PROSPECTUS DATED 13 JULY 2007 Eurosail-UK 2007-3BL PLC ...

PROSPECTUS DATED 13 JULY 2007
Eurosail-UK 2007-3BL PLC
(Incorporated in England and Wales under Registered Number 6240153)
Notes
Initial
Principal
Amount/
Number
Reference rate Margin Maturity Date Issue Price Ratings (S&P/Fitch/
Moody’s)
Class A1b $200,000,000 Note USD-LIBOR 0.07 per cent. September 2027 100 per cent. AAA/AAA/Aaa
Class A1c £102,500,000 Note Sterling LIBOR 0.08 per cent. September 2027 100 per cent. AAA/AAA/Aaa
Class A2a €64,500,000 Note EURIBOR 0.13 per cent. June 2045 100 per cent. AAA/AAA/Aaa
Class A2b $100,000,000 Note USD-LIBOR 0.13 per cent. June 2045 100 per cent. AAA/AAA/Aaa
Class A2c £63,000,000 Note Sterling LIBOR 0.13 per cent. June 2045 100 per cent. AAA/AAA/Aaa
Class A3a €215,000,000 Note EURIBOR 0.17 per cent. June 2045 100 per cent. AAA/AAA/Aaa
Class A3c £64,500,000 Note Sterling LIBOR 0.17 per cent. June 2045 100 per cent. AAA/AAA/Aaa
Class B1a €15,000,000 Note EURIBOR 0.30 per cent. June 2045 100 per cent. AA/AA/Aa2
Class B1c £23,000,000 Note Sterling LIBOR 0.30 per cent. June 2045 100 per cent. AA/AA/Aa2
Class C1a €25,000,000 Note EURIBOR 0.55 per cent. June 2045 100 per cent. A/A-/A2
Class C1c £10,000,000 Note Sterling LIBOR 0.55 per cent. June 2045 100 per cent. A/A-/A2
Class D1a €25,500,000 Note EURIBOR 1.35 per cent. June 2045 100 per cent. BBB-/BBB/Baa1
Class E1c £5,525,000 Note Sterling LIBOR 4.00 per cent. June 2045 100 per cent. BB/BB+Baa3
Class ETc £9,750,000 Note Sterling LIBOR 4.00 per cent. June 2045 100 per cent. BB/BB+N/R
Residual Certificates 10,000 N/A RC Distributions N/A N/A Unrated
This document comprises a prospectus (the “Prospectus”) for the purpose of Directive 2003/71/EC (the
“Prospectus Directive”). Application has been made to the Irish Financial Services Regulatory Authority, as
competent authority under the Prospectus Directive, for the Prospectus to be approved. Application has been
made to the Irish Stock Exchange Limited (the “Irish Stock Exchange”) for the Notes and the Residual
Certificates (together the “Instruments”) to be admitted to the Official List (the “Official List”) and trading on
its regulated market.
Bookrunner, Arranger and Lead Manager
ES INVESTMENT
Co-Manager
The date of this Prospectus is 13 July 2007

The Instruments have not been and will not be registered under the United States Securities Act of 1933,
as amended (the “Securities Act”) or the securities laws of any state of the United States or any other
relevant jurisdiction. The Instruments are being offered solely (a) outside the United States to non-U.S.
Persons in offshore transactions (as defined in Regulation S under the Securities Act (“Regulation S”)) in
reliance on Regulation S and (b) other than in the case of the E Notes and the Residual Certificates within
the United States in reliance on Rule 144A under the Securities Act (“Rule 144A”) to persons who are
qualified institutional buyers as defined in Rule 144A (“Qualified Institutional Buyers”). For certain
restrictions on resales, see “Transfer Restrictions”.
A “Risk Factors” section is included in this Prospectus. Prospective Instrumentholders should be aware
of the aspects of the issues that are summarised in that section.
The Issuer (the “Responsible Person”) accepts responsibility for the information contained in this
Prospectus. To the best of the knowledge and belief of the Issuer (who has taken all reasonable care to
ensure that such is the case) the information contained in this Prospectus is in accordance with the facts
and does not omit anything likely to affect the import of such information.
The Instruments will be obligations solely of the Issuer and will not be guaranteed by, or be the
responsibility of, any other entity. In particular, the Instruments will not be obligations of, and will not
be guaranteed by, Eurosail-UK 2007-3BL Parent Limited (the “Parent”) Preferred Mortgages Limited,
Southern Pacific Personal Loans Limited, Southern Pacific Mortgage Limited, Alliance & Leicester plc,
Amber Homeloans Limited, Matlock London Limited (formerly Matlock Bank Limited), Langersal No. 2
Limited, any Correspondent Lender, any Branded Lender, any Remote Processor, Preferred Mortgages
Collections Limited (“PMCL”), the Collection Account Banks, Vertex Mortgage Services Limited,
Lightfoots Solicitors, Capstone Mortgage Services Limited (in its capacities as the Cash/Bond
Administrator and the Mortgage Administrator), Homeloan Management Limited (in its capacities as the
Standby Cash/Bond Administrator and the Standby Mortgage Administrator) and each other
Transaction Party (as defined under “Summary Information” below), Lehman Brothers International
(Europe) (the “Lead Manager”) and Banco Espirito Santo de Investimento SA (“ES Investment” or the
“Co-Manager” and, together with the Lead Manager, the “Managers”).
PROSPECTIVE PURCHASERS ARE HEREBY NOTIFIED THAT THE SELLER OF ANY
INSTRUMENTS (OTHER THAN IN RELATION TO THE E NOTES AND THE RESIDUAL
CERTIFICATES) MAY BE RELYING ON THE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A.
The information contained in this document with respect to each Transaction Party (other than the
Issuer) relates to and has been obtained from each of them and the Issuer accepts responsibility for the
accurate reproduction of this information. As far as the Issuer is aware, and has been able to ascertain
from information published by each such party, no facts have been omitted which would render the
reproduced information inaccurate or misleading. The delivery of this Prospectus shall not create any
implication that there has been no change in the affairs of each Transaction Party (other than the Issuer)
since the date of this Prospectus, or that the information contained or referred to in this Prospectus is
correct as of any time subsequent to its date. The Instrumentholders will not have any right to proceed
directly against each Transaction Party (other than the Issuer) in respect of their respective obligations
under any of the agreements to which they are a party.
EACH PURCHASER OF INSTRUMENTS OFFERED HEREBY WILL BE DEEMED TO HAVE
MADE CERTAIN ACKNOWLEDGEMENTS, REPRESENTATIONS AND AGREEMENTS AS SET
FORTH HEREIN UNDER “TRANSFER RESTRICTIONS” AND “CERTAIN ERISA
CONSIDERATIONS”. THE INSTRUMENTS ARE NOT TRANSFERABLE EXCEPT IN
ACCORDANCE WITH THE RESTRICTIONS DESCRIBED HEREIN UNDER “TRANSFER
RESTRICTIONS” AND “CERTAIN ERISA CONSIDERATIONS”.
THE INSTRUMENTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), ANY STATE SECURITIES
COMMISSION OR ANY OTHER UNITED STATES REGULATORY AUTHORITY, NOR HAVE
ii

ANY OF THE FOREGOING AUTHORITIES PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
NONE OF THE E NOTES OR THE RESIDUAL CERTIFICATES, OR ANY INTEREST THEREIN,
ARE DESIGNED FOR, OR MAY BE PURCHASED OR HELD BY, ANY EMPLOYEE BENEFIT
PLAN (AS DEFINED IN SECTION 3(3) OF THE UNITED STATES EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) WHICH IS SUBJECT THERETO,
OR ANY PLAN (AS DEFINED IN SECTION 4975 OF THE UNITED STATES INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE “CODE”)) OR BY ANY PERSON ANY OF THE ASSETS OF
WHICH ARE, OR ARE DEEMED FOR PURPOSES OF ERISA OR SECTION 4975 OF THE CODE
TO BE, ASSETS OF SUCH EMPLOYEE BENEFIT PLAN OR PLAN, AND EACH PURCHASER OF
AN E NOTE OR A RESIDUAL CERTIFICATE, OR ANY INTEREST THEREIN, PURSUANT TO
REGULATION S WILL BE DEEMED TO HAVE REPRESENTED, WARRANTED AND AGREED
THAT IT IS NOT, AND FOR SO LONG AS IT HOLDS AN E NOTE OR A RESIDUAL
CERTIFICATE ISSUED PURSUANT TO REGULATION S WILL NOT BE, SUCH EMPLOYEE
BENEFIT PLAN OR PLAN OR A PERSON DEEMED TO HOLD ASSETS OF SUCH EMPLOYEE
BENEFIT PLAN OR PLAN. SEE FURTHER “CERTAIN ERISA CONSIDERATIONS”.
The Instruments will be in fully registered form and in the case of the Notes without interest coupons
attached.
This Prospectus does not constitute an offer of, or an invitation by or on behalf of, the Issuer or the
Managers to subscribe for or purchase any of the Instruments. No action has been taken by the Issuer or
the Managers other than as set out in the cover page of this Prospectus that would permit a public
offering of the Instruments or the distribution of this Prospectus in any country or jurisdiction where
action for that purpose is required. The distribution of this Prospectus and the offering of the
Instruments in certain jurisdictions may be restricted by law. Persons into whose possession this
Prospectus comes are required by the Issuer and the Managers to inform themselves about, and to
observe, such restrictions. For a description of certain further restrictions on offers and sales of
Instruments and distribution of this Prospectus, see “Subscription and Sale” below.
No person has been authorised to give any information or to make any representation concerning the
issue of the Instruments other than those contained in this Prospectus. Nevertheless, if any such
information is given by any broker, seller or any other person, it must not be relied upon as having been
authorised by the Issuer or the Managers. Neither the delivery of this Prospectus nor any offer, sale or
solicitation made in connection herewith shall, in any circumstances, imply that the information
contained herein is correct at any time subsequent to the date of this Prospectus.
An investment in the Instruments is only suitable for financially sophisticated investors who are capable
of evaluating the merits and risk of such investment and who have sufficient resources to be able to bear
any losses which may result from such an investment.
References in this Prospectus to “£”, “pounds”, “pounds sterling” or “sterling” are to the lawful currency
for the time being of the United Kingdom of Great Britain and Northern Ireland. References in this
Prospectus to “€”or “euro” are references to the single currency introduced at the start of the third stage
of European Economic and Monetary Union pursuant to the Treaty of Rome of 25 March 1957, as
amended from time to time. References in this Prospectus to “$”, “U.S.$”, “U.S. Dollar” or “dollars” are
to the lawful currency for the time being of the United States of America.
In connection with the issue of any class of the Notes, the Lead Manager (in such capacity, the “Stabilising
Manager”) or any person acting for the Stabilising Manager may over-allot the Notes (provided that the
aggregate principal amount of Notes allotted does not exceed 105 per cent. of the aggregate principal amount of
the relevant class of Notes) or effect transactions with a view to supporting the market prices of the Notes (or
any class of them) at a level higher than that which might otherwise prevail. However, there is no assurance that
the Stabilising Manager (or persons acting on behalf of the Stabilising Manager) will undertake stabilising
action. Any stabilising action may begin on or after the date on which adequate public disclosure of the terms of
the offer of the Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier
iii

of 30 days after the Closing Date and 60 days after the date of allotment of the relevant class of the Notes. For a
description of these activities, see “Subscription and Sale” below.
The Instruments (a) will be represented by the Reg S Global Notes or the Global Residual Certificate which are
expected to be deposited with The Bank of New York, London Branch, as common depositary (the “Common
Depositary”) for Euroclear Bank S.A./N.V. (“Euroclear”) and Clearstream Banking, société anonyme
(“Clearstream, Luxembourg”) and (b) other than the E Notes and the Residual Certificates, will be represented
by the Rule 144A Global Notes which are expected to be deposited with The Bank of New York, New York
Branch, as custodian (the “Custodian”) for The Depository Trust Company (“DTC”) and registered in the name
of DTC or its nominee, in each case, on the date of issue of the Notes (the “Closing Date”).
Capitalised terms used in this Prospectus, unless otherwise indicated, have the meanings set out in this
Prospectus. An index of defined terms used in this Prospectus appears on pages 213 to 222.
iv

NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE
HAS BEEN FILED UNDER CHAPTER 421-B OF THE STATE OF NEW HAMPSHIRE REVISED
STATUTES ANNOTATED (“RSA 421-B”) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT
THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF
NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY
DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF NEW HAMPSHIRE
HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR
GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE,
OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
INFORMATION AS TO PLACEMENT WITHIN THE UNITED STATES
This Prospectus has been prepared by the Issuer solely for use in connection with the offering of the Notes. This
Prospectus is personal to each potential investor to whom it has been delivered by the Issuer, the Lead Manager,
the other Managers or any of their respective affiliates and does not constitute an offer to any other person or to
the public generally to subscribe for or otherwise acquire the Notes. Distribution of this Prospectus in the
United States to any persons other than the potential investors and those persons, if any, retained to advise such
offeree with respect thereto is unauthorised, and any disclosure of any of its contents, without the prior written
consent of the Issuer, is prohibited.
Additionally, each purchaser of the Notes will be deemed to have made the representations, warranties and
acknowledgements that are described in this Prospectus on pages 198 to 207 below.
ENFORCEABILITY OF JUDGMENTS
The Issuer is a public limited company registered in England and Wales. All of the Issuer’s assets are located
outside the United States. None of the officers and directors of the Issuer are residents of the United States. As
a result, it may not be possible for investors to effect service of process within the United States upon the Issuer
or such persons not residing in the United States with respect to matters arising under the federal or state
securities laws of the United States, or to enforce against them judgments of the courts of the United States
predicated upon the civil liability provisions of such securities laws. There is doubt as to the enforceability in
the United Kingdom, in original actions or in actions for the enforcement of judgments of U.S. courts, of civil
liabilities predicated solely upon such securities laws.
FORWARD-LOOKING STATEMENTS
This Prospectus contains statements which constitute forward-looking statements within the meaning of the
United States Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places
in this Prospectus, including with respect to assumptions on prepayment and certain other characteristics of the
Loans, and reflect significant assumptions and subjective judgements by the Issuer that may or may not prove to
be correct. Such statements may be identified by reference to a future period or periods and the use of forwardlooking
terminology such as “may”, “will”, “could”, “believes”, “expects”, “anticipates”, “continues”,
“intends”, “plans”, or similar terms. Consequently, future results may differ from the Issuer’s expectations due
to a variety of factors, including (but not limited to) the economic environment and regulatory changes in the
residential mortgage industry in the United Kingdom. Moreover, past financial performance should not be
considered a reliable indicator of future performance and prospective purchasers of the Notes are cautioned that
any such statements are not guarantees of performance and involve risks and uncertainties, many of which are
beyond the control of the Issuer. The Managers have not attempted to verify any such statements, nor do they
make any representations, express or implied, with respect thereto. All written and oral forward-looking
statements attributable to the Issuer or persons acting on the Issuer’s behalf are expressly qualified in their
entirety by the cautionary statements set forth in this paragraph. The Issuer will not undertake any obligation to
publish any revisions to these forward-looking statements to reflect circumstances or events occurring after the
date of this Prospectus.
v

AVAILABLE INFORMATION
To permit compliance with Rule 144A in connection with the sale of the Rule 144A Notes, the Issuer will be
required to furnish, upon request of a holder of such Note, or any beneficial owner thereof, to such holder or
beneficial owner and a prospective purchaser designated by such holder or beneficial owner the information
required to be delivered under Rule 144A(d)(4) under the Securities Act if, at the time of the request, the Issuer
is neither a reporting company under Section 13 or Section 15(d) of the United States Securities Exchange Act
of 1934, as amended (the “Exchange Act”) nor exempt from reporting pursuant to Rule 12g3-2(b) under the
Exchange Act.
CIRCULAR 230 NOTICE
To ensure compliance with requirements imposed by the U.S. Internal Revenue Service (the “IRS”), we
inform you that any tax discussion herein was not written and is not intended to be used and cannot be
used by any taxpayer for purposes of avoiding United States federal tax penalties that may be imposed on
the taxpayer. Any such tax discussion was written to support the promotion or marketing of the Notes to
be issued pursuant to this Prospectus. Each taxpayer should seek advice based on the taxpayer’s
particular circumstances from an independent tax adviser.
Notwithstanding any provision herein and the otherwise confidential nature of this Prospectus and its contents,
and effective from the date of commencement of discussion concerning this offering of Notes, each party hereto
(and each employee, representative, or other agent of such party) may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of this transaction and all materials of any kind
(including opinions of other tax analyses) that are provided to it relating to such tax treatment and tax structure,
except to the extent that any such disclosure could reasonably be expected to cause this offering not be in
compliance with securities laws. In addition, no person may disclose the name of or identifying information
with respect to any party identified herein or other non-public business or financial information that is unrelated
to the tax treatment or tax structure of this transaction without the prior consent of the Issuer. For purposes of
this paragraph, the tax treatment of this transaction is the purported or claimed U.S. federal income tax treatment
of this transaction, and the tax structure of this transaction is any fact that may be relevant to understanding the
purported or claimed U.S. federal income tax treatment of this transaction.
vi

TABLE OF CONTENTS
Page
TRANSACTION OVERVIEW.............................................................................................................................1
SUMMARY INFORMATION..............................................................................................................................2
RISK FACTORS .................................................................................................................................................20
CREDIT STRUCTURE ......................................................................................................................................33
THE SELLERS AND ORIGINATORS ..............................................................................................................53
THE ISSUER.......................................................................................................................................................55
THE MORTGAGE ADMINISTRATOR AND THE CASH/BOND ADMINISTRATOR................................57
THE STANDBY MORTGAGE ADMINISTRATOR AND THE STANDBY CASH/BOND
ADMINISTRATOR..............................................................................................................................59
THE ACCOUNT BANK AND THE GIC PROVIDER......................................................................................60
THE LIQUIDITY FACILITY PROVIDER ........................................................................................................61
THE CURRENCY SWAPS COUNTERPARTY, THE CURRENCY SWAPS GUARANTOR, THE
BULLET CAP COUNTERPARTY, THE BULLET CAP GUARANTOR, THE
FIXED/FLOATING SWAP COUNTERPARTY, THE FIXED/FLOATING SWAP
GUARANTOR, THE BBR SWAP COUNTERPARTY AND THE BBR SWAP
GUARANTOR......................................................................................................................................62
THE TRUSTEE...................................................................................................................................................63
THIRD PARTY INFORMATION ......................................................................................................................64
THE MORTGAGE POOL ..................................................................................................................................65
CHARACTERISTICS OF THE PROVISIONAL MORTGAGE POOL............................................................88
TITLE TO THE MORTGAGE POOL ................................................................................................................98
REGULATION OF THE UK RESIDENTIAL MORTGAGE MARKET........................................................115
USE OF PROCEEDS ........................................................................................................................................124
WEIGHTED AVERAGE LIVES OF THE NOTES .........................................................................................125
DESCRIPTION OF THE INSTRUMENTS......................................................................................................127
TERMS AND CONDITIONS OF THE NOTES ..............................................................................................134
TERMS AND CONDITIONS OF THE RESIDUAL CERTIFICATES...........................................................170
UNITED KINGDOM TAXATION...................................................................................................................191
UNITED STATES TAXATION .......................................................................................................................193
SUBSCRIPTION AND SALE ..........................................................................................................................198
TRANSFER RESTRICTIONS..........................................................................................................................203
CERTAIN ERISA CONSIDERATIONS..........................................................................................................208
GENERAL INFORMATION............................................................................................................................210
GLOSSARY ......................................................................................................................................................213
vii

TRANSACTION OVERVIEW
OWNERSHIP STRUCTURE
SHARE TRUSTEE
Wilmington Trust SP
Services (London) Limited
PARENT
100%
Eurosail-UK 2007-3BL Parent
Limited
ISSUER
100%
(beneficial)
Eurosail-UK 2007-3BL plc
TRANSACTION
STRUCTURE
SOUTHERN PACIFIC
PERSONAL LOANS
LIMITED
SELLERS
Sale of Loans
BULLET CAP
COUNTERPARTY
BBR SWAP
COUNTERPARTY
Payments under
Bullet Cap
Transaction
PREFERRED
MORTGAGES
LIMITED
SOUTHERN
PACIFIC
MORTGAGE
LIMITED
AUTHORISED
INVESTMENTS
FIXED/FLOATING
SWAP
COUNTERPARTY
Payments under
BBR Swap
Transaction
Payments under
Fixed/Floating Swap
Transaction
Consideration (including
Residual Certificates)
ISSUER
Sale of
Mortgage Pool
Interest of, and
Interest on,
Funds
Principal
and Interest
GIC ACCOUNT
LIQUIDITY FACILITY
CURRENCY SWAPS
COUNTERPARTY
Payments under Currency
Swap Transactions
Eurosail-UK 2007-3BL plc
Liquidity
Drawings
Security for
Secured
Creditors
Notes
Issue
Proceeds
Principal and
Interest on
Notes
TRUSTEE
THE NOTES
1

SUMMARY INFORMATION
The information set out below is a summary of the principal features of the issue of the Instruments. This
summary should be read in conjunction with, and is qualified in its entirety by reference to, the detailed
information presented elsewhere in this Prospectus.
1. THE PARTIES
Issuer, Sellers and Originators:
The Issuer has been established to acquire a portfolio of
residential mortgage loans (individually the “Loans”, collectively
and, together with the Collateral Security (as defined in Condition
2 (Status, Security and Administration)) relating thereto, the
“Mortgage Pool”):
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
originated by Matlock London Limited (formerly
Matlock Bank Limited) (“Matlock”) trading as London
Mortgage Company (by itself or in association with a
Remote Processor (as defined under “Title to the
Mortgage Pool” below)) and acquired by Southern
Pacific Mortgage Limited (“SPML”);
originated by Langersal No.2 Limited (formerly London
Personal Loans Limited) (“Langersal”) and acquired by
SPML;
originated by SPML by itself or trading as the London
Mortgage Company or in association with a Branded
Lender or a Remote Processor (each as defined under
“Title to the Mortgage Pool” below);
originated by one of the Correspondent Lenders (as
defined under “Title to the Mortgage Pool” below) and
acquired by SPML;
originated by Southern Pacific Personal Loans Limited
(“SPPL”) by itself or trading as London Personal Loans;
originated by Preferred Mortgages Limited (“PML”) by
itself or in association with a Branded Lender or a
Remote Processor;
originated by Amber Homeloans Limited (“Amber”)
and acquired by SPML; and
originated by Alliance & Leicester plc (“A&L”) and
acquired by SPML.
In this Prospectus:
(i)
(ii)
each of SPML and PML, in their respective capacities as
sellers of the Loans to the Issuer are referred to as a
“Seller” and together the “Sellers”; and
each of SPML, SPPL, PML, each Correspondent Lender,
Amber, A&L, Matlock and Langersal (in their respective
capacities as an originator of the Loans), are referred to
as an “Originator” and together the “Originators”.
The acquisition of the Mortgage Pool by the Issuer will be
2

financed by the issue of the Notes.
Parent and Share Trustee:
Corporate Services Provider:
The Issuer’s entire issued share capital is held by Eurosail-UK
2007-3BL Parent Limited (the “Parent”) except for one share
held by Wilmington Trust SP Services (London) Limited (the
“Share Trustee”) as nominee of the Parent under the terms of a
share trust dated 24 May 2007 (the “Share Trust”). The entire
issued share capital of the Parent is held by the Share Trustee
under the terms of a trust established under English law by a
declaration of trust dated 24 May 2007 (the “Charitable Share
Trust”) for the benefit of certain charitable purposes.
Wilmington Trust SP Services (London) Limited (in such
capacity, the “Corporate Services Provider”) will be appointed
as corporate services provider to the Issuer under the terms of an
accession agreement to the Corporate Services Agreement.
OptionCo: Eurosail Options Limited (registered number 4071454)
(“OptionCo”) will be appointed as the company with the benefit
of the Post-Enforcement Call Option.
Mortgage Administrator:
Standby Mortgage Administrator:
Cash Bond Administrator:
Capstone Mortgage Services Limited (“Capstone”) will be
appointed as mortgage administrator (in such capacity, the
“Mortgage Administrator”, which expression includes any other
mortgage administrator appointed in respect of the Instruments)
under the terms of the Master Securitisation Agreement (as
defined below) and the mortgage administration agreement set out
in schedule 3 of the Master Securitisation Agreement (the
“Mortgage Administration Agreement”) as agent for the Issuer
to administer the Mortgage Pool on behalf of the Issuer (see “The
Mortgage Administrator” below). Under the terms of the
Delegation Agreements, Capstone will delegate certain of its
duties under the Mortgage Administration Agreement to Vertex
Mortgage Services Limited (“Vertex”), to Lightfoots Solicitors
(“Lightfoots”) and to Homeloan Management Limited (“HML”).
HML will be appointed as standby mortgage administrator (in
such capacity, the “Standby Mortgage Administrator”, which
expression includes any other standby mortgage administrator
appointed in respect of the Instruments) under the terms of the
Mortgage Administration Agreement, such that HML will assume
the mortgage administration functions if the appointment of the
Mortgage Administrator is terminated in certain circumstances set
out in the Mortgage Administration Agreement (see “The Standby
Mortgage Administrator and the Standby Cash/Bond
Administrator” below).
Capstone (in such capacity, the “Cash/Bond Administrator”,
which expression includes any other cash/bond administrator
appointed in respect of the Instruments) will be appointed under
the terms of the Master Securitisation Agreement and the
cash/bond administration agreement set out in schedule 4 of the
Master Securitisation Agreement (the “Cash/Bond
Administration Agreement”) to manage all cash transactions
and maintain all cash management ledgers as agent for the Issuer
and the Trustee (see “The Cash/Bond Administrator” below).
Under the terms of the Delegation Agreements, Capstone will
delegate certain of its duties under the Cash/Bond Administration
Agreement to Wells Fargo Securitisation Services Limited
3

(“Wells Fargo”).
Standby Cash/Bond Administrator:
Trustee:
Principal Paying Agent, Exchange Agent
and Agent Bank:
Irish Paying Agent:
U.S. Paying Agent:
Registrar and Transfer Agent:
HML will be appointed as standby cash/bond administrator (in
such capacity, the “Standby Cash/Bond Administrator”, which
expression includes any other standby cash/bond administrator
appointed in respect of the Instruments) under the terms of the
Cash/Bond Administration Agreement, such that, if the
appointment of the Cash/Bond Administrator is terminated in
certain circumstances set out in the Cash/Bond Administration
Agreement, the Standby Cash/Bond Administrator will assume
the cash/bond administration functions (see “The Standby
Mortgage Administrator and the Standby Cash/Bond
Administrator” below).
BNY Corporate Trustee Services Limited (whose registered office
is at One Canada Square, London E14 5AL) will be appointed as
trustee for the Noteholders and as trustee for the Residual
Certificateholders in relation to their entitlement to RC
Distributions (in such capacity, the “Trustee”) pursuant to a trust
deed (the “Trust Deed”) to be entered into on or about the
Closing Date between the Issuer and the Trustee. The Trustee
will hold the security granted by the Issuer under the Deed of
Charge for the benefit of, among others, the Instrumentholders.
The Bank of New York, London Branch (whose registered office
is at One Canada Square, London E14 5AL) will be appointed as
principal paying agent (in such capacity, the “Principal Paying
Agent”, which expression includes any other principal paying
agent appointed in respect of the Instruments), as currency
exchange agent (in such capacity, the “Exchange Agent”, which
expression includes any other currency exchange agent appointed
in respect of the Instruments) and as agent bank (in such capacity,
the “Agent Bank”, which expression includes any other agent
bank appointed in respect of the Instruments) in respect of the
Instruments under the terms of the Master Securitisation
Agreement and the paying agency agreement set out in schedule 8
of the Master Securitisation Agreement (the “Paying Agency
Agreement”).
BNY Financial Services PLC (whose address is at 70 Sir John
Rogerson’s Quay, Dublin 2, Ireland) will be appointed as Irish
paying agent in respect of the Instruments (in such capacity, the
“Irish Paying Agent”, which expression includes any other Irish
paying agent appointed in respect of the Instruments) pursuant to
the Paying Agency Agreement. The Irish Paying Agent will
make payments to the Instrumentholders in certain circumstances
where such Instrumentholders are situate in Ireland.
The Bank of New York, New York Branch (whose address is at
101 Barclay Street, New York, NY 10286, U.S.A.) will be
appointed as U.S. paying agent in respect of the Instruments (in
such capacity, the “U.S. Paying Agent”, which expression
includes any other U.S. paying agent appointed in respect of the
Instruments) pursuant to the Paying Agency Agreement.
The Bank of New York (Luxembourg) S.A. (whose address is at
Aerogolf Center, 1A Hoehenhof, L-1736 Senningerberg,
Luxembourg) will be appointed as registrar (in such capacity, the
“Registrar”, which expression includes any other registrar
appointed in respect of the Instruments) and as transfer agent (in
4

such capacity, the “Transfer Agent”, which expression includes
any other transfer agent appointed in respect of the Instruments)
in respect of the Instruments pursuant to the Paying Agency
Agreement.
Account Bank:
GIC Provider:
Investment Administrator:
Liquidity Facility Provider:
Bullet Cap Counterparty and Bullet Cap
Guarantor:
Fixed/Floating Swap Counterparty and
Fixed/Floating Swap Guarantor:
Danske Bank A/S, London Branch whose address is at 75 King
William Street, London EC4N 7DT will be appointed as Account
Bank (the “Account Bank”) under the terms of the Master
Securitisation Agreement and the bank agreement set out in
schedule 5 of the Master Securitisation Agreement (the “Bank
Agreement”).
Danske Bank A/S, London Branch whose address is at 75 King
William Street, London EC3N 7DT will be appointed as GIC
provider (the “GIC Provider”) under the terms of the Master
Securitisation Agreement and the guaranteed investment contract
set out in schedule 6 of the Master Securitisation Agreement (the
“GIC”).
Subject to certain conditions, including each of the Rating
Agencies confirming that the then-current ratings of the Notes
would not be downgraded as a result, the Issuer will enter into an
investment administration agreement (the “Investment
Administration Agreement”) with Lehman Brothers Asset
Management (Europe) Limited (whose registered office is at 25
Bank Street, London E14 5LE) (the “Investment
Administrator”) which will determine from time to time, in
accordance with certain agreed criteria, the investments in which
cash from time to time standing to the credit of the Transaction
Account and/or the GIC Account should be invested.
Lloyds TSB Bank plc acting through its offices at 10 Gresham
Street, London EC2V 7AE will be appointed as Liquidity Facility
Provider (the “Liquidity Facility Provider”) pursuant to the
terms of the Master Securitisation Agreement and the liquidity
facility agreement set out in schedule 7 of the Master
Securitisation Agreement (the “Liquidity Facility Agreement”).
Lehman Brothers Special Financing Inc. (whose address is at
2711 Centerville Road, Suite 400, Wilmington, Delaware, 19808,
USA) will be appointed as the Bullet Cap Counterparty (the
“Bullet Cap Counterparty”) under the terms of the Bullet Cap
Agreement (as defined in “The Bullet Cap Agreement” below).
Lehman Brothers Holdings Inc. (the “Bullet Cap Guarantor”)
will, on or about the Closing Date, enter into a guarantee in
respect of the Bullet Cap Agreement. The Bullet Cap Guarantor
will not be a party to the Bullet Cap Agreement.
Lehman Brothers Special Financing Inc. (whose registered
address is at 2711 Centerville Road, Suite 400, Wilmington,
Delaware, 19808, USA) will be appointed as the fixed/floating
swap counterparty (the “Fixed/Floating Swap Counterparty”,
under the terms of the Fixed/Floating Swap Agreement (as
defined in “The Fixed Floating Swap Agreement” below).
Lehman Brothers Holdings Inc. (the “Fixed/Floating Swap
Guarantor”) will, on or about the Closing Date, enter into a
guarantee in respect of the Fixed/Floating Swap Agreement (the
“Fixed/Floating Swap Guarantee”). The Fixed/Floating Swap
Guarantor will not be a party to the Fixed/Floating Swap
5

Agreement.
BBR Swap Counterparty and BBR
Swap Guarantor:
Lehman Brothers Special Financing Inc. (whose registered
address is at 2711 Centerville Road, Suite 400, Wilmington,
Delaware, 19808, USA) will be appointed as the BBR swap
counterparty (the “BBR Swap Counterparty”, and, together with
the Bullet Cap Counterparty and the Fixed/Floating Swap
Counterparty, the “Hedge Counterparties” and each a “Hedge
Counterparty”) under the terms of the BBR Swap Agreement (as
defined in “The BBR Swap Agreement” below). Lehman Brothers
Holdings Inc. (the “BBR Swap Guarantor”) will enter into on or
about the Closing Date a guarantee in respect of the BBR Swap
Agreement (the “BBR Swap Guarantee”) in relation to the
obligations of the BBR Swap Counterparty under the BBR Swap
Agreement. The BBR Swap Guarantor will not be party to the
BBR Swap Agreement.
Each of the BBR Swap Guarantor, the Bullet Cap Guarantor and
the Fixed/Floating Swap Guarantor is a “Hedge Guarantor”.
Currency Swaps Counterparty and
Currency Swaps Guarantor:
Transaction Parties:
Lehman Brothers Special Financing Inc. (whose registered office
is at 2711 Centerville Road, Suite 400, Wilmington, Delaware,
19808, USA) will be appointed as the currency swaps
counterparty (the “Currency Swaps Counterparty”) under the
terms of each of the Currency Swap Agreements (as defined in
“The Currency Swap Agreements” below). Lehman Brothers
Holdings Inc. (the “Currency Swaps Guarantor”) will, on or
about the Closing Date, enter into a guarantee in respect of each
of the Currency Swap Agreements. The Currency Swaps
Guarantor will not be a party to the Currency Swap Agreements.
The Issuer, the Sellers, the OptionCo, the Corporate Services
Provider, the Mortgage Administrator, the Standby Mortgage
Administrator, the Cash/Bond Administrator, the Standby
Cash/Bond Administrator, the Trustee, the Paying Agents, the
Exchange Agent, the Agent Bank, the Registrar, the Transfer
Agents, the Account Bank, the GIC Provider, the Investment
Administrator, the Liquidity Facility Provider, the Bullet Cap
Counterparty, the Bullet Cap Guarantor, the Fixed/Floating Swap
Counterparty, the Fixed/Floating Swap Guarantor, the BBR Swap
Counterparty, the BBR Swap Guarantor, the Currency Swaps
Counterparty and the Currency Swaps Guarantor are together the
“Transaction Parties” and each a “Transaction Party”.
2. THE TRANSACTION DOCUMENTS
Corporate Services Agreement:
Pursuant to an accession agreement (to be dated the Closing Date)
to a corporate services agreement dated 19 December 2001 (the
“Corporate Services Agreement”), the Corporate Services
Provider will agree to provide certain administrative services to
the Issuer. The Issuer will pay a fee to the Corporate Services
Provider for the provision of such services. Either the Corporate
Services Provider or the Trustee on behalf of the Issuer may, upon
the giving of notice and the expiration of the relevant notice
period (if applicable), terminate the appointment of the Corporate
Services Provider under the Corporate Services Agreement. Any
substitute corporate services provider shall be appointed by, inter
alios, the Issuer. No termination of the appointment of the
Corporate Services Provider shall take effect until a successor
6

corporate services provider has been appointed.
Master Securitisation Agreement:
Mortgage Administration Agreement
and Cash/Bond Administration
Agreement:
To facilitate the administration and servicing of the Mortgage
Pool, the Issuer and the Trustee, inter alios, will enter into a
master securitisation agreement (the “Master Securitisation
Agreement”) to be dated on or about the Closing Date, the
schedules to which will contain the following agreements, all of
which come into effect on the date of the Master Securitisation
Agreement: the Paying Agency Agreement, the Cash/Bond
Administration Agreement, the Mortgage Administration
Agreement, the Liquidity Facility Agreement, the Post
Enforcement Call Option Agreement, the Bank Agreement and
the GIC (each as defined herein).
The Mortgage Administrator and the Cash/Bond Administrator
will be obliged to report on a regular basis to the Trustee and the
Issuer on the performance and status of the Mortgage Pool, the
administration of the Mortgage Pool and other matters relating to
their respective administrative functions as described herein.
Neither the Mortgage Administrator nor the Cash/Bond
Administrator will be responsible for payment of principal or
interest on the Notes, or for payment of the RC Distributions in
respect of the Residual Certificates.
The Issuer is obliged to establish and maintain a system of cash
ledgers (each, a “Ledger” and, together, the “Ledgers”) to
record, allocate and disburse its funds for particular purposes. The
Cash/Bond Administrator will, pursuant to the terms of the
Cash/Bond Administration Agreement, maintain such Ledgers on
the Issuer’s behalf. The amounts standing to the credit, at any
time, of the Ledgers will, together, represent all sums standing to
the credit of the Bank Accounts or invested in Authorised
Investments.
The Issuer will also establish and maintain a provisioning ledger
(the “Principal Deficiency Ledger”) comprised of five subledgers
(respectively the “A Principal Deficiency Ledger”, the
“B Principal Deficiency Ledger”, the “C Principal Deficiency
Ledger”, the “D Principal Deficiency Ledger” and the “E1c
Principal Deficiency Ledger”) to record certain amounts (for
example, losses incurred in respect of the Loans) which, at certain
times, need to be taken into account and provided for in allocating
and disbursing the Issuer’s funds (see further under “Credit
Structure – Principal Deficiency Ledger”).
The Ledgers will be used to monitor the receipt and subsequent
utilisation of cash available to the Issuer from time to time and,
along with the Principal Deficiency Ledger, will be credited and
debited in the manner described under Condition 2(g) (Status,
Security and Administration) and “Credit Structure” below.
7

Delegation Agreements:
Capstone and Wells Fargo have entered into a delegation
agreement (the “Wells Fargo Delegation Agreement”). On or
after the Closing Date, a supplement to the Wells Fargo
Delegation Agreement will be entered into by Capstone and Wells
Fargo pursuant to which Capstone will delegate certain of its
obligations under the Cash/Bond Administration Agreement to
Wells Fargo.
Capstone and Vertex have entered into a delegation agreement
(the “Vertex Delegation Agreement”). On or after the Closing
Date, a supplement to the Vertex Delegation Agreement will be
entered into by Capstone and Vertex pursuant to which Capstone
will delegate certain of its obligations under the Mortgage
Administration Agreement to Vertex.
Capstone and HML will, on or after the Closing Date, enter into a
delegation agreement (the “HML Delegation Agreement”)
pursuant to which Capstone will delegate certain of its obligations
under the Mortgage Administration Agreement to HML.
Capstone and Lightfoots have entered into a servicing agreement
(the “Lightfoots Delegation Agreement” and together with the
Wells Fargo Delegation Agreement, the Vertex Delegation
Agreement and the HML Delegation Agreement, the “Delegation
Agreements”) pursuant to which certain obligations of Capstone
under the Mortgage Administration Agreement will be undertaken
by Lightfoots.
Liquidity Facility Agreement:
Bank Agreement:
The Issuer will make drawings under the Liquidity Facility on any
Interest Payment Date in order to meet certain shortfalls on
interest payments due under the Notes. See “Credit Structure –
Liquidity Facility” below.
Payments by Borrowers in respect of amounts due:
(i)
(ii)
under the SPML Loans and the A&L Loans will be paid
into: (A) an account held by SPML with Barclays Bank
PLC (whose registered office is at 1 Churchill Place,
London E14 5HP) (“Barclays”) and designated as the
Eurosail-UK 2007-3BL SPML Trust Collection Account
(the “Eurosail-UK 2007-3BL SPML Trust Collection
Account”); or (B) an account held by SPPL with
Barclays and designated as the Eurosail-UK 2007-3BL
SPPL Trust Collection Account (the “Eurosail-UK
2007-3BL SPPL Trust Collection Account”); (C) an
account held by SPML t/a London Mortgage Company
with HSBC Bank plc (whose registered office is at 8
Canada Square, London E14 5HQ) (“HSBC”) and
designated as the First Mortgage Collection Account (the
“First Mortgage Collection Account”) or (D) an
account held by SPML t/a London Personal Loans with
HSBC and designated the Second Mortgage Collection
Account (the “Second Mortgage Collection Account”);
under the PML Loans will be paid into the collection
accounts in the name of PMCL (the “PMCL Collection
Accounts”) and held at Barclays; and
8

(iii)
under the Amber Loans will be paid into the collection
account in the name of SPML (the “Amber Collection
Account”) and held at Barclays,
in each case, as described further under “Credit Structure –
Collection Accounts”.
Cleared amounts received into the First Mortgage Collection
Account and the Second Mortgage Collection Account will be
transferred by a nightly automatic transfer into an account held by
SPML t/a London Mortgage Company with HSBC and
designated the First Mortgage Redemption Account (the “First
Mortgage Redemption Account” and, together with the
Eurosail-UK 2007-3BL SPML Trust Collection Account, the
Eurosail-UK 2007-3BL SPPL Trust Collection Account, the First
Mortgage Collection Account, the Second Mortgage Collection
Account, the SPML Collection Sweep Account, the Amber
Collection Account and the PMCL Collection Accounts, the
“Collection Accounts”, and each a “Collection Account”).
Cleared amounts received into any of the Collection Accounts
(other than the First Mortgage Collection Account, the Second
Mortgage Collection Account and the SPML Collection Sweep
Account) which relate to amounts due under the Loans will be
transferred daily into the Transaction Account (as defined and
further described under “Credit Structure - Transaction Account,
Euro Account and Dollar Account”) of the Issuer held at the
Account Bank.
The Issuer will also maintain a Euro Account (as defined and
further described under “Credit Structure - Transaction Account,
Euro Account and Dollar Account”) for holding funds in euro in
connection with the Euro Notes and a Dollar Account (as defined
and further described under “Credit Structure - Transaction
Account, Euro Account and Dollar Account”) for holding funds in
dollars in connection with the Dollar Notes.
GIC:
Bullet Cap Agreement:
Amounts standing to the credit of the Transaction Account will, to
the extent not invested in Authorised Investments pursuant to the
Investment Administration Agreement, be transferred on a daily
basis into accounts in the name of the Issuer maintained with the
GIC Provider (all such accounts, the “GIC Account”). See
“Credit Structure - GIC Account” below.
The Bullet Cap Counterparty and the Issuer will enter into the
Bullet Cap Transaction (as defined in “Credit Structure - Bullet
Cap Transaction” below) which will be subject to the terms of an
agreement entered into between the Bullet Cap Counterparty and
the Issuer in the form of the International Swaps and Derivatives
Association, Inc. (“ISDA”) 1992 Master Agreement
(Multicurrency - Cross Border) together with the schedules
thereto and the confirmations thereunder (the “Bullet Cap
Agreement”).
The Bullet Cap Transaciton will be entered into under the same
ISDA 1992 Master Agreement and Schedule as the
Fixed/Floating Swap Transaction, the BBR Swap Transaction and
the Currency Swap Transactions and references in this Prospectus
to the Bullet Cap Agreement, the Fixed/Floating Swap
Agreement, the BBR Swap Agreement and/or the Currency Swap
Agreements shall be to the same ISDA 1992 Master Agreement
9

and Schedule.
The Bullet Cap Guarantor will enter into a guarantee in respect of
the Bullet Cap Agreement (a “Bullet Cap Guarantee”) in favour
of the Issuer, on or about the Closing Date in relation to the
obligations of the Bullet Cap Counterparty under the Bullet Cap
Agreement.
The interest rate payable under the LIBOR Linked Loans is
calculated by reference to Loan LIBOR and the interest rate
payable under the BBR Linked Loans is calculated by reference
to Loan BBR. The Issuer may be subject to a higher risk of
default in payment by a Borrower under a LIBOR Linked Loan or
a BBR Linked Loan due to an increase in Loan LIBOR or Loan
BBR (as applicable). The purpose of the Bullet Cap Agreement is
to allow the Issuer to mitigate its exposure to such potential
default under a LIBOR Linked Loan due to an increase in Loan
LIBOR and/or under a BBR Linked Loan due to an increase in
Loan BBR.
Fixed/Floating Swap Agreement:
The Issuer and the Fixed/Floating Swap Counterparty will enter
into the Fixed/Floating Swap Transaction (as defined in “Credit
Structure - Fixed/Floating Swap Transaction” below) which will
be subject to the terms of an agreement entered into between the
Fixed/Floating Swap Counterparty and the Issuer in the form of
an ISDA 1992 Master Agreement (Multicurrency - Cross Border)
together with the schedules thereto and the confirmations
thereunder (the “Fixed/Floating Swap Agreement”).
The Fixed/Floating Swap Transaction will be entered into under
the same ISDA 1992 Master Agreement and Schedule as the
Bullet Cap Transaction, the BBR Swap Transaction and the
Currency Swap Transactions and references in this Prospectus to
the Bullet Cap Agreement, the Fixed/Floating Swap Agreement,
the BBR Swap Agreement and/or the Currency Swap Agreements
shall be to the same ISDA 1992 Master Agreement and Schedule.
The Fixed/Floating Swap Guarantor will enter into a guarantee
(the “Fixed/Floating Swap Guarantee”) in favour of the Issuer
on or about the Closing Date in relation to the obligations of the
Fixed/Floating Swap Counterparty under the Fixed/Floating Swap
Agreement.
Under the Fixed/Floating Swap Transaction, on each Interest
Payment Date from and including the Interest Payment Date
falling in December 2007:
(a)
(b)
the Issuer will make a payment to the Fixed/Floating
Swap Counterparty calculated by applying the Weighted
Average Fixed Rate to the Fixed/Floating Notional
Amount; and
the Fixed/Floating Swap Counterparty will make
payments to the Issuer calculated by applying Note
Sterling LIBOR in respect of the immediately preceding
Interest Period and a margin to the Fixed/Floating
Notional Amount.
BBR Swap Agreement:
The Issuer and the BBR Swap Counterparty will enter into the
BBR Swap Transaction (as defined in “Credit Structure - BBR
10

Swap Transaction” below) which will be subject to the terms of
an agreement entered into between the BBR Swap Counterparty
and the Issuer in the form of an ISDA 1992 Master Agreement
(Multicurrency - Cross Border) together with the schedules
thereto and confirmations thereunder (the “BBR Swap
Agreement”).
The BBR Swap Transaction will be entered into under the same
ISDA 1992 Master Agreement and Schedule as the Bullet Cap
Transaction, the Fixed/Floating Swap Transaction and the
Currency Swap Transactions and references in this Prospectus to
the Bullet Cap Agreement, the Fixed/Floating Swap Agreement,
the BBR Swap Agreement and/or the Currency Swap Agreements
shall be to the same ISDA 1992 Master Agreement and Schedule.
The interest rate payable under the BBR Linked Loans is
calculated by reference to Loan BBR whilst the interest rate
payable on the Notes is calculated by reference to the London
interbank offered rate (“LIBOR”) for three month sterling
deposits (or, in the case of the first Interest Period, the linear
interpolation of LIBOR for one month and two month sterling
deposits). There may be a discrepancy between Loan BBR and
LIBOR for three month sterling deposits. The purpose of the BBR
Swap Agreement is to allow the Issuer to mitigate its exposure to
such potential discrepancy between Loan BBR and LIBOR for
three month sterling deposits.
Under the BBR Swap Transaction, on each Interest Payment Date
from and including the Interest Payment Date falling in
September 2007:
(a)
(b)
the Issuer will make a payment to the BBR Swap
Counterparty calculated by applying the aggregate of the
Weighted Average BBR Rate and a margin to the BBR
Notional Amount; and
the BBR Swap Counterparty will make a payment to the
Issuer calculated by applying Note Sterling LIBOR in
respect of the immediately preceding Interest Period to
the BBR Notional Amount.
The BBR Swap Guarantor will enter into a guarantee (the “BBR
Swap Guarantee”) in favour of the Issuer on or about the
Closing Date in relation to the obligations of the BBR Swap
Counterparty under the BBR Swap Agreement.
Currency Swap Agreements:
The Currency Swaps Counterparty will provide the Issuer with
the benefit of swap transactions in relation to each Class of Euro
Notes (the “Euro Currency Swap Transactions”) and each
Class of Dollar Notes (the “Dollar Currency Swap
Transactions” and, together with the Euro Currency Swap
Transactions, the “Currency Swap Transactions”). The
Currency Swap Transactions will be subject to the terms of
separate agreements to be entered into between the Currency
Swaps Counterparty and the Issuer on or before the Closing Date
in the form of an ISDA 1992 Master Agreement (Multicurrency –
Cross Border) together with the schedules thereto and
confirmations thereunder (respectively, the “A Currency Swap
Agreement”, the “B Currency Swap Agreement”, the “C
Currency Swap Agreement” and the “D Currency Swap
11

Agreement” and collectively referred to as the “Currency Swap
Agreements”).
The Currency Swap Transactions will be entered into under the
same ISDA 1992 Master Agreement and Schedule as the Bullet
Cap Transaction, the Fixed/Floating Swap Transaction and the
BBR Swap Transaction and references in this Prospectus to the
Bullet Cap Agreement, the Fixed/Floating Swap Agreement, the
BBR Swap Agreement and/or the Currency Swap Agreements
shall be to the same ISDA 1992 Master Agreement and Schedule.
The Currency Swaps Guarantor will enter into a guarantee (the
“Currency Swap Guarantee”) in favour of the Issuer on or
about the Closing Date in relation to the obligations of the
Currency Swaps Counterparty under the Currency Swap
Agreements.
Payments made by Borrowers under the Loans will be made to
the Issuer in sterling. The purpose of the Currency Swap
Agreements is to protect the Issuer against currency risk as a
result of the amounts due under the Euro Notes being payable in
euro and the amounts due under the Dollar Notes being payable in
dollars.
Post Enforcement Call Option:
Pursuant to the terms of the Master Securitisation Agreement and
the post enforcement call option agreement set out in schedule 9
of the Master Securitisation Agreement (the “Post Enforcement
Call Option Agreement”), the Trustee will, on or about the
Closing Date, grant to OptionCo an option (the “Post
Enforcement Call Option”) to acquire all (but not some only) of
the A Notes, the B Notes, the C Notes, the D Notes and the E
Notes (plus accrued interest thereon) for a consideration of one
euro cent per Euro Note outstanding, one dollar cent per Dollar
Note outstanding and one penny per Sterling Note outstanding
(and for these purposes, each Global Note will be one Note)
following any enforcement of the Security (as described in
Condition 2(h) (Status, Security and Administration)) for the
Notes, after the date on which the Trustee determines that the
proceeds of such enforcement are insufficient, after payment of
all other claims ranking higher in priority to the A Notes, the B
Notes, the C Notes, the D Notes and the E Notes and pro rata
payment of all claims ranking in equal priority to the A Notes, the
B Notes, the C Notes, the D Notes and the E Notes and after the
application of any such proceeds to the A Notes, the B Notes, the
C Notes, the D Notes and the E Notes (in accordance with
Condition 2 (Status, Security and Administration)), to pay any
further amounts due in respect of the A Notes, the B Notes, the C
Notes, the D Notes and the E Notes.
The A Noteholders, the B Noteholders, the C Noteholders, the D
Noteholders and the E Noteholders will be bound by, and the
relevant Notes will be issued subject to, the terms of the Post
Enforcement Call Option granted to the OptionCo pursuant to the
terms and conditions of the Trust Deed and by Condition 5(j)
(Post Enforcement Call Option) and the Trustee will be
irrevocably authorised to enter into the Post Enforcement Call
Option Agreement with the OptionCo on behalf of the A
Noteholders, the B Noteholders, the C Noteholders, the D
Noteholders and the E Noteholders.
12

3. THE LOANS
The Mortgage Pool: The section of this Prospectus headed “The Mortgage Pool -
Characteristics of the Provisional Mortgage Pool” contains
information relating to a portfolio of loans, from which will be
selected the Loans which the Issuer will acquire on the Closing
Date. This information has been prepared in relation to a sample
of Loans and their related Collateral Security with aggregate
Principal Balance as at 30 April 2007 of £685,224,182.60 (the
“Provisional Mortgage Pool”). The portfolio of Loans and their
related Collateral Security to be purchased by the Issuer from the
Sellers on the Closing Date is referred to as the “Initial Mortgage
Pool” and will be selected from the Provisional Mortgage Pool.
Furthermore, Substitute Loans, Ported Loans, Newly-Originated
Loans and Prefunded Loans may, subject to certain conditions, be
acquired by the Issuer from the Sellers after the Closing Date.
As more particularly described under “The Mortgage Pool”
below, Loans within the Mortgage Pool from time to time will
consist of:
(a)
Loans originated by:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Matlock, trading as London Mortgage Company
(by itself or in association with a Remote
Processor) and acquired by SPML;
PML (by itself or in association with a Branded
Lender or a Remote Processor);
SPML (by itself or trading as London Mortgage
Company or in association with a Branded
Lender or a Remote Processor);
Correspondent Lenders and acquired by SPML;
A&L and acquired by SPML; and
Amber and acquired by SPML,
and in each case, secured (in England and Wales and Northern
Ireland) by a first ranking mortgage or charge or (in Scotland) by
a first ranking standard security on the relevant Property
(collectively, the “First Loans”); and
(b)
Loans originated by:
(i)
(ii)
(iii)
Langersal and acquired by SPML;
SPPL (by itself or trading as London Personal
Loans) and acquired by SPML; and
PML (by itself or in association with a Branded
Lender or a Remote Processor),
and in each case, are intended for the Borrowers’ general
personal use and secured by a second ranking mortgage
(in England and Wales) or by a second ranking standard
security (in Scotland) on the relevant Property where a
single lender holds all prior ranking mortgages or, as the
13

case may be, standard securities in respect of the relevant
Property (the “Second Loans”).
4. THE INSTRUMENTS
Notes:
In this document, the A1b Notes and the A1c Notes are
collectively referred to as the “A1 Notes”. The A2a Notes, the
A2b Notes and the A2c Notes are collectively referred to as the
“A2 Notes”. The A3a Notes and the A3c Notes are collectively
referred to as the “A3 Notes” and the A1 Notes, the A2 Notes and
the A3 Notes shall be together referred to as the “A Notes”. The
B1a Notes and the B1c Notes are collectively referred to as the “B
Notes”. The C1a Notes and the C1c Notes are collectively
referred to as the “C Notes”. The D1a Notes are also referred to
as the “D Notes”. The E1c Notes and the ETc Notes are
collectively referred to as the “E Notes”. The A2a Notes, the A3a
Notes, the B1a Notes, the C1a Notes and the D1a Notes are
collectively referred to as the “Euro Notes”. The A1b Notes and
the A2b Notes are collectively referred to as the “Dollar Notes”.
The A1c Notes, the A2c Notes, the A3c Notes, the B1c Notes, the
C1c Notes and the E Notes are collectively referred to as the
“Sterling Notes”. The Dollar Notes, the Sterling Notes and the
Euro Notes are together referred to as the “Notes” and the holders
thereof the “Noteholders”.
The B Notes, C Notes, D Notes and the E Notes are referred to as
the “Junior Notes”.
The ETc Notes are also referred to as the “Revenue Backed
Notes” and all Notes other than the Revenue Backed Notes are
referred to as the “Collateral Backed Notes”.
The Residual Certificates and the Notes together are referred to as
the “Instruments”. The Noteholders and the Residual
Certificateholders are together, the “Instrumentholders”.
Prior to enforcement: (a) payments of interest on the Notes will be
payable in arrear as described in Condition 4 (Interest) and from
the Available Revenue Fund in accordance with the Pre-
Enforcement Priority of Payments as set out in Condition 2(g)
(Status, Security and Administration) and (b) principal on the
Collateral Backed Notes will be payable from the Actual
Redemption Funds and, in the case of the Revenue Backed Notes
from the Available Revenue Fund.
Residual Certificates:
The Residual Certificates representing deferred consideration for
the acquisition of the Initial Mortgage Pool, are constituted by the
Trust Deed and have the benefit of Security but rank subordinate
to the Notes (other than in respect of their entitlement to
Prepayment Charges Receipts (which do not form part of the
Available Revenue Fund) and in their entitlement to RC Senior
Distributions (which rank senior to payments of principal on the
ETc Notes both pre and post enforcement)). Following
redemption of all of the Notes or an enforcement of the Notes
pursuant to Condition 10 (Enforcement of Notes) and disposal of
the Loans in the Mortgage Pool no termination payment or other
amount (other than amounts then payable in respect of the
Residual Revenue) will be payable in respect of the Residual
Certificates and, following the payment of any amounts then
payable in respect of the Residual Revenue, the Residual
14

Certificates shall no longer constitute a claim against the Issuer.
(See “Risk Factors – Residual Certificates” and “Terms and
Conditions of the Residual Certificates” below).
The Residual Certificates represent amounts payable to the
holders thereof in respect of the Residual Revenue received in
respect of the Mortgage Pool.
Form, registration and transfer of
Instruments:
The A Notes, the B Notes, the C Notes and the D Notes to be sold
within the United States to Qualified Institutional Buyers in
reliance on Rule 144A (the “Rule 144A Notes”) will each be
represented by a global note in fully registered form without
coupons attached (the “Rule 144A Global Notes”). It is expected
that the Rule 144A Global Notes will be deposited with the
Custodian and registered in the name of DTC or its nominee on or
about the Closing Date. For the avoidance of doubt, the E Notes
and the Residual Certificates will not be sold within the United
States to Qualified Institutional Buyers in reliance on Rule 144A.
The Notes to be sold in reliance on Regulation S (the “Reg S
Notes”) will each be represented by a global note in fully
registered form without coupons attached (the “Reg S Global
Notes”). The Reg S Global Notes, together with the Rule 144A
Global Notes, are referred to as the “Global Notes”.
It is expected that the Reg S Global Notes will be deposited with
the Common Depositary for Euroclear and Clearstream,
Luxembourg on or about the date of issue of the Notes.
Transfers of interests in the Global Notes will be subject to
certain restrictions. In addition, transferees of Global Notes
and the Residual Certificates will be deemed to have made
certain representations relating to compliance with all
applicable securities, ERISA and tax laws. See further
“Transfer Restrictions”.
A beneficial interest in a Reg S Global Note (other than the E
Notes) may be transferred to a person who takes delivery in the
form of a beneficial interest in the corresponding Rule 144A
Global Note only upon receipt by the Registrar of a written
certificate from the transferor (in the form provided in the Trust
Deed) to the effect that, among other things, such transfer is being
made to a person whom the transferor reasonably believes is a
Qualified Institutional Buyer.
Except in limited circumstances, the Instruments will not be
available in definitive form. For so long as a class of Reg S Notes
or Residual Certificates are represented by a Reg S Global Note
or Global Residual Certificate held by the Common Depositary,
such Reg S Global Note or Global Residual Certificate will be
transferable in accordance with the rules and procedures for the
time being of Euroclear and Clearstream, Luxembourg. For so
long as a class of Rule 144A Notes are represented by a Rule
144A Global Note held by the Custodian and registered in the
name of DTC or its nominee, such Rule 144A Global Note will be
transferable in accordance with the rules and procedures for the
time being of DTC.
The Notes represented by interests in a Reg S Global Note may be
exchanged only for interests in the corresponding Rule 144A
15

Global Note in connection with transfers to U.S. Persons who are
eligible to hold such Notes pursuant to Rule 144A and otherwise
in compliance with the Securities Act and upon appropriate
certification in the manner provided in the Trust Deed. Prior to
40 days after the later of the commencement of the offering and
the Closing Date (the “Distribution Compliance Period”), the
Notes represented by interests in a Rule 144A Global Note may
be exchanged only for interests in a corresponding Reg S Global
Note in connection with transfers to non-U.S. persons in a
transaction meeting the requirements of Rule 903 or 904 of
Regulation S under the Securities Act and otherwise in
compliance with the Securities Act and upon appropriate
certification in the manner provided in the Trust Deed.
Interest on the Notes:
Interest is payable on 13 September 2007 and thereafter quarterly
in arrear on the 13 th day of December, March, June and
September in each year, or if such day is not a Business Day (as
defined in the Conditions) the next succeeding Business Day
(each such date, an “Interest Payment Date”) on the Euro Notes
at an annual rate of the Euro Interbank Offered Rate
(“EURIBOR”) for three month euro deposits (or, in the case of
the first Interest Period, at an annual rate obtained by interpolation
of EURIBOR for one month and two month euro deposits) (“Note
EURIBOR”) plus a margin, on the Dollar Notes at an annual rate
of the London Interbank Offered Rate (“USD-LIBOR”) for three
month dollar deposits (or, in the case of the first Interest Period, at
an annual rate obtained by interpolation of USD-LIBOR for one
month and two month dollar deposits) (“Note USD-LIBOR”)
plus a margin, and on the Sterling Notes at an annual rate of
LIBOR for three month sterling deposits (or, in the case of the
first Interest Period, at an annual rate obtained by interpolation of
LIBOR for one month and two month sterling deposits) (“Note
Sterling LIBOR”) plus a margin. Each period from (and
including) an Interest Payment Date (or the Closing Date, as
defined below) to (but excluding) the next (or first) Interest
Payment Date is an “Interest Period”.
Interest in respect of Euro Notes and Sterling Notes represented
by a Reg S Global Note will (provided that customary
certification as to non-U.S. beneficial ownership has been
received) be payable in euro or sterling, respectively, and those
represented by a Rule 144A Global Note will be payable in
dollars (unless the holder of such Note has elected to receive
payments in euro or sterling, respectively). Interest in respect of
Dollar Notes will be payable in dollars.
RC Distributions:
Interest Determination Date:
An amount is payable on each Interest Payment Date on each
Residual Certificate equal to the total amount of Residual
Revenue divided by the number of Residual Certificates existing
on the relevant Interest Payment Date (such amount, an “RC
Distribution”).
The Rate of Interest payable from time to time in respect of the
Notes will be determined, in the case of the Sterling Notes on the
first day of the Interest Period to which the Rate of Interest shall
apply, in the case of the Euro Notes on a day which is two
TARGET Business Days before the first day of the Interest Period
to which the Rate of Interest shall apply, and in the case of the
Dollar Notes on a day which is two London Business Days before
the first day of the Interest Period to which the Rate of Interest
16

shall apply (each, an “Interest Determination Date”).
Withholding tax:
Redemption of Notes:
Payments of interest and principal with respect to the Notes and
payments of RC Distributions with respect to Residual
Certificates will be subject to any applicable withholding taxes
and neither the Issuer nor any other person will be obliged to pay
additional amounts in relation thereto. The applicability of any
withholding taxes is discussed further under “United Kingdom
Taxation” and “United States Taxation” below.
Prior to redemption on the final Interest Payment Date falling in
September 2027 (in the case of the A1 Notes) and June 2045 (in
the case of the A2 Notes, the A3 Notes, the B Notes, the C Notes,
the D Notes and the E Notes), the Notes will be subject to
mandatory and/or optional redemption in certain circumstances:
(a)
Early Redemption
(i)
(ii)
Provided it has sufficient funds, the Issuer will
redeem all (but not some only) of the Notes at
their Principal Amount Outstanding plus
accrued but unpaid interest in the event of
certain tax changes.
Upon receipt of notice from the Mortgage
Administrator that it intends to exercise its
option under the Mortgage Administration
Agreement in respect of the purchase of the
remaining Loans from the Issuer on any Interest
Payment Date following a date on which the
aggregate Sterling Equivalent Principal Amount
Outstanding of the Collateral Backed Notes is
less than 10 per cent. of the aggregate Sterling
Equivalent Principal Amount Outstanding of
the Collateral Backed Notes on the Closing
Date, the Issuer will redeem on such Interest
Payment Date all (but not some only) of the
Notes at their Principal Amount Outstanding
plus accrued but unpaid interest (see further
Condition 5(e) (Early Redemption)).
(b)
Mandatory Redemption in Part of the Notes
Prior to enforcement, the Notes will be subject to
mandatory redemption in part on each Interest Payment
Date in accordance with Condition 5(b) (Mandatory
redemption in part of the Collateral Backed Notes) and
Condition 5(c) (Mandatory redemption in part of the
Revenue Backed Notes). In the case of the Collateral
Backed Notes, this mandatory redemption in part will be
funded primarily by scheduled principal payments by the
Borrowers under the Loans and principal prepayments
(whether voluntarily by the Borrowers, as a result of
enforcement of security in respect of the related Property
or otherwise). In the case of the Revenue Backed Notes,
this mandatory redemption in part will be funded by
scheduled interest payments by the Borrowers under the
Loans.
17

(c)
Final Redemption
Unless previously redeemed or purchased and cancelled
the A1 Notes will be redeemed at their then Principal
Amount Outstanding on the Interest Payment Date
falling in September 2027 and the other Notes will be
redeemed at their then Principal Amount Outstanding on
the Interest Payment Date falling in June 2045 in each
case, in accordance with Condition 5(a) (Final
Redemption).
(d)
Cancellation of Residual Certificates
Subject to the prior payment to Residual
Certificateholders of all amounts then payable to them at
such time, the Residual Certificates will no longer
constitute a claim against the Issuer following a
redemption of all (but not some only) of the Notes.
(e)
Purchase
The Issuer will not be permitted to purchase any
Instruments.
Security for Instruments:
Pursuant to the Deed of Charge, the Instruments will be secured
by, inter alia, a first fixed charge over the Issuer’s interest in the
Loans, the Mortgages and certain other Collateral Security (as
more fully described in Condition 2(f) (Status, Security and
Administration)), an equitable assignment of the Issuer’s interests
in certain insurance contracts, an assignment of the benefits under
certain agreements, a first fixed charge over the Issuer’s interest
in certain bank accounts and investments and a floating charge
over all the assets and undertakings of the Issuer (the “Security”,
being further described in Condition 2(f) (Status, Security and
Administration)).
For the avoidance of doubt and notwithstanding the foregoing, the
Trustee shall hold the benefit of its security interest with respect
to the Prepayment Charges Receipts solely for the benefit of the
Residual Certificateholders.
Upon enforcement, in point of security, the Instruments will rank
as between themselves as follows: first, interest and principal on
the A Notes pari passu and pro rata; secondly, interest and
principal on the B Notes pari passu and pro rata; thirdly, interest
and principal on the C Notes pari passu and pro rata; fourthly,
interest and principal on the D Notes pari passu and pro rata;
fifthly, interest on the E Notes and principal on the E1c Notes
pari passu and pro rata; sixthly, RC Senior Distributions on the
Residual Certificates; seventhly, principal on the ETc Notes pari
passu and pro rata, and eighthly, any remaining RC Distributions
on the Residual Certificates pari passu and pro rata.
Maintenance of Ratings:
On issue, certain of the Notes are expected to be rated by
Standard & Poor’s Rating Services, a division of The McGraw-
Hill Companies, Inc. (“S&P”), by Fitch Ratings Ltd. (“Fitch”)
and Moody’s Investors Service Limited (“Moody’s” and, together
with S&P and Fitch, the “Rating Agencies”) as specified on the
first page of this document. The Residual Certificates will not be
18

ated.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision, suspension or
withdrawal at any time by one or more of the Rating
Agencies.
References in this Prospectus to a requirement, in any
circumstances, that the then-current ratings of the Notes are to be
maintained (or to words having a similar effect) shall be deemed
to incorporate a requirement that, in those circumstances, the
original ratings of the Notes would, but for any intervening
circumstance or circumstances which have caused them to be
reduced, be maintained.
Use of Proceeds:
The Issuer will apply the proceeds of the issue of the Notes (after
exchanging the euro proceeds and the dollar proceeds for sterling
under the relevant Currency Swap Agreements) to purchase the
Initial Mortgage Pool on the Closing Date, and to purchase the
Prefunded Loans (if any) and the Newly-Originated Loans (if
any) in the period from the Closing Date up to (and including) the
first Interest Payment Date, as more particularly described under
“Use of Proceeds” below.
The Issuer understands that each of the Sellers intends to apply all
or part of the amount it receives from the Issuer on the Closing
Date in or towards repayment of secured loan facilities granted to
its affiliates by an affiliate of Lehman Brothers International
(Europe).
19

RISK FACTORS
The following is a summary of certain aspects of the issue of the Instruments about which prospective
Instrumentholders should be aware. The summary is not intended to be exhaustive and prospective
Instrumentholders should read the detailed information set out elsewhere in this document.
1. CONSIDERATIONS RELATED TO THE LOANS
Borrowers
The Loans in the Mortgage Pool will have been underwritten in accordance with the Lending Criteria (as
defined in “The Mortgage Pool - Lending Criteria” below) on terms generally consistent with those used by
residential mortgage lenders lending to borrowers who do not satisfy the requirements of building societies or
high street banks. The Mortgage Pool may include Loans made to Borrowers who may previously have been
subject to (i) a county court judgment or the Northern Irish or Scottish equivalent; (ii) an individual voluntary
arrangement or bankruptcy order which has been discharged; or (iii) Borrowers who are self-employed.
However, the Lending Criteria take into account, inter alia, a potential borrower’s credit history, employment
history and status, repayment ability and debt service to income ratio and are utilised with a view, in part, to
mitigating the risks in lending to Borrowers in the foregoing categories.
In a limited number of cases, more than one Loan to the same Borrower (with each Loan being secured on a
separate property) is included within the Provisional Mortgage Pool and further occurrences of the same may
arise when Newly-Originated Loans, Ported Loans, Substitute Loans or Prefunded Loans are transferred into the
Mortgage Pool from time to time (in each case in accordance with the terms of the Mortgage Sale Agreement
between, inter alios, the Sellers, the Issuer and the Trustee (the “Mortgage Sale Agreement”) and/or the
Mortgage Administration Agreement, as appropriate).
Bankruptcy of Borrowers
General economic conditions and other factors (which may not affect property values) have an impact on the
ability of Borrowers to repay Loans. Loss of earnings, illness, divorce and other similar factors can lead to an
increase in delinquencies and bankruptcy filings by Borrowers, which may result in a reduction in payments by
such Borrowers on their Loans and could reduce the Issuer’s ability to service payments on the Notes and may
reduce the RC Distributions on the Residual Certificates.
The individual bankruptcy provisions of the Enterprise Act 2002 (the “Enterprise Act”) (which came into force
on 1 April 2004) have reduced the minimum period prior to a bankrupt’s discharge. This appears to have led to
an increased number of individual bankruptcies when compared to the period prior to that date. If this trend
continues or accelerates, the Issuer’s ability to service payments on the Instruments would likely be reduced.
Characteristics of the Loans
The Initial Mortgage Pool will comprise of Loans and their related Collateral Security originated on or prior to
30 April 2007 selected by the Sellers from the Provisional Mortgage Pool. The Provisional Mortgage Pool
consists of Loans and their related Collateral Security, certain characteristics of which are described in
“Characteristics of the Provisional Mortgage Pool” below. There can be no assurance that on the date of
purchase by the Issuer the characteristics of the Initial Mortgage Pool will correspond with that in the
Provisional Mortgage Pool or that any Substitute Loans, Prefunded Loans, Newly Originated Loans or Ported
Loans acquired by the Issuer after the Closing Date will have the same characteristics as exhibited by the
Provisional Mortgage Pool.
Warranties
None of the Issuer, the Managers or the Trustee has undertaken or will undertake any investigations, searches or
other actions in respect of the Loans and their related Collateral Security and each will rely instead on the
warranties to be given by the Sellers in the Mortgage Sale Agreement (the “Warranties” or “Warranty”, as
applicable). The sole remedy (save as described below) of the Issuer in respect of a breach of Warranty by a
Seller which could have a material adverse effect on the relevant Loan and related Collateral Security will be to
require the relevant Seller to repurchase or procure the repurchase of, or to substitute or procure the substitution
20

of a similar loan for, any Loan which is the subject of any breach of Warranty (see “Title to the Mortgage Pool -
Warranties and Repurchase” and “Title to the Mortgage Pool - Conditions of Acquisition of Substitute Loans”
below). However, this will not limit any other remedies available to the Issuer and/or the Trustee if the relevant
Seller fails to repurchase, or to procure the repurchase or replacement of a Loan when obliged to do so. There
can be no assurance that a Seller will have the financial resources to honour its obligation to repurchase any
Loan in respect of which such a breach of Warranty arises. Upon completion of any such repurchase or
replacement, the relevant Loan and related Collateral Security will be transferred to PML or to SPML or (at the
discretion of SPML) to another member of the UK Group (as the case may be) in each case as provided for in
the Mortgage Sale Agreement. The Issuer may not have any rights (under general or contract law) against any
solicitors or valuers who, when acting for the Originators in relation to the origination of any Loan, may have
been negligent or fraudulent.
Without limitation to the foregoing, with respect to the Amber Loans, the Mortgage Sale Agreement contains
various restrictions and limits (including, without limitation, financial/monetary limits and thresholds and time
limits) on SPML’s liability and, in connection with its obligation to repurchase the Amber Loans, provides that
the Issuer shall have no claim or remedy in respect of any breaches of the Warranties where such restrictions or
limits apply. Accordingly, the Issuer may suffer loss in respect of matters referred to in the Warranties. Further,
for a portion of the Amber Loans, the Issuer may not have any direct rights (under general law or in contract)
against any valuers who, when acting for the Originators in relation to the origination of any Amber Loan, may
have been negligent or fraudulent. However, and notwithstanding the absence of any such direct rights, SPML
has, to the extent assignable, assigned its causes and rights of actions against third parties to the Issuer pursuant
to the Mortgage Sale Agreement.
Reliance on third parties in relation to the Loans
The Issuer has engaged Capstone as the Mortgage Administrator and the Cash/Bond Administrator to administer
the Mortgage Pool pursuant to the Mortgage Administration Agreement and to provide certain cash
management services under the Cash/Bond Administration Agreement. It is anticipated that Capstone will
delegate certain of its duties as Mortgage Administrator to HML, to Vertex and to Lightfoots and certain of its
duties as Cash/Bond Administrator to Wells Fargo. In the event that any of the above parties fail to perform
their obligations under the respective agreements to which they are a party, Instrumentholders may be adversely
affected.
Declining property values
The security for the Instruments consists primarily of the Issuer’s interest in the Loans and relevant Collateral
Security. The value of this security may be affected by, among other things, a decline in United Kingdom
residential property values. No assurance can be given that the values of the Properties have remained or will
remain at the level at which they were on the dates of origination of the related Loans. If the residential
property market in the United Kingdom should experience an overall decline in property values, or a decline in
the rental income used by Borrowers to service Buy-to-Let Loans, such a decline could in certain circumstances
result in the value of the security being significantly reduced and, in the event that the security is required to be
enforced, may result in losses to the Instrumentholders.
Prefunded Loans and Newly-Originated Loans
Although each Prefunded Loan will comply, as at its Prefunding Acquisition Date, with the representations and
warranties specified in the Mortgage Sale Agreement, there can be no certainty that all Prefunded Loans
comprised within the Mortgage Pool will have a similar proportion of Capital and Interest Loans, Interest Only
Loans, Part & Part Loans, Home Owner Loans, Buy-to-Let Loans, Fixed Rate Loans, LIBOR Linked Loans,
BBR Linked Loans and/or regulated Loans (as described under “Regulation of the UK Residential Mortgage
Market” below) or similar concentration characteristics as the Loans comprising the Provisional Mortgage Pool.
However, the Issuer will not be obliged to purchase Prefunded Loans unless, inter alia, it has received prior
written confirmation from S&P and Fitch that the inclusion of the Prefunded Loans would not adversely affect
the then-current ratings of the Notes and it has given notice of such purchase to Moody’s. If, on the first Interest
Payment Date, the aggregate amount applied by the Issuer to purchase Prefunded Loans or Newly-Originated
Loans during the period from (but excluding) the Closing Date to (and including) the first Interest Payment Date
is less than the Prefunding Amount or the Newly-Originated Loans Amount, as the case may be, the balance of
the Prefunding Amount or the Newly-Originated Loans Amount shall be added to the Available Redemption
Fund and applied in redemption of the Collateral Backed Notes.
21

Discounted Loans
The Provisional Mortgage Pool contains Discounted Loans, the terms of which provide that the Borrower will
pay a discounted interest rate for a specified time period. Therefore amounts received by the Issuer in respect of
the Discounted Loans are less than would otherwise be the case. In order to increase the amount of Available
Revenue Fund for a specified period, the Issuer will make certain funds available for credit to the Discounted
Margin Reserve Ledger, and such funds will be transferred to the Available Revenue Ledger, as described under
“Credit Structure - Discounted Loans”.
Fixed Rate Loans
The Fixed Rate Loans are subject to a fixed rate of interest but the rates of interest payable in respect of the
Notes are based on a floating rate of interest. As such, the Issuer’s ability to pay interest on the Notes may be
affected if Note Sterling LIBOR increases beyond a certain rate. In order to hedge against this risk, the Issuer
will enter into the Fixed/Floating Swap Agreement and certain interest rate cap transactions as described under
“Credit Structure - Hedging Arrangements”.
Interest Only Loans and Part & Part Loans
In the Provisional Mortgage Pool (as defined in “The Mortgage Pool” below) approximately 55.49 per cent. of
the Loans in the Provisional Mortgage Pool by Principal Balance is comprised of mortgage loans in relation to
which the principal amount is not repayable before maturity and which may have no collateral, such as an
endowment or life policy, as security other than the relevant Property (“Interest Only Loans”) and
approximately 1.77 per cent. of the Loans in the Provisional Mortgage Pool by Principal Balance is comprised
of mortgage loans under the terms of which the loan is effectively separated (at the option of, and at a level
decided by, the Borrower) into two principal amounts, one in respect of which the borrower pays interest only
and the other in respect of which the borrower pays interest and principal (“Part & Part Loans”). Monthly
payments in respect of Part & Part Loans are comprised of the interest due on both portions of the Loan and the
principal repayable on the portion in respect of which the borrower is required to pay both interest and principal.
There is no scheduled amortisation of, in relation to the Interest Only Loans, the principal amount, and in
relation to the Part & Part Loans, the portion of the principal amount on which the Borrower elects not to repay
principal. Consequently, upon the maturity of an Interest Only Loan or a Part & Part Loan, the relevant
Borrower will be required to make a “bullet” payment that will represent the entirety of the principal amount
then outstanding. The ability of such a Borrower to repay an Interest Only Loan or a Part & Part Loan at
maturity frequently depends on such Borrower’s ability to refinance the Property or obtain funds from another
source, such as pension policies, personal equity plans or endowment policies. The ability of the Borrower to
refinance the Property will be affected by a number of factors, including the value of the Property, the
Borrower’s equity in the Property, the financial condition of the Borrower, tax laws and general economic
conditions at the time. Because of the greater risk regarding refinancing, a significant downturn in the property
markets, or the economy in general, could lead to a greater increase in defaults or repayment of principal of
Interest Only Loans, and to a lesser extent, of Part & Part Loans, than on Capital and Interest Loans.
Buy-to-Let Loans
The Provisional Mortgage Pool contains 445 Buy-to-Let Loans, representing approximately 6.89 per cent. of the
Loans in the Provisional Mortgage Pool by Principal Balance, and substantially all of the relevant Properties (in
respect of the Mortgages forming part of the Collateral Security for such Buy-to-Let Loans) are not owneroccupied.
The Borrower’s ability to service payment obligations in respect of a Loan secured on such a
Property is likely to depend on the Borrower’s ability to lease the Properties on appropriate terms. This
dependency on leasing income increases the likelihood, during difficult market conditions, that the rate of
delinquencies and losses on Loans secured by such non-owner occupied properties will be higher than for Loans
secured on the primary residence of a Borrower.
Upon enforcement of a Loan in respect of a Property which is the subject of an existing tenancy, the Mortgage
Administrator may not be able to obtain vacant possession of that Property, in which case the Mortgage
Administrator will only be able to sell the Property as an investment property with one or more sitting tenants.
This may affect (i) the amount that the Mortgage Administrator could realise upon enforcement of the Mortgage
and a sale of the relevant Property and (ii) the speed at which such a sale can be achieved. However, where the
Loan concerned is an English Loan or a Northern Irish Loan, the Mortgage Administrator will have the ability to
appoint a receiver of rent to collect any rents payable in respect of such Property and apply them in payment of
22

any interest and arrears accruing under that Loan. Where the Loan concerned is a Scottish Loan and the
Collateral Security in relation to that Loan does not include a perfected assignation in security of the benefit of
the rent payable in respect of the relevant Property, the Mortgage Administrator will only be able to recover the
rent once either: (a) the relevant Scottish Mortgage has been called-up pursuant to Section 19 of the
Conveyancing and Feudal Reform (Scotland) Act 1970; or (b) the Mortgage Administrator has obtained a court
order entitling it to recover that rent.
Right to Buy Loans
The Provisional Mortgage Pool contains 757 Right to Buy Loans, representing approximately 5.26 per cent. of
the Loans in the Provisional Mortgage Pool by Principal Balance. The Right to Buy Loans have been made in
whole or in part to a Borrower for the purposes of enabling that Borrower to exercise his or her right to buy the
relevant Property under the “Right to Buy” scheme of (in England and Wales) Part V of the Housing Act 1985
(as amended) (the “1985 Act”) or (in Scotland) Part III of the Housing (Scotland) Act 1987 (as amended) (the
“1987 Act”) or (in Northern Ireland) under the Northern Ireland Housing Executive House Sales Scheme as
provided for by the Housing (Northern Ireland) Order 1983 as amended by the Housing (Northern Ireland)
Order 1986, the Housing (Northern Ireland) Order 1992 and the Housing (Northern Ireland) Order 2003, as the
case may be, from a local authority or, in Northern Ireland, the Northern Ireland Housing Executive (the
“NIHE”) or, in certain circumstances, registered social landlords or certain other public sector landlords from
which he or she was renting the Property (the “Landlord”).
Properties in England and Wales sold under the Right to Buy scheme of the 1985 Act are sold by the Landlord
at a discount to market value calculated in accordance with the 1985 Act. A purchaser under this scheme must
repay the whole of the discount if he or she disposes of the property within one year of acquiring it from the
Landlord, four-fifths if he or she does so within two years, three-fifths if within three years, two-fifths if within
four years and one fifth if within five years, unless the offeror’s offer for the disposal of the house was accepted
before 18 January 2005, in which case the purchaser must repay the whole of the discount if he or she sells the
property within one year, two-thirds if he does so within two years and one-third if within three years. The
Landlord obtains a statutory charge over the property in respect of the contingent liability of the purchaser under
the scheme to repay the discount. Under the 1985 Act such statutory charge ranks in priority to other charges
including that of any mortgage lenders except in certain circumstances. Such statutory charge shall
automatically rank behind any charge on the related property in relation to monies advanced by an approved
lending institution to the extent they are advanced for the purpose of enabling the purchaser to exercise his right
to buy. Each of SPML and PML is an approved lending institution for the purposes of the 1985 Act. Unless the
offeror’s offer for the disposal of the house was accepted before 18 January 2005, the purchaser is required,
before a sale or disposal of the property within 10 years of the date of purchase, to offer the property to the
Landlord or another social landlord at full market value and to allow up to 8 weeks for acceptance of the offer.
A mortgage lender selling the property as a mortgagee in possession in such circumstances will also be obliged
to grant such right of first refusal to the Landlord or other social landlord.
Properties sold under the Right to Buy scheme of the 1987 Act are sold by a Landlord at a discount to market
value calculated in accordance with the 1987 Act. A purchaser under this scheme must repay the whole of the
discount if he or she sells the property within one year of acquiring it from the Landlord, two-thirds if he or she
does so within two years and one-third within three years. If the Landlord secures the purchaser’s obligation to
repay the discount or part of the discount via a standard security, this “Discount Standard Security” will rank
behind any other standard security over the property securing funds borrowed for the purpose of either
purchasing the property or improving the property.
With respect to the SPML Branded Loans and the PML Loans, each of SPML and PML (as applicable), in all
instances, advances amounts to enable Borrowers to purchase the relevant property under either the Right to
Buy scheme of the 1985 Act or the 1987 Act (as appropriate) from a Landlord. SPML and/or PML may also, in
some instances, advance additional amounts for Borrowers to use for approved purposes under the 1985 Act
(such as covering costs related to works undertaken in respect of the property) or, where the relevant property is
located in Scotland, for improving the property.
With reference to the Right to Buy scheme of the 1985 Act, where an approved lending institution advances
money to a purchaser for the purposes of both exercising his or her right to buy and for other purposes, the
Landlord may give written consent to the charge granted to the approved lending institution ranking in priority
to the statutory charge in relation to those monies advanced for purposes other than for enabling the exercise of
the right to buy and shall give such consent if such other purposes are approved purposes under the 1985 Act.
23

