank (for the purposes of the US  Investment  Company Act of
       1940 (the 1940 ACT)) with  capital and surplus of at least  US$50,000,000
       as set forth in its most recent published annual report of condition.

4.2    Without prejudice to the provisions of Clauses 27 and 28 of the Principal
       Deed, the New Funding 1 Security  Trustee agrees that it shall not resign
       until  either  (a) the  trust  has  been  completely  liquidated  and the
       proceeds  of  the  liquidation  distributed  to  the  Funding  1  Secured
       Creditors or (b) a successor trustee having the qualifications prescribed
       in section  26(a)(1) of the 1940 Act has been designated and has accepted
       such trusteeship.

5.     TRUST INDENTURE ACT PREVAILS

       If any provision of this Deed limits, qualifies or conflicts with another
       provision  which is  required  to be included in this Deed by, and is not
       subject to a contractual  waiver under,  the U.S. Trust  Indenture Act of
       1939, as amended, the required provision of that act shall prevail.

6.     EXCLUSION OF THIRD PARTY RIGHTS

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


                                       7



7.     MISCELLANEOUS

       The Principal  Deed and this Deed shall  henceforth be read and construed
       together as one deed. A Memorandum  of this Deed shall be endorsed by the
       New Funding 1 Security  Trustee on the Principal Deed and by Funding 1 on
       the duplicate thereof.

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


                                       8



                                    SCHEDULE

            EXTRAORDINARY RESOLUTION OF THE FIRST ISSUER NOTEHOLDERS

                            EXTRAORDINARY RESOLUTION

"THAT this single  Meeting of the holders of those of the [Class A First  Issuer
Notes/Class B First Issuer  Notes/Class C First Issuer Notes] (as defined in the
First Issuer Master  Definitions and  Construction  Schedule dated 13 June 2002)
presently outstanding hereby:

1.     acknowledges  that State Street Bank and Trust Company (STATE STREET) and
       U.S.  Bank  National  Association  (U.S.  BANK) have  notified  Permanent
       Financing No. 1 PLC (the FIRST ISSUER) of their  intention to resign from
       their  respective roles as (a) Funding 1 Security Trustee pursuant to the
       Funding 1 Deed of Charge (as defined  below) and the Deed of Accession to
       the Funding 1 Deed of Charge  dated 6 March 2003  between,  inter  alios,
       Permanent Funding (No. 1) Limited and U.S. Bank; (b) First Issuer Funding
       1  Security  Trustee  pursuant  to the First  Issuer  Deed of Charge  (as
       defined below);  and (c) First Issuer Note Trustee  pursuant to the First
       Issuer Trust Deed (as defined  below),  in each case,  with effect from 1
       July 2003;

2.     instructs  State Street and U.S.  Bank in their  capacity as First Issuer
       Funding 1 Security  Trustees  under the First Issuer Deed of Charge dated
       14 June 2002 (the FIRST ISSUER DEED OF CHARGE) between,  inter alios, the
       First Issuer and State Street to concur in and approve the appointment of
       The  Bank of New York as  Funding  1  Security  Trustee  pursuant  to the
       Funding  1 Deed of  Charge  dated 14 June  2002  (the  FUNDING  1 DEED OF
       CHARGE) between, inter alios, Permanent Funding (No. 1) Limited and State
       Street in place of State Street and U.S. Bank in their  respective  roles
       as Funding 1 Security Trustee;

3.     instructs  State Street and U.S.  Bank in their  capacity as First Issuer
       Note  Trustees  under the First Issuer Trust Deed dated 14 June 2002 (the
       FIRST  ISSUER  TRUST DEED)  between the First  Issuer and State Street to
       concur in and  approve the  appointment  of The Bank of New York as First
       Issuer  Funding 1 Security  Trustee  pursuant to the First Issuer Deed of
       Charge in place of State Street and U.S. Bank in their  respective  roles
       as First Issuer Funding 1 Security Trustee;

4.     assents to and approves the  appointment of The Bank of New York as First
       Issuer  Funding 1 Security  Trustee  pursuant to the First Issuer Deed of
       Charge in place of State Street and U.S. Bank;

5.     assents to and approves the  appointment of The Bank of New York as First
       Issuer Note  Trustee  pursuant to the First Issuer Trust Deed in place of
       State Street and U.S. Bank; and

6.     authorises,  directs and requests State Street, U.S. Bank and The Bank of
       New York, in order to give effect to the terms of this Resolution, to (i)
       enter into deeds  supplemental to the Funding 1 Deed of Charge, the First
       Issuer  Deed of Charge  and the First  Issuer  Trust Deed in the forms or
       substantially  in the forms of the  respective  drafts  produced  to this
       Meeting and for the  purposes of  identification  signed by the  Chairman
       thereof  with such  amendments  (if


                                       9



       any) thereto as State Street and U.S. Bank shall require or agree to; and
       (ii) agree to and concur in and to exercise  and do all such other deeds,
       instruments,  acts and things as may be  necessary  or desirable to carry
       out and give effect to this Extraordinary Resolution."

            EXTRAORDINARY RESOLUTION OF THE SECOND ISSUER NOTEHOLDERS

                            EXTRAORDINARY RESOLUTION

"THAT this single  Meeting of the holders of those of the [Class A Second Issuer
Notes/Class  B Second  Issuer  Notes/Class C Second Issuer Notes] (as defined in
the Second Issuer Master  Definitions  and  Construction  Schedule dated 5 March
2003) presently outstanding hereby:

1.     acknowledges  that State Street Bank and Trust Company (STATE STREET) and
       U.S.  Bank  National  Association  (U.S.  BANK) have  notified  Permanent
       Financing No. 2 PLC (the SECOND ISSUER) of their intention to resign from
       their  respective roles as (a) Funding 1 Security Trustee pursuant to the
       Funding 1 Deed of Charge (as defined  below) and the Deed of Accession to
       the Funding 1 Deed of Charge  dated 6 March 2003  between,  inter  alios,
       Permanent  Funding (No. 1) Limited and U.S. Bank; (b) in the case of U.S.
       Bank only,  Second  Issuer  Funding 1 Security  Trustee  pursuant  to the
       Second Issuer Deed of Charge (as defined  below);  and (c) in the case of
       U.S. Bank only,  Second Issuer Note Trustee pursuant to the Second Issuer
       Trust Deed (as  defined  below),  in each case,  with  effect from 1 July
       2003;

2.     instructs  U.S. Bank in its capacity as Second Issuer  Funding 1 Security
       Trustee  under the Second  Issuer Deed of Charge  dated 6 March 2003 (the
       SECOND ISSUER DEED OF CHARGE) between, inter alios, the Second Issuer and
       U.S.  Bank to concur in and  approve the  appointment  of The Bank of New
       York as  Funding 1 Security  Trustee  pursuant  to the  Funding 1 Deed of
       Charge dated 14 June 2002 (the FUNDING 1 DEED OF CHARGE)  between,  inter
       alios,  Permanent  Funding  (No. 1) Limited and State  Street in place of
       State  Street  and U.S.  Bank in their  respective  roles  as  Funding  1
       Security Trustee;

3.     instructs  U.S.  Bank in its capacity as Second Issuer Note Trustee under
       the Second  Issuer Trust Deed dated 6 March 2003 (the SECOND ISSUER TRUST
       DEED)  between the Second  Issuer and U.S.  Bank to concur in and approve
       the  appointment  of The  Bank of New York as  Second  Issuer  Funding  1
       Security Trustee pursuant to the Second Issuer Deed of Charge in place of
       U.S. Bank in its role as Second Issuer Funding 1 Security Trustee;

4.     assents to and approves the appointment of The Bank of New York as Second
       Issuer Funding 1 Security  Trustee  pursuant to the Second Issuer Deed of
       Charge in place of U.S. Bank;

5.     assents to and approves the appointment of The Bank of New York as Second
       Issuer Note Trustee  pursuant to the Second Issuer Trust Deed in place of
       U.S. Bank; and

6.     authorises,  directs and requests State Street, U.S. Bank and The Bank of
       New York, in order to give effect to the terms of this Resolution, to (i)
       enter into deeds supplemental to the Funding 1 Deed of Charge, the Second
       Issuer  Deed of Charge and the Second  Issuer  Trust Deed in the forms or
       substantially  in the forms of the  respective  drafts  produced  to this
       Meeting and for the  purposes of  identification  signed by the  Chairman
       thereof  with such


                                       10



       amendments  (if any) thereto as State Street and U.S.  Bank shall require
       or agree to; and (ii) agree to and concur in and to  exercise  and do all
       such other  deeds,  instruments,  acts and things as may be  necessary or
       desirable to carry out and give effect to this Extraordinary Resolution."


                                       11



FUNDING 1

EXECUTED as a DEED by                                   )
PERMANENT FUNDING (NO. 1)                               )
LIMITED acting by two                                   )
Directors/a Director and the Secretary:                 )


                                          Director               Xxxxx Xxxxxxxxx

                                          Director/Secretary     Xxxxxx Xxxxx

FIRST ISSUER

EXECUTED as a DEED by                                   )
PERMANENT FINANCING (NO. 1) PLC                         )
acting by two Directors/a Director and the              )
Secretary:                                              )


                                          Director               Xxxxx Xxxxxxxxx

                                          Director/Secretary     Xxxxxx Xxxxx

SECOND ISSUER

EXECUTED as a DEED by                                   )
PERMANENT FINANCING (NO. 2) PLC                         )
acting by two Directors/a Director and the              )
Secretary:                                              )


                                          Director               Xxxxx Xxxxxxxxx

                                          Director/Secretary     Xxxxxx Xxxxx


                                       12



SELLER

EXECUTED as a DEED by                               )          X X Xxxxxxx
HALIFAX PLC                                         )
IN ITS CAPACITY AS SELLER                           )
acting by its attorney in the presence of:          )

Witness:

Name:                                         X Xxxx

Address:                                      Halifax Xxx, Xxxxxxx Xxxx, Xxxxxxx

CASH MANAGER

EXECUTED as a DEED by                               )          X X Xxxxxxx
HALIFAX PLC                                         )
IN ITS CAPACITY AS CASH MANAGER                     )
acting by its attorney in the presence of:          )

Witness:

Name:                                         X Xxxx

Address:                                      Halifax Xxx, Xxxxxxx Xxxx, Xxxxxxx

ACCOUNT BANK

EXECUTED as a DEED by                               )
THE GOVERNOR AND COMPANY OF                         )
THE BANK OF SCOTLAND                                )
IN ITS CAPACITY AS ACCOUNT BANK                     )
acting by two Directors/a Director and the          )
Secretary:                                          )


                                           Director                  X X XxXxxxx

                                           Director/Secretary        X Xxxxxxxx


                                       13



FUNDING 1 SWAP PROVIDER

EXECUTED as a DEED by                               )          X X Xxxxxxx
HALIFAX PLC                                         )
IN ITS CAPACITY AS FUNDING 1 SWAP PROVIDER          )
acting by its attorney in the presence of:          )

Witness:

Name:                                         Xxxx Xxxxx

Address:                                      Halifax Xxx, Xxxxxxx Xxxx, Xxxxxxx

FUNDING 1 GIC PROVIDER

EXECUTED as a DEED by                               )
THE GOVERNOR AND COMPANY OF                         )
THE BANK OF SCOTLAND                                )
IN ITS CAPACITY AS FUNDING 1 GIC PROVIDER           )
acting by two Directors/a Director and the          )
Secretary                                           )

                                            Director                 X X XxXxxxx

                                            Director/Secretary       X Xxxxxxxx

FUNDING 1 CORPORATE SERVICES PROVIDER

EXECUTED as a DEED by                               )
STRUCTURED FINANCE                                  )
MANAGEMENT LIMITED                                  )
acting by two Directors/a Director and the          )
Secretary:                                          )


                                        Director                Xxxxx Xxxxxxxxx

                                        Director/Secretary      Xxxxxx Xxxxx


                                       14



START-UP LOAN PROVIDER

EXECUTED as a DEED by                               )          X X Xxxxxxx
HALIFAX PLC                                         )
IN ITS CAPACITY AS                                  )
START-UP LOAN PROVIDER                              )
acting by its attorney in the presence of:          )

Witness:

Name:                                         Xxxx Xxxxx

Address:                                      Halifax Xxx, Xxxxxxx Xxxx, Xxxxxxx

FUNDING 1 LIQUIDITY FACILITY PROVIDER

EXECUTED as a DEED by                               ) X X Xxxxxx
JPMORGAN CHASE BANK                                 )
acting by its attorney in the presence of:          )

Witness:

Name:                 Xxxx Xxxxxx

Address:              000 Xxxxxx Xxxx
                      Xxxxxx
                      XX0X 0XX

RETIRING CO-FUNDING 1 SECURITY TRUSTEE

EXECUTED as a DEED by                               )     Xxxxx Xxxxxx
STATE STREET BANK AND                               )
TRUST COMPANY                                       )
acting by its authorised signatory:                 )


                                    Authorised Signatory


                                       15



RETIRING CO-FUNDING 1 SECURITY TRUSTEE

EXECUTED and DELIVERED as a DEED by                 )     Xxxxx Xxxxxx
U.S. BANK NATIONAL ASSOCIATION                      )
acting by its authorised signatory:                 )


                                    Authorised Signatory

NEW FUNDING 1 SECURITY TRUSTEE

EXECUTED and DELIVERED as a DEED by                 )     Xxxx Xxxxxxx
THE BANK OF NEW YORK                                )
acting by its attorney in the presence of:          )

Witness:

Name:                                                Xxxxxx Xxxxxxxx

Address:                                             Xxx Xxxxxx Xxxxxx
                                                     Xxxxxx X00 0XX


                                       16


                                                                  EXECUTION COPY

                      SIXTH DEED OF ACCESSION TO FUNDING 1

                                 DEED OF CHARGE

                             DATED 23RD MARCH, 2005

                        PERMANENT FUNDING (NO. 1) LIMITED

                                       AND

                         PERMANENT FINANCING (NO. 1) PLC

                                       AND

                         PERMANENT FINANCING (NO. 2) PLC

                                       AND

                         PERMANENT FINANCING (NO. 3) PLC

                                       AND

                         PERMANENT FINANCING (NO. 4) PLC

                                       AND

                         PERMANENT FINANCING (NO. 5) PLC

                                       AND

                         PERMANENT FINANCING (NO. 6) PLC

                                       AND

                         PERMANENT FINANCING (NO. 7) PLC

                                       AND

                              THE BANK OF NEW YORK

                                       AND

                                   HALIFAX PLC

                                       AND

                THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND

                                       AND

                            JPMORGAN CHASE BANK, N.A.

                                       AND

                      STRUCTURED FINANCE MANAGEMENT LIMITED



                                XXXXX & XXXXX LLP

                                     LONDON



                                    CONTENTS

CLAUSE                                                                      PAGE

1.       Interpretation........................................................3
2.       Representations and Warranties........................................3
3.       Accession.............................................................4
4.       Scope of the Funding 1 Deed of Charge.................................4
5.       Amendment to the Funding 1 Priority of Payments.......................4
6.       [Reserved]............................................................5
7.       Application...........................................................5
8.       Notices and Demands...................................................5
9.       Choice of Law.........................................................6
10.      Counterparts..........................................................6
11.      Third Party Rights....................................................6
12.      Submission to Jurisdiction............................................6
         Signatories...........................................................7

APPENDIX

Amended and Restated Funding Priority of Payments.............................12
         Funding 1 Pre-Enforcement Revenue Priority of Payments...............12
         Funding 1 Principal Priorities of Payments...........................18
         Funding 1 Post-Enforcement Priority of Payments......................27





THIS SIXTH  DEED OF  ACCESSION  TO THE  FUNDING 1 DEED OF CHARGE is made on 23rd
March, 2005

       BETWEEN:

(1)    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 Xxxxxxxxx House,  Guildhall Yard, London EC2V 5AE
       (FUNDING 1);

(2)    PERMANENT  FINANCING (NO. 1) PLC (registered  number  4416192),  a public
       limited company  incorporated  under the laws of England and Wales, whose
       registered office is at Xxxxxxxxx House,  Guildhall Yard, London EC2V 5AE
       (the FIRST ISSUER);

(3)    PERMANENT  FINANCING (NO. 2) PLC (registered  number  4623188),  a public
       limited company  incorporated  under the laws of England and Wales, whose
       registered office is at Xxxxxxxxx House,  Guildhall Yard, London EC2V 5AE
       (the SECOND ISSUER);

(4)    PERMANENT  FINANCING (NO. 3) PLC (registered  number  4907355),  a public
       limited company  incorporated  under the laws of England and Wales, whose
       registered office is at Xxxxxxxxx House,  Guildhall Yard, London EC2V 5AE
       (the THIRD ISSUER);

(5)    PERMANENT  FINANCING (NO. 4) PLC (registered  number  4988201),  a public
       limited company  incorporated  under the laws of England and Wales, whose
       registered office is at Xxxxxxxxx House,  Guildhall Yard, London EC2V 5AE
       (the FOURTH ISSUER);

(6)    PERMANENT  FINANCING (NO. 5) PLC (registered  number  5114399),  a public
       limited company  incorporated  under the laws of England and Wales, whose
       registered office is at Xxxxxxxxx House,  Guildhall Yard, London EC2V 5AE
       (the FIFTH ISSUER);

(7)    PERMANENT FINANCING (NO. 6) PLC  (registered  number  5232464),  a public
       limited company  incorporated  under the laws of England and Wales, whose
       registered office is at Xxxxxxxxx House,  Guildhall Yard, London EC2V 5AE
       (the SIXTH ISSUER);

(8)    THE BANK OF NEW YORK,  whose  principal  office is at Xxx Xxxxxx  Xxxxxx,
       Xxxxxx X00 0XX in its capacity as Security  Trustee;

(9)    HALIFAX  PLC  (registered  number  2367076),  a  public  limited  company
       incorporated under the laws of England and Wales, whose registered office
       is at  Trinity  Road,  Halifax,  West  Yorkshire  HX1 2RG,  acting in its
       capacities  as Cash  Manager,  Seller,  Funding  1 Swap  Provider,  First
       Start-up  Loan  Provider  (the  FIRST  START-UP  LOAN  PROVIDER),  Second
       Start-up  Loan  Provider  (the  SECOND  START-UP  LOAN  PROVIDER),  Third
       Start-up  Loan  Provider  (the  THIRD  START-UP  LOAN  PROVIDER),  Fourth
       Start-up  Loan  Provider  (the  FOURTH  START-UP  LOAN  PROVIDER),  Fifth
       Start-up Loan Provider (the FIFTH START-UP LOAN PROVIDER), Sixth Start-up
       Loan Provider (the SIXTH  START-UP  LOAN  PROVIDER) and Seventh  Start-up
       Loan Provider (the SEVENTH START-UP LOAN PROVIDER);

(10)   THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND,  established  by an Act
       of the  Parliament  of Scotland in 1695, as amended,  acting  through its
       office  situated at 000 Xxxxxxxxxx  Xxxxxx,  Xxxxx XX0 0XX (acting in its
       capacities as ACCOUNT BANK and FUNDING 1 GIC PROVIDER);

(11)   JPMORGAN CHASE BANK,  N.A.  acting through its office at 000 Xxxxxx Xxxx,
       Xxxxxx XX0X 0XX (acting in its  capacity as FUNDING 1 LIQUIDITY  FACILITY
       PROVIDER);


                                        1



(12)   STRUCTURED  FINANCE MANAGEMENT  LIMITED  (registered  number 3853947),  a
       private limited company incorporated under the laws of England and Wales,
       whose  registered  office is at Xxxxxxxxx House,  Guildhall Yard,  London
       EC2V 5AE (acting in its  capacity  as the  FUNDING 1  CORPORATE  SERVICES
       Provider); and

(13)   PERMANENT  FINANCING (NO. 7) PLC (registered  number  5330776),  a public
       limited company  incorporated  under the laws of England and Wales, whose
       registered office is at Xxxxxxxxx House,  Guildhall Yard, London EC2V 5AE
       (the SEVENTH ISSUER).

       WHEREAS:

(A)    Pursuant to the terms of an intercompany loan agreement dated 23rd March,
       2005 made between  Funding 1 and the Seventh  Issuer (the SEVENTH  ISSUER
       INTERCOMPANY  LOAN AGREEMENT),  the Seventh Issuer has agreed to make the
       Seventh  Issuer Term  Advances  available  to Funding 1 and Funding 1 has
       agreed to secure its  obligations  and other  liabilities  to the Seventh
       Issuer thereunder pursuant to the Funding 1 Deed of Charge.

(B)    Pursuant to the terms of a start-up loan agreement  dated 23rd March 2005
       made  between  Funding 1 and the  Seventh  Start-up  Loan  Provider  (the
       SEVENTH START-UP LOAN AGREEMENT),  the Seventh Start-up Loan Provider has
       agreed to make a subordinated  loan to Funding 1 and Funding 1 has agreed
       to secure its obligations and other  liabilities to the Seventh  Start-up
       Loan Provider thereunder pursuant to the Funding 1 Deed of Charge.

(C)    On the  First  Issuer  Closing  Date,  Funding 1 agreed  to  provide  the
       Security  Trustee  with the  benefit  of the  security  described  in the
       Funding 1 Deed of Charge to secure  Funding 1's  obligations  to the then
       Funding 1 Secured  Creditors.  The terms of the  Funding 1 Deed of Charge
       permit  Funding 1 to secure its  obligations  to a New  Funding 1 Secured
       Creditor thereunder.

(D)    On the Second  Issuer  Closing  Date,  the  Second  Issuer and the Second
       Start-up Loan Provider acceded to the Funding 1 Deed of Charge,  pursuant
       to a  deed  of  accession,  made  between  the  then  Funding  1  Secured
       Creditors,  the Second Issuer and the Second  Start-up Loan Provider (the
       FIRST DEED OF ACCESSION).

(E)    On the Third Issuer Closing Date, the Third Issuer and the Third Start-up
       Loan Provider acceded to the Funding 1 Deed of Charge, pursuant to a deed
       of  accession,  made  between the then Funding 1 Secured  Creditors,  the
       Third Issuer and the Third  Start-up  Loan  Provider  (the SECOND DEED OF
       ACCESSION).