Since the 1985 Act does not expressly require that the consent of the Landlord to the postponement of the
statutory charge be obtained at the time the approved lending institution makes an advance for an approved
purpose, neither SPML nor PML normally obtains such consent at the time of making an advance for an
approved purpose. The 1985 Act also does not expressly require that where the Landlord gives such consent
after the making of an advance made for an approved purpose, the Landlord be satisfied that the borrower has
used the advance for an approved purpose.
Additionally, with respect to the SPML Branded Loans and the PML Loans each of SPML and PML (as
applicable) has obtained insurance cover from London & European Title Insurance Services Limited acting as
brokers for certain Lloyd’s syndicates who in turn are reinsured through Axa Global Solutions, which insures
SPML and PML (as applicable) against the risk of losses arising from any funds advanced in excess of the
purchase price not benefiting from the subordination of the statutory charge or the Discount Standard Security
detailed above. The benefit of the relevant policy will be transferred to the Issuer under the terms of the
Mortgage Sale Agreement to the extent that it relates to Loans in the Mortgage Pool.
In Northern Ireland, a similar Right to Buy scheme operates through the NIHE, although certain differences
apply regarding repayment of discount. The discount covenant charge which is created under the standard terms
of the NIHE scheme takes priority immediately after any mortgage securing any amount left outstanding by the
purchaser and advanced to him by a lending institution for the purpose of buying his house (and for some other
purposes). In relation to any subsequent charge granted to any lending institution other than the institution
which provided the initial loan to buy the house, NIHE has a discretion to postpone its charge to this subsequent
charge. Such subsequent charge would include a charge in favour of a new or subsequent lender if the
purchaser were to transfer his initial mortgage to a new or subsequent lender within a period of three years after
purchase of the house (being the period during which the NIHE may recoup discount pursuant to the discount
covenant charge). The discretion is rarely exercised by NIHE. Considerations in respect of application of the
money for approved purposes do not apply in Northern Ireland.
Prepayment Charges
Prepayment Charges Receipts as more fully described in “Credit Structure” provide that amounts received by
the Issuer as additional payments upon the prepayment of Loans (for the avoidance of doubt, excluding the
principal amount to be repaid and any accrued interest payable in respect of such Loans) will be initially
credited to the Prepayment Charges Ledger and will be paid to the Residual Certificateholders as set out under
“Residual Revenue” below.
Under the terms of the Loans a Borrower will, in certain circumstances, have to pay prepayment charges upon
prepayment of a Loan. In certain circumstances, notwithstanding that these prepayment charges are due, no
Prepayment Charges Receipts would be received by the Issuer and no additional amounts would be paid to the
Residual Certificateholders. Additionally, there are situations where it may not be possible to collect in full the
amount of the prepayment charges.
The circumstances in which the Prepayment Charges Receipts received by the Issuer may be reduced or
extinguished include situations where owing to the circumstances of the Borrower, the value of the Property or
the conduct of the Loan, the Mortgage Administrator deems it prudent not to commence or continue any action
to seek to recover the full amount of the prepayment charges.
Certain legal considerations
Title of the Issuer
Legal title to the Mortgages in the Mortgage Pool has remained, since origination and will remain: (i) in the case
of the SPML Loans, with SPML and in the case of Loans originated by SPPL, with SPPL, as the case may be;
and (ii) in the case of the PML Loans, with PML. Subject to the completion of applications to The Land
Registry of England and Wales, the Registers of Scotland or the Registers of Northern Ireland, as applicable, for
registration of the transfers, the legal title to the Amber Loans and the A&L Loans will remain with Amber and
A&L respectively. On the Closing Date, it is expected that legal title to the majority of the Amber Loans and
the A&L Loans shall have been transferred to SPML.
Legal title to the Loans and their related Collateral Security will be transferred to the Issuer only in the limited
circumstances described under “Title to the Mortgage Pool” below. Prior to the Issuer or the Trustee obtaining
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legal title to the Loans and their related Collateral Security in accordance with the terms of the Mortgage Sale
Agreement, SPML (subject, with respect to the Amber Loans and the A&L Loans to the preceding paragraph),
SPPL and PML (in such capacity, a “Legal Titleholder”) will retain the legal title to each Loan and its related
Collateral Security, and a third party that acquires legal title from the relevant Legal Titleholder as a bona fide
purchaser for value without any notice of the interests of the Issuer and the Trustee, as the case may be, might
obtain a good title free of any such interest. However, the risk of third party claims obtaining priority to the
interests of the Issuer or the Trustee in this way would be likely to be limited to circumstances arising from a
breach by the relevant Legal Titleholder of its contractual obligations or fraud, negligence or mistake on the part
of the relevant Legal Titleholder or the Issuer or their respective personnel or agents. The rights of the Issuer
and the Trustee may be or become subject to the direct rights of the Borrowers against the relevant Legal
Titleholder. Such rights may include the right of a Borrower to redeem its Loan and related Collateral Security
by repaying his Loan directly to the relevant Legal Titleholder. These rights may result in the Issuer receiving
less monies than anticipated from the Loans.
For so long as neither the Issuer nor the Trustee has obtained legal title, each relevant Legal Titleholder will,
pursuant to the terms of the Mortgage Sale Agreement, undertake for the benefit of the Issuer and the Trustee
that it will lend its name to, and take such other steps as may reasonably be required by the Issuer or the Trustee
in relation to, any legal proceedings in respect of the Loans originated or acquired by it and their related
Collateral Security.
In order for legal title to the Mortgages over registered land in England and Wales, Northern Ireland and any
land in Scotland to be transferred, transfers and assignations would have to be registered or recorded at the Land
Registry of England and Wales, the Land Registry of Northern Ireland or the Registers of Scotland, as
applicable, and notice would have to be given to the Borrowers.
In order for legal title in the English Mortgages over unregistered land to be transferred, transfers or deeds of
assignment of the English Mortgages of unregistered land together with the Loans secured thereby must be
completed and, where applicable, in order to stop other third party rights arising or continuing, notice should be
given to any prior mortgagee and registered with the Land Charges Registry. In order for legal title in Northern
Irish Mortgages over unregistered land to be transferred, deeds of assignment of the Northern Irish Mortgages of
unregistered land together with the Loans secured thereby must be completed and, in order to establish priority
over unregistered registerable documents that affect such land and documents registered later, registered at the
Registry of Deeds of Northern Ireland pursuant to the Registry of Deeds Act (Northern Ireland) 1970.
Scottish Mortgages
A proportion of the mortgage loans are secured over properties in Scotland. Investors are referred to “Title to
the Mortgage Pool - Scottish Loans” below for further details in respect of certain issues regarding the Scottish
Loans and related Collateral Security.
Northern Irish Mortgages
A proportion of the Loans are Northern Irish Loans. See “Title to the Mortgage Pool - Northern Irish Loans”
below for further details in respect of such Loans and their related Collateral Security.
Enforcement
In order to enforce a power of sale in respect of a property, the relevant mortgagee (which may be the relevant
Legal Titleholder, the Issuer or the Trustee) must first obtain possession of the Property. Possession is usually
obtained by way of a court order although this can be a lengthy and costly process and will involve the
mortgagee assuming certain risks. See “Title to the Mortgage Pool - Enforcement Procedures” and
“Repossession Procedures” below. If obtaining possession of property in such circumstances is lengthy or
costly, the Issuer’s ability to service payments on the Notes would likely be reduced.
Second Loans
The Loans relating to Properties which provide security for approximately 13.11 per cent. by value of Principal
Balance of the Loans in the Provisional Mortgage Pool are Second Loans, being subject to one or more prior
ranking mortgages or (in Scotland) standard securities, in favour of a single mortgagee or (in Scotland) heritable
creditor. The rights of a subsequent mortgagee are subject to those of the prior mortgagee or (in Scotland)
25

heritable creditor, which could result in the Issuer receiving less than the outstanding amount of such Second
Loans on the enforcement of its mortgage relating to such Second Loans, which would, in turn, reduce the
Issuer’s ability to service payments on the Notes. See further “Title to the Mortgage Pool - Second Loans”
below.
2. CONSIDERATIONS RELATED TO THE INSTRUMENTS
Obligations of Issuer only
The Instruments represent obligations of the Issuer alone. They do not constitute obligations or responsibilities
of, and are not guaranteed by, any other person (including, but not limited to, the Managers and the Transaction
Parties other than the Issuer). The Issuer will rely solely on receipts and recoveries in respect of the Loans, the
Reserve Fund, the Discounted Margin Reserve Fund, amounts standing to the credit of the Prefunding Interest
Shortfall Amount Ledger and the Newly-Originated Loans Interest Shortfall Amount Ledger, amounts received
pursuant to the Bullet Cap Transaction, the Fixed/Floating Swap Transaction, the BBR Swap Transaction and
the Currency Swap Transactions, amounts drawn down under the Liquidity Facility and other claims of the
Issuer under the Transaction Documents to enable it to make payments in respect of the Instruments.
Although the Instruments will be full recourse obligations of the Issuer, upon enforcement of the security for the
Instruments, the Trustee or any receiver will, in practice, have recourse only to the Loans and Collateral
Security, and to any other assets of the Issuer then in existence as described in this document (including the
Reserve Fund).
Other than as provided in the Mortgage Sale Agreement (see “Title to the Mortgage Pool” below), the Issuer
and the Trustee will have no recourse to the Sellers in respect of the Loans.
If, upon default by Borrowers and after the exercise by the Mortgage Administrator of all available remedies in
respect of the Loans, the Issuer does not receive the full amount due from those Borrowers, then Noteholders
may receive by way of principal repayment an amount less than the face value of their Notes and the Issuer may
be unable to pay in full interest due on the Notes.
Residual Certificates
The Residual Certificates represent an entitlement only to the Residual Revenue (as defined below under
“Credit Structure – Residual Revenue”). The entitlement of Residual Certificateholders to receive RC
Distributions will be contingent upon the Notes remaining outstanding. The Collateral Backed Notes will be
redeemed as set out above under “Summary Information - The Instruments - Redemption of Notes and
Cancellation of Residual Certificates” by reference to Actual Redemption Funds or, in the case of the Revenue
Backed Notes, the Available Revenue Fund.
The Residual Certificates will be secured by the same security as the Notes but (other than with respect to
entitlement to amounts standing to the credit of the Prepayment Charges Ledger as at the close of business on
the Business Day preceding each Interest Payment Date (which such amounts do not form part of the Available
Revenue Fund) and RC Senior Distributions (which rank senior to payments of principal on the ETc Notes))
will rank subordinate to the Notes. While Residual Certificateholders will have voting rights amongst
themselves, the Residual Certificates will carry no voting rights in respect of the Notes under either the Trust
Deed or the terms and conditions of the Residual Certificates (the “Residual Certificate Conditions”). Holders
of the Residual Certificates will not be entitled to receive any RC Distributions (other than amounts standing to
the credit of the Prepayment Charges Ledger as at the close of business on the Business Day preceding each
such Interest Payment Date) until all amounts then due in priority thereto in accordance with the Priority of
Payments have been paid in full as more fully described in “Credit Structure”.
No recourse to Originators
The Notes are not obligations of, or the responsibility of, or guaranteed by, any Originator (or any subsidiary or
affiliate of the Originators), and no Originator (or any subsidiary or affiliate of the Originators) has any
responsibility to the holders of the Notes for this Prospectus or its contents. Any information concerning the
Originators in this Prospectus comprises only publicly available information issued by or on behalf of the
Originators.
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Revenue Backed Notes
The aggregate principal balance of the Initial Mortgage Pool and amounts standing to the credit of the
Prefunding Ledger will correspond to the aggregate Principal Amount Outstanding of all Collateral Backed
Notes. Receipts of principal in respect of the Loans will not be used by the Issuer to redeem the Revenue
Backed Notes. The Issuer intends to redeem the Revenue Backed Notes with funds in the Available Revenue
Fund in accordance with the Pre-Enforcement Priority of Payments prior to the enforcement of the Security. A
high rate of prepayment in respect of the Loans or a high rate of losses in respect of the Loans will reduce the
amount of time over which interest is earned by the Issuer on the Initial Mortgage Pool and therefore could
adversely affect the ability of the Issuer to repay the Revenue Backed Notes in full.
Limited Liquidity - Instruments
There is not, at present, an active and liquid secondary market for the Instruments. There can be no assurance
that a secondary market for the Instruments will develop or, if a secondary market does develop, that it will
provide holders of the Instruments with liquidity of investment, or that it will continue for the life of the
Instruments.
Following the occurrence of an Event of Default in relation to the Notes while any of the Loans are still
outstanding, the ability of the Issuer to redeem all of the Notes in full will depend upon whether or not the Loans
and Collateral Security can be realised to obtain an amount sufficient to redeem the Notes. There is not, at
present, an active and liquid secondary market for secured residential mortgage loans of this type in the United
Kingdom. The Issuer, or any receiver of the Issuer appointed following enforcement of the security constituted
by the Deed of Charge, may not, therefore, be able to sell Loans on acceptable terms, or at all, should it be
required to do so.
Reliance on third parties in relation to the Instruments
The Issuer is party to contracts with a number of third parties who have agreed to perform services in relation to
the Instruments. Without limitation, pursuant to the Bullet Cap Agreement, the Fixed/Floating Swap
Agreement, the BBR Swap Agreement and the Currency Swap Agreements, the Bullet Cap Counterparty, the
Fixed/Floating Swap Counterparty, the BBR Swap Counterparty and the Currency Swaps Counterparty, as the
case may be, have agreed to provide the Issuer with certain hedges against certain currency and interest rate
fluctuations and pursuant to the Bullet Cap Guarantee, the Fixed/Floating Swap Guarantee, the BBR Swap
Guarantee and the Currency Swap Guarantee, the Bullet Cap Guarantor, the Fixed/Floating Swap Guarantor, the
BBR Swap Guarantor and the Currency Swaps Guarantor have guaranteed the obligations of the Bullet Cap
Counterparty, the Fixed/Floating Swap Counterparty, the BBR Swap Counterparty and the Currency Swaps
Counterparty, respectively, under such hedges. (See “Credit Structure - Hedging Arrangements” and “Credit
Structure - Currency Swap Arrangements”). Pursuant to the Liquidity Facility Agreement, the Liquidity
Facility Provider has agreed to provide the Issuer with a Liquidity Facility (see “Credit Structure - Liquidity
Facility”). Pursuant to the GIC, the GIC Provider has agreed to provide the Issuer with specific rates of interest
on funds on deposit in the GIC Account (see “Credit Structure - GIC Account”). In the event that any of the
above parties fail to perform their obligations under the respective agreements to which they are a party,
Instrumentholders may be adversely affected.
Rising mortgage interest rates
The interest rate payable under LIBOR Linked Loans is calculated by reference to Loan LIBOR and interest rate
payable under the BBR Linked Loans is calculated by reference to Loan BBR, in each case, which may be
subject to variations. The Issuer could be subject to a higher risk of default in payment by a Borrower under a
LIBOR Linked Loan or a BBR Linked Loan as a result of an increase in Loan LIBOR or Loan BBR (as
applicable). The Issuer will enter into the Bullet Cap Agreement (as more fully described in “Credit Structure -
Hedging Arrangements” below) on or about the Closing Date with the Bullet Cap Counterparty. In the event
that Note Sterling LIBOR should increase above the strike rates specified in relation to the Bullet Cap
Agreement, the Issuer will receive payments from the Bullet Cap Counterparty which (with the exception of any
transferred collateral unless such transferred collateral is applied in satisfaction of termination payments due to
the Issuer following the designation of an early termination date under and in accordance with the provisions of
the Bullet Cap Agreement) will form part of the Available Revenue Fund to be applied in accordance with the
Pre-Enforcement Priority of Payments.
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However, there can be no assurance that the Bullet Cap Agreement will adequately address all risks associated
with rising interest rates. The Bullet Cap Agreement will provide that, upon the occurrence of certain events,
the Bullet Cap Agreement may terminate. The Issuer will have available to it, inter alia, amounts paid to it by
Borrowers under the Loans (together with the amount of any termination payment due to it under the Bullet Cap
Agreement), to acquire a replacement cap. No assurance can be given as to the ability of the Issuer to enter into
a replacement cap, or if one is entered into, that the credit rating of any replacement cap counterparty(ies) will
be sufficiently high to prevent a downgrade of the then current ratings of the relevant class of Notes by the
Rating Agencies.
Potential timing mismatch between Loan LIBOR and Note Sterling LIBOR
While interest on the Sterling Notes is Note Sterling LIBOR as determined on each Interest Determination Date,
interest on all LIBOR Linked Loans is determined on each Loan LIBOR Fixing Date. The Issuer will not enter
into any hedging arrangements to mitigate the potential mismatch arising from the interest payments receivable
by the Issuer in respect of LIBOR Linked Loans being calculated by reference to Loan LIBOR and interest
payable by the Issuer in respect of the Notes being calculated by reference to Note Sterling LIBOR, and as a
result of the difference between the reset dates for Loan LIBOR and Note Sterling LIBOR, the calculations of
Loan LIBOR and Note Sterling LIBOR varying.
Potential basis rate mismatch between Loan BBR and Note Sterling LIBOR
While the interest rate on the Sterling Notes is Note Sterling LIBOR, as determined on each Interest
Determination Date, interest on the BBR Linked Loans is determined by reference to the Bank of England base
rate (“Loan BBR”). Loan BBR on all BBR Linked Loans takes effect on each Loan BBR Fixing Date. It is
possible that there will be discrepancies between Loan BBR and Note Sterling LIBOR and hence a potential
mismatch arising from the interest receivable by the Issuer in respect of BBR Linked Loans being calculated by
reference to Loan BBR and interest payable by the Issuer in respect of the Notes being calculated by reference
to Note Sterling LIBOR.
The Issuer will seek to mitigate the effects of the potential mismatch between Loan BBR and Note Sterling
LIBOR by entering into the BBR Swap Agreement with the BBR Swap Counterparty as described under
“Credit Structure - Hedging Arrangements”.
Exchange rate risks
Repayments of principal and payments of interest on the Euro Notes and on the Dollar Notes will be made in
euro and dollars, respectively, but payments made by Borrowers under the Loans to the Issuer will be made in
sterling.
To hedge the Issuer’s currency exchange rate exposure, including any interest rate exposure connected with that
currency exposure, the Issuer will enter into the Currency Swap Transactions with the Currency Swaps
Counterparty. If the Issuer fails to make timely payments of amounts due under a Currency Swap Transaction,
then it will have defaulted under that Currency Swap Transaction. The Currency Swaps Counterparty is only
obliged to make payments to the Issuer under the Currency Swap Transactions as long as the Issuer makes
payments under such Currency Swap Transactions.
If the Currency Swaps Counterparty is not obliged to make payments or if it defaults in its obligations to make
payments of amounts in euro or dollars (as appropriate) equal to the full amount to be paid to the Issuer under
the relevant Currency Swap Agreement, the Issuer will be exposed to changes in euro/sterling (in relation to the
Euro Currency Swap Transactions) or dollar/sterling (in relation to the Dollar Currency Swap Transactions)
currency exchange rates. Unless a replacement currency swap is entered into, the Issuer may have insufficient
funds to make payments due on the Euro Notes and/or the Dollar Notes.
Termination payments on the Currency Swap Agreements
If any of the Currency Swap Transactions terminate, the Issuer may be obliged to make a termination payment
to the Currency Swaps Counterparty. The amount of the termination payment will be based on the cost of
entering into a replacement currency swap agreement.
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There can be no assurance that the Issuer will have sufficient funds available to make any termination payment
under any Currency Swap Agreement. Nor can any assurance be given that the Issuer will be able to enter into a
replacement currency swap agreement or, if one is entered into, that the credit rating of the replacement
currency swaps counterparty will be sufficiently high to prevent a downgrade of the then-current ratings of the
Notes by the Rating Agencies.
Except in relation to any Currency Swaps Counterparty Default Payment, any termination payment due by the
Issuer will rank in priority to the relevant class of Notes. Any additional amounts required to be paid by the
Issuer following termination of the relevant Currency Swap Agreement (including any extra costs incurred (for
example, from entering into “spot” currency or interest rate swaps) if the Issuer cannot immediately enter into a
replacement currency swap agreement) will also rank in priority to the relevant class of Notes.
Therefore, if the Issuer is obliged to make a termination payment to the Currency Swaps Counterparty or pay
any other additional amount as a result of the termination of the relevant Currency Swap Agreement, this could
reduce the Issuer’s ability to service payments on the Notes.
Yield and Prepayment Considerations
The yield to maturity of the Notes of each class and the Residual Certificates will depend on, inter alia, the
amount and timing of payments of principal (including prepayments, sale proceeds arising on enforcement of a
Mortgage, and repurchases by a Seller due to, inter alia, breaches of the warranties under the Mortgage Sale
Agreement) on the Loans and the price paid by the Noteholders or the Residual Certificateholders. Such yield
may be adversely affected by a higher or lower than anticipated rate of prepayments on the Loans.
Prepayments may result from refinancings, voluntary sales of Properties by Borrowers or as a result of
enforcement proceedings under the relevant Loans, as well as the receipt of proceeds from buildings insurance,
life insurance and pension policies (if any). In addition, repurchases of Loans required to be made under the
Mortgage Sale Agreement will have the same effect as a prepayment of such Loans.
The rate of prepayment of Loans cannot be predicted and is influenced by a wide variety of economic, social
and other factors, including prevailing mortgage market interest rates, the availability of alternative financing,
local and regional economic conditions and homeowner mobility. Therefore, no assurance can be given as to
the level of prepayments that the Mortgage Pool will experience.
Conflict between Classes of Noteholders
The Trust Deed contains provisions requiring the Trustee to have regard to the interests of the Noteholders as a
whole as regards all powers, trusts, authorities, duties and discretions of the Trustee (except where expressly
provided otherwise) but requiring the Trustee in any particular case to have regard only to the interests of:
(i)
(ii)
(iii)
(iv)
the A Noteholders if, in the Trustee’s opinion, there is a conflict between the interests of the A
Noteholders on the one hand and the interests of the B Noteholders, the C Noteholders, the D
Noteholders and/or the E Noteholders on the other hand;
(subject to paragraph (i) above or after the A Notes have been redeemed in full or if the interests of the
holders of all outstanding A Notes are in the opinion of the Trustee unaffected, but if there are B Notes,
C Notes, D Notes and/or E Notes outstanding) the B Noteholders if, in the Trustee’s opinion, there is a
conflict between the interests of the B Noteholders on the one hand and the interests of the C
Noteholders, the D Noteholders and/or the E Noteholders on the other hand;
(subject to paragraphs (i) and (ii) above or after the A Notes and the B Notes have been redeemed in
full or if the interests of the holders of all outstanding A Notes and B Notes are in the opinion of the
Trustee unaffected, but if there are C Notes, D Notes and/or E Notes outstanding) the C Noteholders if,
in the Trustee’s opinion, there is a conflict between the interests of the C Noteholders on the one hand
and the interests of the D Noteholders and/or the E Noteholders on the other hand; and
(subject to paragraphs (i), (ii) and (iii) above or after the A Notes, B Notes and C Notes have been
redeemed in full or if the interests of the holders of all outstanding A Notes, B Notes and C Notes are
in the opinion of the Trustee unaffected, but if there are D Notes and/or E Notes outstanding) the D
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Noteholders if, in the Trustee’s opinion, there is a conflict between the interests of the D Noteholders
on the one hand and the interests of the E Noteholders on the other hand.
3. CONSIDERATIONS RELATING TO LEGAL, REGULATORY AND TAXATION REGIMES
European Monetary Union
It is possible that, prior to the maturity of the Notes, the United Kingdom may become a participating Member
State in Economic and Monetary Union and that therefore the euro may become the lawful currency of the
United Kingdom. In this event: (a) all amounts payable in respect of the Sterling Notes may become payable in
euro; (b) the introduction of the euro as the lawful currency of the United Kingdom may result in the
disappearance of published or displayed rates for deposits in sterling used to determine the rates of interest on
the Notes or changes in the way those rates are calculated, quoted and published or displayed; and (c) applicable
provisions of law may allow the Issuer to redenominate the Sterling Notes into euro and take additional
measures in respect of the Sterling Notes.
If the euro becomes the lawful currency of the United Kingdom and the Notes are outstanding at the time, the
Issuer intends to make payments on the Notes in accordance with the then market practice of payments on such
debts. It cannot be said with certainty what effect, if any, the adoption of the euro by the United Kingdom may
have on investors in the Notes. The introduction of the euro could also be accompanied by a volatile interest
rate environment which could adversely affect a Borrower’s ability to repay its loan.
European Union directive on the taxation of savings income
Under EC Council Directive 2003/48/EC on the taxation of savings income, each Member State is required,
from 1 July 2005, to provide to the tax authorities of another Member State details of payments of interest or
other similar income paid by a person within its jurisdiction to, or collected by such a person for, an individual
resident in that other Member State; however, for a transitional period, Austria, Belgium and Luxembourg may
instead apply a withholding system in relation to such payments, deducting tax at rates rising over time to 35%.
The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-
EU countries to the exchange of information relating to such payments.
Also with effect from 1 July 2005, a number of non-EU countries, and certain dependent or associated territories
of certain Member States, have agreed to adopt similar measures (either provision of information or transitional
withholding) in relation to payments made by a person within its jurisdiction to, or collected by such a person
for, an individual resident in a Member State. In addition, the Member States have entered into reciprocal
provision of information or transitional withholding arrangements with certain of those dependent or associated
territories in relation to payments made by a person in a Member State to, or collected by such a person for, an
individual resident in one of those territories.
Implementation of Basel II risk-weighted asset framework may result in changes to the risk-weighting of
the Notes
The Basel Committee on Banking Supervision published the text of a new risk-based capital framework on 26
June 2004 under the title “Basel II: International Convergence of Capital Measurement and Capital Standards:
a Revised Framework.” An updated version was issued by the Basel Committee on 15 November 2005. This
new framework (the “Framework”), which places enhanced emphasis on market discipline and sensitivity to
risk, will serve as the basis for national rule-making and approval processes to continue and for banking
organisations to complete their preparations for implementation of the new Framework. If implemented in
accordance with its current form, the Framework could affect risk-weighting of the Notes in respect of certain
investors if those investors are subject to the new Framework following its statutory implementation.
Consequently, investors should consult their own advisers as to the consequences to and effect on them of the
proposed implementation of the new Framework. No predictions can be made as to the precise effects of
potential changes which might result if the Framework were adopted in its current form.
General regulatory considerations
For a discussion of the potential impact of key regulatory considerations relating to residential mortgage lending
in the United Kingdom, see “Regulation of the UK Residential Mortgage Market” below. This summary of
30

certain regulatory considerations does not discuss all aspects of applicable legislation and other authorities,
which may be important to prospective investors.
No assurance can be given that additional regulatory changes by any regulatory authority will not arise with
regard to the mortgage market in the United Kingdom generally, the Originators’ particular sector in that
market, or specifically in relation to the Originators. Any such action or developments or compliance costs may
have an adverse effect on the Originators, the Mortgage Administrator, the Issuer, the Trustee and their
respective businesses and operations. This may adversely affect the ability of the Issuer to make payments to
Instrumentholders.
Change of law, regulation and accounting practice
The structure of the issue of the Instruments, the ratings which are to be assigned to the Notes and related
transactions is based on English law, in relation to the Northern Irish Loans, Northern Irish law and, in relation
to the Scottish Loans, Scots law, in effect as at the date of this document. No assurance can be given as to the
impact of any possible changes to English law, Scots law, Northern Irish law, or administrative practice in the
United Kingdom after the date of this document.
Withholding Tax under the Instruments
In the event that withholding taxes are imposed in respect of payments to Instrumentholders of amounts due
pursuant to the Instruments, neither the Issuer nor any Paying Agent nor any other person is obliged to gross up
or otherwise compensate Instrumentholders for the lesser amounts the Instrumentholders will receive as a result
of the imposition of withholding taxes. The imposition of such withholding taxes in respect of payments under
the Notes would entitle (but not oblige) the Issuer to redeem the Notes at their Principal Amount Outstanding
(plus accrued interest). See the information set out under the headings “United Kingdom Taxation” and “United
States Taxation” below.
ERISA
Although no assurances can be made, the conditions and restrictions on transfers of the Instruments set forth
under “Transfer Restrictions” and “Certain ERISA Considerations” are intended to prevent the assets of the
Issuer from being treated as the assets of a Benefit Plan for purposes of ERISA and Section 4795 of the Code. If
the assets of the Issuer were deemed to be “plan assets”, certain transactions that the Issuer may have entered
into in the ordinary course of business might constitute non-exempt prohibited transactions under ERISA and/or
Section 4975 of the Code and might have to be rescinded.
Each purchaser or transferee of an Instrument (other than in the case of an E Note or a Residual Certificate) or
an interest in any such Instrument will be deemed to have represented and agreed that (a) it is not and for so
long as it holds any such Instrument or interest will not be (i) an “Employee Benefit Plan” as defined in Section
3(3) of ERISA that is subject thereto or a “Plan” subject to Section 4975 of the Code, (ii) another employee
benefit plan subject to any federal, state or local law substantially similar to Section 406 of ERISA or Section
4975 of the Code, (iii) an entity deemed to be using the assets of or acting on behalf of such an employee benefit
plan subject to ERISA or plan subject to Section 4975 of the Code, or (iv) an entity whose underlying assets are
deemed for purposes of ERISA or Section 4975 of the Code or any similar law to include plan assets of any
such benefit plan, plan or other employee benefit plan, or (b) its purchase and holding of any such Note or
interest will not result in a non-exempt prohibited transaction under ERISA, Section 4975 of the Code or, as
applicable, any similar law. E Notes and Residual Certificates or interests therein may not be purchased or held
by any person that is subject to ERISA or Section 4975 of the Code. Certain representations will be deemed to
have been made by each purchaser in this regard.
See “Certain ERISA Considerations” herein for a more detailed discussion of certain ERISA-related
considerations with respect to an investment in the Notes.
The Issuer believes that the risks described above are the principal risks inherent in the transaction for the
Instrumentholders, but the inability of the Borrowers to pay interest, principal, or other amounts on the
Mortgages and consequently the inability of the Issuer to pay interest, principal, or other amounts on or in
connection with the Instruments may occur for other reasons, and the Issuer does not represent that the
above statements regarding the risk of holding the Instruments are exhaustive. There can be no assurance
that the structural elements described in this Prospectus designed to lessen some of these risks will be
31

sufficient to ensure payment to the Instrumentholders of interest, principal or any other amounts on or in
connection with the Instruments on a timely basis or at all.
32

CREDIT STRUCTURE
The structure of the credit arrangements relating to the issue of the Instruments may be summarised as follows:
Receipts in respect of the Loans
The Issuer will be required to record:
(a)
all “Loan Principal Receipts”, being:
(i)
(ii)
(iii)
principal amounts received from borrowers (“Borrowers”) in respect of the Loans
representing prepayments or repayments of principal;
redemption proceeds representing principal in respect of the Loans; and
net amounts representing principal in respect of the Loans which are recovered on
enforcement of the Collateral Security for the relevant Loans on or before the date on which
any debit is made to the Principal Deficiency Ledger in respect of the relevant Loans,
in each case in a separate ledger for that purpose (together, the “Principal Ledger”);
(b)
(c)
(d)
all Prepayment Charges Receipts (as defined in “Prepayment Charges” below) in a separate ledger for
that purpose (the “Prepayment Charges Ledger”);
all amounts received by the Issuer and determined and recorded by the Mortgage Administrator (in
accordance with the provisions of the Mortgage Administration Agreement) as “Post-Completion
Activity-Based Fees” (the “Post-Completion Activity Based Fees”) in a separate ledger for that
purpose (the “Post-Completion Activity-Based Fees Ledger”); and
all “Loan Revenue Receipts”, being all amounts, other than Loan Principal Receipts, Prepayment
Charges Receipts and Post-Completion Activity-Based Fees, received from Borrowers in respect of the
Loans or otherwise paid or recovered in respect of the Loans (including, for the avoidance of doubt, net
amounts representing principal in respect of the Loans which are subsequently recovered after
enforcement of the relevant Loans or their related Collateral Security following the date on which any
debit is made to the Principal Deficiency Ledger in respect of the relevant Loans) (“Actual Loan
Revenue Receipts”), in a separate ledger for that purpose (the “Revenue Ledger”).
Available Revenue Fund
The Available Revenue Fund (as defined in Condition 2(g) (Status, Security and Administration)) comprises the
credit balance of a ledger (the “Available Revenue Ledger”) established by the Issuer for the purpose of
recording the funds held by the Issuer and to be disbursed according to the Pre-Enforcement Priority of
Payments. On any Interest Payment Date the Available Revenue Fund will include:
(a)
(b)
(c)
(d)
the amount transferred from the Revenue Ledger to the Available Revenue Ledger on the immediately
preceding Determination Date (as described in “Ledgers” below);
the whole of the Reserve Fund transferred to the Available Revenue Ledger on the immediately
preceding Determination Date (as described in “Reserve Fund” below);
the whole of the Bullet Cap Proceeds Reserve Fund transferred to the Available Revenue Ledger on
that Interest Payment Date (following the crediting to the Bullet Cap Proceeds Reserve Ledger of the
Bullet Cap Payments received by the Issuer on such Interest Payment Date) (as described in “Bullet
Cap Proceeds Reserve Fund” below);
any amount received by the Issuer from the Fixed/Floating Swap Counterparty under the
Fixed/Floating Swap Agreement or from the Fixed/Floating Swap Guarantor under the Fixed/Floating
Swap Guarantee from (but excluding) the immediately preceding Interest Payment Date to (and
including) that Interest Payment Date (other than, in each case: (i) collateral transferred to the Issuer
33

thereunder (excluding collateral amounts applied in satisfaction of termination payments due to the
Issuer following the designation of an early termination date under the Fixed/Floating Swap
Agreement); and (ii) any termination payment paid by the Fixed/Floating Swap Counterparty to the
Issuer, to the extent that such termination payment is paid to a suitably rated replacement fixed/floating
swap counterparty in consideration for such counterparty entering into a suitable replacement
fixed/floating swap agreement) (as described under “Hedging Arrangements” below);
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
any amount received by the Issuer from the BBR Swap Counterparty under the BBR Swap Agreement
or from the BBR Swap Guarantor under the BBR Swap Guarantee from (but excluding) the
immediately preceding Interest Payment Date to (and including) that Interest Payment Date (other than,
in each case: (i) collateral transferred to the Issuer thereunder (excluding collateral amounts applied in
satisfaction of termination payments due to the Issuer following the designation of an early termination
date under the BBR Swap Agreement); and (ii) any termination payment paid by the BBR Swap
Counterparty to the Issuer, to the extent that such termination payment is paid to a suitably rated
replacement BBR swap counterparty in consideration for such counterparty entering into a suitable
replacement BBR swap agreement) (as described under “Hedging Arrangements” below);
any amount received by the Issuer from the Currency Swaps Counterparty under the Currency Swap
Agreements or from the Currency Swaps Guarantor under the Currency Swap Guarantee from (but
excluding) the immediately preceding Interest Payment Date to (and including) that Interest Payment
Date (other than, in each case: (i) collateral transferred to the Issuer thereunder (excluding collateral
amounts applied in satisfaction of termination payments due to the Issuer following the designation of
an early termination date under the Currency Swap Agreements); and (ii) any termination payment paid
by the Currency Swaps Counterparty to the Issuer, to the extent that such termination payment is paid
to a suitably rated replacement currency swaps counterparty in consideration for such counterparty
entering into a suitable replacement currency swap agreement) (as described under “Currency Swap
Arrangements below);
any amount transferred from the Liquidity Ledger to the Available Revenue Ledger on that Interest
Payment Date (as described in “Ledgers” below);
on the first Interest Payment Date, any amount transferred from the Prefunding Interest Shortfall
Amount Ledger (comprising that part of the Actual Prefunding Interest Shortfall Amount
corresponding to the portion of the Prefunding Amount used to acquire Prefunded Loans during the
first Interest Period) (see “Prefunded Loans” below);
on the first Interest Payment Date, any amount transferred from the Newly-Originated Loans Interest
Shortfall Amount Ledger (comprising that part of the Actual Newly-Originated Loans Interest Shortfall
Amount corresponding to the portion of the Newly-Originated Loans Amount used to acquire Newly-
Originated Loans during the first Interest Period) (see “Newly-Originated Loans” below);
on each of the first eight Interest Payment Dates, any amount transferred from the Discounted Margin
Reserve Ledger on the immediately preceding Determination Date (see “Discounted Loans” below);
any amount received by the Issuer from the GIC Provider in respect of interest on the credit balance of
the GIC Account for the relevant Interest Period (other than in respect of interest on amounts
representing collateral transferred to the Issuer by the Bullet Cap Counterparty, the Bullet Cap
Guarantor, the Fixed/Floating Swap Counterparty, the Fixed/Floating Swap Guarantor, the BBR Swap
Counterparty, the BBR Swap Guarantor, the Currency Swaps Counterparty or the Currency Swaps
Guarantor); and
any amount received by the Issuer in respect of interest and other earnings on Authorised Investments
(as described in “Authorised Investments” below) from (but excluding) the immediately preceding
Interest Payment Date to (and including) that Interest Payment Date (other than in respect of interest on
amounts representing collateral transferred to the Issuer by the Bullet Cap Counterparty, the Bullet Cap
Guarantor, the Fixed/Floating Swap Counterparty, the Fixed/Floating Swap Guarantor, the BBR Swap
Counterparty, the BBR Swap Guarantor, the Currency Swaps Counterparty or the Currency Swaps
Guarantor).
For the avoidance of doubt, the following shall not be credited to the Available Revenue Ledger:
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(i)
(ii)
(iii)
(iv)
(v)
(vi)
any amounts received by the Issuer from the Bullet Cap Counterparty, the Bullet Cap Guarantor, the
Fixed/Floating Swap Counterparty, the Fixed/Floating Swap Guarantor, the BBR Swap Counterparty,
the BBR Swap Guarantor, the Currency Swaps Counterparty or the Currency Swaps Guarantor in
respect of collateral transferred to the Issuer in accordance with the terms of the Bullet Cap Agreement,
the Fixed/Floating Swap Agreement, the BBR Swap Agreement or any Currency Swap Agreement
(other than collateral amounts applied in satisfaction of termination payments due to the Issuer
following the designation of an early termination date under such Bullet Cap Agreement,
Fixed/Floating Swap Agreement, the BBR Swap Agreement or Currency Swap Agreement), and any
interest earned on all such transferred collateral (prior to it being applied in satisfaction of termination
payments);
any amounts received in respect of principal from the Currency Swaps Counterparty;
any termination payment paid by the Bullet Cap Counterparty, the Fixed/Floating Swap Counterparty,
the BBR Swap Counterparty or the Currency Swaps Counterparty to the Issuer, to the extent such
termination payment is paid to a suitably rated replacement bullet cap counterparty, fixed/floating swap
counterparty, BBR swap counterparty or currency swaps counterparty, in consideration for such
counterparty entering into a suitable replacement transaction with the Issuer at that time;
any Swap Replacement Premium to the extent that it is paid as a termination payment (other than a
Currency Swaps Counterparty Default Payment, a BBR Swap Counterparty Default Payment or a
Fixed/Floating Swap Counterparty Default Payment) due to a Currency Swaps Counterparty, a BBR
Swap Counterparty or a Fixed/Floating Swap Counterparty under the relevant Currency Swap
Agreement, BBR Swap Agreement or Fixed/Floating Swap Agreement;
the Post-Completion Activity-Based Fees; and
Prepayment Charges Receipts.
On each Interest Payment Date, the Available Revenue Fund on such date will be applied to discharge the
payments and provisions set out in the Pre-Enforcement Priority of Payments. Following such application of the
Available Revenue Fund in accordance with the Pre-Enforcement Priority of Payments, it is not intended that
any surplus will be accumulated by the Issuer.
Ledgers
The Issuer will:
(a)
on the third Business Day of the calendar month in which an Interest Payment Date occurs (each such
date, a “Determination Date”):
(i)
(ii)
transfer the whole amount standing to the credit of the Revenue Ledger on that Determination
Date (excluding certain monies which properly belong to third parties (such as overpayments
by Borrowers)) to the Available Revenue Ledger (and make an appropriate debit to the
Revenue Ledger); and
transfer the whole of the Reserve Fund to the Available Revenue Ledger (and make an
appropriate debit to the Reserve Ledger); and
(b)
on each Interest Payment Date transfer the whole of the Bullet Cap Proceeds Reserve Fund to the
Available Revenue Ledger (following the crediting to the Bullet Cap Proceeds Reserve Ledger of the
Bullet Cap Payments received by the Issuer on such Interest Payment Date but before the application of
the Available Revenue Fund in accordance with the Pre-Enforcement Priority of Payments) (and make
an appropriate debit to the Bullet Cap Proceeds Reserve Ledger),
in each case to form part of the Available Revenue Fund on that Interest Payment Date.
For the avoidance of doubt, any amounts in respect of Post-Completion Activity Based Fees and Prepayment
Charges Receipts will not be credited to the Available Revenue Ledger.
35

Drawing under the Liquidity Facility
On each Determination Date, the Issuer will determine whether there is a Residual Revenue Deficiency.
“Residual Revenue Deficiency” means, in respect of a Determination Date, the amount, if any, by which the
Available Revenue Fund on that date (after transfers from the Revenue Ledger and the Reserve Ledger, as
described above) together with the amounts, if any, expected to be credited to the Available Revenue Ledger on
or before the immediately succeeding Interest Payment Date (including any amount to be transferred from the
Bullet Cap Proceeds Reserve Ledger (after taking account of any Bullet Cap Payments to be received from the
Bullet Cap Counterparty and/or the Bullet Cap Guarantor)) is insufficient to pay or provide for payment of the
amounts referred to in items (i) to (vi) (inclusive), (viii), (x), (xii) and (xiv) under the Pre-Enforcement Priority
of Payments.
If there is a Residual Revenue Deficiency on a Determination Date and if such Determination Date is prior to
any Liquidity Drawdown Date, then the Issuer will apply for a drawing under the Liquidity Facility to be made
and credited to the Liquidity Ledger on the immediately succeeding Interest Payment Date (to the extent
permitted and as further described under “Liquidity Facility” below).
On that succeeding Interest Payment Date, the Issuer will debit an amount from the Liquidity Ledger and credit
that amount to the Available Revenue Ledger to make good (to the extent of available funds) the Residual
Revenue Deficiency and to form part of the Available Revenue Fund on that Interest Payment Date.
Liquidity Facility
Under the Liquidity Facility Agreement, the Liquidity Facility Provider will make a revolving facility (the
“Liquidity Facility”) available to the Issuer. Any drawings by the Issuer under the Liquidity Facility will be
initially credited to a ledger in the Transaction Account established for this purpose (the “Liquidity Ledger”).
Use of the Liquidity Facility
The aggregate principal amount of drawings from time to time outstanding under the Liquidity Facility cannot
exceed the “Liquidity Maximum Amount”, being as at the Closing Date, £29,250,000 (the initial available
amount of the Liquidity Facility).
Where the Sterling Equivalent Principal Amount Outstanding (as defined in Condition 6 (Payments)) of the
Collateral Backed Notes has reduced such that the Liquidity Maximum Amount is equal to or greater than 8 per
cent. of the Sterling Equivalent Principal Amount Outstanding of the Collateral Backed Notes, the Liquidity
Maximum Amount shall be reduced on each Interest Payment Date to the greater of (a) 8 per cent. of the
Sterling Equivalent Principal Amount Outstanding of the Collateral Backed Notes (after giving effect to any
principal repayments on the Notes on that Interest Payment Date) and (b) £1,500,000. However, such reduction
will only be made on any such Interest Payment Date if, inter alia:
(a)
(b)
the Trigger Condition is satisfied; and
neither the Mortgage Administrator nor the Cash/Bond Administrator is in default of its obligations
under the Mortgage Administration Agreement or the Cash/Bond Administration Agreement, as
applicable.
The Issuer will, on any Interest Payment Date, make drawings under the Liquidity Facility to the extent of the
lesser of (a) any Residual Revenue Deficiency and (b) the Liquidity Maximum Amount minus any amount then
outstanding under the Liquidity Facility (excluding interest accrued but unpaid on any outstanding drawings)
(the “Available Commitment”). However, no drawing may be made under the Liquidity Facility if:
1. there is an Excessive B Principal Deficiency or if the Default Rate is exceeded, to meet interest
payments on the B Notes;
2. there is an Excessive C Principal Deficiency or if the Default Rate is exceeded, to meet interest
payments on the C Notes;
3. there is an Excessive D Principal Deficiency or if the Default Rate is exceeded, to meet interest
payments on the D Notes; or
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4. there is an Excessive E1c Principal Deficiency or if the Default Rate is exceeded, to meet interest
payments on the E Notes.
For these purposes:
(i)
(ii)
(iii)
(iv)
(v)
an “Excessive B Principal Deficiency” will be determined on each Determination Date and will exist
if, after applying the Available Revenue Fund on the immediately following Interest Payment Date, the
B Principal Deficiency is equal to, or greater than, half the Sterling Equivalent Principal Amount
Outstanding of the B Notes;
an “Excessive C Principal Deficiency” will be determined on each Determination Date and will exist
if, after applying the Available Revenue Fund on the immediately following Interest Payment Date, the
C Principal Deficiency is equal to, or greater than, half the Sterling Equivalent Principal Amount
Outstanding of the C Notes;
an “Excessive D Principal Deficiency” will be determined on each Determination Date and will exist
if, after applying the Available Revenue Fund on the immediately following Interest Payment Date, the
D Principal Deficiency is equal to, or greater than, half the Sterling Equivalent Principal Amount
Outstanding of the D Notes;
an “Excessive E1c Principal Deficiency” will be determined on each Determination Date and will
exist if, after applying the Available Revenue Fund on the immediately following Interest Payment
Date, the E1c Principal Deficiency is equal to, or greater than, half the Principal Amount Outstanding
of the E1c Notes; and
the “Default Rate” will be exceeded if, on the Determination Date prior to the relevant Interest
Payment Date, the aggregate of the Principal Balance of all Loans in the Mortgage Pool that are 90
days or more in arrears (including Repossession Loans) on such Determination Date as a percentage of
the Sterling Equivalent Principal Amount Outstanding of the Collateral Backed Notes on the Closing
Date is greater than 22.5 per cent.
To the extent required to cover any Residual Revenue Deficiency (as described in “Ledgers” above), amounts
standing to the credit of the Liquidity Ledger on any Interest Payment Date will be transferred to the Available
Revenue Ledger on that Interest Payment Date for application in accordance with the Pre-Enforcement Priority
of Payments.
Interest on and repayments of drawings
Interest will be paid on the amount of drawings from time to time outstanding under the Liquidity Facility and
principal will be repaid to the extent of available funds in accordance with item (iv) of the Pre-Enforcement
Priority of Payments.
Any amounts to be credited to the Liquidity Ledger in accordance with the Pre-Enforcement Priority of
Payments will be transferred from the Available Revenue Ledger to the Liquidity Ledger on the relevant Interest
Payment Date and thereafter (but only prior to a Liquidity Drawdown Date as defined in “Liquidity Facility -
Rating of the Liquidity Facility Provider” below) will be utilised in repaying amounts outstanding under the
Liquidity Facility (by debiting the Liquidity Ledger when any such repayment is made).
Amounts repaid under the Liquidity Facility or, on or after a Liquidity Drawdown Date, amounts representing
principal standing to the credit of the Liquidity Ledger, will be capable of being redrawn on any Interest
Payment Date for the purposes and to the extent described above.
Rating of the Liquidity Facility Provider
If (a) at any time, the credit rating of the Liquidity Facility Provider (or a guarantor thereof) falls below a rating
of P-1 by Moody’s or a rating of A-1 by S&P or a rating of F1 by Fitch or (b) the Liquidity Facility is not
renewed, and in each case the liquidity facility is not replaced by a suitable alternative liquidity facility such that
the then-current ratings of the Notes are not adversely affected, the Issuer will forthwith draw down the entirety
of the undrawn Available Commitment under the Liquidity Facility (such drawing being a “Stand-by
Drawing”) and credit such amount to the Transaction Account (making a corresponding credit to the Liquidity
37

Ledger). Each date upon which such Stand-by Drawing is made is a “Liquidity Drawdown Date”. In the
event of a Stand-by Drawing being made, the amount of such drawing deposited into the Transaction Account
will be transferred to the GIC Account.
Reserve Fund
On the Closing Date the Issuer will apply £2,600,000 of the proceeds of the issue of the Notes to establish a
reserve fund (the “Reserve Fund”) by crediting such amount to a ledger (the “Reserve Ledger”) established by
the Issuer on which the Issuer will record amounts deposited in and withdrawn from the Reserve Fund.
On each Interest Payment Date, to the extent that the Available Revenue Fund is sufficient, an amount will be
transferred, in accordance with item (xvi) of the Pre-Enforcement Priority of Payments, from the Available
Revenue Ledger to the Reserve Ledger up to an amount equal to the “Reserve Fund Required Amount”,
being:
(a)
(b)
in respect of each Interest Payment Date from (and including) the Closing Date to (and including) the
Interest Payment Date falling in June 2010, £2,600,000;
in respect of each Interest Payment Date falling in September 2010 and each subsequent Interest
Payment Date:
(i)
if the Reserve Fund Amortisation Conditions are satisfied on such Interest Payment Date, the
greater of:
(A)
(B)
0.80 per cent. of the aggregate Sterling Equivalent Principal Amount Outstanding of
the Collateral Backed Notes as at the immediately preceding Interest Payment Date
after the application of the Available Revenue Fund and the Actual Redemption
Funds on such Interest Payment Date; and
0.30 per cent. of the initial aggregate Sterling Equivalent Principal Amount
Outstanding of the Collateral Backed Notes; and
(ii)
if the Reserve Fund Amortisation Conditions are not satisfied on such Interest Payment Date,
the Reserve Fund Required Amount as at the immediately preceding Interest Payment Date,
and, for the avoidance of doubt, the Reserve Fund Required Amount shall never be greater than £2,600,000.
The “Reserve Fund Amortisation Conditions” shall be satisfied on any Interest Payment Date if:
(a)
(b)
the Trigger Condition is satisfied; and
at least 50% of the aggregate Sterling Equivalent Principal Amount Outstanding of the A Notes on the
Closing Date have been redeemed.
The “Trigger Condition” shall be satisfied if:
(a)
(b)
(c)
the Reserve Fund was at the Reserve Fund Required Amount on the immediately preceding Interest
Payment Date;
the Available Revenue Fund (for the avoidance of doubt, including the Reserve Fund but excluding any
amount transferred from the Liquidity Ledger to the Available Revenue Ledger on that Interest
Payment Date), is sufficient to satisfy items (i) to (xv) (both inclusive) in the Pre-Enforcement Priority
of Payments;
on the immediately preceding Determination Date, either: (a) the aggregate Principal Balance of all
Loans in the Mortgage Pool that are 90 days or more in arrears (including Repossession Loans) as a
percentage of the aggregate Principal Balance of all Loans in the Mortgage Pool does not exceed 22.5
per cent., or (b) the aggregate Principal Balance of all Loans in the Mortgage Pool that are 90 days or
more in arrears (excluding Repossession Loans) as a percentage of the aggregate Principal Balance of
38

all Loans in the Mortgage Pool does not exceed 22.5 per cent. and the aggregate Principal Balance of
all Repossession Loans in the Mortgage Pool since the Closing Date (which include sold repossessions
plus current repossessions) as a percentage of the aggregate Sterling Equivalent Principal Amount
Outstanding of the Collateral Backed Notes on the Closing Date does not exceed 15 per cent. (or, in
each case, such greater percentage agreed between the Issuer and the Rating Agencies from time to
time upon the basis that such increase will not adversely affect the then current ratings of the Notes);
and
(d)
the aggregate value of the principal losses in respect of the Mortgage Pool (whether or not such losses
form part of the Principal Deficiency at such time) as at the immediately preceding Determination Date
is not greater than 1.35 per cent. of the aggregate Sterling Equivalent Principal Amount Outstanding of
the Collateral Backed Notes on the Closing Date.
As indicated in “Credit Structure – Available Revenue Fund” above, on each Determination Date the Reserve
Fund will be transferred to the Available Revenue Ledger so as to form part of the Available Revenue Fund and
be applied in accordance with the Pre-Enforcement Priority of Payments on each Interest Payment Date.
Prepayment Charges
Amounts received by the Issuer as additional payments upon the prepayment of Loans (for the avoidance of
doubt, excluding the principal amount to be repaid and any accrued interest payable in respect of such Loans)
(“Prepayment Charges Receipts”) will be initially credited to the Prepayment Charges Ledger and will be paid
to the Residual Certificateholders as set out under “Residual Revenue” below.
Residual Revenue
The Issuer shall, on such Interest Payment Date, pay to the Residual Certificateholders an amount calculated as
being the aggregate of (a) the amount available at item (xviii) of the Pre-Enforcement Priority of Payments (or
item (x) of the Post-Enforcement Priority of Payments as applicable); (b) the balance of the Available Revenue
Fund (after application of items (i) to (xxiii) of the Pre-Enforcement Priority of Payments) (or after application
of items (i) to (xiii) of the Post-Enforcement Priority of Payments as applicable); and (c) all amounts standing to
the credit of the Prepayment Charges Ledger as of the close of business on the preceding Business Day
(together, the “Residual Revenue”).
The Residual Certificates represent an obligation to pay deferred consideration for the acquisition of the Initial
Mortgage Pool as more fully described in the Mortgage Sale Agreement and are issued to the Sellers in a ratio
calculated to reflect the proportion that the Balance of the Loans sold to the Issuer by each Seller bears to the
aggregate Principal Balance of the Mortgage Pool on the Closing Date.
Each Seller shall be entitled to transfer or grant security over its rights with respect to the Residual Certificates,
subject to the restrictions set out in the Mortgage Sale Agreement.
Collection Accounts
Payments by Borrowers in respect of amounts due under the SPML Loans and the A&L Loans will be made, in
the majority of cases by direct debit, into (i) the Eurosail-UK 2007-3BL SPML Trust Collection Account; (ii)
the Eurosail-UK 2007-3BL SPPL Trust Collection Account; (iii) the First Mortgage Collection Account; or (iv)
the Second Mortgage Collection Account.
Payments by Borrowers in respect of amounts due under the Amber Loans will be made into the Amber
Collection Account.
Payments by Borrowers in respect of amounts due under the PML Loans will be made into one of three accounts
of PMCL held with Barclays (one such account being the “PMCL Specific Collection Account” and the other
two accounts being the “PMCL/Barclays Collection Accounts” and together, the “PMCL Collection
Accounts”). In this document the PMCL Specific Collection Account and the PMCL General Collection
Accounts are together referred to as the “PMCL Collection Accounts” and, the PMCL Collection Accounts,
together with the Eurosail-UK 2007-3BL SPML Trust Collection Account, the Eurosail-UK 2007-3BL SPPL
Trust Collection Account, the First Mortgage Collection Account, the SPML Collection Sweep Account, the
Second Mortgage Collection Account, the Amber Collection Account and the First Mortgage Redemption
39

Account are referred to as the “Collection Accounts” and each a “Collection Account”. Barclays and HSBC,
in each case, in its capacity as a collection account bank with respect to the Loans shall be referred to as the
“Collection Account Banks” and each, a “Collection Account Bank”.
SPML will, by a declaration of trust dated on or about the Closing Date (the “Eurosail-UK 2007-3BL SPML
Trust Collection Account Declaration of Trust”) declare a trust over the Eurosail-UK 2007- 3BL SPML Trust
Collection Account in favour of the Issuer and the Issuer will be the beneficiary of such trust.
SPML will, by a declaration of trust dated on or about the Closing Date (the “SPML Collection Sweep
Account Declaration of Trust”) declare a trust in favour of the Issuer over the SPML Collection Sweep
Account to the extent that amounts relate to collections with respect to the SPML Loans and the Issuer will be
the beneficiary of such trust standing to the credit of the SPML Collection Sweep Account.
SPML has, by a declaration of trust dated 2 May 2006, as amended and restated on 31 October 2006 (the “First
Mortgage Collection Account Declaration of Trust”) declared a trust over the First Mortgage Collection
Account, and the Issuer will, by virtue of a deed in respect of a future purchase dated on or about the Closing
Date, become a beneficiary of such trust to the extent that monies received in the First Mortgage Collection
Account relate to collections in respect of the SPML Loans and the A&L Loans. SPML has, by a declaration of
trust dated 2 May 2006, as amended and restated on 31 October 2006 (the “Second Mortgage Collection
Account Declaration of Trust”) declared a trust over the Second Mortgage Collection Account, and the Issuer
will, by virtue of a deed in respect of a future purchase dated on or about the Closing Date, become a beneficiary
of such trust to the extent that monies received in the Second Mortgage Collection Account relate to collections
in respect of the SPML Loans.
SPML has, by a declaration of trust dated 2 May 2006, as amended and restated on 31 October 2006 (the “First
Mortgage Redemption Account Declaration of Trust” and, together with the First Mortgage Collection
Account Declaration of Trust, the SPML Collection Sweep Account Declaration of Trust, the Second Mortgage
Collection Account Declaration of Trust and the Eurosail-UK 2007-3BL SPML Trust Collection Account
Declaration of Trust, the “SPML Collection Accounts Declarations of Trust”) declared a trust over the First
Mortgage Redemption Account and the Issuer will, by virtue of a deed in respect of a future purchase dated on
or about the Closing Date, become a beneficiary of such trust to the extent that monies received in the First
Mortgage Redemption Account relate to collections in respect of the SPML Loans.
SPPL will, by a declaration of trust dated on or about the Closing Date (the “Eurosail-UK 2007-3BL SPPL
Trust Collection Account Declaration of Trust”) declare a trust over the Eurosail-UK 2007-3BL SPPL Trust
Collection Account in favour of the Issuer and the Issuer will be the beneficiary of such trust.
PMCL has, by a declaration of trust dated 3 October 2005 and a declaration of trust dated 9 November 2005
(together, the “PMCL/Barclays General Collection Account Declaration of Trust”) declared a trust over the
PMCL/Barclays Collection Accounts and, by virtue of two deeds in respect of a future purchase, each dated on
or about the Closing Date, the Issuer will become a beneficiary of such trust to the extent that monies received
in the PMCL/Barclays Collection Accounts relate to collections in respect of the PML Loans. PMCL will also,
by a declaration of trust dated on or about the Closing Date (the “PMCL Specific Collection Account
Declaration of Trust”) declare a trust over the PMCL Specific Collection Account. The Issuer will be the sole
beneficiary of the trust over the PMCL Specific Collection Account.
SPML will, by a declaration of trust dated on or about the Closing Date (the “Amber Collection Account
Declaration of Trust”) declare a trust over the Amber Collection Account in favour of the Issuer and the Issuer
will be the beneficiary of such trust.
The SPML Collection Accounts Declarations of Trust, the Eurosail-UK 2007-3BL SPPL Trust Collection
Account Declaration of Trust, the Amber Collection Account Declaration of Trust, the PMCL/Barclays General
Collection Account Declaration of Trust and the PMCL Specific Collection Account Declaration of Trust are
together referred to as the “Collection Accounts Declarations of Trust”.
Transaction Account, Euro Account and Dollar Account
All cleared amounts received from Borrowers will, except in certain limited circumstances, be transferred daily
from the Collection Accounts (other than the First Mortgage Collection Account and the Second Mortgage
Collection Account) into an account denominated in sterling held in the name of the Issuer at the Account Bank
40

(the “Transaction Account”). Cleared amounts received from Borrowers into the First Mortgage Collection
Account and the Second Mortgage Collection Account will be transferred by a nightly automatic transfer into
the First Mortgage Redemption Account and thereafter amounts relating to SPML Loans will be transferred to
an account in the name of SPML t/a LMC with HSBC (the “SPML Collection Sweep Account”). Amounts
standing to the credit of the SPML Collection Sweep Account shall thereafter be transferred back to the First
Mortgage Redemption Account and thereafter amounts standing to the credit of the First Mortgage Redemption
Account which relate to amounts due under the SPML Loans and the A&L Loans will be transferred to the
Transaction Account. All other amounts received by the Issuer will be credited to the Transaction Account
except for (a) amounts denominated in euro received under the Euro Currency Swap Agreements, which shall be
credited to an account denominated in euro held in the name of the Issuer at the Account Bank (the “Euro
Account”) and (b) amounts denominated in dollars received under the Dollar Currency Swap Agreements,
which shall be credited to an account denominated in dollars held in the name of the Issuer at the Account Bank
(the “Dollar Account”). The Transaction Account, the Euro Account, the Dollar Account and the GIC Account
are, together, referred to as the “Bank Accounts”.
GIC Account
Unless invested in accordance with the Investment Administration Agreement, amounts received into the
Transaction Account and collateral posted in the form of sterling by the Bullet Cap Counterparty, the
Fixed/Floating Swap Counterparty, the BBR Swap Counterparty or the Currency Swaps Counterparty will, on a
daily basis, be transferred into the GIC Account held by the Issuer at Danske Bank A/S, London Branch (the
“GIC Provider”), where such amounts will earn a guaranteed rate of interest related to Note Sterling LIBOR
set for the related Interest Period. Before any payment is due to be made from the Transaction Account, such
amount will be transferred from the GIC Account back to the Transaction Account.
If the rating of the unsecured, unsubordinated and unguaranteed short term debt of the Account Bank or the GIC
Provider or any replacement falls below any of the Rating Agencies’ highest short term ratings or the rating then
required to maintain the then current ratings of the Notes, then the Issuer will be required, within 30 calendar
days of the downgrade, either to transfer the Bank Accounts to, or ensure that the Account Bank’s or the GIC
Provider’s obligations, as the case may be, are guaranteed by, an entity having the Rating Agencies’ highest
short term ratings after obtaining the prior written consent of the Trustee and prior written confirmation from
S&P and Fitch that the then current ratings of the Notes will not be thereby adversely affected (“Rating Agency
Confirmation”) and giving notice thereof to Moody’s.
Investment Administration Agreement
Subject to certain conditions, including S&P and Fitch confirming that the then current ratings of the Notes
would not be downgraded or withdrawn as a result, the Issuer will enter into the Investment Administration
Agreement with the Investment Administrator which will determine from time to time in accordance with
certain agreed criteria the investments in which cash from time to time standing to the credit of the Transaction
Account and/or the GIC Account should be invested.
The Investment Administrator may only invest the Issuer’s cash in assets which: (i) are denominated in sterling;
(ii) have a short term unsecured, unguaranteed and unsubordinated rating of at least A-1 from S&P and F1+
from Fitch and a fund rating of at least Aaa/MR1+ from Moody’s; (iii) mature on or may be sold or otherwise
liquidated prior to the Interest Payment Date on which the cash used by the Issuer to acquire such investment is
required by the Issuer (in the determination of the Cash/Bond Administrator); and (iv) the expected rate of
return of which is determined by the Investment Administrator to be greater than the expected rate of return on
the GIC Account (“Authorised Investments”), which may include investments in funds which are managed by
Lehman Brothers International (Europe) or its affiliates.
Principal Deficiency Ledger
A Principal Deficiency Ledger comprising five sub-ledgers, known as the A Principal Deficiency Ledger, the B
Principal Deficiency Ledger, the C Principal Deficiency Ledger, the D Principal Deficiency Ledger and the E1c
Principal Deficiency Ledger, respectively, will be established in order to record any losses on the Mortgage Pool
in respect of Loan Principal Receipts following enforcement of the Collateral Security for the relevant Loans
(each, a “Deficiency”).
41

Any Deficiency:
(a)
(b)
(c)
(d)
(e)
shall be entered as a debit first on the E1c Principal Deficiency Ledger so long as the debit balance on
such sub-ledger (the “E1c Principal Deficiency”) is less than the Principal Amount Outstanding of the
E1c Notes (the “E1c Principal Deficiency Limit”);
thereafter such amounts shall be entered as a debit on the D Principal Deficiency Ledger so long as the
debit balance on such sub-ledger (the “D Principal Deficiency”) is less than the Sterling Equivalent
Principal Amount Outstanding of the D Notes (the “D Principal Deficiency Limit”);
thereafter such amounts shall be entered as a debit on the C Principal Deficiency Ledger so long as the
debit balance on such sub-ledger (the “C Principal Deficiency”) is less than the Sterling Equivalent
Principal Amount Outstanding of the C Notes (the “C Principal Deficiency Limit”);
thereafter such amounts shall be entered as a debit on the B Principal Deficiency Ledger so long as the
debit balance on such sub-ledger (the “B Principal Deficiency”) is less than the Sterling Equivalent
Principal Amount Outstanding of the B Notes (the “B Principal Deficiency Limit”); and
thereafter such amounts shall be entered as a debit on the A Principal Deficiency Ledger (the debit
balance on such sub-ledger being the “A Principal Deficiency” and together with the B Principal
Deficiency, the C Principal Deficiency, the D Principal Deficiency and the E1c Principal Deficiency,
the “Principal Deficiency”).
On each Interest Payment Date, subject to the Available Revenue Fund being sufficient:
(a)
(b)
(c)
(d)
(e)
the A Principal Deficiency will be reduced (and an appropriate credit will be made to the A Principal
Deficiency Ledger) by any funds applied at item (vii) of the Pre-Enforcement Priority of Payments;
the B Principal Deficiency will be reduced (and an appropriate credit will be made to the B Principal
Deficiency Ledger) by any funds applied at item (ix) of the Pre-Enforcement Priority of Payments;
the C Principal Deficiency will be reduced (and an appropriate credit will be made to the C Principal
Deficiency Ledger) by any funds applied at item (xi) of the Pre-Enforcement Priority of Payments;
the D Principal Deficiency will be reduced (and an appropriate credit will be made to the D Principal
Deficiency Ledger) by any funds applied at item (xiii) of the Pre-Enforcement Priority of Payments;
and
the E1c Principal Deficiency will be reduced (and an appropriate credit will be made to the E1c
Principal Deficiency Ledger) by any funds applied at item (xv) of the Pre-Enforcement Priority of
Payments,
in each case, by transferring an appropriate amount from the Available Revenue Ledger to the Principal Ledger.
The B Notes, the C Notes, the D Notes, the E Notes, and the Residual Certificates
The B Noteholders, the C Noteholders, the D Noteholders and the E Noteholders will not be entitled to receive
any payment of interest and the Residual Certificateholders will not be entitled to receive any RC Distribution
(other than in respect of Prepayment Charges Receipts), on an Interest Payment Date unless and until all
amounts of interest then due to the A Noteholders have been paid in full, in accordance with the relevant
Priority of Payments. The C Noteholders, the D Noteholders and the E Noteholders will not be entitled to
receive any payment of interest and the Residual Certificateholders will not be entitled to receive any RC
Distribution (other than in respect of Prepayment Charges Receipts), on an Interest Payment Date unless and
until all amounts of interest then due to the A Noteholders and the B Noteholders have been paid in full, in
accordance with the relevant Priority of Payments. The D Noteholders and the E Noteholders will not be
entitled to receive any payment of interest and the Residual Certificateholders will not be entitled to receive any
RC Distribution (other than in respect of Prepayment Charges Receipts), on an Interest Payment Date unless and
until all amounts of interest then due to the A Noteholders, the B Noteholders and the C Noteholders have been
paid in full, in accordance with the relevant Priority of Payments. The E Noteholders will not be entitled to
receive any payment of interest and the Residual Certificateholders will not be entitled to receive any RC
42

Distribution (other than in respect of Prepayment Charges Receipts), on an Interest Payment Date unless and
until all amounts of interest then due to the A Noteholders, the B Noteholders, the C Noteholders and the D
Noteholders have been paid in full, in accordance with the relevant Priority of Payments. The Residual
Certificateholders will not be entitled to receive any RC Distributions (other than in respect of Prepayment
Charges Receipts) on an Interest Payment Date unless and until all amounts of interest then due to the A
Noteholders, the B Noteholders, the C Noteholders, the D Noteholders and the E Noteholders have been paid in
full, in accordance with the relevant Priority of Payments.
In the event that, on any Determination Date, the Available Revenue Fund is insufficient to make payment in
full of interest amounts due and payable on the Junior Notes, then to that extent interest shall be deferred until
the next Interest Payment Date on which the Available Revenue Fund is sufficient to make such payment, as
more fully set out in Condition 6 (Payments).
Each class of Notes and the Residual Certificates will be constituted by the Trust Deed and will share the same
security although, upon enforcement, in point of security, the Instruments will rank as between themselves as
follows: first, interest and principal on the A Notes pari passu and pro rata; secondly, interest and principal on
the B Notes pari passu and pro rata, thirdly, interest and principal on the C Notes pari passu and pro rata;
fourthly, interest and principal on the D Notes pari passu and pro rata; fifthly, interest on the E Notes and
principal on the E1c Notes pari passu and pro rata; sixthly, RC Senior Distributions on the Residual
Certificates; seventhly, principal on the ETc Notes pari passu and pro rata; and eighthly, any remaining RC
Distributions on the Residual Certificates pari passu and pro rata.
For the avoidance of doubt and notwithstanding the foregoing, the Trustee shall hold the benefit of its security
interest with respect to the Prepayment Charges Receipts solely for the benefit of the Residual
Certificateholders.
Profit Ledger
On each Interest Payment Date, to the extent of available funds, an amount equal to 0.01 per cent. of the
aggregate balances standing to the credit of the Revenue Ledger on the immediately preceding Determination
Date divided by four will be credited to a ledger of the Transaction Account (the “Profit Ledger”). Subject to
the enforcement of the Notes in accordance with Condition 10 (Enforcement of Notes), the amount standing to
the credit of the Profit Ledger is expected to be paid to the Parent by way of dividend.
LIBOR Linked Loans, Fixed Rate Loans and BBR Linked Loans
The Lending Criteria require that any Loan comprised in the Mortgage Pool is either: (a) a “LIBOR Linked
Loan”, which means that the interest rate payable on the Loan is calculated as a specified margin above or
below “Loan LIBOR” being LIBOR for three month sterling deposits from time to time; (b) a “Fixed Rate
Loan”, which means that the interest rate payable on the loan is a fixed rate of interest set by reference to a predetermined
rate or series of rates for a fixed period or periods; or (c) a “BBR Linked Loan”, which means that
the interest rate payable on the Loan is calculated as a specified margin in excess of a “Loan Base Rate” being
a rate set by SPML above or below “Loan BBR” being the Bank of England Base Rate (and, for the avoidance
of doubt, the term BBR Linked Loan or LIBOR Linked Loans where used in the following sections, excludes
Fixed Rate Loans which are also BBR Linked Loans or the LIBOR Linked Loans).
Subject to adjustment for Business Days, Loan LIBOR on all LIBOR Linked Loans in the Mortgage Pool from
time to time is currently set and re-set on the first day of March, June, September and December in each year
(each a “Loan LIBOR Fixing Date”), and applies from each Loan LIBOR Fixing Date until the day preceding
the next Loan LIBOR Fixing Date.
Subject to adjustment for Business Days, Loan BBR on all BBR Linked Loans in the Mortgage Pool from time
to time is currently set and re-set on a monthly basis (each date of such setting or re-setting of Loan BBR,
“Loan BBR Fixing Date”), and applies from each Loan BBR Fixing Date until the day preceding the next Loan
BBR Fixing Date.
Fixed Rate Loans which were but are no longer subject to a fixed rate of interest will convert into LIBOR
Linked Loans or BBR Linked Loans upon the end of the fixed rate period, to the extent not previously
redeemed.
43

Hedging Arrangements
Bullet Cap Transaction
The interest rate payable under the LIBOR Linked Loans is calculated by reference to Loan LIBOR and interest
rate payable under the BBR Linked Loans is calculated by reference to Loan BBR, in each case, which may be
subject to variations. The Issuer could be subject to a higher risk of default in payment by a Borrower under a
LIBOR Linked Loan or a BBR Linked Loan as a result of an increase in Loan LIBOR or Loan BBR (as
applicable). In order to mitigate the Issuer’s exposure to such potential default under a LIBOR Linked Loan due
to an increase in Loan LIBOR or under a BBR Linked Loan due to an increase in Loan BBR, the Issuer will
enter into an interest rate cap agreement (the “Bullet Cap Agreement”) and an interest rate cap transaction
thereunder (the “Bullet Cap Transaction”) on or about the Closing Date with the Bullet Cap Counterparty.
The Bullet Cap Transaction will be entered into under the same ISDA 1992 Master Agreement and Schedule as
the Fixed/Floating Swap Transaciton, the BBR Swap Transaction and the Curency Swap Transactions and
references in this Prospectus to the Bullet Cap Agreement, the Fixed/Floating Swap Agreement, the BBR Swap
Agreement and/or the Currency Swap Agreements shall be to the same ISDA 1992 Master Agreement and
Schedule.
Pursuant to the terms of the Bullet Cap Agreement, the Issuer will make a one-off payment to the Bullet Cap
Counterparty on the Closing Date and, in relation to each Interest Period from the Interest Payment Date falling
in September 2007 until (and including) the Interest Payment Date falling in September 2008, from (but
excluding) the Interest Payment Date falling in September 2008 until (and including) the Interest Payment Date
falling in September 2009 and from (but excluding) the Interest Payment Date falling in September 2009 until
(and including) the Interest Payment Date falling in September 2010, in respect of which Note Sterling LIBOR
exceeds the strike rate of 7.25 per cent., 8.00 per cent. and 8.25 per cent. per annum (on an Actual/365 (Fixed)
basis) respectively, the Bullet Cap Counterparty will make a payment to the Issuer determined by reference to
the application of a rate (which rate shall be calculated by reference to the amount by which Note Sterling
LIBOR exceeds the relevant strike rate) to a notional amount as set out in the Bullet Cap Transaction.
The obligations of the Bullet Cap Counterparty under the Bullet Cap Agreement will be guaranteed by the
Bullet Cap Guarantor in accordance with the provisions of the Bullet Cap Guarantee.
Bullet Cap Proceeds Reserve Fund
Amounts received by the Issuer from the Bullet Cap Counterparty under the Bullet Cap Agreement or the Bullet
Cap Guarantor under the Bullet Cap Guarantee other than (i) any amounts received by the Issuer from the Bullet
Cap Counterparty (or the Bullet Cap Guarantor) in respect of transferred collateral under the Bullet Cap
Agreement or the Bullet Cap Guarantee, (other than collateral amounts applied in satisfaction of termination
payments due to the Issuer following the designation of an early termination date under the Bullet Cap
Agreement), and any interest earned on all transferred collateral, (ii) any termination payment paid by the Bullet
Cap Counterparty to the Issuer (to the extent such termination payment is paid to a suitably rated replacement
bullet cap counterparty in consideration for such replacement bullet cap counterparty entering into a suitable
replacement transaction with the Issuer at that time) (each such amount, a “Bullet Cap Payment”) shall be
applied to establish a reserve fund (the “Bullet Cap Proceeds Reserve Fund”). The Issuer will also establish a
ledger (the “Bullet Cap Proceeds Reserve Ledger”) on which it will record amounts deposited in and
withdrawn from the Bullet Cap Proceeds Reserve Fund.
As indicated in “Credit Structure – Available Revenue Fund” above, on each Interest Payment Date the Bullet
Cap Proceeds Reserve Fund will be transferred to the Available Revenue Ledger so as to form part of the
Available Revenue Fund and be applied in accordance with the Pre-Enforcement Priority of Payments on each
Interest Payment Date.
On each Interest Payment Date, other than the Interest Payment Date upon which the Notes are redeemed in full,
to the extent that the Available Revenue Fund is sufficient, an amount will be transferred, in accordance with
item (xvii) of the Pre-Enforcement Priority of Payments, from the Available Revenue Ledger to the Bullet Cap
Proceeds Reserve Ledger up to an amount (the “Relevant Amount”) equal to the aggregate of (i) the balance of
the Bullet Cap Proceeds Reserve Fund on the immediately preceding Interest Payment Date and (ii) the
aggregate amount of the Bullet Cap Payments received since the immediately preceding Interest Payment Date.
44

On the Interest Payment Date upon which the Notes are redeemed in full, an amount equal to the Relevant
Amount will be paid, in accordance with item (xxi) of the Pre-Enforcement Priority of Payments, to the Bullet
Cap Counterparty in accordance with the terms of the Bullet Cap Transaction.
Fixed/Floating Swap Transaction
The Fixed Rate Loans are subject to a fixed rate of interest, but the rates of interest payable on the Notes (or, in
the case of the Euro Notes and the Dollar Notes, the periodic payments payable by the Issuer under the Currency
Swap Agreements) are calculated by LIBOR for three month sterling deposits (or, in the case of the first Interest
Period, the linear interpolation of LIBOR for one month and two month sterling deposits) which may be subject
to variations. As such, the Issuer’s ability to pay interest on the Notes might be adversely affected as LIBOR
increases. In order to mitigate the Issuer’s exposure to such an increase in LIBOR for three month sterling
deposits, the Issuer will enter into a swap agreement (the “Fixed/Floating Swap Agreement”) and a
fixed/floating swap transaction thereunder (the “Fixed/Floating Swap Transaction”) on or about the Closing
Date with the Fixed/Floating Swap Counterparty.
The Fixed/Floating Swap Transaction will be entered into under the same ISDA 1992 Master Agreement and
Schedule as the BBR Swap Transaction, the Bullet Cap Transaction and the Currency Swap Transactions and
references in this Prospectus to the Fixed/Floating Swap Agreement, the BBR Swap Agreement, the Bullet Cap
Agreement and/or the Currency Swap Agreements shall be to the same ISDA 1992 Master Agreement and
Schedule.
Pursuant to the terms of the Fixed/Floating Swap Agreement, on each Interest Payment Date from and including
the Interest Payment Date falling in December 2007:
(a)
(b)
the Issuer will make a payment to the Fixed/Floating Swap Counterparty calculated by applying the
Weighted Average Fixed Rate to the Fixed/Floating Notional Amount; and
the Fixed/Floating Swap Counterparty will make payments to the Issuer calculated by applying the
aggregate of (i) Note Sterling LIBOR in respect of the immediately preceding Interest Period and (ii)
the applicable Asset Yield (on an Actual/365 (Fixed) basis) to the Fixed/Floating Notional Amount,
where:
“Asset Yield” means, on any Interest Payment Date, (i) with respect to Loans subject to a fixed rate of interest
for the duration of such Loans, 5.43 per cent. and (ii) with respect to all other Fixed Rate Loans, 0.54 per cent.
“Fixed/Floating Notional Amount” means, in respect of any Interest Payment Date, an amount equal to the
Performing Balance in respect of the Interest Period preceding such Interest Payment Date;
“Performing Balance” means, in respect of any Interest Period:
(a)
(b)
(c)
the Actual Loan Revenue Receipts received in respect of the Fixed Rate Loans in the Mortgage Pool
during the three calendar months ending immediately prior to the Interest Payment Date (the “Relevant
Period”),
divided by the interest scheduled to have been received in respect of the Fixed Rate Loans in the
Mortgage Pool during the Relevant Period, and
multiplied by the average of the aggregate of the Principal Balance of the Fixed Rate Loans in the
Mortgage Pool as of the last calendar day of each of the calendar months ending during such Interest
Period; and
“Weighted Average Fixed Rate” means, in respect of any Interest Payment Date, the interest scheduled to have
been received in respect of the Fixed Rate Loans in the Mortgage Pool during the Relevant Period divided by
the average of the aggregate of the Principal Balance of the Fixed Rate Loans in the Mortgage Pool as of the last
calendar day of each of the calendar months ending during such Interest Period.
45

The obligations of the Fixed/Floating Swap Counterparty under the Fixed/Floating Swap Agreement will be
guaranteed by the Fixed/Floating Swap Guarantor in accordance with the provisions of the Fixed/Floating Swap
Guarantee.
BBR Swap Transaction
The BBR Linked Loans are subject to a rate of interest determined by reference to Loan BBR, but the rates of
interest payable on the Notes (or, in the case of the Euro Notes and the Dollar Notes, the periodic payments
payable by the Issuer under the Currency Swap Agreements) are calculated by LIBOR for three month sterling
deposits (or, in the case of the first Interest Period, the linear interpolation of LIBOR for one month and two
month sterling deposits), and hence there may be a discrepancy between Loan BBR and LIBOR for three month
sterling deposits. As such, the Issuer’s ability to pay interest on the Notes might be adversely affected if there is
a discrepancy between Loan BBR and LIBOR for three month sterling deposits. In order to mitigate the Issuer’s
exposure to such a discrepancy between Loan BBR and LIBOR for three month sterling deposits, the Issuer will
enter into a swap agreement (the “BBR Swap Agreement” and, together with the Bullet Cap Agreement and
the Fixed/Floating Swap Agreement, the “Hedging Agreements” and each a “Hedging Agreement”) and a
BBR swap transaction thereunder (the “BBR Swap Transaction” and, together with the Bullet Cap Transaction
and the Fixed/Floating Swap Transaction, the “Hedging Transactions” and each a “Hedging Transaction”) on
or about the Closing Date with the BBR Swap Counterparty.
The BBR Swap Transaction will be entered into under the same ISDA 1992 Master Agreement and Schedule as
the Fixed/Floating Swap Transaction, the Bullet Cap Transaction and the Currency Swap Transactions and
references in this Prospectus to the Fixed/Floating Swap Agreement, the BBR Swap Agreement, the Bullet Cap
Agreement and/or the Currency Swap Agreements shall be to the same ISDA 1992 Master Agreement and
Schedule.
Pursuant to the terms of the BBR Swap Agreement, on each Interest Payment Date from and including the
Interest Payment Date falling in September 2007:
(a)
(b)
the Issuer will make a payment to the BBR Swap Counterparty calculated by applying the aggregate of
the Weighted Average BBR Rate and a margin to the BBR Notional Amount; and
the BBR Swap Counterparty will make a payment to the Issuer calculated by applying Note Sterling
LIBOR in respect of the immediately preceding Interest Period to the BBR Notional Amount,
where:
“BBR Linked Performing Balance” means, in respect of any Interest Period:
(a)
(b)
(c)
the Actual Loan Revenue Receipts received in respect of the non-fixed currently BBR Linked Loans in
the Mortgage Pool during the Relevant Period,
divided by the interest scheduled to have been received in respect of the non-fixed currently BBR
Linked Loans in the Mortgage Pool during the Relevant Period, and
multiplied by the average of the aggregate of the Principal Balance of the non-fixed currently BBR
Linked Loans in the Mortgage Pool as of the last calendar day of each of the calendar months ending
during such Interest Period;
“BBR Notional Amount” means, in respect of any Interest Payment Date, an amount equal to the BBR Linked
Performing Balance in respect of the Interest Period preceding such Interest Payment Date;
“Weighted Average BBR Rate” means, in respect of any Interest Payment Date, the weighted average BBR
rate charged on the non-fixed currently BBR Linked Loans during the Relevant Period.
The obligations of the BBR Swap Counterparty under the BBR Swap Agreement will be guaranteed by the BBR
Swap Guarantor in accordance with the provisions of the BBR Swap Guarantee.
46

Termination of Hedging Transactions
A Hedging Transaction may be terminated by the relevant Hedge Counterparty in circumstances including,
broadly, where the Issuer is in default by reason of failure by the Issuer to make payments, where certain
insolvency-related events affect the Issuer, in the event that proceedings are taken against the Issuer by the
Trustee to enforce payment of the Notes or if the Notes are redeemed in full. A Hedging Transaction may be
terminated by the Issuer in circumstances including, broadly where the relevant Hedge Counterparty or the
relevant Hedge Guarantor is in default by reason of failure by such Hedge Counterparty or such Hedge
Guarantor to make payments, where the relevant Hedge Counterparty or a Hedge Guarantor is otherwise in
breach of the relevant Hedging Agreement or a Hedging Guarantee (as applicable) or has made certain
misrepresentations, where the relevant Hedge Counterparty or the relevant Hedge Guarantor defaults under any
derivative transaction entered into with the Issuer, where certain insolvency-related or corporate reorganisation
events affect the relevant Hedge Counterparty or the relevant Hedge Guarantor and where certain tax
representations given by the relevant Hedge Counterparty prove to be incorrect.
Each Hedging Transaction may be terminated early by the Issuer or the relevant Hedge Counterparty in the
event that (i) there is a change of law or change in application of the relevant law which results in such party
being obliged to make a withholding or deduction on account of a tax on a payment to be made by such party
under such Hedging Transaction and thereby being required, under the terms of such Hedging Transaction to
gross up payments made under the Hedging Transaction or (ii) there is a change in law which results in the
illegality of the obligations to be performed by either party under such Hedging Transaction. Promptly upon the
termination of the Hedging Agreement, the Issuer shall notify the Trustee of such termination.
Upon termination of a Hedging Transaction, depending on replacement values, the Hedge Counterparty may be
liable to make a termination payment to the Issuer or vice versa in accordance with the terms of the relevant
Hedging Agreement. Except as described above, the Hedge Counterparty is not bound to make any other
payments. In particular, the Hedge Counterparty will not make or guarantee any payments in respect of the
Notes.
In the event that the rating of a Hedge Counterparty or, as the case may be, a Hedge Guarantor is downgraded
below the relevant rating(s) specified (in accordance with the requirements of Fitch, Moody’s and S&P) in the
relevant Hedging Agreement then the Issuer has the right, subject to certain conditions, to terminate such
Hedging Agreement unless the Hedge Counterparty, within the time period specified in such Hedging
Agreement and at its own cost, takes certain remedial steps which may include:
(i)
(ii)
(iii)
providing collateral for its obligations in accordance with (and only if permitted by) the terms of such
Hedging Agreement; or
obtaining a guarantee of, or a co-obligor for its obligations under such Hedging Agreement from a third
party whose ratings are equal to or higher than the ratings specified in such Hedging Agreement and/or
where the terms of such Hedging Agreement so provide, the Rating Agencies confirm that the thencurrent
ratings of the Notes will not be downgraded or withdrawn as a result of obtaining such
guarantee or co-obligor; or
transferring all of its rights and obligations under such Hedging Agreement to a third party provided
that such third party’s ratings are equal to or higher than the ratings specified in such Hedging
Agreement.
Where a Hedge Counterparty or a Hedge Guarantor provides collateral in accordance with the terms of the
relevant Hedging Agreement or Hedging Guarantee, as the case may be, such collateral will, upon receipt by the
Issuer, be credited to a separate ledger created to record the amount of collateral received under such Hedging
Agreement (the “Collateral Ledger”) and transferred (if in sterling cash form) to the GIC Account. Any
collateral or interest thereon provided by such Hedge Counterparty or Hedge Guarantor shall not form part of
the Available Revenue Fund other than collateral amounts applied in satisfaction of termination payments due to
the Issuer following the designation of an early termination date under such Hedging Agreement.
A Hedge Counterparty may, with the consent of the Issuer or the Trustee, subject to the conditions set out in the
relevant Hedging Agreement, transfer its rights and obligations in respect of such Hedging Agreement to
another entity, provided that, among other things, such entity satisfies the rating requirements of the Rating
Agencies.
47

Currency Swap Arrangements
The Euro Notes and the Dollar Notes will be denominated in euro and dollars, respectively, and the Issuer will
pay interest and principal on the Euro Notes in euro and on the Dollar Notes in dollars. However, payments of
interest and principal by Borrowers under the Loans to the Issuer will be made in sterling. In addition, each of
the Euro Notes and the Dollar Notes will bear interest at rates based on margins over Note EURIBOR and Note
USD-LIBOR, respectively. In order to protect itself against its exposure to the relevant Note EURIBOR interest
rate and Note USD-LIBOR interest rate and its currency exchange rate exposure in respect of the Euro Notes
and the Dollar Notes, on or prior to the Closing Date the Issuer and the Currency Swaps Counterparty will enter
into the Currency Swap Transactions in relation to each class of Euro Notes and Dollar Notes.
The Currency Swap Transactions will be entered into under the same ISDA 1992 Master Agreement and
Schedule as the Fixed/Floating Swap Transaction, the BBR Swap Transaction and the Bullet Cap Transaction
and references in this Prospectus to the Currency Swap Agreements, the Fixed/Floating Swap Agreement, the
BBR Swap Agreement and/or the the Bullet Cap Agreement shall be to the same ISDA 1992 Master Agreement
and Schedule.
Under the terms of each Currency Swap Transaction, the Issuer will pay to the Currency Swaps Counterparty:
(a)
(b)
(c)
on the Closing Date, the proceeds received on the issue of the relevant class of Notes;
on each Interest Payment Date, an amount in sterling equal to the amount available to be applied in
repayment of principal on the relevant class of Notes on that Interest Payment Date; and
on each Interest Payment Date, an amount in sterling based on three month sterling LIBOR, except on
the first Interest Payment Date, an amount in sterling based on a linear interpolation of one month and
two month sterling LIBOR.
Under the terms of each Currency Swap Transaction, the Currency Swaps Counterparty will pay to the Issuer:
(A)
(B)
(C)
on the Closing Date, an amount in sterling calculated by reference to the euro proceeds (in relation to
the Euro Currency Swap Transactions) and an amount in sterling calculated by reference to the dollar
proceeds (in relation to the Dollar Currency Swap Transactions) of the issue of the relevant class of
Notes and paid to the Currency Swaps Counterparty by the Issuer on the Closing Date, such proceeds
to be converted into sterling at the applicable Currency Swap Rate;
on each Interest Payment Date, an amount in euro (in relation to the Euro Currency Swap Transactions)
and an amount in dollars (in relation to the Dollar Currency Swap Transactions) calculated by reference
to the amount in sterling paid to the Currency Swaps Counterparty by the Issuer on such Interest
Payment Date under (b) above; and
on each Interest Payment Date, an amount in euro (in relation to the Euro Currency Swap Transactions)
and an amount in dollars (in relation to the Dollar Currency Swap Transactions) calculated by reference
to the amount in sterling paid to the Currency Swaps Counterparty by the Issuer under (c) above.
The sterling/dollar exchange rate has been set at £1.00 : $2.020 (rounded to three decimal places) in respect of
the A1b Currency Swap Transaction (the “A1b Currency Swap Rate”) and at £1.00 : $2.020 (rounded to three
decimal places) in respect of the A2b Currency Swap Transaction (the “A2b Currency Swap Rate”). The
sterling/euro exchange rate has been set at £1.00 : €1.483 (rounded to three decimal places) in respect of the A2a
Currency Swap Transaction (the “A2a Currency Swap Rate”), at £1.00 : €1.481 (rounded to three decimal
places) in respect of the A3a Currency Swap Transaction (the “A3a Currency Swap Rate”), at £1.00 : €1.478
(rounded to three decimal places) in respect of the B1a Currency Swap Transaction (the “B1a Currency Swap
Rate”), at £1.00 : €1.473 (rounded to three decimal places) in respect of the C1a Currency Swap Transaction
(the “C1a Currency Swap Rate”) and £1.00 : €1.480 (rounded to three decimal places) in respect of the D1a
Currency Swap Transaction (the “D1a Currency Swap Rate” and, together with the A1b Currency Swap Rate,
the A2a Currency Swap Rate, the A2b Currency Swap Rate, the A3a Currency Swap Rate, the B1a Currency
Swap Rate and the C1a Currency Swap Rate the, “Currency Swap Rates”).
Each Currency Swap Transaction may be terminated by the Currency Swaps Counterparty in circumstances
including, broadly, where the Issuer is in default by reason of failure by the Issuer to make payments, where the
48

Issuer is dissolved (other than pursuant to a merger) or the Notes are redeemed in full for tax reasons. Each
Currency Swap Transaction may be terminated by the Issuer in circumstances including, broadly, where the
Currency Swaps Counterparty is in default by reason of failure by the Currency Swaps Counterparty to make
payments, where the Currency Swaps Counterparty is otherwise in breach of the relevant Currency Swap
Agreement or has made certain misrepresentations, where the Currency Swaps Counterparty defaults under any
derivative transaction entered into with the Issuer, where certain insolvency related or corporate reorganisation
events affect the Currency Swaps Counterparty and where certain tax representations given by the Currency
Swaps Counterparty prove to be incorrect. Each Currency Swap Transaction may also be terminated early by
the Issuer or the Currency Swaps Counterparty in the event that (i) there is a change of law or change in
application of the relevant law which results in such party being obliged to make a withholding or deduction on
account of a tax on a payment to be made by such party under the Currency Swap Transaction and thereby being
required, under the terms of the Currency Swap Transaction to gross up payments made under the Currency
Swap Transaction or (ii) there is a change in law which results in the illegality of the obligations to be
performed by either party under the Currency Swap Transaction.
Promptly upon the termination of a Currency Swap Transaction, the Issuer shall notify the Trustee of such
termination. Upon termination of a Currency Swap Transaction, either the Issuer or the Currency Swaps
Counterparty may be liable to make a termination payment to the other in accordance with the terms of the
relevant Currency Swap Agreement. Except as described above the Currency Swaps Counterparty is not bound
to make any other payments. In particular, the Currency Swaps Counterparty will not make or guarantee any
payments in respect of the Notes.
In the event that the relevant rating(s) of the Currency Swaps Counterparty or the Currency Swaps Guarantor (as
applicable) is downgraded below the relevant rating(s) specified (in accordance with the requirements of Fitch,
S&P and Moody’s) in the Currency Swap Agreements, then the Issuer has the right, subject to certain
conditions, to terminate the relevant Currency Swap Agreement unless the Currency Swaps Counterparty,
within the time period specified in the relevant Currency Swap Agreement and at its own cost, takes certain
remedial measures which may include:
(a)
(b)
(c)
providing collateral for its obligations in accordance with (and only if permitted by) the terms of the
relevant Currency Swap Agreement; or
obtaining a guarantee of, or a co-obligor for its obligations under the relevant Currency Swap
Agreement from a third party whose ratings are equal to or higher than the ratings specified in the
relevant Currency Swap Agreement and, where the terms of the relevant Currency Swap Agreement so
provide, the relevant Rating Agencies confirm that the then-current ratings of the Notes will not be
downgraded as a result of obtaining such guarantee or co-obligor; or
transferring all of its rights and obligations under the relevant Currency Swap Agreement to a third
party provided that such third party’s ratings are equal to or higher than the ratings specified in the
relevant Currency Swap Agreement.
Where the Currency Swaps Counterparty or the Currency Swaps Guarantor (as applicable) provides collateral in
accordance with the terms of any Currency Swap Agreement or the Currency Swap Guarantee (as the case may
be) such collateral will, upon receipt by the Issuer, be credited to the Collateral Ledger and transferred (if in
Sterling cash form) to the GIC Account. Any collateral or interest thereon provided by the Currency Swaps
Counterparty or the Currency Swaps Guarantor (as applicable), other than collateral amounts applied in
satisfaction of termination payments due to the Issuer following the designation of an early termination date
under the relevant Currency Swap Agreement, shall not form part of the Available Revenue Fund.
The Currency Swaps Counterparty may, with the consent of the Issuer or the Trustee, subject to the conditions
set out in the relevant Currency Swap Agreement, transfer its obligations in respect of any Currency Swap
Agreement to another entity provided that, among other things, such entity satisfies the ratings requirements of
the Rating Agencies and that the Rating Agencies confirm that such transfer of obligations would not result in a
downgrade of the then-current ratings of the Notes.
The obligations of the Currency Swaps Counterparty under the Currency Swap Agreements will be guaranteed
by the Currency Swaps Guarantor in accordance with the provisions of the Currency Swap Guarantee.
49

Discounted Loans
Under the terms of certain Loans included in the Provisional Mortgage Pool and expected to be included in the
Mortgage Pool from time to time, the margin payable by a Borrower will be discounted during a specified initial
period of the Loan (the “Discounted Loans”).
In order to increase the amount of Available Revenue Fund for a specified period, the Issuer will, on the Closing
Date establish a reserve fund (the “Discounted Margin Reserve Fund”) by crediting £8,690,000 of the
proceeds of the issue of the Notes to the GIC Account and making such funds available for credit to a ledger
established for that purpose (the “Discounted Margin Reserve Ledger”).
On each Determination Date, until (and including) the Determination Date falling in June 2009, the Issuer, or
the Cash/Bond Administrator on its behalf, will debit a specified amount to the Discounted Margin Reserve
Ledger and credit the Available Revenue Ledger accordingly. These amounts will be:
Determination Date falling in Specified amount (£)
September 2007 2,400,000
December 2007 1,190,000
March 2008 1,150,000
June 2008 1,130,000
September 2008 1,050,000
December 2008 880,000
March 2009 630,000
June 2009 260,000
Newly-Originated Loans
It is a requirement of the Mortgage Sale Agreement that the Loans to be sold by each of the Sellers must be such
that the Cash/Bond Administrator shall have verified receipt of 50 per cent. or more of a first monthly payment
due from a Borrower under the applicable Mortgage Conditions (a “Monthly Payment”) applicable to the
relevant Loan. Loans in respect of which there is not on the Closing Date a verified receipt of 50 per cent. or
more of a Monthly Payment (being the “Newly-Originated Loans”), will not be sold to the Issuer on the
Closing Date and will therefore not form part of the Initial Mortgage Pool.
In such event, that part (the “Newly-Originated Loans Amount”) of the proceeds of the issue of the Notes shall
be retained in the Transaction Account which will be recorded in a separate ledger (the “Newly-Originated
Loans Ledger”) and transferred on the Closing Date into the GIC Account.
To the extent that PML (in relation to the PML Loans) or SPML or SPPL (in relation to the SPML Loans) or
SPML (in relation to the Amber Loans and the A&L Loans) has, on any Business Day after the Closing Date up
to (and including) the first Interest Payment Date, received from the Borrower payment of at least 50 per cent. of
a Monthly Payment due in respect of the relevant Loan, PML or SPML (as applicable) may sell such Loan to the
Issuer in accordance with the Mortgage Sale Agreement and, to that extent, the Issuer, or the Cash/Bond
Administrator on its behalf, shall utilise the whole or part (as the case may be) of the Newly-Originated Loans
Amount in payment to PML or SPML (as applicable) of the initial consideration for such sale.
The Issuer will, on the Closing Date, make available from the proceeds of the issue of the Notes, for credit to a
ledger established for that purpose (the “Newly-Originated Loans Interest Shortfall Amount Ledger”), the
“Anticipated Newly-Originated Loans Interest Shortfall Amount” being the amount by which (a) the
amount of interest that will be payable by the Issuer in respect of the first Interest Period on Notes having a
Sterling Equivalent Principal Amount Outstanding corresponding to the Newly-Originated Loans Amount
(where such Notes are a combination of A Notes, B Notes, C Notes, D Notes and E1c Notes pro rata to their
respective total Sterling Equivalent Principal Amount Outstanding) is expected to exceed (b) the amount of
interest that will be earned by the Issuer by investing the Newly-Originated Loans Amount in the GIC Account
throughout the first Interest Period.
The amount by which the interest that would be payable by the Issuer on such Notes actually exceeds the
interest earned on the Newly-Originated Loans Amount is referred to as the “Actual Newly-Originated Loans
Interest Shortfall Amount” and will be determined by the Cash/Bond Administrator acting in accordance with
50

the terms of the Cash/Bond Administration Agreement. The Issuer, or the Cash/Bond Administrator on its
behalf, will:
(a)
(b)
on each date on which the Issuer acquires Newly-Originated Loans, debit the Newly-Originated Loans
Interest Shortfall Amount Ledger with that part of the Actual Newly-Originated Loans Interest
Shortfall Amount referable to the portion of the Newly-Originated Loans Amount used to purchase
Newly-Originated Loans on that date and credit the Available Revenue Ledger with a corresponding
amount (which amount will form part of the Available Revenue Fund to be applied on the first Interest
Payment Date in accordance with the Pre-Enforcement Priority of Payments); and
on the last date on which Newly-Originated Loans are acquired by the Issuer, credit any remaining
amount standing to the credit of the Newly-Originated Loans Interest Shortfall Amount Ledger to the
Available Revenue Ledger.
To the extent that the Cash/Bond Administrator shall not have been able to verify due payment by Borrowers of
50 per cent. or more of a first Monthly Payment under a Newly-Originated Loan by the first Interest Payment
Date, the Issuer, or the Cash/Bond Administrator on its behalf, shall debit all amounts then standing to the credit
of the Newly-Originated Loans Ledger and credit the same to the Principal Ledger to be applied on such Interest
Payment Date as Actual Redemption Funds.
There will not be any Newly-Originated Loans in the Initial Mortgage Pool and therefore the Newly-Originated
Loans Amount will be zero.
Prefunded Loans
Further Loans (the “Prefunded Loans”) together with their related Collateral Security, will be purchased by the
Issuer from the Sellers and included in the Mortgage Pool on any Business Day after the Closing Date up to
(and including) the first Interest Payment Date (a “Prefunding Acquisition Date”) subject to the relevant
Prefunded Loans and related Collateral Security complying with the Warranties and to the relevant Seller having
received prior written confirmation from each of S&P and Fitch that the inclusion of the Prefunded Loans would
not adversely affect the then-current ratings of the Notes and the Issuer and/or the relevant Seller giving notice
of such purchase to Moody’s. It will be a requirement of the Mortgage Sale Agreement that, in respect of the
Prefunded Loans to be sold by a Seller, the relevant Seller must represent that the relevant Borrower has paid at
least 50 per cent. of the first Monthly Payment prior to the Determination Date preceding the first Interest
Payment Date.
The Issuer will purchase Prefunded Loans and related Collateral Security solely using the amount (the
“Prefunding Amount”) credited to the Transaction Account on the Closing Date to be used for such purpose
and recorded in a ledger established for that purpose (the “Prefunding Ledger”). The Prefunding Amount on
the Closing Date will be the amount by which the proceeds of the Collateral Backed Notes exceeds the sum of
(a) the aggregate purchase price payable by the Issuer in respect of the Loans comprised in the Initial Mortgage
Pool on the Closing Date and (b) the Newly-Originated Loans Amount (as defined above). After the Closing
Date, no further amounts may be credited or re-credited to the Prefunding Ledger. Save as specified in the
following sentences, amounts standing to the credit of the Prefunding Ledger may not be used for any purpose
other than the acquisition by the Issuer of Prefunded Loans. Such amounts will be invested under the GIC
Account between the Closing Date and a Prefunding Acquisition Date. The Issuer, or the Cash/Bond
Administrator on its behalf, will debit all amounts standing to the credit of the Prefunding Ledger on the
Determination Date immediately prior to the first Interest Payment Date which are not allocated for the purchase
of Prefunded Loans on any Prefunding Acquisition Date falling on or after such Determination Date and credit
the same to the Principal Ledger to be applied on such Interest Payment Date as Actual Redemption Funds.
The Issuer, or the Cash/Bond Administrator on its behalf, will, on the Closing Date, make available from the
proceeds of the issue of the Notes, for credit to a ledger established for that purpose (the “Prefunding Interest
Shortfall Amount Ledger”), the “Anticipated Prefunding Interest Shortfall Amount” being the amount by
which (a) the amount of interest that will be payable by the Issuer in respect of the first Interest Period on Notes
having a Sterling Equivalent Principal Amount Outstanding corresponding to the Prefunding Amount (where
such Notes are a combination of A Notes, B Notes, C Notes, D Notes and E1c Notes pro rata to their respective
total Sterling Equivalent Principal Amount Outstanding) is expected to exceed (b) the amount of interest that
will be earned by the Issuer by investing the Prefunding Amount in the GIC Account throughout the first
Interest Period.
51

The amount by which the interest that would be payable by the Issuer on such Notes actually exceeds the
amount of interest earned on the Prefunding Amount is referred to as the “Actual Prefunding Interest
Shortfall Amount” and will be determined by the Cash/Bond Administrator acting in accordance with the terms
of the Cash/Bond Administration Agreement. The Issuer, or the Cash/Bond Administrator on its behalf, will:
(a)
(b)
on each Prefunding Acquisition Date, debit the Prefunding Interest Shortfall Amount Ledger with that
part of the Actual Prefunding Interest Shortfall Amount referable to the portion of the Prefunding
Amount used to purchase Prefunded Loans on that date and credit the Available Revenue Ledger with
a corresponding amount (which amount will form part of the Available Revenue Fund to be applied on
the first Interest Payment Date in accordance with the Pre-Enforcement Priority of Payments); and
on the last Prefunding Acquisition Date, credit any remaining amount standing to the credit of the
Prefunding Interest Shortfall Amount Ledger to the Available Revenue Ledger.
As the Prefunding Amount will be zero and the Anticipated Prefunding Interest Shortfall Amount is zero, there
will be no amounts standing to the credit of the Prefunding Interest Shortfall Amount Ledger to be credited to
the Available Revenue Ledger and available to be applied on the first Interest Payment Date as part of the
Available Revenue Fund.
52

THE SELLERS AND ORIGINATORS
Preferred Mortgages Limited
PML is a limited company incorporated in England and Wales under the Companies Acts 1985 and 1989 on 14
December 1995 (registration number 3137809). PML is engaged in the business of originating, purchasing and
selling residential mortgage loans made to borrowers whose borrowing needs may not be met by traditional
financial institutions in the UK residential market. PML is a subsidiary of an affiliate of Lehman Brothers
International (Europe), the Lead Manager. However, such affiliate may consider offers in respect of its interest
in PML from time to time and may not continue to hold such interest for the duration of the life of the Notes.
The registered office of PML is at 6 Broadgate, London EC2M 2QS.
Southern Pacific Mortgage Limited
SPML is a limited company incorporated in England and Wales under the Companies Acts 1985 and 1989 on 15
October 1996 (registration number 3266119). SPML is the holding company of nine subsidiary companies
incorporated in England and Wales under the Companies Acts 1985 and 1989 with limited liability and one
subsidiary incorporated in Jersey (each, a “Subsidiary” and together with SPML and any other subsidiaries
from time to time, the “UK Group”). The UK Group’s primary business is the origination of standard and nonstandard
residential mortgages in the UK. SPML is a subsidiary of an affiliate of Lehman Brothers International
(Europe), the Lead Manager. However, such affiliate may consider offers in respect of its interest from time to
time and may not continue to hold its interest for the duration of the life of the Notes.
SPML’s registered office and principal place of business is at 1st Floor, 6 Broadgate, London EC2M 2QS.
Southern Pacific Personal Loans Limited
SPPL, an affiliate of SPML, is a limited company incorporated in England and Wales under the Companies Acts
1985 and 1989 on 25 October 2000 (registration number 4096093). SPPL’s entire issued share capital is owned
by Resetfan Limited (registration number 3752197) whose registered office is at 1st Floor, 6 Broadgate, London
EC2M 2QS. SPPL’s primary business is the origination of loans secured by second ranking residential
mortgages or (in Scotland) by second ranking standard securities in the UK. SPPL also originates, where all
prior mortgages or standard securities over a property are held by a single lender, some loans secured by
mortgages or standard securities ranking immediately after the single lender.
SPPL’s registered office and principal place of business is at 1st Floor, 6 Broadgate, London EC2M 2QS.
SPPL will have sold the Loans originated by it and which are to be included in the Initial Mortgage Pool to
SPML not later than the Closing Date.
Matlock London Limited (formerly Matlock Bank Limited)
Matlock London Limited is a limited company incorporated in England and Wales under the Companies Act
1985 and 1989 on 25 April 1958 (registered number 00603511). The registered office of Matlock London
Limited is at Fourth Floor, Eagle House, 108-110 Jermyn Street, London SW1Y 6EE. Until 2 May 2006 it
traded as the London Mortgage Company. On 14 May 2007, it changed its name from Matlock Bank Limited to
Matlock London Limited.
Langersal No. 2 Limited
Langersal No. 2 Limited is a limited company incorporated in England and Wales under the Companies Act
1985 and 1989 on 1 November 1973 (registered number 01143030). The registered office of Langersal No. 2
Limited is at Fourth Floor, Eagle House, 108-110 Jermyn Street, London SW1Y 6EE. It was formerly called
London Personal Loans Limited until it changed its name on 2 May 2006.
Amber Homeloans Limited
Amber Homeloans Limited was incorporated on 19 May 1993 in England and Wales under the Companies Act
1985 and 1989 (registration number 2819645) and its registered office is at 1 Providence Place, Skipton, North
53

Yorkshire, BD23 2HY. It was incorporated with the name Pinkard Limited and changed its name firstly on 6
September 1993 to Stroud and Swindon Mortgage Company Limited and then on 9 February 1994 to Stroud and
Swindon Company (No2) Limited and then on 4 June 2001 to Amber Homeloans Limited. Amber is a wholly
owned subsidiary of Skipton Building Society. Amber provides a selection of specialist mortgage products for
lending networks and packaging companies. Amber originates most of its mortgages through a selection of
mortgage intermediaries and packagers with a small percentage via Skipton Building Society.
Amber also purchases and sells mortgage portfolios from, and to, other lenders such as banks. building societies
and insurance companies. With total assets of over £1.16 billion at the end of 2006, Amber is comparable in
size with the 20th largest building society in the UK.
Alliance & Leicester plc
On 21 April 1997, Alliance & Leicester Building Society converted from a mutual building society into a bank,
Alliance & Leicester plc, whose securities are listed and traded on the London Stock Exchange. A&L’s primary
businesses include a full range of retail banking products and services ranging from residential mortgages,
current accounts, personal loans and savings products and commercial banking services to a wide range of
customers ranging from sole traders to blue-chip companies.
A&L provides a number of other products and services through strategic partnerships with third parties. On 10
June 2006, A&L entered into an agreement with SPML and Lehman Brothers International (Europe) pursuant to
which A&L agreed to originate a range of prime self-certified and income verified, near prime, near prime buy
to let and credit adverse residential mortgages and sell the same to SPML.
Alliance & Leicester plc (company registration number 03263713) is a public company limited by shares
incorporated in England on 10 October 1996. Alliance & Leicester plc has its registered office address at
Carlton Park, Narborough, Leicester LE19 0AL. Alliance & Leicester plc is authorised and regulated by the
Financial Services Authority (registration number 189099).
54

THE ISSUER
Introduction
The Issuer is a public limited company incorporated in England and Wales on 8 May 2007, under the
Companies Acts 1985 and 1989. The issued share capital of the Issuer comprises 50,000 ordinary shares of
£1.00, of which 49,999 are held by the Parent and one is held by the Share Trustee, as nominee for the Parent
under the terms of the Share Trust. The entire issued share capital of the Parent is held by the Share Trustee
under the terms of the Charitable Share Trust. The Issuer has no subsidiaries. The Issuer has been established
as a special purpose vehicle or entity for the purpose of issuing asset backed securities.
The principal objects of the Issuer are set out in Clause 4 of its memorandum of association and permit the
Issuer, among other things, to invest in, acquire, manage and administer mortgage loans, to lend money and give
credit, secured or unsecured, and to acquire an interest in trust property. The Issuer has no intention to lend
money or otherwise give credit on a secured basis where FSA authorisation would be required.
Pursuant to the Corporate Services Agreement, the Corporate Services Provider will agree to provide certain
administrative services to the Issuer. The Issuer will pay a fee to the Corporate Services Provider for the
provision of such services. The Corporate Services Provider may retire at any time on giving not less than 90
days prior written notice to the Issuer. The Trustee on behalf of the Issuer may remove the Corporate Services
Provider upon 30 days prior written notice provided that an adequate alternative corporate services provider has
been appointed on terms substantially the same as those set out in the Corporate Services Agreement. The
Trustee on behalf of the Issuer may remove the Corporate Services Provider immediately upon written notice in
certain circumstances, including if the Corporate Services Provider or the Issuer is in breach of any of the terms
of the Corporate Services Agreement and such breach has not been remedied within 30 days after service of
notice requiring the same to be remedied; or upon the insolvency of the Corporate Services Provider.
Directors
The directors of the Issuer and their respective business addresses and principal activities are:
Name Address Principal Activities
Robin Gregory Baker Tower 42
International Financial Centre
25 Old Broad Street
London EC2N 1HQ
Mark Howard Filer Tower 42
International Financial Centre
25 Old Broad Street
London EC2N 1HQ
Officer, Wilmington Trust SP
Services (London) Limited
Officer, Wilmington Trust SP
Services (London) Limited
Wilmington Trust SP Services
(London) Limited
Tower 42
International Financial Centre
25 Old Broad Street
London EC2N 1HQ
Company director
The secretary of the Issuer is Clifford Chance Secretaries (CCA) Limited whose registered office is at 10 Upper
Bank Street, London E14 5JJ.
The registered office of the Issuer is at c/o Wilmington Trust SP Services (London) Limited, Tower 42 (Level
11), 25 Old Broad Street, London, EC2N 1HQ, England. The contact telephone number of the Issuer’s
registered office is +44 (0)20 7614 1111.
The directors of Wilmington Trust SP Services (London) Limited and their principal activities are:
55

Name Position Principal Activities
David William Dupert Non-Executive Chairman Banker
William James Farrell II Non-Executive Deputy Chairman Banker
Martin McDermott Chief Executive Officer Company Director
James Patrick Johnston Fairrie Managing Director Company Director
Mark Filer Executive Director Company Director
Nicolas Patch Executive Director Company Director
Jean-Christophe Schroeder Executive Director Company Director
John Merrill Beeson Non-Executive Director Banker
The business address of each director of Wilmington Trust SP Services (London) Limited is Tower 42 (Level
11), International Financial Centre, 25 Old Broad Street, London EC2N 1HQ.
Activities
The Issuer has been established specifically to acquire a portfolio of residential mortgage loans originated by: (i)
Matlock (trading as the London Mortgage Company (by itself or in association with a Remote Processor) or
trading as London Personal Loans); (ii) Langersal; (iii) SPML (by itself or trading as the London Mortgage
Company or in association with the Branded Lenders or Remote Processors); (iv) the Correspondent Lenders;
(v) SPPL (by itself or trading as London Personal Loans); (vi) PML (by itself or in association with a Branded
Lender or a Remote Processor); (vii) A&L; and (viii) Amber, in each case, such acquisition financed by the
issue of the Instruments. Its activities will be restricted by the Conditions and the Transaction Documents and
will be limited to the issue of the Instruments, the ownership of the Loans and their Collateral Security, the
exercise of related rights and powers, and other activities referred to herein or reasonably incidental thereto.
These activities will include the collection of payments of principal and interest from Borrowers on Loans and
the operation of arrears procedures.
Substantially all of the above activities will be carried out by the Mortgage Administrator on an agency basis
under the Mortgage Administration Agreement. Additionally, the Cash/Bond Administrator will provide cash
management and bond reporting services to the Issuer pursuant to the Cash/Bond Administration Agreement.
The Issuer (if so requested by the Trustee) or the Trustee may revoke the agency (and, simultaneously, the
rights) of the Mortgage Administrator and/or the Cash/Bond Administrator upon the occurrence of certain
events of default or insolvency or similar events in relation to the Mortgage Administrator or, as the case may
be, the Cash/Bond Administrator or, in certain circumstances, following an Event of Default (as defined in the
Conditions) in relation to the Notes. Following such an event as aforesaid, the Issuer (if so requested by the
Trustee) or the Trustee may, subject to certain conditions, appoint substitute administrators. In regard to
mortgage administration functions to be provided by the Mortgage Administrator, the Standby Mortgage
Administrator has agreed to act as a substitute mortgage administrator and, in regard to cash management and
bond reporting services, the Standby Cash/Bond Administrator has agreed to act as a substitute cash/bond
administrator (for each of which, see “Mortgage Administration Agreement and Cash/Bond Administration
Agreement” under “Summary Information” above).
The Issuer has not engaged since its incorporation in any material activities. The Issuer has not traded since the
date of its incorporation.
The Issuer will publish annual reports and accounts, has applied for a consumer credit licence under the CCA
and has applied to be registered as a data controller under the Data Protection Act 1998. The Issuer has not
prepared audited financial statements as of the date of this document.
56

THE MORTGAGE ADMINISTRATOR AND THE CASH/BOND ADMINISTRATOR
Mortgage Administrator
Capstone will be appointed as the Mortgage Administrator pursuant to the Mortgage Administration Agreement
and will be responsible for the provision of certain mortgage administration services. Provision will be made in
the Mortgage Administration Agreement for the sub-contracting or delegation by Capstone of such services
provided in each case that certain conditions are met, including obtaining the prior written confirmation of S&P
and Fitch that the then-current rating of the Notes would not be adversely affected by such transfer, giving
notice of such sub-contracting or delegation to Moody’s and obtaining the prior written consent of the Trustee to
the proposed arrangement and the terms thereof. Provision will be made in the Mortgage Administration
Agreement for Capstone to sub-contract or delegate the performance of such services including, without
limitation, pursuant to the Delegation Agreements.
Notwithstanding the arrangement entered into by Capstone with Vertex, HML and Lightfoots pursuant to the
Delegation Agreements, the Mortgage Administrator will remain primarily liable for the execution of the
functions of administration set forth in the Mortgage Administration Agreement.
On each Interest Payment Date, amounts representing the Post-Completion Activity Based Fees standing to the
credit of the Post-Completion Activity-Based Fees Ledger, as of the close of business on the preceding Business
Day, shall be paid to the Mortgage Administrator.
Cash/Bond Administrator
Capstone will be appointed as the Cash/Bond Administrator of the Issuer pursuant to the Cash/Bond
Administration Agreement. The Cash/Bond Administrator will be responsible for the administration and
management of the cash receipts and disbursements, the ledgers and making certain allocations and investments
of cash, of the Issuer. The Cash/Bond Administrator will also be responsible for making certain calculations
and preparing and distributing certain reports to Instrumentholders as referred to herein. The Cash/Bond
Administrator shall, on each Interest Payment Date, apply amounts representing Residual Revenue for
distribution to the Residual Certificateholders.
Provision will be made in the Cash/Bond Administration Agreement for Capstone to sub-contract or delegate
the performance of such services including, without limitation, pursuant to the Wells Fargo Delegation
Agreement. Notwithstanding the arrangements entered into by Capstone with Wells Fargo pursuant to the
Wells Fargo Delegation Agreement, the Cash/Bond Administrator will remain primarily liable for the execution
of the functions of administration and cash management set forth in the Cash/Bond Administration Agreement.
Capstone Mortgage Services Limited
Capstone Mortgage Services Limited (“Capstone”) is a limited company incorporated in England and Wales
under the Companies Acts 1985 and 1989 on 3 March 2005 (registration number 5381786).
Capstone has the following servicer ratings: “RPS2+” in respect of its primary servicer rating (prime and subprime)
and “RSS2+UK” in respect of its special servicer rating by Fitch and “Above Average” as a sub-prime
residential mortgage servicer by S&P.
Capstone’s registered office is at No. 6 Broadgate, London, EC2M 2QS and its principal place of business from
which its servicing activities are carried out is at St. John’s Place, Easton Street, High Wycombe,
Buckinghamshire, HP11 1NL.
Capstone is a subsidiary of an affiliate of Lehman Brothers International (Europe), the Lead Manager.
However, such affiliate may consider offers in respect of its interest from time to time and may not continue to
hold its interest for the duration of the life of the Notes.
Wells Fargo Securitisation Services Limited
Wells Fargo Securitisation Services Limited (“Wells Fargo”) is a private limited company registered in
England and Wales and having its registered office at 6-8 Underwood Street, London N1 7JQ and its principal
place of business at 25 Canada Square, Level 32, Canary Wharf, London E14 5LQ.
57

Wells Fargo is a wholly-owned subsidiary of Wells Fargo Bank International, part of Wells Fargo & Company,
a diversified financial services company, providing banking, insurance, investments, mortgage and consumer
finance for more than 23 million customers through 6,062 stores, the internet and other distribution channels
across North America and elsewhere internationally. Wells Fargo & Company has $482 billion in assets and
more than 158,000 team members. Wells Fargo & Company ranked fifth in assets and fourth in market value of
its stock among peers as of 31 December 2006.
Vertex Mortgage Services Limited
Vertex is a company incorporated in England and Wales (Registered Number 02042968), is authorised and
regulated by the FSA (Reference Number 306064), and has its registered office at Pegasus House, Kings
Business Park, Liverpool, Prescot, Merseyside, L34 1PJ.
Vertex operates from three sites in the U.K., Cheltenham, Chester and Dudley, and the IT systems at all sites are
fully interchangeable so that in a disaster recovery situation, mortgage loans can be serviced from any location.
Vertex processes approximately 20,000 mortgage applications each year and is currently servicing
approximately 70,000 loans with an aggregate value of £4,000,000,000.
Homeloan Management Limited
The section entitled “The Standby Mortgage Administrator and the Standby Cash/Bond Administrator” contains
a description of Homeloan Management Limited.
Lightfoots Solicitors
Lightfoots Solicitors is a firm of solicitors operating from its office in Thame, Oxfordshire. The firm consists of
4 partners and 12 assistant solicitors supported by about 100 legal executives, paralegals and others. Their
mortgage arrears and debt recovery departments have more than 15 years’ experience of dealing with sub-prime
borrowers for a number of mortgage lenders. Lightfoots also have an estate agency and property lettings
department.
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THE STANDBY MORTGAGE ADMINISTRATOR AND THE STANDBY CASH/BOND
ADMINISTRATOR
Homeloan Management Limited
Homeloan Management Limited will be appointed as the standby mortgage administrator and the standby
cash/bond administrator pursuant to the terms of the Mortgage Administration Agreement and the Cash/Bond
Administration Agreement respectively. In the event that the appointment of the Mortgage Administrator or the
Cash/Bond Administrator (as the case may be) pursuant to the Mortgage Administration Agreement or the
Cash/Bond Administration Agreement (as the case may be) is terminated, the Standby Mortgage Administrator
or, as is relevant, the Standby Cash/Bond Administrator, will agree to provide the equivalent services to the
Issuer as set out in the Mortgage Administration Agreement or the Cash/Bond Administration Agreement (as
applicable).
The registered office and principal place of business of Homeloan Management Limited is 1 Providence Place,
Skipton, North Yorkshire BD23 2HL.
Homeloan Management Limited currently provides mortgage administration services to approximately 45
institutions, including building societies and centralised lenders. Homeloan Management Limited has been
providing these services since 1988 and annually services approximately 322,000 mortgage loans.
Homeloan Management Limited is rated RPS2+ by Fitch and SQ2 by Moody’s in respect of its primary servicer
responsibilities for UK residential mortgage loans.
Homeloan Management Limited currently has approximately 1,800 full time employees who are responsible for
all aspects of mortgage servicing including the collection of payments and enforcement of borrowers’
obligations.
Investors are referred above to the section entitled “Title to the Mortgage Pool - Administration of the Mortgage
Pool” for a summary of the provisions governing the appointment and termination of the Mortgage
Administrator, the Cash/Bond Administrator, the Standby Mortgage Administrator and the Standby Cash/Bond
Administrator.
59

Danske Bank A/S, London Branch
THE ACCOUNT BANK AND THE GIC PROVIDER
Danske Bank A/S was founded in 1871 and has, through the years, merged with a number of financial
institutions. Danske Bank is a commercial bank with limited liability and carries on business under the Danish
Financial Business Act, Consolidation Act No. 286 of 4 April 2006, as amended.
The registered office of Danske Bank is at Holmens Kanal 2-12, DK-1092 Copenhagen K, Denmark; the
telephone number is +45 33 44 00 00; CVR-nr. 61 12 62 28 – København.
The Danske Bank Group provides a wide range of banking, mortgage and insurance products as well as other
financial services, and is the largest financial institution in Denmark – and one of the largest in the Nordic
region – measured by total assets.
The total assets of the consolidated Danske Bank Group were DKK 2,739 billion (USD 483.9 billion) at the end
of 2006. Shareholders’ equity was DKK 95 billion (USD 16.8 billion) at the end of 2006.
Current credit ratings of Danske Bank A/S are as follows: Moody’s: P-1 (short-term) and Aa1 (long-term),
S&P: A-1+ (short-term) and AA- (long-term), Fitch: F1+ (short-term) and AA- (long-term).
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THE LIQUIDITY FACILITY PROVIDER
Lloyds TSB Bank plc
Lloyds TSB Bank plc, acting through its corporate office at 10 Gresham Street, London, EC2V 7AE, will act as
the Liquidity Facility Provider under the Liquidity Facility Agreement. Lloyds TSB Bank plc, together with its
subsidiaries and affiliates, provides a range of banking and financial services in the UK and overseas. These
include providing personal, business and corporate customers with banking and other related financial services.
Lloyds TSB Bank plc is regulated by the Financial Services Authority. The short term, unsecured,
unsubordinated debt obligations of Lloyds TSB Bank plc as at the date of this Prospectus are rated “P 1” by
Moody’s, “A 1+” by S&P and “F1+” by Fitch. The long term unsecured, unsubordinated debt obligations of
Lloyds TSB Bank plc as at the date of this Prospectus are rated “Aaa” by Moody’s, “AA” by S&P and “AA+”
by Fitch.
61

THE CURRENCY SWAPS COUNTERPARTY, THE CURRENCY SWAPS GUARANTOR, THE
BULLET CAP COUNTERPARTY, THE BULLET CAP GUARANTOR, THE FIXED/FLOATING
SWAP COUNTERPARTY, THE FIXED/FLOATING SWAP GUARANTOR, THE BBR SWAP
COUNTERPARTY AND THE BBR SWAP GUARANTOR
Lehman Brothers Special Financing Inc. (in its capacity as the Fixed/Floating Swap Counterparty under the
terms of the Fixed/Floating Swap Agreement, the “Fixed/Floating Swap Counterparty”, in its capacity as the
BBR Swap Counterparty under the terms of the BBR Swap Agreement, the “BBR Swap Counterparty”, in its
capacity as the Currency Swaps Counterparty under the terms of the Currency Swap Agreements, the
“Currency Swaps Counterparty” and in its capacity as Bullet Cap Counterparty under the terms of the Bullet
Cap Agreement, the “Bullet Cap Counterparty”) is a wholly owned indirect subsidiary of Lehman Brothers
Holdings Inc. (in its capacity as the guarantor under the Fixed/Floating Swap Agreement, the “Fixed/Floating
Swap Guarantor”, in its capacity as the guarantor under the BBR Swap Agreement, the “BBR Swap
Guarantor”, in its capacity as the guarantor under the Currency Swap Agreements, the “Currency Swaps
Guarantor” and in its capacity as the guarantor under the Bullet Cap Agreement, the “Bullet Cap
Guarantor”). The registered office of the Fixed/Floating Swap Counterparty, the BBR Swap Counterparty, the
Currency Swaps Counterparty and the Bullet Cap Counterparty is 2711 Centerville Road, Suite 400,
Wilmington, Delaware, 19808, USA.
The Fixed/Floating Swap Guarantor, the BBR Swap Guarantor, the Currency Swaps Guarantor and the Bullet
Cap Guarantor currently has a short-term rating of P-1 from Moody’s, A-1 from S&P and F1+ from Fitch.
Each of the Fixed/Floating Swap Counterparty, the Fixed/Floating Swap Guarantor, the BBR Swap
Counterparty, the BBR Swap Guarantor, the Currency Swaps Counterparty, the Currency Swaps Guarantor, the
Bullet Cap Counterparty and the Bullet Cap Guarantor is a corporation organised and existing under the laws of
the State of Delaware. The Fixed/Floating Swap Counterparty, the Fixed/Floating Swap Guarantor, the BBR
Swap Counterparty, the BBR Swap Guarantor, the Currency Swaps Counterparty, the Currency Swaps
Guarantor, the Bullet Cap Counterparty and the Bullet Cap Guarantor are engaged primarily in providing
financial services which include capital raising for clients through securities underwriting and direct placements,
corporate finance and strategic advisory services, private equity investments, securities sales and trading,
research and the trading of foreign exchange, derivative products and certain commodities.
Except for the information provided in the preceding paragraphs of this section, the Fixed/Floating Swap
Counterparty, the Fixed/Floating Swap Guarantor, the BBR Swap Counterparty, the BBR Swap Guarantor,
the Currency Swaps Counterparty, the Currency Swaps Guarantor, the Bullet Cap Counterparty and the
Bullet Cap Guarantor have not been involved in the preparation of, and do not accept responsibility for, this
document.
62

THE TRUSTEE
BNY Corporate Trustee Services Limited will be appointed pursuant to the Trust Deed as Trustee for the
Instrumentholders.
The Bank of New York, a wholly owned subsidiary of The Bank of New York Mellon Corporation, is
incorporated, with limited liability by Charter, under the Laws of the State of New York by special act of the
New York State Legislature, Chapter 616 of the Laws of 1871, with its Head Office situate at One Wall Street,
New York, NY 10286, USA and having a branch registered in England & Wales with FC No 005522 and BR
No 000818 with its principal office in the United Kingdom situate at One Canada Square, London E14 5AL.
The Bank of New York is a leading provider of corporate trust and agency services. Global Corporate Trust
services $11 trillion in outstanding debt for some 90,000 clients worldwide. The Bank is a recognized leader for
trust services in several debt products, including corporate and municipal debt, mortgage-backed and assetbacked
securities, derivative securities services and international debt offerings.
The Bank of New York Mellon Corporation (NYSE: BK) is a global financial services company focused on
helping clients move and manage their financial assets, operating in 37 countries and serving more than 100
markets. The company is a leading provider of financial services for institutions, corporations and high-networth
individuals, providing superior asset and wealth management, asset servicing, issuer services, and
treasury services through a worldwide client-focused team. It has more than $18 trillion in assets under custody
and administration and $1 trillion in assets under management, and it services more than $11 trillion in
outstanding debt. Additional information is available at www.bnymellon.com.
The Trustee will not be responsible for (a) supervising the performance by the Issuer or any other party to the
Transaction Documents of their respective obligations under the Transaction Documents and the Trustee will be
entitled to assume, until it has written notice to the contrary, that all such persons are properly performing their
duties, or (b) considering the basis on which approvals or consents are granted by the Issuer or any other party to
the Transaction Documents under the Transaction Documents. The Trustee will not be liable to any
Instrumentholder or other Secured Creditor for any failure to make or to cause to be made on its behalf the
searches, investigations and enquiries which would normally be made by a prudent chargee in relation to the
Charged Property and has no responsibility in relation to the legality, validity, sufficiency and enforceability of
the Security and the Transaction Documents.
63

THIRD PARTY INFORMATION
The information contained in this document with respect to the Originators, the Mortgage Administrator, the
Cash/Bond Administrator, the Account Bank, each Collection Account Bank, the GIC Provider, the Bullet Cap
Counterparty, Bullet Cap Guarantor, the Currency Swaps Counterparty, the Currency Swaps Guarantor, the
Fixed/Floating Swap Counterparty, the Fixed/Floating Swap Guarantor, the BBR Swap Counterparty, the BBR
Swap Guarantor, the Liquidity Facility Provider, the Standby Mortgage Administrator, the Standby Cash/Bond
Administrator, Wells Fargo, Vertex, HML, Lightfoots and the Trustee, relates to and has been obtained from
each of them, someone on behalf of them or is publicly available information and the Issuer accepts
responsibility for the accurate reproduction of this information. As far as the Issuer is aware, and has been able
to ascertain from information published by each such party, no facts have been omitted which would render the
reproduced information inaccurate or misleading. The delivery of this Prospectus shall not create any
implication that there has been no change in the affairs of the Originators, the Mortgage Administrator, the
Cash/Bond Administrator, the Account Bank, each Collection Account Bank, the GIC Provider, the Bullet Cap
Counterparty, the Bullet Cap Guarantor, the Currency Swaps Counterparty, the Currency Swaps Guarantor, the
Fixed/Floating Swap Counterparty, the Fixed/Floating Swap Guarantor, the BBR Swap Counterparty, the BBR
Swap Guarantor, the Liquidity Facility Provider, the Standby Mortgage Administrator, the Standby Cash/Bond
Administrator, Wells Fargo, Vertex, HML, Lightfoots and the Trustee, since the date stated in respect of the
relevant information in this document, or that the information contained or referred to in this document is
correct as of any time subsequent to its date. None of the Instrumentholders will have any right to proceed
directly against either of the Originators, the Mortgage Administrator, the Cash/Bond Administrator, the
Account Bank, a Collection Account Bank, the GIC Provider, the Bullet Cap Counterparty, the Bullet Cap
Guarantor, the Currency Swaps Counterparty, the Currency Swaps Guarantor, the Fixed/Floating Swap
Counterparty, the Fixed/Floating Swap Guarantor, the BBR Swap Counterparty, the BBR Swap Guarantor, the
Liquidity Facility Provider, the Standby Mortgage Administrator, the Standby Cash/Bond Administrator, Wells
Fargo, Vertex, HML, Lightfoots and the Trustee, in respect of their respective obligations under any of the
agreements to which they are a party.
64

THE MORTGAGE POOL
The Mortgage Pool
The pool of Loans and related Collateral Security owned by the Issuer from time to time (the “Mortgage Pool”)
will comprise:
(a)
(b)
the Initial Mortgage Pool; and
any Prefunded Loans, Newly-Originated Loans, Ported Loans or Substitute Loans acquired by the Issuer
in accordance with the provisions of the Mortgage Sale Agreement and their related Collateral Security,
other than, in any such case, Loans which have been repaid or in respect of which funds representing principal
outstanding have otherwise been received in full or which have been re-transferred to a Seller (or, at the
discretion of the relevant Seller, to another member of the UK Group) in each case pursuant to the Mortgage
Sale Agreement.
The Initial Mortgage Pool will comprise the Loans and their related Collateral Security selected by the Sellers
from the Provisional Mortgage Pool and to be purchased by the Issuer on the Closing Date. The Provisional
Mortgage Pool consists of a sample of Loans and their related Collateral Security originated on or prior to 30
April 2007 with aggregate Principal Balance of £685,224,182.60 (the “Provisional Mortgage Pool”), certain
characteristics of which are described in “Characteristics of the Provisional Mortgage Pool” below. The
Provisional Mortgage Pool has the following general characteristics:
Aggregate Principal Balance £685,224,182.60
Number of Loans 9,631
Average current Principal Balance £71,148
Weighted average loan to value ratio at origination
73.07 per cent.
Weighted average stabilised margin LIBOR
3.21 per cent. per annum
Weighted average stabilised margin BBR
3.04 per cent. per annum
The term “weighted average stabilised margin” refers to the margin after the expiry of all fixed and discounted
rate periods.
Approximately £46,309,155.15 in aggregate of the Principal Balance of the Loans comprised in the Provisional
Mortgage Pool (approximately 6.76 per cent.) are regulated by the CCA (as described under “Regulation of the
UK Residential Mortgage Market – Consumer Credit Act 1974” below). Approximately £501,977,741.49 in
aggregate of the Principal Balance of the Loans comprised in the Provisional Mortgage pool (approximately
73.26 per cent.) are regulated by the FSMA (as described under “Regulation of the UK Residential Mortgage
Market – Financial Services and Markets Act 2000” below). The remaining £136,937,285.96 (approximately
19.98 per cent.) are not so regulated.
Prior to the Closing Date, in forming the Initial Mortgage Pool, the Sellers will exclude from the Provisional
Mortgage Pool all Loans (and their related Collateral Security): (a) which are fully redeemed; or (b) which the
Sellers believe would be required to be repurchased (or substituted) for breach of Warranty if sold to the Issuer
pursuant to the Mortgage Sale Agreement. In addition, prior to the Closing Date, repayments and prepayments
may have occurred in relation to Loans in the Provisional Mortgage Pool which will be included in the Initial
Mortgage Pool. Hence the aggregate Principal Balance of the Loans which form the Initial Mortgage Pool may
be less than the aggregate Principal Balance of the Provisional Mortgage Pool.
Types of Loans
Loans within the Mortgage Pool from time to time will consist of:
(a)
Loans originated by:
(i)
Matlock trading as London Mortgage Company (by itself or in association with a Remote
Processor);
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(ii)
(iii)
(iv)
(v)
(vi)
SPML (either by itself or trading as London Mortgage Company or in association with a
Branded Lender or Remote Processor (each as defined under “Title to the Mortgage Pool”
below));
a Correspondent Lender;
PML (by itself or in association with a Branded Lender or a Remote Processor);
Amber; and
A&L,
and, in each case, secured (in England and Wales) by a first ranking mortgage or (in Northern Ireland)
by a first ranking mortgage or charge or (in Scotland) by a first ranking standard security on the
relevant Property being:
(i)
(ii)
(iii)
(iv)
Loans which are intended for Borrowers (as defined under “Credit Structure — Receipts in
respect of the Loans” below) who wish to use the Loans as a means to purchase or refinance a
residential property to be used solely as the Borrower’s own residence (“Home Owner
Loans”);
Loans which are intended for Borrowers who wish to use the Loans as a means to purchase or
refinance residential property for the purpose of letting to third parties (“Buy-to-Let Loans”);
Loans which are intended for Borrowers who wish to use the Loans as a means to purchase
residential property in the public sector by exercising their right to buy under applicable
legislation (“Right to Buy Loans”); and
Loans which are intended for Borrowers who wish to use the loans as a means to purchase a
share in a property which is owned by a Registered Social Landlord (“Shared Ownership
Loans”),
each such Loan, a “First Loan”; and
(b)
Loans originated by:
(i)
(ii)
(iii)
(iv)
Matlock;
Langersal;
SPPL (by itself or trading as London Personal Loans); and
PML (by itself or in association with a Branded Lender or a Remote Processor),
and, in each case, which are intended for Borrowers’ general personal use, secured by a second ranking
mortgage or (in Scotland) by a second ranking standard security on the relevant Property where a
single lender holds all prior ranking mortgages or, as the case may be, standard securities in respect of
the relevant Property (each such Loan, a “Second Loan”).
Repayment terms under each type of loan differ according to the repayment type. The following repayment
types are included in the Provisional Mortgage Pool:
(a)
(b)
“Capital and Interest Loans”, under the terms of which monthly repayments covering both interest
and principal are payable until the Loan is fully repaid by its maturity. Supporting life assurance cover
is not required to be charged by way of collateral security but may be in some cases;
“Interest Only Loans”, in relation to which the principal amount is not repayable before maturity; and
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(c)
“Part & Part Loans”, in relation to which Borrowers have elected to repay their Loans by utilising
both the capital and interest option (described in (a) above) for part of the Loan, and the interest only
option (described in (b) above) for the remaining part of the Loan.
Sale of Loans and Collateral Security
Under the Mortgage Sale Agreement, the Sellers will sell and the Issuer will purchase the Loans and Collateral
Security comprised in the Initial Mortgage Pool for consideration equal to the aggregate of:
(a)
an amount equal to £645,999,995, representing:
(i)
(ii)
the aggregate Principal Balance of the Loans comprised in the Initial Mortgage Pool as at the
Closing Date (excluding, for the avoidance of doubt, the “Aggregate Accrued Interest”
being the aggregate amount of interest accrued at the Closing Date but not yet due from each
Borrower), which is expected to be approximately £649,999,995, plus a premium of
approximately £9,750,000 (such premium being equal to the amount expected to be received
by the Issuer upon issue of the Revenue Backed Notes),
less an amount of £13,750,000, being the aggregate amount used by the Issuer to fund the
Subordinated Costs Ledger, the Reserve Fund and the Discounted Margin Reserve Fund on
the Closing Date; and
(b)
an amount representing deferred consideration which is represented by the Residual Certificates for the
acquisition of the Initial Mortgage Pool.
The Issuer will not purchase Aggregate Accrued Interest but will pay to the relevant Seller (as owner thereof)
amounts representing Aggregate Accrued Interest when and to the extent received by the Issuer.
Following the sale of the Initial Mortgage Pool to the Issuer on the Closing Date, further Loans may from time
to time be included in the Mortgage Pool. These further Loans, which will be Substitute Loans, Ported Loans,
Newly-Originated Loans or Prefunded Loans, may be acquired by the Issuer from the Sellers in accordance with
the provisions of the Mortgage Sale Agreement.
Shared Ownership Scheme
About 2.60 per cent. by current balance of the Loans comprised in the Provisional Mortgage Pool have been
made to the Borrowers who are tenants under shared ownership leases (the “Shared Ownership Scheme”).
The Shared Ownership Scheme (which operates in England and Wales and in Northern Ireland through
Northern Ireland Co-Ownership Housing Association Limited (known also as Co-Ownership Housing)) was
introduced in England and Wales by the Housing Act 1985 and into Northern Ireland by Co-Ownership Housing
founded in 1978 as a friendly society under the Industrial and Provident Societies Act (Northern Ireland) 1969
and the Industrial and Provident Societies (Amendment) (Northern Ireland) Order 1976 and registered as a
housing association under the Housing (Northern Ireland) Order 1981 and enables eligible persons (each, a
“Shared Ownership Scheme Borrower”) to purchase a share in a property which is owned by a “Registered
Social Landlord” (as defined in Section 1 of the Housing Act 1985) or is owned by Co-Ownership Housing in
Northern Ireland.
Under the Share Ownership Scheme, the relevant Registered Social Landlord grants a long lease of a property to
a Shared Ownership Scheme Borrower, who also pays an initial premium in respect of the initial share in the
property being acquired. The Shared Ownership Scheme Borrower also pays rent under the lease granted by the
Registered Social Landlord, the level of rent being proportional to the share of the property which is retained by
the Registered Social Landlord or Co-Ownership Housing.
The Shared Ownership Scheme Borrower enjoys exclusive possession of the relevant property and owns a
leasehold interest in such property. The Shared Ownership Scheme Borrower is allowed to purchase additional
shares in the property by paying additional lump sums in respect of the further share being acquired. Any such
additional acquisition results in a proportionate reduction in the rent payable to the relevant Registered Social
Landlord or Co-Ownership Housing. Upon completion of the purchase of the final share the Shared Ownership
Scheme Borrower can acquire, subject to certain instances where a leasehold interest is maintained, the
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Registered Social Landlord or Co-Ownership Housing to transfer its freehold title to the property to such
Borrower.
PML makes PML Loans available to Shared Ownership Scheme Borrowers to assist them in the purchase of the
relevant share which the relevant Shared Ownership Scheme Borrower is acquiring in a property which is
subject to the Shared Ownership Scheme.
In order for a putative Shared Ownership Scheme Borrower to be eligible for a PML Loan, PML requires that
the share which is being acquired in the property is no less than 25 per cent. of the market value of the relevant
property. In addition, PML requires that the purchase price payable in respect of the initial share in the relevant
property be calculated by reference to the market value of such share.
As security for the PML Loan amounts advanced to the relevant Shared Ownership Scheme Borrower, PML
takes an all monies first ranking mortgage over the relevant lease. Before making a PML Loan available to a
Shared Ownership Scheme Borrower, PML requires, among other things, that the relevant lease between the
Shared Ownership Scheme Borrower and the relevant Registered Social Landlord or Co-Ownership Housing
permits the Shared Ownership Scheme Borrower to acquire up to the then unacquired share in the relevant
property. PML requires that these provisions (known as “staircasing provisions”) provide that the purchase
price payable for an additional share or shares is calculated by reference to the percentage share being purchased
of the market value.
In addition, before making a PML Loan available to a Shared Ownership Scheme Borrower, PML generally
requires that a shared ownership lease contains a “mortgagee protection clause”.
Provided that the value of the property exceeds the amounts owed to the lender (subject to certain restrictions),
the Shared Ownership Scheme documentation is designed to enable PML to recover the amounts owed to it
under the PML Loan by the Shared Ownership Scheme Borrower ahead of the relevant Registered Social
Landlord or Co-Ownership Housing or its mortgagee, if any.
In shared ownership lease documentation where a suitable mortgagee protection clause exists, any shortfall in
the amount owed to a Registered Social Landlord or Co-Ownership Housing for its share in the property, after
the mortgagee has recovered amounts to which it is entitled, is treated as a debt owed by the Shared Ownership
Scheme Borrower to such Registered Social Landlord or Co-Ownership Housing. The Registered Social
Landlord or Co-Ownership Housing has no further recourse to the mortgagee.
On default by a Shared Ownership Scheme Borrower under a PML Loan, PML will operate its usual
enforcement procedures tailored to take into account the relevant Shared Ownership Borrower’s interest in the
property concerned.
Ported Loans
Under the Mortgage Conditions of certain of the Loans, upon the application of a Borrower, the relevant
Originator may grant to such Borrower a loan on substantially the same commercial terms as the existing Loan
between such Originator and the Borrower but such new loan will be secured by a new mortgage on a different
property to that on which the Mortgage with respect to the Loan was secured. The “portable” feature of the
Loan as set out in the Mortgage Conditions allows a Borrower to redeem its existing Loan and thereafter enter
into a new loan on substantially similar commercial terms with respect to a different property and is designed to
be used where a Borrower wishes to sell the property that the Loan is secured on and purchase a new property.
In the event that a Borrower requests that its Loan be “ported” as described above, and such request is approved,
the relevant Seller shall substitute or procure the substitution of the existing Loan for the Ported Loan and the
Issuer shall acquire from the relevant Seller the Ported Loan for a consideration equal to (subject to the
remainder of this paragraph and in accordance with the Mortgage Sale Agreement) the existing Loan. In the
event that the outstanding balance of the Ported Loan is an amount greater than the outstanding balance of the
existing Loan, the Issuer shall acquire a first ranking legal mortgage or charge or first ranking standard security
over the relevant property securing the Ported Loan only to the extent of the Principal Balance with respect to
the existing Loan and the relevant Seller shall obtain a second ranking legal mortgage or charge or second
ranking standard security over the relevant property securing the Ported Loan to the extent of such excess. In
the event that the outstanding balance of the Ported Loan is less than the then outstanding balance of the existing
Loan, the substitution of such Loan for a Ported Loan shall be on condition that any principal amounts due to the
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Issuer under the existing Loan in excess of the outstanding balance of the Ported Loan be repaid on the date of
such substitution.
Conditions of Acquisition of Ported Loans
The acquisition by the Issuer of a Loan in the Mortgage Pool for an equivalent loan which, at the time of
porting, complies with the relevant warranties (a “Ported Loan”) is subject to the following conditions:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
no Enforcement Notice has been given by the Trustee which remains in effect;
the Warranties are true in respect of the Ported Loan;
the applicable Lending Criteria as at such time have been applied to the Ported Loan and to the
circumstances of the Borrower at the time the Ported Loan was made;
there is no deficiency recorded in the Principal Deficiency Ledger and no drawing under the Liquidity
Facility Agreement (other than in respect of amounts standing to the credit of the Liquidity Ledger)
remains unpaid;
the Reserve Fund was at the Reserve Fund Required Amount on the immediately preceding Interest
Payment Date;
neither SPML (in relation to an SPML Loan, an A&L Loan or an Amber Loan) nor PML (in relation to a
PML Loan) is in breach of any obligation on its part to repurchase or procure the purchase of any Loan
in accordance with the Mortgage Sale Agreement;
the Ported Loan was made on the terms of the relevant standard documentation utilised at the time of
such Ported Loan by SPML (in relation to an SPML Loan or an Amber Loan) or PML (in relation to a
PML Loan) to document the terms of Loans;
the relevant Borrower is not in material breach of the obligations on its part of the terms and conditions
applicable (i) to the relevant Ported Loan and (ii) to the Collateral Security relating to such Ported Loan;
the existing Loan had been current for at least 6 months at the time the Ported Loan was made;
the LTV of the Ported Loan is not higher than the current LTV of the existing Loan;
the amount of the Ported Loan is not higher than the amount of the existing Loan;
the repayment terms of each Ported Loan are substantially the same as the repayment terms of the
existing Loan; no Loan has been converted to an Interest Only Loan and the margin on the Ported Loan
is at least the same as the existing Loan;
the Ported Loan does not have a final maturity beyond the date falling two years prior to the Interest
Payment Date falling in June 2045; and
the Principal Balance of the Ported Loan, when added to the sum of the aggregate Principal Balance of
any Ported Loan previously purchased does not exceed 10 per cent. of the aggregate Principal Balance
of the Loans on the Closing Date, save that the figure of 10 per cent. referred to above may be increased
from time to time upon the Rating Agencies agreeing that such increase will not adversely affect the
then current ratings by the Rating Agencies of the Notes.
Lending Criteria
SPML Lending Criteria
Each of SPML, SPPL and the Correspondent Lenders have applied the following criteria (the “SPML Lending
Criteria” which expression includes the additional criteria referred to in “Lending Criteria - Additional
Requirements” below and refers to such criteria or additional criteria as they may be varied from time to time as
69

eferred to in “Changes to Lending Criteria” below) in respect of the SPML Loans comprising the Initial
Mortgage Pool, except in the case of the MARS1 Loans, the SPS C Loans, the SPS D Loans and the SPS E
Loans (in each case, as defined under “Title to the Mortgage Pool” below):
(a)
Loan - amount
the principal amount of the Loan at the time of completion of the Loan must be at least £25,001 (in
respect of a First Loan) or £5,000 (in respect of a Second Loan). The Loan will not exceed £1,000,000
(in the case of a First Loan) or £150,000 (in the case of a Second Loan) at any time during the life of
the Loan;
(b)
Loan - loan to value ratio
(i)
other than in certain restricted cases approved on a case-by-case basis by the relevant
Originator as applicable, the loan to value ratio (the “LTV”) is calculated:
(A)
(B)
in the case of each First Loan, by dividing the initial principal amount advanced at
completion of the Loan (excluding fees and insurance premiums) by the lower of the
open market valuation of the Property and the purchase price of such Property or (in
the case of a remortgage) the open market valuation of the Property. On a Right to
Buy Loan (or in the case of sitting tenants), the applicant has the opportunity to
purchase a property at a discounted price. In these cases, LTV is calculated using the
amount advanced divided by the open market value only, instead of the purchase
price;
in the case of each Second Loan, by dividing the sum of the initial principal amount
advanced at completion of the Loan (excluding legal fees and insurance premiums)
and the aggregate principal amount then secured by each prior mortgage by the
valuation of the Property,
and, in each case, expressing the result as a percentage;
(ii)
(iii)
the LTV of each First Loan at the date of the initial advance must be no more than 95 per
cent.; and
at the date of the initial advance of each Second Loan, the initial principal amount advanced at
completion of the Second Loan plus the aggregate principal amount then secured by all prior
mortgages must be not more than 100 per cent. of the valuation of the Property;
(c)
Loan - term
each Loan must have an initial term of between 5 and 35 years for a First Loan and between 5 and 30
years for a Second Loan and (except for a Capital and Interest Loan) have no scheduled principal
repayment prior to its stated final maturity which (in the case of mortgages in the Initial Mortgage
Pool) must be no later than two years prior to the Interest Payment Date falling in June 2045;
(d)
Loan - Right to Buy legislation
none of the Loans (except for Right to Buy Loans) will have been made in whole or in part to a
Borrower for the purpose of enabling that Borrower to exercise his right to buy the relevant Property
under Part V of the Housing Act 1985 (as amended) or (in Scotland) under Part III of the Housing
(Scotland) Act 1987 (as amended) or (in Northern Ireland) under the Housing (Northern Ireland) Order
1983 (as amended), as the case may be;
(e)
Property - private residence
other than in respect of Buy-to-Let Loans, the Properties will constitute the private residence of the
relevant Borrowers;
70

(f)
Property - title - investigation and insurance
(i)
(ii)
(iii)
(iv)
prior to making a First Loan to a Borrower, SPML or the relevant Correspondent Lender (as
applicable) will have caused its solicitors to carry out in relation to the relevant Property all
investigations, searches and other actions and enquiries which a Prudent Mortgage Lender or
its solicitors normally make when lending to an individual on the security of residential
property in England and Wales, in Northern Ireland or in Scotland and in each case received a
certificate or report on title relating to such Property and the results thereof were such as
would be acceptable to a Prudent Mortgage Lender; or
with respect to SPML Branded Loans, prior to making a First Loan to a Borrower, SPML or
the relevant Correspondent Lender (as applicable) will have arranged title insurance through
European Title Insurance Services Limited reinsured by either a Lloyd’s syndicate or Axa
Global Solutions;
prior to making a Loan to a Borrower, SPPL will have arranged title insurance through
European Title Insurance Services Limited reinsured by either a Lloyd’s syndicate or Axa
Global Solutions; and
any firm of solicitors acting on behalf of SPML or the relevant Correspondent Lender, as the
case may be, on the making of each Loan had at least two practising partners;
(g)
Property - Borrower’s title
the relevant Borrower must have good and marketable title to the relevant Property free from any
encumbrance (except the Mortgage and, in relation to Right to Buy Loans, any charges or, as the case
may be, standard securities which have been registered in favour of the relevant Landlord) which
would adversely affect such title and, except where lodged with the relevant registry, in the case of
First Loans only, holds all title deeds and loan files necessary to evidence such title to the strict order of
the lender whether pursuant to a custody agreement or on undertakings acceptable to a Prudent
Mortgage Lender from solicitors of the relevant Borrower and, without limiting the foregoing, in the
case of a leasehold or (in Scotland) long lease Property or (in Northern Ireland) long leasehold
Property:
(i)
(ii)
(iii)
the lease cannot be forfeited or (in Scotland) irritated on the bankruptcy of the tenant;
any requisite consent of the landlord to or notice to the landlord of, the creation of the related
security must have been obtained or given; and
a copy of the consent or notice must have been or will be placed with title deeds;
(h)
Property - location
all of the residential properties, which are secured by a Mortgage in relation to each Loan, will be in
England, Wales, Northern Ireland or Scotland;
(i)
Property - Mortgage characteristics
(i)
each First Loan must be secured by a first ranking legal mortgage (an “English First
Mortgage”) over a freehold or long leasehold residential property in England or Wales (an
“English Property”) or secured by a first ranking standard security (a “Scottish First
Mortgage”) over a heritable or long lease residential property in Scotland (a “Scottish
Property”) or secured by a first mortgage or charge (a “Northern Irish Mortgage” and such
Loan a “Northern Irish Loan”) over a freehold or long leasehold residential property in
Northern Ireland (a “Northern Irish Property”) (the English Mortgages, the Northern Irish
Mortgages and the Scottish Mortgages are collectively defined as the “Mortgages” and each
English Property, Northern Irish Property and Scottish Property is defined as a “Property” or,
collectively, as the “Properties”) subject only (in certain appropriate cases) to registration or
recording at the Land Registry of England and Wales, the Land Registry of Northern Ireland
and the Registry of Deeds of Northern Ireland (the “Registers of Northern Ireland”) or the
71