(F)    On the Fourth  Issuer  Closing  Date,  the  Fourth  Issuer and the Fourth
       Start-up Loan Provider acceded to the Funding 1 Deed of Charge,  pursuant
       to a  deed  of  accession,  made  between  the  then  Funding  1  Secured
       Creditors,  the Fourth Issuer and the Fourth  Start-up Loan Provider (the
       THIRD DEED OF ACCESSION).

(G)    On the  Fourth  Issuer  Closing  Date,  Funding 1 agreed to  provide  the
       Security Trustee with the benefit of the security described in the Second
       Supplemental  Funding 1 Deed of Charge to secure Funding 1's  obligations
       to the  then  Funding  1  Secured  Creditors.  The  terms  of the  Second
       Supplemental Funding 1 Deed of Charge also permit Funding 1 to secure its
       obligations to a New Funding 1 Secured Creditor thereunder.

(H)    On the Fifth Issuer Closing Date, the Fifth Issuer and the Fifth Start-up
       Loan Provider acceded to the Funding 1 Deed of Charge, pursuant to a deed
       of  accession,  made  between the then Funding 1 Secured  Creditors,  the
       Fifth Issuer and the Fifth  Start-up  Loan  Provider  (the FOURTH DEED OF
       ACCESSION).


                                        2



(I)    On the Sixth Issuer Closing Date, the Sixth Issuer and the Sixth Start-up
       Loan Provider acceded to the Funding 1 Deed of Charge, pursuant to a deed
       of  accession,  made  between the then Funding 1 Secured  Creditors,  the
       Sixth  Issuer and the Sixth  Start-up  Loan  Provider  (the FIFTH DEED OF
       ACCESSION).

(J)    The Seventh Issuer and the Seventh  Start-up Loan Provider have agreed to
       enter into this Deed to accede to the provisions of the Funding 1 Deed of
       Charge.

(K)    The Funding 1 Secured  Creditors  have agreed to enter into this Deed to,
       among other things, acknowledge and agree to such accession and to permit
       any  consequential  changes to the Funding 1 Priority of Payments set out
       in PART 1,  PART 2 and  PART 3 of  SCHEDULE  3 of the  Funding  1 Deed of
       Charge as are required and any other amendment as may be required to give
       effect to this Accession Undertaking.

       NOW THIS DEED WITNESSES as follows:

1.     INTERPRETATION

1.1    The amended and restated  master  definitions and  construction  schedule
       signed by, amongst others, the parties to this Deed and dated 23rd March,
       2005 (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) is expressly  and  specifically
       incorporated into this Deed 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 Deed,  including the Recitals hereto and this Deed shall
       be construed in accordance with the interpretation  provisions set out in
       CLAUSE 2 of the Master Definitions and Construction Schedule.

1.2    For the avoidance of doubt, references in this Deed to the Funding 1 Deed
       of Charge  shall  include,  where the  context  so  permits,  the  Second
       Supplemental Funding 1 Deed of Charge.

2.     REPRESENTATIONS AND WARRANTIES

2.1    The Seventh Issuer hereby represents and warrants to the Security Trustee
       and each of the Funding 1 Secured  Creditors in respect of itself that as
       of the date of this Deed:

       (a)    pursuant  to the terms of the  Seventh  Issuer  Intercompany  Loan
              Agreement,  Funding 1 has agreed to pay to the Seventh  Issuer the
              amounts set out in the Seventh Issuer Intercompany Loan Agreement;
              and

       (b)    the Seventh Issuer  Intercompany Loan Agreement expressly provides
              that all amounts due from Funding 1  thereunder  are to be secured
              by the Funding 1 Deed of Charge.

2.2    The Seventh Start-up Loan Provider hereby  represents and warrants to the
       Security  Trustee and each of the Funding 1 Secured  Creditors in respect
       of itself that as of the date of this Deed:

       (a)    pursuant  to the terms of the  Seventh  Start-up  Loan  Agreement,
              Funding 1 has agreed to pay to the Seventh  Start-up Loan Provider
              the amounts set out in the Seventh Start-up Loan Agreement; and


                                        3



       (b)    the Seventh  Start-up Loan Agreement  expressly  provides that all
              amounts  due from  Funding 1  thereunder  are to be secured by the
              Funding 1 Deed of Charge.

2.3    Funding 1 hereby represents and warrants to the Security Trustee and each
       of the Funding 1 Secured  Creditors that as at the date of this Deed, the
       conditions to incurring further secured Financial Indebtedness set out in
       CLAUSE 2.2 (New  Intercompany  Loan Agreements) of the Intercompany  Loan
       Terms and Conditions are satisfied.

3.     ACCESSION

       In  consideration  of the Seventh  Issuer and the Seventh  Start-up  Loan
       Provider being  accepted as Funding 1 Secured  Creditors for the purposes
       of the Funding 1 Deed of Charge by the  parties  thereto as from the date
       of this Deed,  each of the Seventh  Issuer and the Seventh  Start-up Loan
       Provider:

       (a)    confirms  that as from the date of this  Deed,  it intends to be a
              party to the  Funding  1 Deed of  Charge  as a  Funding  1 Secured
              Creditor;

       (b)    undertakes to comply with and be bound by all of the provisions of
              the Master Definitions and Construction  Schedule (as the same may
              be further amended,  varied or restated from time to time) and the
              Funding 1 Deed of Charge  in its  capacity  as a Funding 1 Secured
              Creditor, as if it had been an original party thereto;

       (c)    undertakes  to  perform,  comply  with  and be bound by all of the
              provisions  of the  Funding 1 Deed of Charge in its  capacity as a
              Funding 1 Secured  Creditor,  as if it had been an original  party
              thereto as provided in CLAUSE 31.8  (Funding 1 Secured  Creditors)
              (including without limitation CLAUSES 8.4 (Priorities of Payment -
              After Service of an Intercompany  Loan Acceleration  Notice),  8.5
              (Application   of  Monies   Received   After   Intercompany   Loan
              Acceleration  Notice) and 9.2 (No Enforcement by Funding 1 Secured
              Creditors); and

       (d)    agrees that the Security  Trustee shall be the Security Trustee of
              the Funding 1 Deed of Charge for all  Funding 1 Secured  Creditors
              upon and  subject  to the terms  set out in the  Funding 1 Deed of
              Charge.

4.     SCOPE OF THE FUNDING 1 DEED OF CHARGE

       Funding 1, the Seventh Issuer, the Seventh Start-up Loan Provider and the
       Security  Trustee  hereby  agree  that for  relevant  purposes  under the
       Funding 1 Deed of Charge  and the  Master  Definitions  and  Construction
       Schedule:

       (a)    the Seventh Issuer Intercompany Agreement and the Seventh Start-up
              Loan Agreement shall be treated as Funding 1 Agreements; and

       (b)    the Seventh Issuer and the Seventh Start-up Loan Provider shall be
              treated as Funding 1 Secured  Creditors.

5.     AMENDMENT TO THE FUNDING 1 PRIORITY OF PAYMENTS

       The Funding 1 Secured  Creditors agree to amend and restate the Funding 1
       Priority of  Payments  set out in PART 1, PART 2 and PART 3 of SCHEDULE 3
       of the Funding 1 Deed of Charge in accordance with APPENDIX 1 hereto.


                                        4


6.     [RESERVED]

7.     APPLICATION

       Prior to and following  enforcement of the Funding 1 Security all amounts
       at any time held by Funding 1, the Cash Manager or the  Security  Trustee
       in respect of the security  created  under this Deed shall be held and/or
       applied by such person  subject to and in  accordance  with the  relevant
       provisions of the Funding 1 Deed of Charge.

8.     NOTICES AND DEMANDS

       Any notice or  communication  under or in connection  with this Deed, the
       Funding 1 Deed of  Charge  or the  Master  Definitions  and  Construction
       Schedule  shall be given in the manner and at the times set out in CLAUSE
       30 (Notices and Demands) of the Funding 1 Deed of Charge to the addresses
       given in this CLAUSE 8 or at such other address as the recipient may have
       notified to the other parties hereto and/or thereto in writing.

       The address referred to in this CLAUSE 8 for the Seventh Issuer is:

                                  Permanent Financing (No. 7) PLC
                                  Xxxxxxxxx House
                                  Guildhall Yard
                                  London
                                  EC2V 5AE

       Facsimile:                 x00 (0) 00 0000 0000
       For the attention of:      The Director

       with a copy to:            HBOS Treasury Services plc
                                  00 Xxx Xxxxx Xxxxxx
                                  Xxxxxx
                                  XX0X 0XX

       Facsimile:                 x00 (0) 00 0000 0000

       For the attention of:      Head of Mortgage Securitisation and Covered
                                  Bonds
       The address  referred to in this  CLAUSE 8 for the  Seventh  Start-up
       Loan Provider is:

                                  Halifax plc
                                  Trinity Road (LP/3/3/SEC)
                                  Halifax
                                  West Yorkshire
                                  HX1 2RG

       Facsimile:                 x00 (0) 000 000 0000

       For the attention of:      the Head of Mortgage Securitisation

       with a copy to:            HBOS Treasury Services plc
                                  00 Xxx Xxxxx Xxxxxx
                                  Xxxxxx
                                  XX0X 0XX

       Facsimile:                 x00 (0) 00 0000 0000


                                        5



       For the attention of:      the Head of Mortgage Securitisation and
                                  Covered Bonds

       The address referred to in this CLAUSE 8 for the Security Trustee is:

                                  The Bank of New York
                                  One Canada Xxxxxx
                                  Xxxxxx X00 0XX

       Facsimile:                 +(44) (0) 00 0000 0000/6399
       For the attention of:      Global Structured Finance - Corporate Trust

       or such other address and/or numbers as the Seventh  Issuer,  the Seventh
       Start-up Loan Provider or the Security  Trustee may notify to the parties
       to the  Funding  1 Deed of  Charge  in  accordance  with  the  provisions
       thereof.

9.     CHOICE OF LAW

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

10.    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.

11.    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.

12.    SUBMISSION TO JURISDICTION

       Each party to this Deed hereby  irrevocably  submits to the non-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 an inconvenient  forum for the maintenance or
       hearing of such action or proceeding.

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


                                        6



                                   SIGNATORIES

FUNDING 1

EXECUTED as a DEED by                    )      ................................
PERMANENT FUNDING (NO. 1)                )
LIMITED acting by its attorney           )
in the presence of                       )

Witness's Signature:  ....................

Name:                 ....................

Address:              ....................





FIRST ISSUER

EXECUTED as a DEED by                    )      ................................
PERMANENT FINANCING (NO. 1)              )
PLC acting by its attorney               )
in the presence of                       )

Witness's Signature:  ...................

Name:                 ...................

Address:              ...................





SECOND ISSUER

EXECUTED as a DEED by                    )      ................................
PERMANENT FINANCING (NO. 2)              )
PLC acting by its attorney               )
in the presence of                       )

Witness's Signature:  ...................

Name:                 ...................

Address:              ...................


                                        7



THIRD ISSUER

EXECUTED as a DEED by                    )      ................................
PERMANENT FINANCING (NO. 3)              )
PLC acting by its attorney               )
in the presence of                       )

Witness's Signature:  ...................