Registers of Scotland (as applicable) of such Mortgage and there is nothing to prevent such
registration or recording being effected with absolute and unqualified title in due course;
(ii)
(iii)
(iv)
each Second Loan must be secured by a legal mortgage over an English Property (an “English
Second Mortgage” and together with an English First Mortgage, an “English Mortgage” and
any such First Loan or Second Loan, an “English Loan”) or secured by a standard security
over a Scottish Property (a “Scottish Second Mortgage” and together with a Scottish First
Mortgage, a “Scottish Mortgage” and any such First Loan or Second Loan, a “Scottish
Loan”) where a single lender holds all prior ranking mortgages or, as the case may be,
standard securities in respect of the relevant Property subject only (in certain appropriate
cases) to registration or recording (as applicable) of such Mortgage at the Land Registry of
England and Wales, or the Registers of Scotland, and there is nothing to prevent such
registration or recording being effected with absolute and unqualified title in due course;
in the case of each First Loan, the unexpired term of any leasehold or long lease residential
Property is at least 35 years longer than the term of the relevant First Loan; and
in the case of each Second Loan, the unexpired term of any leasehold or long lease residential
Property is at least 50 years longer than the term of the relevant Second Loan;
(j)
Property - occupancy rights
(i)
(ii)
in relation to any Loan other than a Scottish Loan, every person, of whom SPML, SPPL or, as
the case may be, the relevant Correspondent Lender had knowledge, who at the date upon
which such Loan was made had attained the age of 17 and who is residing or about to reside in
the relevant Property must either be named as a joint borrower or have signed a form of
consent declaring that he or she will assert no right to any overriding or other interest by
occupation adverse to the rights under the relevant Loan and related Collateral Security; and
in relation to any Scottish Loan that is a First Loan, at or prior to the date upon which such
Loan was made, SPML or the relevant Correspondent Lender must have obtained all
necessary consents, declarations, affidavits or other documentation so as to ensure that neither
the relevant Scottish Mortgage nor the relevant Scottish Property was subject to any statutory
right of occupancy under the Matrimonial Homes (Family Protection) (Scotland) Act 1981 or
under the Civil Partnership Act 2004;
(k)
Property - construction
only property of acceptable construction intended for use wholly or partly as a principal place of
residence or let under an assured shorthold or short assured tenancy will be acceptable;
(l)
Property - NHBC certificate
properties under 10 years old will have the benefit of a NHBC or an architect’s certificate or equivalent
from an acceptable body;
(m)
Property - types
(i)
(ii)
each Property constitutes a separate dwelling unit and is either detached, semi-detached or
terraced and either a house, flat, bungalow or maisonette, is either freehold, leasehold, or (in
Northern Ireland) freehold or long leasehold, or (in Scotland) heritable or long lease title and
does not otherwise comprise a property type outside this SPML Lending Criteria; and
none of the Properties are any of the following:
(A)
(B)
properties designated as defective under the Housing Defects Act 1984 and Housing
Act 1985 (or the equivalent legislation applicable in Northern Ireland);
properties containing mundic block materials;
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(C)
(D)
properties with agricultural and occupational restrictions; and
properties not wholly owned by the borrower, where equity is retained by a builder/
developer, housing association or other third party;
(n)
Property - valuation
(i)
(ii)
each Property offered as security for a First Loan must have been valued by a RICS or
equivalent qualified surveyor which, when instructed, was chosen from a panel of valuation
firms approved by SPML; and
each Property offered as security for a Second Loan must have been subject to: (x) a
valuation; or (y) a drive-by valuation, in each case, by a RICS or equivalent qualified surveyor
which, when instructed, was chosen from a panel of valuation firms approved by SPPL or a
Hometrack Realtime Valuation Report or (z) an automated valuation model;
(o)
Property - insured status
in the case of a First Loan, except where the relevant Property is at completion of the relevant
Mortgage (or, where appropriate, in the case of self-build properties, at the date of completion of the
relevant property), insured under a Block Buildings Policy (as defined under “Title to the Mortgage
Pool - Insurance Contracts - Buildings Insurance and Title Insurance” below) in the name of the
relevant Originator, the relevant Originator took all reasonable steps to ensure that at the date of
completion of the Mortgage, the Property was insured under a policy with an insurance company
against fire and other commercial risks for an amount not less than the full reinstatement value
determined by a valuer appointed by SPML or SPPL;
(p)
Borrower - capacity
all of the Borrowers are individuals and were at least (in respect of First Loans) 18 years of age or (in
respect of Second Loans) 21 years of age at the time the relevant Loan was completed;
(q)
Borrower - connected persons
no Borrower is an employee of SPML or SPPL or of any Correspondent Lender at the time of
origination;
(r)
Borrower - number
a maximum number of four Borrowers are allowed to be parties to a Loan;
(s)
Borrower - credit history
the Borrower’s credit and employment history will have been assessed with the aid of one or more of
the following:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
search supplied by credit reference agency;
confirmation of voters roll entries or proof of residency;
references from current employers, payslips or P60 tax forms;
accountant’s certificate or tax assessments;
references from current lenders; and
references from current landlords;
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(t)
Borrower - County Court Judgments etc.
where a county court judgment (or its Scottish or Northern Irish equivalent) (“CCJ”) relating to a
Borrower has been revealed by the credit reference search or arrears have been revealed by lenders’ or
landlords’ references or a Borrower has been subject to a bankruptcy order or an individual voluntary
arrangement, explanations satisfactory to the relevant Originator will have been provided. In relation to
Borrowers of First Loans which are classified by the relevant Originator as sub-prime loans, a CCJ is
disregarded if it meets any of the following criteria:
(i) the CCJ amount was less than £150;
(ii)
(iii)
the CCJ was satisfied more than 12 months previously; or
the CCJ was registered more than 2 years previously;
(u)
Borrower - discharge of bankruptcy order
(i)
(ii)
Borrowers who were the subject of a bankruptcy order or its Scottish or Northern Irish
equivalent must have provided a certificate of discharge (where the credit reference search does
not disclose the same); and
Borrowers who were the subject of an individual voluntary arrangement must have provided a
confirmation of satisfactory conduct of the individual voluntary arrangement where appropriate
unless a credit reference search shows that such arrangement has been satisfied;
(v)
Borrower - income
(i)
(ii)
the income of the Borrowers is assessed by reference to the application form and supporting
documentation, where appropriate, and may consist of salary plus additional regular
remuneration for employed Borrowers, net profit plus any additional income confirmed by the
accountant for self-employed Borrowers (i.e. where a Borrower is (A) holding at least 25 per
cent. of the issued share capital of a company (except where SPML, SPPL or the relevant
Correspondent Lender, as applicable, reasonably considers that the remuneration of the
Borrower makes it inappropriate to consider such Borrower as an employed Borrower), (B) a
partner in a partnership, or (C) a sole trader), pensions, investments and rental income, and other
monies approved by an authorised officer of the relevant Originator; and
with the exception of certain allowable fees added to the aggregate Principal Balance of the
First Loan or where the authorised lending officer of SPML, SPPL or the relevant
Correspondent Lender, so determines as an underwriting exception in accordance with the
Lending Criteria, the principal amount advanced:
(A)
(B)
in the case of First Loans: (x) will not exceed the higher of 4.5 times the assessed
income of the primary Borrower plus one times the assessed income of any
secondary Borrower(s), or 3.75 times the combined assessed incomes of the primary
and secondary Borrowers or (y) is based on an affordability calculation on which the
outstanding commitments will not exceed a percentage of the gross monthly income;
and
in the case of Second Loans, is based on an affordability calculation on which the
outstanding commitments will not exceed 50% of gross monthly income; and
(w)
Second Loans
on or promptly after completion of each Second Loan, the relevant Originator will have notified, or
procured notification of and the consent of, the mortgagee of the prior ranking mortgage or mortgages
or (in Scotland) the heritable creditor of the prior ranking standard security or securities that the
relevant Second Loan has been created and secured by the relevant Mortgage.
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The lending criteria in respect of the MARS 1 Loans (the “MARS 1 Lending Criteria”), the SPS C Loans (the
“SPS C Lending Criteria”), the SPS D Loans (the “SPS D Lending Criteria”) and the SPS E Loans (the “SPS
E Lending Criteria”) refer to the lending criteria set out in the offering circular issued by Marble Arch
Residential Securitisation Limited dated 2 May 2003, the offering circular issued by Southern Pacific Securities
C PLC dated 12 November 2001, the offering circular issued by Southern Pacific Securities D PLC dated 30
May 2002 and the offering circular issued by Southern Pacific Securities E plc dated 3 October 2002,
respectively.
PML Lending Criteria
PML has applied the following criteria (the “PML Lending Criteria” which expression includes the additional
criteria referred to in “Lending Criteria - Additional Requirements” below and refers to such criteria or
additional criteria as they may be varied from time to time as referred to in “Changes to Lending Criteria”
below) in respect of the PML Loans comprising the Initial Mortgage Pool, except in the case of the PRS 1
Loans, the PRS 3 Loans, the PRS 4 Loans, the PRS 5 Loans and the PRS 6 Loans:
(a)
Loan - amount
each Loan at the time of completion must be at least £10,000. Each Loan will not exceed £1,000,000 at
any time during the life of such PML Loan;
(b)
Loan - loan to value ratio
(i)
(ii)
the LTV is calculated by dividing the initial principal amount advanced at completion of the
Loan by (in the case of a purchase) the lower of the open market valuation and the purchase
price of the Property or (in the case of a remortgage) the open market valuation of the
property. On a Right to Buy Loan (or in the case of sitting tenants), the applicant has the
opportunity to purchase a property at a discounted price. In these cases, LTV is calculated
using the amount advanced divided by the open market value only, instead of the purchase
price; and
the LTV of each PML Loan at the date of the initial advance must be no more than 95 per
cent;
(c)
Loan - term
each PML Loan must have an initial term of between 5 and 35 years and (except for a Capital and
Interest Loan and a Part & Part Loan) have no scheduled principal repayment prior to its stated final
maturity which (in the case of mortgages in the Initial Mortgage Pool) must be no later than two years
prior to the Interest Payment Date falling in June 2045;
(d)
Loan - Right to Buy legislation
none of the PML Loans (except for Right to Buy Loans) will have been made in whole or in part to a
Borrower for the purpose of enabling that Borrower to exercise his right to buy the relevant Property
under Part V of the Housing Act 1985 (as amended) or (in Scotland) under Part III of the Housing
(Scotland) Act 1987 (as amended) or (in Northern Ireland) under the Housing (Northern Ireland) Order
1983 (as amended), as the case may be;
(e)
Property - principal residence
other than in respect of Buy-to-Let Loans, the Properties will at the time of origination constitute the
principal private residence of the relevant Borrowers;
(f)
Property - title - investigation and insurance
(i)
prior to making a Loan to a Borrower, PML will have caused its solicitors to carry out in
relation to the relevant Property all investigations, searches and other actions and enquiries
which a Prudent Mortgage Lender or its solicitors normally make when lending to an
individual on the security of residential property in England and Wales, in Northern Ireland or
75

in Scotland and in each case received a certificate or report on title relating to such Property
and the results thereof were such as would be acceptable to a Prudent Mortgage Lender;
(ii)
(iii)
at the time of completion of a Loan, the relevant Property must either have been insured under
a Block Buildings Policy (as defined under “Title to the Mortgage Pool – Insurance Contracts
– Buildings Insurance” below) in the name of PML, or PML must be jointly insured with the
Borrower under, or its interest noted on, a buildings policy in relation to the relevant Property;
and
any firm of solicitors acting on behalf of PML on the making of each Loan in England, Wales
and Scotland had at least two practising partners;
(g)
Property - Borrower’s title
the relevant Borrower must have good and marketable title to the relevant Property free from any
encumbrance (except the Mortgage and, in relation to Right to Buy Loans, any charges which have
been registered in favour of the relevant Landlord or, as the case may be, standard securities) which
would adversely affect such title and holds all title deeds and loan files necessary to evidence such title
to the strict order of the lender whether pursuant to a custody agreement or on undertakings acceptable
to a Prudent Mortgage Lender from solicitors of the relevant Borrower and, without limiting the
foregoing, in the case of a leasehold Property or (in Scotland) long lease Property or (in Northern
Ireland) long leasehold Property:
(i)
(ii)
(iii)
the lease cannot be forfeited or (in Scotland) irritated on the bankruptcy of the tenant;
any requisite consent of the landlord to or notice to the landlord of, the creation of the related
security must have been obtained or given; and
a copy of the consent or notice must have been or will be placed with title deeds;
(h)
Property - location
all of the residential properties, which are secured by a Mortgage in relation to each PML Loan, will be
in England, Wales, Northern Ireland or Scotland;
(i)
Property - Mortgage characteristics
(i)
(ii)
each Loan must be secured by a first ranking legal mortgage over a freehold or long leasehold
residential property in England or Wales or secured by a first ranking standard security over a
heritable or long lease residential property in Scotland or secured by a first mortgage or charge
over a freehold or long leasehold residential property in Northern Ireland; and
in each case, the unexpired term of any leasehold or long lease residential Property is at least
35 years longer than the term of the relevant Mortgage;
(j)
Property - occupancy rights
(i)
(ii)
in relation to any Loan other than a Scottish Loan, every person, of whom PML had
knowledge, who at the date upon which such PML Loan was made had attained the age of 17
and who is residing or about to reside in the relevant Property must either be named as a joint
borrower or have signed a form of consent declaring that he or she will assert no right to any
overriding or other interest by occupation adverse to the rights under the relevant PML Loan
and related Collateral Security; and
in relation to any Scottish Loan, at or prior to the date upon which such PML Loan was made,
PML must have obtained all necessary consents, declarations, affidavits or other
documentation so as to ensure that neither the relevant Scottish Mortgage nor the relevant
Scottish Property was subject to any statutory right of occupancy under the Matrimonial
Homes (Family Protection) (Scotland) Act 1981 or under the Civil Partnership Act 2004;
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(k)
Property - construction
only property of acceptable construction intended for use wholly or partly as a principal place of
residence or let under an assured shorthold or short assured tenancy will be acceptable;
(l)
Property - NHBC certificate
Properties under 10 years old will have the benefit of a NHBC or an architect’s certificate or equivalent
from an acceptable body;
(m)
Property - types
(i)
(ii)
each Property constitutes a separate dwelling unit and is either detached, semi-detached or
terraced and either a house, flat, bungalow or maisonette, is either freehold, leasehold, or (in
Northern Ireland) freehold or long leasehold, or (in Scotland) heritable or long lease title and
does not otherwise comprise a property type outside this PML Lending Criteria; and
none of the Properties are any of the following:
(A)
(B)
properties designated as defective under the Housing Defects Act 1984 and Housing
Act 1985 (or the equivalent legislation applicable in Northern Ireland);
properties with agricultural and occupational restrictions; and
(C ) (with the exception of the Shared Ownership Loans), properties not wholly owned by
the borrower, where equity is retained by a builder/ developer, housing association or
other third party;
(n)
Property - valuation
each Property offered as security for a PML Loan must have been valued by a qualified surveyor
(MRICS/FRICS or equivalent qualification) which, when instructed, was chosen from a panel of
valuation firms approved by PML;
(o)
Property - insured status
except where the relevant Property is at completion of the relevant Mortgage (or, where appropriate, in
the case of self-build properties, at the date of completion of the relevant property), insured under a
Block Buildings Policy (as defined under “Title to the Mortgage Pool - Insurance Contracts -
Buildings Insurance and Title Insurance” below) in the name of PML, PML took all reasonable steps
to ensure that at the date of completion of the Mortgage, the Property was insured under a policy with
an insurance company against fire and other commercial risks for an amount not less than the full
reinstatement value determined by a valuer appointed by PML;
(p)
Borrower - capacity
all of the Borrowers are individuals and were at least 18 years of age at the time the relevant PML Loan
was completed;
(q)
Borrower - connected persons
at the time of application, no Borrower was an employee of PML;
(r)
Borrower - number
a maximum number of four Borrowers are allowed to be parties to a PML Loan;
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(s)
Borrower - credit history
the Borrower’s credit and employment history will have been assessed with the aid of one or more of
the following:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
search supplied by credit reference agency;
confirmation of voters roll entries or proof of residency;
references from current employers, payslips or P60 tax forms;
accountant’s certificate or tax assessments;
references from current lenders; and
references from current landlords;
(t)
Borrower - County Court Judgments etc.
where a CCJ relating to a Borrower has been revealed by the credit reference search or arrears have
been revealed by lenders’ or landlords’ references or a Borrower has been subject to a bankruptcy order
or an individual voluntary arrangement, explanations satisfactory to PML, will have been provided;
(u)
Borrower - discharge of bankruptcy order
(i)
(ii)
Borrowers who were the subject of a bankruptcy order or its Scottish or Northern Irish
equivalent must have provided a certificate of discharge (where the credit reference search
does not disclose the same); and
Borrowers who were the subject of an individual voluntary arrangement must have provided a
confirmation of satisfactory conduct of the individual voluntary arrangement where
appropriate unless a credit reference search shows that such arrangement has been satisfied,
(v)
Borrower - income
(i)
(ii)
the income of the Borrowers is assessed by reference to the application form and supporting
documentation, where appropriate, and may consist of salary plus additional regular
remuneration for employed Borrowers, net profit plus any additional income confirmed by the
accountant for self-employed Borrowers (i.e. where a Borrower is (A) holding at least 25 per
cent. of the issued share capital of a company (except where PML reasonably considers that
the remuneration of the Borrower makes it inappropriate to consider such Borrower as an
employed Borrower), (B) a partner in a partnership, or (C) a sole trader), pensions,
investments and rental income, and other monies approved by an authorised officer of PML;
and
with the exception of certain allowable fees added to the aggregate Principal Balance of the
Loan or where the authorised lending officer of PML so determines as an underwriting
exception in accordance with the PML Lending Criteria, the principal amount advanced:
(A)
(B)
will not exceed the higher of 3.75 times the assessed income of the primary Borrower
plus one times the assessed income of any secondary Borrower(s), or 3.25 times the
combined assessed incomes of the primary and secondary Borrowers; or
is based on an affordability calculation on which the outstanding commitments will
not exceed 53 per cent. of gross monthly income,
The lending criteria in respect of the PRS 1 Loans (the “PRS 1 Lending Criteria”), the PRS 3 Loans (the “PRS
3 Lending Criteria”), the PRS 4 Loans (the “PRS 4 Lending Criteria”), the PRS 5 Loans (the “PRS 5
Lending Criteria”) and the PRS 6 Loans (the “PRS 6 Lending Criteria”) refer to the lending criteria set out in
78

the offering circular issued by Preferred Residential Securities 1 PLC dated 14 August 1998, the offering
circular issued by Preferred Residential Securities 3 PLC dated 8 February 2001, the offering circular issued by
Preferred Residential Securities 4 PLC dated 4 December 2001, the offering circular issued by Preferred
Residential Securities 5 PLC dated 18 September 2002 and the offering circular issued by Preferred Residential
Securities 6 PLC dated 1 July 2003, respectively.
Lending Criteria - Additional Requirements
Certain types of SPML Loans or PML Loans are subject to additional criteria as set out below (as such criteria
may be amended from time to time):
(a)
Right to Buy Loans
Right to Buy Loans are required to comply with Part V of the Housing Act 1985 (as amended), the
Housing (Northern Ireland) Order 1983 (as amended) or Part III of the Housing (Scotland) Act 1987
(as amended) (as applicable).
(b)
Buy-to-Let Loans
Buy-to-Let Loans are governed by the same or similar lending criteria as for Home Owner Loans, and
include:
(i)
(ii)
an examination of the future rental income of the residential property; and
the relevant Property will have been let on the terms of:
(A)
(B)
(C)
(D)
an assured shorthold tenancy agreement of not more than six months’ tenure; or
with respect to any Northern Irish Property, a tenancy agreement of not more than six
months tenure and which confers the same rights on the Borrower as an assured
shorthold tenancy agreement would in England and Wales and which is either not
controlled by the Rent (N.I.) Order 1978 or is not a controlled tenancy under the
provisions of the Private Tenancies (Northern Ireland) Order 2006; or
with respect to any Scottish Property, a short assured tenancy agreement of not more
than six months’ tenure; or
an agreement conferring the same rights on the relevant Originator and the Borrower
as such a tenancy agreement of not more than six months’ tenure.
(c)
Second Loans
On or promptly after completion of each Second Loan, SPPL, Matlock, Langersal or PML will have
notified, or procured notification of, the mortgagee of the prior ranking mortgage or mortgages or (in
Scotland) the heritable creditor of the prior ranking standard security or securities that the relevant
Second Loan has been created and secured by the relevant Mortgage.
Amber Lending Criteria
Amber has applied the following criteria (the “Amber Lending Criteria” which expression includes the
additional criteria referred to in “Lending Criteria - Additional Requirements” below and refers to such criteria
or additional criteria as they may be varied from time to time as referred to in “Changes to Lending Criteria”
below) in respect of the Amber Loans comprising the Initial Mortgage Pool:
(a)
Loan term
Each Amber Loan has an original term of between 5 and 35 years;
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(b)
Age of Borrower
Borrowers must be at least 18 years at the time of application for a Loan. Furthermore, the term of
Loans usually must end before the primary applicant reaches the age of 75 years old (subject to
approved exceptions);
(c)
Borrowers - number
No more than four Borrowers may be parties to an Amber Loan;
(d)
Borrower - Employment Details
The policies of Amber in regard to the verification of the details of a Borrower’s income distinguish
between two different categories of Borrower, employed and self-employed.
The income of employed Borrowers can be substantiated by:
(1) a P60 and 1 months’ supporting payslips or a formal reference from the applying Borrower's
employer and the last month’s bank statement; or
(2) self-certification by the Borrower (only under certain conditions and for Loans up to certain
maximum amounts).
For the purpose of calculating a Borrower’s gross income not only is base salary considered but also
additional compensation such as a certain percentage of guaranteed overtime, bonuses and
commissions, confirmed pension income, regular investment and rental income, employer subsidies
and maintenance payments.
The income of self-employed Borrowers can be confirmed either by:
(1) a minimum of two year’s accounts prepared and signed by a suitably qualified accountant; or
(2) self-certification by the Borrower (only under certain conditions and for Amber Loans up to
certain maximum amounts).
(e)
Property - characteristics
(i)
(ii)
each Amber Loan must be secured by a first legal charge over a freehold or long leasehold
residential property in England or Wales or by a first ranking standard security over a heritable
or long lease property in Scotland, or by a first ranking charge or mortgage over freehold or long
leasehold property in Northern Ireland. The expiry of a leasehold or long lease property that
serves as security for an Amber Loan must post-date the maturity of the Amber Loan by at least
50 years;
Generally, only properties intended for use exclusively or at least primarily as a principal place
of residence will be acceptable. Properties under 10 years old are generally required to have the
benefit of a NHBC guarantee.
Certain property types will not be considered for the purposes of providing security for a Loan.
Examples of properties that would not be deemed acceptable as security include:
(1) freehold flats and freehold maisonettes in England or Wales or Northern Ireland;
(2) properties with agricultural restrictions where the LTV in respect of the Amber Loan is more
than 50 per cent.; and
(3) properties not wholly owned by the Borrower, where equity is retained by a builder/developer,
housing association or other third party.
80

(f)
Loan - amount
No Loan was originated with a provisional amount of £25,000 or less at the time of completion or a
provisional amount including further advances exceeding £1,000,000 unless an underwriting exception
was approved;
(g)
Maximum LTV
The LTV is calculated by dividing the gross principal amount (net of any fees) committed at
completion of the Loan by the lower of the valuation of the Property as established by the valuer
selected from the approved panel of surveyors or, in the case of a Loan made for financing the purchase
of a Property, the disclosed purchase price (except in exceptional cases, i.e. where the purchase price
reflects a discount);
(h)
Loan – loan to value ratio
The current policy of Amber is not to originate Loans with an LTV higher than 95%;
(i)
Borrower - income
Unless an underwriting exception is approved, a Loan will not exceed either:
(i)
the income of the primary Borrower multiplied by 4 and added to the income of any secondary
Borrower; or
(ii) the Borrowers' joint income multiplied by 3.25;
(j)
Borrower - credit history
In addition to employer and valuer references, Amber may, depending upon the particular
circumstances, require Borrowers to furnish other references, e.g. from previous lenders. Amber may
also review a Borrower's bank or building society statements but only does so in limited circumstances.
In addition, Amber requires that an approved credit search covering the preceding three years be
undertaken for all Borrowers.
Where a CCJ (or its Scottish equivalent) relating to a Borrower has been revealed by the credit
reference search or a Borrower has been subject to a Bankruptcy Order or an IVA, explanations are
generally obtained.
Amber generally considers the accumulated aggregate value of the CCJs lodged against a Borrower in
the preceding three-year period in its consideration of that Borrower's Mortgage application and/or in
its setting of the rate to be charged on the Loan. The aggregate value of the CCJs will determine the
products for which the Borrower is eligible.
Where satisfaction of a CCJ is a requirement of the Loan, a certificate of satisfaction must have been
provided, however these are not required if the CCJ is showing as satisfied on the Credit Search.
Borrowers who were extended a Loan despite being previously subject to a Bankruptcy Order are
generally required to provide a certificate of discharge.
Repossessions in the preceding 6 years of previously mortgaged property will also be considered as
relevant to a Borrower's application for a Loan. The Borrower is required to submit information
relating to any outstanding debt and/or ongoing debt recovery in relation to the repossession for the
review of Amber. Amber only accept repossessions on certain adverse products.
(k)
Property - valuation
Each Property must have been valued by a qualified surveyor (ARICS or equivalent qualification)
chosen from a panel of valuation firms approved by Amber. All members of Amber’s valuer panel are
81

insured for professional indemnity risks to a minimum level of £500,000.
completed as per an Amber standard template.
Valuations must be
(l)
Borrower maintenance covenants
The relevant Borrower has covenanted to keep the relevant Property in good repair and condition, to
comply with all covenants and statutory requirements in respect of the relevant Property and to pay in a
timely fashion all taxes and other amounts required to be paid in connection with the Property. Each of
the Borrowers has also agreed to allow Amber to carry out an inspection of the condition of the
relevant Property at any reasonable time.
(m)
Buildings Insurance
It is a condition of each Loan that each Property is insured for its full reinstatement value as stated in
the valuation report with an acceptable insurance company and at the Borrower's cost. Amber requests
each Borrower to produce evidence of current buildings insurance prior to the completion of each
Amber Loan. However, Amber does not delay completion of a Loan if such evidence of current
buildings insurance is not received prior to completion. The interest of Amber is required to be noted
on the relevant policy from the date of completion of the Loan.
Payment Holidays/Overpayment
The Amber Loans allow for a Borrower to take payment holidays or make overpayments. Payment Holidays
may only be taken if a “surplus” exists. A surplus will exist if the Borrower has previously made overpayments
in relation to the Amber Loan, although such a surplus will be reduced by the aggregate value of any payment
holidays that the Borrower has already taken. Payment holidays may be taken for up to six consecutive months,
subject to certain conditions, which include:
(i)
(ii)
(iii)
(iv)
(v)
no payment holiday is allowed until six months after the end of the month when the Amber Loan was
completed:
no payment holiday is allowed if the Amber Loan is in arrears or has been in arrears at any time within
the last 6 months before the payment holiday request is made;
no payment holiday will be allowed if it will result in any surplus being exceeded at the end of the
proposed payment holiday;
a payment holiday may not be taken in respect of more than six monthly payments in any period of
twelve consecutive months; and
following the payment holiday the outstanding balance of the Amber Loan must not exceed 95% of the
most recent valuation of the relevant Property.
The overpayment may reduce the Borrower’s principal balance. While the Borrower’s obligation to make
monthly payments is suspended during any payment holiday, such amount will be recorded as arrears (and
reported by the Issuer as such) but such that no action will be taken in respect of non-payment Accordingly,
interest will accrue against the Borrower on such amount on a daily basis.
Further advance
Mortgage further advances made by Amber were made pursuant to the Amber Lending Criteria and, together
with the initial advances, must not have exceeded the maximum loan amount permitted by the Amber Lending
Criteria. Generally, the Borrower should have paid its current Loan for a period of at least 6 months and must
never have been in arrears in relation to the existing Loan. This policy is, however, subject to some exceptions,
taken on a case-by-case basis.
Where a CCJ (or its Scottish equivalent) relating to a Borrower has been revealed by the credit reference search
or a Borrower has been subject to a Bankruptcy Order or an IVA, explanations are generally obtained.
82

Amber generally considers the accumulated aggregate value of the CCJs lodged against a Borrower in the
preceding three-year period in its consideration of that Borrower's Loan application and/or in its setting of the
rate to be charged on the Loan. The aggregate value of the CCJs will determine the products for which the
Borrower is eligible.
Where satisfaction of a CCJ is a requirement of the Loan, a certificate of satisfaction must have been provided,
however these are not required if the CCJ is showing as satisfied on the Credit Search.
Borrowers who were extended a Loan despite being previously subject to a Bankruptcy Order are generally
required to provide a certificate of discharge.
Lending Criteria
A&L Lending Criteria
A&L has applied the following criteria (the “A&L Lending Criteria” as they may be varied from time to time
as referred to in “Changes to Lending Criteria” below) in respect of the A&L Loans comprising the Initial
Mortgage Pool:
(a)
Loan - amount
the principal amount of the Loan at the time of completion of the Loan must be at least £26,000. The
Loan will not exceed £500,000 at any time during the life of the Loan;
(b)
Loan - loan to value ratio
(i)
(ii)
other than in certain restricted cases approved on a case-by-case basis by A&L, the loan to value
ratio (“LTV”) is calculated by dividing the initial principal amount advanced at completion of
the Loan (excluding fees and insurance premiums) by the lower of the open market valuation of
the Property and the purchase price of such Property or (in the case of a remortgage) the open
market valuation of the Property; and
the LTV of each Loan at the date of the initial advance must be no more than 90 per cent.;
(c)
Loan - term
each Loan must have an initial term of between 5 and 35 years and (except for a Capital and Interest
Loan) have no scheduled principal repayment prior to its stated final maturity which (in the case of
mortgages in the Initial Mortgage Pool) must be no later than two years prior to the Interest Payment
Date falling in June 2045;
(d)
Loan - Right to Buy legislation
none of the Loans will have been made in whole or in part to a Borrower for the purpose of enabling that
Borrower to exercise his right to buy the relevant Property under Part V of the Housing Act 1985 (as
amended) or (in Scotland) under Part III of the Housing (Scotland) Act 1987 (as amended);
(e)
Property - private residence
the Properties will constitute the private residence of the relevant Borrowers;
(f)
Property - title - investigation and insurance
prior to making a Loan to a Borrower, A&L will have caused its solicitors to carry out in relation to the
relevant Property all investigations, searches and other actions and enquiries which a Prudent Mortgage
Lender or its solicitors normally make when lending to an individual on the security of residential
property in England and Wales, or in Scotland and in each case received a certificate or report on title
relating to such Property and the results thereof were such as would be acceptable to a Prudent Mortgage
Lender;
83

(g)
Property - Borrower’s title
the relevant Borrower must have good and marketable title to the relevant Property free from any
encumbrance (except the Mortgage) which would adversely affect such title and holds all title deeds and
loan files necessary to evidence such title to the strict order of the lender whether pursuant to a custody
agreement or on undertakings acceptable to a Prudent Mortgage Lender from solicitors of the relevant
Borrower and, without limiting the foregoing, in the case of a leasehold or (in Scotland) long lease
Property:
(i)
(ii)
(iii)
the lease cannot be forfeited or (in Scotland) irritated on the bankruptcy of the tenant;
any requisite consent of the landlord to or notice to the landlord of, the creation of the related
security must have been obtained or given; and
a copy of the consent or notice must have been or will be placed with title deeds;
(h)
Property - location
all of the residential properties, which are secured by a Mortgage in relation to each Loan, will be in
England, Wales or Scotland;
(i)
Property - Mortgage characteristics
(i)
(ii)
each Loan must be secured by a first ranking legal mortgage over a freehold or long leasehold
residential property in England or Wales or secured by a first ranking standard security over a
heritable or long lease residential property in Scotland subject only (in certain appropriate cases)
to registration or recording at the Land Registry of England and Wales or the Registers of
Scotland (as applicable) of such Mortgage and there is nothing to prevent such registration or
recording being effected with absolute and unqualified title in due course; and
the unexpired term of any leasehold or long lease residential Property is at least 35 years longer
than the term of the relevant Loan;
(j)
Property - occupancy rights
(i)
(ii)
in relation to any Loan other than a Scottish Loan, every person, of whom A&L had knowledge,
who at the date upon which such Loan was made had attained the age of 17 and who is residing
or about to reside in the relevant Property must either be named as a joint borrower or have
signed a form of consent declaring that he or she will assert no right to any overriding or other
interest by occupation adverse to the rights under the relevant Loan and related Collateral
Security; and
in relation to any Scottish Loan, at or prior to the date upon which such Loan was made, A&L
must have obtained all necessary consents, declarations, affidavits or other documentation so as
to ensure that neither the relevant Scottish Mortgage nor the relevant Scottish Property was
subject to any statutory right of occupancy under the Matrimonial Homes (Family Protection)
(Scotland) Act 1981 or under the Civil Partnership Act 2004;
(k)
Property - construction
only property of acceptable construction intended for use wholly or partly as a principal place of
residence or let under an assured shorthold or short assured tenancy will be acceptable;
(l)
Property - NHBC certificate
properties under 10 years old will have the benefit of a NHBC or an architect’s certificate or equivalent
from an acceptable body;
84

(m)
Property - types
(i)
(ii)
each Property constitutes a separate dwelling unit and is either detached, semi-detached or
terraced and either a house, flat, bungalow or maisonette, is either freehold, leasehold, or (in
Scotland) heritable or long lease title and does not otherwise comprise a property type outside
this A&L Lending Criteria; and
none of the Properties are any of the following:
(A)
(B)
(C)
(D)
properties designated as defective under the Housing Defects Act 1984 and Housing Act
1985;
properties containing mundic block materials;
properties with agricultural and occupational restrictions; and
properties not wholly owned by the borrower, where equity is retained by a builder/
developer, housing association or other third party;
(n)
Property - valuation
each Property offered as security for a Loan must have been valued by an RICS or equivalent qualified
surveyor which, when instructed, was chosen from a panel of valuation firms approved by A&L;
(o)
Property - insured status
A&L instructs the acting solicitor to ensure that, at the date of completion of the Mortgage, the Property
was insured under a policy with an insurance company against fire and other commercial risks for an
amount not less than the full reinstatement value determined by a valuer appointed by A&L;
(p)
Borrower - capacity
all of the Borrowers are individuals and were at least 18 years of age at the time the relevant Loan was
completed;
(q)
Borrower - connected persons
at the time of application, no Borrower is an employee of A&L;
(r)
Borrower - number
a maximum number of two Borrowers are allowed to be parties to a Loan;
(s)
Borrower - credit history
the Borrower’s credit and employment history will have been assessed with the aid of one or more of the
following:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
search supplied by credit reference agency;
confirmation of voters roll entries or proof of residency;
references from current employers, payslips or P60 tax forms;
accountant’s certificate or tax assessments;
references from current lenders; and
references from current landlords;
85

(t)
Borrower - County Court Judgments etc.
where a county court judgment (or its Scottish equivalent) (“CCJ”) relating to a Borrower has been
revealed by the credit reference search or arrears have been revealed by lenders’ or landlords’ references
or a Borrower has been subject to a bankruptcy order or an individual voluntary arrangement,
explanations satisfactory to A&L will have been provided In relation to Borrowers of Loans which are
classified by A&L as sub-prime loans, a CCJ is disregarded if it meets any of the following criteria:
(i)
(ii)
the CCJ was satisfied more than 12 months previously; or
the CCJ was registered more than 2 years previously;
(u)
Borrower - discharge of bankruptcy order
(i)
(ii)
Borrowers who were the subject of a bankruptcy order or its Scottish equivalent must have
provided a certificate of discharge (where the credit reference search does not disclose the same);
and
Borrowers who were the subject of an individual voluntary arrangement must have provided a
confirmation of satisfactory conduct of the individual voluntary arrangement where appropriate
unless a credit reference search shows that such arrangement has been satisfied; and
(v)
Borrower - income
(i)
(ii)
the income of the Borrowers is assessed by reference to the application form and supporting
documentation, where appropriate, and may consist of salary plus additional regular
remuneration for employed Borrowers, net profit plus any additional income confirmed by the
accountant for self-employed Borrowers (i.e. where a Borrower is (A) holding at least 25 per
cent. of the issued share capital of a company (except where A&L reasonably considers that the
remuneration of the Borrower makes it inappropriate to consider such Borrower as an employed
Borrower), (B) a partner in a partnership, or (C) a sole trader), pensions, investments and rental
income, and other monies approved by an authorised officer of the relevant Originator; and
the applicant’s ability to repay is assessed using an affordability calculation.
Changes to Lending Criteria
Subject to obtaining any relevant consents, SPML, SPPL, the relevant Correspondent Lender, A&L or PML
may vary the SPML Lending Criteria or the A&L Lending Criteria or the PML Lending Criteria (as applicable)
from time to time in the manner of a reasonably prudent mortgage lender lending to Borrowers in England,
Wales, Northern Ireland and Scotland who include the recently self employed, independent contractors,
temporary employees and people who may have experienced previous credit problems being, in each case,
people who generally do not satisfy the lending criteria of traditional sources of residential mortgage capital (a
“Prudent Mortgage Lender”). Substitute Loans, Ported Loans, Newly-Originated Loans and Prefunded
Loans, in each case together with their related Collateral Security, may from time to time only be included in the
Mortgage Pool if they were originated in accordance with the Lending Criteria (as described in this document as
so varied) and the conditions contained in “Title to the Mortgage Pool - Conditions of Acquisition of Substitute
Loans” below, “The Mortgage Pool – Conditions of Acquisition of Ported Loans” above, “Credit Structure -
Newly-Originated Loans” above and “Credit Structure - Prefunded Loans” above have been satisfied.
The Amber Lending Criteria may be varied from time to time if varied in the manner of a Reasonable and
Prudent Mortgage Lender. A “Reasonable and Prudent Mortgage Lender” is a reasonable and prudent
mortgage lender underwriting residential mortgage loans to Borrowers in the non-conforming residential
mortgage market.
The SPML Lending Criteria, the MARS 1 Lending Criteria, the SPS C Lending Criteria, the SPS D Lending
Criteria, the SPS E Lending Criteria, the PRS 1 Lending Criteria, the PRS 3 Lending Criteria, the PRS 4
Lending Criteria, the PRS 5 Lending Criteria, the PR6 Lending Criteria, the Amber Lending Criteria, the A&L
Lending Criteria and the PML Lending Criteria are together, the “Lending Criteria”.
86

Underwriting exception
On a case-by-case basis, and within approved limits Matlock, Langersal, SPML, SPPL, the relevant
Correspondent Lender, A&L or PML may have determined that, based upon compensating factors, a
prospective Borrower who did not strictly qualify under the Lending Criteria in application at that time
warranted an underwriting exception. Examples of underwriting exceptions include, but are not limited to,
where the principal amount to be advanced exceeds the maximum principal amount that would normally be
available as calculated by reference to the applicable income multiple of the Borrower and where the income of
the Borrower has not been fully verified. Compensating factors may include, but are not limited to, a low LTV
and stable employment.
In certain cases where a prospective Borrower or Loan did not fulfil in all respects the Amber Lending Criteria
at the relevant time, the relevant Amber Loan may nevertheless have been approved where an underwriter of
Amber with an approved lending mandate considered that, notwithstanding those deviations, the risks, taken as
a whole, would be acceptable to Amber acting as a Reasonable and Prudent Mortgage Lender.
87

CHARACTERISTICS OF THE PROVISIONAL MORTGAGE POOL
The Loans in the Provisional Mortgage Pool have the characteristics indicated in Tables 1 to 28 below:
Table 1:
Distribution of Loans by Loan to Value Ratio on the Origination Date
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Loan to Value Ratio on the
Origination Date (%)
Number of
Loans
Less than or equal to 30.00 337 3.50 11,623,129.82 1.70
30.01 – 40.00 497 5.16 24,449,889.71 3.57
40.01 – 50.00 867 9.00 48,931,907.85 7.14
50.01 – 60.00 979 10.17 62,239,737.48 9.08
60.01 – 70.00 1,304 13.54 95,068,222.32 13.87
70.01 – 80.00 1,829 18.99 131,280,672.79 19.16
80.01 – 90.00 3,048 31.65 208,978,560.40 30.50
90.01 – 95.00 685 7.11 92,515,073.88 13.50
95.01 – 100.00 85 0.88 10,136,988.35 1.48
Total: 9,631 100.00 685,224,182.60 100.00
The weighted average loan to value ratio on the origination date of the Loans in the Provisional Mortgage Pool
is 73.07 per cent. There has been no revaluation of any of the Properties for the purposes of the issue of the
Notes. Valuation information in this document in respect of the Properties is based upon valuations made for the
purposes of and around the time of the origination of the relevant Loan.
Table 2: Distribution of Loans by Current Loan to Value Ratio on 30 April 2007
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Current Loan to Value
Ratio (%)
Number of
Loans
Less than or equal to 30.00 380 3.95 12,428,842.01 1.81
30.01 – 40.00 508 5.27 24,698,361.22 3.60
40.01 – 50.00 888 9.22 49,565,540.96 7.23
50.01 – 60.00 999 10.37 63,353,244.78 9.25
60.01 – 70.00 1,336 13.87 96,288,265.16 14.05
70.01 – 80.00 1,813 18.82 134,242,359.22 19.59
80.01 – 90.00 2,974 30.88 205,532,460.16 29.99
90.01 – 95.00 643 6.68 88,682,981.49 12.94
95.01 – 100.00 90 0.93 10,432,127.60 1.52
Total: 9,631 100.00 685,224,182.60 100.00
The weighted average loan to value ratio as at 30 April 2007 is 72.91 per cent.
Table 3: Distribution of Loans by Current Principal Balance on 30 April 2007
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Current Principal Balances (£) Loans
1 – 25,000 2,903 30.14 41,298,476.23 6.03
25,001 – 50,000 1,938 20.12 67,699,292.67 9.88
50,001 – 75,000 1,391 14.44 86,451,376.08 12.62
75,001 – 100,000 1,064 11.05 92,045,318.16 13.43
100,001 – 150,000 1,222 12.69 147,998,020.89 21.60
150,001 – 300,000 951 9.87 187,417,650.52 27.35
300,001 – 400,000 106 1.10 35,285,161.57 5.15
Greater than or equal to 400,001 56 0.58 27,028,886.48 3.94
Total: 9,631 100.00 685,224,182.60 100.00
The average current principal balance of the Loans in the Provisional Mortgage Pool is £71,148
88

Table 4: Distribution of Loans by Original Balance on 30 April 2007
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Original Balances (£)
Loans
1 – 25,000 2,807 29.15 39,267,747.33 5.73
25,001 – 50,000 1,987 20.63 67,875,275.77 9.91
50,001 – 75,000 1,416 14.70 87,129,962.16 12.72
75,001 – 100,000 1,074 11.15 92,333,404.03 13.47
100,001 – 150,000 1,228 12.75 148,283,375.58 21.64
150,001 – 300,000 957 9.94 188,038,427.62 27.44
300,001 – 400,000 107 1.11 35,727,701.71 5.21
Greater than or equal to 400,001 55 0.57 26,568,288.40 3.88
Total: 9,631 100.00 685,224,182.60 100.00
The average original balance of the Loans in the Provisional Mortgage Pool is £71,510
Table 5:
Distribution of Loans with CCJs by Loan to Value Ratio on the Origination Date
Loan to Value Ratio on the Total Loans 0 CCJs 1 CCJ
Greater than 1
CCJ
Origination Date (%) No. % No. % No. % No. %
Less than or equal to 30.00 337 3.50 283 2.94 35 0.36 19 0.20
30.01 – 40.00 497 5.16 408 4.24 73 0.76 16 0.17
40.01 – 50.00 867 9.00 715 7.42 110 1.14 42 0.44
50.01 – 60.00 979 10.17 793 8.23 124 1.29 62 0.64
60.01 – 70.00 1,304 13.54 1,029 10.68 190 1.97 85 0.88
70.01 – 80.00 1,829 18.99 1,415 14.69 302 3.14 112 1.16
80.01 – 90.00 3,048 31.65 2,464 25.58 408 4.24 176 1.83
90.01 – 95.00 685 7.11 573 5.95 80 0.83 32 0.33
Greater than or equal to 95.01 85 0.88 79 0.82 6 0.06 0 0.00
Total: 9,631 100.00 7,759 80.56 1,328 13.79 544 5.65
All percentages are presented as a percentage of the total number of Loans in the Provisional Mortgage Pool.
Table 6: Distribution of Loans with CCJs by Stabilised Margin 1
CCJs by Stabilised Total Loans 0 CCJs 1 CCJ
Greater than 1
CCJ
Margin (%) No. % No. % No. % No. %
Less than or equal to 0.50 1 0.01 1 0.01 0 0.00 0 0.00
0.51 – 1.00 50 0.52 47 0.49 2 0.02 1 0.01
1.01 – 1.50 282 2.92 263 2.72 18 0.19 1 0.01
1.51 – 2.00 1,060 10.96 935 9.67 99 1.02 26 0.27
2.01 – 2.50 1,294 13.38 1,117 11.55 130 1.34 47 0.49
2.51 – 3.00 1,171 12.11 861 8.91 216 2.23 94 0.97
3.01 – 3.50 920 9.52 660 6.83 176 1.82 84 0.87
3.51 – 4.00 569 5.89 388 4.01 112 1.16 69 0.71
4.01 – 4.50 605 6.26 471 4.87 93 0.96 41 0.42
4.51 – 5.00 706 7.30 616 6.37 71 0.73 19 0.20
5.01 – 5.50 292 3.02 244 2.52 33 0.34 15 0.16
5.51 – 6.00 562 5.81 494 5.11 53 0.55 15 0.16
6.01 – 6.50 185 1.91 145 1.50 32 0.33 8 0.08
6.51 – 7.00 744 7.70 649 6.71 70 0.72 25 0.26
Greater than or equal to 1,227 12.69 904 9.35 224 2.32 99 1.02
7.01
Total: 9,668 100.00 7,795 80.63 1,329 13.75 544 5.63
All percentages are presented as a percentage of the total number of Loans in the Provisional Mortgage Pool.
89

Table 7:
Distribution of Loans by Loan Purpose
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Loan Purpose
Loans
Purchase 2,414 25.06 231,944,765.41 33.85
Remortgage 7,217 74.94 453,279,417.19 66.15
Total: 9,631 100.00 685,224,182.60 100.00
Table 8:
Distribution of Loans by Product Type
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Product Type
Loans
Near Prime 5,106 53.02 311,914,719.84 45.52
Prime 703 7.30 105,534,937.95 15.40
Sub-Prime 3,822 39.68 267,774,524.81 39.08
Total: 9,631 100.00 685,224,182.60 100.00
Table 9:
Distribution of Loans by Tenure by LTV
Loan to Value Ratio on the Total Loans Heritable Title Freehold Leasehold
Origination Date (%) No. % No. % No. % No. %
Less than or equal to 30.00 337 3.50 11 0.11 257 2.67 69 0.72
30.01 – 40.00 497 5.16 22 0.23 367 3.81 108 1.12
40.01 – 50.00 867 9.00 47 0.49 603 6.26 217 2.25
50.01 – 60.00 979 10.17 65 0.67 763 7.92 151 1.57
60.01 – 70.00 1,304 13.54 86 0.89 1,031 10.71 187 1.94
70.01 – 80.00 1,829 18.99 107 1.11 1,477 15.34 245 2.54
80.01 – 90.00 3,048 31.65 204 2.12 2,431 25.24 413 4.29
90.01 – 95.00 685 7.11 20 0.21 548 5.69 117 1.21
Greater than or equal to 95.01 85 0.88 5 0.05 57 0.59 23 0.24
Total: 9,631 100.00 567 5.89 7,534 78.23 1,530 15.89
All percentages are presented as a percentage of the total number of Loans in the Provisional Mortgage Pool.
Table 10:
Distribution of Loans by Property Type
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Property Type
Loans
Semi Detached House 2,843 29.52 172,089,033.92 25.11
Detached House 1,142 11.86 115,273,919.57 16.82
Flat/Maisonette 1,089 11.31 87,786,154.06 12.81
Terraced House 1,388 14.41 72,607,387.78 10.60
Mid Terraced House 1,276 13.25 71,885,176.25 10.49
End Terraced House 915 9.50 58,453,986.25 8.53
Semi – House/Bungalow 208 2.16 25,835,709.47 3.77
Detached – House/Bungalow 138 1.43 24,971,362.39 3.64
Terraced – House/Bungalow 211 2.19 24,515,717.13 3.58
Detached Bungalow 301 3.13 23,520,854.77 3.43
Semi Detached Bungalow 112 1.16 7,952,662.24 1.16
Terraced Bungalow 8 0.08 332,218.77 0.05
Total: 9,631 100.00 685,224,182.60 100.00
90

Table 11:
Distribution of Loans by Region
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Region
Loans
East Anglia 342 3.55 22,520,081.76 3.29
East Midlands 584 6.06 39,637,832.91 5.78
Greater London 1,004 10.42 115,275,067.68 16.82
North 614 6.38 30,407,863.00 4.44
North West 1,136 11.80 61,878,068.88 9.03
Northern Ireland 606 6.29 51,097,902.18 7.46
Outer Metro 157 1.63 12,505,357.37 1.83
Scotland 575 5.97 25,924,901.10 3.78
South East 1,475 15.32 133,707,291.62 19.51
South West 695 7.22 53,942,902.46 7.87
Wales 610 6.33 33,199,433.09 4.85
West Midlands 880 9.14 52,886,003.66 7.72
Yorkshire & Humberside 953 9.90 52,241,476.89 7.62
Total: 9,631 100.00 685,224,182.60 100.00
Table 12: Distribution of Loans by Remaining Months to Maturity 1
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Remaining Term to Maturity
(months)
Number of
Loans
Less than or equal to 120 1,974 20.42 60,891,349.87 8.89
121 – 180 1,298 13.43 78,902,782.56 11.51
181 – 240 1,842 19.05 148,074,949.11 21.61
241 – 300 3,926 40.61 342,817,193.04 50.03
Greater than or equal to 301 628 6.50 54,537,908.02 7.96
Total: 9,668 100.00 685,224,182.60 100.00
The weighted average remaining term to stated maturity of the Loans in the Provisional Mortgage Pool was 249
months.
Table 13:
Distribution of Loans by Repayment Method
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Repayment Method
Loans
Interest Only 3,193 33.15 380,231,965.26 55.49
Part & Part 100 1.04 12,110,127.51 1.77
Capital and Interest 6,338 65.81 292,882,089.83 42.74
Total: 9,631 100.00 685,224,182.60 100.00
Table 14:
Distribution of Loans by Performance Status
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage
Pool
Number of
Number of Days in Arrears
Loans
Less than or equal to 30 9,082 94.30 643,909,866.69 93.97
Greater than 30 and less than or equal to 60 340 3.53 24,819,232.25 3.62
Greater than 60 and less than or equal to 90 209 2.17 16,495,083.66 2.41
Total: 9,631 100.00 685,224,182.60 100.00
The weighted average number of days in arrears in the Provisional Mortgage Pool was 5.05 days.
91

Table 15:
Distribution of Loans by Income Multiple
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Income Multiple
Loans
Less than or equal to 1.00 197 2.05 7,135,721.31 1.04
1.01 – 1.50 512 5.32 21,907,171.03 3.20
1.51 – 2.00 951 9.87 45,827,537.76 6.69
2.01 – 2.50 1,527 15.86 95,056,306.15 13.87
2.51 – 3.00 1,824 18.94 137,849,927.23 20.12
3.01 – 3.50 1,747 18.14 142,432,483.30 20.79
3.51 – 4.00 1,203 12.49 89,841,128.47 13.11
Greater than or equal to 4.01 1,670 17.34 145,173,907.35 21.19
Total: 9,631 100.00 685,224,182.60 100.00
Table 16: Distribution of Loans by Rate Type 1
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Rate Type
Loans
Discount 3m LIBOR 242 2.50 20,815,591.04 3.04
Discount BBR 171 1.77 23,535,652.02 3.43
Fixed 3m LIBOR 3,664 37.90 402,308,713.97 58.71
Fixed BBR 1,575 16.29 97,282,500.94 14.20
Variable 3m LIBOR 3,917 40.52 131,657,610.90 19.21
Variable BBR 99 1.02 9,624,113.73 1.40
Total: 9,668 100.00 685,224,182.60 100.00
Table 17: Distribution of Loans by Rate Type (Non-aggregated) 1
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Rate Type
Loans
Discount 3m LIBOR Until 2007/ 5 6 0.06 566,986.73 0.08
Discount 3m LIBOR Until 2007/ 6 24 0.25 1,308,312.41 0.19
Discount 3m LIBOR Until 2007/ 7 5 0.05 466,079.55 0.07
Discount 3m LIBOR Until 2007/ 8 12 0.12 1,094,038.20 0.16
Discount 3m LIBOR Until 2007/ 9 10 0.10 1,262,658.25 0.18
Discount 3m LIBOR Until 2007/10 14 0.14 1,180,646.16 0.17
Discount 3m LIBOR Until 2007/11 10 0.10 935,437.30 0.14
Discount 3m LIBOR Until 2007/12 38 0.39 2,324,442.80 0.34
Discount 3m LIBOR Until 2008/ 1 12 0.12 1,266,390.77 0.18
Discount 3m LIBOR Until 2008/ 2 19 0.20 2,009,090.32 0.29
Discount 3m LIBOR Until 2008/ 3 15 0.16 1,164,883.36 0.17
Discount 3m LIBOR Until 2008/ 6 2 0.02 70,051.56 0.01
Discount 3m LIBOR Until 2008/ 8 1 0.01 55,871.40 0.01
Discount 3m LIBOR Until 2008/ 9 4 0.04 259,821.31 0.04
Discount 3m LIBOR Until 2008/10 1 0.01 119,213.23 0.02
Discount 3m LIBOR Until 2008/12 1 0.01 80,424.00 0.01
Discount 3m LIBOR Until 2009/ 1 3 0.03 150,712.37 0.02
Discount 3m LIBOR Until 2009/ 2 8 0.08 1,044,641.42 0.15
Discount 3m LIBOR Until 2009/ 3 12 0.12 857,849.42 0.13
Discount 3m LIBOR Until 2009/ 5 24 0.25 2,027,023.53 0.30
Discount 3m LIBOR Until 2009/ 6 15 0.16 2,021,415.06 0.30
Discount 3m LIBOR Until 2009/ 8 3 0.03 277,469.83 0.04
Discount 3m LIBOR Until 2009/ 9 1 0.01 52,137.06 0.01
Discount 3m LIBOR Until 2010/ 6 2 0.02 219,995.00 0.03
Discount BBR Until 2007/ 4 3 0.03 397,758.83 0.06
Discount BBR Until 2007/ 5 2 0.02 245,920.66 0.04
92

Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Rate Type
Loans
Discount BBR Until 2007/ 6 5 0.05 862,165.38 0.13
Discount BBR Until 2007/ 7 4 0.04 396,163.50 0.06
Discount BBR Until 2007/ 8 3 0.03 728,088.10 0.11
Discount BBR Until 2007/ 9 14 0.14 2,177,842.22 0.32
Discount BBR Until 2007/10 3 0.03 212,833.26 0.03
Discount BBR Until 2007/11 2 0.02 373,861.76 0.05
Discount BBR Until 2008/ 1 8 0.08 902,277.51 0.13
Discount BBR Until 2008/ 3 1 0.01 157,970.89 0.02
Discount BBR Until 2008/ 4 3 0.03 290,062.53 0.04
Discount BBR Until 2008/ 7 51 0.53 6,798,767.75 0.99
Discount BBR Until 2008/ 8 2 0.02 294,371.80 0.04
Discount BBR Until 2008/ 9 28 0.29 3,483,999.82 0.51
Discount BBR Until 2008/10 3 0.03 236,655.38 0.03
Discount BBR Until 2009/ 1 11 0.11 1,973,952.80 0.29
Discount BBR Until 2009/ 2 13 0.13 1,174,349.77 0.17
Discount BBR Until 2009/ 3 3 0.03 408,339.25 0.06
Discount BBR Until 2009/ 4 11 0.11 2,296,489.01 0.34
Discount BBR Until 2009/ 8 1 0.01 123,781.80 0.02
Fixed 3m LIBOR Until 2007/ 5 1 0.01 68,079.36 0.01
Fixed 3m LIBOR Until 2007/ 8 2 0.02 185,339.57 0.03
Fixed 3m LIBOR Until 2007/ 9 1 0.01 44,285.76 0.01
Fixed 3m LIBOR Until 2007/12 3 0.03 212,227.27 0.03
Fixed 3m LIBOR Until 2008/ 1 3 0.03 148,257.64 0.02
Fixed 3m LIBOR Until 2008/ 3 6 0.06 557,122.77 0.08
Fixed 3m LIBOR Until 2008/ 4 11 0.11 928,832.80 0.14
Fixed 3m LIBOR Until 2008/ 6 45 0.47 4,950,518.75 0.72
Fixed 3m LIBOR Until 2008/ 7 139 1.44 17,898,830.20 2.61
Fixed 3m LIBOR Until 2008/ 9 87 0.90 7,107,861.96 1.04
Fixed 3m LIBOR Until 2008/10 144 1.49 14,516,010.42 2.12
Fixed 3m LIBOR Until 2008/12 137 1.42 14,982,815.47 2.19
Fixed 3m LIBOR Until 2009/ 1 751 7.77 84,353,802.68 12.31
Fixed 3m LIBOR Until 2009/ 3 971 10.04 112,188,127.42 16.37
Fixed 3m LIBOR Until 2009/ 4 12 0.12 977,196.15 0.14
Fixed 3m LIBOR Until 2009/ 5 94 0.97 13,680,892.86 2.00
Fixed 3m LIBOR Until 2009/ 6 611 6.32 69,106,016.85 10.09
Fixed 3m LIBOR Until 2009/ 7 124 1.28 12,109,296.04 1.77
Fixed 3m LIBOR Until 2009/ 8 12 0.12 1,525,777.03 0.22
Fixed 3m LIBOR Until 2009/ 9 29 0.30 2,507,865.44 0.37
Fixed 3m LIBOR Until 2009/10 46 0.48 4,041,003.40 0.59
Fixed 3m LIBOR Until 2009/12 18 0.19 1,495,451.11 0.22
Fixed 3m LIBOR Until 2010/ 1 209 2.16 17,201,627.47 2.51
Fixed 3m LIBOR Until 2010/ 3 118 1.22 12,056,734.83 1.76
Fixed 3m LIBOR Until 2010/ 6 73 0.76 7,636,604.58 1.11
Fixed 3m LIBOR Until 2011/ 5 7 0.07 889,524.12 0.13
Fixed 3m LIBOR Until 2011/ 6 3 0.03 350,603.30 0.05
Fixed 3m LIBOR Until 2011/ 8 1 0.01 130,591.72 0.02
Fixed 3m LIBOR Until 2012/ 6 6 0.06 457,417.00 0.07
Fixed BBR Until 2008/ 7 5 0.05 412,835.69 0.06
Fixed BBR Until 2008/ 9 206 2.13 31,837,468.47 4.65
Fixed BBR Until 2008/10 12 0.12 1,940,176.60 0.28
Fixed BBR Until 2009/ 1 48 0.50 7,978,522.29 1.16
Fixed BBR Until 2009/ 2 144 1.49 23,511,256.61 3.43
Fixed BBR Until 2009/ 4 60 0.62 11,976,838.47 1.75
Fixed BBR Until 2009/ 5 5 0.05 613,396.68 0.09
Fixed BBR Until 2009/ 9 8 0.08 701,464.43 0.10
Fixed BBR Until Maturity 1,087 11.24 18,310,541.70 2.67
Variable 3m LIBOR 3,917 40.52 131,657,610.90 19.21
93

Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Rate Type
Loans
Variable BBR 99 1.02 9,624,113.73 1.40
Total: 9,668 100.00 685,224,182.60 100.00
Table 18:
Distribution of Loans by Priority of Mortgage
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent of
Provisional
Mortgage Pool
Number of
Priority
Loans
Firsts 5,730 59.50 595,392,926.02 86.89
Seconds 3,901 40.50 89,831,256.58 13.11
Total: 9,631 100.00 685,224,182.60 100.00
Table 19: Distribution of Loans by Months since Origination 1
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Months since Origination
Loans
0 – 1 2,574 26.62 214,892,051.69 31.36
2 – 3 4,254 44.00 242,446,461.02 35.38
4 – 5 393 4.06 34,704,313.91 5.06
6 – 10 606 6.27 54,162,887.23 7.90
11 – 15 323 3.34 36,900,254.71 5.39
Greater than or equal to 16 1,518 15.70 102,118,214.04 14.90
Total: 9,668 100.00 685,224,182.60 100.00
The weighted average number of months for a Loan in the Provisional Mortgage Pool since origination is 8.34
months.
Table 20: Distribution of Loans by Stabilised Margin 3M LIBOR 1
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Stabilised Margin 3M LIBOR (%) Loans
Less than or equal to 1.50 332 4.24 29,428,904.99 5.30
1.51 – 1.75 473 6.05 39,895,061.88 7.19
1.76 – 2.00 560 7.16 65,103,916.13 11.74
2.01 – 2.25 356 4.55 34,892,395.03 6.29
2.26 – 2.50 459 5.87 48,364,667.69 8.72
2.51 – 2.75 604 7.72 57,360,564.23 10.34
2.76 – 3.00 454 5.80 51,074,302.92 9.21
3.01 – 3.25 490 6.26 45,687,738.82 8.24
3.26 – 3.50 342 4.37 36,448,210.76 6.57
3.51 – 3.75 281 3.59 26,813,555.66 4.83
3.76 – 4.00 247 3.16 21,244,386.86 3.83
4.01 – 4.25 442 5.65 23,588,236.45 4.25
4.26 – 4.50 157 2.01 6,910,781.67 1.25
4.51 – 4.75 288 3.68 8,906,883.52 1.61
4.76 – 5.00 141 1.80 3,750,894.42 0.68
5.01 – 5.25 235 3.00 8,024,247.63 1.45
5.26 – 5.50 57 0.73 1,430,716.47 0.26
5.51 – 5.75 134 1.71 3,692,344.67 0.67
5.76 – 6.00 66 0.84 1,164,789.07 0.21
6.01 – 6.25 109 1.39 2,811,735.03 0.51
6.26 – 6.50 76 0.97 1,571,599.71 0.28
94

Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Stabilised Margin 3M LIBOR (%) Loans
6.51 – 6.75 363 4.64 10,899,786.96 1.96
6.76 – 7.00 41 0.52 809,330.35 0.15
Greater than or equal to 7.01 1,116 14.27 24,906,864.99 4.49
Total: 7,823 100.00 554,781,915.91 100.00
The weighted average Stabilised Margin 3M LIBOR of the loans in the Provisional Mortgage Pool is 3.21 per
cent.
Note: The “Stabilised Margin” is the margin rate of all loans post any applicable fixed or discount rates.
Table 21: Distribution of Loans by Stabilised Margin BBR 1
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Stabilised Margin BBR (%)
Loans
Less than or equal to 1.50 1 0.05 103,542.10 0.08
1.51 – 1.75 5 0.27 524,489.28 0.40
1.76 – 2.00 22 1.19 3,321,624.55 2.55
2.01 – 2.25 127 6.88 23,539,389.44 18.05
2.26 – 2.50 352 19.08 47,671,629.25 36.55
2.51 – 2.75 45 2.44 7,882,439.93 6.04
2.76 – 3.00 68 3.69 10,183,670.77 7.81
3.01 – 3.25 30 1.63 4,130,108.96 3.17
3.26 – 3.50 58 3.14 7,859,380.67 6.03
3.51 – 3.75 34 1.84 4,534,016.33 3.48
3.76 – 4.00 7 0.38 702,661.52 0.54
4.01 – 4.25 3 0.16 455,337.74 0.35
4.26 – 4.50 3 0.16 604,270.73 0.46
4.51 – 4.75 277 15.01 4,774,124.63 3.66
5.51 – 5.75 362 19.62 6,244,296.00 4.79
6.51 – 6.75 340 18.43 5,888,350.56 4.51
Greater than or equal to 7.01 111 6.02 2,022,934.23 1.55
Total: 1,845 100.00 130,442,266.69 100.00
The weighted average Stabilised Margin BBR of the loans in the Provisional Mortgage Pool is 3.04 per cent.
Note: The “Stabilised Margin” is the margin rate of all loans post any applicable fixed or discount rates.
Table 22: Distribution of Loans by Current Margin 3M LIBOR 1
Per cent. of
Discount &
Variable Loans
Aggregate Current
Principal Balance
(£)
Per cent. of
Discount &
Variable Loans
Current Margin (excluding
fixed loans) 3M LIBOR (%)
Number of
Loans
Less than or equal to 0.00 34 0.82 2,493,742.47 1.64
0.01 - 0.25 22 0.53 2,376,773.15 1.56
0.26 - 0.50 31 0.75 2,392,100.27 1.57
0.51 - 0.75 23 0.55 2,153,199.91 1.41
0.76 - 1.00 53 1.27 5,215,621.30 3.42
1.01 - 1.25 15 0.36 1,842,810.81 1.21
1.26 - 1.50 17 0.41 1,488,415.41 0.98
1.51 - 1.75 20 0.48 2,263,833.33 1.48
1.76 - 2.00 18 0.43 1,428,530.17 0.94
2.01 - 2.25 33 0.79 2,550,299.68 1.67
2.26 - 2.50 20 0.48 1,441,839.06 0.95
2.51 - 2.75 52 1.25 3,116,964.16 2.04
2.76 - 3.00 74 1.78 4,674,944.02 3.07
3.01 - 3.25 209 5.03 9,692,379.11 6.36
95

Per cent. of
Discount &
Variable Loans
Aggregate Current
Principal Balance
(£)
Per cent. of
Discount &
Variable Loans
Current Margin (excluding
fixed loans) 3M LIBOR (%)
Number of
Loans
3.26 - 3.50 126 3.03 7,272,126.89 4.77
3.51 - 3.75 121 2.91 7,065,245.79 4.63
3.76 - 4.00 164 3.94 8,636,344.02 5.66
4.01 - 4.25 371 8.92 13,307,025.32 8.73
4.26 - 4.50 141 3.39 5,727,914.42 3.76
4.51 - 4.75 296 7.12 9,239,226.86 6.06
4.76 - 5.00 143 3.44 3,738,860.70 2.45
5.01 - 5.25 236 5.67 8,051,783.85 5.28
5.26 - 5.50 53 1.27 1,201,761.94 0.79
5.51 - 5.75 126 3.03 3,302,332.99 2.17
5.76 - 6.00 61 1.47 1,012,160.47 0.66
6.01 - 6.25 109 2.62 2,815,992.81 1.85
6.26 - 6.50 76 1.83 1,571,599.71 1.03
6.51 - 6.75 361 8.68 10,788,193.20 7.08
6.76 - 7.00 40 0.96 763,510.35 0.50
Greater than or equal to 7.01 1,114 26.79 24,847,669.77 16.30
Total: 4,159 100.00 152,473,201.94 100.00
The Current Margin in the above table excludes the Fixed Rate Loans in the Provisional Mortgage Pool.
The weighted average Current Margin of the Loans 3M LIBOR is 4.64 per cent.
Table 23: Distribution of Loans by Current Margin BBR 1
Per cent. of
Discount &
Variable Loans
Aggregate Current
Principal Balance
(£)
Per cent. of
Discount &
Variable Loans
Current Margin (excluding
fixed loans) BBR (%)
Number of
Loans
0.01 - 0.25 15 5.56 3,196,637.33 9.64
0.26 - 0.50 12 4.44 1,431,236.16 4.32
0.51 - 0.75 17 6.30 1,639,628.20 4.94
0.76 - 1.00 14 5.19 1,536,207.06 4.63
1.01 - 1.25 60 22.22 7,966,583.58 24.02
1.26 - 1.50 24 8.89 3,681,328.91 11.10
1.51 - 1.75 8 2.96 1,319,997.62 3.98
1.76 - 2.00 2 0.74 239,527.35 0.72
2.01 - 2.25 4 1.48 902,975.99 2.72
2.26 - 2.50 52 19.26 3,063,181.91 9.24
2.51 - 2.75 5 1.85 396,483.89 1.20
2.76 - 3.00 3 1.11 516,688.31 1.56
3.01 - 3.25 2 0.74 241,165.25 0.73
3.26 - 3.50 28 10.37 3,634,358.86 10.96
3.51 - 3.75 15 5.56 2,128,110.16 6.42
3.76 - 4.00 3 1.11 157,542.33 0.48
4.01 - 4.25 1 0.37 121,319.89 0.37
4.26 - 4.50 3 1.11 604,270.73 1.82
4.51 - 4.75 2 0.74 382,522.22 1.15
Total: 270 100.00 33,159,765.75 100.00
The Current Margin in the above table excludes the Fixed Rate Loans in the Provisional Mortgage Pool.
The weighted average Current Margin of the Loans BBR is 1.75 per cent.
96