Name:                 ...................

Address:              ...................



FOURTH ISSUER

EXECUTED as a DEED by                    )      ................................
PERMANENT FINANCING (NO. 4)              )
PLC acting by its attorney               )
in the presence of                       )

Witness's Signature:  ...................

Name:                 ...................

Address:              ...................




FIFTH ISSUER

EXECUTED as a DEED by                    )      ................................
PERMANENT FINANCING (NO. 5)              )
PLC acting by its attorney               )
in the presence of                       )

Witness's Signature:  ...................

Name:                 ...................

Address:              ...................


                                       8





SIXTH ISSUER

EXECUTED as a DEED by                               )      .....................
PERMANENT FINANCING (NO. 6)                         )
PLC acting by its attorney                          )
in the presence of                                  )

Witness's Signature:  ..................

Name:                 ..................

Address:              ..................

HALIFAX

EXECUTED as a DEED by                                )
HALIFAX PLC                                          )
IN ITS CAPACITIES AS SELLER, CASH MANAGER            )
FUNDING 1 SWAP PROVIDER, FIRST START-UP              )
LOAN PROVIDER, SECOND START-UP LOAN                  )
PROVIDER, THIRD START-UP LOAN PROVIDER,              )
FOURTH START-UP LOAN PROVIDER,                       )
FIFTH START-UP LOAN PROVIDER,                        )
SIXTH START-UP LOAN PROVIDER AND                     )
SEVENTH START-UP LOAN PROVIDER                       )
acting by its attorney                               )
in the presence of                                   )      ....................

Witness's Signature:   ....................

Name:                  ....................

Address:               ....................



THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND

EXECUTED as a DEED by                                )      ....................
THE GOVERNOR AND COMPANY OF                          )
THE BANK OF SCOTLAND                                 )
IN ITS CAPACITIES AS ACCOUNT BANK                    )
AND FUNDING 1 GIC PROVIDER                           )
acting by its attorney                               )
in the presence of                                   )

Witness's Signature  ......................

Name:                ......................

Address:             ......................


                                       9


FUNDING 1 CORPORATE SERVICES PROVIDER

EXECUTED as a DEED by                   )      ................................
STRUCTURED FINANCE                      )
MANAGEMENT LIMITED                      )
in its capacity as                      )
CORPORATE SERVICES PROVIDER             )
acting by its attorney                  )
in the presence of:                     )
                                            (as attorney for STRUCTURED FINANCE
                                            MANAGEMENT LIMITED)

Witness's Signature:  ....................

Name:                 ....................

Address:              ....................



FUNDING 1 LIQUIDITY FACILITY PROVIDER

EXECUTED as a DEED by                   )
JPMORGAN CHASE BANK, N.A.               )
acting by its attorney                  )
in the presence of                      )      ................................

Witness's Signature:  ....................

Name:                 ....................

Address:              ....................



SECURITY TRUSTEE

EXECUTED as a DEED by                   )
THE BANK OF NEW YORK                    )
acting by its attorney                  )
in the presence of                      )      ................................

Witness's Signature:  ....................

Name:                 ....................

Address:              ....................



SEVENTH ISSUER

EXECUTED as a DEED by                    )      ...............................
PERMANENT FINANCING (NO. 7)              )
PLC acting by its attorney               )
in the presence of                       )

Witness's Signature:  ....................

Name:                 ....................

Address:              ....................


                                       10





                                   APPENDIX 1

                AMENDED AND RESTATED FUNDING PRIORITY OF PAYMENTS

                                   SCHEDULE 3

                         FUNDING 1 PRIORITY OF PAYMENTS

                                     PART 1

             FUNDING 1 PRE-ENFORCEMENT REVENUE PRIORITY OF PAYMENTS

1.     CALCULATION OF FUNDING 1 AVAILABLE REVENUE RECEIPTS

1.1    On the day falling  four  Business  Days prior to each Funding 1 Interest
       Payment Date, the Cash Manager will calculate whether Funding 1 Available
       Revenue  Receipts  will be  sufficient  on the next  Funding  1  Interest
       Payment  Date to pay items (a) to (f),  (h), (j) and (l) in the Funding 1
       Pre-Enforcement Revenue Priority of Payments.

1.2    Subject to paragraph 1.3 below, if there would be insufficient  Funding 1
       Available  Revenue  Receipts on the relevant  Funding 1 Interest  Payment
       Date  to pay  items  (a) to  (f),  (h),  (j)  and  (l) of the  Funding  1
       Pre-Enforcement Revenue Priority of Payments, then Funding 1 (or the Cash
       Manager on its behalf)  shall pay or provide for that deficit by applying
       amounts then standing to the credit of (a) first, the Funding 1 Principal
       Ledger, if any, and (b) second, any amounts standing to the credit of the
       Cash  Accumulation  Ledger after  deducting  the amounts  standing to the
       credit of the Funding 1 Principal  Xxxxxx (if any) from such ledger,  and
       the  Cash  Manager  shall  make a  corresponding  entry  in the  relevant
       Principal Deficiency Ledger.

1.3    Funding 1 Principal  Receipts may not be used to pay interest on any Term
       Advance if and to the  extent  that would  result in a  deficiency  being
       recorded  or  an  existing  deficiency  being  increased  on a  Principal
       Deficiency Sub-Ledger relating to a higher ranking Term Advance.

1.4    If there are no (or  insufficient)  amounts standing to the credit of the
       Funding 1 Principal Ledger and the Cash  Accumulation  Ledger to cure the
       insufficiency  described  in paragraph  1.2 above (an "UNCURED  FUNDING 1
       REVENUE  SHORTFALL"),   then  on  the  London  Business  Day  immediately
       preceding the relevant  Funding 1 Interest  Payment Date the Cash Manager
       will (i) direct Funding 1 to request a drawing  pursuant to CLAUSE 5.1 of
       the Funding 1 Liquidity  Facility  Agreement to apply towards the Uncured
       Funding  1 Revenue  Shortfall  to apply  towards  the  Uncured  Funding 1
       Revenue  Shortfall  in  accordance  with the  Funding  1  Pre-Enforcement
       Revenue Priority of Payments.

2.     DISTRIBUTION OF FUNDING 1 AVAILABLE REVENUE RECEIPTS PRIOR TO THE SERVICE
       OF AN INTERCOMPANY LOAN ACCELERATION NOTICE ON FUNDING 1

2.1    This  section  sets out the order of priority of payments by Funding 1 as
       at the  Closing  Date.  If Funding 1 enters  into New  Intercompany  Loan
       Agreements, then this order of priority may change pursuant to CLAUSE 7.5
       of the Funding 1 Deed of Charge.

2.2    Except for amounts  due to third  parties by an Issuer  and/or  Funding 1
       under  paragraph  (a) below or amounts due to the Account  Bank and/or an
       Issuer  Account  Bank  which  shall be paid when due,  on each  Funding 1
       Interest  Payment  Date  prior to the  service  of an  Intercompany  Loan
       Acceleration  Notice on  Funding 1, the Cash  Manager  will apply (i) the
       Funding 1 Available Revenue Receipts, (ii) if Funding 1 Available Revenue
       Receipts  are


                                       11



       insufficient to pay items (a) to (f), (h), (j) and (l),  amounts standing
       to the credit of the Funding 1 Principal Ledger and the Cash Accumulation
       Ledger and (iii), if there is an Uncured Revenue  Shortfall on such date,
       drawings under the Funding 1 Liquidity  Facility  Agreement to the extent
       necessary to pay the items in items (a) to (f),  (h), (j) and (l), in the
       following order of priority (being the FUNDING 1 PRE-ENFORCEMENT  REVENUE
       PRIORITY OF Payments):

       firstly,  in or  towards  satisfaction  of pro rata and pari  passu,  the
       amounts due to:

              the Security  Trustee  (together  with  interest and any amount in
              respect of VAT on those  amounts)  and to provide  for any amounts
              due or to become due in the immediately  following Interest Period
              to the Security Trustee under the Funding 1 Deed of Charge;

              pro rata and pari passu, to pay amounts due to the First Issuer in
              respect of the First Issuer's  obligations  specified in items (a)
              to (c)  inclusive  of the  First  Issuer  Pre-Enforcement  Revenue
              Priority of Payments  or, as the case may be, items (a) and (b) of
              the First Issuer Post-Enforcement Priority of Payments;

              pro rata and pari passu,  to pay amounts due to the Second  Issuer
              in respect of the Second Issuer's  obligations  specified in items
              (a) to (c) inclusive of the Second Issuer Pre-Enforcement  Revenue
              Priority of Payments  or, as the case may be, items (a) and (b) of
              the Second Issuer Post-Enforcement Priority of Payments;

              pro rata and pari passu, to pay amounts due to the Third Issuer in
              respect of the Third Issuer's  obligations  specified in items (a)
              to (c)  inclusive  of the  Third  Issuer  Pre-Enforcement  Revenue
              Priority of Payments  or, as the case may be, items (a) and (b) of
              the Third Issuer Post-Enforcement Priority of Payments;

              pro rata and pari passu,  to pay amounts due to the Fourth  Issuer
              in respect of the Fourth Issuer's  obligations  specified in items
              (a) to (c) inclusive of the Fourth Issuer Pre-Enforcement  Revenue
              Priority of Payments  or, as the case may be, items (a) and (b) of
              the Fourth Issuer Post-Enforcement Priority of Payments;

              pro rata and pari passu, to pay amounts due to the Fifth Issuer in
              respect of the Fifth Issuer's  obligations  specified in items (a)
              to (c)  inclusive  of the  Fifth  Issuer  Pre-Enforcement  Revenue
              Priority of Payments  or, as the case may be, items (a) and (b) of
              the Fifth Issuer Post-Enforcement Priority of Payments;

              pro rata and pari passu, to pay amounts due to the Sixth Issuer in
              respect of the Sixth Issuer's  obligations  specified in items (a)
              to (c)  inclusive  of the  Sixth  Issuer  Pre-Enforcement  Revenue
              Priority of Payments  or, as the case may be, items (a) and (b) of
              the Sixth Issuer Post-Enforcement Priority of Payments

              pro rata and pari passu,  to pay amounts due to the Seventh Issuer
              in respect of the Seventh Issuer's obligations  specified in items
              (a) to (c) inclusive of the Seventh Issuer Pre-Enforcement Revenue
              Priority of Payments  or, as the case may be, items (a) and (b) of
              the Seventh Issuer Post-Enforcement Priority of Payments;


                                       12




              any third party  creditors of Funding 1 (other than those referred
              to later in this order of priority  of  payments),  which  amounts
              have been  incurred  without  breach by Funding 1 of the Funding 1
              Agreements  (and  for  which  payment  has not been  provided  for
              elsewhere)  and to provide  for any of these  amounts  expected to
              become  due and  payable  in the  immediately  following  Interest
              Period  by  Funding 1 and to pay or  discharge  any  liability  of
              Funding 1 for corporation tax on any chargeable  income or gain of
              Funding 1;

       secondly,  in or towards  satisfaction  of amounts  due to the  Funding 1
       Liquidity  Facility  Provider  under  the  Funding 1  Liquidity  Facility
       Agreement,   together  with  VAT,  if  any,  (except  for  amounts  drawn
       thereunder to repay principal on the Bullet Term Advances,  the Scheduled
       Amortisation  Term  Advances  and any  Funding 1  Liquidity  Subordinated
       Amounts);

       thirdly,  in or towards  satisfaction  of amounts  due and payable to the
       Cash  Manager  under the Cash  Management  Agreement  (together  with any
       amount in respect of VAT on those amounts);

       fourthly,  in or  towards  satisfaction,  pro  rata and  pari  passu,  of
       amounts,  if any,  due and payable to the Account Bank under the terms of
       the Bank  Account  Agreement  and to the  Funding  1  Corporate  Services
       Provider under the Funding 1 Corporate Services Agreement;

       fifthly,  in or  towards  satisfaction  of all  amounts  (if any) due and
       payable to the Funding 1 Swap Provider under the Funding 1 Swap Agreement
       (including termination payments but excluding any Funding 1 Swap Excluded
       Termination Amount);

       sixthly,  in or towards  satisfaction,  pro rata and pari  passu,  of the
       amounts of interest due and payable on the Term AAA Advances;

       seventhly, towards a credit to the AAA Principal Deficiency Sub-Ledger in
       an amount sufficient to eliminate any debit on that ledger;

       eighthly,  in or towards  satisfaction,  pro rata and pari passu,  of the
       amounts of interest due and payable on the Term AA Advances;

       ninthly, towards a credit to the AA Principal Deficiency Sub-Ledger in an
       amount sufficient to eliminate any debit on that ledger;

       tenthly,  in or towards  satisfaction,  pro rata and pari  passu,  of the
       amounts of interest due and payable on the Term A Advances;

       eleventhly,  towards a credit to the A Principal Deficiency Sub-Ledger in
       an amount sufficient to eliminate any debit on that ledger;

       twelfthly,  in or  towards  satisfaction,  pro rata and  pari  passu,  of
       amounts of interest due and payable on the Term BBB Advances;

       thirteenthly, towards a credit to the BBB Principal Deficiency Sub-Ledger
       in an amount sufficient to eliminate any debit on that ledger;

       fourteenthly,  in or  towards  satisfaction,  pro rata  and  pari  passu,
       according to the respective amounts thereof:


                                       13




              any  amounts  due to the  First  Issuer  in  respect  of the First
              Issuer's  obligations (if any) to make a termination  payment to a
              First Issuer Swap  Provider  (but  excluding any First Issuer Swap
              Excluded Termination Amount);

              any  amounts  due to the  Second  Issuer in  respect of the Second
              Issuer's  obligations (if any) to make a termination  payment to a
              Second Issuer Swap Provider (but  excluding any Second Issuer Swap
              Excluded Termination Amount);

              any  amounts  due to the  Third  Issuer  in  respect  of the Third
              Issuer's  obligations (if any) to make a termination  payment to a
              Third Issuer Swap  Provider  (but  excluding any Third Issuer Swap
              Excluded Termination Amount);

              any  amounts  due to the  Fourth  Issuer in  respect of the Fourth
              Issuer's  obligations (if any) to make a termination  payment to a
              Fourth Issuer Swap Provider (but  excluding any Fourth Issuer Swap
              Excluded Termination Amount);

              any  amounts  due to the  Fifth  Issuer  in  respect  of the Fifth
              Issuer's  obligations (if any) to make a termination  payment to a
              Fifth Issuer Swap  Provider  (but  excluding any Fifth Issuer Swap
              Excluded Termination Amount);

              any  amounts  due to the  Sixth  Issuer  in  respect  of the Sixth
              Issuer's  obligations (if any) to make a termination  payment to a
              Sixth Issuer Swap  Provider  (but  excluding any Sixth Issuer Swap
              Excluded Termination Amount); and

              any amounts  due to the  Seventh  Issuer in respect of the Seventh
              Issuer's  obligations (if any) to make a termination  payment to a
              Seventh  Issuer Swap  Provider (but  excluding any Seventh  Issuer
              Swap Excluded Termination Amount);

       fifteenthly,  towards a credit to the General Reserve Ledger in an amount
       up to the General  Reserve Fund  Required  Amount taking into account any
       net  replenishment of the General Reserve Fund on that Funding 1 Interest
       Payment Date from Funding 1 Available Principal Receipts;

       sixteenthly, if a Liquidity Reserve Fund Rating Event has occurred and is
       continuing,  towards  a credit  to the  Liquidity  Reserve  Ledger to the
       extent  the  amount  standing  to the  credit  thereof  is less  than the
       Liquidity  Reserve  Fund  Required  Amount,  taking into  account any net
       replenishment  of the  Liquidity  Reserve  Fund on the Funding 1 Interest
       Payment Day from Funding 1 Available Principal Receipts;

       seventeenthly,  in or towards  satisfaction,  pro rata and pari passu, of
       any amounts due (without double counting) to:

              the First Issuer in respect of the First  Issuer's  obligations to
              make any termination  payment to a First Issuer Swap Provider as a
              result  of a  First  Issuer  Swap  Provider  Excluded  Termination
              Amount;

              the Second Issuer in respect of the Second Issuer's obligations to
              make any termination payment to a Second Issuer Swap Provider as a
              result  of a Second  Issuer  Swap  Provider  Excluded  Termination
              Amount;


                                       14



              the Third Issuer in respect of the Third  Issuer's  obligations to
              make any termination  payment to a Third Issuer Swap Provider as a
              result  of a  Third  Issuer  Swap  Provider  Excluded  Termination
              Amount;

              the Fourth Issuer in respect of the Fourth Issuer's obligations to
              make any termination payment to a Fourth Issuer Swap Provider as a
              result  of a Fourth  Issuer  Swap  Provider  Excluded  Termination
              Amount;

              the Fifth Issuer in respect of the Fifth  Issuer's  obligations to
              make any termination  payment to a Fifth Issuer Swap Provider as a
              result  of a  Fifth  Issuer  Swap  Provider  Excluded  Termination
              Amount;

              the Sixth Issuer in respect of the Sixth  Issuer's  obligations to
              make any termination  payment to a Sixth Issuer Swap Provider as a
              result  of a  Sixth  Issuer  Swap  Provider  Excluded  Termination
              Amount;

              the Seventh Issuer in respect of the Seventh Issuer's  obligations
              to make any termination  payment to a Seventh Issuer Swap Provider
              as a result of a Seventh Issuer Swap Provider Excluded Termination
              Amount;

              the First  Issuer in respect of any other  amounts due and payable
              under  the  First  Issuer  Intercompany  Loan  Agreement  and  not
              otherwise provided for in this order of priorities;

              the Second  Issuer in respect of any other amounts due and payable
              under  the  Second  Issuer  Intercompany  Loan  Agreement  and not
              otherwise provided for in this order of priorities;

              the Third  Issuer in respect of any other  amounts due and payable
              under  the  Third  Issuer  Intercompany  Loan  Agreement  and  not
              otherwise provided for in this order of priorities;

              the Fourth  Issuer in respect of any other amounts due and payable
              under  the  Fourth  Issuer  Intercompany  Loan  Agreement  and not
              otherwise provided for in this order of priorities;

              the Fifth  Issuer in respect of any other  amounts due and payable
              under  the  Fifth  Issuer  Intercompany  Loan  Agreement  and  not
              otherwise provided for in this order of priorities;

              the Sixth  Issuer in respect of any other  amounts due and payable
              under  the  Sixth  Issuer  Intercompany  Loan  Agreement  and  not
              otherwise provided for in this order of priorities;

              the Seventh Issuer in respect of any other amounts due and payable
              under the  Seventh  Issuer  Intercompany  Loan  Agreement  and not
              otherwise provided for in this order of priorities;

              after the  occurrence  of a Funding 1 Swap  Provider  Default or a
              Funding  1 Swap  Provider  Downgrade  Termination  Event,  towards
              payment of any  termination  amount  due and  payable by Funding 1
              under the Funding 1 Swap Agreement; and


                                       15



              the  Funding 1  Liquidity  Facility  Provider to pay any Funding 1
              Liquidity  Subordinated  Amounts due under the Funding 1 Liquidity
              Facility Agreement;

       eighteenthly, towards payment pro rata and pari passu amounts due to:

              the First  Start-up  Loan Provider  under the First  Start-up Loan
              Agreement;

              the Second  Start-up Loan Provider under the Second  Start-up Loan
              Agreement;

              the Third  Start-up  Loan Provider  under the Third  Start-up Loan
              Agreement;

              the Fourth  Start-up Loan Provider under the Fourth  Start-up Loan
              Agreement;

              the Fifth  Start-up  Loan Provider  under the Fifth  Start-up Loan
              Agreement;

              the Sixth  Start-up  Loan Provider  under the Sixth  Start-up Loan
              Agreement; and

              the Seventh Start-up Loan Provider under the Seventh Start-up Loan
              Agreement;

       nineteenthly, towards payment of an amount equal to 0.01 per cent. of the
       Funding 1 Available Revenue Receipts; and

       twentiethly,  towards  payment  to the  shareholders  of Funding 1 of any
       dividend declared by Funding 1.


                                       16



                                     PART 2

                   FUNDING 1 PRINCIPAL PRIORITIES OF PAYMENTS

1.     DUE AND PAYABLE DATES OF TERM ADVANCES

1.1    Each First  Issuer Term  Advance  shall  become "due and  payable" on the
       earlier to occur of:

              each respective First Issuer Term Advances Due Date;

              the date upon which a Trigger Event occurs;

              the date upon which the Note  Trustee  serves a Note  Acceleration
              Notice on the First Issuer; and

              the date upon which the Security  Trustee  serves an  Intercompany
              Loan Acceleration Notice on Funding 1.

       Each Second  Issuer Term  Advance  shall  become "due and payable" on the
       earlier to occur of:

              each respective Second Issuer Term Advances Due Date;

              the date upon which a Trigger Event occurs;

              the date upon which the Note  Trustee  serves a Note  Acceleration
              Notice on the Second Issuer;

              the date upon which the Security  Trustee  serves an  Intercompany
              Loan Acceleration Notice on Funding 1; and

              the date upon  which a Step-up  Date  occurs  in  relation  to the
              relevant Second Issuer Term Advance.

       Each Third  Issuer Term  Advance  shall  become "due and  payable" on the
       earlier to occur of:

              each respective Third Issuer Term Advances Due Date;

              the date upon which a Trigger Event occurs;

              the date upon which the Note  Trustee  serves a Note  Acceleration
              Notice on the Third Issuer;

              the date upon which the Security  Trustee  serves an  Intercompany
              Loan Acceleration Notice on Funding 1; and

              the date upon  which a Step-up  Date  occurs  in  relation  to the
              relevant Third Issuer Term Advance.

       Each Fourth  Issuer Term  Advance  shall  become "due and payable" on the
       earlier to occur of:

              each respective Fourth Issuer Term Advances Due Date;

              the date upon which a Trigger Event occurs;


                                       17



              the date upon which the Note  Trustee  serves a Note  Acceleration
              Notice on the Fourth Issuer;

              the date upon which the Security  Trustee  serves an  Intercompany
              Loan Acceleration Notice on Funding 1; and

              the date upon  which a Step-up  Date  occurs  in  relation  to the
              relevant Fourth Issuer Term Advance.