Table 24:
Distribution of Loans by Self-Certified Status
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number
Self-Certified
of Loans
No 4,091 42.48 261,048,230.60 38.10
Yes 5,540 57.52 424,175,952.00 61.90
Total: 9,631 100.00 685,224,182.60 100.00
Table 25:
Distribution of Loans by Right to Buy
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Right to Buy
Loans
No 8,874 92.14 649,167,052.46 94.74
Yes 757 7.86 36,057,130.14 5.26
Total: 9,631 100.00 685,224,182.60 100.00
Table 26:
Distribution of Loans by Buy to Let
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Buy to Let
Loans
No 9,186 95.38 637,980,355.62 93.11
Yes 445 4.62 47,243,826.98 6.89
Total: 9,631 100.00 685,224,182.60 100.00
Table 27:
Distribution of Loans by Shared Ownership
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Shared Ownership
Loans
No 9,359 97.18 667,393,862.95 97.40
Yes 272 2.82 17,830,319.65 2.60
Total: 9,631 100.00 685,224,182.60 100.00
Table 28:
Distribution of Loans by Originator
Per cent. of
Provisional
Mortgage Pool
Aggregate Current
Principal Balance
(£)
Per cent. of
Provisional
Mortgage Pool
Number of
Originator
Loans
Amber 680 7.06 90,696,195.85 13.24
A&L 144 1.50 26,260,877.80 3.83
LMC 1,366 14.18 61,599,279.76 8.99
PML 2,624 27.25 214,136,679.59 31.25
SPML 4,817 50.02 292,531,149.60 42.69
Total: 9,631 100.00 685,224,182.60 100.00
1
With respect to Tables 6, 12, 16, 17, 19, 20, 21, 22 and 23 further advances made with respect to a Loan and secured by a
first legal mortgage or charge or first standard security (as the case may be) has been included as a separate Loan for the
purposes of these tables.
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The Initial Mortgage Pool will consist of:
TITLE TO THE MORTGAGE POOL
(a)
Loans to be sold by SPML (the “SPML Loans”), including:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
Loans originated by Matlock trading as London Mortgage Company (by itself or in
association with a Remote Processor);
Loans originated by Langersal;
Loans originated by each of SPML and SPPL;
Loans originated by one of a number of correspondent lenders (each a “Correspondent
Lender”);
Loans originated by SPML in association with a Branded Lender;
Loans originated by SPML in association with a Remote Processor;
Loans originated by SPML trading as London Mortgage Company;
Loans originated by SPPL trading as London Personal Loans;
(b)
(c)
(d)
Loans originated and to be sold by PML by itself or in association with a Branded Lender or a Remote
Processor (the “PML Loans”).
Loans originated by A&L and to be sold by SPML (the “A&L Loans”); and
Loans originated by Amber and to be sold by SPML (the “Amber Loans”), including:
(i)
(ii)
Loans originated by Amber in association with an Amber Packager; and
Loans originated by Amber in association with an Amber Intermediary.
In this document:
“Branded Lenders” means the companies participating in SPML’s or PML’s branded lending programme with
respect to the origination of loans by SPML or PML (as the case may be), and “Branded Lender” means each
such company;
“Loans” means the SPML Loans, the Amber Loans, the A&L Loans and the PML Loans, or any of them, as the
context requires.
“Remote Processor” means the companies participating in SPML’s or PML’s or Matlock’s (trading as London
Mortgage Company) remote processing programme with respect to the origination of loans by SPML, PML or
Matlock (as the case may be), and each such company, a “Remote Processor”; and
“SPML Branded Loans” means the SPML Loans other than Loans originated by (i) SPML trading as London
Mortgage Company; (ii) SPPL trading as London Personal Loans; (iii) Matlock trading as London Mortgage
Company and (iv) Langersal.
SPML Loans
Each Loan originated by Matlock is originated on the terms of origination documents and underwriting
procedures which were administered by Matlock.
Each Loan originated by Langersal is originated on the terms of the origination documents and underwriting
procedures which were administered by Matlock and identical, in all material respects, to those of Matlock.
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Each Loan originated by SPPL is originated on the terms of origination documents and underwriting procedures
which are administered by SPML and identical, in all material respects, to those of SPML.
Each Loan originated by SPPL to be comprised in the Initial Mortgage Pool, will be beneficially (or, in
Scotland, contractually) transferred to SPML on or prior to the Closing Date.
Each Loan originated by SPML trading as the London Mortgage Company and SPPL trading as London
Personal Loans is originated on the terms of origination documents and underwriting procedures which are
administered to the same standard as that administered by SPML and SPPL.
Each Loan originated by SPML in association with a Branded Lender or a Remote Processor is originated on the
terms of origination documents and underwriting procedures identical, in all material respects, to those of
SPML. SPML is the legal and beneficial owner of each SPML Loan and its related Collateral Security
originated in association with a Branded Lender or a Remote Processor from its origination.
The Mortgage Pool may, from time to time, include Loans and their related Collateral Security originated by
lenders other than those referred to above. Loans originated by such lenders will be on terms and
documentation not materially different from the SPML Lending Criteria and documentation used by SPML.
0.22 per cent. of the Loans in the Provisional Mortgage Pool were the subject of a previous securitisation
transaction by Marble Arch Residential Securitisation Limited (the “MARS 1 Loans”). This securitisation
transaction has been redeemed and, as part of that process, SPML has purchased the MARS 1 Loans. 0.06 per
cent. of the Loans in the Provisional Mortgage Pool were the subject of a previous securitisation transaction by
Southern Pacific Securities C PLC (the “SPS C Loans”). This securitisation transaction has been redeemed
and, as part of that process, SPML has repurchased the SPS C Loans. 0.20 per cent. of the Loans in the
Provisional Mortgage Pool were the subject of a previous securitisation transaction by Southern Pacific
Securities D PLC (the “SPS D Loans”). This securitisation transaction has been redeemed and, as part of that
process, SPML has purchased the SPS D Loans. 0.11 per cent. of the Loans in the Provisional Mortgage Pool
were the subject of a previous securitisation transaction by Southern Pacific Securities E PLC (the “SPS E
Loans”). This securitisation transaction has been redeemed and, as part of that process, SPML has repurchased
the SPS E Loans.
PML Loans
Each Loan originated by PML is originated on the terms of origination documents and procedures which are
administered by PML.
Each Loan originated by PML in association with a Branded Lender or a Remote Processor is originated on the
terms of origination documents and underwriting procedures identical, in all material respects, to those of PML.
PML is the legal and beneficial owner of each PML Loan and its related Collateral Security originated in
association with a Branded Lender or a Remote Processor from its origination.
0.02 per cent. of the Loans in the Provisional Mortgage Pool were the subject of a previous securitisation
transaction by Preferred Residential Securities 1 PLC (the “PRS 1 Loans”). This securitisation transaction has
been redeemed and, as part of that process, PML has purchased the PRS 1 Loans. 0.09 per cent. of the Loans in
the Provisional Mortgage Pool were the subject of a previous securitisation transaction by Preferred Residential
Securities 3 PLC (the “PRS 3 Loans”). This securitisation transaction has been redeemed and, as part of that
process, PML has repurchased the PRS 3 Loans. 0.76 per cent. of the Loans in the Provisional Mortgage Pool
were the subject of a previous securitisation transaction by Preferred Residential Securities 4 PLC (the “PRS 4
Loans”). This securitisation transaction has been redeemed and, as part of that process, PML has repurchased
the PRS 4 Loans. 1.60 per cent. of the Loans in the Provisional Mortgage Pool were the subject of a previous
securitisation transaction by Preferred Residential Securities 5 PLC (the “PRS 5 Loans”). This securitisation
transaction has been redeemed and, as part of that process, SPML has repurchased the PRS 5 Loans. 4.61 per
cent. of the Loans in the Provisional Mortgage Pool were the subject of a previous securitisation transaction by
Preferred Residential Securities 6 PLC (the “PRS 6 Loans”). This securitisation transaction has been redeemed
and, as part of that process, PML has repurchased the PRS 6 Loans.
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General
Each of SPML and PML operates a remote processing programme. The Remote Processors handle the
origination of loans using SPML’s or PML’s (as applicable) standard terms, loan and mortgage documentation
on the basis that SPML or PML (as applicable) employees based at the Remote Processors’ premises deal with
these loan applications from the beginning of the origination process up until just before completion of such
loans. An underwriter who is employed by SPML or PML (as applicable) and located at the Remote
Processor’s premises gives the final approval for each loan application. At the time of completion of these
loans, the relevant loan documentation and file is sent back to SPML or PML (as applicable) for completion and
SPML or PML (as applicable) employees (located at SPML or PML (as applicable) premises) then deal with
these loan accounts including completion, registration and servicing functions.
The Mortgage Pool may, from time to time, include Loans and their related Collateral Security originated by
lenders other than those referred to above. Loans originated by such lenders will be on terms and
documentation not materially different from the Lending Criteria and documentation used by SPML or PML (as
applicable).
A&L Loans
Pursuant to a mortgage origination and sale agreement dated 10 June 2006 (the “A&L Mortgage Origination
and Sale Agreement”) SPML shall, from time to time, upon completion of origination by A&L acquire the
beneficial title to such mortgage loans. Upon acquisition of such loans, SPML shall apply to The Land Registry
of England and Wales or the Registers of Scotland, as applicable, to register or record transfers or assignations
of the legal title in the mortgages, or standard securities as the case may be, in relation to such loans in favour of
SPML and, upon the registration of, or recording of such transfers or assignations being completed and notice
served on the borrowers, SPML will be the legal owner of such mortgages, or standard securities. It typically
takes between 2 and 4 months in England and Wales or 1 to 2 months in Scotland for the registration or
recording of the transfer or assignation of a mortgage to be completed. Until such time as registration or
recording of the transfers or assignations of the Mortgages in relation to the A&L Loans to SPML is complete
and notice served on the borrowers, SPML will not be the legal title holder of such Mortgages. As of the
Closing date, SPML is the legal owner of all but 39 of the Mortgages relating to the A&L Loans.
Each A&L Loan originated by A&L is originated on the terms of origination documents and underwriting
procedures which were administered by A&L.
Amber Loans
Amber may derive its mortgage business from a network of Amber Packagers (as defined below). Amber
regularly monitors the performance of its partners during the course of its business. Amber sources its mortgage
business through a network of authorised packagers that have been approved by Amber (the “Amber
Packagers”) for the submission of loan applications and the introduction of potential borrowers to Amber and
its mortgage and related financial products. Amber has approximately 69 such Amber Packagers operating
throughout the United Kingdom, and many of these Amber Packagers have their own network of mortgage
intermediaries attracting business on their behalf. Amber has sourced and will source business direct from
mortgage intermediaries (each an “Amber Intermediary” and together the “Amber Intermediaries”). This
business is processed through Amber’s registered office at 1 Providence Place, Skipton. From time to time, a
number of these intermediaries also carry on packaging activities for Amber. Amber requires professional and
business standards to be met as a precondition to becoming one of its Amber Packagers. Before becoming an
Amber Packager, a packager must, among other things, confirm that: (a) it holds all necessary authorisations and
permissions under the FSMA in respect of its activities as a packager; (b) it was (before 1 March 2000)
registered under the Data Protection Act 1984 or (on and after 1 March 2000) notified under the Data Protection
Act 1998; (c) it will comply with the guidelines for non-standard lending; and (d) it holds, and will maintain, a
Consumer Credit Licence. Mortgage business is underwritten at Homeloan Management Limited (HML),
whether derived via Amber Packagers or otherwise. Each Amber Loan originated by Amber is originated on the
terms of origination documents and procedures which are administered by HML.
SPML acquired the Amber Loans from Amber Homeloans Limited on 5 January 2007. As of the Closing Date,
SPML is the legal owner of all but 19 of the Mortgages relating to the Amber Loans. The equitable interest of
the 19 Mortgages in respect of which SPML is not the legal owner has been transferred to SPML but SPML is
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awaiting formal registration of its interest in the Mortgages. SPML will become the legal owner of those 19
Mortgages upon the completion of such registration process.
Sale of Loans
The Loans and the Collateral Security comprised in the Initial Mortgage Pool will be sold on the Closing Date
by the Sellers to the Issuer. Substitute Loans, Ported Loans, Prefunded Loans and Newly-Originated Loans may
be acquired by the Issuer from a Seller after the Closing Date, in each case in accordance with the terms of the
Mortgage Sale Agreement. The sale of the Loans and their related Collateral Security to the Issuer will take
effect in equity only or, in the case of Scottish Loans, by means of declarations of trust by PML, SPML and (as
applicable) SPPL, in each case, as Legal Titleholder of the relevant Scottish Loans, in favour of the Issuer (such
declarations of trust, together with any declaration of trust supplemental thereto, the “Scottish Trusts”), until
such time as transfers and assignations of such Loans and the related Collateral Security in favour of the Issuer
have been completed and, in respect of the registered or registerable titles to land, registered or recorded at the
Land Registry of England and Wales, the Registers of Northern Ireland or the Registers of Scotland (in the
circumstances mentioned below) and notice has been served on the Borrowers. The sale of the relevant Seller’s
interest in the Life Policies, if any, (as defined in “Life Policies” below) will take effect in equity only (or, as the
case may be, by means of the Scottish Trusts). The Issuer will grant a first fixed equitable charge in favour of
the Trustee over its interest in the Loans and the Collateral Security (or in the case of Scottish Loans, a first
fixed security over its interest under the Scottish Trusts).
The Mortgage Administrator will be required under the terms of the Mortgage Administration Agreement to
ensure the safe custody of title deeds in respect of the Loans and the Collateral Security as agent of the Issuer.
The Mortgage Administrator has arranged for the title deeds relating to the Loans, which it does have to be held
by Iron Mountain (UK) Ltd, File and Data Storage Limited (each a “Title Deeds Holder”). Under the terms of
the Mortgage Administration Agreement, the Mortgage Administrator will be obliged to notify each Title Deeds
Holder to hold the title deeds in respect of the Loans and the related Collateral Security to the order of the
Trustee.
Neither the Issuer nor the Trustee currently intend to effect any registration at the Land Registry of England and
Wales, the Registers of Northern Ireland or any registration or recording in the Registers of Scotland to perfect
the sale of the Loans and the Collateral Security to the Issuer or the charge of them by the Issuer in favour of the
Trustee nor, save as mentioned below, do they intend to obtain possession of the title deeds to the Properties and
the Loans and their related Collateral Security.
Save as mentioned below, notice of the assignment to the Issuer of the Loans and Collateral Security and their
subsequent charging or assigning to the Trustee will not be given to the Borrowers.
Under the Mortgage Sale Agreement and the Deed of Charge, each of the Issuer (with the consent of the
Trustee) and the Trustee will be entitled to effect such registrations and recordings and give such notices as it,
acting in its absolute discretion, considers necessary to protect and perfect the interests respectively of the Issuer
(as purchaser) and the Trustee (as chargee) in the Loans and the Collateral Security, inter alia, where (a) it is
obliged to do so by law, by court order or by a mandatory requirement of any regulatory authority, (b) an
Enforcement Notice (as defined in Condition 9(a) (Events of Default)) has been given, (c) the Trustee considers
that the Charged Property (as defined in the Deed of Charge) or any part thereof is in jeopardy (including due to
the possible insolvency of any of SPML or SPPL or PML in each case as legal titleholder of the relevant Loans)
or (d) any action is taken for the winding-up, dissolution, administration or reorganisation of SPML or SPPL or
PML. These rights are supported by irrevocable powers of attorney given by, among others, the Issuer, SPML,
SPPL and PML.
The effect of (i) not giving notice to the Borrowers of the sale of the relevant Loans and their Collateral Security
to the Issuer and the charging of the Issuer’s interest in the Loans and their Collateral Security to the Trustee and
(ii) the charge of the Issuer’s rights thereto in favour of the Trustee pursuant to the Deed of Charge taking effect
in equity (or extending over the Issuer’s beneficial interest) only, is that the rights of the Issuer and the Trustee
may be, or may become, subject to equities as well as to the interests of third parties who perfect a legal interest
prior to the Issuer or the Trustee acquiring and perfecting a legal interest (such as, in the case of English
Mortgages or Northern Irish Mortgages over unregistered land, a third party acquiring a legal interest in the
relevant Mortgage without notice of the Issuer’s or the Trustee’s interests or, in the case of Mortgages over
registered land or any land in Scotland (whether at the Land Registry of England and Wales, the Registers of
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Northern Ireland or the Registers of Scotland), a third party acquiring a legal interest by registration or recording
prior to the registration or recording of the Issuer’s or the Trustee’s interests).
Until the legal interest of the Issuer or, as the case may be, the Trustee, has been perfected, the Issuer, or as the
case may be, the Trustee may also need to join the relevant legal titleholder in any legal proceedings taken
against the relevant Borrower. The Borrower is also entitled to set-off (or exercise any analogous rights in
Scotland) any amounts owing to the relevant legal titleholder in respect of such Loan against any other amount
owed by the relevant legal titleholder to such Borrower.
The risk of such equitable and other interests leading to third party claims obtaining priority to the interests of
the Issuer or the Trustee in the Loans and the Collateral Security is likely to be limited to circumstances arising
from a breach by the relevant legal titleholder or the Issuer of its or their contractual or other obligations or
fraud or mistake on the part of the relevant legal titleholder or the Issuer or their respective officers, employees
or agents (if any).
Second Loans
Approximately 13.11 per cent. of the Loans by Principal Balance in the Provisional Mortgage Pool are subject
to one or more prior ranking mortgages. That percentage is expected to remain approximately the same in
respect of the Initial Mortgage Pool and after the purchase of the Newly-Originated Loans and the Prefunded
Loans by the Issuer, as contemplated in “Credit Structure – Prefunded Loans” and “Credit Structure – Newly-
Originated Loans” above. Second Loans in the Initial Mortgage Pool will have been originated by SPPL, PML,
Langersal or Matlock.
If the Borrower defaults in relation to the obligations under a prior mortgage, a prior mortgagee will be able to
enforce its security by selling the relevant Property to repay the monies which it is owed, without reference to
the subsequent mortgagee. The sale proceeds of the Property would be applied both towards the costs
associated with the sale and the outstanding balance (including interest) owing to any prior mortgagee, in each
case in priority to monies owing in respect of the subsequent mortgage. There can be no guarantee that the
remaining balance would be sufficient to cover the amount outstanding under the related Loan. The same
considerations apply where the subsequent mortgagee takes action to enforce its Loan following default by a
Borrower. Further, it will generally only be possible for the subsequent mortgagee itself to realise the value of
the security if no prior mortgagee takes steps to enforce its security. Where a subsequent mortgagee is disposing
of a property, any prior mortgagee would need to release its mortgage or mortgages on completion of any
disposal of the relevant Property when the proceeds of sale are disbursed, according to priority. The subsequent
mortgagee will not generally be able to exercise its remedies (save for its contractual remedies) while a prior
mortgagee is exercising the same remedies.
Prior to origination of each Second Loan, the relevant Originator put certain procedures in place to ascertain the
principal amount of any prior mortgage in order to minimise the risk of its suffering a loss in the event of a
forced sale following a default. However, the following should be noted:
(a)
(b)
(c)
a subsequent mortgagee has no actual control over the amount owing under a prior mortgage and will
not necessarily know of a default or the extent to which arrears have accrued until informed by the
prior mortgagees. Accruals and any disposal and other costs incurred by any prior mortgagee on
enforcement will not have been taken into account when any Loan is made;
a subsequent mortgagee will not have any control over the timing of a forced sale following a default.
Save in limited circumstances, a prior mortgagee owes no duty to a Borrower or a subsequent
mortgagee to delay a sale in the event of a depressed market or otherwise to take account of market
conditions generally; and
a prior mortgagee owes a duty to obtain a fair market price and, in order to discharge such duty, would
normally be expected to conduct the sale in a certain way (for example, to advertise at given times in a
widely read newspaper). A fair market price means a fair market price at the time a prior mortgagee
decides to sell. It will also take account of the fact that potential buyers will be aware that the sale is a
forced sale. A fair market sale is not therefore likely to be the best possible price, nor will it
necessarily be as high as the latest market valuation or the valuation relied on by the subsequent
mortgagee in originally deciding whether to advance the relevant Loan.
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Prior to making a Second Loan, the relevant Originator does not, except in unusual cases, instruct solicitors to
act on its behalf in completing the relevant Loan and the applicable Collateral Security and to carry out certain
investigations into the title to the relevant Property.
A second or subsequent mortgagee may also be exposed to other risks arising as a result of the rights of a prior
mortgagee. Further advances made by the prior mortgagee before it receives notice (actual, constructive or
imputed in the case of unregistered land in England and Wales or any land in Scotland or deemed notice in the
case of registered land in England and Wales) of the later mortgage will have priority over advances made under
the later mortgage. Each relevant Originator’s procedures involve giving notice to the prior mortgagee on
completion of its mortgage, which will prevent the “tacking” of further advances under prior mortgages of
registered and unregistered land in England and Wales or the priority of any such further advance in Scotland.
The relevant prior mortgagee is not affected by the later mortgage unless it makes an advance after the date
when notice ought to have been received in due course of post.
Where the prior mortgage contains an obligation on the part of the prior mortgagee to make further advances,
the question of notice is irrelevant and, subject in the case of registered land in England and Wales to an
appropriate note being made on the register (no such procedure being required in Scotland), further advances
made pursuant to such an obligation will have priority whenever they are made. The nature and the extent of the
obligation to make further advances is ascertainable only on inspection of the relevant mortgage documents.
A further risk for the subsequent mortgagee is that a prior mortgagee who has the benefit of more than one
mortgage created by the same Borrower (whether or not over the same property) may (except in the case of a
Scottish Mortgage) be entitled to exercise a right of consolidation. This would entitle it to insist that either none
or all of the mortgages in its favour be redeemed at the same time and in priority to the rights of the subsequent
mortgagee.
In the case of unregistered land in England and Wales, a second or subsequent legal mortgagee will not, in
general, have the title deeds to the charged property since they will normally be in the possession of a prior
mortgagee. Each such subsequent Mortgage should be protected by registration at the Land Charges Registry
(in England and Wales) and each relevant Originator’s procedures require that this be done after the completion
of the relevant Second Loan. In the case of registered land in England and Wales and any land in Scotland, a
second or subsequent legal mortgage can be protected by registration at the Land Registry of England and Wales
in respect of registered land in England and Wales or the Registers of Scotland in respect of land in Scotland.
Again, each relevant Originator’s standard procedures require that such registration is effected and a charge
certificate (or such other documentation) obtained (a charge certificate will not however have been issued in
respect of land in England and Wales from 13 October 2003).
Scottish Loans
The Scottish Loans are secured by security taken over the relevant Scottish Properties by way of standard
security, being the only means of creating a fixed charge or security over heritable property in Scotland.
References in this document to a “mortgage” and a “mortgagee” (or the “Legal Titleholder”) are to be read in
relation to Scottish Properties as references to such a standard security and the heritable creditor thereunder,
respectively.
A statutory set of “Standard Conditions” is automatically imported into all standard securities, although the
majority of these Standard Conditions may be varied by agreement between the parties.
The main provisions of the Standard Conditions which cannot be varied by agreement relate to enforcement.
Generally, where a breach by a borrower entitles the lender to enforce the security, an appropriate statutory
notice must first be served. First, the lender may serve a “calling up notice” requiring repayment, in which
event the borrower has two months to comply and in default the lender may enforce its rights under the standard
security by sale or the other remedies provided by statute (court application only being necessary where the
borrower fails to vacate the property or the standard security securing the loan is enforceable in accordance with
Section 126 of the CCA (as further described in “Repossession Procedures” below)). Alternatively, in the case
of remediable breaches, the lender may serve a “notice of default”, in which event the borrower has only one
month in which to comply, but also has the right to object to the notice by court application within fourteen days
of the date of service. In addition, the lender may in certain circumstances make direct application to the court
without the requirement of a preliminary notice. The appropriate steps for enforcement will therefore depend on
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the circumstances of each case, and the Mortgage Administrator will in practice proceed with the remedy most
likely to be effective in enforcing or protecting the security.
Formerly, on court application being made by the lender for the relevant enforcement remedies (once a default
by the borrower had been established by one of the methods detailed in the preceding paragraph), the Scottish
courts were bound, except in very limited circumstances, to grant the enforcement remedies sought. This
position has been altered, however, by the Mortgage Rights (Scotland) Act 2001, which was brought into force
on 3 December 2001. The principal effect of the Mortgage Rights (Scotland) Act 2001 is to confer on the court
a discretion, on the application of the borrower (or the borrower’s spouse or partner) within certain time limits,
to suspend the exercise of the lender’s enforcement remedies for such period and to such extent as the court
considers reasonable in the circumstances, having regard amongst other factors to the nature of the default, the
applicant’s ability to remedy it and the availability of alternative accommodation. This legislation has brought
the situation in Scotland broadly into line with that in England and Wales where Sections 36 to 38 of the
Administration of Justice Act 1970 provide the courts with similar discretion.
Northern Irish Loans
Approximately 7.46 per cent. of the Loans in the Provisional Mortgage Pool, by current balance as of the
Origination Date, are Northern Irish Loans. The title to the relevant Properties is registered either in the Land
Registry of Northern Ireland or the Registry of Deeds of Northern Ireland, depending on the nature of the title.
These Loans are secured over the relevant Properties by way of a first legal mortgage or charge.
In cases of default by a Borrower requiring the issue of legal proceedings, those proceedings are virtually
identical to English proceedings. After a possession order is obtained the judgement is enforced through the
Enforcement of Judgements Office (rather than by bailiffs) and it has its own procedures for enforcement.
By virtue of Article 51 of The Judgements Enforcement (Northern Ireland) Order 1981 an order charging land,
i.e. a judgement mortgage, if founded on a judgement in respect of rates payable in respect of that land, shall
have priority over all other charges and encumbrances whatever affecting that land except other debts owing to
the Crown.
Warranties and Repurchase
The Mortgage Sale Agreement will contain warranties to be given by SPML in relation to the SPML Loans, the
A&L Loans and the Amber Loans and warranties to be given by PML in relation to the PML Loans in the
Mortgage Pool. No searches, enquiries or independent investigation of title of the type which a prudent
purchaser or mortgagee would normally be expected to carry out have been or will be made by the Issuer or the
Trustee, each of whom is relying upon the Warranties.
If there is an unremedied or irremediable breach of any of the Warranties which could have a material adverse
effect on the Loan and the related Collateral Security or certain other circumstances arise, then SPML (in
relation to the SPML Loans, the A&L Loans and the Amber Loans) or PML (in relation to the PML Loans) is
(a) required to repurchase or procure the repurchase of the relevant Loan and its related Collateral Security for a
consideration in cash which is equal to the Principal Balance of the relevant Loan plus accrued interest (to the
extent the same has arisen after the sale of the Loan to the Issuer) and all other amounts due under such Loan
and related Collateral Security less interest paid in advance to the Issuer (which the Issuer shall be entitled to
retain) or (b) in certain circumstances may alternatively procure that such Loan and its Collateral Security be
substituted as described under “Title to the Mortgage Pool - Conditions of Acquisition of Substitute Loans”
below. Performance of the obligation to repurchase or procure the repurchase or substitution will be in
satisfaction of all of SPML’s or PML’s (as applicable) liabilities in respect thereof.
“Principal Balance” means, in relation to any Loan and on any date, the original principal amount advanced to
the Borrower plus any other disbursement, legal expense, fee, charge or premium capitalised and added to the
amounts secured by the relevant Mortgage in accordance with the conditions of the Loan on or prior to such date
(including, for the avoidance of doubt, capitalised interest) plus, in relation to a Loan and the Mortgage relating
thereto, any advance of further monies to the Borrower on the security of the relevant Mortgage after the date of
completion of such Loan less any repayments of such amounts.
The representations and warranties referred to will include statements to the following effect by SPML (in
relation to the SPML Loans, the A&L Loans and the Amber Loans) and by PML (in relation to the PML Loans):
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(1) Legal, valid and binding obligation
Each Loan and its related Collateral Security constitutes a valid and binding obligation of the relevant
Borrower enforceable in accordance with its terms and is non-cancellable, and each such related
Collateral Security secures the repayment of the full amount payable by the relevant Borrower in
respect of the Loan.
(2) First ranking mortgage
Subject to completion of any registration or recording which may be pending at the Land Registry of
England and Wales, the Registers of Scotland or the Registers of Northern Ireland, each Mortgage in
respect of a Loan (other than a Second Loan) constitutes a first ranking legal mortgage or charge or
first ranking standard security over the relevant Property and there is nothing to prevent such
registration or recording being effected in due course.
(3) Second ranking mortgage
Subject to completion of any registration or recording which may be pending at the Land Registry of
England and Wales or the Registers of Scotland, each Mortgage in respect of a Second Loan constitutes
a legal mortgage or charge or standard security over the relevant Property and (i) a single lender holds
all prior ranking mortgages or standard securities in respect of the relevant Property and (ii) the
relevant Originator has notified, or procured notification to, such lender holding the prior ranking
mortgages or standard securities of the making of such Second Loan and its related Mortgage.
(4) No Borrower right of set off
No lien or right of set-off or rescission or counterclaim or defence has been created or arisen between
the Originator of any Loan and the relevant Borrower which would entitle such Borrower to reduce the
amount of any payment otherwise due in respect of the relevant Loan and related Collateral Security
and, to the best of such Originator’s knowledge, no such lien or right has been asserted by any
Borrower.
(5) Searches or insurance as to title
Save where the Mortgage in respect of the First Loan is covered by a valid title insurance policy, prior
to making a First Loan to a Borrower, the relevant Originator or, where applicable, the relevant
Correspondent Lender will have instructed, or required to be instructed on its behalf, solicitors to carry
out in relation to the relevant Property all investigations, searches and other actions and enquiries
which a Prudent Mortgage Lender or its solicitors or conveyancers normally make when lending to an
individual on the security of residential property in England and Wales, Scotland or Northern Ireland,
and in each case received a report on title or certificate of title which, either initially or after further
investigation, revealed no material matter which would cause a Prudent Mortgage Lender to decline the
First Loan having regard to the Lending Criteria.
(6) Valuation
Prior to making a Loan:
(i)
(ii)
in the case of a First Loan, the relevant Property was valued by an independent qualified
surveyor chosen from the panel of valuers from time to time appointed by the relevant
Originator; and
in the case of a Second Loan, (x) the relevant Originator procured at least a drive-by valuation
or (y) such Second Loan was the subject of an automated valuation model,
and, in each case, the results of each such valuation would be acceptable to a Prudent Mortgage
Lender.
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(7) Registration
In relation to each Mortgage of Property where registration or recording of the relevant Mortgage is
pending at the Land Registry of England and Wales, the Registers of Northern Ireland or the Registers
of Scotland, so far as the relevant Seller is aware, there is no caution, notice, inhibition, restriction or
other matter which would prevent the registration or recording of that Mortgage.
(8) Compliance with Lending Criteria
Immediately prior to making a Loan, the nature and amount of such Loan and its related Collateral
Security and the circumstances of the relevant Borrower and the relevant Property satisfied the relevant
Lending Criteria in all material respects.
(9) Compliance with standard mortgage documentation
Each Loan and its related Collateral Security has been made and remains on the terms of the relevant
Originator’s or, where applicable, the relevant Correspondent Lender’s standard mortgage
documentation as referenced in the Mortgage Sale Agreement (so far as applicable) either (i) without
any material variation thereto (it being acknowledged that a variation merely to record that a Branded
Lender or a Remote Processor is acting in association with the relevant lender is not a material
variation) or (ii) without any variation which would affect in any material adverse respect the legal,
valid, binding and enforceable nature of the obligations of the Borrower under that standard mortgage
documentation or the nature of the Borrower’s rights thereunder or which would breach in any material
adverse respect any of the other Lending Criteria, other than as required to comply with any applicable
law or regulation. No Loan incorporates the flexible lending or flexible mortgage standard terms and
conditions of SPML, SPPL, the Branded Lenders, the Remote Processors or PML.
(10) Consumer Credit Act 1974
(11) Arrears
No agreement for any Loan is or includes a regulated consumer credit agreement (as defined in Section
8 of the CCA) or constitutes any other agreement regulated or partly regulated by the CCA (other than
Sections 137 to 140 of the CCA) or, to the extent that it is so regulated or partly regulated, all of the
requirements of the CCA have been met in full (or to the extent of any non-compliance, such noncompliance
would not be such as to prevent enforcement of that Loan or any of its material terms by
the lender thereunder).
Except as shown in “Table 14: Distribution of Loans by Performance Status” in “The Mortgage Pool -
Characteristics of the Provisional Mortgage Pool” above, as of 30 April 2007 no payments equivalent
to an amount in excess of one month’s instalment of interest and principal were overdue in respect of
any Loan in the Provisional Mortgage Pool.
(12) Insurance
(i)
(ii)
So far as the Seller is aware, in the case of a First Loan, the relevant Property, except where a
Property was at completion of the relevant Mortgage (or, where appropriate, in the case of
self-build properties, at the date of completion of the relevant property) covered by the Block
Buildings Policy or a buildings policy providing equivalent cover, the relevant Originator took
all reasonable steps to ensure that at the date of completion of each Mortgage the relevant
Property was insured under a policy with an insurance company against fire and other
commercial risks for an amount not less than the full reinstatement value determined by a
valuer approved by the relevant Originator;
the Block Buildings Policy covers all fire and other commercial risks for an amount not less
than the full reinstatement value of the Properties covered by the Block Buildings Policy and
SPML (in relation to the SPML Loans) or PML (in relation to the PML Loans) is the insured
party under the Block Buildings Policy, and so far as the Seller is aware, the Block Buildings
Policy is in full force and effect and all premiums thereon are current at the date such Loan is
purchased by the Issuer and SPML (in relation to the SPML Loans) or PML (in relation to the
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PML Loans) is not aware of any circumstances giving the insurer thereunder the right to avoid
or terminate such policy or to reduce the amount payable in respect of any claim thereunder in
so far as it relates to the Properties; and
(iii)
(iv)
neither SPML (in relation to the SPML Loans) nor PML (in relation to the PML Loans) has
received notice that any act, event or breach of any of the terms of any of the buildings
policies in respect of a Property has occurred, the effect of which in any case is likely to cause
such policy or policies to be materially adversely affected and there is no claim outstanding
under any of the buildings policies (where applicable) (save, in relation to the buildings
policies, minor claims not involving the destruction of a Property) and neither SPML (in
relation to the SPML Loans) nor PML (in relation to the PML Loans) is aware of any act or
thing which has occurred which would, or would be likely to, give rise to any claim under any
of the foregoing; or
where they have become aware that no policy is in place, the property is covered by a
contingency policy.
(13) Term
No Loan has a final maturity beyond the date falling two years prior to the final maturity of the Notes
(other than the A1 Notes).
(14) Interest rate determination
All Loans are (i) LIBOR Linked Loans or Fixed Rate Loans and the Base Rate (as defined in the
applicable mortgage conditions applying to the Loans (the “Mortgage Conditions”)) in respect of all
LIBOR Linked Loans is determinable by reference to the London Interbank Offered Rate for threemonth
sterling deposits from time to time and is equal to or greater than Loan LIBOR or (ii) BBR
Linked Loans.
(15) Origination and administration
(i)
(ii)
Each Loan was originated in the ordinary course of the relevant Originator’s or, as applicable,
the relevant Correspondent Lender’s residential secured lending activities; and
each relevant Originator or, as applicable, each Correspondent Lender has procured that since
the making of any Loan full and proper accounts, books and records have been kept showing
clearly all material transactions, payments, receipts and proceedings relating to such Loan and
its Collateral Security as a Prudent Mortgage Lender would keep and all such accounts, books
and records are up to date, accurate in all material respects and have been kept to standards
acceptable to a Prudent Mortgage Lender and in the possession of the Mortgage Administrator
or held to its order (subject to the provisions of the Deed of Charge).
(16) Right to Buy legislation
(i)
(ii)
In relation to each Right to Buy Loan that is an SPML Branded Loan or a PML Loan
governed by either English law or Northern Irish law (a) each of SPML or, as applicable, the
relevant Correspondent Lender (in relation to the SPML Branded Loans) and PML (in relation
to the PML Loans) was an approved lending institution under the relevant legislation or has
adequate title insurance to protect against any loss arising as a result of any priority of the
statutory charge arising under such Right to Buy Loan in respect of the relevant Property, (b)
the original advance was made to the person exercising the right to buy and (c) the original
advance was made for the purpose of enabling such person to exercise the right to buy, and
in relation to each Right to Buy Loan governed by Scots law, the relevant advance was made
for the purposes of enabling the Borrower to either purchase the relevant Property or carry out
improvements to it.
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(17) Buy-to-Let Loans
In relation to each Buy-to-Let Loan, (i) the relevant tenancy is either an assured shorthold tenancy, or,
in Scotland, a short assured tenancy, or, in Northern Ireland, an agreement which confers the same
rights on the relevant Originator or, as applicable, the relevant Correspondent Lender and the Borrower
and which is either not controlled by the Rent (NI) Order 1978 or is not a controlled tenancy under the
provisions of the Private Tenancies (Northern Ireland) Order 2006; and (ii) the tenancy agreement was
at the time of origination of the relevant Buy-to-Let Loan on terms which would be acceptable to a
reasonably Prudent Mortgage Lender, and neither SPML (in relation to the SPML Loans) nor PML (in
relation to the PML Loans) is aware of any material breach of such agreement.
Without limitation to the foregoing, with respect to the Amber Loans, the Mortgage Sale Agreement contains
various restrictions and limits (including, without limitation, financial/monetary limits and thresholds and time
limits) on SPML’s liability and, in connection with its obligation to repurchase the Amber Loans, provide that
the Issuer shall have no claim or remedy in respect of any breaches of the Warranties where such restrictions or
limits apply. Accordingly, the Issuer may suffer loss in respect of matters referred to in the Warranties. Further,
for a portion of the Amber Loans, the Issuer may not have any direct rights (under general law or in contract)
against any valuers who, when acting for the originators in relation to the origination of any Amber Loan, may
have been negligent or fraudulent. However, and notwithstanding the absence of any such direct rights, SPML
has, to the extent assignable, assigned its causes and rights of actions against third parties to the Issuer pursuant
to the Mortgage Sale Agreement.
“Building Policies” means:
(a)
(b)
all buildings insurance policies relating to Properties which have been, or as the context may require,
ought to have been taken out in the name of the relevant Borrower or in the name of the Borrower and
the relevant Originator or, as applicable, the relevant Correspondent Lender, or in the name of the
Borrower with the relevant Originator or, as applicable, the relevant Correspondent Lender’s interest
noted, in accordance with the applicable Mortgage Conditions; and
all landlord’s buildings insurance policies relating to leasehold Properties,
(including, without limitation, the Block Building Policy) or any of them.
Administration of the Mortgage Pool
The Mortgage Administrator will be appointed by the Issuer and the Trustee to administer the Mortgage Pool on
behalf of the Issuer under the Mortgage Administration Agreement. The duties of the Mortgage Administrator
include:
(a)
(b)
(c)
(d)
collecting payments on the Loans and discharging Mortgages and other Collateral Security upon
redemption;
monitoring and, where appropriate, pursuing arrears and enforcing the Collateral Security;
taking all reasonable steps to ensure safe custody of all title deeds and documents in respect of the
Loans and their Collateral Security which are in its possession; and
making claims under insurance contracts (including the Building Policies and the Life Policies (if
any)).
The Mortgage Administrator shall exercise such discretion as is vested in it under the Mortgage Administration
Agreement for the purpose of administering the Mortgage Pool as would be exercised by a reasonable and
prudent provider of services such as the services to be provided by the Mortgage Administrator under the
Mortgage Administration Agreement and each of the other Transaction Documents to which the Mortgage
Administrator is a party. The Mortgage Administrator has no power or discretion under the terms of the
Mortgage Administration Agreement to convert a Loan of one type (for example an Interest Only Loan) into a
Loan of a different type.
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The Mortgage Administrator will be entitled to charge a fee for its services under the Mortgage Administration
Agreement, payable on each Interest Payment Date (subject to the Priority of Payments).
The appointment of Capstone as Mortgage Administrator may be terminated by the Issuer (with the consent of
the Trustee) or the Trustee on the happening of certain events, including but not limited to:
(a)
(b)
insolvency or similar events occur in relation to Capstone; or
Capstone is in default under the Mortgage Administration Agreement.
Following any such termination, the Standby Mortgage Administrator will assume this function under the terms
of the Mortgage Administration Agreement.
Under the terms of the Delegation Agreements, Capstone will delegate certain of its duties under the Mortgage
Administration Agreement to HML, Vertex and Lightfoots.
The appointment of the Standby Mortgage Administrator under the Mortgage Administration Agreement may
only be terminated by the Standby Mortgage Administrator by giving not less than 90 days’ written notice to the
Trustee, Capstone as Mortgage Administrator and the Issuer upon the occurrence of certain events relating to the
fees of the Standby Mortgage Administrator.
For the purpose of the administration of the Mortgage Pool, the Cash/Bond Administrator will be authorised to
operate the Bank Accounts for the purpose of the Cash/Bond Administration Agreement. The duties of the
Cash/Bond Administrator will include, inter alia:
(a)
(b)
(c)
(d)
managing the operation of the Liquidity Facility and the Bank Accounts;
making the required Ledger entries;
maintaining and/or replenishing the Reserve Fund; and
operating the Priority of Payments and making arrangements for the payment by the Issuer of interest
and principal in respect of the Notes, subject to the terms thereof and to the availability of funds.
The Cash/Bond Administrator will be entitled to charge a fee for its services under the Cash/Bond
Administration Agreement, payable on each Interest Payment Date (subject to the Priority of Payments).
The appointment of Capstone as Cash/Bond Administrator may be terminated by the Issuer (with the consent of
the Trustee) or the Trustee upon the happening of certain events, including but not limited to certain events of
default or if insolvency or similar events occur in relation to Capstone. Following any such termination, the
Standby Cash/Bond Administrator will assume this function under the terms of the Cash/Bond Administration
Agreement.
Under the terms of the Wells Fargo Delegation Agreement, Capstone will delegate certain of its duties under the
Cash/Bond Administration Agreement to Wells Fargo.
Enforcement Procedures
The Mortgage Administrator has procedures for managing loans that are in arrears (“Enforcement
Procedures”), including early contact with borrowers in order to find a solution to any financial difficulties they
may be experiencing. These same procedures, as from time to time varied in accordance with the practice of a
Prudent Mortgage Lender, will continue to be applied in respect of arrears arising on the Loans in the Mortgage
Pool.
The Mortgage Administrator carries out detailed daily and monthly analyses of the Mortgage Pool and arrears.
Borrowers who fail to make payments when due are contacted by the Mortgage Administrator’s collection staff
by telephone and letters. This contact is maintained by reminder letters and telephone calls during the course of
the next month. Depending on the results of initial contacts, the Borrower may receive multiple calls and letters
during delinquency.
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Through such contact, the Mortgage Administrator will endeavour to collect the outstanding monthly payment
in full. However, if the Borrower is unable to make such payment in full, the Mortgage Administrator will
require the Borrower to make an immediate payment and to arrange a schedule of payments to clear the arrears
balance.
Where such contact fails, or if the Borrower does not forward the requisite payments, the Mortgage
Administrator will instruct an independent debt counsellor to ascertain the reason for non-payment and obtain
more details about the Borrower’s circumstances.
Once a Borrower falls 2.5 months (excluding fees) or more into arrears, the Mortgage Administrator will decide
whether to instruct a solicitor and commence legal proceedings, or to delay litigation. Delays are only
sanctioned by the Mortgage Administrator when there are clear signs that a satisfactory paying arrangement will
be reached shortly. If no such delay is sanctioned, the Borrower is issued with a notice giving a set number of
days to clear all arrears or face litigation.
Notwithstanding the preceding, to the extent that HML services the Amber Loans, HML shall apply its own
enforcement procedures to such Amber Loans. Such enforcement procedures may differ from the Enforcement
Procedures.
Repossession procedures
Once litigation becomes necessary, the Mortgage Administrator instructs solicitors from a pre-selected panel.
During litigation, the Mortgage Administrator maintains constant contact with the Borrower to arrange for
payments to be made. Such contact is maintained through the Mortgage Administrator collection staff.
Where the court makes an order for repossession, the Mortgage Administrator appoints managing agents with a
view to achieving a swift sale at the best price. Loans are considered to be in repossession when a court order
for repossession of the underlying property has been received and the Mortgage Administrator is in possession
of such property (“Repossession Loans”). The Mortgage Administrator’s experience to date in England, Wales
and Scotland suggests that it takes approximately twelve months, and in Northern Ireland fifteen months from
the date of the first missed Monthly Payment to sell a property.
A court order under Section 126 of the CCA is necessary to enforce a land mortgage or heritable security
securing a credit agreement to the extent that the credit agreement is regulated by the CCA or treated as such or
is a regulated mortgage contract under the FSMA that would otherwise have been regulated by the CCA or
treated as such.
Conditions of Acquisition of Substitute Loans
The acquisition by the Issuer of a Loan in the Mortgage Pool for an equivalent loan which, at the time its
substitution, complies with the relevant warranties (a “Substitute Loan”) is subject to the Rating Agencies
confirming that the then-current ratings of the Notes would not be downgraded as a result and the following
conditions as specified below:
(a)
(b)
(c)
(d)
(e)
no Enforcement Notice has been given by the Trustee which remains in effect;
the Warranties are true in respect of the Substitute Loan;
the Lending Criteria as at such time have been applied to the Substitute Loan and to the circumstances
of the Borrower at the time the Substitute Loan was made;
there is no deficiency recorded in the Principal Deficiency Ledger and no drawing under the Liquidity
Facility Agreement (other than in respect of amounts standing to the credit of the Liquidity Ledger)
remains unpaid;
neither SPML (in relation to an SPML Loan, an A&L Loan or an Amber Loan) nor PML (in relation to
a PML Loan) is in breach of any obligation on its part to repurchase or procure the purchase of any
Loan in accordance with the Mortgage Sale Agreement;
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(f)
(g)
(h)
(i)
(j)
(k)
(l)
the Substitute Loan was made on the terms of the relevant standard documentation utilised at the time
of such Substitute Loan by SPML (in relation to an SPML Loan, an A&L Loan or an Amber Loan) or
PML (in relation to a PML Loan) to document the terms of Loans;
the relevant Borrower is not in material breach of the obligations on its part of the terms and conditions
applicable (i) to the relevant Substitute Loan and (ii) to the Collateral Security relating to such
Substitute Loan;
the acquisition of the Substitute Loan (and any other Substitute Loans to be acquired on the same date)
will not cause the weighted average of the loan-to-value ratios of all Loans in the Mortgage Pool, to
increase by more than 1 per cent. (or such other larger percentage as may be agreed with the Rating
Agencies) from the weighted average of the loan-to-value ratios of all Loans in the Mortgage Pool on
the Closing Date (where the loan-to-value ratio in respect of each Loan is determined as the ratio of the
Principal Balance of each Loan in the Mortgage Pool as at the relevant date to the amount of the most
recent valuation of the mortgaged Property relating to such Loan);
following the acquisition of the Substitute Loan on any date, the product of the weighted average
foreclosure frequency for the Mortgage Pool, as calculated by the Mortgage Administrator (“WAFF”),
and the weighted average loss severity for the Mortgage Pool, as calculated by the Mortgage
Administrator (“WALS”), in each case after such acquisition and after all other acquisitions of
Substitute Loans to be made on such date calculated on such date in the same way as for the Initial
Mortgage Pool (or as otherwise agreed by the Rating Agencies from time to time) would not exceed the
product of the WAFF and WALS for the Mortgage Pool calculated on the Closing Date, plus 0.25 per
cent. provided that the figure of 0.25 per cent. may be increased from time to time upon the Rating
Agencies agreeing that such increase will not adversely affect the then current ratings of the Notes (or
as otherwise agreed by the Mortgage Administrator and the Rating Agencies);
following the acquisition of the Substitute Loan on any date the weighted average Margin (“WAM”) for
the Mortgage Pool after such acquisition and after all other acquisitions of Substitute Loans to be made
on such date calculated on such date in the same way as for the Initial Mortgage Pool (or as otherwise
agreed by the Rating Agencies from time to time) would not be more than 30 basis points lower than the
WAM of the Mortgage Pool at the previous Interest Payment Date;
if a fixed rate of interest applies for a specified period of time to the Loan being substituted, then the
relevant Substitute Loan will not have a fixed rate of interest for a period which is longer than the one
applicable to the Loan being substituted at the time of its origination; and
the Principal Balance of the Substitute Loan, when added to the sum of the aggregate Principal Balance
of any Substitute Loan previously purchased does not exceed 10 per cent. of the aggregate Principal
Balance of the Loans on the Closing Date, save that the figure of 10 per cent. referred to above may be
increased from time to time upon the Rating Agencies agreeing that such increase will not adversely
affect the then current ratings by the Rating Agencies of the Notes.
For the purposes of paragraph (j) immediately above, “Margin” means, in respect of any Loan, the margin rate
on such Loan.
Conditions of Acquisition of Prefunded Loans
The acquisition by the Issuer of Prefunded Loans is subject to the Rating Agencies confirming that the thencurrent
ratings of the Notes would not be downgraded as a result and the following conditions as specified
below:
(a)
(b)
(c)
no Enforcement Notice has been given by the Trustee which remains in effect;
the Warranties are true in respect of the Prefunded Loan;
the Lending Criteria as at such time have been applied to the Prefunded Loan and to the circumstances
of the Borrower at the time the Prefunded Loan was made;
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(d)
(e)
(f)
(g)
the final maturity date of the Prefunded Loan does not extend beyond the date that is three years prior
to the maturity date of the Notes (other than the A1 Notes);
the LTV of the Prefunded Loan is no more than 95 per cent. in relation to First Loans and 100 per cent.
in relation to Second Loans;
following the acquisition of the Prefunded Loan on any date the weighted average LTV for the
Mortgage Pool after such acquisition and after all other acquisitions of Prefunded Loans to be made on
such date calculated on such date in the same way as for the Initial Mortgage Pool (or as otherwise
agreed by the Rating Agencies from time to time) would not exceed 85 per cent.;
following the acquisition of the Prefunded Loan on any date the weighted average Stabilised Margin
(“WASM”) for the Mortgage Pool after such acquisition and after all other acquisitions of Prefunded
Loans to be made on such date calculated on such date in the same way as for the Initial Mortgage Pool
(or as otherwise agreed by the Rating Agencies from time to time) would not be more than 100 basis
points lower than the WASM of the Initial Mortgage Pool;
“Stabilised Margin” means, in respect of any Loan, the margin rate on such Loan post any applicable
fixed or discount rate; and
(h)
without prejudice to the particularity of paragraphs (f) and (g) above, following the acquisition of the
Prefunded Loan on any date the characteristics of the Mortgage Pool after such acquisition and after all
other acquisitions of Prefunded Loans to be made on such date would not be substantially different
from the characteristics of the Initial Mortgage Pool.
Insurance Contracts - Buildings Insurance and Title Insurance
SPML
In relation to each SPML Loan, that is a First Loan the SPML Lending Criteria require that either the relevant
Property is insured under a block buildings policy (a “Block Buildings Policy”) in the name of SPML, or that
the interest of SPML is noted on, or that SPML is named as joint insured under, a buildings insurance policy
over the relevant Property. SPML will warrant, in the Mortgage Sale Agreement, that:
(a)
(b)
at the time the relevant Loan was completed, each related Property was insured either (i) under a Block
Buildings Policy in the name of, among others, the Mortgagee or (ii) under a buildings policy under
which SPML was an insured party thereunder or its interest had been noted by the insurers, in either
case against fire and other commercial risks and for an amount not less than the full reinstatement value
determined by a valuer approved by SPML; and
each Block Buildings Policy is in full force and effect, all premiums have been paid as at the Closing
Date and SPML is not aware of any grounds for the avoidance or termination of any of the Block
Buildings Policies so far, in each case, as they relate to the Properties.
The Block Buildings Policy is underwritten by Royal & Sun Alliance Insurance plc (registered number 93792)
whose registered office is at St. Mark’s Court, Chart Way, Horsham, West Sussex, RH12 1XL. Royal & Sun
Alliance Insurance plc is one of the U.K.’s leading insurers.
In respect of each SPML Branded Loan, SPML has arranged contingency cover (“SPML Title Insurance”) in
respect of any loss arising from the existence of any adverse matter which would have been revealed had SPML
instructed a solicitor to conduct a search or other procedure against the title to the relevant Property. The Title
Insurance also covers any loss arising as a result of any priority of a charge arising by force of statute in respect
of Right to Buy Loans. The Title Insurance is arranged by London & European Title Insurance Services
Limited (registered number 4459633) whose registered address is 3rd Floor, 5-10 Bury Street, London EC3A
5AT. London & European Title Insurance Services Limited is one of Europe’s leading providers of title
insurance services. The title insurance is underwritten by Axa Insurance. London & European Title Insurance
Services Limited has supplied SPML with title insurance and related services since May 1998.
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Life Policies – SPML
None of SPML, SPPL, Matlock, Langersal or the Correspondent Lenders require Borrowers to take out life
assurance policies and/or endowment policies (“Life Policies”) in respect of Loans comprised in the Mortgage
Pool, nor do any of SPML, SPPL, Matlock, Langersal or the Correspondent Lenders require a Borrower to
assign an existing Life Policy to them. Where a Borrower offers to take out a Life Policy or to assign an
existing Life Policy, SPML, SPPL, Matlock, Langersal or the relevant Correspondent Lender, as applicable,
may accept such offer. In those circumstances, the Issuer and the Trustee will have the benefit of the charges
over the Life Policies provided as collateral security, although no warranties will be provided to the Issuer in
respect of the Life Policies.
Upon the occurrence of certain events requiring the enforcement of the Issuer’s security interests, or at the
request of the Trustee, SPML will be required under the terms of the Mortgage Sale Agreement to procure the
giving of notice to the relevant insurers of the charges over and assignations in security of the Life Policies.
PML
As part of the Security, the Issuer and the Trustee will have the benefit of a Block Buildings Policy (as defined
below) to the extent of their respective interests in the PML Loans.
The PML Lending Criteria require that either the relevant Property is insured under a Block Buildings Policy in
the name of PML, which is currently with Lloyd’s of London, or that the interest of PML is noted on, or that
PML is included as joint insured under a buildings insurance policy over the relevant Property, subject to the
approval of PML. PML will warrant, in the Mortgage Sale Agreement, that:
(a)
(b)
at the time the relevant PML Loan was completed, the related Property was either insured (i) under the
Block Buildings Policy in the name of, inter alios, PML or (ii) under a buildings policy under which
PML was either an insured party thereunder or its interest had been noted by the insurers, in either
case, against fire and other commercial risks and for an amount not less than the full reinstatement
value determined by a valuer approved by PML (the “PML Insurance Contracts” which term shall
include any title insurance policies, commercial combined insurance policies and any other insurance
contracts in replacement, addition or substitution therefor from time to time (including any
endorsements or extensions thereto from time to time) to which PML has the benefit); and
the Block Buildings Policy is in full force and effect, all premiums have been paid as at the Closing
Date and PML is not aware of any ground for the avoidance or termination of any of the Block
Buildings Policies so far, in each case, as they relate to the Properties.
The insurers for the Block Buildings Policy are Fusion Insurance Services Limited (at Lloyd’s of London), 71
Fenchurch Street, London EC3M 4HH. Fusion Insurance Services Limited offers a range of insurance policies
including block buildings insurance.
Life Policies - PML
In relation to certain of the PML Loans, the Issuer and the Trustee may have the benefit of the charges over
certain life assurance and endowment policies (“Life Policies”) provided as Collateral Security in respect of
certain of the PML Loans comprised in the Mortgage Pool although no warranties are provided to the Issuer in
respect of such Life Policies. Upon the occurrence of certain specific events of default, or at the request of the
Issuer (with the consent of the Trustee) or the Trustee, the Mortgage Administrator is required under the
Mortgage Sale Agreement to give notice to the relevant insurers of (i) the charges over the Life Policies, if any,
and (ii) the Issuer’s and the Trustee’s respective interests in such Life Policies, if any.
In relation to the Scottish Loans, the Issuer and the Trustee may have the benefit of the assignations in security
of Life Policies provided as Collateral Security in respect of certain of the Scottish Loans comprised in the
Mortgage Pool although no warranties are provided to the Issuer in respect of such Life Policies. Upon the
occurrence of certain specific events of default or at the request of the Trustee, PML is required under the
Mortgage Sale Agreement to procure the giving of notice to the relevant insurers of (i) the assignations in
security of the Life Policies, if any, and (ii) the Issuer’s and the Trustee’s respective interests in such Life
Policies, if any.
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In relation to the Northern Irish Loans, the Issuer and the Trustee may have the benefit of the charges over
certain Life Policies provided as Collateral Security in respect of certain of the Northern Irish Loans comprised
in the Mortgage Pool although no warranties are provided to the Issuer in respect of such Life Policies. Upon
the occurrence of certain specific events of default, or at the request of the Trustee, PML is required under the
Mortgage Sale Agreement to procure the giving of notice to the relevant insurers of (i) the charges over the Life
Policies, if any, and (ii) the Issuer’s and the Trustee’s respective interests in such Life Policies, if any.
Amber
In relation to each Amber Loan, the Amber Lending Criteria require that either the relevant Property is insured
under a buildings policy in the name of the Borrower and that the interest of Amber is noted on, or that Amber is
named as joint insured under, that policy.
Amber does not delay completion of an Amber Loan if such evidence of current buildings insurance is not
received prior to completion. Once the loan has completed a chase procedure is carried out to obtain a copy of
the schedule. This is not received in all cases and therefore there may be some loans where there is no building
insurance evident on the loan file.
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REGULATION OF THE UK RESIDENTIAL MORTGAGE MARKET
Introduction
The following summary of certain regulatory considerations does not discuss all aspects of applicable legislation
and other authorities which may be important to prospective investors.
Self-regulation under the Mortgage Code
Until 31 October 2004, residential mortgage business in the United Kingdom was self-regulated under the
mortgage code (the “Mortgage Code”) sponsored by the Council of Mortgage Lenders (the “CML”) and
policed by the Mortgage Code Compliance Board (the “MCCB”). Membership of the CML and compliance
with the Mortgage Code were voluntary. The Mortgage Code set out a minimum standard of good mortgage
business practice. Since 30 April 1998, lender-subscribers to the Mortgage Code were not able to accept
mortgage business introduced by intermediaries who were not registered with (before 1 November 2000) the
Mortgage Code Register of Intermediaries or (on or after 1 November 2000 until 31 October 2004) the MCCB.
The Mortgage Code ceased to apply on 31 October 2004 and the MCCB ceased its regulatory operations.
Financial Services and Markets Act 2000
On and after 31 October 2004 (the date known as N(M)), most first-charge residential mortgage business in the
United Kingdom is regulated by the Financial Services Authority (the “FSA”) under the Financial Services and
Markets Act 2000 (the “FSMA”) and subordinate legislation and brought within the jurisdiction of the Financial
Ombudsman Service (the “Ombudsman”).
The statutory regime applies to any “regulated mortgage contract” entered into or varied on or after N(M),
which is a contract where, at the time the contract is entered into on or after N(M) (or varied sufficiently to
amount to a new contract): (a) the borrower is an individual or trustee; (b) the contract provides for the
obligation of the borrower to repay to be secured by a first ranking legal mortgage (or, in Scotland, a first
ranking standard security) on land (other than timeshare accommodation) in the United Kingdom; and (c) at
least 40 per cent. of that land is used, or is intended to be used, as or in connection with any dwelling by the
borrower or (in the case of credit provided to trustees) by an individual who is a beneficiary of the trust, or by a
related person.
Entering into, advising on, administering and arranging regulated mortgage contracts (including arranging and
advising on variations to such contracts) are regulated activities under the FSMA (together with agreeing to do
any of these things).
Any person carrying out a regulated activity, unless an exemption is available, must be authorised by the FSA,
with specific permission required from the FSA to engage in the activity. If requirements as to authorisation and
permission of lenders and brokers or as to issue and approval of financial promotions are not complied with, a
regulated mortgage contract will be unenforceable against the borrower except with the approval of a court.
In particular, an unauthorised person may arrange for an authorised person to administer its regulated mortgage
contracts but, if that arrangement comes to an end, that unauthorised person may commit an offence if it
administers the contracts for more than one month beginning with the day on which that arrangement comes to
an end, although this will not render the contracts unenforceable against the borrower.
The Financial Services and Markets Act 2000 (Consequential Amendments) Order 2005 came into force on 16
November 2005. This order, which amends sections 82 and 146 of the CCA, is intended to remove the
possibility that a mortgage agreement could fall to be regulated in certain circumstances under both FSMA and
the CCA.
The FSA Mortgages: Conduct of Business Sourcebook (the “MCOB”) sets out FSA rules in respect of
regulated mortgage activities. These rules cover, inter alia, pre-contract disclosure, start-of-contract disclosure,
post-sale disclosure (annual statements), rules on contract changes, charges, arrears and repossessions and
certain pre-origination matters, such as financial promotions and pre-application illustrations. MCOB came into
force on N(M). The FSA wrote in November 2005 to a number of mortgage providers to ask for explanations,
to be provided before the end of 2005, of their calculations of the amounts of early redemption charges that are
contractually applicable in the event of an early redemption.
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Prudential and authorisation requirements placed on authorised persons in respect of regulated mortgage
activities came into force on N(M), together with rules covering the extension of the appointed representatives
regime (which previously applied to investment business) to mortgages.
Under Section 150 of the FSMA, a borrower is entitled to claim damages for loss suffered as a result of any
contravention by an authorised person of an FSA rule. In the case of such contravention by an originator, a
borrower may claim such damages against the originator, or set off the amount of such claim against the amount
owing by the borrower under the loan agreement or any other loan agreement that the borrower has taken from
the originator. Any such set-off may adversely affect the ability of the Issuer to make payments to
Instrumentholders.
So as to avoid dual regulation, it is intended that regulated mortgage contracts will not be regulated by the CCA.
This exemption only affects credit agreements made on or after N(M), and credit agreements made before N(M)
but subsequently changed such that a new contract is entered into on or after N(M) constitutes a regulated
mortgage contract. A court order is necessary, however, to enforce a land mortgage or heritable security
securing a regulated mortgage contract to the extent that it would otherwise be regulated by the CCA or treated
as such.
On and after N(M), no variation has been or will be made to the Loans, and nothing has been or will be done in
relation to the Loans, where it will result in the Issuer or the Trustee entering into, advising on, administering or
arranging a regulated mortgage contract (including arranging or advising on variation to such contract), or
agreeing to do any of these things, if it would have been or would be required to be authorised under the FSMA
to do so.
Office of Fair Trading
The Office of Fair Trading (the “OFT”) has responsibility for the issue of licences under the CCA and the
monitoring of activities of licence-holders. If the OFT feels that a licence-holder is no longer fit to hold his
licence, the OFT can commence formal proceedings for the revocation of the licence. In the event that a
consumer credit licence is revoked, the former licence-holder will no longer be able to carry on activities
licensable under the CCA. The OFT may review businesses and operations, provide guidelines to follow, and
take action when necessary with regard to the mortgage market in the United Kingdom.
Non-Status Lending Guidelines for Lenders and Brokers and Responsible Lending
The Non-Status Lending Guidelines for Lenders and Brokers (the “Guidelines”) issued by the OFT in July 1997
and revised in November 1997 apply to all secured loans made to “non-status borrowers”, defined for the
purposes of the Guidelines as borrowers with a low or impaired credit rating or who might otherwise find it
difficult generally to obtain finance from traditional sources on normal terms and conditions. Most of the
Borrowers would be so regarded.
The Guidelines are not legislation. They set out certain “principles” to be applied in the context of the nonstatus
residential mortgage market that are considered by the OFT to be good business practice for lenders and
brokers to adopt in order that their fitness to hold a consumer credit licence is not brought into question.
Although it is not obliged to do so, both SPML and PML have liaised with the OFT and both SPML and PML
have taken steps to ensure that it adopts practices and procedures in compliance with the Guidelines.
The Guidelines provide guidance as to the activities of lenders and brokers in the non-status secured lending
market in areas such as advertising and marketing, loan documentation and contract terms, selling methods,
underwriting, dual interest rates, flat interest rates and early redemption payments. The Guidelines are designed
to promote transparency in all dealings with borrowers, requiring clear contract terms and conditions to be
provided promptly with full explanations of all fees and charges payable by the borrower in connection with the
mortgage.
According to the Guidelines, advertising and other promotional material must be clear and easily legible and
should not be misleading, and the Guidelines prohibit unfair sales tactics.
The relationship between lenders and brokers is also addressed by the Guidelines. Brokers are obliged to
disclose at the outset of the transaction their status with regard to the borrower and the lender, together with
details of any fee or commission payable to them as broker or if they are tied to a particular lender. Lenders
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must take all reasonable steps to ensure that brokers and other intermediaries regularly marketing their products
do not engage in unfair business practices or act unlawfully, that they serve the best interests of the borrowers
and explain clearly the documentation and consequences of any breach or early repayment by the borrowers.
The actions of any broker or other intermediary involved in marketing a lender’s products can jeopardise the
lender’s fitness to hold a consumer credit licence, and the Guidelines make clear that lenders must take all
reasonable steps to ensure that such brokers and other intermediaries comply with the Guidelines and all
relevant statutory requirements. This is so even if the lender has no formal or informal control or influence over
the broker.
The Guidelines require that lenders carry on responsible lending, with all underwriting decisions being subject
to a proper assessment of the borrower’s ability to pay, taking into account all relevant circumstances, such as
the purpose of the loan, the borrower’s income, outgoings, employment and previous credit history. Lenders
must take all reasonable steps to verify the accuracy of information provided by borrowers in respect of or in
support of the loan application, and all underwriting staff must be properly trained and supervised.
The Guidelines emphasise prompt notification to borrowers of any changes in the terms and conditions of the
mortgage. For example, the lender may not change the borrower’s monthly payment date unilaterally unless at
least two months’ written notice has been given, and the borrower must be given written notice of any increase
in interest rates at least fourteen days before the date on which the relevant payment falls due.
Charges payable on any early redemption (in whole or in part) are also dealt with in the Guidelines. Essentially,
partial repayments must be permitted and any early repayment charges must do no more than cover the costs
reasonably incurred by the lender in processing the payments and cover reasonable losses arising from the
prepayment. The Guidelines state that lenders should discontinue the use of the “Rule of 78” in non-status loans
unregulated by the CCA on the basis that it can be unfair and oppressive and should not apply it rigidly to
existing loan agreements without a cap to ensure that payments on early redemption are not excessive. The
“Rule of 78” was a method of apportioning interest in a way that front-loaded interest payments to the detriment
of borrowers making early repayments.
The Guidelines also state that inclusion of an annual flat interest rate, in cases where the amount of interest
component of the payment made by the borrower on each payment date under the loan is calculated on the basis
of the full amount drawn under the loan, rather than the principal amount outstanding from time to time under
the loan, should be avoided.
In addition, the Guidelines discourage lenders from charging a higher interest rate on default on the basis that it
is unfair and oppressive. Any administrative charges incurred on default (or as a result of a partial repayment of
principal) must be reasonable, covering the lender’s administrative costs only, and must be set out in the
documentation.
Arrears must be dealt with sympathetically and positively and monitored closely, with repossession taking place
only as a last resort. Additionally, the requisite court proceedings should not be instituted unless all other
avenues have failed.
Lenders regulated by the FSMA are subject to “responsible lending” requirements. They are obliged to take
account of the borrower’s ability to repay before deciding to enter into a regulated mortgage contract (or to
make further advances on such a contract). They must also put in place, and operate in accordance with, a
written responsible lending policy.
Unfair Terms in Consumer Contracts Regulations 1994 and 1999
The Unfair Terms in Consumer Contracts Regulations 1999 (the “1999 Regulations”) and (in so far as
applicable) the Unfair Terms in Consumer Contracts Regulations 1994 (together with the 1999 Regulations, the
“Regulations”) apply to agreements made on or after 1 July 1995 and apply to all or almost all of the Loans.
The Regulations provide that: (a) a consumer may challenge a standard term in an agreement on the basis that it
is “unfair” within the Regulations and therefore not binding on the consumer; and (b) the OFT, the FSA and
any other “qualifying body” (as defined in the 1999 Regulations) may seek to enjoin (or, in Scotland, interdict)
a business against relying on unfair terms, although the rest of the agreement will remain enforceable if it is
capable of continuing in existence without the unfair term.
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This will not generally affect core terms, which set out the main subject matter of the contract (for example, the
borrower’s obligation to repay the principal), provided that these terms are written in plain and intelligible
language and given sufficient prominence, but may affect terms deemed to be ancillary terms, which may
include the ability to impose an early repayment charge and other terms the application of which are in the
lender’s discretion.
For example, if a term permitting the lender to vary the interest rate is found to be unfair, the borrower will not
be liable to pay interest at the increased rate or, to the extent that he has paid it, will be able, as against the
lender or any assignee such as the Issuer, to claim repayment of the extra interest amounts paid or to set off the
amount of such claim against the amount owing by the borrower under the loan agreement or under any other
loan agreement that the borrower has taken with the lender. Any such non-recovery, claim or set-off may
adversely affect the ability of the Issuer to make payments to Instrumentholders.
In February 2000, the OFT issued a guidance note (the “Guidance Note”) on what the OFT considered to be
“fair” or “unfair” within the Regulations for interest variation terms. The Guidance Note accepts the principle
of a term linking an interest rate to an external rate which is outside the lender’s control. It provides that,
generally, the OFT and the Consumers’ Association will not regard such term as unfair if the lender explains at
the outset how the interest rate is linked to the external rate and, if the link does not provide for precise and
immediate tracking, the maximum margin of difference, and the time limits within which changes will be made.
All of the LIBOR Linked Loans and the BBR Linked Loans are made on terms that provide for the mortgage
rate to be at a fixed margin above the Loan LIBOR or Loan BBR (as applicable) and include an explanation of
when and how the tracking will take effect.
Other interest variation terms (which are not related to such external rates) are likely to be regarded as being
“unfair” by the OFT or the Consumers’ Association unless: (a) the lender notifies each affected borrower in
writing at least 30 days before the change in rate; and (b) the borrower is able to repay the whole loan within
three months after the change without incurring an early repayment charge. Both SPML and PML have
reviewed the Guidance Note and each has concluded that the terms on which the Loans were originated comply
in all material respects with the Guidance Note. The Guidance Note has been withdrawn from the OFT website.
The FSA has agreed with the OFT to take responsibility for the enforcement of the Regulations in mortgage
agreements and the FSA may take the Guidance Note into account.
In May 2005, the FSA issued a statement of good practice on fairness of terms in consumer contracts, which is
addressed to firms authorised and regulated by the FSA in relation to products and services within the FSA’s
regulatory scope. This statement provides, inter alia, guidance relating to contracts that “lock-in” consumers
(being contracts where, in order to withdraw from the contract, the consumer is required to give advance notice
or to pay a cost or to give up a benefit). Firms are warned to take care to ensure that interest rate variation terms
that apply to locked-in customers are fair. Firms may also consider drafting the contract to permit a change to
be made only where any lock-in term is not exercised.
Under a concordat agreed between the FSA and the OFT with effect from 31 July 2006, all complaints referred
to either the FSA or the OFT will be subject to determining which is best placed to consider the matter. In doing
so, consideration will be given to matters such as which body will have responsibility for most of the contract or
the particular terms of the provision complained about. It should be noted that the OFT on 5 April 2006,
publicly announced that the principles the OFT considers should be applied in assessing the fairness of credit
card default charges, shall apply (or are likely to apply) also to analogous default charges in other agreements
including those for mortgages.
In August 2002, the Law Commission for England and Wales and the Scottish Law Commission published a
Joint Consultation Paper proposing changes to the 1999 Regulations, including harmonising provisions of the
1999 Regulations and the Unfair Contract Terms Act 1977. A final report, together with a draft bill on unfair
terms, was published in February 2005. It is not proposed that there should be any significant increase in the
extent of controls over terms in consumer contracts. Some changes are proposed, however, such as that: (a) a
consumer may also challenge a negotiated term in an agreement on the basis that it is “unfair” and
“unreasonable” within the legislation and therefore not binding on the consumer; and (b) in any challenge by a
consumer (but not by the OFT, the FSA or any other qualifying body) of a standard term or a negotiated term,
the burden of proof lies on the business to show that the term is fair and reasonable. It is too early to predict
what effect the proposals, if enacted, would have on the Loans.
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Consumer Credit Act 1974
Currently, a credit agreement is regulated by the CCA where: (a) the borrower is or includes an individual; (b)
the amount of “credit” as defined in the CCA does not exceed the financial limit, which is £25,000 for credit
agreements made on or after 1 May 1998, or lower amounts for credit agreements made before that date; and (c)
the credit agreement is not an exempt agreement under the CCA. Where the Credit Agreement is regulated by
the FSA under the FSMA it is an exempt agreement under the CCA. Approximately 6.76 per cent. in aggregate
of the Principal Balance of the Loans comprised in the Provisional Mortgage Pool are regulated by the CCA and
the remaining approximately 93.24 per cent. are designated as non-regulated by the CCA.
Any credit agreement that is wholly or partly regulated by the CCA or treated as such has to comply with
requirements under the CCA as to licensing of lenders and brokers, documentation and procedures of credit
agreements, and (in so far as applicable) pre-contract disclosure. If it does not comply with those requirements,
then to the extent that the credit agreement is regulated by the CCA or treated as such, it may be unenforceable
against the borrower:
(a)
time;
without an order of the OFT, if the lender or any broker does not hold the required licence at the relevant
(b) totally, if the form to be signed by the borrower is not signed by the borrower personally or omits or
misstates a “prescribed term”; or
(c) without a court order in other cases and, in exercising its discretion whether to make the order, the court
would take into account any prejudice suffered by the borrower and any culpability of the lender.
A court order under Section 126 of the CCA is necessary to enforce a land mortgage or heritable security
securing a credit agreement to the extent that the credit agreement is regulated by the CCA or treated as such. In
dealing with such application, the court has the power, if it appears just to do so, to amend a credit agreement or
to impose conditions upon its performance or to make a time order (for example, giving extra time for arrears to
be cleared).
Under Section 75 of the CCA in certain circumstances: (a) the lender is liable to the borrower in relation to
misrepresentation and breach of contract by a supplier in a transaction financed by the lender, where the related
credit agreement is or is treated as entered into under pre-existing arrangements, or in contemplation of future
arrangements, between the lender and the supplier; for example, the relevant Originator is liable to the Borrower
in relation to any misrepresentation and breach of contract by the supplier of insurance financed by the Loan in
such circumstances; and (b) the lender has a statutory indemnity from the supplier against such liability, subject
to any agreement between the lender and the supplier. The borrower may set off the amount of such claim
against the lender against the amount owing by the borrower under the loan agreement or under any other loan
agreement that the borrower has taken from the lender. Any such set-off may adversely affect the ability of the
Issuer to make payments to Noteholders.
In November 2002, the Department for Business, Enterprise and Regulatory Reform (formerly the Department
for Trade and Industry) (“DBERR”) announced its intention that a credit agreement will be regulated by the
CCA where, for credit agreements made after this change is implemented: (a) the borrower is or includes an
individual, save for partnerships of four or more partners; (b) irrespective of the amount of credit (although in
July 2003, the DBERR announced its intention that the financial limit will remain for certain business-tobusiness
lending); and (c) the credit agreement is not an exempt agreement. In December 2003, the DBERR
published a White Paper proposing amendments to the CCA and to secondary legislation made under it.
In June 2004, secondary legislation was made: (a) amending requirements as to documentation of credit
agreements, coming into force on 31 May 2005, or 31 August 2005 for agreements given to the borrower for
signature but not made before 31 May 2005 (the “Consumer Credit (Agreements) (Amendment) Regulations
2004”); (b) pre-contract disclosure, coming into force on 31 May 2005 (the “Consumer Credit (Disclosure of
Information) Regulations 2004”); and (c) replacing the Rule of 78 formula for calculating the maximum
amount payable on early settlement with a formula more favourable to the borrower, coming into force on 31
May 2005 for new agreements, or 31 May 2007 or 31 May 2010, depending on the term of the agreement, for
agreements existing before 31 May 2005 (the “Consumer Credit (Early Settlement) Regulations 2004”).
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In March 2006 the CCA was amended with the passage of the Consumer Credit Act 2006 (the “CCA 2006”).
The CCA 2006 is being brought into force in stages (subject to transitional provisions) and will amend the CCA
by, inter alia: (a) changing the definition of a credit agreement regulated by the CCA to that announced by the
DBERR as described above; and (b) repealing the rule that, to the extent that a credit agreement is regulated by
the CCA or treated as such, it may be unenforceable totally. Any Loan made or changed such that a new
contract is entered into after these amendments become effective, other than a regulated mortgage contract
under the FSMA or other exempt agreement under the CCA, will be regulated by the CCA. Such Loan will
have to comply with requirements under the CCA as described above and, if it does not comply, it will be
unenforceable without an order of the OFT or without a court order, as described above.
The CCA 2006 also amends the CCA by: (a) strengthening the licensing regime; (b) changing the grounds for
challenging a credit agreement, from “extortionate credit bargain”, to “unfair relationship” between the lender
and the borrower, with retrospective effect on existing agreements; and (c) extending the jurisdiction of the
Ombudsman to licence-holders under the CCA. Further proposals to amend the CCA and secondary legislation
made under it are expected at an unspecified time.
The Sellers have interpreted certain technical rules under the CCA in a way common with many other lenders in
the mortgage market. If such interpretation were held to be incorrect by a court or other dispute resolution
authority, then a Loan, to any extent that it is regulated by the CCA or treated as such, would be unenforceable
as described above. If such interpretation were challenged by a significant number of borrowers, then this could
lead to significant disruption and shortfall in the income of the Issuer. Court decisions have been made on
technical rules under the CCA against certain mortgage lenders, but such decisions are very few and are
generally county court decisions which are not binding on other courts.
Financial Services (Distance Marketing) Regulations 2004
The Financial Services (Distance Marketing) Regulations 2004 apply to, inter alia, credit agreements entered
into on or after 31 October 2004 by means of distance communication, (i.e. without any substantive
simultaneous physical presence of the lender and the borrower). Regulated mortgage contracts under the FSMA
will not be cancellable under these regulations, if originated by a United Kingdom lender from an establishment
in the United Kingdom. Certain other credit agreements will indeed be cancellable under these regulations, if
the borrower does not receive prescribed information at the prescribed time. Where the credit agreement is
cancellable under these regulations or the rules of the FSA, the borrower may send notice of cancellation at any
time before the end of the fourteenth day after the day on which the cancellable agreement is made if all
prescribed information has been received or, if later, the borrower receives the last of prescribed information.
If the borrower cancels the credit agreement under these regulations, then:
(a)
(b)
(c)
the borrower is liable to repay the principal and any other sums paid by the lender to the borrower under
or in relation to the cancelled agreement, within 30 days beginning with the day of the borrower sending
notice of cancellation or, if later, the lender receiving notice of cancellation;
the borrower is liable to pay interest, or any early repayment charge or other charge for credit under the
cancelled agreement, only if the borrower received certain prescribed information at the prescribed time
and if other conditions are met; and
any security is treated as never having had effect for the cancelled agreement.
Financial Ombudsman Service
Under the FSMA, the Ombudsman is required to make decisions on, inter alia, complaints relating to activities
and transactions under its jurisdiction on the basis of what, in the Ombudsman’s opinion, would be fair and
reasonable in all circumstances of the case, taking into account, inter alia, law and guidance. Complaints
brought before the Ombudsman for consideration must be decided on a case-by-case basis, with reference to the
particular facts of any individual case. Each case would first be adjudicated by an adjudicator. Either party to
the case may appeal against the adjudication. In the event of an appeal, the case proceeds to a final decision by
the Ombudsman. The Ombudsman may order a money award to the borrower. Any such award may adversely
affect the ability of the Issuer to make payments to Noteholders.
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Potential for Regulatory Changes
In addition to the ongoing process of reform to the CCA set out above, the following developments may affect
or lead to reform of the regulatory framework, legislation or rules applicable to mortgage lending.
Professor Miles’ Report on the UK Mortgage Market
It was announced in the Budget statement made by the Chancellor of the Exchequer in April 2003, that
Professor David Miles of Imperial College, London would review the UK mortgage market in order to (i)
analyse the supply and demand side factors limiting the developments of the longer term fixed mortgage market
in the United Kingdom to establish why the share of longer term fixed rate mortgages is so low compared to the
United States and other EU countries; (ii) consult with key stakeholders to establish views and inform analysis;
(iii) examine whether there has been any market failure that has held back the market for longer term fixed rate
mortgages and consider associated opportunities, risks and potential costs. On 9 December 2003, the Interim
Report of Professor Miles’ review (the “Interim Report”) was published and on 12 March 2004, the final
report and recommendations (the “Final Report”) was published.
The Final Report analyses why long-term fixed rate mortgages currently only account for a small proportion of
the UK mortgage market. It confirms the findings of the Interim Report and concludes that the low take-up of
these products is due principally to the fact that: (i) borrowers attach greater weight to the level of initial
monthly repayments than to the overall cost of borrowing; (ii) many borrowers have a poor understanding of
risks involved with different mortgages; and (iii) many mortgage lenders offer short-term fixed rate or
discounted deals to new customers, which are subsidised by existing customers, and which make longer-term
fixed rate mortgages look more expensive as a result.
Professor Miles made the following recommendations:
(a)
(b)
(c)
(d)
(e)
the FSA should require mortgage advice to better take account of consumer attitudes to risk and the risk
characteristics of different mortgage products;
the FSA should require additional pre-sale disclosure to be made in relation to the variability of rates;
increased emphasis should be placed on improving the financial capability of consumers, particularly in
relation to the risks associated with mortgage borrowing and resources should be raised from levies
placed on the financial services industry;
the FSA should remove barriers to switching by requiring all products to be available to all borrowers
such that incentivised rates offered only to new customers should be prevented and should improve
consumer awareness of the process involved in remortgaging; and
awareness of the FSA comparative tables on mortgages should be improved by mandatory disclosure in
customer documentation and that leaflets disclosing rates on all products offered by a lender should be
distributed with annual statements to borrowers.
Professor Miles additionally made a number of recommendations in relation to the funding for lenders of longterm
lending products.
It is possible that these recommendations may be accepted and may result in changes to regulatory requirements.
No assurance can be given that any recommendations, if adopted, will not have an adverse effect on the Loans,
the Originators, the Issuer, the Mortgage Administrator and the Cash/Bond Administrator and their respective
businesses and operations.
Second Revised Proposal for a new Consumer Credit Directive
In September 2002, the European Commission published a proposal for a directive of the European Parliament
and of the Council on the harmonisation of the laws, regulations and administrative provisions of the member
states concerning credit for consumers and surety agreements entered into by consumers. In its original form,
the proposal prescribes requirements for, inter alia, further drawings and further advances made in relation to
existing agreements and new agreements, and provides that mortgage loans which do not comply with these
requirements may be unenforceable.
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There was significant opposition from the European Parliament to the original form of the proposed directive,
and there are differences of opinion as to the extent to which it should apply to mortgage loans. In October
2004, the European Commission published an amended form of the proposed directive. In this amended form,
the proposed directive would have applied to any loan secured by a mortgage on land that includes an equity
release element and is not over €100,000, but it was unclear whether it would apply to further drawings and
further advances made in relation to agreements existing before national implementing legislation comes into
force.
In February 2005 the DBERR published a consultation paper on the European Commission’s amended form of
the proposed directive, and in June 2005 a summary of responses to this consultation. The European
Commission published on 19 July 2005 a green paper on mortgage credit in the EU launching a consultation
lasting until 30 November 2005.
In October 2005, the European Commission published a second revised proposal for the directive. Under this
second revised proposal the regulated agreement regime would be restricted to consumer credit of up to €50,000
and a stand-alone category for credit contracts of up to €300 each. The DBERR published a secondary
consultation on the European Commission’s second revised text in March 2006 and a Government response to
that consultation was published in November 2006.
On 21 May 2007 the Council of Ministers reached political agreement on the proposed directive. A common
position is expected to be transmitted to the European Parliament in late September/early October 2007, where
further amendment may take place. It is not known when the directive will then come into force, and Member
States will then have a further two years in which to bring national implementing legislation into force. Until
the final text of the directive is decided and the details of United Kingdom implementing legislation are
published, it is not certain what effect the adoption and implementation of the directive would have on the
Loans, the Originators, the Issuer or the Mortgage Administrator and their respective businesses and operations.
No assurance can be given that the finalised directive and the United Kingdom implementing legislation will not
adversely affect the ability of the Issuer to make payments to Instrumentholders.
Unfair Commercial Practices Directive 2005
On 11 May 2005, the European Parliament and Council adopted a directive on unfair business-to-consumer
commercial practices (the “Unfair Practices Directive”). The Unfair Practices Directive will affect all
contracts entered into with persons who are natural persons and acting for purposes outside their trade, business,
craft or profession. Although the Unfair Practices Directive is not concerned solely with financial services, it
may have some impact in relation to the residential mortgage market.
Under the Unfair Practices Directive, a commercial practice is to be regarded as unfair if it is: (a) contrary to the
requirements of professional diligence; and (b) materially distorts or is likely to distort the economic behaviour
of the average consumer who the practice reaches or to whom it is addressed (or where a practice is directed at
or is of a type which may affect a particular group of consumers, the average consumer of that group). In
addition to the general prohibition on unfair commercial practices, the Unfair Practices Directive contains
provisions aimed at aggressive and misleading practices and a list of practices which will in all cases be
considered unfair.
The Unfair Practices Directive is a maximum harmonisation measure which means that Member States will be
prevented from retaining consumer protection measures which go beyond it within its scope. However, in
relation to financial services, member states are permitted to retain protections which go beyond the
requirements of the Unfair Practices Directive. Therefore, in the context of financial services, the Unfair
Practices Directive will potentially place additional obligations on mortgage lenders where there currently are
no specific rules applying.
The Unfair Practices Directive states that its provisions are to be implemented by Member States by 12 June
2007 and the implementing provisions are to come into force by 12 December 2007, subject to a transitional
period until 12 June 2013. In December 2005, the DBERR published a consultation paper on the proposed
implementation of the Unfair Practices Directive in the UK. A second consultation was issued by the DBERR
in December 2006. Whilst the consultation papers indicate that the Government has decided to repeal much
existing domestic legislation which overlaps with, and is replicated by, the Unfair Practices Directive, the
DBERR expects the regulations implementing the directive to become the main law regulating fair trade in the
UK. The DBERR has stated its intention to bring the implementing regulations into force by April 2008. Until
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the final details of the United Kingdom implementing legislation are published, it is not certain what effect the
adoption and implementation of the Unfair Practices Directive would have on the Loans, the Originators, the
Issuer, the Mortgage Administrator and the Cash/Bond Administrator and their respective businesses and
operations. No assurance can be given that the United Kingdom’s implementation of the Unfair Practices
Directive will not adversely affect the ability of the Issuer to make payments to Instrumentholders.
123

USE OF PROCEEDS
The net proceeds of the issue of the Notes are expected to amount to approximately £657,290,000 (being the
amount of £659,750,000 representing the proceeds of the issue of the Notes, less the amount of £2,460,000 used
to pay the costs of their issue).
The proceeds of the issue of the Notes will be applied (after exchanging the proceeds of the Euro Notes and the
Dollar Notes for sterling pursuant to the Currency Swap Agreements) towards the purchase of the Initial
Mortgage Pool on the Closing Date and also towards the purchase of the Newly-Originated Loans and the
Prefunded Loans up to (and including) the first Interest Payment Date (see “The Mortgage Pool - Sale of Loans
and Collateral Security” above) except for the following amounts which shall be applied as follows:
(a)
(b)
(c)
(d)
(e)
an amount of £2,460,000 shall be used to pay the costs of the issue of the Notes and shall be credited to
the Transaction Account with a corresponding credit to a ledger (the “Subordinated Costs Ledger”)
established by the Issuer and applied in or towards payment of the costs and expenses incurred by the
Issuer in connection with the issue of the Notes (including underwriting fees and the cost of the
arrangement of the Hedging Agreements and the Currency Swap Agreements);
an amount of £2,600,000 shall be used to initially fund the Reserve Fund and shall be credited to the
Transaction Account with a corresponding credit to the Reserve Ledger and thereafter transferred from
the Transaction Account to the GIC Account;
an amount of £0 shall be used to fund the Anticipated Newly-Originated Loans Interest Shortfall
Amount and shall be credited to the Transaction Account with a corresponding credit to the Newly-
Originated Loans Interest Shortfall Amount Ledger;
an amount of £0 shall be used to fund the Prefunding Interest Shortfall Amount and shall be credited to
the Transaction Account with a corresponding credit to the Prefunding Interest Shortfall Amount
Ledger; and
an amount of £8,690,000 shall be used to fund the Discounted Margin Reserve Fund and shall be
credited to the Transaction Account with a corresponding credit to the Discounted Margin Reserve
Ledger and thereafter transferred from the Transaction Account to the GIC Account.
To the extent that, on the Closing Date, the net proceeds of the Collateral Backed Notes less the Newly-
Originated Loans Amount and the Prefunding Amount, is greater than the purchase price for the Initial
Mortgage Pool (as set out under “Newly-Originated Loans” above) that excess will be credited to the Principal
Ledger on the Closing Date.
The Issuer understands that each of SPML and PML intend to apply part of the amount it receives from the
Issuer on the Closing Date in or towards repayment of secured loan facilities granted to affiliates of SPML (in
the case of SPML) or affiliates of PML (in the case of PML) by an affiliate of Lehman Brothers International
(Europe).
124

WEIGHTED AVERAGE LIVES OF THE NOTES
Weighted average life refers to the average amount of time that will elapse from the date of issuance of a
security to the date of distribution to the investor of amounts distributed in net reduction of principal of such
security (assuming no losses). The weighted average lives of the Notes will be influenced by, among other
things, the actual rate of redemption of the Loans.
The model used in this document for the Loans comprised in the Mortgage Pool represents an assumed constant
per annum rate of prepayment (“CPR”) each month relative to the then outstanding Principal Balance of such
Loans. CPR does not purport to be either a historical description of the prepayment experience of any pool of
mortgage loans or a prediction of the expected rate of prepayment of mortgage loans, including the Loans to be
included in the Mortgage Pool.
The following tables were prepared based on the characteristics of the Loans to be included in the Mortgage
Pool and the following additional assumptions (the “Modelling Assumptions”):
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
no Loan is sold by the Issuer;
no Principal Deficiency arises;
no Substitute Loan, Prefunded Loans or Newly-Originated Loans are purchased;
the portfolio composition of loan characteristics remain the same throughout the life of the Notes;
Note Sterling LIBOR of 5.80 per cent.;
the Sterling Notes pay interest on an Actual/365 (Fixed) basis;
the Euro Notes pay interest on an Actual/360 basis;
the Dollar Notes pay interest on an Actual/360 basis;
(i) the Closing Date is 16 July 2007;
(j)
(k)
no Loan is in arrears or default; and
the Performance Conditions are satisfied.
The actual characteristics and performance of the Loans are likely to differ from the assumptions used in
constructing the tables set forth below, which are hypothetical in nature and are provided only to give a general
sense of how the cash flows might behave under varying prepayment scenarios. For example, it is not expected
that the Loans will prepay at a constant rate until maturity, that all of the Loans will prepay at the same rate or
that there will be no defaults or delinquencies on the Loans. Any difference between such assumptions and the
actual characteristics and performance of the Loans will cause the weighted average life of the Notes to differ
(which difference could be material) from the corresponding information in the tables for each indicated
percentage of CPR.
Subject to foregoing discussions and assumptions, the following tables indicate the weighted average lives of
the A Notes, the B Notes, the C Notes, the D Notes, the E1c Notes and the ETc Notes calculated on a 30/360
basis.
Weighted Average Life in Years (to maturity)
0.00%
CPR
5.00%
CPR
10.00%
CPR
15.00%
CPR
20.00%
CPR
25.00%
CPR
30.00%
CPR
35.00%
CPR
15.00%
-
35.00%
CPR*
A1 Notes 10.44 2.91 1.62 1.12 0.86 0.70 0.59 0.51 0.96
A2 Notes 18.71 8.89 5.00 3.41 2.55 2.02 1.66 1.41 2.01
125

A3 Notes 21.39 18.04 13.15 9.55 7.27 5.67 4.62 3.91 4.45
B Notes 21.69 18.33 13.64 10.54 8.10 6.64 5.48 4.50 5.24
C Notes 21.80 18.42 13.77 10.82 8.52 7.07 5.85 4.79 5.56
D Notes 22.07 18.54 13.98 11.01 9.04 7.70 6.43 5.25 6.08
E1c Notes 22.53 18.89 14.31 11.37 9.41 8.46 7.37 6.08 6.99
ETc Notes 0.57 0.60 0.60 0.60 0.60 0.61 0.61 0.61 0.60
Weighted Average Life in Years (to 10 per cent. optional redemption)
0.00%
CPR
5.00%
CPR
10.00%
CPR
15.00%
CPR
20.00%
CPR
25.00%
CPR
30.00%
CPR
35.00%
CPR
15.00%
-
35.00%
CPR*
A1 Notes 10.44 2.91 1.62 1.12 0.86 0.70 0.59 0.51 0.96
A2 Notes 18.71 8.89 5.00 3.41 2.55 2.02 1.66 1.41 2.01
A3 Notes 21.33 17.98 12.77 9.05 6.87 5.39 4.39 3.72 4.26
B Notes 21.46 18.13 12.90 9.13 6.88 5.65 4.66 3.84 4.54
C Notes 21.46 18.13 12.90 9.13 6.88 5.65 4.66 3.84 4.54
D Notes 21.46 18.13 12.90 9.13 6.88 5.65 4.66 3.84 4.54
E1c Notes 21.46 18.13 12.90 9.13 6.88 5.65 4.66 3.84 4.54
ETc Notes 0.57 0.60 0.60 0.60 0.60 0.61 0.61 0.61 0.60
*Indicates an assumed constant per annum rate of prepayment of 15.00% per annum for the first year and an
assumed constant per annum rate of prepayment of 35.00% per annum for each succeeding year.
126