       Each Fifth  Issuer Term  Advance  shall  become "due and  payable" on the
       earlier to occur of:

              each respective Fifth Issuer Term Advances Due Date;

              the date upon which a Trigger Event occurs;

              the date upon which the Note  Trustee  serves a Note  Acceleration
              Notice on the Fifth Issuer;

              the date upon which the Security  Trustee  serves an  Intercompany
              Loan Acceleration Notice on Funding 1; and

              the date upon  which a Step-up  Date  occurs  in  relation  to the
              relevant Fifth Issuer Term Advance.

1.2    Each Sixth  Issuer Term  Advance  shall  become "due and  payable" on the
       earlier to occur of:

       each respective Sixth Issuer Term Advances Due Date;

       the date upon which a Trigger Event occurs;

       the date upon which the Note Trustee serves a Note Acceleration Notice on
       the Sixth Issuer;

       the date upon which the  Security  Trustee  serves an  Intercompany  Loan
       Acceleration Notice on Funding 1; and

       the date upon which a Step-up  Date occurs in  relation  to the  relevant
       Sixth Issuer Term  Advance.

1.3    Each Seventh  Issuer Term  Advance  shall become "due and payable" on the
       earlier to occur of:

       each respective Seventh Issuer Term Advances Due Date;

       the date upon which a Trigger Event occurs;

       the date upon which the Note Trustee serves a Note Acceleration Notice on
       the Seventh Issuer;

       the date upon which the  Security  Trustee  serves an  Intercompany  Loan
       Acceleration Notice on Funding 1; and

       the date upon which a Step-up  Date occurs in  relation  to the  relevant
       Seventh Issuer Term Advance.


                                       18



       In respect of certain  of the Term  Advances,  if there are  insufficient
       Funding 1  Available  Principal  Receipts  available  to repay  such Term
       Advance on a Funding 1 Interest Payment Date upon which that Term Advance
       is due  and  payable  (either  in  full  or as a  Scheduled  Amortisation
       Instalment),  then the shortfall  will be repaid on subsequent  Funding 1
       Interest Payment Dates from Funding 1 Available  Principal Receipts until
       that Term Advance is fully repaid.

2.     REPAYMENT OF TERM  ADVANCES OF EACH SERIES PRIOR TO THE  OCCURRENCE  OF A
       TRIGGER  EVENT AND PRIOR TO THE  SERVICE ON FUNDING 1 OF AN  INTERCOMPANY
       LOAN  ACCELERATION  NOTICE  OR  THE  SERVICE  ON  EACH  ISSUER  OF A NOTE
       ACCELERATION NOTICE

2.1    On each  Funding 1 Interest  Payment Date (but prior to the date on which
       (a)  a  Trigger  Event  occurs,   (b)  the  Security  Trustee  serves  an
       Intercompany Loan Acceleration Notice on Funding 1 or (c) each Issuer has
       been served with a Note  Acceleration  Notice by the Note  Trustee),  the
       Cash Manager  shall apply Funding 1 Available  Principal  Receipts in the
       following order of priority:

              firstly,  towards  repayment  of  amounts  due  to the  Funding  1
              Liquidity Facility Provider under the Funding 1 Liquidity Facility
              to the extent only that amounts were drawn  thereunder in order to
              make Eligible Liquidity Facility Principal Repayments;

              secondly,  to the extent only that monies have been drawn from the
              General  Reserve  Fund  to  make  Eligible  General  Reserve  Fund
              Principal Repayments, towards replenishment of the General Reserve
              Fund to the extent that the amount  standing to the credit thereof
              is less than the General Reserve Fund Required Amount;

              thirdly, if a Liquidity Reserve Fund Rating Event has occurred and
              is  continuing  (i) to the extent only that monies have been drawn
              from  the  Liquidity  Reserve  Fund  in  order  to  make  Eligible
              Liquidity Reserve Fund Principal  Repayments or (ii) to the extent
              that the  Liquidity  Reserve  fund has not been  previously  fully
              funded and Funding 1 Available  Revenue Receipts on such Funding 1
              Interest  Payment Date are insufficient to do so, towards a credit
              to the Funding 1 Liquidity  Reserve  Ledger to the extent that the
              amount  standing to the credit  thereof is less than the Liquidity
              Reserve Required Amount;

              fourthly, towards repayment of all Term AAA Advances that are then
              due and  payable  in an order  of  priority  based on their  Final
              Repayment Date, so that the earliest  maturing Term AAA Advance is
              paid  first  (and if any Term  AAA  Advances  have the same  Final
              Repayment  Date,  then those Term Advances will be repaid pro rata
              and pari  passu),  in each case  subject to Rules (1), (2) and (3)
              set out in paragraphs 2.2(a), (b) and (c) below;

              fifthly,  pro rata and pari passu towards repayment of all Term AA
              Advances  that are then due and  payable,  in each case subject to
              Rules (1), (2) and (3) set out in paragraphs  2.2(a),  (b) and (c)
              below;

              sixthly,  pro rata and pari passu towards  repayment of all Term A
              Advances  that are then due and  payable,  in each case subject to
              Rules (1), (2) and (3) set out in paragraphs  2.2(a),  (b) and (c)
              below;

              seventhly,  pro rata and pari passu towards  repayment of all Term
              BBB Advances  that are then due and payable,  in each case subject
              to Rules (1), (2) and (3) set out in  paragraphs  2.2(a),  (b) and
              (c) below;


                                       19



              eigthly,  towards a credit to the Cash  Accumulation  Ledger until
              the  balance is equal to Funding 1's Cash  Accumulation  Liability
              (as  calculated  after any payments  are made at paragraph  2.1(d)
              above); and

              ninethly,  the  remainder  shall  be  credited  to the  Funding  1
              Principal  Xxxxxx.

2.2    In the applicable circumstances, the following Rules apply in determining
       the amounts to be paid under  paragraphs  2.1(d),  (e), (f) and (g) above
       and, where  indicated,  paragraphs  3.1(d),  (e), (f) and (g) and 4.1(d),
       (e), (f) and (g) below:

              Rule (1) - Deferral of repayment  of  Pass-Through  Term  Advances
              and/or    Scheduled    Amortisation    Instalments    in   certain
              circumstances.

                     Deferral of Term AA Advances,  Term A Advances  and/or Term
                     BB Advances

                        If on a Funding 1 Interest Payment Date:

                            there  is a  debit  balance  on  the  BBB  Principal
                            Deficiency  Sub-Ledger,  the A Principal  Deficiency
                            Sub-Ledger   or   the   AA   Principal    Deficiency
                            Sub-Ledger,  after  application  of  the  Funding  1
                            Available   Revenue   Receipts  on  that  Funding  1
                            Interest Payment Date; or

                            the Adjusted General Reserve Fund Level is less than
                            the General Reserve Fund Threshold; or

                            the aggregate Outstanding Principal Balance of Loans
                            in the  Mortgages  Trust,  in  respect  of which the
                            aggregate amount in arrears is more than three times
                            the  Monthly  Payment  then due,  is more than 5 per
                            cent. of the aggregate Outstanding Principal Balance
                            of Loans in the Mortgages Trust,

                     then  until  the  relevant  circumstance  as  described  in
                     subparagraphs 2.2(a)(i)(A)I, II or III above has been cured
                     or otherwise ceases to exist, if:

                     (aa) any Term AAA  Advance  (whether  or not such  Term AAA
                     Advance is then due and payable) remains  outstanding after
                     making the payments under  paragraph  2.1(d) above the Term
                     AA Advances (including the Seventh Issuer Term AA Advances)
                     will  not  be  entitled  to  Principal   Repayments   under
                     paragraph 2.1(e) above;

                     (bb) any Term AAA  Advance or any Term AA Advance  (whether
                     or not such Term AAA Advance or Term AA Advance is then due
                     and payable) remains  outstanding after making the payments
                     under  paragraphs  2.1(d)  and/or (e) above then the Term A
                     Advances will not be entitled to Principal Repayments under
                     paragraph 2.1(f) above.

                     (cc) any Term AAA Advance,  any Term AA Advance or any Term
                     A Advance  (whether or not such Term AAA Advance or Term AA
                     Advance or Term A Advance is then due and payable)  remains
                     outstanding  after  making the  payments


                                       20



                     under  paragraphs  2.1(d)  and/or (e) and/or (f) above then
                     the Term BBB Advances  (including  the Seventh  Issuer Term
                     BBB Advances) will not be entitled to Principal  Repayments
                     under paragraph 2.1(g) above.

              Deferral of Scheduled Amortisation Term Advances when CPR is below
              certain threshold(s) prior to Step-up Date:

              If on a Funding 1 Interest Payment Date:

                     one  or  more  Bullet  Term  Advances  are  within  a  Cash
                     Accumulation  Period at that time  (irrespective of whether
                     any Scheduled  Amortisation  Instalments are then in a Cash
                     Accumulation Period); and

                     either:

                            the quarterly CPR is less than 10 per cent.; or

                            both:

                            (aa) the  quarterly  CPR is equal to or greater than
                            10 per cent.,  but less than 15 per cent.;  and

                            (bb) the annualised CPR is less than 10 per cent.,

                            then on or before their  Step-up Dates the Scheduled
                            Amortisation  Term  Advances  will  be  entitled  to
                            Principal  Repayments  under paragraph  2.1(d) above
                            only to the  extent  permitted  under the  Scheduled
                            Amortisation Repayment Restrictions.

              Deferral of original  Pass-Through Term Advances when CPR is below
              a certain threshold prior to Step-up Date:

              If on a Funding 1 Interest Payment Date:

                     one  or  more  Bullet  Term   Advances   and/or   Scheduled
                     Amortisation  Instalments  are  within a Cash  Accumulation
                     Period at that time; and

                     the quarterly CPR is less than 15 per cent.; and

                     there is a Cash Accumulation Shortfall at that time,

              then, on or before their Step-up Dates, the Original  Pass-Through
              Term  Advances  will be entitled  to  principal  repayments  under
              paragraphs 2.1(d),  (e), (f) and (g) (as applicable) above only to
              the   extent   permitted   under   the   Pass-Through    Repayment
              Restrictions.