DESCRIPTION OF THE INSTRUMENTS
General
The issue of the Instruments will be the subject of a trust deed dated the Closing Date (the “Trust Deed”, which
expression includes such trust deed as from time to time modified in accordance with the provisions therein
contained and any deed or other document expressed to be supplemental thereto as from time to time so
modified) and made between the Issuer and BNY Corporate Trustee Services Limited (the “Trustee”, which
expression includes any further or other trustee of the Trust Deed) as trustee for, among others, the holders for
the time being of the Notes (the “Noteholders”) and the holders for the time being of the Residual Certificates
(the “Residual Certificateholders”, and together with the Noteholders, the “Instrumentholders”). Under the
terms of a master securitisation agreement dated on or about the Closing Date and the paying agency agreement
set out in schedule 8 thereof (the “Paying Agency Agreement”, which expression includes any modification
thereto) and made between, among others, the Issuer, the Trustee, The Bank of New York, London Branch as
agent bank (in such capacity, the “Agent Bank”, which expression includes any other agent bank appointed in
respect of the Instruments), as principal paying agent (in such capacity, the “Principal Paying Agent”, which
expression includes any other principal paying agent appointed in respect of the Instruments) and as currency
exchange agent (in such capacity, the “Exchange Agent”, which expression includes any other currency
exchange agent appointed in respect of the Notes) for the Instruments, BNY Financial Services PLC as Irish
paying agent (the “Irish Paying Agent”, which expression includes any other Irish paying agent appointed in
respect of the Instruments), The Bank of New York (Luxembourg) S.A. as registrar for the Instruments (the
“Registrar” which expression includes any other registrar appointed in respect of the Instruments) and as
transfer agent (together with any successor or additional transfer agent appointed from time to time in
connection with the Notes, the “Transfer Agents”) and The Bank of New York, New York Branch, as U.S.
paying agent (the “U.S. Paying Agent”, which expression includes any other U.S. paying agent appointed in
respect of the Instruments, and, together with the Principal Paying Agent and the Irish Paying Agent, the
“Paying Agents” which expression includes any further or other paying agents for the time being appointed in
respect of the Instruments), provision is made for the payment of principal and interest in respect of the
Instruments. The statements in the Conditions and the Residual Certificate Conditions include summaries of,
and are subject to, the detailed provisions of the Trust Deed and the Deed of Charge.
Copies of the Transaction Documents are available for inspection by the Instrumentholders upon reasonable
notice during normal business hours at the principal office for the time being of the Trustee, currently at One
Canada Square, London E14 5AL, England and at the specified offices of the Paying Agents. The
Instrumentholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the
provisions of each Transaction Document.
Global Instruments
Representation of Notes
The Principal Amount Outstanding and the interest element of the A1b Notes (a) which are Reg S Notes will be
represented by a global note (the “A1b Reg S Global Note”) in fully registered form, without interest coupons,
and (b) which are Rule 144A Notes will be represented by a global note (the “A1b Rule 144A Global Note”) in
fully registered form, without interest coupons, each of which shall be issued on the Closing Date and together
shall be for an aggregate principal amount of $200,000,000.
The Principal Amount Outstanding and the interest element of the A1c Notes (a) which are Reg S Notes will be
represented by a global note (the “A1c Reg S Global Note”) in fully registered form, without interest coupons,
and (b) which are Rule 144A Notes will be represented by a global note (the “A1c Rule 144A Global Note”) in
fully registered form, without interest coupons, each of which shall be issued on the Closing Date and together
shall be for an aggregate principal amount of £102,500,000.
The Principal Amount Outstanding and the interest element of the A2a Notes (a) which are Reg S Notes will be
represented by a global note (the “A2a Reg S Global Note”) in fully registered form, without interest coupons,
and (b) which are Rule 144A Notes will be represented by a global note (the “A2a Rule 144A Global Note”) in
fully registered form, without interest coupons, each of which shall be issued on the Closing Date and together
shall be for an aggregate principal amount of €64,500,000.
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The Principal Amount Outstanding and the interest element of the A2b Notes (a) which are Reg S Notes will be
represented by a global note (the “A2b Reg S Global Note”) in fully registered form, without interest coupons,
and (b) which are Rule 144A Notes will be represented by a global note (the “A2b Rule 144A Global Note”) in
fully registered form, without interest coupons, each of which shall be issued on the Closing Date and together
shall be for an aggregate principal amount of $100,000,000.
The Principal Amount Outstanding and the interest element of the A2c Notes (a) which are Reg S Notes will be
represented by a global note (the “A2c Reg S Global Note”) in fully registered form, without interest coupons,
and (b) which are Rule 144A Notes will be represented by a global note (the “A2c Rule 144A Global Note”) in
fully registered form, without interest coupons, each of which shall be issued on the Closing Date and together
shall be for an aggregate principal amount of £63,000,000.
The Principal Amount Outstanding and the interest element of the A3a Notes (a) which are Reg S Notes will be
represented by a global note (the “A3a Reg S Global Note”) in fully registered form, without interest coupons,
and (b) which are Rule 144A Notes will be represented by a global note (the “A3a Rule 144A Global Note”) in
fully registered form, without interest coupons, each of which shall be issued on the Closing Date and together
shall be for an aggregate principal amount of €215,000,000.
The Principal Amount Outstanding and the interest element of the A3c Notes (a) which are Reg S Notes will be
represented by a global note (the “A3c Reg S Global Note”) in fully registered form, without interest coupons,
and (b) which are Rule 144A Notes will be represented by a global note (the “A3c Rule 144A Global Note”) in
fully registered form, without interest coupons, each of which shall be issued on the Closing Date and together
shall be for an aggregate principal amount of £64,500,000.
The Principal Amount Outstanding and the interest element of the B1a Notes (a) which are Reg S Notes will be
represented by a global note (the “B1a Reg S Global Note”) in fully registered form, without interest coupons,
and (b) which are Rule 144A Notes will be represented by a global note (the “B1a Rule 144A Global Note”) in
fully registered form, without interest coupons, each of which shall be issued on the Closing Date and together
shall be for an aggregate principal amount of €15,000,000.
The Principal Amount Outstanding and the interest element of the B1c Notes (a) which are Reg S Notes will be
represented by a global note (the “B1c Reg S Global Note”) in fully registered form, without interest coupons,
and (b) which are Rule 144A Notes will be represented by a global note (the “B1c Rule 144A Global Note”) in
fully registered form, without interest coupons, each of which shall be issued on the Closing Date and together
shall be for an aggregate principal amount of £23,000,000.
The Principal Amount Outstanding and the interest element of the C1a Notes (a) which are Reg S Notes will be
represented by a global note (the “C1a Reg S Global Note”) in fully registered form, without interest coupons,
and (b) which are Rule 144A Notes will be represented by a global note (the “C1a Rule 144A Global Note”) in
fully registered form, without interest coupons, each of which shall be issued on the Closing Date and together
shall be for an aggregate principal amount of €25,000,000.
The Principal Amount Outstanding and the interest element of the C1c Notes (a) which are Reg S Notes will be
represented by a global note (the “C1c Reg S Global Note”) in fully registered form, without interest coupons,
and (b) which are Rule 144A Notes will be represented by a global note (the “C1c Rule 144A Global Note”) in
fully registered form, without interest coupons, each of which shall be issued on the Closing Date and together
shall be for an aggregate principal amount of £10,000,000.
The Principal Amount Outstanding and the interest element of the D1a Notes (a) which are Reg S Notes will be
represented by a global note (the “D1a Reg S Global Note”) in fully registered form, without interest coupons,
and (b) which are Rule 144A Notes will be represented by a global note (the “D1a Rule 144A Global Note”) in
fully registered form, without interest coupons, each of which shall be issued on the Closing Date and together
shall be for an aggregate principal amount of €25,500,000.
The Principal Amount Outstanding and the interest element of the E1c Notes will be represented by a global
note (the “E1c Reg S Global Note”) in fully registered form, without interest coupons, which shall be issued on
the Closing Date and together shall be for an aggregate principal amount of £5,525,000.
The Principal Amount Outstanding and the interest element of the ETc Notes will be represented by a global
note (the “ETc Reg S Global Note” and together with the E1c Reg S Global Note, the “E Global Notes”) in
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fully registered form, without interest coupons, which shall be issued on the Closing Date and together shall be
for an aggregate principal amount of £9,750,000.
The A1b Reg S Global Note, the A1c Reg S Global Note, the A2a Reg S Global Note, the A2b Reg S Global
Note, the A2c Reg S Global Note, the A3a Reg S Global Note, the A3c Reg S Global Note, the B1a Reg S
Global Note, the B1c Reg S Global Note, the C1a Reg S Global Note, the C1c Reg S Global Note, the D1a Reg
S Global Note, the E1c Reg S Global Note and the ETc Reg S Global Note are, together, referred to as the “Reg
S Global Notes”.
The A1b Rule 144A Global Note, the A1c Rule 144A Global Note, the A2a Rule 144A Global Note, the A2b
Rule 144A Global Note, the A2c Rule 144A Global Note, the A3a Rule 144A Global Note, the A3c Rule 144A
Global Note, the B1a Rule 144A Global Note, the B1c Rule 144A Global Note, the C1a Rule 144A Global
Note, the C1c Rule 144A Global Note and the D1a Rule 144A Global Note are, together, referred to as the
“Rule 144A Global Notes”.
The Reg S Global Notes and the Rule 144A Global Notes are together referred to as the “Global Notes”.
Representation of Residual Certificates
The Residual Certificates will be represented by a global certificate in fully registered form (the “Global
Residual Certificate” and together with the Global Notes, the “Global Instruments”).
Deposit of Global Instruments
Each of the Rule 144A Global Notes will be deposited on behalf of the subscribers of such Notes with The Bank
of New York, New York Branch as custodian (the “Custodian”) for The Depository Trust Company (“DTC”)
and registered in the name of DTC or its nominee on the date of issue of the Notes (the “Closing Date”).
Each of the Reg S Global Notes and the Global Residual Certificate will be deposited on behalf of the
subscribers of such Instruments with The Bank of New York as common depositary (the “Common
Depositary”) for Euroclear Bank S.A./N.V. (“Euroclear”) and Clearstream Banking, société anonyme
(“Clearstream, Luxembourg”) on the Closing Date registered in the name of its nominee. Reference to
Euroclear or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference
to any additional or alternative clearing system approved by the Issuer and the Trustee.
Transfers and Transfer Restrictions
Title to the Global Instruments and any definitive instruments issued in respect thereof will pass by transfer and
registration.
No Global Instrument will be exchangeable for Definitive Notes or Definitive Residual Certificates, except in
the limited circumstances described below. Each of the persons appearing from time to time in the records of
Euroclear, Clearstream, Luxembourg or DTC as the holder of an Instrument will be entitled to receive any
payment so made in respect of that Instrument in accordance with the respective rules and procedures of
Euroclear, Clearstream, Luxembourg, or DTC as appropriate.
For so long as Instruments are represented by a Global Instrument and such Global Instrument is held through
Euroclear, Clearstream, Luxembourg or DTC, as appropriate, such Instruments will be transferable in
accordance with the rules and procedures for the time being of Euroclear, Clearstream, Luxembourg or DTC, as
appropriate. See “Clearance and Settlement” below.
The Rule 144A Global Notes will bear a legend substantially identical to that appearing under “Transfer
Restrictions”, and neither such Rule 144A Global Notes nor any book-entry interest therein may be transferred
except in compliance with the transfer restrictions set forth in such legend and the regulations referred to in
Condition 1 (Form, Denomination and Title). Beneficial interests in a Rule 144A Global Note may be
transferred to a person who takes delivery in the form of a beneficial interest in the corresponding Reg S Global
Note, whether before or after the expiration of the Distribution Compliance Period, only upon receipt by the
Registrar of a written certification from the transferor (in the form provided in the Trust Deed) to the effect that
among other things, such transfer is being made outside the United States to a non-U.S. person in an offshore
transaction in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act (if available) and
129

that, if such transfer occurs prior to the expiration of the Distribution Compliance Period, the interest transferred
will be held immediately thereafter through Euroclear or Clearstream, Luxembourg.
A beneficial interest in a Reg S Global Note (other than the E Notes) may be transferred to a person who takes
delivery in the form of a beneficial interest in the corresponding Rule 144A Global Note only upon receipt by
the Registrar of a written certificate from the transferor (in the form provided in the Trust Deed) to the effect
that, among other things, such transfer is being made to a person whom the transferor reasonably believes is a
Qualified Institutional Buyer.
Any beneficial interest in a Reg S Global Note (other than the E Notes) that is transferred to a person who takes
delivery in the form of a beneficial interest in the corresponding Rule 144A Global Note will, upon transfer,
cease to be represented by a beneficial interest in such Reg S Global Note and will become represented by a
beneficial interest in such Rule 144A Global Note and, accordingly, will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such Rule 144A Global Note. Any
beneficial interest in a Rule 144A Global Note that is transferred to a person who takes delivery in the form of a
beneficial interest in a corresponding Reg S Global Note will, upon transfer, cease to be represented by a
beneficial interest in such Rule 144A Global Note and will become represented by a beneficial interest in such
Reg S Global Note and, accordingly, will thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such Reg S Global Note.
A person acquiring a beneficial interest in a Rule 144A Global Note shall be deemed to have agreed to be bound
by the transfer restrictions applicable to such Note and may be requested to agree in writing to be so bound.
These transfer restrictions are set forth in the section entitled “Transfer Restrictions”.
Clearance and Settlement
Ownership of beneficial interests in the Global Instruments will be limited to persons that have accounts with
Euroclear, Clearstream, Luxembourg or DTC (“participants”) or persons that hold interests in the Global Notes
through participants (“indirect participants”), including, as applicable, banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with Euroclear, Clearstream, Luxembourg or
DTC, either directly or indirectly. Indirect participants shall also include persons that hold beneficial interests
through such indirect participants. Euroclear, Clearstream, Luxembourg and DTC, as applicable, will credit the
participants’ accounts with the respective amount of Notes beneficially owned by such participants on each of
their respective book-entry registration and transfer systems. The accounts to be credited shall be designated by
the Lead Manager. Beneficial interests in the Global Notes will be shown on, and transfers of book-entry
interests or the interest therein will be effected only through, records maintained by Euroclear, Clearstream,
Luxembourg or DTC (with respect to the interests of their participants) and on the records of participants or
indirect participants (with respect to the interests of their indirect participants). The laws of some jurisdictions
or other applicable rules may require that certain purchasers of securities take physical delivery of such
securities in definitive form. The foregoing limitations may therefore impair the ability to own, transfer or
pledge book-entry interests.
Except as set forth below under “Issue of Instruments in Definitive Form”, participants or indirect participants
will not be entitled to have Instruments registered in their names, will not receive or be entitled to receive
physical delivery of Instruments in definitive registered form and will not be considered the holders thereof
under the Trust Deed. Accordingly, each person holding a beneficial interest in the Global Instruments must
rely on the rules and procedures of Euroclear, Clearstream, Luxembourg or DTC, as the case may be, and
indirect participants must rely on the procedures of the participants or indirect participants through which such
person owns its interest in the relevant Global Instruments, to exercise any rights and obligations of an
Instrumentholder under the Trust Deed.
Unless beneficial interests in the Global Notes are exchanged for Notes in definitive form (“Definitive Notes”)
or beneficial interests in the Global Residual Certificate are exchanged for Residual Certificates in definitive
form (“Definitive Residual Certificates” and together with the Definitive Notes, the “Definitive
Instruments”), the Global Instruments registered in the name of a nominee for DTC or the Common Depositary
for Euroclear and Clearstream, Luxembourg, as the case may be, may not be transferred except (a) in the case of
the Global Notes, to reduce the Principal Amount Outstanding of a Global Note of one class and to increase the
Principal Amount Outstanding of the corresponding Global Note of the same class as provided in the regulations
concerning transfers of the Global Notes set out in Condition 1 (Form, Denomination and Title) and (b) as a
whole (i) in the case of the Rule 144A Global Notes, by DTC to a nominee of DTC or by a nominee of DTC to
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DTC or another nominee of DTC, or by DTC or any such nominee to a successor of DTC, and (ii) in the case of
the Reg S Global Notes and the Global Residual Certificate, by Euroclear or Clearstream, Luxembourg to the
Common Depositary or by the Common Depositary to Euroclear or Clearstream, Luxembourg, or another
nominee of Euroclear and Clearstream, Luxembourg or by Euroclear and Clearstream, Luxembourg or any such
nominee to a successor of Euroclear or Clearstream, Luxembourg, as the case may be, or a nominee of such
successor.
Investors may hold beneficial interests in respect of the Rule 144A Global Notes directly through DTC (if they
are participants in such system), or indirectly through organisations which are participants in such system. All
beneficial interests in the Rule 144A Global Notes will be subject to the procedures and requirements of DTC.
Investors may hold beneficial interests in respect of the Reg S Global Notes and the Global Residual Certificate
directly through Euroclear or Clearstream, Luxembourg, if they are account holders in such systems, or
indirectly through organisations which are account holders in such systems. After the expiration of the
Distribution Compliance Period (as defined below) but not earlier, investors may also hold such beneficial
interests through organisations, other than Euroclear or Clearstream, Luxembourg, that are participants in the
DTC system. Euroclear and Clearstream, Luxembourg will hold beneficial interests in each Reg S Global Note
and the Global Residual Certificate on behalf of their account holders through securities accounts in the
respective account holders’ name on Euroclear’s and Clearstream, Luxembourg’s respective book-entry
registration and transfer system.
Although DTC, Euroclear and Clearstream, Luxembourg have agreed to certain procedures to facilitate transfers
of beneficial interests in the Global Instruments among participants of DTC and account holders of Euroclear
and Clearstream, Luxembourg, they are under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. None of the Issuer, the Trustee or any of their respective
agents will have any responsibility for the performance by DTC, Euroclear or Clearstream, Luxembourg or their
respective participants or account holders of their respective obligations under the rules and procedures
governing their operations.
Information Regarding DTC, Euroclear and Clearstream, Luxembourg
DTC, Euroclear and Clearstream, Luxembourg have advised the Issuer as follows:
(a)
(b)
DTC - DTC is a limited-purpose trust company organised under the New York Banking Law, a
“banking organisation” within the meaning of the New York Banking Law, a member of the Federal
Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial
Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities of its participants and to facilitate the clearance and settlement
of transactions among its participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement of securities
certificates. DTC participants include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organisations, some of whom (and/or their representative) own DTC.
Euroclear and Clearstream, Luxembourg - Euroclear and Clearstream, Luxembourg each hold
securities for their account holders and facilitate the clearance and settlement of securities transactions
by electronic book-entry transfer between their respective account holders, thereby eliminating the
need for physical movements of certificates and any risk from lack of simultaneous transfers of
securities. Euroclear and Clearstream, Luxembourg each provide various services including
safekeeping, administration, clearance and settlement of internationally traded securities and securities
lending and borrowing. Euroclear and Clearstream, Luxembourg each also deal with domestic
securities markets in several countries through established depository and custodial relationships. The
respective systems of Euroclear and Clearstream, Luxembourg have established an electronic bridge
between their two systems across which their respective account holders may settle trades with each
other. Account holders in both Euroclear and Clearstream, Luxembourg are world-wide financial
institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to both Euroclear and Clearstream, Luxembourg is available to other
institutions that clear through or maintain a custodial relationship with an account holder of either
system. An account holder’s overall contractual relations with either Euroclear or Clearstream,
Luxembourg are governed by the respective rules and operating procedures of Euroclear or
Clearstream, Luxembourg and any applicable laws. Both Euroclear and Clearstream, Luxembourg act
131

under such rules and operating procedures only on behalf of their respective account holders, and have
no record of or relationship with persons holding through their respective account holders.
The Issuer understands that under existing industry practices, if either the Issuer or the Trustee requests any
action of owners of beneficial interests in Global Instruments or if an owner of a beneficial interest in a Global
Instrument desires to give instructions or take any action that a holder is entitled to give or take under the Trust
Deed, Euroclear, Clearstream, Luxembourg or DTC, as the case may be, would authorise the participants
owning the relevant beneficial interest in the Global Instrument to give instructions or take such action, and such
participants would authorise indirect participants to give or take such action or would otherwise act upon the
instructions of such indirect participants.
Payments
Principal and interest on the Notes represented by a Global Note will be payable to the registered owner thereof
and such registered owner will be the only person entitled to receive payments in respect of such Global Note
and the Issuer will be discharged by payment to, or to the order of the registered owner of such Global Notes in
respect of each amount so paid. No person other than the registered owner of the Notes represented by a Global
Note shall have any claim against the Issuer in respect of any payment due on such Global Note.
All amounts payable to DTC or its nominee as registered holder of the Rule 144A Global Notes shall be paid by
transfer to the sterling account, euro account or dollar account of the Exchange Agent (as applicable) on behalf
of DTC or its nominee for conversion into and payment in U.S. Dollars or in the currency of the relevant Rule
144A Global Note, as applicable, in accordance with the provisions of the Paying Agency Agreement.
An RC Distribution on the Residual Certificates represented by Definitive Residual Certificates will be payable
to the Residual Certificateholders in whose name the Definitive Residual Certificates are registered on the
Register maintained by the Registrar at its specified office. RC Distributions on the Residual Certificates
represented by the Global Residual Certificate will be payable to the person in whose name the Global Residual
Certificate is registered at the specified office of the Registrar.
Members of, or participants in, DTC, Euroclear and Clearstream, Luxembourg as well as any other persons on
whose behalf such participants may act will have no rights under the Trust Deed with respect to the Rule 144A
Global Notes, the Reg S Global Notes and the Global Residual Certificate held on their behalf by the Custodian
(with respect to the Rule 144A Global Notes) and by the Common Depositary for Euroclear and Clearstream,
Luxembourg (with respect to the Reg S Global Notes and the Global Residual Certificate). DTC (with respect
to the Rule 144A Global Notes) and the Common Depositary for Euroclear and Clearstream, Luxembourg (with
respect to the Reg S Global Notes and the Global Residual Certificate) or, in each case, their nominees, may be
treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the holder of such Rule 144A
Global Notes or Reg S Global Notes or the Global Residual Certificate, as the case may be, for the purposes of
payment.
The Issuer expects that in accordance with the rules and procedures for the time being of Euroclear or, as the
case may be, Clearstream, Luxembourg, after receipt of any payment in respect of a Reg S Global Note or the
Global Residual Certificate held by the Common Depositary for Euroclear and Clearstream, Luxembourg, the
respective systems will promptly credit their participants’ accounts with payments in amounts proportionate to
their respective beneficial interests in such Reg S Global Note and the Global Residual Certificate as shown in
the records of Euroclear or of Clearstream, Luxembourg. The Issuer expects that in the case of DTC, upon
receipt of any payment in respect of a Rule 144A Global Note, DTC will promptly credit its participants’
accounts with payments in amounts proportionate to their respective beneficial interests in such Rule 144A
Global Note as shown on the records of DTC. The Issuer expects that payments by participants to owners of
beneficial interests in a Global Note held through such participants or indirect participants will be governed by
standing customer instructions and customary practices, as is now the case with the securities held for the
accounts of customers registered in the names of nominees for such customers (with respect to the Global
Instruments). Such payments will be the responsibility of such participants or indirect participants. None of the
Issuer, the Trustee or any of their respective agents will have any responsibility or liability for any aspect of the
records relating to or payments made on account of a participant’s ownership of beneficial interests in such
Global Instruments or for maintaining, supervising or reviewing any records relating to a participant’s
ownership of beneficial interests in such Global Instruments.
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Issue of Instruments in Definitive Form
If (i) the Notes become due and repayable pursuant to Condition 9(a) (Events of Default) or the circumstances
referred to in Residual Certificate Condition 9 (Events of Default) occurs or (ii) in the case of a Reg S Global
Note and the Global Residual Certificate, either Euroclear or Clearstream, Luxembourg is closed for business
for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces an
intention permanently to cease business or has in fact done so and no successor clearing system acceptable to
the Trustee is available, or (iii) in the case of the Rule 144A Global Notes, DTC has notified the Issuer that it is
at any time unwilling or unable to continue as the holder with respect to the Rule 144A Global Notes, or is at
any time unwilling or unable to continue as, or ceases to be a clearing agency under the Exchange Act and a
successor to DTC registered as a clearing agency under the Exchange Act is not appointed by the Issuer within
90 days of such notification or cessation or (iv) as a result of any amendment to, or change in (a) the laws or
regulations of the United Kingdom (or of any political sub-division thereof) or of any authority therein or
thereof having power to tax or (b) the interpretation or administration of such laws or regulations, which
becomes effective on or after the Closing Date, the Issuer is or the Paying Agents are or will be required to
make any deduction or withholding from any payment in respect of the Instruments which would not be
required were the Instruments in definitive form, then the Issuer will, within 30 days of the occurrence of the
relevant event, issue serially numbered Instruments, as applicable, in definitive form in exchange for the whole
outstanding interest in (1) the Reg S Global Notes and the Global Residual Certificate, (with respect to item (i),
(ii) and (iv) above) and (2) the Rule 144A Global Notes (with respect to item (i), (iii) and (iv) above) provided
that in no event will the Instruments be issued in definitive bearer form.
Any notice to Instrumentholders shall be deemed to have been duly given if published in accordance with
Condition 14 (Notice to Noteholders) and Residual Certificate Condition 13 (Notice to Residual
Certificateholders).
133

TERMS AND CONDITIONS OF THE NOTES
If Notes in definitive form were to be issued, the terms and conditions (subject to amendment and completion)
set out on each Note would be as set out below. While the Notes remain in global form, the same terms and
conditions govern such Notes, except to the extent that they are appropriate only to Notes in definitive form.
These terms and conditions are subject to the detailed provisions of the Trust Deed and the Deed of Charge.
The $200,000,000 Class A1b Mortgage Backed Floating Rate Notes due 2027 (the “A1b Notes”), the
£102,500,000 Class A1c Mortgage Backed Floating Rate Notes due 2027 (the “A1c Notes” and, together with
the A1b Notes, the “A1 Notes”), the €64,500,000 Class A2a Mortgage Backed Floating Rate Notes due 2045
(the “A2a Notes”), the $100,000,000 Class A2b Mortgage Backed Floating Rate Notes due 2045 (the “A2b
Notes”), the £63,000,000 Class A2c Mortgage Backed Floating Rate Notes due 2045 (the “A2c Notes” and,
together with the A2a Notes and the A2b Notes, the “A2 Notes”), the €215,000,000 Class A3a Mortgage
Backed Floating Rate Notes due 2045 (the “A3a Notes”), the £64,500,000 Class A3c Mortgage Backed Floating
Rate Notes due 2045 (the “A3c Notes” and together with the A3a Notes, the “A3 Notes”, the A1 Notes, the A2
Notes and the A3 Notes being, together, the “A Notes”), the €15,000,000 Class B1a Mortgage Backed Floating
Rate Notes due 2045 (the “B1a Notes”), the £23,000,000 Class B1c Mortgage Backed Floating Rate Notes due
2045 (the “B1c Notes”, and, together with the B1a Notes, the “B Notes”), the €25,000,000 Class C1a Mortgage
Backed Floating Rate Notes due 2045 (the “C1a Notes”), the £10,000,000 Class C1c Mortgage Backed Floating
Rate Notes due 2045 (the “C1c Notes”, and, together with the C1a Notes, the “C Notes”), the €25,500,000
Class D1a Mortgage Backed Floating Rate Notes due 2045 (the “D1a Notes”), the £5,525,000 Class E1c
Mortgage Backed Floating Rate Notes due 2045 (the “E1c Notes”) and the £9,750,000 Class ETc Mortgage
Backed Floating Rate Notes due 2045 (the “ETc Notes” and, together with the E1c Notes, the “E Notes”). The
D1a Notes are also referred to as the “D Notes”. The ETc Notes are also referred to in these Conditions as the
“Revenue Backed Notes”. All Notes other than the Revenue Backed Notes are collectively referred to as the
“Collateral Backed Notes”. The Notes will be issued by Eurosail-UK 2007-3BL plc (the “Issuer”) on or about
16 July 2007 (the “Closing Date”).
The A Notes, the B Notes, the C Notes, the D Notes and the E Notes are referred to as the “Notes” and any
reference below to a “Class” of Notes or a “Class” of holders of Notes shall be a reference to the A1b Notes, the
A1c Notes, the A2a Notes, the A2b Notes, the A2c Notes, the A3a Notes, the A3c Notes, the A1 Notes, the A2
Notes, the A3 Notes, the A Notes, the B1a Notes, the B1c Notes, the B Notes, the C1a Notes, the C1c Notes, the
C Notes, the D1a Notes, the D Notes, the E1c Notes, the ETc Notes and the E Notes or to the holders thereof
(the “Noteholders”). The Notes will be constituted by a trust deed (as amended, restated and/or supplemented
from time to time, the “Trust Deed”) to be dated on or about the Closing Date between the Issuer and BNY
Corporate Trustee Services Limited as trustee (the “Trustee”, which expression includes all persons for the time
being trustee or trustees appointed pursuant to the Trust Deed) for the holders for the time being of the Notes
and are subject to a master securitisation agreement dated on or about the Closing Date and the paying agency
agreement set out in schedule 8 thereof (the “Paying Agency Agreement”, which expression includes any
modification thereto) between, among others, the Issuer, The Bank of New York, London Branch as agent bank
(in such capacity, the “Agent Bank” which expression includes any successor agent bank appointed from time
to time in connection with the Notes), as principal paying agent (in such capacity, the “Principal Paying
Agent” which expression includes any successor principal paying agent appointed from time to time in
connection with the Notes) and as currency exchange agent for the Notes (in such capacity, the “Exchange
Agent”, which expression includes any successor currency exchange agent appointed from time to time in
connection with the Notes), BNY Financial Services PLC as Irish paying agent (in such capacity, the “Irish
Paying Agent” which expression includes any successor Irish paying agent appointed from time to time in
connection with the Notes), The Bank of New York, New York Branch as U.S. paying agent (in such capacity,
the “U.S. Paying Agent” which expression includes any successor U.S. paying agent appointed from time to
time in connection with the Notes and together with the Principal Paying Agent, the Irish Paying Agent and each
other paying agent and successor paying agent appointed from time to time in connection with the Notes, the
“Paying Agents”), The Bank of New York (Luxembourg) S.A. as registrar for the Notes (in such capacity, the
“Registrar” which expression includes any successor registrar appointed from time to time in connection with
the Notes) and as transfer agent for the Notes (together with any successor or additional transfer agent appointed
from time to time in connection with the Notes, the “Transfer Agents”) and the Trustee. The security for the
Notes is created pursuant to, and on the terms set out in, a deed of charge (as amended, restated and/or
supplemented from time to time, the “Deed of Charge”) to be dated on or about the Closing Date between,
among others, the Issuer and the Trustee.
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Copies of the Transaction Documents are available for inspection by the Instrumentholders upon reasonable
notice during normal business hours at the principal office for the time being of the Trustee, being at the Closing
Date at One Canada Square, London E14 5AL and at the specified offices for the time being of the Paying
Agents.
The statements in these conditions relating to the Notes (the “Conditions”) include summaries of, and are
subject to, the detailed provisions of the Trust Deed, the Deed of Charge, the Paying Agency Agreement and the
other Transaction Documents. The Noteholders are entitled to the benefit of, are bound by, and are deemed to
have notice of, all the provisions of the Trust Deed, the Paying Agency Agreement, the Deed of Charge and
each other Transaction Document.
Capitalised words and expressions which are used in these Conditions, shall, unless otherwise defined below,
have the same meanings as those given in the Master Definitions Schedule set out in schedule 1 (Master
Definitions Schedule) of the Master Securitisation Agreement dated on or about the Closing Date between,
among others, the Issuer, the Mortgage Administrator, the Trustee, the Principal Paying Agent, the Irish Paying
Agent and the Sellers and the following capitalised words and expressions shall have the following meanings:
“A1b Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the A1b Notes entered into by the Issuer on or about the Closing Date under the A Currency Swap Agreement,
and any additional and/or replacement currency and interest rate swap transaction entered into by the Issuer
from time to time in connection with the A1b Notes.
“A2a Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the A2a Notes entered into by the Issuer on or about the Closing Date under the A Currency Swap Agreement,
and any additional and/or replacement currency and interest rate swap transaction entered into by the Issuer
from time to time in connection with the A2a Notes.
“A2b Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the A2b Notes entered into by the Issuer on or about the Closing Date under the A Currency Swap Agreement,
and any additional and/or replacement currency and interest rate swap transaction entered into by the Issuer
from time to time in connection with the A2b Notes.
“A3a Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the A3a Notes entered into by the Issuer on or about the Closing Date under the A Currency Swap Agreement,
and any additional and/or replacement currency and interest rate swap transaction entered into by the Issuer
from time to time in connection with the A3a Notes.
“Actual Redemption Funds” means, at any Determination Date, an amount calculated as the aggregate of:
(a)
(b)
(c)
(d)
the amount standing to the credit of the Principal Ledger;
the amount (if any) calculated on that Determination Date to be the amount by which the Principal
Deficiency is expected to be reduced by the application of the Available Revenue Fund on the
immediately succeeding Interest Payment Date;
the amount in respect of principal (if any) to be received by the Issuer from the Currency Swaps
Counterparty under the Currency Swap Agreements on the immediately succeeding Interest Payment
Date; and
(as at the first Determination Date only) the amount (if any) standing to the credit of the Prefunding
Ledger and the Newly-Originated Loans Ledger on the first Determination Date which is not allocated
for the purpose of purchasing the Prefunded Loans and the Newly-Originated Loans, respectively, on
or before the first Interest Payment Date.
“Affiliate” means, in relation to any person, any other person who, directly or indirectly is in control of, or
controlled by, or is under common control with, such person (and for the purposes of this definition, “control”
of a person means the power, direct or indirect (i) to vote more than 50 per cent. of the securities having
ordinary voting power for the election of directors of such person or (ii) to direct or cause the direction of the
management and policies of such person, whether by contract or otherwise).
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“Appointee” means any attorney, manager, agent, delegate, nominee, custodian, receiver, administrative
receiver or other person appointed by the Trustee under the Trust Deed or the Deed of Charge.
“Apportionment Factor” means in relation to (a) the first Interest Payment Date, the number of days in the first
Interest Period divided by 365; and (b) any other Interest Payment Date, 0.25.
“Available Revenue Ledger” means the Ledger of such name created by the Cash/Bond Administrator
pursuant to the terms of the Cash/Bond Administration Agreement.
“B1a Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the B1a Notes entered into by the Issuer on or about the Closing Date under the B Currency Swap Agreement,
and any additional and/or replacement currency and interest rate swap transaction entered into by the Issuer
from time to time in connection with the B1a Notes.
“Basic Terms Modification” means, inter alia: (a) a modification to the date of maturity of the Notes; (b) a
modification which would have the effect of changing any day for payment of interest in respect of the Notes;
(c) changes to the amount of principal payable in respect of the Notes; (d) the alteration of the Rate of Interest
applicable in respect of the Notes; (e) the alteration of the majority required to pass an Extraordinary Resolution;
(f) the alteration of the currency of payment of the Notes; or (g) any alteration of the priority of redemption of
the Notes.
“BBR Swap Counterparty Default Payment” means amounts payable by the Issuer to the BBR Swap
Counterparty in connection with the termination of the BBR Swap Agreement where:
(a)
(b)
the BBR Swap Counterparty is a Defaulting Party (as such term is defined in the BBR Swap
Agreement); or
where the BBR Swap Counterparty is the sole Affected Party (as such term is defined in the BBR Swap
Agreement).
“BBR Swap Net Amount” means, on any Interest Payment Date, an amount payable by the Issuer to the BBR
Swap Counterparty under the BBR Swap Agreement which is the amount (if any) by which:
(a)
an amount calculated by applying the aggregate of the Weighted Average BBR Rate and a margin to
the BBR Notional Amount,
exceeds
(b)
an amount calculated by applying Note Sterling LIBOR in respect of the immediately preceding
Interest Period to the BBR Notional Amount.
“Business Day” means a day (other than Saturday or Sunday) on which commercial banks and foreign
exchange markets settle payments and are open for general business (including dealings in foreign exchange and
foreign currency deposits) in London and New York and which is a TARGET Business Day.
“C1a Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the C1a Notes entered into by the Issuer on or about the Closing Date under the C Currency Swap Agreement,
and any additional and/or replacement currency and interest rate swap transaction entered into by the Issuer
from time to time in connection with the C1a Notes.
“Currency Swaps Counterparty Default Payment” means amounts payable by the Issuer to the Currency
Swaps Counterparty in connection with the termination of any Currency Swap Agreement where:
(a)
(b)
the Currency Swaps Counterparty is a Defaulting Party (as such term is defined in the relevant
Currency Swap Agreement); or
where the Currency Swaps Counterparty is the sole Affected Party (as such term is defined in the
relevant Currency Swap Agreement).
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“D1a Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the D1a Notes entered into by the Issuer on or about the Closing Date under the D Currency Swap Agreement,
and any additional and/or replacement currency and interest rate swap transaction entered into by the Issuer
from time to time in connection with the D1a Notes.
“Determination Date” means the third Business Day of the calendar month in which an Interest Payment Date
occurs.
“Excess Swap Collateral” means an amount equal to the value of the collateral (or the applicable part of any
collateral) provided by the Bullet Cap Counterparty, the Fixed/Floating Swap Counterparty, the Currency Swaps
Counterparty or the BBR Swap Counterparty to the Issuer in accordance with the Bullet Cap Agreement, the
Fixed/Floating Swap Agreement, a Currency Swap Agreement or the BBR Swap Agreement which:
(a)
(b)
is in excess of the termination amount that the Bullet Cap Counterparty, the Fixed/Floating Swap
Counterparty, the Currency Swaps Counterparty or the BBR Swap Counterparty would otherwise be
required to pay to the Issuer under the Bullet Cap Agreement, the Fixed/Floating Swap Agreement, the
relevant Currency Swap Agreement or the BBR Swap Agreement; or
the Bullet Cap Counterparty, the Fixed/Floating Swap Counterparty, the Currency Swaps Counterparty
or the BBR Swap Counterparty is entitled to under the Bullet Cap Agreement, the Fixed/Floating Swap
Agreement, the relevant Currency Swap Agreement or the BBR Swap Agreement.
“Extraordinary Resolution” means (a) a resolution passed at a meeting of the relevant Class or, if two or more
Classes are voting on the resolution, at a meeting of the relevant Classes or separate meetings of the relevant
Classes, as the case may be, duly convened and held in accordance with the Trust Deed by a majority at each
such meeting consisting of not less than 75 per cent. of the persons voting thereat upon a show of hands or if a
poll is duly demanded by a majority consisting of not less than 75 per cent. of the votes cast on such poll or (b) a
resolution in writing signed by or on behalf of all the Noteholders of the relevant Class or Classes, as the case
may be, provided that a resolution to amend the definition of Permitted Activities or to request that the Issuer
undertake any action that is not Permitted Activities shall be required to be passed by holders of not less than 50
per cent. of each of (x) the aggregate Sterling Equivalent Principal Amount Outstanding of the Notes and (y) the
Total Number Outstanding of the Residual Certificates.
“Fixed/Floating Swap Counterparty Default Payment” means amounts payable by the Issuer to the
Fixed/Floating Swap Counterparty in connection with the termination of the Fixed/Floating Swap Agreement
where:
(a)
(b)
the Fixed/Floating Swap Counterparty is a Defaulting Party (as such term is defined in the
Fixed/Floating Swap Agreement); or
where the Fixed/Floating Swap Counterparty is the sole Affected Party (as such term is defined in the
Fixed/Floating Swap Agreement).
“Fixed/Floating Swap Net Amount” means, on any Interest Payment Date, an amount payable by the Issuer to
the Fixed/Floating Swap Counterparty under the Fixed/Floating Swap which is the amount (if any) by which:
(a)
an amount calculated by applying the Weighted Average Fixed Rate to the Fixed/Floating Notional
Amount,
exceeds
(b)
an amount calculated by applying the aggregate of (i) Note Sterling LIBOR in respect of the
immediately preceding Interest Period and (ii) the applicable Asset Yield (on an Actual/365 (Fixed)
basis) to the Fixed/Floating Notional Amount.
“Independent Director” means a duly appointed member of the board of directors of the relevant entity who
should not have been, at the time of such appointment, or at any time in the preceding five years, a direct or
indirect legal or beneficial owner in such entity or any of its affiliates (excluding de minimus ownership
interests).
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“Interest Determination Date” means in the case of the Dollar Notes a day which is two London Business
Days before the first day of the Interest Period to which the Rate of Interest shall apply, in the case of the
Sterling Notes the first day of the Interest Period to which the Rate of Interest shall apply, and in the case of the
Euro Notes a day which is two TARGET Business Days before the first day of the Interest Period to which the
Rate of Interest shall apply.
“Interest Period” means the period from (and including) an Interest Payment Date (or the Closing Date) to (but
excluding) the next (or first) Interest Payment Date.
“Junior Notes” means the B Notes, the C Notes, the D Notes and/or the E Notes.
“Liquidity Drawn Amount” means, on any Determination Date:
(a)
(b)
at any time prior to a Liquidity Drawdown Date, the amount then drawn under the Liquidity Facility
and not repaid together with all accrued interest up to (but excluding) the related Interest Payment Date
pursuant to the Liquidity Facility Agreement; and
at any time on or after a Liquidity Drawdown Date, the difference between the Liquidity Maximum
Amount and the amount standing to the credit of the Liquidity Ledger on that Determination Date.
“London Business Day” means a day (other than Saturday or Sunday) on which commercial banks and foreign
exchange markets settle payments and are open for general business (including dealings in foreign exchange and
foreign currency deposits) in London.
“Most Senior Class of Notes” means, at any time:
(a)
(b)
(c)
(d)
(e)
the A Notes; or
if no A Notes are then outstanding, the B Notes; or
if no A Notes or B Notes are then outstanding, the C Notes; or
if no A Notes or B Notes or C Notes are then outstanding, the D Notes; or
if no A Notes or B Notes or C Notes or D Notes are then outstanding, the E Notes.
“Note EURIBOR” means, in relation to an Interest Period, the Rate of Interest applicable to the Euro Notes as
determined in accordance with Condition 4(c) (Rate of Interest), less the Relevant Margin.
“Note Sterling LIBOR” means, in relation to an Interest Period, the Rate of Interest applicable to the Sterling
Notes as determined in accordance with Condition 4(c) (Rate of Interest), less the Relevant Margin.
“Note USD-LIBOR” means, in relation to an Interest Period, the Rate of Interest applicable to the Dollar Notes
as determined in accordance with Condition 4(c) (Rate of Interest), less the Relevant Margin.
“Permitted Activities” means the activities contemplated in the Transaction Documents as being undertaken by
the Issuer, including (i) the acquisition of the Loans, the Collateral Security and their Related Rights; (ii) the
appointment of entities to undertake the administration and servicing of the Loans, the Collateral Security and
their Related Rights and the collection and administration of monies relating thereto in accordance with the
terms of the Transaction Documents; (iii) the issue of the Instruments, the granting and maintaining of security
therefor, the listing and rating thereof and the making of any Basic Terms Modifications thereto; (iv) the
entering into of borrowings, including under the Liquidity Facility Agreement; (v) the investment of collections
from the Loans together with any proceeds retained by the Issuer from the issue of the Instruments and any
borrowings and (vi) the payment of liabilities, maintenance of hedging and administrative functions required to
be undertaken in respect of the Instruments.
“Performance Conditions” shall be satisfied on any Interest Payment Date if:
(a)
the Trigger Condition is satisfied;
138