       Rule (2) - Repayment  of Payable  Pass-Through  Term  Advances  after the
       occurrence of a Step-up Date

       Following the occurrence of the Step-up Date under an  Intercompany  Loan
       Agreement  (INTERCOMPANY LOAN A) but prior to the time which Rule (3) (as
       set out in paragraph  2.2(c) below) becomes  applicable and provided that
       the  Funding 1 Share of


                                       21



       the Trust Property is greater than zero, the aggregate amount repaid on a
       Funding 1 Interest  Payment Date in relation to Term Advances (other than
       Bullet Term Advances or Scheduled  Amortisation  Instalments)  under that
       Intercompany Loan A under paragraphs 2.1(d), (e), (f) and (g) above shall
       be limited to an amount calculated as follows:

                                           Outstanding Principal Balance of
                                                 Intercompany Loan A
       Funding 1 Principal Funds x    ------------------------------------------
                                       Aggregate Outstanding Principal Balance
                                                of all Intercompany Loans

       Rule  (3)  -  Repayment  of  Term  Advances   after  service  of  a  Note
       Acceleration Notice on one or more (but not all) of the Issuers

       If the Note Trustee serves a Note Acceleration Notice on one or more (but
       not  all) of the  Issuers,  then  this  Rule  (3)  will  apply.  In these
       circumstances:

              service of a Note Acceleration Notice will not result in automatic
              enforcement of the Funding 1 Security;

              all of the Term Advances  (including any  outstanding  Bullet Term
              Advances  and  Scheduled   Amortisation   Instalments)  under  the
              Intercompany  Loan  relating to the  relevant  Issuer who has been
              served  a Note  Acceleration  Notice  (INTERCOMPANY  LOAN  B) will
              become immediately due and payable;

              the Cash Manager shall apply the  appropriate  amount of Funding 1
              Available  Principal  Receipts allocated to Intercompany Loan B at
              the  relevant  level of the  Funding  1  Principal  Priorities  of
              Payments,  towards repayment, pro rata and pari passu, of any Term
              AAA Advances  outstanding under that Intercompany Loan B (that is,
              those Term AAA Advances will not be repaid in an order of priority
              based on their Final Repayment Date); and

              the aggregate  amount repaid on a Funding 1 Interest  Payment Date
              in respect of Intercompany  Loan B under paragraphs  2.1(d),  (e),
              (f) and (g), 3.1(d),  (e), (f) and (g) or 4.1(d), (e), (f) and (g)
              (as  applicable)  of the  relevant  priority of payments  shall be
              limited to an amount calculated as follows:


                                           Outstanding Principal Balance of
                                                 Intercompany Loan B
       Funding 1 Principal Funds x    ------------------------------------------
                                       Aggregate Outstanding Principal Balance
                                                of all Intercompany Loans

       ALLOCATIONS INVOLVING RULE (2) OR RULE (3)

3.     Where  Rule  (2) or Rule  (3)  applies  at a  level  of any  priority  of
       payments,  the funds  available  for making  payments at that level shall
       first  be  allocated  without  reference  to  Rule  (2) or  Rule  (3) (as
       applicable).  However,  if the  amount so  allocated  to one or more Term
       Advances  exceeds  the  amount  permitted  under Rule (2) or Rule (3) (as
       applicable)  to be paid in  respect of those Term  Advances  (the  CAPPED
       ADVANCES),  the  excess  shall then be  reallocated  among any other Term
       Advances at that level using the method of  allocation as applies at that
       level but without  reference to the Capped  Advances in calculating  such
       reallocation.  If a  further  such  excess  arises  as a  result  of  the
       reallocation  process, the reallocation process shall be repeated at that
       level in  relation  to each such  further  excess  that  arises  until no
       further  funds  can be  allocated  at  that  level  following  which  the
       remaining excess shall then be applied at


                                       22



       the next level of that  priority of payments.  Repayment of Term Advances
       of each Series following the occurrence of a Non-Asset  Trigger Event but
       prior to the service on Funding 1 of an  Intercompany  Loan  Acceleration
       Notice or the  service on each Issuer of a Note  Acceleration  Notice.

3.1    On each Funding 1 Interest  Payment Date  following  the  occurrence of a
       Non-Asset  Trigger  Event  (but  prior to the date on which  (i) an Asset
       Trigger Event occurs,  (ii) the Security  Trustee serves an  Intercompany
       Loan  Acceleration  Notice on  Funding 1 or (iii)  each  Issuer  has been
       served with a Note Acceleration Notice), the Bullet Term Advances and the
       Scheduled Amortisation Term Advances under each Intercompany Loan will be
       deemed to be  Pass-Through  Term Advances and, on each Funding 1 Interest
       Payment  Date,  Funding 1 will be required  to apply  Funding 1 Available
       Principal Receipts in the following order of priority:

              firstly,  towards  repayment  of  amounts  due  to the  Funding  1
              Liquidity Facility Provider under the Funding 1 Liquidity Facility
              to the extent only that amounts were drawn  thereunder in order to
              make Eligible Liquidity Facility Principal Repayments;

              secondly,  to the extent only that monies have been drawn from the
              General  Reserve  Fund  to  make  Eligible  General  Reserve  Fund
              Principal Repayments, towards replenishment of the General Reserve
              Fund to the extent that the amount  standing to the credit thereof
              is less than the General Reserve Fund Required Amount;

              thirdly, if a Liquidity Reserve Fund Rating Event has occurred and
              is  continuing  (i) to the extent only that monies have been drawn
              from  the  Liquidity  Reserve  Fund  in  order  to  make  Eligible
              Liquidity Reserve Fund Principal  Repayments or (ii) to the extent
              that the  Liquidity  Reserve  fund has not been  previously  fully
              funded and Funding 1 Available  Revenue Receipts on such Funding 1
              Interest   Payment  Date  are   insufficient  to  do  so,  towards
              replenishment  of the  Liquidity  Reserve  Fund to the extent only
              that the amount  standing  to the credit  thereof is less than the
              Liquidity Reserve Fund Required Amount;

              fourthly,  to repay the Term AAA Advance with the  earliest  Final
              Repayment  Date,  then to repay the Term AAA Advance with the next
              earliest  Final  Repayment  Date,  and so on  until  the  Term AAA
              Advances are fully repaid;

              fifthly,  pro rata and pari passu,  to repay the Term AA Advances,
              until those Term AA Advances are fully repaid;

              sixthly,  in  satisfaction of pro rata and pari passu to repay the
              Term A Advances, until each of those is fully repaid; and

              seventhly,  pro  rata  and  pari  passu,  to  repay  the  Term BBB
              Advances, until each of those Term BBB Advances are fully repaid.

4.     REPAYMENT OF TERM ADVANCES OF EACH SERIES  FOLLOWING THE OCCURRENCE OF AN
       ASSET  TRIGGER  EVENT  BUT  PRIOR  TO  THE  SERVICE  ON  FUNDING  1 OF AN
       INTERCOMPANY LOAN ACCELERATION  NOTICE OR THE SERVICE ON EACH ISSUER OF A
       NOTE ACCELERATION NOTICE

4.1    Following the  occurrence  of an Asset  Trigger  Event  (whether or not a
       Non-Asset Trigger Event occurs or has occurred) (but prior to (i) service
       by the Security Trustee of an Intercompany  Loan  Acceleration  Notice on
       Funding 1 or (ii) each issuer has been  served  with a Note  Acceleration
       Notice),  the Bullet Term  Advances and the Scheduled  Amortisation  Term
       Advances  in  respect  of all  Intercompany  Loans  will be  deemed to be
       Pass-Through


                                       23



       Term Advances, and on each Funding 1 Interest Payment Date Funding 1 will
       be  required  to apply  Funding 1  Available  Principal  Receipts  in the
       following order of priority:

              firstly,  towards  repayment  of  amounts  due  to the  Funding  1
              Liquidity Facility Provider under the Funding 1 Liquidity Facility
              to the extent only that those  amounts were drawn in order to make
              Eligible Liquidity Facility Principal Repayments;

              secondly,  to the extent only that monies have been drawn from the
              General  Reserve  Fund  to  make  Eligible  General  Reserve  Fund
              Principal  Repayments,  towards  a credit to the  General  Reserve
              Ledge to the extent the amount  standing to the credit  thereof is
              less than the General Reserve Fund Required Amount;

              thirdly, if a Liquidity Reserve Fund Rating Event has occurred and
              is  continuing  (i) to the extent only that monies have been drawn
              from  the  Liquidity  Reserve  Fund  in  order  to  make  Eligible
              Liquidity Reserve Fund Principal  Repayments or (ii) to the extent
              that the  Liquidity  Reserve  fund has not been  previously  fully
              funded and Funding 1 Available  Revenue Receipts on such Funding 1
              Interest  Payment Date are insufficient to do so, towards a credit
              to the  Liquidity  Reserve  Ledger to the  extent  that the amount
              standing to the credit thereof is less than the Liquidity  Reserve
              Fund Required Amount;

              fourthly,  pro rata and pari passu,  towards repayment of the Term
              AAA  Advances,  until  each of those  Term AAA  Advances  is fully
              repaid;

              fifthly, pro rata and pari passu, towards repayment of the Term AA
              Advances until each of those Term AA Advances is fully repaid;

              sixthly,  pro rata and pari passu, towards repayment of the Term A
              Advances until each of those Term A Advances is fully repaid; and

              seventhly,  pro rata and pari passu, towards repayment of the Term
              BBB  Advances,  until  each of those  Term BBB  Advances  is fully
              repaid.

5.     REPAYMENT OF TERM  ADVANCES OF EACH SERIES  FOLLOWING THE SERVICE ON EACH
       ISSUER OF A NOTE ACCELERATION  NOTICE BUT PRIOR TO THE SERVICE ON FUNDING
       1 OF AN INTERCOMPANY LOAN ACCELERATION NOTICE

5.1    If each Issuer has been served with a Note Acceleration Notice, then that
       will not result in automatic  enforcement of the Funding 1 Security under
       the Funding 1 Deed of Charge. In those circumstances, however, the Bullet
       Term Advances and any  Scheduled  Amortisation  Term Advances  under each
       Issuer's  respective  Intercompany Loan will be deemed to be Pass-Through
       Term Advances and Funding 1 will be required to apply Funding 1 Available
       Principal  Receipts  on  each  Funding  1  Interest  Payment  Date in the
       following order of priority:

              firstly,  towards  repayment  to the Funding 1 Liquidity  Facility
              Provider of amounts  drawn under the Funding 1 Liquidity  Facility
              on the prior  Funding  1  Interest  Payment  Date in order to make
              Eligible Liquidity Facility Principal Repayments;

              secondly,  to the extent only that monies have been drawn from the
              General  Reserve  Fund  to  make  Eligible  General  Reserve  Fund
              Principal  Repayments,  towards  a credit to the  General  Reserve
              Ledger to the extent the amount  standing to the credit thereof is
              less than the General Reserve Fund Required Amount;


                                       24



              thirdly, if a Liquidity Reserve Fund Rating Event has occurred and
              is  continuing  (i) to the extent only that monies have been drawn
              from  the  Liquidity  Reserve  Fund  in  order  to  make  Eligible
              Liquidity Reserve Fund Principal  Repayments or (ii) to the extent
              that the  Liquidity  Reserve  Fund has not been  previously  fully
              funded and Funding 1 Available  Revenue Receipts on such Funding 1
              Interest  Payment Date are insufficient to do so, towards a credit
              to the  Liquidity  Reserve  Ledger to the  extent  that the amount
              standing to the credit thereof is less than the Liquidity  Reserve
              Fund Required Amount;

              fourthly,  pro rata and pari passu,  towards repayment of the Term
              AAA  Advances,  until  each of those  Term AAA  Advances  is fully
              repaid.

              fifthly, pro rata and pari passu, towards repayment of the Term AA
              Advances, until each of those Term AA Advances is fully repaid;

              sixthly,  pro rata and pari passu, towards repayment of the Term A
              Advances, until each of those Term A Advances is fully repaid; and

              seventhly,  pro rata and pari passu, towards repayment of the Term
              BBB  Advances,  until  each of those  Term BBB  Advances  is fully
              repaid.