(b)
(c)
at least 50 per cent. of the Sterling Equivalent Principal Amount Outstanding of the A Notes on the
Closing Date have been redeemed; and
the A1 Notes and the A2 Notes have been fully redeemed.
“Principal Deficiency” means the amounts recorded as a debit on each principal deficiency ledger established
by or on behalf of the Issuer pursuant to the Cash/Bond Administration Agreement.
“RC Senior Distribution” means, in respect of any RC Distribution arising in respect of any Residual
Certificate, an amount equal to such RC Distribution multiplied by that fraction of the Residual Revenue from
which such RC Distribution arises formed by amounts arising under item (xviii) of the Pre-Enforcement Priority
of Payments or item (x) of the Post-Enforcement Priority of Payments.
“Relevant Exchange Rate” means in relation to a Note or Class of Notes the exchange rate specified in the
relevant Currency Swap Agreement relating to such Note or Class of Notes or, if that Currency Swap
Agreement has terminated, the applicable spot rate.
“Relevant Margin” means, in respect of any class of Notes, the per cent. per annum set out in the following
table:
Class A1b Notes 0.07
Class A1c Notes 0.08
Class A2a Notes 0.13
Class A2b Notes 0.13
Class A2c Notes 0.13
Class A3a Notes 0.17
Class A3c Notes 0.17
Class B1a Notes 0.30
Class B1c Notes 0.30
Class C1a Notes 0.55
Class C1c Notes 0.55
Class D1a Notes 1.35
Class E1c Notes 4.00
Class ETc Notes 4.00
“Reserve Fund Required Amount”, means:
(a)
(b)
in respect of each Interest Payment Date from (and including) the Closing Date to (and including) the
Interest Payment Date falling in June 2010, £2,600,000;
in respect of the Interest Payment Date falling in September 2010 and each subsequent Interest
Payment Date:
(i)
if the Reserve Fund Amortisation Conditions are satisfied on such Interest Payment Date, the
greater of:
(A)
(B)
0.80 per cent. of the aggregate Sterling Equivalent Principal Amount Outstanding of
the Collateral Backed Notes as at the immediately preceding Interest Payment Date
after the application of the Available Revenue Fund and the Actual Redemption
Funds on such Interest Payment Date; and
0.30 per cent. of the initial aggregate Sterling Equivalent Principal Amount
Outstanding of the Collateral Backed Notes; and
(ii)
if the Reserve Fund Amortisation Conditions are not satisfied on such Interest Payment Date,
the Reserve Fund Required Amount as at the immediately preceding Interest Payment Date,
and, for the avoidance of doubt, the Reserve Fund Required Amount shall never be greater than £2,600,000.
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The “Reserve Fund Amortisation Conditions” shall be satisfied on any Interest Payment Date if:
(a)
(b)
the Trigger Condition is satisfied; and
at least 50 per cent. of the aggregate Sterling Equivalent Principal Amount Outstanding of the A Notes
on the Closing Date have been redeemed.
“Residual Revenue” means, as of any Interest Payment Date, an amount equal to the aggregate of:
(a)
(b)
(c)
the amount available at item (xviii) of the Pre-Enforcement Priority of Payments (or item (x) of the Post
Enforcement Priority of Payments as applicable);
the balance of the Available Revenue Fund (after application of items (i) to (xxiii) of the Pre-
Enforcement Priority of Payments) (or after application of items (i) to (xiii) of the Post Enforcement
Priority of Payments as applicable); and
the amounts standing to the credit of the Prepayment Charges Ledger as of the close of business on the
preceding Business Day.
“Sterling Equivalent Principal Amount Outstanding” means (a) in relation to a Note or Class of Notes which
is denominated in a currency other than sterling, the sterling equivalent of the Principal Amount Outstanding of
such Note or Class of Notes ascertained using the Relevant Exchange Rate relating to such Notes, and (b) in
relation to any other Note (or Class of Notes), the Principal Amount Outstanding of such Note (or Class of
Notes).
“Swap Replacement Premium” means (i) in respect of the Currency Swaps Counterparty, any premium or
other amount received by the Issuer from a replacement currency swaps counterparty providing a replacement
currency swap transaction, (ii) in respect of the Fixed/Floating Swap Counterparty, any premium or other
amount received by the Issuer from a replacement fixed/floating swap counterparty providing a replacement
fixed/floating swap transaction, and (iii) in respect of the BBR Swap Counterparty, any premium or other
amount received by the Issuer from a replacement fixed/floating swap counterparty providing a replacement
BBR swap transaction.
“TARGET Business Day” means a day on which the Trans-European Automated Real-time Gross Settlement
Express Transfer (TARGET) system is open.
“Total Number Outstanding” means 10,000.
“Transaction Documents” means the Trust Deed, the Deed of Charge, the Paying Agency Agreement, the
Mortgage Administration Agreement, the Cash/Bond Administration Agreement, the Mortgage Sale Agreement,
the Liquidity Facility Agreement, the Collection Accounts Declarations of Trust, the Post Enforcement Call
Option Agreement, the Investment Administration Agreement, the Bullet Cap Agreement, the Bullet Cap
Guarantee, the Currency Swap Agreements, the Currency Swap Guarantee, the Fixed/Floating Swap
Agreement, the Fixed/Floating Swap Guarantee, the BBR Swap Agreement, the BBR Swap Guarantee, the
Corporate Services Agreement, the GIC, the Master Definitions Schedule, the Master Securitisation Agreement,
the Scottish Trusts, the Subscription Agreement and the Bank Agreement, and each a “Transaction
Document”.
“Trigger Condition” shall be satisfied if:
(a)
(b)
(c)
the Reserve Fund was at the Reserve Fund Required Amount on the immediately preceding Interest
Payment Date;
the Available Revenue Fund, (for the avoidance of doubt, including the Reserve Fund but excluding
any amount transferred from the Liquidity Ledger to the Available Revenue Ledger on that Interest
Payment Date) is sufficient to satisfy items (i) to (xv) (both inclusive) in the Pre-Enforcement Priority
of Payments;
on the immediately preceding Determination Date, either: (a) the aggregate Principal Balance of all
Loans in the Mortgage Pool that are 90 days or more in arrears (including Repossession Loans) as a
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percentage of the aggregate Principal Balance of all Loans in the Mortgage Pool does not exceed 22.5
per cent., or (b) the aggregate Principal Balance of all Loans in the Mortgage Pool that are 90 days or
more in arrears (excluding Repossession Loans) as a percentage of the aggregate Principal Balance of
all Loans in the Mortgage Pool does not exceed 22.5 per cent. and the aggregate Principal Balance of
all Repossession Loans in the Mortgage Pool since the Closing Date (which include sold repossessions
plus current repossessions) as a percentage of the aggregate Sterling Equivalent Principal Amount
Outstanding of the Collateral Backed Notes on the Closing Date does not exceed 15 per cent. (or, in
each case, such greater percentage agreed between the Issuer and the Rating Agencies from time to
time upon the basis that such increase will not adversely affect the then current ratings of the Notes);
and
(d)
the aggregate value of the principal losses in respect of the Mortgage Pool (whether or not such losses
form part of the Principal Deficiency at such time) as at the immediately preceding Determination Date
is not greater than 1.35 per cent. of the aggregate Sterling Equivalent Principal Amount Outstanding of
the Collateral Backed Notes on the Closing Date.
1. Form, Denomination and Title
(a)
(b)
(c)
The A2a Notes, the A3a Notes, the B1a Notes, the C1a Notes and the D1a Notes (together, the “Euro
Notes”) are each issued in fully registered form without principal receipts, interest coupons or talons
attached, and may be held or traded in holdings in the minimum aggregate original principal amount of
€50,000 and integral multiples of €1,000 in excess thereof. The A1b Notes and the A2b Notes
(together, the “Dollar Notes”) are each issued in fully registered form without principal receipts,
interest coupons or talons attached, and may be held or traded in holdings in the minimum aggregate
original principal amount of $100,000 and integral multiples of $1,000 in excess thereof. The A1c
Notes, the A2c Notes, the A3c Notes, the B1c Notes, the C1c Notes, the E1c Notes and the ETc Notes
(together the “Sterling Notes”) are each issued in fully registered form without principal receipts,
interest coupons or talons attached, and may be held or traded in holdings in the minimum aggregate
original principal amount of £50,000 and integral multiples of £1,000 in excess thereof.
The Principal Amount Outstanding (as defined in Condition 5(d) (Note Principal Payments, Principal
Amount Outstanding and Pool Factor)) of the Notes of each Class offered and sold outside the United
States solely to non-U.S. Persons in offshore transactions (as defined in Regulation S (“Regulation S”)
under the Securities Act of 1933, as amended (the “Securities Act”), is represented initially by a global
certificate in fully registered form (each a “Reg S Global Note”). The Principal Amount Outstanding
of the Notes of each Class offered and sold within the United States in reliance on Rule 144A under the
Securities Act (“Rule 144A”) solely to qualified institutional buyers as defined therein (“Qualified
Institutional Buyers”) is represented initially by a global note in fully registered form (each a “Rule
144A Global Note” and together with the Reg S Global Notes, the “Global Notes”). References
herein to the “Notes” shall include (i) in relation to any Notes represented by a Global Note, units in
the applicable denomination and currency (which, in the case of the Euro Notes is €1,000 respectively,
in the case of the Dollar Notes is $1,000 respectively and in the case of the Sterling Notes is £1,000
respectively), (ii) Definitive Notes issued in exchange for a Global Note and (iii) any Global Note.
If (i) the Notes become due and repayable pursuant to Condition 9(a) (Events of Default) or (ii) in the
case of a Reg S Global Note, either Euroclear or Clearstream, Luxembourg is closed for business for a
continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces an
intention permanently to cease business or has in fact done so and no successor clearing system
acceptable to the Trustee is available, (iii) in the case of the Rule 144A Global Notes, DTC has notified
the Issuer that it is at any time unwilling or unable to continue as the holder with respect to the Rule
144A Global Notes, or is at any time unwilling or unable to continue as, or ceases to be, a clearing
agency under the Exchange Act and a successor to DTC registered as a clearing agency under the
Exchange Act is not appointed by the Issuer within 90 days of such notification or cessation or (iv) as a
result of any amendment to, or change in, (a) the laws or regulations of the United Kingdom (or of any
political sub-division thereof) or of any authority therein or thereof having power to tax or (b) the
interpretation or administration of such laws or regulations, which becomes effective on or after the
Closing Date, the Issuer is or the Paying Agents are or will be required to make any deduction or
withholding from any payment in respect of the Notes which would not be required were the Notes in
definitive form, then the Issuer will, within 30 days of the occurrence of the relevant event, issue
serially numbered Notes, as applicable, in definitive form in exchange for the whole outstanding
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interest in (a) the Reg S Global Notes (with respect to items (i), (ii) and (iv) above) and (b) the Rule
144A Global Notes (with respect to items (i), (iii) and (iv) above); provided that in no event will the
Notes be issued in definitive bearer form.
(d)
(e)
(f)
(g)
Title to the Notes will pass by transfer and registration as described below.
With respect to the Notes, subject as provided below, the person listed in the register (the “Register”)
as the holder of any such Note will (to the fullest extent permitted by applicable law) be deemed and
treated at all times, by all persons and for all purposes (including the making of payments), as the
absolute owner of such Note regardless of any notice of ownership, theft or loss, or of any trust or other
interest therein or of any writing thereon or, if more than one person, the first named of such person
will be treated as the absolute owner of such Note (save to the extent that in accordance with DTC's
published rules and procedures, any ownership rights may be exercised by its participants or beneficial
owners through participants), and the expressions “Noteholder” and “holder of Notes” and related
expressions shall be construed accordingly.
The Issuer will cause to be kept at the specified office of the Registrar the Register on which shall be
entered the names and addresses of the holders of the Notes and the particulars of such Notes held by
them and all transfers and redemptions of such Notes. No transfer of such Notes will be valid unless
and until entered on the Register.
Transfers and exchanges of beneficial interests in the Global Notes and entries on the Register relating
to the Notes will be made subject to any restrictions on transfers set forth on such Notes and the
detailed regulations concerning transfers of such Notes contained in the Trust Deed and the legend
appearing on the face of the Notes. In no event will a transfer of a beneficial interest in a Global Note
or a Definitive Note be made absent compliance with the regulations referred to above, and any
purported transfer in violation of such regulations shall be void ab initio and will not be honoured by
the Issuer or the Trustee. The regulations referred to above may be changed by the Issuer with the
prior written approval of the Trustee and, if with respect to the Notes, the Registrar.
2. Status, Security and Administration
Status and relationship between Classes of Notes
(a)
(b)
(c)
The Notes of each Class constitute direct, secured (as more particularly described in the Deed of
Charge) and unconditional obligations of the Issuer and rank pari passu without preference or priority
amongst Notes of the same Class.
Prior to the enforcement of the security created by or pursuant to the Deed of Charge (the “Security”),
payment of interest on the Notes will be made in accordance with the order of priority set out in
Condition 2(g) (Status, Security and Administration) and mandatory payments of principal pursuant to
Condition 5(b) (Mandatory redemption in part of the Collateral Backed Notes) and 5(c) (Mandatory
redemption in part of the Revenue Backed Notes) will be made in accordance with the order of priority
set out in such Condition. In the event of the Security being enforced, payment of principal and
interest on the Notes will be made in accordance with the order of priority set out in Condition 2(h)
(Status, Security and Administration).
The Trust Deed and the Deed of Charge contain provisions requiring the Trustee to have regard to the
interests of the holders of the A Notes (the “A Noteholders”), the holders of the B Notes (the “B
Noteholders”), the holders of the C Notes (the “C Noteholders”), the holders of the D Notes (the “D
Noteholders”) and the holders of the E Notes (the “E Noteholders”) equally as regards all powers,
trusts, authorities, duties and discretions of the Trustee (except where expressly provided otherwise),
but requiring the Trustee in any such case to have regard only to:
(i)
(ii)
the interests of the A Noteholders if, in the Trustee’s sole opinion, there is a conflict between
the interests of the A Noteholders (or any Class thereof) and the interests of the B
Noteholders, the C Noteholders, the D Noteholders and/or the E Noteholders;
subject to (i) above or if there are no A Notes outstanding, the interests of the B Noteholders
if, in the Trustee’s sole opinion, there is a conflict between the interests of the B Noteholders
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(or any Class thereof) and the interests of the C Noteholders, the D Noteholders and/or the E
Noteholders;
(iii)
(iv)
subject to (i) and (ii) above or if there are no A Notes or B Notes outstanding, the interests of
the C Noteholders, if, in the Trustee’s sole opinion, there is a conflict between the interests of
the C Noteholders (or any Class thereof) and the interests of the D Noteholders and/or the E
Noteholders; and
subject to (i), (ii) and (iii) above or if there are no A Notes, B Notes or C Notes outstanding,
the interests of the D Noteholders, if, in the Trustee’s sole opinion, there is a conflict between
the interests of the D Noteholders and the interests of the E Noteholders.
(d)
(e)
The Trust Deed contains provisions limiting the powers of a Class of Noteholders, inter alia, to pass
any Extraordinary Resolution according to the effect thereof on the interests of the holders of the Class
or Classes ranking senior thereto in any Priority of Payments. Except in certain circumstances, the
Trust Deed imposes no such limitations on the power of a Class of Noteholders to bind any Class or
Classes of Noteholders ranking junior thereto in any Priority of Payments.
The Trust Deed contains provisions to the effect that, so long as any of the Notes are outstanding and
subject to Condition 2(c) the Trustee shall not be required, when exercising its powers, authorities and
discretions, to have regard to the interests of, or act at the direction of, any persons having the benefit
of the Security, other than the Noteholders and the Residual Certificateholders in accordance with the
Trust Deed, and, in relation to the exercise of such powers, authorities and discretions, the Trustee shall
have no liability to such persons as a consequence of so acting.
Security
(f)
As security for the payment of all monies payable in respect of the Notes, the Residual Certificates and
otherwise under the Trust Deed (including the remuneration, expenses and any other claims of the
Trustee and any receiver appointed under the Deed of Charge) and in respect of certain amounts
payable to the Mortgage Administrator under the Mortgage Administration Agreement, the Cash/Bond
Administrator under the Cash/Bond Administration Agreement, the Standby Mortgage Administrator
under the Mortgage Administration Agreement, the Standby Cash/Bond Administrator under the
Cash/Bond Administration Agreement, the Principal Paying Agent, the Irish Paying Agent, the U.S.
Paying Agent, any other Paying Agent, the Registrar, the Transfer Agents, the Exchange Agent and the
Agent Bank under the Paying Agency Agreement, the Liquidity Facility Provider under the Liquidity
Facility Agreement, the Account Bank and the Collection Account Banks under the Bank Agreement,
the GIC Provider under the GIC, the Bullet Cap Counterparty under the Bullet Cap Agreement, the
Currency Swaps Counterparty under the Currency Swap Agreements, the Fixed/Floating Swap
Counterparty under the Fixed/Floating Swap Agreement, the BBR Swap Counterparty under the BBR
Swap Agreement, the Investment Administrator under the Investment Administration Agreement, the
Corporate Services Provider under the Corporate Services Agreement and each Seller in respect of its
entitlement to unpaid consideration under the Mortgage Sale Agreement, the Issuer will enter into the
Deed of Charge, creating the following security in favour of the Trustee for itself and on trust for the
other persons expressed to be secured parties thereunder (save that the Trustee shall hold the benefit of
its security interest with respect to the Prepayment Charges Receipts solely for the benefit of the
Residual Certificateholders) (such parties, the “Secured Creditors”):
(i)
a first fixed charge in favour of the Trustee over the Issuer’s interests in each Loan, each
related Mortgage and all other collateral security given or obtained in connection with such
Loan in the Mortgage Pool (such collateral security, together with the Mortgages, the
“Collateral Security” and including, without limitation, (1) the benefit of all affidavits,
declarations, consents, renunciations, waivers and deeds of postponement from occupiers and
other persons having an interest in or rights in connection with the relevant Property, (2) the
benefit of (including notations of interest on) insurance and assurance policies (including,
without limitation, all returns of premium and proceeds in respect of such policies) deposited,
charged, obtained, or held in connection with the relevant Loan, Mortgage and/or Property,
and (3) (to the extent assignable without the consent of the relevant counterparty) all courses
and rights of action (whether assigned to the Issuer or otherwise) against valuers, solicitors,
the Land Registry of England and Wales, the Registers of Northern Ireland and the Registers
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of Scotland or any other person in connection with any report (including a report on title),
valuation, opinion, certificate, consent or other statement of fact or opinion given in
connection with the relevant Loan, Mortgage, other collateral security or Property) and, in
relation to Loans which are Scottish Loans, such fixed charge will take the form of an
assignation in security, governed by Scots law, of the Issuer’s interests in each such Scottish
Loan, its related Scottish Mortgage and other Collateral Security as comprised in the relevant
Scottish Trust;
(ii)
(iii)
(iv)
(v)
an assignment in favour of the Trustee of the Issuer’s interests in the insurance contracts to the
extent that they relate to the Loans and their related Collateral Security;
an assignment in favour of the Trustee of the benefit of the Issuer in each of the Transaction
Documents (other than the Trust Deed and the Deed of Charge);
a first fixed charge in favour of the Trustee over the Issuer’s interest in the Bank Accounts and
any other bank accounts or Authorised Investments in which the Issuer has an interest; and
a first floating charge in favour of the Trustee (ranking after the security referred to in
paragraphs (i) to (iv) above) over the whole of the undertaking, property, assets and rights of
the Issuer,
(such property, assets, rights, accounts, undertaking, together, the “Charged Property”).
Priority of Payments prior to enforcement
(g)
The “Available Revenue Fund” at any time comprises the credit balance of the Available Revenue
Ledger at that time. Prior to enforcement of the Security, on each Interest Payment Date the Issuer is
required to apply the Available Revenue Fund calculated as at the immediately preceding
Determination Date (and taking into account any payments to be made or received from that date up to
and including the immediately following Interest Payment Date) in or towards the satisfaction of the
following amounts in the following order of priority (the “Pre-Enforcement Priority of Payments”)
in each case making an appropriate debit to the Available Revenue Ledger:
(i)
(ii)
first, when due, the remuneration payable to the Trustee or any Appointee (plus value added
tax, if any) and any costs, charges, liabilities and expenses incurred by the Trustee or any
Appointee under the provisions of or in connection with the Trust Deed, the Deed of Charge
or any other Transaction Document together with any applicable interest as provided in the
Trust Deed or the Deed of Charge;
second, when due, pro rata:
(A)
(B)
amounts, including audit fees, company secretarial expenses and costs and expenses
incurred in connection with the appointment of any substitute administrator (plus
value added tax, if any), which are payable by the Issuer to third parties and incurred
without breach by the Issuer pursuant to the Trust Deed, the Deed of Charge or the
Cash/Bond Administration Agreement and not provided for payment elsewhere and
to provide for any such amounts expected to become due and payable by the Issuer
during the Interest Period commencing on that Interest Payment Date and to provide
for the Issuer’s primary liability or possible primary liability for corporation tax, and
an amount equal to any premia due in respect of insurance contracts held by the
Issuer;
(iii)
third, pro rata:
(A)
except to the extent already paid to the Mortgage Administrator since the preceding
Interest Payment Date or, in the case of the first Interest Payment Date, since the
Closing Date (1) the mortgage administration fee due and payable under the
Mortgage Administration Agreement, such fee being up to a maximum of the product
of 0.25 per cent. per annum and the aggregate Principal Balance of the Loans as at
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the Determination Date immediately preceding the immediately prior Interest
Payment Date, multiplied by the Apportionment Factor and (2) any costs and
expenses incurred by the Mortgage Administrator in accordance with the Mortgage
Administration Agreement;
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
except to the extent already paid to the Cash/Bond Administrator since the preceding
Interest Payment Date or, in the case of the first Interest Payment Date, since the
Closing Date) (1) the cash/bond administration fee payable under the Cash/Bond
Administration Agreement to the Cash/Bond Administrator and (2) any costs and
expenses incurred by the Cash/Bond Administrator due and payable in accordance
with the Cash/Bond Administration Agreement;
prior to the assumption by the Standby Mortgage Administrator of the duties and
obligations of the Mortgage Administrator, (1) the standby mortgage administrator
fee in an amount of no more than £6,000 per annum (plus value added tax chargeable
on the fee up to a rate of 17.5 per cent.), due and payable pursuant to the Mortgage
Administration Agreement to the Standby Mortgage Administrator divided by four
and (2) costs and expenses incurred by the Standby Mortgage Administrator in
accordance with the Mortgage Administration Agreement;
prior to the assumption by the Standby Cash/Bond Administrator of the duties and
obligations of the Cash/Bond Administrator, (1) the standby cash/bond administrator
fee in an amount of no more than £3,000 per annum (plus value added tax chargeable
on the fee up to a rate of 17.5 per cent.), payable pursuant to the Cash/Bond
Administration Agreement to the Standby Cash/Bond Administrator divided by four
and (2) costs and expenses incurred by the Standby Cash/Bond Administrator in
accordance with the Cash/Bond Administration Agreement;
(1) the corporate services fee (inclusive of value added tax if any) due and payable
pursuant to the Corporate Services Agreement to the Corporate Services Provider
divided by four and (2) costs and expenses incurred by the Corporate Services
Provider in accordance with the Corporate Services Agreement;
amounts due to the Paying Agents, the Registrar, the Transfer Agents, the Exchange
Agent and the Agent Bank under the Paying Agency Agreement;
amounts due to the GIC Provider under the GIC;
amounts due to the Investment Administrator under the Investment Administration
Agreement; and
amounts due to the Account Bank and the Collection Account Banks under the Bank
Agreement;
(iv)
(v)
fourth, amounts payable to the Liquidity Facility Provider pursuant to the Liquidity Facility
Agreement;
fifth, to pay pari passu and pro rata:
(A)
(B)
(C)
any Fixed/Floating Swap Net Amount due and payable to the Fixed/Floating Swap
Counterparty pursuant to the Fixed/Floating Swap Agreement;
any amounts payable by the Issuer to the Fixed/Floating Swap Counterparty in
connection with the termination of the Fixed/Floating Swap Agreement (other than a
Fixed/Floating Swap Counterparty Default Payment);
any BBR Swap Net Amount due and payable to the BBR Swap Counterparty
pursuant to the BBR Swap Agreement; and
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(D)
any amounts payable by the Issuer to the BBR Swap Counterparty in connection with
the termination of the BBR Swap Agreement (other than a BBR Swap Counterparty
Default Payment);
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
sixth, to pay pari passu and pro rata, (A) amounts of interest due and payable on the A1c
Notes and/or the A2c Notes and/or the A3c Notes and (B) amounts payable (other than with
respect to principal and Currency Swaps Counterparty Default Payments) to the Currency
Swaps Counterparty under the terms of the A1b Currency Swap Transaction, the A2a
Currency Swap Transaction, the A2b Currency Swap Transaction and the A3a Currency Swap
Transaction and by applying interest received from the Currency Swaps Counterparty under
the A1b Currency Swap Transaction, the A2a Currency Swap Transaction, the A2b Currency
Swap Transaction and the A3a Currency Swap Transaction, any interest due and payable on
the A1b Notes, the A2a Notes, the A2b Notes and the A3a Notes, respectively;
seventh, amounts to reduce the A Principal Deficiency to zero (by crediting the Principal
Ledger and making a corresponding credit to the A Principal Deficiency Ledger) such
amounts to be applied in redemption of the Notes in accordance with Condition 5(b)
(Mandatory redemption in part of the Collateral Backed Notes);
eighth, to pay pari passu and pro rata (A) amounts of interest due and payable on the B1c
Notes and (B) amounts payable (other than with respect to principal and Currency Swaps
Counterparty Default Payments) to the Currency Swaps Counterparty under the terms of the
B1a Currency Swap Transaction and, by applying interest received from the Currency Swaps
Counterparty under the B1a Currency Swap Transaction, any interest due and payable on the
B1a Notes;
ninth, to apply amounts to reduce the B Principal Deficiency to zero (by crediting the
Principal Ledger and making a corresponding credit to the B Principal Deficiency Ledger),
such amounts to be applied in redemption of the Notes in accordance with Condition 5(b)
(Mandatory redemption in part of the Collateral Backed Notes);
tenth, to pay pari passu and pro rata (A) amounts of interest due and payable on the C1c
Notes and (B) amounts payable (other than with respect to principal and Currency Swaps
Counterparty Default Payments) to the Currency Swaps Counterparty under the terms of the
C1a Currency Swap Transaction and, by applying interest received from the Currency Swaps
Counterparty under the C1a Currency Swap Transaction, any interest due and payable on the
C1a Notes;
eleventh, to apply amounts to reduce the C Principal Deficiency to zero (by crediting the
Principal Ledger and making a corresponding credit to the C Principal Deficiency Ledger),
such amounts to be applied in redemption of the Notes in accordance with Condition 5(b)
(Mandatory redemption in part of the Collateral Backed Notes);
twelfth, to pay pari passu and pro rata, amounts payable (other than with respect to principal
and Currency Swaps Counterparty Default Payments) to the Currency Swaps Counterparty
under the terms of the D1a Currency Swap Transaction and, by applying interest received
from the Currency Swaps Counterparty under the D1a Currency Swap Transaction, any
interest due and payable on the D1a Notes;
thirteenth, to apply amounts to reduce the D Principal Deficiency to zero (by crediting the
Principal Ledger and making a corresponding credit to the D Principal Deficiency Ledger),
such amounts to be applied in redemption of the Notes in accordance with Condition 5(b)
(Mandatory redemption in part of the Collateral Backed Notes);
fourteenth, to pay pari passu and pro rata, all amounts of interest due and payable on the E
Notes;
fifteenth, to apply amounts to reduce the E1c Principal Deficiency to zero (by crediting the
Principal Ledger and making a corresponding credit to the E1c Principal Deficiency Ledger),
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such amounts to be applied in redemption of the Notes in accordance with Condition 5(b)
(Mandatory redemption in part of the Collateral Backed Notes);
(xvi)
(xvii)
sixteenth, except upon the Interest Payment Date on which the Notes are redeemed in full, (by
crediting the Reserve Ledger) to increase the balance of the Reserve Fund until it reaches the
Reserve Fund Required Amount;
seventeenth, except upon the Interest Payment Date on which the Notes are redeemed in full,
(by crediting the Bullet Cap Proceeds Reserve Ledger) to increase the balance of the Bullet
Cap Proceeds Reserve Fund up to an amount equal to the aggregate of:
(A)
(B)
the balance of the Bullet Cap Proceeds Reserve Fund on the immediately preceding
Interest Payment Date; and
the aggregate amount of the Bullet Cap Payments received since the immediately
preceding Interest Payment Date;
(xviii)
(xix)
(xx)
(xxi)
eighteenth, an amount of up to 20 per cent. of the Principal Amount Outstanding of the ETc
Notes multiplied by the day count of the relevant Interest Period divided by 365 in or towards
payment, pari passu and pro rata, of RC Distributions to the Residual Certificateholders;
nineteenth, (by crediting the Profit Ledger) to retain an amount equal to 0.0025 per cent. of the
aggregate balance standing to the credit of the Revenue Ledger on the immediately preceding
Determination Date;
twentieth, in redeeming, pari passu and pro rata, up to 60 per cent. of the Principal Amount
Outstanding of the ETc Notes as at the immediately preceding Interest Payment Date
(following application of any funds towards redemption of principal on the ETc Notes on that
date), unless the Principal Amount Outstanding of the ETc Notes as at the immediately
preceding Interest Payment Date (following application of any funds towards redemption of
principal on the ETc Notes on that date) is less than or equal to 25 per cent. of the initial
Principal Amount Outstanding of the ETc Notes, in which case the payment will be towards
the ETc Notes until the ETc Notes have been redeemed in full;
twenty-first, upon the Interest Payment Date on which the Notes are redeemed in full, in
paying to the Bullet Cap Counterparty in accordance with the terms of the Bullet Cap
Transaction, an amount equal to the aggregate of:
(A)
(B)
the balance of the Bullet Cap Proceeds Reserve Fund on the immediately preceding
Interest Payment Date; and
the aggregate amount of the Bullet Cap Payments received since the immediately
preceding Interest Payment Date;
(xxii) twenty-second, pari passu and pro rata:
(A)
(B)
(c)
in or towards payment of any Currency Swaps Counterparty Default Payment
payable to the Currency Swaps Counterparty;
in or towards payment of any Fixed/Floating Swap Counterparty Default Payment
payable to the Fixed/Floating Swap Counterparty; and
in or towards payment of any BBR Swap Counterparty Default Payment payable to
the BBR Swap Counterparty;
(xxiii)
twenty-third, pari passu and pro rata:
(A)
to the Standby Mortgage Administrator of an amount, if any, equal to that portion of
value added tax owing in respect of the Standby Mortgage Administrator’s fee due
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and payable under (iii)(C) above to the extent that the rate of value added tax in
respect of that fee exceeds 17.5 per cent.; and
(B)
to the Standby Cash/Bond Administrator of an amount, if any, equal to that portion of
value added tax owing in respect of the Standby Cash/Bond Administrator’s fee due
and payable under (iii)(D) above to the extent that the rate of value added tax in
respect of that fee exceeds 17.5 per cent.; and
(xxiv)
twenty-fourth, in or towards payment pari passu and pro rata, of RC Distributions to the
Residual Certificateholders.
In the event that any payment is to be made from the Available Revenue Fund by the Issuer and the
Currency Swap Agreements do not result in the relevant amount of the Available Revenue Fund being
denominated in the relevant currency in which such payment is to be made, the Issuer shall convert the
relevant amounts comprised in the Available Revenue Fund to make such payment into such currency
at the then prevailing spot rate of exchange as may be required in order to be applied in or towards such
payment.
Where any payment is to be made from the Available Revenue Fund on an Interest Payment Date by
the Issuer to the Currency Swaps Counterparty under any paragraph of this Condition 2 (Status,
Security and Administration), the Available Revenue Fund shall exclude the corresponding payment
received from the Currency Swaps Counterparty under the relevant Currency Swap Agreement on or
before that Interest Payment Date in exchange for such payment to be made by the Issuer. However,
the payment received from the Currency Swaps Counterparty shall be applied in or towards making
payment to the Noteholders of the relevant Class of the amounts then due and payable to such
Noteholders.
In the event that the Bullet Cap Transaction, the Fixed/Floating Swap Transaction, the BBR Swap
Transaction or a Currency Swap Transaction terminates, a termination payment may be paid by the
Bullet Cap Counterparty, the Fixed/Floating Swap Counterparty, the BBR Swap Counterparty or the
Currency Swaps Counterparty, as applicable, to the Issuer. Upon the receipt by the Issuer of written
instructions from the Trustee, provided that the Trustee has verified prior to giving such instruction that
the then current ratings of the Notes will not be adversely affected, the Issuer will apply such
termination payment towards payment to a suitably rated replacement bullet cap counterparty,
fixed/floating swap counterparty, BBR swap counterparty or currency swaps counterparty, as
applicable, in consideration for such replacement bullet cap counterparty, fixed/floating swap
counterparty, BBR swap counterparty or currency swaps counterparty, as applicable, entering into a
suitable replacement bullet cap agreement, fixed/floating swap agreement, BBR swap agreement or
currency swap agreement, as applicable, with the Issuer. Such termination payment received by the
Issuer shall not form part of the Available Revenue Fund, except to the extent that it is not used as
consideration for such replacement bullet cap agreement, fixed/floating swap agreement, BBR swap
agreement or replacement currency swap agreement, as applicable.
Any Swap Replacement Premium to the extent of a termination payment due to the Currency Swaps
Counterparty or the Fixed/Floating Swap Counterparty or the BBR Swap Counterparty under the
relevant Currency Swap Agreement or the Fixed/Floating Swap Agreement or the BBR Swap
Agreement, as the case may be, that is not a Currency Swaps Counterparty Default Payment or a
Fixed/Floating Swap Counterparty Default Payment or a BBR Swap Counterparty Default Payment
will be paid directly by the Issuer to such Currency Swaps Counterparty or Fixed/Floating Swap
Counterparty or BBR Swap Counterparty, as the case may be, and not via the Priority of Payments.
Any Excess Swap Collateral will be paid directly to the relevant Currency Swaps Counterparty, the
Fixed/Floating Swap Counterparty, the BBR Swap Counterparty or the Bullet Cap Counterparty and
not via the Priority of Payments.
In addition to payments pursuant to items (xviii) and (xxiv) of the Pre-Enforcement Priority of
Payments above, the Residual Certificateholders will, on each Interest Payment Date, be entitled to
distributions of all amounts standing to the credit of the Prepayment Charges Ledger as at the close of
business on the Business Day preceding such Interest Payment Date.
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Priority of Payments Post-Enforcement
(h)
After the Trustee has given notice to the Issuer pursuant to Condition 9(a) (Events of Default) declaring
the Notes to be due and repayable, the Trustee shall, to the extent of the funds available to the Issuer
and from the proceeds of enforcement of the Security (other than the proceeds of any Stand-by
Drawing under the Liquidity Facility Agreement which has not been utilised as a Stand-by Liquidity
Drawing (which shall be used to repay all or a portion of such Stand-by Drawing), any collateral posted
under the Currency Swap Agreements, the Fixed/Floating Swap Agreement, the BBR Swap Agreement
or the Bullet Cap Agreement (excluding collateral amounts applied in satisfaction of termination
payments due to the Issuer following the designation of an early termination date under the Bullet Cap
Agreement, the Fixed/Floating Swap Agreement, the BBR Swap Agreement or any Currency Swap
Agreement by way of netting)), make payments in the following order of priority (the “Post-
Enforcement Priority of Payments” and, together with the Pre-Enforcement Priority of Payments, the
“Priority of Payments”) pursuant to, in accordance with and as set out more fully in the Deed of
Charge:
(i)
(ii)
(iii)
(iv)
first, to pay, pro rata, any remuneration then due to the Trustee, any receiver or administrator
appointed by the Trustee or any other Appointee of the Trustee and all amounts due in respect
of legal fees and other costs, charges, liabilities, losses, damages, proceedings, claims and
demands then incurred by the Trustee, such receiver or administrator or such Appointee
together with interest thereon (plus value added tax, if any);
second, to pay, pro rata, the fees, costs, expenses and liabilities due to the Mortgage
Administrator, the Cash/Bond Administrator, the Standby Mortgage Administrator, the
Standby Cash/Bond Administrator (the fees of such Standby Mortgage Administrator and
Standby Cash/Bond Administrator to be paid together with value added tax up to a rate of 17.5
per cent. only), the Investment Administrator, the Corporate Services Provider, the Paying
Agents, the Registrar, the Transfer Agents, the Exchange Agent, the Agent Bank, the Account
Bank, the Collection Account Banks and the GIC Provider, together with value added tax (if
any) chargeable thereon;
third, to pay any amount due to the Liquidity Facility Provider pursuant to the Liquidity
Facility Agreement;
fourth, to pay pari passu and pro rata,
(A)
(B)
(C)
(D)
any Fixed/Floating Swap Net Amount due and payable to the Fixed/Floating Swap
Counterparty pursuant to the Fixed/Floating Swap Agreement;
any amounts payable by the Issuer to the Fixed/Floating Swap Counterparty in
connection with the termination of the Fixed/Floating Swap Agreement (other than a
Fixed/Floating Swap Counterparty Default Payment);
any BBR Swap Net Amount due and payable to the BBR Swap Counterparty
pursuant to the BBR Swap Agreement; and
any amounts payable by the Issuer to the BBR Swap Counterparty in connection with
the termination of the BBR Swap Agreement (other than a BBR Swap Counterparty
Default Payment);
(v)
fifth, to pay, pari passu and pro rata (1) all amounts of interest and principal then due and
payable on the A1c Notes, the A2c Notes and the A3c Notes and (2) all amounts payable to
the Currency Swaps Counterparty including but not limited to payment in respect of the final
exchange amounts under the terms of the A1b Currency Swap Transaction, the A2a Currency
Swap Transaction, the A2b Currency Swap Transaction and the A3a Currency Swap
Transaction (and in the case of (2) except for any Currency Swaps Counterparty Default
Payment) and, by applying the amount received from the Currency Swaps Counterparty under
the A1b Currency Swap Transaction, the A2a Currency Swap Transaction, the A2b Currency
Swap Transaction and the A3a Currency Swap Transaction in respect of such payment, any
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interest and principal then due and payable on the A1b Notes, the A2a Notes, the A2b Notes
and the A3a Notes, respectively;
(vi)
(vii)
(viii)
(ix)
sixth, to pay, pari passu and pro rata (1) all amounts of interest and principal then due and
payable on the B1c Notes and (2) all amounts payable to the Currency Swaps Counterparty
including but not limited to payment in respect of the final exchange amounts under the terms
of the B1a Currency Swap Transaction (except for any Currency Swaps Counterparty Default
Payment) and, by applying the amount received from the Currency Swaps Counterparty under
the B1a Currency Swap Transaction in respect of such payment, any interest and principal
then due and payable on the B1a Notes;
seventh, to pay, pari passu and pro rata (1) all amounts of interest and principal then due and
payable on the C1c Notes and (2) all amounts payable to the Currency Swaps Counterparty
including but not limited to payment in respect of the final exchange amounts under the terms
of the C1a Currency Swap Transaction (except for any Currency Swaps Counterparty Default
Payment) and, by applying the amount received from the Currency Swaps Counterparty under
the C1a Currency Swap Transaction in respect of such payment, any interest and principal
then due and payable on the C1a Notes;
eighth, to pay, pari passu and pro rata, all amounts payable to the Currency Swaps
Counterparty including but not limited to payment in respect of the final exchange amounts
under the terms of the D1a Currency Swap Transaction (except for any Currency Swaps
Counterparty Default Payment) and, by applying the amount received from the Currency
Swaps Counterparty under the D1a Currency Swap Transaction in respect of such payment,
any interest and principal then due and payable on the D1a Notes;
ninth, to pay, pari passu and pro rata:
(A)
(B)
all amounts of interest then due and payable on the E Notes; and
all amounts of principal due on the E1c Notes until redemption in full thereof;
(x)
(xi)
(xii)
tenth, an amount of up to 20 per cent. of the Principal Amount Outstanding of the ETc Notes
multiplied by the day count of the relevant Interest Period divided by 365 in or towards
payment, pari passu and pro rata, of RC Distributions to the Residual Certificateholders;
eleventh, to pay, pari passu and pro rata, all amounts of principal due on the ETc Notes until
redemption in full thereof;
twelfth, pari passu and pro rata:
(A)
(B)
(C)
in or towards payment of any Currency Swaps Counterparty Default Payment
payable to the Currency Swaps Counterparty;
in or towards payment of any Fixed/Floating Swap Counterparty Default Payment
payable to the Fixed/Floating Swap Counterparty; and
in or towards payment of any BBR Swap Counterparty Default Payment payable to
the BBR Swap Counterparty;
(xiii)
thirteenth, to pay, pro rata:
(A)
(B)
to the Standby Mortgage Administrator an amount, if any, equal to that portion of
value added tax owing in respect of the Standby Mortgage Administrator’s fee to the
extent that the rate of value added tax in respect of that fee exceeds 17.5 per cent.;
and
to the Standby Cash/Bond Administrator an amount, if any, equal to that portion of
value added tax owing in respect of the Standby Cash/Bond Administrator’s fee to
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the extent that the rate of value added tax in respect of that fee exceeds 17.5 per cent.;
and
(xiv)
fourteenth, in or towards payment, pari passu and pro rata, of RC Distributions (other than
RC Senior Distributions) to the Residual Certificateholders.
In addition to payments pursuant to items (x) and (xiv) of the Post Enforcement Priority of Payments
above, the Residual Certificateholders will, on each Interest Payment Date, be entitled to distributions
of all amounts standing to the credit of the Prepayment Charges Ledger as at the close of business on
the Business Day preceding such Interest Payment Date.
In such distribution, the manner of making payments to the Noteholders shall remain as specified prior
to the Notes being declared due and payable. The Noteholders have full recourse to the Issuer in
respect of the payments prescribed above and accordingly are entitled to bring a claim under English
law, subject to the Trust Deed, for the full amount of such payments in accordance with Condition 10
(Enforcement of Notes).
The Security will become enforceable upon the giving of an Enforcement Notice pursuant to Condition
9(a) (Events of Default) or upon any failure by the Issuer to pay the full amount when due on the Notes
pursuant to Condition 5(a) (Final redemption) or following the giving of notice of redemption of the
Notes pursuant to Condition 5(e) (Early Redemption) or Condition 5(f) (Redemption for tax reasons)
provided that, if the Security has become enforceable otherwise than by reason of a default in payment
of any amount due on the Notes, the Trustee will not be entitled to dispose of the assets comprised in
the Security or any part thereof unless either (A) the Trustee is satisfied that sufficient amounts would
be realised to allow discharge in full of all amounts owing to the Noteholders and any other Secured
Creditors ranking pari passu with or in priority thereto; or (B) the Trustee is of the sole opinion,
reached after considering at any time and from time to time the advice of an investment bank or other
financial adviser selected by the Trustee, acting in its absolute discretion, that the cash flow
prospectively receivable by the Issuer will not (or that there is a significant risk that it will not) be
sufficient, having regard to any other relevant actual, contingent or prospective liabilities of the Issuer,
to discharge in full in due course all amounts owing to the Noteholders and any other Secured Creditors
ranking pari passu with or in priority thereto.
Control of Trustee
(i)
The Notes are subject to the Deed of Charge pursuant to which the claims and exercise of rights by the
beneficiaries of the Security against the Issuer are regulated.
3. Covenants
Save with the prior written consent of the Trustee (but subject as provided in Condition 11 (Meetings of
Noteholders; Modifications; Consents; Waiver)) or as provided in or envisaged by any of the Transaction
Documents, the Issuer shall not for so long as any Note remains outstanding (as defined in the Master
Definitions Schedule):
(a)
Negative pledge
create or permit to subsist any mortgage, sub-mortgage, assignment, assignation, standard security,
charge, sub-charge, pledge, lien (unless arising by operation of law), hypothecation, assignation or
other security interest whatsoever upon the whole or any part of its assets, present or future (including
any uncalled capital) or its undertaking;
(b)
Restrictions on activities
(i)
(ii)
engage in any activity which is not reasonably incidental to any of the activities which the
Transaction Documents provide or envisage that the Issuer will engage in;
open nor have any interest in any account whatsoever with any bank or other financial
institution other than the Bank Accounts and the Collection Accounts, save where such
account is immediately charged in favour of the Trustee so as to form part of the assets subject
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to the Security described in Condition 2 (Status, Security and Administration) and the Trustee
receives from such other bank or financial institution an acknowledgement of the security
rights and interests of the Trustee and an agreement that it will not exercise any right of set off
it might otherwise have against the account in question;
(iii)
(iv)
(v)
(vi)
have any subsidiaries or employees or own, rent, lease or be in possession of any assets
(including, without limitation, buildings, premises or equipment);
act as a director of or hold any office in any company or other organisation;
amend, supplement or otherwise modify its Memorandum or Articles of Association or other
constitutive documents; or
engage, or permit any of its affiliates to engage, in any activities in the United States (directly
or through agents), derive, or permit any of its affiliates to derive, any income from sources
within the United States as determined under U.S. federal income tax principles, and hold, or
permit any of its affiliates to hold, any mortgaged property that would cause it or any of its
affiliates to be engaged or deemed to be engaged in a trade or business within the United
States as determined under U.S. federal income tax principles;
(c)
Dividends or distributions
pay any dividend or make any other distribution to its shareholders (other than amounts paid from the
Profit Ledger) or issue any further shares;
(d)
Borrowings
incur or permit to subsist any indebtedness in respect of borrowed money whatsoever or give any
guarantee or indemnity in respect of any indebtedness or any obligation of any person;
(e)
Merger
consolidate or merge with any other person or convey or transfer its properties or assets substantially as
an entirety to any other person;
(f)
Disposal of assets
transfer, sell, lend, part with or otherwise dispose of or deal with, or grant any option over any present
or future right to acquire, any of its assets or undertaking or any interest, estate, right, title or benefit
therein;
(g)
Tax grouping
(i)
(ii)
apply to become part of any group for the purposes of Section 43 of the Value Added Tax Act
1994 with any other company or group of companies, or any such act, regulation, order,
statutory instrument or directive which may from time to time re-enact, replace, amend, vary,
codify, consolidate or repeal the Value Added Tax Act 1994; or
surrender or consent to the surrender of any amounts by way of group relief within the
meaning of Chapter IV of Part X of the Income and Corporation Taxes Act 1988;
(h)
Other
permit any of the Transaction Documents, the insurance contracts relating to the Mortgages from time
to time owned by the Issuer or the priority of the security interests created thereby to be amended,
invalidated, rendered ineffective, terminated, postponed or discharged, or consent to any variation
thereof, or exercise any powers of consent or waiver in relation thereto pursuant to the terms of the
Trust Deed, these Conditions and the Residual Certificate Conditions, or permit any party to any of the
Transaction Documents or insurance contracts or any other person whose obligations form part of the
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Security to be released from such obligations, or dispose of any part of the Security save as envisaged
in the Transaction Documents; and
(i)
Independent Director
at any time have fewer than one Independent Director.
In giving any consent to the foregoing, the Trustee may require the Issuer to make such modifications or
additions to the provisions of any of the Transaction Documents or may impose such other conditions or
requirements as the Trustee, acting in its absolute discretion may deem expedient in the interests of the
Noteholders, provided that S&P and Fitch provide written confirmation to the Trustee that the then-current
ratings of the Notes will not be downgraded, withdrawn or qualified as a result of such modifications or
additions and notice of such modification and/or addition is given to Moody’s.
4. Interest
(a)
Period of Accrual
Each Note of each Class bears interest from (and including) the Closing Date. Each Note shall cease to
bear interest from its due date for redemption unless, upon due presentation, payment of the relevant
amount of principal is improperly withheld or refused or unless default is otherwise made in respect of
the payment, in which event, interest will continue to accrue as provided in the Trust Deed.
(b)
Interest Payment Dates and Interest Periods
Subject to Condition 6 (Payments), interest on the Sterling Notes is payable in sterling (as defined in
the Master Definitions Schedule), interest on the Euro Notes is payable in euro (as defined in the
Master Definitions Schedule) and interest on the Dollar Notes is payable in dollars (as defined in the
Master Definitions Schedule) in arrear on the 13th day of September, December, March and June in
each year (or if such day is not a Business Day, the next succeeding Business Day) (each such date an
“Interest Payment Date”), the first such payment to be made on 13 September 2007.
(c)
Rate of Interest
Subject to Condition 7 (Prescription), the rate of interest payable from time to time (the “Rate of
Interest”) and the Interest Amount (as defined below) in respect of each Class of the Notes will be
determined on the basis of the provisions set out below:
(i)
on each Interest Determination Date, the Agent Bank will determine the offered quotation to
leading banks in the London Interbank market for three month sterling deposits (in the case of
the Sterling Notes) or for three month dollar deposits (in the case of the Dollar Notes) or in the
Eurozone Interbank market for three month euro deposits (in the case of the Euro Notes) (or,
in the case of the first Interest Period, such rate shall be obtained by linear interpolation (as
defined in the 2000 ISDA Definitions published by the International Swaps and Derivatives
Association Inc.) of the rate for one month and two month sterling or dollar deposits in the
London Interbank market or the rate obtained by linear interpolation of the rate for one month
and two month euro deposits in the Eurozone Interbank market, as the case may be) by
reference to the display designated as the British Bankers Association’s Interest Settlement
Rate as quoted on the Reuters Screen No. 3750 (in the case of the Sterling Notes and the
Dollar Notes) and the Reuters Screen No. 248 (in the case of the Euro Notes) or:
(A) such other page as may replace Reuters Screen No. 3750 or Reuters Screen No. 248,
as the case may be, on that service for the purpose of displaying such information; or
(B)
if that service ceases to display such information, such page as displays such
information on such service (or, if more than one, that one previously approved in
writing by the Trustee) as may replace such service as at or about 11.00 a.m. (London
time) or, in relation to the Euro Notes, 11.00 a.m. (Brussels time) on that date,
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(the “Screen Rate”). If the Screen Rate is unavailable, the Agent Bank will request the
principal London office of each of the Reference Banks (as defined in Condition 4(h)
(Reference Banks and Agent Bank) below) to provide the Agent Bank with its offered
quotation as at or about 11.00 a.m. (London time) or, in relation to the Euro Notes, 11.00 a.m.
(Brussels time) on that date to leading banks for three month sterling deposits (in the case of
the Sterling Notes) for three month dollar deposits (in the case of the Dollar Notes) or for
three month euro deposits (in the case of the Euro Notes) (and in the case of the first Interest
Period, such rate shall be obtained by linear interpolation of the rate for one month and two
month sterling, dollar or euro deposits, as the case may be). The Rate of Interest for each
Class for such Interest Period shall, subject as provided below, be the Relevant Margin (as
defined below) above the relevant Screen Rate or, as the case may be, above the relevant
arithmetic mean (rounded if necessary to the nearest 0.0001 per cent., 0.00005 per cent. being
rounded upwards) of the quotations of the Reference Banks;
(ii)
(iii)
if, on the relevant Interest Determination Date, the Screen Rate is unavailable and only two of
the Reference Banks provide such quotations, the Rate of Interest for the relevant Interest
Period shall be determined (in accordance with (i) above) on the basis of the quotations of the
two quoting Reference Banks;
if, on the relevant Interest Determination Date, the Screen Rate is unavailable and only one or
none of the Reference Banks provides such a quotation, then the Rate of Interest for the
relevant Interest Period shall be the Reserve Interest Rate. The “Reserve Interest Rate” shall
be the rate per annum which the Agent Bank determines to be either:
(A)
(B)
the Relevant Margin above the arithmetic mean (rounded if necessary to the nearest
0.0001 per cent., 0.00005 per cent. being rounded upwards) of the sterling lending
rates (in the case of the Sterling Notes), of the dollar lending rates (in the case of the
Dollar Notes) or of the euro lending rates (in the case of the Euro Notes) which
leading banks in London (selected by the Agent Bank in its absolute discretion) are
quoting, as at or about 11.00 a.m. (London time) or, in relation to the Euro Notes,
11.00 a.m. (Brussels time), on the relevant Interest Determination Date, for the
relevant Interest Period to the Reference Banks or those of them (being at least two in
number) to which such quotations are in the sole opinion of the Agent Bank being so
made; or
if the Agent Bank certifies that it cannot determine such arithmetic mean, the
Relevant Margin above the average of the sterling lending rates (in the case of the
Sterling Notes), of the dollar lending rates (in the case of the Dollar Notes) or of the
euro lending rates (in the case of the Euro Notes) which leading banks in London
(selected by the Agent Bank in its absolute discretion) are quoting on the relevant
Interest Determination Date to leading banks which have their head offices in
London for the relevant Interest Period,
provided that if the Agent Bank certifies as aforesaid and further certifies that none of the
banks selected as provided in (B) above is quoting to leading banks as aforesaid, then the
Reserve Interest Rate shall be the Rate of Interest in effect for the Interest Period ending on
the next Interest Payment Date after the relevant Interest Determination Date.
(d)
Determination of Rates of Interest and Calculation of Interest Amounts
The Agent Bank shall, on each Interest Determination Date, determine and notify in writing the Issuer,
the Mortgage Administrator, the Cash/Bond Administrator, the Trustee, the Irish Stock Exchange and
the Paying Agents:
(i)
(ii)
the Rate of Interest applicable to the relevant Interest Period, and
the sterling amount, the dollar amount or the euro amount, as the case may be, equal to the Rate
of Interest in respect of each Note multiplied by the Principal Amount Outstanding of such Note
and then multiplied by the actual number of days elapsed in the Interest Period and divided by
365 (in the case of the Sterling Notes) and divided by 360 (in the case of the Euro Notes or the
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Dollar Notes) (each, an “Interest Amount”) payable in respect of such Interest Period in respect
of each Note.
(e)
Publication of Rate of Interest, Interest Amount and other Notices
As soon as practicable after providing notification thereof, the Agent Bank (on behalf of the Issuer)
will cause the Rate of Interest and the Interest Amounts for each Interest Period and the immediately
succeeding Interest Payment Date to be notified to each stock exchange and competent listing authority
(if any) on which the Notes are then listed and will cause notice thereof to be given in accordance with
Condition 14 (Notice to Noteholders). The Interest Amounts and Interest Payment Date so notified
may subsequently be amended (or appropriate alternative arrangements made by way of adjustment)
without notice in the event of any extension or shortening of the Interest Period.
(f)
Determination or calculation by Trustee
If the Agent Bank does not at any time for any reason determine any Rate of Interest and/or calculate
any Interest Amount in accordance with the foregoing paragraphs, the Trustee shall (at the cost of the
Issuer):
(i)
(ii)
determine or procure the determination of the Rate of Interest not so determined at such rate
as, in its absolute discretion (having such regard as it shall think fit to the procedure described
above), it shall deem fair and reasonable in all the circumstances, and
calculate or procure the calculation of the Interest Amount not so calculated in the manner
specified in paragraph (i) above,
and any such determination and/or calculation by, or procured by, the Trustee shall be notified (at the
cost of the Issuer) in accordance with Condition 4(d) (Determination of Rates of Interest and
Calculation of Interest Amounts) and Condition 4(e) (Publication of Rate of Interest, Interest Amount
and other Notices) above and shall be deemed to have been made by the Agent Bank.
(g)
Notifications to be final
All notifications, opinions, determinations, certificates, calculations, quotations and decisions given,
expressed, made or obtained for the purposes of this Condition, whether by the Reference Banks (or
any of them) or the Agent Bank or the Trustee shall (in the absence of wilful default, bad faith or
manifest or proven error) be binding on the Issuer, the Cash/Bond Administrator, the Reference Banks,
the Agent Bank, the Trustee and all Instrumentholders and (in such absence as aforesaid) no liability to
the Trustee, the Instrumentholders shall attach to the Issuer, to the Reference Banks, the Agent Bank or
the Trustee in connection with the exercise or non-exercise by them or any of them of their powers,
duties and discretions hereunder.
(h)
Reference Banks and Agent Bank
The Issuer shall ensure that, so long as any of the Notes remains outstanding, there shall at all times be
three Reference Banks and an Agent Bank. The initial Reference Banks shall be the principal London
office of each of Barclays Bank PLC, National Westminster Bank Plc and HSBC Bank plc (the
“Reference Banks”). In the event of the principal London office of any such bank being unable or
unwilling to continue to act as a Reference Bank or in the event of the Agent Bank being unwilling to
act as the Agent Bank, the Issuer shall appoint such other bank as may be approved by the Trustee to
act as such in its place. The Agent Bank may not resign until a successor approved by the Trustee has
been appointed.
5. Redemption and Post Enforcement Call Option
(a)
Final redemption
Unless previously redeemed as provided in this Condition, the Issuer shall redeem:
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(i)
(ii)
the A1 Notes at their Principal Amount Outstanding (as defined in Condition 5(d) (Mandatory
Redemption in Part of the Revenue Backed Notes) below) on the Interest Payment Date falling
in September 2027; and
all other Notes at their Principal Amount Outstanding on the Interest Payment Date falling in
June 2045.
The Issuer may not redeem Notes in whole or in part prior to the relevant Interest Payment Date
indicated in this Condition 5(a) (Final redemption) except as provided in Condition 5(b) (Mandatory
redemption in part of the Collateral Backed Notes), Condition 5(c) (Mandatory redemption in part of
the Revenue Backed Notes), Condition 5(e) (Early Redemption) or Condition 5(f) (Redemption for tax
reasons) of this Condition 5 (Redemption), but without prejudice to Condition 9 (Events of Default).
(b)
Mandatory redemption in part of the Collateral Backed Notes
(i)
On each Interest Payment Date, other than the Interest Payment Date on which the Notes are
to be redeemed under Condition 5(a) (Final redemption) above or Condition 5(e) (Early
Redemption) or Condition 5(f) (Redemption for tax reasons), below, the Issuer shall apply an
amount equal to the Actual Redemption Funds as at the Determination Date prior to such
Interest Payment Date in making payment in the following priority (the “Redemption
Priority”) (in each case only if and to the extent that payments or provisions of a higher
priority have been made in full) and in each case making a debit to the Principal Ledger:
(1) in redeeming, pari passu and pro rata (in accordance with the Sterling Equivalent
Principal Amount Outstanding of each), the A1 Notes until the Interest Payment Date
on which the A1 Notes have been redeemed in full;
(2) after the A1 Notes have been redeemed in full, in redeeming, pari passu and pro rata
(in accordance with the Sterling Equivalent Principal Amount Outstanding of each),
the A2 Notes until the Interest Payment Date on which the A2 Notes have been
redeemed in full;
(3) after the A1 Notes and the A2 Notes have been redeemed in full, in redeeming, pari
passu and pro rata (in accordance with the Sterling Equivalent Principal Amount
Outstanding of each), the A3 Notes until the Interest Payment Date on which the A3
Notes have been redeemed in full;
(4) after the A Notes have been redeemed in full, in redeeming, pari passu and pro rata
(in accordance with the Sterling Equivalent Principal Amount Outstanding of each),
the B Notes until the Interest Payment Date on which the B Notes have been
redeemed in full;
(5) after the A Notes and the B Notes have been redeemed in full, in redeeming, pari
passu and pro rata (in accordance with the Sterling Equivalent Principal Amount
Outstanding of each), the C Notes until the Interest Payment Date on which the C
Notes have been redeemed in full;
(6) after the A Notes, the B Notes and the C Notes have been redeemed in full, in
redeeming, pari passu and pro rata (in accordance with the Sterling Equivalent
Principal Amount Outstanding of each), the D Notes until the Interest Payment Date
on which the D Notes have been redeemed in full; and
(7) after the A Notes, the B Notes, the C Notes and the D Notes have been redeemed in
full, in redeeming, pari passu and pro rata (in accordance with the Sterling
Equivalent Principal Amount Outstanding of each), the E1c Notes until the Interest
Payment Date on which the E1c Notes have been redeemed in full,
provided that the Actual Redemption Funds shall not be applied in accordance with the
Redemption Priority but shall instead be applied:
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(A)
(B)
on any such Interest Payment Date immediately succeeding a Determination Date (i)
on which the Performance Conditions are satisfied and (ii) the aggregate Principal
Amount Outstanding of the Collateral Backed Notes on such date is greater than or
equal to 10 per cent. of the aggregate principal amount of the Collateral Backed
Notes as at the Closing Date, pari passu and pro rata (in accordance with the Sterling
Equivalent Principal Amount Outstanding of each), between the A3 Notes, B Notes,
C Notes, D Notes and the E1c Notes; and
on any Interest Payment Date on which after application of the Available Revenue
Fund on that Interest Payment Date there is an A Principal Deficiency, in the
following order of priority:
(a)
(b)
(c)
(d)
(e)
in redeeming, pari passu and pro rata (in accordance with the Sterling
Equivalent Principal Amount Outstanding of each), the A Notes until the
Interest Payment Date on which the A Notes have been redeemed in full;
after the A Notes have been redeemed in full, in redeeming, pari passu and
pro rata (in accordance with the Sterling Equivalent Principal Amount
Outstanding of each), the B Notes until the Interest Payment Date on which
the B Notes have been redeemed in full;
after the A Notes and the B Notes have been redeemed in full, in redeeming,
pari passu and pro rata (in accordance with the Sterling Equivalent
Principal Amount Outstanding of each), the C Notes until the Interest
Payment Date on which the C Notes have been redeemed in full;
after the A Notes, the B Notes and the C Notes have been redeemed in full,
in redeeming, pari passu and pro rata (in accordance with the Sterling
Equivalent Principal Amount Outstanding of each), the D Notes until the
Interest Payment Date on which the D Notes have been redeemed in full;
and
after the A Notes, the B Notes, the C Notes and the D Notes have been
redeemed in full, in redeeming, pari passu and pro rata, the E1c Notes until
the Interest Payment Date on which the E1c Notes have been redeemed in
full.
Except as indicated otherwise, redemptions in relation to any Class of Notes will be
made by pro rata and pari passu redemption of Notes of such Class.
(ii)
The Cash/Bond Administrator is responsible, pursuant to the Cash/Bond
Administration Agreement, for determining the amount of the Actual Redemption
Funds and the amounts required to reduce the balance of each Principal Deficiency
Ledger in each case to zero as at any Determination Date and each determination so
made shall (in the absence of negligence, wilful default, bad faith or manifest error)
be final and binding on the Issuer, the Mortgage Administrator, the Trustee and all
Instrumentholders and no liability to the Instrumentholders shall attach to the Issuer,
the Trustee or (in such absence as aforesaid) to the Cash/Bond Administrator in
connection therewith.
(c)
Mandatory redemption in part of the Revenue Backed Notes
On each Interest Payment Date prior to the enforcement of the Security, other than the Interest
Payment Date on which the Notes are to be redeemed under Condition 5(a) (Final
redemption) above or Condition 5(e) (Early Redemption) or Condition 5(f) (Redemption for
tax reasons) below, the Issuer shall apply from the Available Revenue Fund the amount
available at item (xx) of the Pre-Enforcement Priority of Payments in redeeming, pari passu
and pro rata, the ETc Notes.
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(d)
Note Principal Payments, Principal Amount Outstanding and Pool Factor
The principal amount so payable in respect of each Note of each Class (the “Note Principal
Payment”) on any Interest Payment Date under Condition 5(b) (Mandatory redemption in
part of the Collateral Backed Notes) above (or, in respect of the Revenue Backed Notes, under
Condition 5(c) (Mandatory redemption in part of the Revenue Backed Notes) above) shall be
the amount calculated on the Determination Date immediately preceding that Interest Payment
Date to be applied in redemption of Notes of that Class divided by the number of Notes of that
Class outstanding on the relevant Interest Payment Date (rounded down to the nearest pound,
nearest dollar or nearest euro, as applicable); provided always that no such Note Principal
Payment may exceed the Principal Amount Outstanding of the relevant Note.
With respect to each Note of each Class on (or as soon as practicable after) each
Determination Date, the Issuer shall determine (or cause the Cash/Bond Administrator to
determine):
(i)
(ii)
(iii)
the amount of any Note Principal Payment due on the Interest Payment Date next
following such Determination Date;
the Principal Amount Outstanding of such Note on the Interest Payment Date next
following such Determination Date (after deducting any Note Principal Payment due
to be made in respect of that Note on that Interest Payment Date); and
the fraction expressed as a decimal to the sixth point (the “Pool Factor”), of which
the numerator is the Principal Amount Outstanding of a Note of that class (as referred
to in paragraph (ii) above) and the denominator is the principal amount of that Note
on issue expressed as an entire integer.
Each determination by or on behalf of the Issuer of any Note Principal Payment, the Principal
Amount Outstanding of a Note and the Pool Factor shall in each case (in the absence of wilful
default, bad faith or manifest error) be final and binding on all persons.
The “Principal Amount Outstanding” of (i) a Note on any date shall be the initial principal
amount of such Note less the aggregate amount of all Note Principal Payments in respect of
such Note that have become due and payable since the Closing Date and on or prior to such
date have been paid and of (ii) a Class of Notes shall be the aggregate Principal Amount
Outstanding of the Notes of that Class as determined in accordance with (i) above.
With respect to each Class of Notes the Issuer will cause each determination of a Note
Principal Payment, Principal Amount Outstanding and Pool Factor to be notified in writing
forthwith to the Trustee, the Paying Agents, the Registrar, the Agent Bank and (for so long as
the Notes are listed on or by one or more stock exchanges and/or competent listing authorities)
the relevant stock exchanges and/or competent listing authorities, and will immediately cause
notice of each determination of a Note Principal Payment, Principal Amount Outstanding and
Pool Factor to be given in accordance with Condition 14 (Notice to Noteholders) by not later
than one Business Day prior to the relevant Interest Payment Date. If no Note Principal
Payment is due to be made on the Notes of any Class on any Interest Payment Date a notice to
this effect will be given to the Noteholders.
If the Issuer does not at any time for any reason determine (or cause the Cash/Bond
Administrator to determine) with respect to each Class of Notes, a Note Principal Payment,
the Principal Amount Outstanding or the Pool Factor in accordance with the preceding
provisions of this paragraph, such Note Principal Payment, Principal Amount Outstanding and
Pool Factor may be determined by the Trustee, acting in its absolute discretion, in accordance
with this paragraph and each such determination or calculation shall be deemed to have been
made by the Issuer or the Cash/Bond Administrator (as applicable).
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(e)
Early Redemption
On any Interest Payment Date following receipt by the Issuer of a notice from the Mortgage
Administrator that the Mortgage Administrator intends to exercise its option under the
Mortgage Administration Agreement to purchase or arrange for the purchase of, the remaining
Loans from the Issuer on any Interest Payment Date following a date on which the aggregate
Sterling Equivalent Principal Amount Outstanding (as defined in Condition 6 (Payments)) of
the Collateral Backed Notes is less than 10 per cent. of the aggregate Sterling Equivalent
Principal Amount Outstanding (as defined in Condition 6 (Payments)) of the Collateral
Backed Notes on the Closing Date, the Issuer will upon giving no more than 60 nor less than
30 days’ written notice to the Trustee, the Noteholders in accordance with Condition 14
(Notice to Noteholders), redeem all (but not some only) of the Notes at their Principal Amount
Outstanding plus any accrued but unpaid interest, provided that prior to giving any such
notice, the Issuer shall have provided to the Trustee a certificate signed by two directors of the
Issuer to the effect that it will have the funds, not subject to any interest of any other person
(other than any security interest held by the Trustee in such funds for the benefit of the
Secured Creditors), required to redeem the Notes as aforesaid and any amounts payable in
priority thereto under the applicable Priority of Payments except that, for the avoidance of
doubt, the restrictions imposed in item (xx) of the Pre Enforcement Priority of Payments on
the redemption of the Principal Amount Outstanding of the ETc Notes shall not apply in
respect of a redemption under this Condition 5(e) (Early Redemption).
(f)
Redemption for tax reasons
If:
(i)
the Issuer at any time satisfies the Trustee immediately prior to the giving of the notice
referred to below that either:
(A)
(B)
(C)
on the next Interest Payment Date the Issuer would be required by reason of a change
in law, or the interpretation or administration thereof to deduct or withhold from any
payment of principal or interest on the Notes (other than in respect of default
interest), any amount for or on account of any present or future taxes, duties,
assessments or governmental charges of whatever nature imposed, levied, collected,
withheld or assessed by the United Kingdom or any political sub-division thereof or
any authority thereof or therein, or
on the next Interest Payment Date the Issuer, the Bullet Cap Counterparty, the BBR
Swap Counterparty, the Fixed/Floating Swap Counterparty or the Currency Swaps
Counterparty would be required by reason of a change in law, or the interpretation or
administration thereof, to deduct or withhold from any payment under the Bullet Cap
Agreement, the BBR Swap Agreement, the Fixed/Floating Swap Agreement or a
Currency Swap Agreement any amount for or on account of any present or future
taxes, duties, assessments or governmental charges of whatever nature imposed,
levied, collected, withheld or assessed by the United Kingdom or any political subdivision
thereof or any authority thereof or therein, or
the total amount payable in respect of interest in relation to any of the Loans during
an Interest Period ceases to be receivable (whether by reason of any Borrower being
obliged to deduct or withhold any amount in respect of tax therefrom or otherwise,
and whether or not actually received) by the Issuer during such Interest Period, and
(ii)
(A) the Trustee is of the opinion that such changes would be materially prejudicial to the
interests of the Noteholders, or (B) the Trustee seeks and obtains the approval of the holders
of the Most Senior Class of Notes to redeem the Notes, such approval to be given by way of
an Extraordinary Resolution of the holders of the Most Senior Class of Notes passed in
accordance with the provisions of the Trust Deed (for the avoidance of doubt, if the Trustee
chooses to seek the approval of the holders of the Most Senior Class of Notes, the decision of
the holders of the Most Senior Class of Notes shall prevail irrespective of whether the Trustee
is nevertheless of the opinion that such changes would be or would not be materially
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prejudicial to the interests of the Noteholders and in no event should the Trustee be liable for
any loss incurred by any person by reason of any delay in seeking, or failure to obtain, such
approval),
then, provided that it has sufficient funds, the Issuer shall, having given not more than 60 nor less than
30 days’ written notice to the Trustee and the Noteholders in accordance with Condition 14 (Notice to
Noteholders), redeem all (but not some only) of the Notes on any Interest Payment Date at their
Principal Amount Outstanding plus any accrued but unpaid interest provided that, prior to giving any
such notice, the Issuer shall have provided (at the Issuer’s cost) to the Trustee:
(A)
(B)
a certificate signed by two directors of the Issuer to the effect that it will have the funds, not
subject to the interest of any other person (other than any security interest held by the Trustee
in such funds for the benefit of the Secured Creditors), required to redeem the Notes as
aforesaid and any amounts payable in priority thereto under the applicable Priority of
Payments, and
if appropriate a legal opinion (in form and substance satisfactory to the Trustee) from a firm of
lawyers in England (approved in writing by the Trustee) opining on the relevant change in tax
law (or interpretation or administration thereof).
Any certificate and legal opinion given by or on behalf of the Issuer may be relied on by the Trustee
and shall be conclusive and binding on the Noteholders and the Trustee shall have no liability for
acting on such reliance.
(g)
Notice of Redemption
Any such notice as is referred to in Condition 5(e) (Early Redemption) or Condition 5(f) (Redemption
for tax reasons) shall be irrevocable and, upon the expiration of such notice, the Issuer shall be bound
to redeem the Notes at their Principal Amount Outstanding.
(h)
Purchase
The Issuer shall not purchase any Notes.
(i)
Cancellation
All Notes redeemed pursuant to Condition 5(e) (Early Redemption) or Condition 5(f) (Redemption for
tax reasons) will be cancelled upon redemption and may not be resold or re-issued.
(j)
Post Enforcement Call Option
All of the Noteholders will, at the request of the holder of the Post Enforcement Call Option, sell all
(but not some only) of their holdings of the Notes to the holder of the Post Enforcement Call Option,
pursuant to the option granted to it by the Trustee (as agent for the Noteholders) to acquire all (but not
some only) of the Notes (plus accrued interest thereon), for the consideration of one euro cent per Euro
Note outstanding, one dollar cent per Dollar Note outstanding and one penny per Sterling Note
outstanding (and for these purposes, each Global Note shall be one Note) in the event that the Security
for the Notes is enforced, at any time after the date on which the Trustee determines that the proceeds
of such enforcement are insufficient, after payment of all other claims ranking higher in priority to the
Notes and pro rata payment of all claims ranking in equal priority to the Notes and after the application
of any such proceeds to the Notes under the Deed of Charge, to pay any further principal and interest
and any other amounts whatsoever due in respect of the Notes.
Furthermore, each of the Noteholders acknowledges that the Trustee has the authority and the power to
bind the Noteholders in accordance with the terms and conditions set out in the Post Enforcement Call
Option and each Noteholder, by subscribing for or purchasing the relevant Notes, agrees to be so
bound.
Notice of such determination will be given by the Trustee to the Noteholders in accordance with
Condition 14 (Notice to Noteholders).
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(k)
Currencies
For the purpose of this Condition 5 (Redemption and Post Enforcement Call Option), “redeeming”
means:
(1) in respect of the Euro Notes, payment of the amount of Actual Redemption Funds available to
be applied in repaying the Euro Notes of the relevant Class to the Currency Swaps
Counterparty under the terms of the relevant Currency Swap Transaction in exchange for its
euro equivalent calculated by reference to the applicable Currency Swap Rate, and application
of such euro equivalent amount by the Issuer to repay the Euro Notes of the relevant Class;
and
(2) in respect of the Dollar Notes, payment of the amount of Actual Redemption Funds available
to be applied in repaying the Dollar Notes of the relevant Class to the Currency Swaps
Counterparty under the terms of the relevant Currency Swap Transaction in exchange for its
dollar equivalent calculated by reference to the applicable Currency Swap Rate, and
application of such dollar equivalent amount by the Issuer to repay the Dollar Notes of the
relevant Class,
and where any payment is to be made from the Actual Redemption Funds on an Interest Payment Date
by the Issuer to the Currency Swaps Counterparty under (1) or (2) above, the Actual Redemption Funds
shall exclude the corresponding payment received from the Currency Swaps Counterparty under the
relevant Currency Swap Agreement on or before that Interest Payment Date in exchange for such
payment to be made by the Issuer, and repaying shall include repayment in part. However, such
payment received from the Currency Swaps Counterparty shall be applied in or towards making
payments to the Noteholders of the relevant Class of the amounts then due and payable to such
Noteholders.
In the event that any payment is to be made from Actual Redemption Funds by the Issuer under this
Condition and the Actual Redemption Funds do not comprise a sufficient amount in the relevant
currency in which such payment is to be made, the Issuer shall convert any remaining amounts
comprised in the Actual Redemption Funds into such currency at the then prevailing spot rate of
exchange as may be required in order to be applied in or towards such payment provided that the
payment received from the Currency Swaps Counterparty shall be applied in or towards making
payment to the Noteholders of the relevant Class of the amounts then due and payable to such
Noteholders.
6. Payments
(a)
(b)
(c)
Payments in respect of the Euro Notes (i) represented by a Rule 144A Global Note will be paid by
transfer to a euro account of the Exchange Agent on behalf of DTC or its nominee for conversion into
and payment in U.S. dollars or in the currency of the relevant Rule 144A Global Note, as applicable, in
accordance with the provisions of the Paying Agency Agreement and (ii) represented by a Reg S Global
Note will be made by euro cheque drawn on or, at the option of the holder, by a transfer to a euro
account maintained by the payee with a euro clearing bank as specified by the payee.
Payments in respect of the Dollar Notes (i) represented by a Rule 144A Global Note will be paid by a
dollar cheque delivered to DTC or its nominee or by wire transfer in immediately available funds to a
dollar account maintained by DTC or its nominee and (ii) represented by a Reg S Global Note will be
made by dollar cheque drawn on or, at the option of the holder, by a transfer to a dollar account
maintained by the payee with a dollar clearing bank as specified by the payee.
Payments in respect of the Sterling Notes (i) represented by a Rule 144A Global Note will be paid by
transfer to a sterling account of the Exchange Agent on behalf of DTC or its nominee for conversion
into and payment in U.S. dollars or in the currency of the relevant Rule 144A Global Note, as
applicable, in accordance with the provisions of the Paying Agency Agreement and (ii) represented by
a Reg S Global Note will be made by sterling cheque drawn on or, at the option of the holder, by a
transfer to a sterling account maintained by the payee with a sterling clearing bank as specified by the
payee.
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(d)
(e)
(f)
(g)
(h)
(i)
(j)
Payments of principal and interest in respect of the Notes are subject in all cases to any fiscal or other
laws and regulations applicable thereto. No commission or expenses shall be charged to the
Noteholders in respect of such payments.
If payment of principal is improperly withheld or refused or default is otherwise made in respect of
such payment, the interest which continues to accrue in respect of the relevant Note in accordance with
the Trust Deed will be paid, to the persons shown in the Register at the close of business on the Record
Date and, in the case of final redemption of the Notes, against surrender of the relevant Note.
The initial Principal Paying Agent, the initial Irish Paying Agent, the initial U.S. Paying Agent, the
initial Exchange Agent, the initial Registrar and their initial specified offices are set out at the end of
these Conditions. The Issuer reserves the right, subject to the prior written approval of the Trustee, at
any time to vary or terminate the appointment of the Registrar or of any Paying Agent and appoint an
additional or other Registrar or Paying Agent. The Issuer will at all times maintain a Principal Paying
Agent, a Registrar and (so long as the Notes are listed on the Irish Stock Exchange) a Paying Agent
with a specified office in Ireland (which may be the Principal Paying Agent). The Issuer will cause at
least 14 days’ notice of any change in or addition to the Registrar or any Paying Agent or their
specified offices to be given in accordance with Condition 14 (Notice to Noteholders).
If any Note is presented for payment or if the due date for any payment of principal and/or interest in
respect of any Note is on a Saturday, a Sunday or a day on which banks are not generally open for
business in the location of the Paying Agent to whom such presentation is made or a day on which
commercial banks and foreign exchange markets do not settle payments and are not open for general
business in a principal financial centre of the country or region of the currency of the relevant Note,
payment will not be made until the next succeeding business day in that location and no further
payments of additional amounts by way of interest, principal or otherwise shall be due in respect of
such Note.
For purposes of this Condition 6 (Payments), “Record Date” means 15 calendar days before the due
date for the relevant payment.
In the event that the aggregate funds, if any (computed in accordance with the provisions of the
Cash/Bond Administration Agreement), available to the Issuer on any Interest Payment Date for
application in or towards the payment of interest which is, but for this Condition, due on the Junior
Notes on such Interest Payment Date, are not sufficient to satisfy in full the aggregate amount of
interest which is, but for this Condition, otherwise due on the Junior Notes on such Interest Payment
Date, then notwithstanding any other provision of these Conditions, there shall be payable on such
Interest Payment Date by way of interest on each Junior Note a pro rata share of such aggregate funds
calculated by reference to the ratio borne by the Sterling Equivalent Principal Amount Outstanding of
such Junior Note (as the case may be) to the then Sterling Equivalent Principal Amount Outstanding of
the Class of such Junior Notes (as the case may be).
The amount by which the aggregate amount of interest paid on the relevant Junior Notes on any
Interest Payment Date in accordance with this Condition 6 (Payments) falls short of the aggregate
amount of interest which would otherwise be payable on the relevant Junior Notes on that date (the
“Interest Shortfall”) shall accrue interest during each Interest Period during which it remains
outstanding at the Rate of Interest for such Interest Period. A pro rata share of the Interest Shortfall
(together with interest thereon) calculated by reference to the ratio borne by the then Sterling
Equivalent Principal Amount Outstanding of such Junior Note (as the case may be) to the Sterling
Equivalent Principal Amount Outstanding of all the Junior Notes (as the case may be) shall be
aggregated within the amount of, and treated for the purpose of this Condition as if it were, interest due
on each B Note or, as the case may be, C Note, or, as the case may be, D Note or, as the case may be, E
Note on the next succeeding Interest Payment Date. This provision and the paragraph above shall
cease to apply on the Interest Payment Date referred to in Condition 5(a) (Final redemption) at which
time all accrued interest shall become due and payable.
7. Prescription
Claims against the Issuer in respect of the Notes shall become void unless presented for payment within a period
of 10 years (in the case of principal) and five years (in the case of interest) from the relevant date in respect
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thereof. In this Condition the relevant date is the date on which a payment in respect thereof first becomes due
or (if the full amount of the monies payable in respect of all the Notes due on or before that date has not been
duly received by the Principal Paying Agent or the Trustee on or prior to such date) the date on which, the full
amount of such monies having been so received, notice to that effect is duly given to the Noteholders in
accordance with Condition 14 (Notice to Noteholders).
8. Taxation
All payments in respect of the Notes will be made without withholding or deduction for, or on account of, any
present or future taxes, duties or charges of whatsoever nature unless the Issuer or the relevant Paying Agent (as
applicable) is required by applicable law to make any payment in respect of the Notes subject to any
withholding or deduction for, or on account of, any present or future taxes, duties or charges of whatsoever
nature. In that event the Issuer or any Paying Agent (as the case may be) shall make such payment after such
withholding or deduction has been made and shall account to the relevant authorities for the amount so required
to be withheld or deducted. Neither the Issuer nor any Paying Agent will be obliged to make any additional
payments to holders of Notes in respect of such withholding or deduction.
9. Events of Default
(a)
The Trustee may, at the Trustee’s discretion, or shall, if so requested in writing by the holders of not
less than 25 per cent. in aggregate Sterling Equivalent Principal Amount Outstanding of the then
outstanding Notes of the Most Senior Class of Notes, or if so directed by or pursuant to an
Extraordinary Resolution of the holders of the then outstanding Notes of the Most Senior Class of
Notes (subject in each case to the Trustee being indemnified and/or secured to its satisfaction), serve a
notice (an “Enforcement Notice”) on the Issuer declaring, in writing, the Notes to be due and
repayable (whereupon the Security shall become enforceable) at any time after the happening of any of
the following events (each, an “Event of Default”).
(i)
(ii)
(iii)
(iv)
(v)
subject to Condition 6(i) (Payments) and Condition 6(j) (Payments), default being made for a
period of three Business Days in the payment of the principal of or any interest on any Note
when and as the same ought to be paid in accordance with these Conditions; or
the Issuer failing duly to perform or observe any other obligation binding upon it under the
Notes or any Transaction Document and, in any such case such failure is continuing for a
period of 14 days following the service by the Trustee on the Issuer of notice requiring the
same to be remedied (except that no such notice will be required where the Trustee certifies
that, in its sole opinion, such failure is incapable of remedy); or
the Issuer, otherwise than for the purposes of such amalgamation or reconstruction as is
referred to in sub-paragraph (iv) below, ceasing or, through or consequent upon an official
action of the board of directors of the Issuer, threatens to cease to carry on business or a
substantial part of its business or being unable to pay its debts as and when they fall due or,
within the meaning of Section 123(1) or (2) (as if the words “it is proved to the satisfaction of
the court” did not appear in Section 123(2)) of the Insolvency Act 1986 (as that Section may
be amended from time to time), being deemed unable to pay its debts; or
an order being made or an effective resolution being passed for the winding-up of the Issuer
except a winding-up for the purposes of or pursuant to an amalgamation or reconstruction the
terms of which have previously been approved by the Trustee in writing or by an
Extraordinary Resolution of the holders of the Most Senior Class of Notes; or
proceedings being otherwise initiated against the Issuer under any applicable liquidation,
insolvency, composition, reorganisation or other similar laws (including, but not limited to,
application or pending application for an administration order or appointment of a liquidator
or administrator) and such proceedings not, in the sole opinion of the Trustee, being disputed
in good faith with a reasonable prospect of success, or an administration order being granted,
or an administrative receiver or other receiver, liquidator, administrator or other similar
official being appointed in relation to the Issuer or in relation to all or any part of the
undertaking, property or assets of the Issuer, or an encumbrancer taking possession of all or
any part of the undertaking, property or assets of the Issuer, or a distress or diligence or
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execution or other process being levied or enforced upon or sued out against all or any part of
the undertaking, property or assets of the Issuer and such possession or process (as the case
may be) not being discharged or not otherwise ceasing to apply within 15 days, or the Issuer
initiating or consenting to proceedings relating to itself under applicable liquidation,
insolvency, composition, reorganisation or other similar laws or making a conveyance or
assignment for the benefit of its creditors generally,
provided that, in the case of each of the events described in sub-paragraphs (ii) and (iii) of this
paragraph (a), the Trustee shall have certified to the Issuer that such event is, in its sole opinion,
materially prejudicial to the interests of the Noteholders.
(b)
Upon any declaration being made by the Trustee in accordance with paragraph (a) above that the Notes
are due and repayable, the Notes shall immediately become due and repayable at their Principal
Amount Outstanding together with accrued interest and the Security shall become enforceable as
provided in the Trust Deed and Deed of Charge.
10. Enforcement of Notes
The Trustee may, at any time, at its discretion and without further notice, take such proceedings against the
Issuer or any other party to any of the Transaction Documents as the Trustee may think fit to enforce the
provisions of the Notes or the Trust Deed or any other Transaction Document and, at any time after the Security
has become enforceable, may, at its discretion and without further notice, take such steps as it may think fit to
enforce the Security, but it shall not be bound to take any such proceedings or steps unless:
(a)
(b)
it shall have been requested by the holders of not less than 25 per cent. in aggregate Sterling Equivalent
Principal Amount Outstanding of the then outstanding Notes of the Most Senior Class of Notes or so
directed by an Extraordinary Resolution of the holders of the outstanding notes of the Most Senior
Class of Notes; and
it shall have been indemnified and/or secured to its satisfaction.
No Noteholder shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound
so to do, fails to do so within a reasonable period and such failure shall be continuing.
11. Meetings of Noteholders; Modifications; Consents; Waiver
(a)
(b)
The Trust Deed contains provisions for convening meetings of any Class of Noteholders to consider
any matter affecting their interests, including the sanctioning by an Extraordinary Resolution of the
Noteholders of any Class of any modification of the Notes of such Class (including these Conditions as
they relate to the Notes of such Class) or the provisions of any of the Transaction Documents. Any
resolution to alter the definition of Permitted Activities or to request that the Issuer undertake any
action that is not Permitted Activities shall be by Extraordinary Resolution. For the purposes of, inter
alia, any Extraordinary Resolution to alter the definition of Permitted Activities any Notes held by or
on behalf of a Seller or any of its Affiliates have no voting rights and are deemed not to be outstanding
for the purposes of any vote on such Extraordinary Resolution.
The quorum at any meeting of the Noteholders of any Class of Notes for passing an Extraordinary
Resolution shall be one or more persons holding or representing over 50 per cent. of the aggregate
Sterling Equivalent Principal Amount Outstanding of the Notes of such Class then outstanding, or, at
any adjourned meeting, one or more persons holding or representing Notes of such Class whatever the
aggregate Sterling Equivalent Principal Amount Outstanding of the Notes of such Class held or
represented by him or them except that, at any meeting the business of which includes the sanctioning
of a Basic Term Modification, the necessary quorum for passing an Extraordinary Resolution shall be
one or more persons holding or representing not less than 75 per cent., or at any adjourned such
meeting not less than 25 per cent., of the aggregate Sterling Equivalent Principal Amount Outstanding
of the Notes of such Class then outstanding. The quorum at any meeting of the Noteholders of any
Class of Notes for all business other than voting on an Extraordinary Resolution shall be one or more
persons holding or representing in the aggregate not less than 5 per cent. of the aggregate Sterling
Equivalent Principal Amount Outstanding of the Notes of such Class or, at any adjourned meeting, one
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or more persons being or representing the Noteholders of such Class, whatever the aggregate Sterling
Equivalent Principal Amount Outstanding of the Notes of such Class then outstanding so held.
(c)
(d)
(e)
Except in certain circumstances described in the Trust Deed, an Extraordinary Resolution of the B
Noteholders shall be effective (and will bind the A Noteholders, the C Noteholders, the D Noteholders,
and the E Noteholders) when the Trustee is of the sole opinion that it will not be materially prejudicial
to the interests of the A Noteholders, or it is sanctioned by an Extraordinary Resolution of the A
Noteholders. Except in certain circumstances described in the Trust Deed, an Extraordinary Resolution
of the C Noteholders shall be effective (and will bind the A Noteholders, the B Noteholders, the D
Noteholders and the E Noteholders) when the Trustee is of the sole opinion that it will not be
materially prejudicial to the respective interests of the A Noteholders and the B Noteholders or it is
sanctioned by an Extraordinary Resolution of the A Noteholders and the B Noteholders. Except in
certain circumstances described in the Trust Deed, an Extraordinary Resolution of the D Noteholders
shall be effective (and will bind the A Noteholders, the B Noteholders, the C Noteholders and the E
Noteholders) when the Trustee is of the sole opinion that it will not be materially prejudicial to the
respective interests of the A Noteholders, the B Noteholders and the C Noteholders, or it is sanctioned
by an Extraordinary Resolution of the A Noteholders, the B Noteholders and the C Noteholders.
Except in certain circumstances described in the Trust Deed, an Extraordinary Resolution of the E
Noteholders shall be effective (and will bind the A Noteholders, the B Noteholders, the C Noteholders
and the D Noteholders) when the Trustee is of the sole opinion that it will not be materially prejudicial
to the respective interests of the A Noteholders, the B Noteholders, the C Noteholders and the D
Noteholders, or it is sanctioned by an Extraordinary Resolution of the A Noteholders, the B
Noteholders, the C Noteholders and the D Noteholders. Except in certain circumstances, the Trust
Deed imposes no such limitations on the powers of the A Noteholders the exercise of which will be
binding on the B Noteholders, the C Noteholders, the D Noteholders and the E Noteholders irrespective
of the effect on their interests.
An Extraordinary Resolution passed at any meeting of the Noteholders of any Class of Notes shall be
binding on all Noteholders of such Class, whether or not they are present at the meeting.
The Trust Deed provides that:
(i)
(ii)
(iii)
(iv)
a resolution or request which in the opinion of the Trustee affects the interests of the holders
of one Class only of the A Notes shall, in the case of a resolution, be deemed to have been
duly passed at a separate meeting of the holders of the A Notes of that Class and, in the case
of a request, be deemed to have been duly made if made by the requisite percentage of the
holders of the A Notes of that Class;
a resolution or request which in the opinion of the Trustee affects the interests of the holders
of any two or more Classes of the A Notes but does not give rise to a conflict of interest
between the holders of such two or more Classes of the A Notes (including, for the avoidance
of doubt, a conflict of interest between the holders of the A1 Notes, the A2 Notes and/or the
A3 Notes) shall, in the case of a resolution, be deemed to have been duly passed if passed at a
single meeting of the holders of such two or more Classes of the A Notes, and, in the case of a
request, be deemed to have been duly made if made by the requisite percentage of the holders
of such two or more Classes of the A Notes taken together;
a resolution or request which in the opinion of the Trustee affects the interests of the holders
of any two or more Classes of the A Notes and gives or may give rise to a conflict of interest
between the holders of such two or more Classes of the A Notes shall, in the case of a
resolution, be duly passed only if passed at separate meetings of the holders of each such two
or more Classes of the A Notes, and, in the case of a request, be deemed to have been duly
made if made by the requisite percentage of the holders of each of such two or more Classes
of the A Notes taken separately;
a resolution or request which in the opinion of the Trustee affects the interests of the holders
of one Class only of the B Notes shall be deemed to have been duly passed at a separate
meeting of the holders of the B Notes of that Class and, in the case of a request, be deemed to
have been duly made if made by the requisite percentage of the holders of the B Notes of that
Class;
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(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
a resolution or request which in the opinion of the Trustee affects the interests of the holders
of both Classes of the B Notes but does not give rise to a conflict of interest between the
holders of both Classes of the B Notes shall, in the case of a resolution, be deemed to have
been duly passed if passed at a single meeting of the holders of both Classes of the B Notes,
and, in the case of a request, be deemed to have been duly made if made by the requisite
percentage of the holders of both Classes of the B Notes taken together;
a resolution or request which in the opinion of the Trustee affects the interests of the holders
of both Classes of the B Notes and gives or may give rise to a conflict of interest between the
holders of both Classes of the B Notes shall, in the case of a resolution, be duly passed only if
passed at separate meetings of the holders of both Classes of the B Notes, and, in the case of a
request, be deemed to have been duly made if made by the requisite percentage of the holders
of both Classes of the B Notes taken separately;
a resolution or request which in the opinion of the Trustee affects the interests of the holders
of one Class only of the C Notes shall be deemed to have been duly passed at a separate
meeting of the holders of the C Notes of that Class and, in the case of a request, be deemed to
have been duly made if made by the requisite percentage of the holders of the C Notes of that
Class;
a resolution or request which in the opinion of the Trustee affects the interests of the holders
of both Classes of the C Notes but does not give rise to a conflict of interest between the
holders of both Classes of the C Notes shall, in the case of a resolution, be deemed to have
been duly passed if passed at a single meeting of the holders of both Classes of the C Notes,
and, in the case of a request, be deemed to have been duly made if made by the requisite
percentage of the holders of both Classes of the C Notes taken together;
a resolution or request which in the opinion of the Trustee affects the interests of the holders
of both Classes of the C Notes and gives or may give rise to a conflict of interest between the
holders of both Classes of the C Notes shall, in the case of a resolution, be duly passed only if
passed at separate meetings of the holders of both Classes of the C Notes, and, in the case of a
request, be deemed to have been duly made if made by the requisite percentage of the holders
of both Classes of the C Notes taken separately;
a resolution or request which in the opinion of the Trustee affects the interests of the holders
of one Class only of the E Notes shall, in the case of a resolution, be deemed to have been
duly passed at a separate meeting of the holders of the E Notes of that Class and, in the case of
a request, be deemed to have been duly made if made by the requisite percentage of the
holders of the E Notes of that Class;
a resolution or request which in the opinion of the Trustee affects the interests of the holders
of both Classes of the E Notes but does not give rise to a conflict of interest between the
holders of both such Classes of the E Notes shall, in the case of a resolution, be deemed to
have been duly passed if passed at a single meeting of the holders of both such Classes of the
E Notes, and, in the case of a request, be deemed to have been duly made if made by the
requisite percentage of the holders of both such Classes of the E Notes taken together; and
a resolution or request which in the opinion of the Trustee affects the interests of the holders
of both Classes of the E Notes and gives or may give rise to a conflict of interest between the
holders of both such Classes of the E Notes shall, in the case of a resolution, be duly passed
only if passed at separate meetings of the holders of both such Classes of the E Notes, and, in
the case of a request, be deemed to have been duly made if made by the requisite percentage
of the holders of each of both such Classes of the E Notes taken separately.
(f)
The Trustee may agree without the consent of the Noteholders of any Class or any other Secured
Creditor:
(i)
to any modification of, or to the waiver or authorisation of any breach or proposed breach of,
the Notes of any Class (including these Conditions) or any of the Transaction Documents
provided that the Trustee is of the opinion that such modification, waiver or authorisation will
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not be materially prejudicial to the interests of the Noteholders of any Class and would not
constitute a change in any Permitted Activities that the Issuer may undertake, or
(ii)
to any modification of the Notes of any Class (including these Conditions) or any of the
Transaction Documents, which in the Trustee’s sole opinion is of a formal, minor or technical
nature or to correct a manifest error or an error which is, in the sole opinion of the Trustee,
proven.
The Trustee may also without the consent of the Noteholders of any Class or any other Secured
Creditor determine, acting in its absolute discretion, but only if and in so far in its sole opinion the
interests of the Noteholders of each Class shall not be materially prejudiced thereby, that any Event of
Default or any condition, event or act which, with the giving of notice and/or lapse of time and/or the
issue of a certificate and/or the making of any determination, would constitute an Event of Default shall
not, or shall not subject to specified conditions, be treated as such (but the Trustee may not make any
such determination of any Event of Default or any such waiver or authorisation of any such breach or
proposed breach of the Notes (including the Conditions) or any of the Transaction Documents in
contravention of an express direction of the Noteholders given by Extraordinary Resolution or a
request under Condition 9 (Events of Default)). Any such modification, waiver, authorisation or
determination shall be binding on the Noteholders of each Class and any other Secured Creditor and,
unless the Trustee agrees otherwise, any such modification shall be notified to the Noteholders in
accordance with Condition 14 (Notice to Noteholders) as soon as practicable thereafter.
12. Indemnification and Exoneration of the Trustee
The Trust Deed contains provisions governing the responsibility (and relief from responsibility) of the Trustee
and providing for its indemnification in certain circumstances, including provisions relieving it from taking
enforcement proceedings or enforcing the Security unless indemnified and/or secured to its satisfaction and, for
the avoidance of doubt, whenever the Trustee is under the provisions of the Trust Deed bound to act at the
request or direction of the Noteholders, the Trustee shall nevertheless not be so bound unless first indemnified
and/or secured to its satisfaction. The Trustee and its related companies are entitled to enter into business
transactions with, among others, the Issuer, the Mortgage Administrator, the Cash/Bond Administrator and/or
related companies of any of them without accounting for any profit resulting therefrom. The Trustee will not be
responsible for any loss, expense or liability which may be suffered as a result of, inter alia, any assets
comprised in the Security, or any deeds or documents of title thereto, being uninsured or inadequately insured or
being held by or to the order of the Mortgage Administrator, the Cash/Bond Administrator or any agent or
related company of the Mortgage Administrator, the Cash/Bond Administrator or by clearing organisations or
their operators or by intermediaries such as banks, brokers or other similar persons on behalf of the Trustee.
The Trust Deed provides that the Trustee shall be under no obligation to monitor or supervise compliance by the
Issuer, the Mortgage Administrator or the Cash/Bond Administrator with their respective obligations or to make
any searches, enquiries, or independent investigations of title in relation to any of the Properties secured by the
Mortgages.
The Trustee will not be responsible for (a) supervising the performance by the Issuer or any other party to the
Transaction Documents of their respective obligations under the Transaction Documents and the Trustee will be
entitled to assume, until it has written notice to the contrary, that all such persons are properly performing their
duties, or (b) considering the basis on which approvals or consents are granted by the Issuer or any other party to
the Transaction Documents under the Transaction Documents. The Trustee will not be liable to any Noteholder
or other Secured Creditor for any failure to make or to cause to be made on their behalf the searches,
investigations and enquiries which would normally be made by a prudent chargee in relation to the Security and
has no responsibility in relation to the legality, validity, sufficiency and enforceability of the Security and the
Transaction Documents.
13. Replacement of Definitive Notes
If any Note is mutilated, defaced, lost, stolen or destroyed, it may be replaced at the specified office of any
Paying Agent (located outside the United States and its possessions). Replacement of any mutilated, defaced,
lost, stolen or destroyed Note will only be made on payment of such costs as may be incurred in connection
therewith and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or
defaced Notes must be surrendered before new ones will be issued.
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14. Notice to Noteholders
Any notice to the Noteholders shall be validly given by any of:
(a)
(b)
(c)
(d)
the information contained in such notice appearing on a page of the Reuters Screen, or any other
medium for electronic display of data as may be previously approved in writing by the Trustee (in each
case a “Relevant Screen”);
by publication in a leading newspaper published in Ireland (which is expected to be The Irish Times)
or, if such newspaper shall cease to be published or timely publication therein shall not be practicable,
in such English language newspaper or newspapers as the Trustee shall approve having a general
circulation in Dublin;
whilst the Notes are in global form, if delivered to Euroclear and/or Clearstream, Luxembourg (as
applicable) for communicating them to the Noteholders; or
whilst the Notes are in definitive form, if mailed to the Noteholders at their respective addresses in the
Register.
The Issuer shall also ensure that notices are duly published in a manner which complies with the rules and
regulations of any stock exchange on which the Notes are for the time being listed or any other relevant
authority.
Any notice under paragraph (a) or (b) shall be deemed to have been given to the Noteholders on the date of such
publication or, if published more than once or on different dates, on the first date on which publication shall
have been made in the newspaper or in all newspapers in which (or on the Relevant Screen on which)
publication is required. Any notice under paragraph (c) shall be deemed to have been given to the Noteholders
on the third day after the day on which the said notice was given to Euroclear and Clearstream, Luxembourg.
Any notice under paragraph (d) shall be deemed to have been given on the third day after being mailed to the
address of the relevant Noteholders at its address stated in the Register.
The Trustee shall be at liberty to sanction some other method of giving notice to the Noteholders or any
category of them if, in its sole opinion, such other method is reasonable having regard to market practice then
prevailing and to the requirements of the stock exchange on which the Notes are then listed and provided that
notice of such other method is given to the Noteholders in such manner as the Trustee shall require.
15. Third Party Rights
No person shall have any right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term or
condition of the Notes.
16. Governing Law and Jurisdiction
(a)
(b)
(c)
The Trust Deed and the Notes are governed by, and shall be construed in accordance with, English law.
The Issuer has agreed in the Trust Deed that the courts of England shall have non-exclusive jurisdiction
to hear and determine any suit, action or proceedings, and to settle any disputes, which may arise out of
or in connection with the Notes (respectively, the “Proceedings” and “Disputes”) and, for such
purposes, irrevocably submits to the jurisdiction of such courts.
In the Trust Deed, the Issuer has waived any objection which it might now or hereafter have to the
courts of England being nominated as the forum to hear and determine any Proceedings and to settle
any Disputes, and agreed not to claim that any such court is not a convenient or appropriate forum.
17. U.S. Tax Treatment and Provision of Information
(a)
It is the intention of the Issuer and each Noteholder and beneficial owner (“Owner”) of an interest in
the Notes that the A Notes, the B Notes, the C Notes and the D Notes will be indebtedness of the Issuer
and the E Notes will be equity of the Issuer, for all United States federal, state and local income and
franchise tax purposes and for the purposes of any other United States federal, state and local tax
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imposed on or measured by income (the “Intended U.S. Tax Treatment”). To the extent applicable
and absent a final determination to the contrary, the Issuer and each Noteholder and Owner, by
acceptance of such Note, or a beneficial interest therein, agree to treat the Notes, for purposes of United
States federal, state and local income or franchise taxes and any other United States federal, state and
local taxes imposed on or measured by income, consistent with the Intended U.S. Tax Treatment and to
report such Notes on all applicable tax returns in a manner consistent with such treatment.
(b)
For so long as any Notes remain outstanding and are “restricted securities” (as defined in Rule
144(a)(3) under the Securities Act), the Issuer shall, during any period in which it is neither subject to
Section 13 or Section 15(e) of the Exchange Act nor exempt from reporting pursuant to rule 12g3-2(b)
thereunder, furnish, at its expense, to any holder of, or Owner of an interest in, such Notes in
connection with any resale thereof and to any prospective purchaser designated by such holder or
Owner, in each case upon request, the information specified in, and meeting the requirements of, Rule
144A(d)(4) under the Securities Act.
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TERMS AND CONDITIONS OF THE RESIDUAL CERTIFICATES
If Residual Certificates in definitive form were to be issued, the terms and conditions (subject to amendment and
completion) set out on each Residual Certificate would be as set out below. While the Residual Certificates
remain in global form, the same terms and conditions govern such Residual Certificates, except to the extent
that they are appropriate only to Residual Certificates in definitive form. These terms and conditions are
subject to the detailed provisions of the Trust Deed and the Deed of Charge.
The residual certificates (the “Residual Certificates”) will be issued by Eurosail-UK 2007-3BL PLC (the
“Issuer”) on or about 16 July 2007 (the “Closing Date”).
The Residual Certificates will be constituted by a trust deed (as amended, restated and/or supplemented from
time to time, the “Trust Deed”) to be dated on or about the Closing Date between the Issuer and BNY
Corporate Trustee Services Limited as trustee (the “Trustee” which expression includes all persons for the time
being trustee or trustees appointed pursuant to the Trust Deed) for the holders for the time being of the Residual
Certificates and are subject to a master securitisation agreement dated on or about the Closing Date and the
paying agency agreement set out in schedule 8 thereof (as amended, restated and/or supplemented from time to
time, the “Paying Agency Agreement”) between, among others, the Issuer, The Bank of New York, London
Branch as agent bank (in such capacity, the “Agent Bank” which expression includes any successor agent bank
appointed from time to time in connection with the Residual Certificates), as principal paying agent (in such
capacity, the “Principal Paying Agent” which expression includes any successor principal paying agent
appointed from time to time in connection with the Residual Certificates) and as currency exchange agent for
the Notes (in such capacity, the “Exchange Agent”, which expression includes any successor currency
exchange agent appointed from time to time in connection with the Notes), BNY Financial Services PLC as
Irish paying agent (in such capacity, the “Irish Paying Agent” which expression includes any successor Irish
paying agent appointed from time to time in connection with the Notes), The Bank of New York, New York
Branch as U.S. paying agent (in such capacity, the “U.S. Paying Agent” which expression includes any
successor U.S. paying agent appointed from time to time in connection with the Notes and, together with each
other paying agent and successor paying agent appointed from time to time in connection with the Notes, the
“Paying Agents”), The Bank of New York (Luxembourg) S.A. as registrar (in such capacity, the “Registrar”
which expression includes any successor registrar appointed from time to time in connection with the Residual
Certificates) and as transfer agent (together with any successor or additional transfer agent appointed from time
to time in connection with the Residual Certificates, the “Transfer Agents”) and the Trustee. The security for
the Residual Certificates is created pursuant to, and on the terms set out in, a deed of charge (as amended,
restated and/or supplemented from time to time, the “Deed of Charge”) to be dated on or about the Closing
Date between, among others, the Issuer and the Trustee.
Copies of the Transaction Documents are available for inspection by the Instrumentholders upon reasonable
notice during normal business hours at the principal office for the time being of the Trustee, being at the Closing
Date at One Canada Square, London E14 5AL and at the specified offices for the time being of the Paying
Agents.
The statements in these conditions relating to the Residual Certificates (the “Residual Certificate Conditions”)
include summaries of, and are subject to, the detailed provisions of the Trust Deed, the Deed of Charge, the
Paying Agency Agreement and the other Transaction Documents. The Residual Certificateholders are entitled
to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed, the
Paying Agency Agreement, the Deed of Charge and each other Transaction Document.
Capitalised words and expressions which are used in these Residual Certificate Conditions, shall, unless
otherwise defined below, have the same meanings as those given in the Master Definitions Schedule set out in
Schedule 1 (Master Definitions Schedule) of the Master Securitisation Agreement dated on or about the Closing
Date between, among others, the Issuer, the Mortgage Administrator, the Trustee, the Principal Paying Agent,
the Irish Paying Agent and the Sellers and the following capitalised words and expressions shall have the
following meanings:
“A1b Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the A1b Notes entered into by the Issuer on or about the Closing Date under the A Currency Swap Agreement,
and any additional and/or replacement currency and interest rate swap transaction entered into by the Issuer
from time to time in connection with the A1b Notes.
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“A2a Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the A2a Notes entered into by the Issuer on or about the Closing Date under the A Currency Swap Agreement,
and any additional and/or replacement currency and interest rate swap transaction entered into by the Issuer
from time to time in connection with the A2a Notes.
“A2b Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the A2b Notes entered into by the Issuer on or about the Closing Date under the A Currency Swap Agreement,
and any additional and/or replacement currency and interest rate swap transaction entered into by the Issuer
from time to time in connection with the A2b Notes.
“A3a Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the A3a Notes entered into by the Issuer on or about the Closing Date under the A Currency Swap Agreement,
and any additional and/or replacement currency and interest rate swap transaction entered into by the Issuer
from time to time in connection with the A3a Notes.
“Affiliate” means, in relation to any person, any other person who, directly or indirectly is in control of, or
controlled by, or is under common control with, such person (and for the purposes of this definition, “control”
of a person means the power, direct or indirect (a) to vote more than 50 per cent. of the securities having
ordinary voting power for the election of directors of such person or (b) to direct or cause the direction of the
management and policies of such person, whether by contract or otherwise).
“Appointee” means any attorney, manager, agent, delegate, nominee, custodian, receiver, administrative
receiver or other person appointed by the Trustee under the Trust Deed or the Deed of Charge.
“Apportionment Factor” means in relation to (a) the first Interest Payment Date, the number of days in the first
Interest Period divided by 365; and (b) any other Interest Payment Date, 0.25.
“B1a Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the B1a Notes entered into by the Issuer on or about the Closing Date under the B1a Currency Swap Agreement,
and any additional and/or replacement currency and interest rate swap transaction entered into by the Issuer
from time to time in connection with the B1a Notes.
“Basic Terms Modification” means, inter alia: (a) a modification which would have the effect of changing any
day for payment in respect of the Residual Certificate; (b) the alteration of the majority required to pass an
Extraordinary Resolution; (c) the alteration of the currency of payment of the Residual Certificate; or (d) any
alteration of the priority of redemption of the Residual Certificate.
“BBR Swap Counterparty Default Payment” means amounts payable by the Issuer to the BBR Swap
Counterparty in connection with the termination of the BBR Swap Agreement where:
(a)
(b)
the BBR Swap Counterparty is a Defaulting Party (as such term is defined in the BBR Swap
Agreement); or
where the BBR Swap Counterparty is the sole Affected Party (as such term is defined in the BBR Swap
Agreement).
“BBR Swap Net Amount” means, on any Interest Payment Date, an amount payable by the Issuer to the BBR
Swap Counterparty under the BBR Swap Agreement which is the amount (if any) by which:
(a)
an amount calculated by applying the aggregate of the Weighted Average BBR Rate and a margin to
the BBR Notional Amount,
exceeds
(b)
an amount calculated by applying Note Sterling LIBOR in respect of the immediately preceding
Interest Period to the BBR Notional Amount.
“Business Day” means a day (other than Saturday or Sunday) on which commercial banks and foreign
exchange markets settle payments and are open for general business (including dealings in foreign exchange and
foreign currency deposits) in London and New York and which is a TARGET Business Day.
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“C1a Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the C1a Notes entered into by the Issuer on or about the Closing Date under the C1a Currency Swap Agreement,
and any additional and/or replacement currency and interest rate swap transaction entered into by the Issuer
from time to time in connection with the C1a Notes.
“Currency Swaps Counterparty Default Payment” means amounts payable by the Issuer to the Currency
Swaps Counterparty in connection with the termination of any Currency Swap Agreement where:
(a)
(b)
the Currency Swaps Counterparty is a Defaulting Party (as such term is defined in the relevant
Currency Swap Agreement); or
where the Currency Swaps Counterparty is the sole Affected Party (as such term is defined in the
relevant Currency Swap Agreement).
“D1a Currency Swap Transaction” means the currency and interest rate swap transaction in connection with
the D1a Notes entered into by the Issuer on or about the Closing Date under the D1a Currency Swap
Agreement, and any additional and/or replacement currency and interest rate swap transaction entered into by
the Issuer from time to time in connection with the D1a Notes.
“Determination Date” means the third Business Day of the calendar month in which an Interest Payment Date
occurs.
“Excess Swap Collateral” means an amount equal to the value of the collateral (or the applicable part of any
collateral) provided by the Bullet Cap Counterparty, the Fixed/Floating Swap Counterparty, the Currency Swaps
Counterparty or the BBR Swap Counterparty to the Issuer in accordance with the Bullet Cap Agreement, the
Fixed/Floating Swap Agreement, a Currency Swap Agreement or the BBR Swap Agreement which:
(a)
(b)
is in excess of the termination amount that the Bullet Cap Counterparty, the Fixed/Floating Swap
Counterparty, the Currency Swaps Counterparty or the BBR Swap Counterparty would otherwise be
required to pay to the Issuer under the Bullet Cap Agreement, the Fixed/Floating Swap Agreement, the
relevant Currency Swap Agreement or the BBR Swap Agreement; or
the Bullet Cap Counterparty, the Fixed/Floating Swap Counterparty, the Currency Swaps Counterparty
or the BBR Swap Counterparty is entitled to under the Bullet Cap Agreement, the Fixed/Floating Swap
Agreement, the relevant Currency Swap Agreement or the BBR Swap Agreement.
“Extraordinary Resolution” means (a) a resolution passed at a meeting of the Residual Certificateholders duly
convened and held in accordance with the Trust Deed by a majority at such meeting consisting of not less than
75 per cent. of the persons voting thereat upon a show of hands or if a poll is duly demanded by a majority
consisting of not less than 75 per cent. of the votes cast on such poll or (b) a resolution in writing signed by or
on behalf of all the Residual Certificateholders provided that a resolution to amend the definition of Permitted
Activities or to request that the Issuer undertake any action that is not Permitted Activities shall be required to
be passed by holders of not less than 50 per cent. of each of (x) the aggregate Sterling Equivalent Principal
Amount Outstanding of the Notes and (y) the Total Number Outstanding of the Residual Certificates.
“Fixed/Floating Swap Counterparty Default Payment” means amounts payable by the Issuer to the
Fixed/Floating Swap Counterparty in connection with the termination of the Fixed/Floating Swap Agreement
where:
(a)
(b)
the Fixed/Floating Swap Counterparty is a Defaulting Party (as such term is defined in the
Fixed/Floating Swap Agreement); or
where the Fixed/Floating Swap Counterparty is the sole Affected Party (as such term is defined in the
Fixed/Floating Swap Agreement).
“Fixed/Floating Swap Net Amount” means, on any Interest Payment Date, an amount payable by the Issuer to
the Fixed/Floating Swap Counterparty under the Fixed/Floating Swap which is the amount (if any) by which:
(a)
an amount calculated by applying the Weighted Average Fixed Rate to the Fixed/Floating Notional
Amount
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exceeds
(b)
an amount calculated by applying the aggregate of (i) Note Sterling LIBOR in respect of the
immediately preceding Interest Period and (ii) the applicable Asset Yield (on an Actual/365 (Fixed)
basis) to the Fixed/Floating Notional Amount.
“Independent Director” means a duly appointed member of the board of directors of the relevant entity who
should not have been, at the time of such appointment, or at any time in the preceding five years a direct or
indirect legal or beneficial owner in such entity or any of its affiliates (excluding de minimus ownership
interests).
“Permitted Activities” means the activities contemplated in the Transaction Documents as being undertaken by
the Issuer, including (a) the acquisition of the Loans, the Collateral Security and the Related Rights; (b) the
appointment of entities to undertake the administration and servicing of the Loans, the Collateral Security and
their Related Rights and the collection and administration of monies relating thereto in accordance with the
terms of the Transaction Documents; (c) the issue of the Instruments, the granting and maintaining of security
therefor, the listing and rating thereof and the making of any Basic Terms Modifications thereto; (d) the entering
into of borrowings, including under the Liquidity Facility Agreement; (e) the investment of collections from the
Loans together with any proceeds retained by the Issuer from the issue of the Instruments and any borrowings
and (f) the payment of liabilities, maintenance of hedging and administrative functions required to be
undertaken in respect of the Instruments.
“RC Senior Distribution” means, in respect of any RC Distribution, an amount equal to such RC Distributions
multiplied by that fraction of the Residual Revenue from which such RC Distributions arises formed by amounts
arising under item (xviii) of the Pre-Enforcement Priority of Payments or item (x) of the Post-Enforcement
Priority of Payments.
“Related Rights” means all ancillary rights, accretions and supplements to the Loans and Collateral Security.
“Residual Revenue” means, as of any Interest Payment Date, an amount equal to the aggregate of:
(a)
(b)
(c)
the amount available at item (xviii) of the Pre-Enforcement Priority of Payments (or item (x) of the
Post-Enforcement Priority of Payments as applicable);
the balance of the Available Revenue Fund (after application of items (i) to (xxiii) of the Pre-
Enforcement Priority of Payments) (or after application of items (i) to (xiii) of the Post-Enforcement
Priority of Payments as applicable); and
the amounts standing to the credit of the Prepayment Charges Ledger as of the close of business on the
preceding Business Day.
“Swap Replacement Premium” means: (a) in respect of the Currency Swaps Counterparty, any premium or
other amount received by the Issuer from a replacement currency swaps counterparty providing a replacement
currency swap transaction; (b) in respect of the Fixed/Floating Swap Counterparty, any premium or other
amount received by the Issuer from a replacement fixed/floating swap counterparty providing a replacement
fixed/floating swap transaction; and (c) in respect of the BBR Swap Counterparty, any premium or other amount
received by the Issuer from a replacement fixed/floating swap counterparty providing a replacement BBR swap
transaction.
“TARGET Business Day” means a day on which the Trans-European Automated Real-time Gross Settlement
Express Transfer (TARGET) system is open.
“Total Number Outstanding” means 10,000.
“Transaction Documents” means the Trust Deed, the Deed of Charge, the Paying Agency Agreement, the
Mortgage Administration Agreement, the Cash/Bond Administration Agreement, the Mortgage Sale Agreement,
the Liquidity Facility Agreement, the Collection Accounts Declarations of Trust, the Post Enforcement Call
Option Agreement, the Investment Administration Agreement, the Bullet Cap Agreement, the Bullet Cap
Guarantee, the Currency Swap Agreements, the Currency Swap Guarantee, the Fixed/Floating Swap
Agreement, the Fixed/Floating Swap Guarantee, the BBR Swap Agreement, the BBR Swap Guarantee, the
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Corporate Services Agreement, the GIC, the Master Definitions Schedule, the Master Securitisation Agreement,
the Scottish Trusts, the Subscription Agreement and the Bank Agreement, and each a “Transaction
Document”.
1. Form, Denomination and Title
(a)
(b)
(c)
(d)
(e)
(f)
The Residual Certificates are represented initially by a global certificate in registered form (the
“Global Residual Certificate”). References herein to the “Residual Certificates” shall include (i) in
relation to any Residual Certificates represented by the Global Residual Certificate, units thereof
corresponding to the Residual Certificates, (ii) Definitive Residual Certificates issued in exchange for
the Global Residual Certificate and (iii) the Global Residual Certificate.
If (i) the circumstances referred to in Residual Certificate Condition 9(a) (Events of Default) occurs or
(ii) either Euroclear or Clearstream, Luxembourg is closed for business for a continuous period of 14
days (other than by reason of holiday, statutory or otherwise) or announces an intention permanently to
cease business or has in fact done so and no successor clearing system acceptable to the Trustee is
available or (iii) as a result of any amendment to, or change in, (A) the laws or regulations of the
United Kingdom (or of any political sub division thereof) or of any authority therein or thereof having
power to tax or (B) the interpretation or administration of such laws or regulations, which becomes
effective on or after the Closing Date, the Issuer is or the Paying Agents are or will be required to make
any deduction or withholding from any payment in respect of the Residual Certificates which would
not be required were the Residual Certificates in definitive form, then the Issuer will, within 30 days of
the occurrence of the relevant event, issue serially numbered Residual Certificates in definitive
registered form in exchange for the whole outstanding interest in the Global Residual Certificate.
With respect to the Definitive Residual Certificates, title shall pass by and upon registration in the
register which the Issuer shall procure to be kept by the Registrar (the “Register”). Any holder of a
Global Residual Certificate (a “Global Residual Certificateholder”) or holder of a Definitive
Residual Certificate (a “Definitive Residual Certificateholder”) shall (to the fullest extent permitted
by applicable laws) be deemed and treated at all times, by all persons and for all purposes (including
the making of any payments), as the absolute owner of such Global Residual Certificate or Definitive
Residual Certificate as the case may be, regardless of any notice of ownership, theft or loss, of any trust
or other interest therein or of any writing thereon other than a duly executed transfer of such Residual
Certificate in the form endorsed thereon.
Transfers and exchanges of beneficial interests in the Global Residual Certificate will be made subject
to any restrictions on transfers set forth on such Residual Certificate. In no event will a transfer of a
beneficial interest in the Global Residual Certificate or a Definitive Residual Certificate be made
absent compliance with the regulations referred to above, and any purported transfer in violation of
such regulations shall be void ab initio and will not be honoured by the Issuer or the Trustee. The
regulations referred to above may be changed by the Issuer with the prior written approval of the
Trustee.
A Definitive Residual Certificate may be transferred upon the surrender of the relevant Definitive
Residual Certificate, together with the form of transfer endorsed on it duly completed and executed, at
the specified office of the Registrar. Each new Definitive Residual Certificate to be issued upon a
transfer will, within five business days (in the place of the specified office of the Registrar) of receipt
of such request for transfer, be available for delivery at the specified office of the Registrar stipulated
in the request for transfer, or be mailed at the risk of the holder of the Definitive Residual Certificate to
such address as may be specified in such request.
Registration of Definitive Residual Certificates on transfer will be effected without charge by or on
behalf of the Issuer or the Registrar, but upon payment of (or the giving of such indemnity as the
Registrar may require in respect of) any tax or other governmental charges which may be imposed in
relation to it. No holder of a Definitive Residual Certificate may require the transfer of such Residual
Certificate to be registered during the period of 15 days ending on the due date for any payment of
sums due on such Residual Certificate.
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2. Status, Security and Administration
Status
(a)
(b)
The Residual Certificates constitute direct, secured (as more particularly described in the Deed of
Charge) and unconditional obligations of the Issuer and rank pari passu without preference or priority
amongst themselves.
The Residual Certificates have no voting rights under the Trust Deed or these Residual Certificate
Conditions save in respect of themselves. The Trust Deed contains provisions to the effect that, so long
as any of the Notes are outstanding, the Trustee shall not be required, when exercising its powers,
authorities and discretions, to have regard to the interests of, or act at the direction of, any persons
having the benefit of the Security, other than the Noteholders and the Residual Certificateholders in
accordance with the Trust Deed, and, in relation to the exercise of such powers, authorities and
discretions, the Trustee shall have no liability to such persons as a consequence of so acting.
Security
(c)
As security for the payment of all monies payable in respect of the Notes, the Residual Certificates and
otherwise under the Trust Deed (including the remuneration, expenses and any other claims of the
Trustee and any receiver appointed under the Deed of Charge) and in respect of certain amounts
payable to the Mortgage Administrator under the Mortgage Administration Agreement, the Cash/Bond
Administrator under the Cash/Bond Administration Agreement, the Standby Mortgage Administrator
under the Mortgage Administration Agreement, the Standby Cash/Bond Administrator under the
Cash/Bond Administration Agreement, the Principal Paying Agent, the Irish Paying Agent, the U.S.
Paying Agent, any other Paying Agent, the Registrar, the Transfer Agents, the Exchange Agent and the
Agent Bank under the Paying Agency Agreement, the Liquidity Facility Provider under the Liquidity
Facility Agreement, the Account Bank and the Collection Account Banks under the Bank Agreement,
the GIC Provider under the GIC, the Bullet Cap Counterparty under the Bullet Cap Agreement, the
Currency Swaps Counterparty under the Currency Swap Agreements, the Fixed/Floating Swap
Counterparty under the Fixed/Floating Swap Agreement, the BBR Swap Counterparty under the BBR
Swap Agreement, the Investment Administrator under the Investment Administration Agreement, the
Corporate Services Provider under the Corporate Services Agreement and each Seller in respect of its
entitlement to unpaid consideration under the Mortgage Sale Agreement, the Issuer will enter into the
Deed of Charge, creating the following security in favour of the Trustee for itself and on trust for the
other persons expressed to be secured parties thereunder (save that the Trustee shall hold the benefit of
its security interest with respect to the Prepayment Charges Receipts solely for the benefit of the
Residual Certificateholders) (such parties, the “Secured Creditors”):
(i)
a first fixed charge in favour of the Trustee over the Issuer’s interests in each Loan, each
related Mortgage and all other collateral security given or obtained in connection with such
Loan in the Mortgage Pool (such collateral security, together with the Mortgages, the
“Collateral Security” and including, without limitation, (1) the benefit of all affidavits,
declarations, consents, renunciations, waivers and deeds of postponement from occupiers and
other persons having an interest in or rights in connection with the relevant Property, (2) the
benefit of (including notations of interest on) insurance and assurance policies (including,
without limitation, all returns of premium and proceeds in respect of such policies) deposited,
charged, obtained, or held in connection with the relevant Loan, Mortgage and/or Property,
and (3) (to the extent assignable without the consent of the relevant counterparty) all courses
and rights of action (whether assigned to the Issuer or otherwise) against valuers, solicitors,
the Land Registry of England and Wales, the Registers of Northern Ireland and the Registers
of Scotland or any other person in connection with any report (including a report on title),
valuation, opinion, certificate, consent or other statement of fact or opinion given in
connection with the relevant Loan, Mortgage, other collateral security or Property) and, in
relation to Loans which are Scottish Loans, such fixed charge will take the form of an
assignation in security, governed by Scots law, of the Issuer’s interests in each such Scottish
Loan, its related Scottish Mortgage and other Collateral Security as comprised in the relevant
Scottish Trust;
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(ii)
(iii)
(iv)
(v)
an assignment in favour of the Trustee of the Issuer’s interests in the insurance contracts to the
extent that they relate to the Loans and their related Collateral Security;
an assignment in favour of the Trustee of the benefit of the Issuer in each of the Transaction
Documents (other than the Trust Deed and the Deed of Charge);
a first fixed charge in favour of the Trustee over the Issuer’s interest in the Bank Accounts and
any other bank accounts or Authorised Investments in which the Issuer has an interest; and
a first floating charge in favour of the Trustee (ranking after the security referred to in
paragraphs (i) to (iv) above) over the whole of the undertaking, property, assets and rights of
the Issuer,
(such property, assets, rights, accounts, undertaking, together, the “Charged Property”).
Priority of Payments prior to enforcement
(d)
The “Available Revenue Fund” at any time comprises the credit balance of the Available Revenue
Ledger at that time. Prior to enforcement of the Security, on each Interest Payment Date the Issuer is
required to apply the Available Revenue Fund calculated as at the immediately preceding
Determination Date (and taking into account any payments to be made or received from that date up to
and including the immediately following Interest Payment Date) in or towards the satisfaction of the
following amounts in the following order of priority (the “Pre-Enforcement Priority of Payments”)
in each case making an appropriate debit to the Available Revenue Ledger:
(i)
(ii)
first, when due, the remuneration payable to the Trustee or any Appointee (plus value added
tax, if any) and any costs, charges, liabilities and expenses incurred by the Trustee or any
Appointee under the provisions of or in connection with the Trust Deed, the Deed of Charge
or any other Transaction Document together with any applicable interest as provided in the
Trust Deed or the Deed of Charge;
second, when due, pro rata:
(A)
(B)
amounts, including audit fees, company secretarial expenses and costs and expenses
incurred in connection with the appointment of any substitute administrator (plus
value added tax, if any), which are payable by the Issuer to third parties and incurred
without breach by the Issuer pursuant to the Trust Deed, the Deed of Charge or the
Cash/Bond Administration Agreement and not provided for payment elsewhere and
to provide for any such amounts expected to become due and payable by the Issuer
during the Interest Period commencing on that Interest Payment Date and to provide
for the Issuer’s primary liability or possible primary liability for corporation tax, and
an amount equal to any premia due in respect of insurance contracts held by the
Issuer;
(iii)
third, pro rata:
(A)
(B)
except to the extent already paid to the Mortgage Administrator since the preceding
Interest Payment Date or, in the case of the first Interest Payment Date, since the
Closing Date, (1) the mortgage administration fee due and payable under the
Mortgage Administration Agreement, such fee being up to a maximum of the product
of 0.25 per cent. per annum and the aggregate Principal Balance of the Loans as at
the Determination Date immediately preceding the immediately prior Interest
Payment Date, multiplied by the Apportionment Factor and (2) any costs and
expenses incurred by the Mortgage Administrator in accordance with the Mortgage
Administration Agreement;
except to the extent already paid to the Cash/Bond Administrator since the preceding
Interest Payment Date or, in the case of the first Interest Payment Date, since the
Closing Date, (1) the cash/bond administration fee due and payable under the
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Cash/Bond Administration Agreement to the Cash/Bond Administrator and (2) any
costs and expenses incurred by the Cash/Bond Administrator due and payable in
accordance with the Cash/Bond Administration Agreement;
(C)
(D)
(E)
(F)
(G)
(H)
(I)
prior to the assumption by the Standby Mortgage Administrator of the duties and
obligations of the Mortgage Administrator, (1) the standby mortgage administrator
fee in an amount of no more than £6,000 per annum (plus value added tax chargeable
on the fee up to a rate of 17.5 per cent.), due and payable pursuant to the Mortgage
Administration Agreement to the Standby Mortgage Administrator divided by four
and (2) costs and expenses incurred by the Standby Mortgage Administrator in
accordance with the Mortgage Administration Agreement;
prior to the assumption by the Standby Cash/Bond Administrator of the duties and
obligations of the Cash/Bond Administrator, (1) the standby cash/bond administrator
fee in an amount of no more than £3,000 per annum (plus value added tax chargeable
on the fee up to a rate of 17.5 per cent.), payable pursuant to the Cash/Bond
Administration Agreement to the Standby Cash/Bond Administrator divided by four
and (2) costs and expenses incurred by the Standby Cash/Bond Administrator in
accordance with the Cash/Bond Administration Agreement;
(1) the corporate services fee (inclusive of value added tax if any) due and payable
pursuant to the Corporate Services Agreement to the Corporate Services Provider
divided by four and (2) costs and expenses incurred by the Corporate Services
Provider in accordance with the Corporate Services Agreement;
amounts due to the Paying Agents, the Registrar, the Transfer Agents, the Exchange
Agent and the Agent Bank under the Paying Agency Agreement;
amounts due to the GIC Provider under the GIC;
amounts due to the Investment Administrator under the Investment Administration
Agreement; and
amounts due to the Account Bank and the Collection Account Banks under the Bank
Agreement;
(iv)
(v)
fourth, amounts payable to the Liquidity Facility Provider pursuant to the Liquidity Facility
Agreement;
fifth, to pay pari passu and pro rata:
(A)
(B)
(C)
(D)
any Fixed/Floating Swap Net Amount due and payable to the Fixed/Floating Swap
Counterparty pursuant to the Fixed/Floating Swap Agreement;
any amounts payable by the Issuer to the Fixed/Floating Swap Counterparty in
connection with the termination of the Fixed/Floating Swap Agreement (other than a
Fixed/Floating Swap Counterparty Default Payment);
any BBR Swap Net Amount due and payable to the BBR Swap Counterparty
pursuant to the BBR Swap Agreement; and
any amounts payable by the Issuer to the BBR Swap Counterparty in connection with
the termination of the BBR Swap Agreement (other than a BBR Swap Counterparty
Default Payment);
(vi)
sixth, to pay pari passu and pro rata, (A) amounts of interest due and payable on the A1c
Notes and/or the A2c Notes and/or the A3c Notes and (B) amounts payable (other than with
respect to principal and Currency Swaps Counterparty Default Payments) to the Currency
Swaps Counterparty under the terms of the A1b Currency Swap Transaction, the A2a
Currency Swap Transaction, the A2b Currency Swap Transaction and the A3a Currency Swap
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Transaction and by applying interest received from the Currency Swaps Counterparty under
the A1b Currency Swap Transaction, the A2a Currency Swap Transaction, the A2b Currency
Swap Transaction and the A3a Currency Swap Transaction, any interest due and payable on
the A1b Notes, the A2a Notes, the A2b Notes and the A3a Notes, respectively;
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
seventh, amounts to reduce the A Principal Deficiency to zero (by crediting the Principal
Ledger and making a corresponding credit to the A Principal Deficiency Ledger) such
amounts to be applied in redemption of the Notes in accordance with Condition 5(b)
(Mandatory redemption in part of the Collateral Backed Notes) of the Notes;
eighth, to pay pari passu and pro rata (A) amounts of interest due and payable on the B1c
Notes and (B) amounts payable (other than with respect to principal and Currency Swaps
Counterparty Default Payments) to the Currency Swaps Counterparty under the terms of the
B1a Currency Swap Transaction and, by applying interest received from the Currency Swaps
Counterparty under the B1a Currency Swap Transaction, any interest due and payable on the
B1a Notes;
ninth, to apply amounts to reduce the B Principal Deficiency to zero (by crediting the
Principal Ledger and making a corresponding credit to the B Principal Deficiency Ledger),
such amounts to be applied in redemption of the Notes in accordance with Condition 5(b)
(Mandatory redemption in part of the Collateral Backed Notes) of the Notes;
tenth, to pay pari passu and pro rata (A) amounts of interest due and payable on the C1c
Notes and (B) amounts payable (other than with respect to principal and Currency Swaps
Counterparty Default Payments) to the Currency Swaps Counterparty under the terms of the
C1a Currency Swap Transaction and, by applying interest received from the Currency Swaps
Counterparty under the C1a Currency Swap Transaction, any interest due and payable on the
C1a Notes;
eleventh, to apply amounts to reduce the C Principal Deficiency to zero (by crediting the
Principal Ledger and making a corresponding credit to the C Principal Deficiency Ledger),
such amounts to be applied in redemption of the Notes in accordance with Condition 5(b)
(Mandatory redemption in part of the Collateral Backed Notes) of the Notes;
twelfth, to pay pari passu and pro rata, amounts payable (other than with respect to principal
and Currency Swaps Counterparty Default Payments) to the Currency Swaps Counterparty
under the terms of the D1a Currency Swap Transaction and, by applying interest received
from the Currency Swaps Counterparty under the D1a Currency Swap Transaction, any
interest due and payable on the D1a Notes;
thirteenth, to apply amounts to reduce the D Principal Deficiency to zero (by crediting the
Principal Ledger and making a corresponding credit to the D Principal Deficiency Ledger),
such amounts to be applied in redemption of the Notes in accordance with Condition 5(b)
(Mandatory redemption in part of the Collateral Backed Notes) of the Notes;
fourteenth, to pay pari passu and pro rata, all amounts of interest due and payable on the E
Notes;
fifteenth, to apply amounts to reduce the E1c Principal Deficiency to zero (by crediting the
Principal Ledger and making a corresponding credit to the E1c Principal Deficiency Ledger),
such amounts to be applied in redemption of the Notes in accordance with Condition 5(b)
(Mandatory redemption in part of the Collateral Backed Notes) of the Notes;
sixteenth, except upon the Interest Payment Date on which the Notes are redeemed in full, (by
crediting the Reserve Ledger) to increase the balance of the Reserve Fund until it reaches the
Reserve Fund Required Amount;
seventeenth, except upon the Interest Payment Date on which the Notes are redeemed in full,
(by crediting the Bullet Cap Proceeds Reserve Ledger) to increase the balance of the Bullet
Cap Proceeds Reserve Fund up to an amount equal to the aggregate of:
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(A)
(B)
the balance of the Bullet Cap Proceeds Reserve Fund on the immediately preceding
Interest Payment Date; and
the aggregate amount of the Bullet Cap Payments received since the immediately
preceding Interest Payment Date;
(xviii)
(xix)
(xx)
(xxi)
eighteenth, an amount of up to 20 per cent. of the Principal Amount Outstanding of the ETc
Notes multiplied by the day count of the relevant Interest Period divided by 365 in or towards
payment, pari passu and pro rata, of RC Distributions to the Residual Certificateholders;
nineteenth, (by crediting the Profit Ledger) to retain an amount equal to 0.0025 per cent. of
the aggregate balance standing to the credit of the Revenue Ledger on the immediately
preceding Determination Date;
twentieth, in redeeming, pari passu and pro rata, up to 60 per cent. of the Principal Amount
Outstanding of the ETc Notes as at the immediately preceding Interest Payment Date
(following application of any funds towards redemption of principal on the ETc Notes on that
date), unless the Principal Amount Outstanding of the ETc Notes as at the immediately
preceding Interest Payment Date (following application of any funds towards redemption of
principal on the ETc Notes on that date) is less than or equal to 25 per cent. of the initial
Principal Amount Outstanding of the ETc Notes, in which case the payment will be towards
the ETc Notes until the ETc Notes have been redeemed in full;
twenty-first, upon the Interest Payment Date on which the Notes are redeemed in full, in
paying to the Bullet Cap Counterparty in accordance with the terms of the Bullet Cap
Transaction, an amount equal to the aggregate of:
(A)
(B)
the balance of the Bullet Cap Proceeds Reserve Fund on the immediately preceding
Interest Payment Date; and
the aggregate amount of the Bullet Cap Payments received since the immediately
preceding Interest Payment Date;
(xxii) twenty-second, pari passu and pro rata:
(A)
(B)
(c)
in or towards payment of any Currency Swaps Counterparty Default Payment
payable to the Currency Swaps Counterparty;
in or towards payment of any Fixed/Floating Swap Counterparty Default Payment
payable to the Fixed/Floating Swap Counterparty; and
in or towards payment of any BBR Swap Counterparty Default Payment payable to
the BBR Swap Counterparty;
(xxiii)
twenty-third, pari passu and pro rata:
(A)
(B)
to the Standby Mortgage Administrator of an amount, if any, equal to that portion of
value added tax owing in respect of the Standby Mortgage Administrator’s fee due
and payable under (iii)(C) above to the extent that the rate of value added tax in
respect of that fee exceeds 17.5 per cent.; and
to the Standby Cash/Bond Administrator of an amount, if any, equal to that portion of
value added tax owing in respect of the Standby Cash/Bond Administrator’s fee due
and payable under (iii)(D) above to the extent that the rate of value added tax in
respect of that fee exceeds 17.5 per cent.; and
(xxiv)
twenty-fourth, in or towards payment pari passu and pro rata, of RC Distributions to the
Residual Certificateholders.
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In the event that any payment is to be made from the Available Revenue Fund by the Issuer and the
Currency Swap Agreements do not result in the relevant amount of the Available Revenue Fund being
denominated in the relevant currency in which such payment is to be made, the Issuer shall convert the
relevant amounts comprised in the Available Revenue Fund to make such payment into such currency
at the then prevailing spot rate of exchange as may be required in order to be applied in or towards such
payment.
Where any payment is to be made from the Available Revenue Fund on an Interest Payment Date by
the Issuer to the Currency Swaps Counterparty under any paragraph of this Condition 2 (Status,
Security and Administration), the Available Revenue Fund shall exclude the corresponding payment
received from the Currency Swaps Counterparty under the relevant Currency Swap Agreement on or
before that Interest Payment Date in exchange for such payment to be made by the Issuer. However,
the payment received from the Currency Swaps Counterparty shall be applied in or towards making
payment to the Noteholders of the relevant Class of the amounts then due and payable to such
Noteholders.
In the event that the Bullet Cap Transaction, the Fixed/Floating Swap Transaction, the BBR Swap
Transaction or a Currency Swap Transaction terminates, a termination payment may be paid by the
Bullet Cap Counterparty, the Fixed/Floating Swap Counterparty, the BBR Swap Counterparty or the
Currency Swaps Counterparty, as applicable, to the Issuer. Upon the receipt by the Issuer of written
instructions from the Trustee, provided that the Trustee has verified prior to giving such instruction that
the then current ratings of the Notes will not be adversely affected, the Issuer will apply such
termination payment towards payment to a suitably rated replacement bullet cap counterparty,
fixed/floating swap counterparty, BBR swap counterparty or currency swaps counterparty, as
applicable, in consideration for such replacement bullet cap counterparty, fixed/floating swap
counterparty, BBR swap counterparty or currency swaps counterparty, as applicable, entering into a
suitable replacement bullet cap agreement, fixed/floating swap agreement, BBR swap agreement or
currency swap agreement, as applicable, with the Issuer. Such termination payment received by the
Issuer shall not form part of the Available Revenue Fund, except to the extent that it is not used as
consideration for such replacement bullet cap agreement, fixed/floating swap agreement, BBR swap
agreement or replacement currency swap agreement, as applicable.
Any Swap Replacement Premium to the extent of a termination payment due to the Currency Swaps
Counterparty or the Fixed/Floating Swap Counterparty or the BBR Swap Counterparty under the
relevant Currency Swap Agreement or the Fixed/Floating Swap Agreement or the BBR Swap
Agreement, as the case may be, that is not a Currency Swaps Counterparty Default Payment or a
Fixed/Floating Swap Counterparty Default Payment or a BBR Swap Counterparty Default Payment
will be paid directly by the Issuer to such Currency Swaps Counterparty or Fixed/Floating Swap
Counterparty or BBR Swap Counterparty, as the case may be, and not via the Priority of Payments.
Any Excess Swap Collateral will be paid directly to the relevant Currency Swaps Counterparty, the
Fixed/Floating Swap Counterparty, the BBR Swap Counterparty or the Bullet Cap Counterparty and
not via the Priority of Payments.
In addition to payments pursuant to items (xviii) and (xxiv) of the Pre-Enforcement Priority of
Payments above, the Residual Certificateholders will, on each Interest Payment Date, be entitled to
distributions of all amounts standing to the credit of the Prepayment Charges Ledger as at the close of
business on the Business Day preceding such Interest Payment Date
Priority of Payments Post-Enforcement
(e)
After the Trustee has given notice to the Issuer pursuant to Condition 9(a) (Events of Default) declaring
the Notes to be due and repayable, the Trustee shall, to the extent of the funds available to the Issuer
and from the proceeds of enforcement of the Security (other than the proceeds of any Stand-by
Drawing under the Liquidity Facility Agreement which has not been utilised as a Stand-by Liquidity
Drawing (which shall be used to repay all or a portion of such Stand-by Drawing), any collateral posted
under the Currency Swap Agreements, the Fixed/Floating Swap Agreement, the BBR Swap Agreement
or the Bullet Cap Agreement (excluding collateral amounts applied in satisfaction of termination
payments due to the Issuer following the designation of an early termination date under the Bullet Cap
Agreement, the Fixed/Floating Swap Agreement, the BBR Swap Agreement or any Currency Swap
Agreement by way of netting)), make payments in the following order of priority (the “Post-
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Enforcement Priority of Payments” and, together with the Pre-Enforcement Priority of Payments, the
“Priority of Payments”) pursuant to, in accordance with and as set out more fully in the Deed of
Charge:
(i)
(ii)
(iii)
(iv)
first, to pay, pro rata, any remuneration then due to the Trustee, any receiver or administrator
appointed by the Trustee or any other Appointee of the Trustee and all amounts due in respect
of legal fees and other costs, charges, liabilities, losses, damages, proceedings, claims and
demands then incurred by the Trustee, such receiver or administrator or such Appointee
together with interest thereon (plus value added tax, if any);
second, to pay, pro rata, the fees, costs, expenses and liabilities due to the Mortgage
Administrator, the Cash/Bond Administrator, the Standby Mortgage Administrator, the
Standby Cash/Bond Administrator (the fees of such Standby Mortgage Administrator and
Standby Cash/Bond Administrator to be paid together with value added tax up to a rate of 17.5
per cent. only), the Investment Administrator, the Corporate Services Provider, the Paying
Agents, the Registrar, the Transfer Agents, the Exchange Agents, the Agent Bank, the
Account Bank, the Collection Account Banks and the GIC Provider, together with value
added tax (if any) chargeable thereon;
third, to pay any amount due to the Liquidity Facility Provider pursuant to the Liquidity
Facility Agreement;
fourth, to pay pari passu and pro rata,
(A)
(B)
(C)
(D)
any Fixed/Floating Swap Net Amount due and payable to the Fixed/Floating Swap
Counterparty pursuant to the Fixed/Floating Swap Agreement;
any amounts payable by the Issuer to the Fixed/Floating Swap Counterparty in
connection with the termination of the Fixed/Floating Swap Agreement (other than a
Fixed/Floating Swap Counterparty Default Payment);
any BBR Swap Net Amount due and payable to the BBR Swap Counterparty
pursuant to the BBR Swap Agreement; and
any amounts payable by the Issuer to the BBR Swap Counterparty in connection with
the termination of the BBR Swap Agreement (other than a BBR Swap Counterparty
Default Payment);
(v)
(vi)
(vii)
fifth, to pay, pari passu and pro rata (1) all amounts of interest and principal then due and
payable on the A1c Notes, the A2c Notes and the A3c Notes and (2) all amounts payable to
the Currency Swaps Counterparty including but not limited to payment in respect of the final
exchange amounts under the terms of the A1b Currency Swap Transaction, the A2a Currency
Swap Transaction, the A2b Currency Swap Transaction and the A3a Currency Swap
Transaction (except for any Currency Swaps Counterparty Default Payment) and, by applying
the amount received from the Currency Swaps Counterparty under, the A1b Currency Swap
Transaction, the A2a Currency Swap Transaction, the A2b Currency Swap Transaction and
the A3a Currency Swap Transaction in respect of such payment, any interest and principal
then due and payable on the A1b Notes, the A2a Notes, the A2b Notes and the A3a Notes,
respectively;
sixth, to pay, pari passu and pro rata (A) all amounts of interest and principal then due and
payable on the B1c Notes and (B) all amounts payable to the Currency Swaps Counterparty
including but not limited to payment in respect of the final exchange amounts under the terms
of the B1a Currency Swap Transaction (except for any Currency Swaps Counterparty Default
Payment) and, by applying the amount received from the Currency Swaps Counterparty under
the B1a Currency Swap Transaction in respect of such payment, any interest and principal
then due and payable on the B1a Notes;
seventh, to pay, pari passu and pro rata (1) all amounts of interest and principal then due and
payable on the C1c Notes and (2) all amounts payable to the Currency Swaps Counterparty
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including but not limited to payment in respect of the final exchange amounts under the terms
of the C1a Currency Swap Transaction (except for any Currency Swaps Counterparty Default
Payment) and, by applying the amount received from the Currency Swaps Counterparty under
the C1a Currency Swap Transaction in respect of such payment, any interest and principal
then due and payable on the C1a Notes;
(viii)
(ix)
eighth, to pay, pari passu and pro rata, all amounts payable to the Currency Swaps
Counterparty including but not limited to payment in respect of the final exchange amounts
under the terms of the D1a Currency Swap Transaction (except for any Currency Swaps
Counterparty Default Payment) and, by applying the amount received from the Currency
Swaps Counterparty under the D1a Currency Swap Transaction in respect of such payment,
any interest and principal then due and payable on the D1a Notes;
ninth, to pay, pari passu and pro rata:
(A)
(B)
all amounts of interest then due and payable on the E Notes; and
all amounts of principal due on the E1c Notes until redemption in full thereof;
(x)
(xi)
(xii)
tenth, an amount of up to 20 per cent. of the Principal Amount Outstanding of the ETc Notes
multiplied by the day count of the relevant Interest Period divided by 365 in or towards
payment, pari passu and pro rata, of RC Distributions to the Residual Certificateholders;
eleventh, to pay, pari passu and pro rata, all amounts of principal due on the ETc Notes until
redemption in full thereof;
twelfth, pari passu and pro rata:
(A)
(B)
(C)
in or towards payment of any Currency Swaps Counterparty Default Payment
payable to the Currency Swaps Counterparty;
in or towards payment of any Fixed/Floating Swap Counterparty Default Payment
payable to the Fixed/Floating Swap Counterparty; and
in or towards payment of any BBR Swap Counterparty Default Payment payable to
the BBR Swap Counterparty;
(xiii)
thirteenth, to pay, pro rata:
(A)
(B)
to the Standby Mortgage Administrator an amount, if any, equal to that portion of
value added tax owing in respect of the Standby Mortgage Administrator’s fee to the
extent that the rate of value added tax in respect of that fee exceeds 17.5 per cent.;
and
to the Standby Cash/Bond Administrator an amount, if any, equal to that portion of
value added tax owing in respect of the Standby Cash/Bond Administrator’s fee to
the extent that the rate of value added tax in respect of that fee exceeds 17.5 per cent.;
and
(xiv)
fourteenth, in or towards payment, pari passu and pro rata, of RC Distributions (other than
RC Senior Distributions) to the Residual Certificateholders.
In addition to payments pursuant to items (x) and (xiv) of the Post-Enforcement Priority of Payments
above, the Residual Certificateholders will, on each Interest Payment Date, be entitled to distributions
of all amounts standing to the credit of the Prepayment Charges Ledger as at the close of business on
the Business Day preceding such Interest Payment Date.
In such distribution, the manner of making payments to the Residual Certificateholders shall remain as
specified prior to the Residual Certificates being declared due and payable. The Residual
Certificateholders have full recourse to the Issuer in respect of the payments prescribed above and
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accordingly are entitled to bring a claim under English law, subject to the Trust Deed, for the full
amount of such payments in accordance with Residual Certificate Condition 9 (Events of Default).
The Security will become enforceable upon the giving of an Enforcement Notice pursuant to Residual
Certificate Condition 9(a) (Events of Default) of the Notes or upon any failure by the Issuer to pay the
full amount when due on the Notes pursuant to Condition 5(a) (Final Redemption) of the Notes or
following the giving of notice of redemption of the Notes pursuant to Condition 5(e) (Early
Redemption) or Condition 5(f) (Redemption for tax reasons) of the Notes provided that, if the Security
has become enforceable otherwise than by reason of a default in payment of any amount due on the
Notes the Trustee will not be entitled to dispose of the assets comprised in the Security or any part
thereof unless either (A) the Trustee is satisfied that sufficient amounts would be realised to allow
discharge in full of all amounts owing to the Noteholders and any other Secured Creditors ranking pari
passu with or in priority thereto; or (B) the Trustee is of the sole opinion, reached after considering at
any time and from time to time the advice of an investment bank or other financial adviser selected by
the Trustee, acting in its absolute discretion, that the cash flow prospectively receivable by the Issuer
will not (or that there is a significant risk that it will not) be sufficient, having regard to any other
relevant actual, contingent or prospective liabilities of the Issuer, to discharge in full in due course all
amounts owing to the Noteholders and any other Secured Creditors ranking pari passu with or in
priority thereto.
Control of Trustee
(f)
The Residual Certificates are subject to the Deed of Charge pursuant to which the claims and exercise
of rights by the beneficiaries of the Security against the Issuer are regulated.
3. Covenants
Save with the prior written consent of the Trustee (but subject as provided in Residual Certificate Condition 10
(Meetings of Residual Certificateholders; Modifications; Consents; Waiver)) or as provided in or envisaged by
the Conditions to the Notes or any of the Transaction Documents, the Issuer shall not for so long as any
Residual Certificate remains outstanding (as defined in the Master Definitions Schedule):
(a)
Negative pledge
create or permit to subsist any mortgage, sub mortgage, assignment, assignation, standard security,
charge, sub charge, pledge, lien (unless arising by operation of law), hypothecation, assignation or
other security interest whatsoever upon the whole or any part of its assets, present or future (including
any uncalled capital) or its undertaking;
(b)
Restrictions on activities
(i)
(ii)
(iii)
(iv)
(v)
engage in any activity which is not reasonably incidental to any of the activities which the
Transaction Documents provide or envisage that the Issuer will engage in;
open nor have any interest in any account whatsoever with any bank or other financial
institution other than the Bank Accounts and the Collection Accounts, save where such
account is immediately charged in favour of the Trustee so as to form part of the assets subject
to the Security described in Residual Certificate Condition 2 (Status, Security and
Administration) and the Trustee receives from such other bank or financial institution an
acknowledgement of the security rights and interests of the Trustee and an agreement that it
will not exercise any right of set off it might otherwise have against the account in question;
have any subsidiaries or employees or own, rent, lease or be in possession of any assets
(including, without limitation, buildings, premises or equipment);
act as a director of or hold any office in any company or other organisation;
amend, supplement or otherwise modify its Memorandum or Articles of Association or other
constitutive documents; or
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(vi)
engage, or permit any of its affiliates to engage, in any activities in the United States (directly
or through agents), derive, or permit any of its affiliates to derive, any income from sources
within the United States as determined under U.S. federal income tax principles, and hold, or
permit any of its affiliates to hold, any mortgaged property that would cause it or any of its
affiliates to be engaged or deemed to be engaged in a trade or business within the United
States as determined under U.S. federal income tax principles;
(c)
Dividends or distributions
pay any dividend or make any other distribution to its shareholders or issue any further shares (other
than amounts paid from the Profit Ledger);
(d)
Borrowings
incur or permit to subsist any indebtedness in respect of borrowed money whatsoever or give any
guarantee or indemnity in respect of any indebtedness or any obligation of any person;
(e)
Merger
consolidate or merge with any other person or convey or transfer its properties or assets substantially as
an entirety to any other person;
(f)
Disposal of assets
transfer, sell, lend, part with or otherwise dispose of or deal with, or grant any option over any present
or future right to acquire, any of its assets or undertaking or any interest, estate, right, title or benefit
therein;
(g)
Tax grouping
(i)
(ii)
apply to become part of any group for the purposes of Section 43 of the Value Added Tax Act
1994 with any other company or group of companies, or any such act, regulation, order,
statutory instrument or directive which may from time to time re enact, replace, amend, vary,
codify, consolidate or repeal the Value Added Tax Act 1994; or
surrender or consent to the surrender of any amounts by way of group relief within the
meaning of Chapter IV of Part X of the Income and Corporation Taxes Act 1988;
(h)
Other
permit any of the Transaction Documents, the insurance contracts relating to the Mortgages from time
to time owned by the Issuer or the priority of the security interests created thereby to be amended,
invalidated, rendered ineffective, terminated, postponed or discharged, or consent to any variation
thereof, or exercise any powers of consent or waiver in relation thereto pursuant to the terms of the
Trust Deed, the Conditions and these Residual Certificate Conditions, or permit any party to any of the
Transaction Documents or insurance contracts or any other person whose obligations form part of the
Security to be released from such obligations, or dispose of any part of the Security save as envisaged
in the Transaction Documents; and
(i)
Independent Director
at any time have fewer than one Independent Director.
In giving any consent to the foregoing, the Trustee may require the Issuer to make such modifications or
additions to the provisions of any of the Transaction Documents or may impose such other conditions or
requirements as the Trustee, acting in its absolute discretion, may deem expedient in the interests of the
Noteholders, provided that S&P and Fitch provide prior written confirmation to the Trustee that the then current
ratings of the Notes will not be downgraded, withdrawn or qualified as a result of such modifications or
additions and notice of such modification and/or addition is given to Moody’s.
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4. RC Distributions
(a)
Entitlement
Each Residual Certificate bears an entitlement to receive a distribution (an “RC Distribution”) on each
Interest Payment Date equal to a pro rata share of the Residual Revenue in respect of such Interest
Payment Date.
Each Residual Certificate shall cease to bear an entitlement to any RC Distributions from the date of
the cancellation of the Residual Certificates (in accordance with Residual Certificate Condition 5
(Cancellation)).
(b)
Payment
Subject to Residual Certificate Condition 6 (Payments), RC Distributions are payable in sterling on the
13th day of September, December, March and June in each year (or if such day is not a Business Day,
the next succeeding Business Day) (each such date an “Interest Payment Date”), the first such
payment to be made on 13 September 2007.
(c)
Determination and Calculation
The Agent Bank shall, on each Interest Payment Date, determine and notify in writing the Issuer, the
Mortgage Administrator, the Trustee, the Paying Agents and the Irish Stock Exchange of the sterling
amount of the RC Distributions payable on such Interest Payment Date in respect of each Residual
Certificate.
(d)
Publication and other Notices
As soon as practicable after receiving notification thereof, the Agent Bank (on behalf of the Issuer) will
cause the RC Distributions amount payable on each Interest Payment Date to be notified to each stock
exchange (if any) on which the Residual Certificates are then listed and will cause notice thereof to be
given in accordance with Residual Certificate Condition 13 (Notice to Residual Certificateholders).
(e)
Determination or calculation by Trustee
If the Agent Bank does not at any time for any reason determine and/or calculate the RC Distributions
in accordance with paragraph (c), the Trustee shall (at the cost of the Issuer) determine and calculate or
procure the determination and calculation of the RC Distributions amount, and any such determination
and/or calculation by, or procured by, the Trustee shall be notified (at the cost of the Issuer) in
accordance with paragraph (c) above and shall be deemed to have been made by the Agent Bank.
(f)
Notifications to be final
All notifications, opinions, determinations, certificates, calculations, quotations and decisions given,
expressed, made or obtained for the purposes of this Residual Certificate Condition, whether by the
Reference Banks (or any of them) or the Agent Bank or the Trustee shall (in the absence of wilful
default, bad faith or manifest or proven error) be binding on the Issuer, the Cash/Bond Administrator,
the Agent Bank, the Trustee and all Residual Certificateholders and (in such absence as aforesaid) no
liability to the Trustee or the Residual Certificateholders shall attach to the Issuer, to the Cash/Bond
Administrator, the Agent Bank or the Trustee in connection with the exercise or non exercise by them
or any of them of their powers, duties and discretions hereunder.
5. Cancellation
The entitlement of Residual Certificateholders to receive RC Distributions is contingent on the Notes remaining
outstanding. Subject to the payment to Residual Certificateholders of RC Distributions then payable, the
Residual Certificates shall be cancelled and will no longer constitute a claim against the Issuer following any
redemption of all (but not some only) of the Notes. The Issuer shall not purchase any Residual Certificates.
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6. Payments
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Payments of RC Distributions in respect of the Global Residual Certificate will be made to the persons
in whose names the Global Residual Certificate is registered on the Register at the close of business on
the tenth Business Day before the relevant due date (the “Record Date”). Payments in respect of the
Global Residual Certificate will be made by transfer to a sterling account maintained by the payee with
a bank in London.
The holder of the Global Residual Certificate shall be the only person entitled to receive payments in
respect of Notes represented by such Global Residual Certificate and the Issuer will be discharged by
payment to, or to the order of, the holder of such Global Residual Certificate in respect of each amount
so paid. Each of the persons shown in the records of Euroclear and Clearstream, Luxembourg as the
beneficial owner of a particular principal amount of Residual Certificates represented by such Global
Residual Certificate must look solely to Euroclear or Clearstream, Luxembourg, as the case may be, for
his share of each payment made by the Issuer to, or to the order of, the holder of the Global Residual
Certificate. Such persons shall have no claim directly against the Issuer in respect of payment due on
the Residual Certificates for so long as such Global Residual Certificate is outstanding.
Payments of RC Distributions in respect of Definitive Residual Certificates will be made by sterling
cheque drawn on a bank in London, mailed to the holder (or to the first-named joint holders) of such
Definitive Residual Certificates at the address shown on the Register not later than the due date for
such payment. For the purposes of this Residual Certificate Condition 6(c) (Payments), the holder of a
Definitive Residual Certificate will be deemed to be the person shown as the holder (or the first-named
of joint holders) on the Register on the Record Date.
Upon application by the holder of a Definitive Residual Certificate to the specified office of the
Registrar not later than the Record Date for any payment in respect of such Definitive Residual
Certificate, such payment will be made by transfer to a sterling account maintained by the payee with a
bank in London. Any such application for transfer to such an account shall be deemed to relate to all
future payments in respect of the Definitive Residual Certificates which become payable to the
Residual Certificateholder who has made the initial application until such time as the Registrar is
notified in writing to the contrary by such Residual Certificateholder.
Payments of RC Distributions in respect of the Residual Certificates are subject in all cases to any
fiscal or other laws and regulations applicable thereto. No commission or expenses shall be charged to
the Residual Certificateholders in respect of such payments.
The initial Principal Paying Agent, the initial Irish Paying Agent, the initial U.S. Paying Agent and the
initial Registrar and their initial specified offices are set out at the end of these Residual Certificate
Conditions. The Issuer reserves the right, subject to the prior written approval of the Trustee, at any
time to vary or terminate the appointment of any Paying Agent and appoint an additional or other
Paying Agent; provided that such Paying Agent’s officer administering payments in respect of the
Residual Certificates is located outside the United States and its possessions. The Issuer undertakes
that it will ensure that it maintains a Principal Paying Agent in an EU Member State that will not be
obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any other
Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 or
any law implementing or complying with, or introduced in order to conform to, such Directive and (so
long as the Residual Certificates are listed on the Irish Stock Exchange) a Paying Agent with a
specified office in Ireland (which may be the Principal Paying Agent). The Issuer will cause at least 14
days notice of any change in or addition to any Paying Agent or its specified office to be given in
accordance with Residual Certificate Condition 13 (Notice to Residual Certificateholders).
If the due date for any payment of an RC Distribution is on a Saturday, a Sunday or a day on which
commercial banks and foreign exchange markets do not settle payments and are not open for general
business in London, payment will not be made until the next succeeding business day in that location
and no further payments of additional amounts by way of interest, principal or otherwise shall be due in
respect of such Residual Certificate.
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7. Prescription
The Global Residual Certificate shall become void unless presented for payment within a period of five years
from the date on which the final RC Distributions first became due. Claims for RC Distributions in respect of
Definitive Residual Certificates shall become void unless made within a period of five years from the date on
which the final RC Distributions first became due. After the date on which a Residual Certificate becomes void
in its entirety, no claim may be made in respect thereof.
8. Taxation
All payments in respect of the Residual Certificates will be made without withholding or deduction for, or on
account of, any present or future taxes, duties or charges of whatsoever nature unless the Issuer or the relevant
Paying Agent (as applicable) is required by applicable law to make any payment in respect of the Residual
Certificates subject to any withholding or deduction for, or on account of, any present or future taxes, duties or
charges of whatsoever nature. In that event the Issuer or any Paying Agent (as the case may be) shall make such
payment after such withholding or deduction has been made and shall account to the relevant authorities for the
amount so required to be withheld or deducted. Neither the Issuer nor any Paying Agent will be obliged to
make any additional payments to holders of Residual Certificates in respect of such withholding or deduction.
9. Events of Default
Upon the service of a notice by the Trustee on the Issuer in accordance with Condition 9(a) (Events of Default)
of the Notes that the Notes are due and repayable, RC Distributions in respect of the Residual Revenue (if any)
received by the Issuer as at the date of such declaration shall become immediately due and payable.
10. Meetings of Residual Certificateholders; Modifications; Consents; Waiver
(a)
(b)
(c)
(d)
(e)
The Trust Deed contains provisions for convening meetings of Residual Certificateholders, to consider
any matter affecting their interests, including the sanctioning by an Extraordinary Resolution of the
Residual Certificateholders of any modification of the Residual Certificates (including these Residual
Certificate Conditions). Any resolution to alter the definition of Permitted Activities or to request that
the Issuer undertake any action that is not Permitted Activities shall be by Extraordinary Resolution.
For the purposes of, inter alia, any Extraordinary Resolution to alter the definition of Permitted
Activities any Residual Certificates held by or on behalf of a Seller or any of its Affiliates have no
voting rights and are deemed not to be outstanding for the purposes of any vote on such Extraordinary
Resolution.
The quorum at any meeting of the Residual Certificateholders for passing an Extraordinary Resolution
shall be one or more persons holding or representing over 50 per cent. of the Residual Certificates, or,
at any adjourned meeting, one or more persons being or representing any Residual Certificates
whatever the Residual Certificates so held except that, at any meeting the business of which includes
the sanctioning of a Basic Terms Modification, the necessary quorum for passing an Extraordinary
Resolution shall be one or more persons holding or representing not less than 75 per cent., or at any
adjourned such meeting not less than 25 per cent., of the Residual Certificates. The quorum at any
meeting of the Residual Certificateholders for all business other than voting on an Extraordinary
Resolution shall be one or more persons holding or representing in the aggregate not less than 5 per
cent. of the Residual Certificates or, at any adjourned meeting, one or more persons being or
representing any Residual Certificates whatever the Residual Certificates so held.
An Extraordinary Resolution of the Residual Certificateholders shall only be effective when the
Trustee is of the opinion that it will not be materially prejudicial to the interests of the Noteholders or
any of them, or it is sanctioned by an Extraordinary Resolution of the A Noteholders, the B
Noteholders, the C Noteholders, the D Noteholders and the E Noteholders.
An Extraordinary Resolution passed at any meeting of the Residual Certificateholders shall be binding
on all Residual Certificateholders, whether or not they are present at the meeting.
The Trustee may agree without the consent of the Residual Certificateholders:
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(i)
(ii)
to any modification of, or to the waiver or authorisation of any breach or proposed breach of,
the Residual Certificates or any of the Transaction Documents without having regard to the
interests of the relevant Residual Certificateholders provided that, in the case of a breach of
Residual Certificate Condition 4 (RC Distributions) or Residual Certificate Conditions 6
(Payments) or in the case of modification of the Residual Certificate Conditions, the Trustee is
of the opinion that such modification, waiver or authorisation will not be materially prejudicial
to the interests of the Residual Certificateholder, and would not constitute a change in any
Permitted Activities that the Issuer may undertake; or
to any modification of the Residual Certificates (including these Residual Certificate
Conditions) or any of the Transaction Documents, which in the Trustee’s sole opinion is of a
formal, minor or technical nature or to correct a manifest error or an error which is, in the sole
opinion of the Trustee, proven.
11. Indemnification and Exoneration of the Trustee
(a)
(b)
(c)
The Trust Deed contains provisions governing the responsibility (and relief from responsibility) of the
Trustee and providing for its indemnification in certain circumstances, including provisions relieving it
from taking enforcement proceedings or enforcing the Security unless indemnified and/or secured to its
satisfaction and, for the avoidance of doubt, whenever the Trustee is under the provisions of the Trust
Deed bound to act at the request or direction of the Residual Certificateholders, the Trustee shall
nevertheless not be so bound unless first indemnified and/or secured to its satisfaction. The Trustee
and its related companies are entitled to enter into business transactions with, among others, the Issuer,
the Mortgage Administrator, the Cash/Bond Administrator and/or related companies of any of them
without accounting for any profit resulting therefrom. The Trustee will not be responsible for any loss,
expense or liability which may be suffered as a result of, inter alia, any assets comprised in the
Security, or any deeds or documents of title thereto, being uninsured or inadequately insured or being
held by or to the order of the Mortgage Administrator, the Cash/Bond Administrator or any agent or
related company of the Mortgage Administrator, the Cash/Bond Administrator or by clearing
organisations or their operators or by intermediaries such as banks, brokers or other similar persons on
behalf of the Trustee.
The Trust Deed provides that the Trustee shall be under no obligation to monitor or supervise
compliance by the Issuer, the Mortgage Administrator or the Cash/Bond Administrator with their
respective obligations or to make any searches, enquiries, or independent investigations of title in
relation to any of the Properties secured by the Mortgages.
The Trustee will not be responsible for (i) supervising the performance by the Issuer or any other party
to the Transaction Documents of their respective obligations under the Transaction Documents and the
Trustee will be entitled to assume, until it has written notice to the contrary, that all such persons are
properly performing their duties, or (ii) considering the basis on which approvals or consents are
granted by the Issuer or any other party to the Transaction Documents under the Transaction
Documents. The Trustee will not be liable to any Residual Certificateholder or other Secured Creditor
for any failure to make or to cause to be made on their behalf the searches, investigations and enquiries
which would normally be made by a prudent chargee in relation to the Security and has no
responsibility in relation to the legality, validity, sufficiency and enforceability of the Security and the
Transaction Documents.
12. Replacement of Definitive Residual Certificates
If any Residual Certificate is mutilated, defaced, lost, stolen or destroyed, it may be replaced at the specified
office of any Paying Agent (located outside the United States and its possessions). Replacement of any
mutilated, defaced, lost, stolen or destroyed Residual Certificate will only be made on payment of such costs as
may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer may
reasonably require. Mutilated or defaced Residual Certificates must be surrendered before new ones will be
issued.
13. Notice to Residual Certificateholders
Any notice to the Residual Certificateholders shall be validly given by any of:
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(a)
(b)
(c)
(d)
the information contained in such notice appearing on a page of the Reuters Screen, or any other
medium for electronic display of data as may be previously approved in writing by the Trustee (in each
case a “Relevant Screen”);
by publication in a leading newspaper published in Ireland (which is expected to be The Irish Times)
or, if such newspaper shall cease to be published or timely publication therein shall not be practicable,
in such English language newspaper or newspapers as the Trustee shall approve having a general
circulation in Dublin;
whilst the Residual Certificates are in global form, if delivered to Euroclear and/or Clearstream,
Luxembourg (as applicable) for communicating them to the Residual Certificateholders; or
whilst the Residual Certificates are in definitive form, if mailed to the Residual Certificateholders at
their respective addresses in the Register.
The Issuer shall also ensure that notices are duly published in a manner which complies with the rules and
regulations of any stock exchange on which the Residual Certificates are for the time being listed or any other
relevant authority.
Any notice under paragraph (a) or (b) shall be deemed to have been given to the Residual Certificateholders on
the date of such publication or, if published more than once or on different dates, on the first date on which
publication shall have been made in the newspaper or in all newspapers in which (or on the Relevant Screen on
which) publication is required. Any notice under paragraph (c) shall be deemed to have been given to the
Residual Certificateholders on the third day after the day on which the said notice was given to Euroclear and
Clearstream, Luxembourg. Any notice under paragraph (d) shall be deemed to have been given on the third day
after being mailed to the address of the relevant Residual Certificateholder at its address stated in the Register.
The Trustee shall be at liberty to sanction some other method of giving notice to the Residual Certificateholders
if, in its sole opinion, such other method is reasonable having regard to market practice then prevailing and to
the requirements of the stock exchange on which the Residual Certificateholders are then listed and provided
that notice of such other method is given to the Residual Certificateholders in such manner as the Trustee shall
require.
14. Third Party Rights
No person shall have any right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term or
condition of the Residual Certificates.
15. Governing Law and Jurisdiction
(a)
(b)
(c)
The Trust Deed and the Residual Certificates are governed by, and shall be construed in accordance
with, English law.
The Issuer has agreed in the Trust Deed that the courts of England shall have non exclusive jurisdiction
to hear and determine any suit, action or proceedings, and to settle any disputes, which may arise out of
or in connection with the Residual Certificates (respectively, the “Proceedings” and “Disputes”) and,
for such purposes, irrevocably submits to the jurisdiction of such courts.
In the Trust Deed, the Issuer has waived any objection which it might now or hereafter have to the
courts of England being nominated as the forum to hear and determine any Proceedings and to settle
any Disputes, and agreed not to claim that any such court is not a convenient or appropriate forum.
16. U.S. Tax Treatment and Provision of Information
It is the intention of the Issuer and each Residual Certificateholder and beneficial owner (“Owner”) of an
interest in the Residual Certificates that the Residual Certificates will be equity of the Issuer, for all United
States federal, state and local income and franchise tax purposes and for the purposes of any other United States
federal, state and local tax imposed on or measured by income (the “Intended U.S. Tax Treatment”). To the
extent applicable and absent a final determination to the contrary, the Issuer and each Residual Certificateholder
and Owner, by acceptance of any Residual Certificates, or a beneficial interest therein, agree to treat the
189