6.     REPAYMENT OF TERM ADVANCES WHEN FUNDING 1 RECEIVES THE AMOUNT OUTSTANDING
       UNDER AN INTERCOMPANY LOAN

       If Funding 1 receives a payment from the Seller in the  circumstances set
       out in CLAUSE 7 of the  Mortgages  Trust  Deed or the  proceeds  of a New
       Intercompany Loan which are to be used to refinance another  Intercompany
       Loan (such payment by the Seller or such proceeds  being a FULL REPAYMENT
       AMOUNT),  then  Funding  1 will not apply  the Full  Repayment  Amount as
       described in paragraphs 2 to 5 above.  Instead,  Funding 1 will apply the
       Full Repayment Amount to repay the relevant  Intercompany Loan. If at any
       time only one Intercompany Loan is outstanding, then Funding 1 will apply
       the Full  Repayment  Amount  first to repay  amounts due to the Funding 1
       Liquidity Facility Provider under the Funding 1 Liquidity Facility to the
       extent  only that  amounts  were drawn  thereunder  in order to repay the
       principal  amounts  of any  Bullet  Term  Advances  made under any of the
       Intercompany  Loans  and the  remainder  shall be  applied  to repay  the
       relevant Intercompany Loan.


                                       25



                                     PART 3

                 FUNDING 1 POST-ENFORCEMENT PRIORITY OF PAYMENTS

All monies  received or  recovered  by the  Security  Trustee or the Receiver in
respect of the Funding 1 Security  subsequent to the Security Trustee serving an
Intercompany Loan Acceleration Notice on Funding 1, will be applied (save to the
extent required by law) by the Security  Trustee or the Receiver on each Funding
1 Interest  Payment Date in accordance  with the following order of priority (in
each case only and to the extent that payments or provision of a higher priority
have been made in full):

(a)    firstly, in or towards  satisfaction of, pro rata and pari passu, amounts
       due to:

              the Security  Trustee and any  Receiver  appointed by the Security
              Trustee,  together  with interest and any amount in respect of VAT
              on those amounts,  and to provide for any amounts due or to become
              due to the  Security  Trustee and the  Receiver  in the  following
              Interest Period under the Funding 1 Deed of Charge;

              the First  Issuer in  respect  of the First  Issuer's  obligations
              specified   in   items   (a)   and   (b)  of  the   First   Issuer
              Post-Enforcement Priority of Payments;

              the Second  Issuer in respect of the Second  Issuer's  obligations
              specified   in   items   (a)   and  (b)  of  the   Second   Issuer
              Post-Enforcement Priority of Payments;

              the Third  Issuer in  respect  of the Third  Issuer's  obligations
              specified   in   items   (a)   and   (b)  of  the   Third   Issuer
              Post-Enforcement Priority of Payments;

              the Fourth  Issuer in respect of the Fourth  Issuer's  obligations
              specified   in   items   (a)   and  (b)  of  the   Fourth   Issuer
              Post-Enforcement Priority of Payments;

              the Fifth  Issuer in  respect  of the Fifth  Issuer's  obligations
              specified   in   items   (a)   and   (b)  of  the   Fifth   Issuer
              Post-Enforcement Priority of Payments;

              the Sixth  Issuer in  respect  of the Sixth  Issuer's  obligations
              specified   in   items   (a)   and   (b)  of  the   Sixth   Issuer
              Post-Enforcement Priority of Payments; and

              the Seventh Issuer in respect of the Seventh Issuer's  obligations
              specified   in   items   (a)  and  (b)  of  the   Seventh   Issuer
              Post-Enforcement Priority of Payments;

(b)    secondly,  in or towards  satisfaction  of amounts due and payable to the
       Cash Manager and any costs, charges, liabilities and expenses then due or
       to become due and payable to the Cash Manager  under the Cash  Management
       Agreement, together with VAT on those amounts;

(c)    thirdly, in or towards  satisfaction of, pro rata and pari passu, amounts
       (if any) due to the  Account  Bank  under the  terms of the Bank  Account
       Agreement  and to the Funding 1  Corporate  Services  Provider  under the
       Funding 1 Corporate Services Agreement;

(d)    fourthly,  in or  towards  satisfaction  of  amounts  (if any) due to the
       Funding 1  Liquidity  Facility  Provider  under the  Funding 1  Liquidity
       Facility Agreement,  together with VAT, if any, (except for any Funding 1
       Liquidity Facility Subordinated Amounts);

(e)    fifthly,  in or  towards  satisfaction  of  amounts  (if  any) due to the
       Funding 1 Swap Provider under the Funding 1 Swap Agreement (including any
       termination payment but excluding any Funding 1 Swap Excluded Termination
       Amount);


                                       26



(f)    sixthly, in or towards  satisfaction of, pro rata and pari passu, amounts
       of interest and principal due and payable on the Term AAA Advances;

(g)    seventhly,  in or  towards  satisfaction  of,  pro rata  and pari  passu,
       amounts  of  interest  and  principal  due  and  payable  on the  Term AA
       Advances;

(h)    eighthly, in or towards satisfaction of, pro rata and pari passu, amounts
       of interest and principal due and payable on the Term A Advances;

(i)    ninthly, in or towards  satisfaction of, pro rata and pari passu, amounts
       of interest and principal due and payable on the Term BBB Advances;

(j)    tenthly, in or towards satisfaction of any amounts due to:

              the First Issuer in respect of the First Issuer's obligation's (if
              any) to make a termination payment to a First Issuer Swap Provider
              (but excluding any First Issuer Swap Excluded Termination Amount);

              the Second  Issuer in respect of the Second  Issuer's  obligations
              (if any) to make a  termination  payment to a Second  Issuer  Swap
              Provider   (but   excluding   any  Second   Issuer  Swap  Excluded
              Termination Amount);

              the Third Issuer in respect of the Third Issuer's  obligations (if
              any) to make a termination payment to a Third Issuer Swap Provider
              (but excluding any Third Issuer Swap Excluded Termination Amount);

              the Fourth  Issuer in respect of the Fourth  Issuer's  obligations
              (if any) to make a  termination  payment to a Fourth  Issuer  Swap
              Provider   (but   excluding   any  Fourth   Issuer  Swap  Excluded
              Termination Amount);

              the Fifth Issuer in respect of the Fifth Issuer's  obligations (if
              any) to make a termination payment to a Fifth Issuer Swap Provider
              (but excluding any Fifth Issuer Swap Excluded Termination Amount);

              the Sixth Issuer in respect of the Sixth Issuer's  obligations (if
              any) to make a termination payment to a Sixth Issuer Swap Provider
              (but excluding any Sixth Issuer Swap Excluded Termination Amount);
              and

              the Seventh Issuer in respect of the Seventh Issuer's  obligations
              (if any) to make a  termination  payment to a Seventh  Issuer Swap
              Provider  (but   excluding   any  Seventh   Issuer  Swap  Excluded
              Termination Amount);

(k)    eleventhly,  in or  towards  satisfaction  of,  pro rata  and pari  passu
       (without double counting):

              amounts due to the First  Issuer in respect of the First  Issuer's
              obligations to pay any termination  payment to a First Issuer Swap
              Provider as a result of a First Issuer Swap Provider  Default or a
              First  Issuer  Swap  Provider  Downgrade   Termination  Event  (as
              appropriate);
                                       27



              amounts due to the Second Issuer in respect of the Second Issuer's
              obligations to pay any termination payment to a Second Issuer Swap
              Provider as a result of a Second Issuer Swap Provider Default or a
              Second  Issuer  Swap  Provider  Downgrade  Termination  Event  (as
              appropriate);

              amounts due to the Third  Issuer in respect of the Third  Issuer's
              obligations to pay any termination  payment to a Third Issuer Swap
              Provider as a result of a Current Swap Provider Default or a Third
              Issuer Swap Provider Downgrade Termination Event (as appropriate);

              amounts due to the Fourth Issuer in respect of the Fourth Issuer's
              obligations to pay any termination payment to a Fourth Issuer Swap
              Provider  as a result  of a Current  Swap  Provider  Default  or a
              Fourth  Issuer  Swap  Provider  Downgrade  Termination  Event  (as
              appropriate);

              amounts due to the Fifth  Issuer in respect of the Fifth  Issuer's
              obligations to pay any termination  payment to a Fifth Issuer Swap
              Provider as a result of a Current Swap Provider Default or a Fifth
              Issuer Swap Provider Downgrade Termination Event (as appropriate);

              amounts due to the Sixth  Issuer in respect of the Sixth  Issuer's
              obligations to pay any termination  payment to a Sixth Issuer Swap
              Provider as a result of a Current Swap Provider Default or a Sixth
              Issuer Swap Provider Downgrade Termination Event (as appropriate);

              amounts  due to the  Seventh  Issuer  in  respect  of the  Seventh
              Issuer's  obligations to pay any termination  payment to a Seventh
              Issuer  Swap  Provider  as a result  of a  Current  Swap  Provider
              Default or a Seventh  Issuer Swap Provider  Downgrade  Termination
              Event (as appropriate);

              any other  amounts due to the First  Issuer under the First Issuer
              Intercompany Loan Agreement and not otherwise provided for earlier
              in this order of priorities;

              any other amounts due to the Second Issuer under the Second Issuer
              Intercompany Loan Agreement and not otherwise provided for earlier
              in this order of priorities;

              any other  amounts due to the Third  Issuer under the Third Issuer
              Intercompany Loan Agreement and not otherwise provided for earlier
              in this order of priorities;

              any other amounts due to the Fourth Issuer under the Fourth Issuer
              Intercompany Loan Agreement and not otherwise provided for earlier
              in this order of priorities;

              any other  amounts due to the Fifth  Issuer under the Fifth Issuer
              Intercompany Loan Agreement and not otherwise provided for earlier
              in this order of priorities;

              any other  amounts due to the Sixth  Issuer under the Sixth Issuer
              Intercompany Loan Agreement and not otherwise provided for earlier
              in this order of priorities;

              any other  amounts  due to the  Seventh  Issuer  under the Seventh
              Issuer  Intercompany Loan Agreement and not otherwise provided for
              earlier in this order of priorities;

              any Funding 1 Liquidity  Subordinated Amounts due to the Funding 1
              Liquidity Facility Provider; and

              amounts  due to the  Funding 1 Swap  Provider  in  respect  of any
              termination payment due to the Funding 1 Swap Provider as a result
              of a Funding 1 Swap Provider  Default or a Funding 1 Swap Provider
              Downgrade Termination Event; and

(l)    twelfthly, towards payment, pro rata and pari passu, of amounts due to:


                                       28



              the First  Start-up  Loan Provider  under the First  Start-up Loan
              Agreement;

              the Second  Start-up Loan Provider under the Second  Start-up Loan
              Agreement;

              the Third  Start-up  Loan Provider  under the Third  Start-up Loan
              Agreement;

              the Fourth  Start-up Loan Provider under the Fourth  Start-up Loan
              Agreement;

              the Fifth  Start-up  Loan Provider  under the Fifth  Start-up Loan
              Agreement;

              the Sixth  Start-up  Loan Provider  under the Sixth  Start-up Loan
              Agreement; and

              the Seventh Start-up Loan Provider under the Seventh Start-up Loan
              Agreement.


                                       29