Residual Certificates, for purposes of United States federal, state and local income or franchise taxes and any
other United States federal, state and local taxes imposed on or measured by income, consistent with the
Intended U.S. Tax Treatment and to report the Residual Certificates on all applicable tax returns in a manner
consistent with such treatment.
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UNITED KINGDOM TAXATION
The following is a summary of the Issuer’s understanding of current United Kingdom tax law and HM Revenue
& Customs published practice as at the date of this document relating to certain aspects of the United Kingdom
taxation of the Instruments. It relates only to the position of the Instrumentholders.
The summary set out below is a general guide and does not constitute advice to prospective Noteholders or
Residual Certificateholders. The summary applies only to the persons who are beneficial owners of the
Instruments and should be treated with appropriate caution. Some aspects do not apply to certain classes of
taxpayer (such as dealers). Prospective Noteholders or Residual Certificateholders who are in any doubt as to
their tax position or who may be subject to tax in a jurisdiction other than the United Kingdom should seek their
own professional advice.
Interest on the Notes and RC Distributions on the Residual Certificates
Withholding tax on payments of interest on the Notes
For so long as the Notes are and continue to be listed on a “recognised stock exchange” within the meaning of
Section 1005 of the Income Tax Act 2007 (the Irish Stock Exchange is a “recognised stock exchange” for this
purpose), interest payments on each of the Notes will be treated as the “payment of interest on a quoted
Eurobond” within the meaning of Section 882 of the ITA 2007 (as elaborated by Section 987 of the ITA 2007).
Note that the United Kingdom Finance Bill 2007 contains a proposed new statutory meaning for references to
“listed on a recognised stock exchange” in the ITA 2007.
The draft legislation provides that securities will be treated as listed on a recognised stock exchange if they are
admitted to trading on that exchange and either they are included in the United Kingdom official list (within the
meaning of Part 6 of the Financial Services and Markets Act 2000) or they are officially listed, in accordance
with provisions corresponding to those generally applicable in European Economic Area States, in a country
outside the United Kingdom in which there is a recognised stock exchange. While the Notes are and continue to
be quoted Eurobonds, payments of interest on the Notes may be made without withholding or deduction for or
on account of United Kingdom income tax irrespective of whether the Notes are in global form or in definitive
form.
If the Notes cease to be listed on a recognised stock exchange, an amount must be withheld on account of
United Kingdom income tax at the lower rate (currently 20 per cent.) from interest paid on them, subject to any
direction to the contrary from HM Revenue & Customs in respect of such relief as may be available pursuant to
the provisions of an applicable double taxation treaty or to any other relief or exemption which may apply.
Withholding Tax on RC Distributions on the Residual Certificates
RC Distributions may be paid by the Issuer without withholding or deduction for or on account of United
Kingdom income tax, pursuant to section 930 of the ITA 2007 where (a) the Issuer reasonably believes that the
person beneficially entitled to the RC Distribution is a company resident in the United Kingdom for tax
purposes or a non United Kingdom tax resident company carrying on a trade through a permanent establishment
in the United Kingdom and the RC Distribution is taken into account in computing the company’s profits
chargeable to United Kingdom corporation tax and (b) HMRC has not given a direction under section 931 of the
ITA 2007 directing that section 930 of the ITA 2007 is not to apply to the RC Distributions.
RC Distributions may be paid by the Issuer without withholding or deduction for or on account of United
Kingdom income tax in other circumstances. Accordingly Residual Certificateholders should take appropriate
United Kingdom tax advice regarding the imposition of United Kingdom withholding tax (if any) on RC
Distributions and the availability of potential exemptions.
Provision of information
Noteholders should note that where any interest is paid to them (or to any person acting on their behalf) by the
Issuer or any person in the United Kingdom acting on behalf of the Issuer (a “paying agent”), or is received by
any person in the United Kingdom acting on behalf of the relevant Noteholder (other than solely by clearing or
arranging the clearing of a cheque) (a “collecting agent”), then the Issuer, the paying agent or the collecting
agent (as the case may be) may, in certain cases, be required to supply to HM Revenue & Customs details of the
191

payment and certain details relating to the Noteholder. These provisions will apply whether or not the interest
has been paid subject to withholding or deduction for or on account of United Kingdom income tax and whether
or not the Noteholder is resident in the United Kingdom for United Kingdom taxation purposes. Where the
Noteholder is not so resident, the details provided to HM Revenue & Customs may, in certain cases, be passed
by HM Revenue & Customs to the tax authorities of the jurisdiction in which the Noteholder is resident for
taxation purposes.
United Kingdom corporation tax payers
In general, Noteholders which are within the charge to United Kingdom corporation tax in respect of the Notes
will be charged to tax and obtain relief as income on all returns on and fluctuations in value of the Notes broadly
in accordance with their statutory accounting treatment.
192

UNITED STATES TAXATION
To ensure compliance with requirements imposed by the U.S. Internal Revenue Service, we inform you
that any tax discussion herein was not written and is not intended to be used and cannot be used by any
taxpayer for purposes of avoiding U.S. federal income tax penalties that may be imposed on the taxpayer.
Any such tax discussion was written to support the promotion or marketing of the Notes to be issued
pursuant to this document. Prospective purchasers of the U.S. Offered Notes (as defined below) should
consult their own tax advisers as to the particular U.S. federal income tax consequences to them of the
purchase, ownership and disposition of the U.S. Offered Notes as well as the applicability and effect of
any state, local, foreign or other tax laws.
The following is a summary of certain U.S. federal income tax consequences to a U.S. Holder (defined below)
of its acquisition, ownership and disposition of the A Notes, B Notes, C Notes and D Notes in reliance on Rule
144A (the “U.S. Offered Notes”). The following summary applies only to a U.S. Holder that acquires a U.S.
Offered Note on original issue at its “issue price” (the first price at which a substantial amount of U.S. Offered
Notes is sold for money, excluding sales to bond houses, brokers, or similar persons or organisations acting in
the capacity of underwriters, placement agents, or wholesalers) and holds such U.S. Offered Note as a “capital
asset” (generally, property held for investment). In addition, the following summary does not discuss aspects of
U.S. Federal income tax law that may be applicable to a U.S. Holder in light of its particular situation, including,
among others, a U.S. holder that is an insurance company, a tax-exempt organisation, a bank, a dealer in
securities or currencies, a securities dealer that elects the mark-to-market treatment, a U.S. Holder that holds a
U.S. Offered Note as part of a “straddle,” “hedge” or “conversion transaction” for U.S. federal income tax
purposes, a U.S. Holder entering into “constructive transactions” with respect to such U.S. Offered Note, a U.S.
Holder whose functional currency is not the U.S. dollar, or an expatriate. Further, this discussion does not
address any tax consequences applicable to holders of equity interests in a U.S. Holder.
The following summary is based on the provisions of the Internal Revenue Code of 1986, as amended (the
“Code”), applicable Treasury Regulations, judicial authority and administrative rulings and practices, in effect
as of the date of this offering, any of which may be appealed, revoked or otherwise altered with retroactive
effect, thereby changing the U.S. federal income tax consequences discussed below. There is no assurance that
the U.S. Internal Revenue Service (the “IRS”) will not take a contrary view, and no ruling from the IRS has
been or will be sought.
As used herein, the term “U.S. Holder” means a beneficial owner of a U.S. Offered Note that is for U.S. Federal
income tax purposes:
(a)
(b)
(c)
(d)
a citizen or resident of the United States,
a corporation created or organised under the laws of the United States or any State or the District of
Columbia,
an estate whose income is subject to U.S. federal income taxation regardless of its source,
a trust, if both
(i)
(ii)
a court within the United States is able to exercise primary jurisdiction over the administration
of the trust, and
one or more United States persons have the authority to control all substantial decisions of the
trust, or
(e)
a trust in existence on 20 August 1996, and treated as a United States person prior to such date, that has
elected to continue to be treated as a United States person.
If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds a U.S.
Offered Note, the U.S. federal income tax treatment of a partner in such partnership generally will depend upon
the activities of the partnership and the status of the partner. Therefore, partners in a partnership holding a U.S.
Offered Note should consult their own tax advisers regarding the U.S. federal income tax consequences to such
partners of the acquisition, ownership and disposition of the U.S. Offered Note by such partnership.
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Treatment of U.S. Offered Notes
The Issuer will treat the U.S. Offered Notes as debt for U.S. federal income tax purposes. Each U.S. Holder of a
U.S. Offered Note, by acceptance of such U.S. Offered Note, will agree to treat such U.S. Offered Note as debt
for U.S. federal income tax purposes. Although there is no authority addressing the characterisation of
securities with terms similar to the U.S. Offered Notes under current law, and while not free from doubt, Weil,
Gotshal & Manges LLP (“U.S. Tax Counsel”), is of the opinion that the U.S. Offered Notes will be treated as
debt for U.S. federal income tax purposes. The opinion of U.S. Tax Counsel is not binding on the IRS, and no
assurance can be given that the characterisation of the U.S. Offered Notes as debt would prevail if the issue were
challenged by the IRS. Prospective U.S. Holders should consult with their tax advisers as to the effect of a
recharacterisation of the U.S. Offered Notes as equity interests in the Issuer. The remainder of this discussion
assumes the U.S. Offered Notes will be treated as debt for U.S. federal income tax purposes.
The U.S. Offered Notes will not be qualifying real property loans in the hands of domestic building and loan
associations, real estate investment trusts, or REMICs under Section 7701(a)(19)(C), 856(c)(5)(B) or 860G(a)(3)
of the Code, respectively.
Interest and Original Issue Discount on the U.S. Offered Notes
In general, stated interest on a U.S. Offered Note that is considered “qualified stated interest” will be includible
in the gross income of a U.S. Holder in accordance with its regular method of tax accounting. “Qualified stated
interest” is interest that is unconditionally payable at least annually at a single fixed or qualified floating rate.
Interest on a U.S. Offered Note that is not “qualified stated interest” must be accrued by a U.S. Holder as
original issue discount (“OID”) on a yield to maturity basis, regardless of such U.S. Holder’s regular method of
tax accounting. If stated interest is treated as qualified stated interest, the U.S. Offered Notes will nonetheless
still be treated as issued with OID if it is issued at a discount. However, discount on the U.S. Offered Notes
attributable to the issuance of the U.S. Offered Notes at less than par will only be required to be accrued under
Treasury Regulations governing the treatment of OID (the “OID Regulations”) if such discount exceeds a
statutorily defined de minimis amount. Any de minimis OID on the U.S. Offered Notes will be includible in the
income of a U.S. Holder on a pro rata basis as principal payments are made on the U.S. Offered Notes. It is not
expected that the U.S. Offered Notes will be issued with more than a de minimis amount of OID.
Interest on the A1 Notes, the A2 Notes and the A3 Notes is unconditionally payable at a qualified floating rate,
and hence will be treated as “qualified stated interest” and taxed under a U.S. Holder’s regular method of
accounting. Stated interest on the B Notes, the C Notes and the D Notes is subject to deferral in certain limited
circumstances and, accordingly, it is possible that stated interest thereon may not be treated as qualified stated
interest because such interest is not unconditionally payable. The Issuer intends to treat all stated interest on the
B Notes, the C Notes and the D Notes as qualified stated interest and not as OID (since the likelihood that
payments of interest will be deferred (beyond the applicable Interest Payment Dates) is remote). Subject to the
discussion of prepayment assumptions below, if stated interest on the B Notes, the C Notes and the D Notes is
not treated as qualified stated interest, the B Notes, C Notes and D Notes will be treated as issued with OID and
taxed in the manner described above. Prospective investors considering the purchase of the U.S. Offered Notes
should consult their own tax advisers as to the computation of OID on the U.S. Offered Notes.
Under the Code and applicable legislative history, if payments on a debt instrument are subject to acceleration
by reason of prepayments of other obligations securing such debt instrument, then OID must be calculated and
accrued using the prepayment assumptions that were used to price the debt instrument. Here, the prepayment
assumption that will be used in determining the rate of accrual of OID, market discount and premium, if any, for
U.S. federal income tax purposes will be based on the assumption that the Loans in the Mortgage Pool will
prepay at a CPR of 15 per cent. per annum in the first year following the Closing Date and at a CPR of 35 per
cent. per annum thereafter. No representation is made that the Loans in the Mortgage Pool will pay on the basis
of such prepayment assumption or in accordance with any other prepayment scenario.
As an alternative to the above treatment, U.S. Holders may elect to include in gross income all interest with
respect to the U.S. Offered Notes, including stated interest and de minimis OID, subject to certain adjustments,
on the yield to maturity basis described above.
Interest and OID, if any, on a U.S. Offered Note will be treated as arising from foreign sources for foreign tax
credit purposes. The rules relating to foreign tax credits and the timing thereof are complex. U.S. Holders
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should consult their own tax advisers regarding the availability of a foreign tax credit and the application of the
foreign tax credit limitations to their particular circumstances.
Sale, Retirement or Other Taxable Disposition
In general, a U.S. Holder will recognise gain or loss upon the sale, retirement or other taxable disposition of a
U.S. Offered Note in an amount equal to the difference between the amount of cash and the fair market value of
the property received in exchange for the U.S. Offered Note (except to the extent attributable to the payment of
accrued interest, if any, not previously taken into income, which generally will be taxable to the U.S. Holder as
ordinary income) and the U.S. Holder’s adjusted tax basis in the U.S. Offered Note. A U.S. Holder’s tax basis
in a U.S. Offered Note generally will equal the acquisition cost of the Note, reduced for any amounts received
by the U.S. Holder from the Issuer in respect of the U.S. Offered Note other than qualified stated interest. In
addition, to the extent that any U.S. Offered Note is issued with OID, the U.S. Holder will increase the U.S.
Holder’s tax basis in the U.S. Offered Note by the amount included in income as OID. Gain or loss realised on
the sale, retirement or other taxable disposition of a U.S. Offered Note will be long-term capital gain or loss if
the U.S. Holder has held the U.S. Offered Note for more than one year at the time of the sale, retirement or other
taxable disposition of the U.S. Offered Note. Gain or loss realised by a U.S. Holder on the sale, retirement or
other taxable disposition of a U.S. Offered Note generally will be U.S. source gain or loss for foreign tax credit
purposes. The deductability of capital losses is subject to limitations.
Foreign Currency Gain or Loss with respect to Interest on certain A Notes, B Notes, C Notes and D Notes
The following discussion applies to U.S. Holders of the A1c Notes, A2a Notes, A2c Notes, A3a Notes, A3c
Notes, B1a Notes, B1c Notes, the C1a Notes, C1c Notes and D1a Notes (“U.S. Offered Foreign Currency
Notes”) whether or not the U.S. Holders receive payments in pounds sterling or euro, as the case may be.
A U.S. Holder that uses the cash method of accounting for U.S. federal income tax purposes and that receives a
payment of interest on a U.S. Offered Foreign Currency Note will be required to include in income the U.S.
Dollar value of the payment in pounds sterling or euro (determined by reference to the spot rate in effect on the
date such payment is received) regardless of whether the payment is in fact converted to U.S. Dollars at that
time, and such U.S. Dollar value will be the U.S. Holder’s tax basis in the pounds sterling or euro amount.
A U.S. Holder that uses the accrual method of accounting for U.S. federal income tax purposes, or that
otherwise is required to accrue interest prior to receipt, generally will be required to include in income the U.S.
Dollar value of the amount of interest income that has accrued or is otherwise required to be taken into account
with respect to a U.S. Offered Foreign Currency Note during the relevant accrual period. The U.S. Dollar value
of such accrued income will be determined by translating such income at the average rate of exchange for the
accrual period or, with respect to an accrual period that spans two taxable years, at the average rate for the
partial period within the taxable year. A U.S. Holder will recognise exchange gain or loss (which will be treated
as ordinary income or loss) with respect to accrued interest income on the date such income is received. The
amount of ordinary income or loss will equal the difference, if any, between the U.S. Dollar value of the
payment in pounds sterling or euro received (determined on the date such payment is received) in respect of
such accrual period and the U.S. Dollar value of interest income that has accrued during such accrual period (as
determined above). Such U.S. Holder may elect to determine the U.S. Dollar value of the interest by reference
to the spot rate in effect on the last day of the interest accrual period (or, in the case of a partial accrual period,
the spot rate on the last day of the taxable year). If the last day of the interest accrual period is within five
business days of the receipt of the payment, the electing U.S. Holder may translate interest at the spot rate on the
date of the receipt. This election will apply to all debt instruments held by a U.S. Holder at the beginning of the
first taxable year to which the election applies (or thereafter acquired by the U.S. Holder) and will be
irrevocable without the consent of the IRS.
Any exchange gain or loss resulting from the disposition of the pounds sterling or euro amount subsequent to
the receipt by the U.S. Holder will be treated as ordinary income or loss. Any exchange gain or loss generally
will be treated as U.S. source income or loss for foreign tax credit purposes.
To the extent that a U.S. Offered Foreign Currency Note is issued with OID, the U.S. Holder of such note must
accrue OID in the same manner as an accrual method U.S. Holder above, regardless of the U.S. Holder’s
method of accounting.
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Foreign Currency Gain or Loss on Sale, Retirement or Other Taxable Disposition of the U.S. Offered
Foreign Currency Notes
The following discussion applies to U.S. Holders of the U.S. Offered Foreign Currency Notes whether or not the
U.S. Holders receive payments in pounds sterling or euro.
Generally, the amount realised upon the sale, retirement or other taxable disposition of a U.S. Offered Foreign
Currency Note will equal the U.S. Dollar value of the pounds sterling or euro amount received as determined
using the spot rate on the date of such sale, retirement or other taxable disposition. To the extent the amount
realised upon the sale, retirement or other taxable disposition of a U.S. Offered Foreign Currency Note
represents accrued but unpaid interest or OID, such amounts must be taken into account as interest income, with
exchange gain or loss computed as described above. While the U.S. Offered Foreign Currency Notes are traded
on a qualifying established securities market, a cash basis U.S. Holder (or an accrual basis U.S. Holder that
elects to be treated as a cash basis taxpayer pursuant to the applicable Treasury Regulations) that sells a U.S.
Offered Foreign Currency Note and receives pounds sterling or euro will have an amount realised equal to the
U.S. Dollar value of the pounds sterling or euro amount received, determined using the spot rate on the
settlement date of the sale. An accrual basis U.S. Holder that does not make the cash basis election and that
receives pounds sterling or euro will have an amount realised equal to the U.S. Dollar value of the pounds
sterling or euro amount received, determined using the spot rate on the date of sale. Any gain or loss realised
upon the sale, retirement or other taxable disposition of a U.S. Offered Foreign Currency Note that is
attributable to fluctuations in exchange rates will be ordinary income or loss which will not be treated as interest
income or expense. Gain or loss in the period between the purchase of the U.S. Offered Foreign Currency Notes
and the sale of the U.S. Offered Foreign Currency Notes attributable to fluctuations in currency exchange rates
will equal the difference between the U.S. Dollar value of the principal amount of those Notes in pounds sterling
or euro, determined on the date such payment is received or the U.S. Offered Foreign Currency Notes is
disposed of, and the U.S. Dollar value of the principal amount of the U.S. Offered Foreign Currency Notes in
pounds sterling or euro, determined on the date the U.S. Holder purchased the U.S. Offered Foreign Currency
Notes. Such foreign currency gain or loss will be recognised only to the extent of the total gain or loss realised
by the U.S. Holder on the sale, retirement or other taxable disposition of the U.S. Offered Foreign Currency
Notes.
Any exchange gain or loss resulting from the disposition of the pounds sterling or euro amount subsequent to
the receipt by the U.S. Holder will be treated as ordinary income or loss. Any exchange gain or loss generally
will be treated as U.S. source income or loss for foreign tax credit purposes.
Tax Shelter Reporting Requirements
If a U.S. Holder realises a loss upon the disposition or deemed disposition of the U.S. Offered Notes in an
amount that exceeds a certain threshold, or if a U.S. Holder realises a foreign currency loss in an amount that
exceeds a certain threshold, it is possible that the provisions of U.S. Treasury Regulations involving “reportable
transactions” could apply, with a resulting requirement to separately disclose the loss generating transaction to
the IRS. While these regulations are directed towards “tax shelters,” they are written quite broadly, and apply to
transactions that would not typically be considered tax shelters. In addition, a significant penalty is imposed on
taxpayers that participate in a “reportable transaction” and fail to make the required disclosure. The penalty is
generally $10,000 for natural persons and $50,000 for other persons (increased to $100,000 and $200,000,
respectively, if the reportable transaction is a “listed” transaction as defined in applicable regulations). U.S.
Holders should consult their own tax advisers concerning any possible disclosure obligation with respect to the
U.S. Offered Notes.
Foreign Tax Credits
To the extent that payments to a U.S. Holder of interest on, or proceeds from the sale, redemption or other
taxable disposition of, the U.S. Offered Notes are subject to a United Kingdom income or withholding tax, it
may be possible for the U.S. Holder to reduce or eliminate such United Kingdom income or withholding tax
under the United States-United Kingdom income tax treaty. To the extent that the United States-United
Kingdom income tax treaty does not reduce or eliminate such United Kingdom income or withholding tax, the
U.S. Holder may use such amounts as a credit against its U.S. federal income tax liability in respect of any such
payments that are treated as foreign source income, or as a deduction to reduce its taxable income, in each case
subject to certain limitations.
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Information Reporting and Backup Withholding
A U.S. Holder that is an “exempt recipient” will not be subject to information reporting requirements with
respect to principal of, interest on, and proceeds from the sale, retirement or other taxable disposition of, a U.S.
Offered Note. A U.S. Holder that is not an exempt recipient may be subject to information reporting
requirements. Such U.S. Holder can satisfy these requirements by providing the Issuer or its paying agent with a
duly completed and executed copy of IRS Form W-9 or a substantially similar form. In general, individuals are
not exempt recipients, whereas corporations and certain other entities generally are exempt recipients.
If a U.S. Holder subject to the information reporting requirement fails to provide the Issuer or its paying agent
with a duly completed and executed copy of IRS Form W-9 or a substantially similar form, or the information
on such form, including the U.S. Holder’s U.S. taxpayer identification number, is incorrect or incomplete, or the
IRS notifies the Issuer or its paying agent that the U.S. Holder has failed to report or under-reported payments of
interest or dividends, the Issuer or its paying agent will be required to withhold a portion of all payments it
makes to the U.S. Holder and pay to the IRS as a backup against the U.S. Holder’s potential U.S. federal income
tax liability. Backup withholding is not an additional tax and may be credited against the U.S. Holder’s U.S.
federal income tax liability or refunded to the U.S. Holder, provided that the holder timely files a tax return with
the IRS. Prospective purchasers should consult their own tax advisers regarding the applicability of the
information reporting and backup withholding rules to them.
The above summary is not intended to constitute a complete analysis of all U.S. federal income tax
consequences relating to U.S. Holders of their acquisition, ownership and disposition of the U.S. Offered
Notes. U.S. Holders should consult their own tax advisers concerning the tax consequences to them of the
acquisition, ownership and disposition of the U.S. Offered Notes in light of their particular circumstances
under the U.S. federal, state, local, foreign and other laws.
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SUBSCRIPTION AND SALE
Pursuant to a subscription agreement dated on or about the date of this document between, inter alios, Lehman
Brothers International (Europe) and Banco Espirito Santo de Investmento SA (collectively the “Managers” and
each a “Manager”), the Issuer, PML and SPML (the “Subscription Agreement”):
(a)
(b)
the Managers have agreed with the Issuer to purchase the Notes at the issue price of 100 per cent. of
their principal amount; and
the Issuer will pay to the Managers a combined management, underwriting and selling commission of
0.20 per cent. of the aggregate principal amount of the Notes.
The Subscription Agreement is subject to a number of conditions and may be terminated by the Managers in
certain circumstances prior to payment for the Notes to the Issuer. Under the terms of the Subscription
Agreement, the Issuer, PML and SPML have each agreed to indemnify the Managers against certain liabilities
in connection with the issue of the Notes.
The Residual Certificates will be delivered to, or to the order of, PML and SPML as part of the consideration for
the purchase of the Initial Mortgage Pool. No monetary amounts will be received by the Issuer in respect of the
Residual Certificates and therefore no net proceeds will be received by the Issuer in respect of such instruments.
Set out below is a summary of the principal restrictions on the offer and sale of the Notes and the distribution of
documents relating to the Notes.
United States of America
The Notes have not been and will not be registered under the U.S. Securities Act of 1933 (the “Securities Act”)
and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (as
defined in Regulation S under the Securities Act) except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act. The Notes (the E Notes in relation to (ii) of this
paragraph only) will be offered and sold only (i) within the United States to Qualified Institutional Buyers
pursuant to Rule 144A and (ii) outside the United States to non-U.S. persons in offshore transactions in
compliance with Rule 903 or 904 of Regulation S.
In connection with sales outside the United States, each Manager has agreed under the Subscription Agreement
that, except for sales described in the preceding paragraph, it will not offer, sell or deliver the Notes to, or for the
account or benefit of U.S. Persons (i) as part of such Manager’s distribution at any time or (ii) otherwise prior to
the expiration of the 40-day Distribution Compliance Period and, accordingly, neither it, its affiliates nor any
persons acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the
Notes and it and its affiliates have complied with and will comply with the offering restriction requirements of
Regulation S under the Securities Act.
Each Manager has also agreed under the Subscription Agreement that, at or prior to confirmation of sale of a
Note, it will have sent to each distributor, dealer or other person to which it sells such Note during the
Distribution Compliance Period a confirmation or notice to substantially the following effect:
“The Notes covered hereby have not been and will not be registered under the U.S. Securities Act, and
the Notes may not be offered and sold within the United States or to, or for the account or benefit of,
U.S. Persons (as defined in Regulation S) (i) as part of their distribution at any time or (ii) otherwise
until 40 days after the later of the commencement of the offering and the Closing Date, except in either
case in accordance with Regulation S or pursuant to an exemption from the registration requirements of
the U.S. Securities Act. Terms used above have the meanings given to them by Regulation S”.
In addition, until the end of the Distribution Compliance Period, the offer or sale of any Notes within the United
States by a distributor, dealer or other person that is not participating in the offering may violate the registration
requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A
under the Securities Act.
The Subscription Agreement will provide that each Manager, through its U.S. registered broker-dealer affiliates,
may arrange for the offer and resale of the Rule 144A Notes in the United States to persons that are Qualified
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Institutional Buyers in transactions made in compliance with Rule 144A under the Securities Act. Each of the
Managers under the Subscription Agreement has agreed that neither it, nor its affiliates, nor any persons acting
on its or their behalf, have engaged or will engage in any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) in connection with the offer and sale of the Rule
144A Notes in the United States.
Under the Subscription Agreement:
(i)
(ii)
(iii)
(iv)
(v)
the Managers have represented and agreed that, except to the extent permitted under United States
Treasury Regulation Section 1.163-5(c)(2)(i)(D) (the “TEFRA D Rules”), (a) they have not offered or
sold, and during the restricted period will not offer or sell, any of the relevant Reg S Notes to a person
who is within the United States and its possessions or to a United States person (for purposes of U.S.
federal income tax law), and (b) they have not delivered and will not deliver in definitive form within
the United States and its possessions any of the relevant Reg S Notes that are sold during the restricted
period (within the meaning of the TEFRA D Rules);
the Managers have further represented and agreed that they have and, throughout the restricted period
(within the meaning of the TEFRA D Rules) will have, in effect procedures reasonably designed to
ensure that their employees or agents who are directly engaged in selling the relevant Reg S Notes are
aware that the relevant Reg S Notes may not be offered or sold during the restricted period (within the
meaning of the TEFRA D Rules) to a person who is within the United States and its possessions or to a
United States person (for purposes of U.S. federal income tax law), except as permitted by the TEFRA
D Rules;
each Manager, if it is a United States person (for purposes of U.S. federal income tax law), has
represented that it is acquiring the relevant Reg S Notes for purposes of resale in connection with their
original issuance and if it retains Reg S Notes for its own account, it will only do so in accordance with
the requirements of United States Treasury Regulation Section 1.163-5(c)(2)(i)(D)(6);
with respect to each affiliate of the Managers that acquires from them Reg S Notes for the purpose of
offering or selling such Reg S Notes during the restricted period (within the meaning of the TEFRA D
Rules), the Managers have repeated and confirmed the representations and agreements contained in the
above paragraphs (i), (ii) and (iii) on their behalf; and
terms used in the above paragraphs (i), (ii) and (iii) have the meanings given to them by Regulation S
and by the United States Internal Revenue Code and regulations thereunder, including the TEFRA D
Rules.
United Kingdom
Under the Subscription Agreement, each Manager has further represented to and agreed with the Issuer that:
(a)
(b)
it has only communicated or caused to be communicated, and will only communicate or cause to be
communicated, any invitation or inducement to engage in investment activity (within the meaning of
Section 21 of the FSMA) received by them in connection with the issue or sale of such Notes in
circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and
it has complied and will comply with all applicable provisions of the FSMA with respect to anything
done by it in relation to such Notes in, from or otherwise involving the United Kingdom.
The Netherlands
Under the Subscription Agreement each Manager has further represented to and agreed with the Issuer that:
(a)
the Issuer must verify that all Dutch resident purchasers of Notes (including rights representing an
interest in a Global Note) (i) issued by it directly to such purchasers on or before the Closing Date or
(ii) issued by it in circumstances where it is reasonably able to identify the Dutch resident holders
thereof (in each case other than the Managers) on or before the Closing Date as Professional Market
Parties (as defined below) and shall agree (or procure that the relevant Manager agrees) with each such
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purchaser that any Notes acquired by it may not be offered, sold, transferred or delivered by any such
purchaser, except in accordance with the restrictions referred to in paragraph (b) below; and
(b)
the Prospectus will not be distributed and the Notes (including rights representing an interest in a Note
in a global form) will not be offered, sold, transferred or delivered by it as part of their initial
distribution or at any time thereafter, directly or indirectly, to individuals or legal entities who are
established, domiciled or have their residence in The Netherlands (“Dutch Residents”) other than to
the following entities (“Professional Market Parties“ or “PMPs”) provided they acquire the Notes for
their own account and they also trade or invest in securities in the conduct of a business or profession:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
banks, insurance companies, securities firms, collective investment institutions or pension
funds that are supervised or licensed under Dutch law, including their Netherlands subsidiaries
provided such subsidiaries are also subject to prudential supervision (either directly or
indirectly through consolidated supervision at the level of their parent company);
banks or securities firms licensed or supervised in a European Economic Area member state
(other than The Netherlands) and registered with the Dutch Central Bank (De Nederlandsche
Bank N.V.) (the “DNB”) or the Dutch Authority for the Financial Markets (Stichting Autoriteit
Financiële Markten) acting through a branch office in The Netherlands;
Netherlands collective investment institutions which offer their shares or participations
exclusively to professional investors or are otherwise exempt under the Exemption Regulation
pursuant to the Investment Institutions Supervision Act;
the Dutch government (de Staat der Nederlanden), the DNB, Dutch regional, local or other
decentralised governmental institutions, or any international treaty organisations and
supranational organisations located in The Netherlands;
Netherlands enterprises or entities with total assets of at least €500,000,000 (or the equivalent
thereof in another currency) according to their balance sheet at the end of the financial year
preceding the date they acquire the Notes or any interest therein;
Netherlands enterprises, entities or individuals with a net equity (eigen vermogen) of at least
€10,000,000 (or the equivalent thereof in another currency) according to their balance sheet at
the end of the financial year preceding the date they acquire the Notes or any interest therein
and who or which have been active in the financial markets on average twice a month over a
period of at least two consecutive years preceding such date;
any Netherlands person or Netherlands entity who or which is subject to supervision by a
regulatory authority in any country in order to lawfully operate in the financial markets (which
includes: authorised credit institutions, investment firms, other authorised or regulated
financial institutions, insurance companies, collective investment schemes and their
management companies, pension funds and their management companies, and commodity
dealers);
any Netherlands person or Netherlands entity who or which engages in a regulated activity on
the financial markets but who or which is not subject to supervision by a regulatory authority
(which includes without limitation: exempt credit institutions, investment firms, financial
institutions, insurance companies, collective investment schemes and their management
companies, pension funds and their management companies, commodity dealers and special
purpose vehicles);
any Netherlands entity whose corporate purpose is solely to invest in securities (which
includes, without limitation, hedge funds);
any Netherlands companies or Netherlands legal entities which meet at least two of the
following three criteria according to their most recent consolidated or nonconsolidated annual
accounts: (A) an average number of employees during the financial year of at least 250; (B)
total assets of at least €43,000,000; or (C) an annual net turnover of at least €50,000,000;
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(xi)
(xii)
companies having their registered office in The Netherlands which do not meet at least two of
the three criteria mentioned in (x) above and which have (A) expressly requested the Dutch
Authority for the Financial Markets (Stichting Autoriteit Financiele Markten: the “AFM”) to
be considered as qualified investors (within the meaning of Directive 2003/71/EC) and (B)
been entered on the register of qualified investors maintained by the AFM;
natural persons who are resident in The Netherlands if these persons meet at least two of the
following criteria:
(A)
(B)
(C)
the person has carried out transactions of a significant size on the financial markets at
an average frequency of, at least, 10 per quarter over the previous four quarters;
the size of the person’s securities portfolio exceeds €500,000; and
the person works or has worked for at least one year in the financial sector in a
professional position which requires knowledge of investment in securities,
provided further that this natural person has: (1) expressly requested the AFM to be
considered as qualified investors and (2) been entered on the register of qualified investors
maintained by the AFM; and
(xiii)
such other Netherlands entities designated by the competent Netherlands authorities after the
date hereof by any amendment of the applicable regulations.
All Notes shall bear the following legends:
“THIS NOTE (OR ANY INTEREST HEREIN) MAY NOT BE SOLD, TRANSFERRED OR DELIVERED
TO INDIVIDUALS OR LEGAL ENTITIES WHO ARE ESTABLISHED, DOMICILED OR HAVE THEIR
RESIDENCE IN THE NETHERLANDS (“DUTCH RESIDENTS”) OTHER THAN PROFESSIONAL
MARKET PARTIES WITHIN THE MEANING OF THE EXEMPTION REGULATION UNDER THE
DUTCH ACT ON THE SUPERVISION OF CREDIT INSTITUTIONS 1992 (AS AMENDED) THAT
ACQUIRE THIS NOTE (OR ANY INTEREST HEREIN) FOR THEIR OWN ACCOUNT OR FOR THE
ACCOUNT OF ANOTHER PMP AND THAT TRADE OR INVEST IN SECURITIES IN THE CONDUCT
OF A BUSINESS OR PROFESSION (“PMP”).
EACH DUTCH RESIDENT BY PURCHASING THE NOTE (OR ANY INTEREST HEREIN), WILL BE
DEEMED TO HAVE REPRESENTED AND AGREED FOR THE BENEFIT OF THE ISSUER THAT IT IS A
PMP AND IS ACQUIRING THIS NOTE (OR ANY SUCH INTEREST HEREIN) FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF ANOTHER PMP.
EACH HOLDER OF THIS NOTE (OR ANY INTEREST HEREIN), BY PURCHASING SUCH NOTE (OR
ANY SUCH INTEREST THEREIN), WILL BE DEEMED TO HAVE REPRESENTED AND AGREED FOR
THE BENEFIT OF THE ISSUER THAT (1) SUCH NOTE (OR ANY INTEREST HEREIN) MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANY DUTCH RESIDENT OTHER
THAN TO A PMP ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER PMP
AND THAT (2) IT WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS DESCRIBED HEREIN
TO ANY SUBSEQUENT TRANSFEREE.”
Republic of France
Each Manager has represented and agreed that it has not offered or sold, and will not offer or sell, directly, or
indirectly, the Notes to the public in the Republic of France and that offers and sales of the Notes in the
Republic of France will be made only to qualified investors (investisseurs qualifiés) other than individuals or to
a restricted group of investors (cercle restreint d’investisseurs), all acting for their account as defined in and in
accordance with Article L.411-2 of the French Code Monétaire et Financier and decree no. 98-880 dated 1
October 1998 (now codified under Articles D411-1 and D411-2 of the French Code Monétaire et Financier).
In addition, each Manager has represented and agreed that it has not distributed or caused to be distributed and
will not distribute or cause to be distributed in the Republic of France this Prospectus or any other offering
material relating to the Notes other than to investors to whom offers and sales of the Notes in France may be
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made as described above and that this Prospectus has not been submitted for approval (visa) by the Autorité des
Marchés Financiers and does not constitute an offer for sale or subscription of securities.
Germany
Each Manager has confirmed that it is aware of the fact that no German sales prospectus (Verkaufsprospekt)
within the meaning of the Securities and Sales Prospectus Act (Wertpapier-Verkaufsprospektgesetz, the “SSP
Act”) of the Federal Republic of Germany has been or will be published with respect to the Notes. In particular,
each Manager has represented that it has not engaged and has agreed that it will not engage in public offering
(öffentliches Angebot) within the meaning of the SSP Act with respect to any Notes otherwise than in
accordance with the FSMA and all other applicable legal and regulatory requirements.
Spain
Each Manager has represented and agreed that the Notes may not be offered or sold in Spain except in
circumstances which do not constitute a public offer of securities in Spain within the meaning of article 30bis of
the Spanish Securities Market Law of 28 July 1988 (Ley 24/1988, de 28 de julio, del Mercado de Valores), as
amended and restated, and supplemental rules enacted thereunder or without complying with all legal and
regulatory requirements under Spanish securities laws.
Neither the Notes nor this Prospectus have been registered with the Spanish Securities Market Commission
(Comisión Nacional del Mercado de Valores) and therefore this Prospectus is not intended for any public offer
of the Notes in Spain.
General
Application has been made to the Irish Stock Exchange Limited for each class of Notes and the Residual
Certificates to be admitted to the Official List of the Irish Stock Exchange. Under the Subscription Agreement,
each Manager has acknowledged that, save for making such applications and for having procured the delivery of
a copy of the Prospectus for registration to the Irish Financial Services Regulatory Authority, no action has been
or will be taken in any jurisdiction by it that would permit a public offering of the relevant Notes and Residual
Certificates, or possession or distribution of this Prospectus (in proof or final form) or any amendment or
supplement thereto or any other offering material relating to the relevant Notes and Residual Certificates in any
country or jurisdiction where action for that purpose is required. Under the Subscription Agreement each
Manager has agreed to comply with all applicable laws and regulations in each jurisdiction in or from which it
may offer or sell the relevant Notes or have in its possession or distribute this Prospectus (in proof or in final
form) or any amendment or supplement thereto or any other offering material.
Each of SPML and PML has also covenanted in the Mortgage Sale Agreement that it shall not transfer the
Residual Certificates or any interest in the Residual Certificates except on arm’s length terms and that it will
procure that any transferee of the Residual Certificates (a) represents in writing to the Issuer that the transfer of
the Residual Certificates or interest in the Residual Certificates is on arm’s length terms; and (b) covenants in
writing to the Issuer that it shall only make a further transfer of the Residual Certificates or any interest in the
Residual Certificates (i) on arm’s length terms; and (ii) if the person to whom it transfers the Residual
Certificates or interest in the Residual Certificates represents and covenants in writing to the Issuer on the same
terms as (a) and (b).
Attention is drawn to the information set out on the inside front cover of this document.
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TRANSFER RESTRICTIONS
Because of the following restrictions, purchasers are advised to consult legal counsel prior to making any offer,
resale, pledge or transfer of the Instruments.
The Instruments have not been and will not be registered under the Securities Act or the securities laws of any
state of the United States or any other relevant jurisdiction and accordingly, may not be reoffered, resold,
pledged or otherwise transferred except in accordance with the restrictions described below and each purchaser
will be deemed to have agreed.
Legend
Unless determined otherwise by the Issuer in accordance with applicable law and so long as any class of Notes
is outstanding, a Reg S Global Note (excluding the E Global Notes) and any definitive Note issued in exchange
for an interest in it, will bear a legend substantially as set forth below:
NEITHER THIS INSTRUMENT NOR BENEFICIAL INTERESTS HEREIN HAVE BEEN OR ARE
EXPECTED TO BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR THE
SECURITIES LAWS OF ANY OTHER JURISDICTION AND MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S
UNDER THE SECURITIES ACT) UNLESS REGISTERED UNDER THE SECURITIES ACT OR SUCH
OTHER LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENT OF THE
SECURITIES ACT OR SUCH OTHER LAWS IS AVAILABLE.
BY PURCHASING OR OTHERWISE ACQUIRING ANY BENEFICIAL INTEREST IN THIS
INSTRUMENT, EACH OWNER OF SUCH BENEFICIAL INTEREST WILL BE DEEMED TO HAVE
AGREED FOR THE BENEFIT OF THE ISSUER AND FOR ANY AGENT OR SELLER WITH RESPECT
TO THE INSTRUMENT THAT IF IT SHOULD DECIDE TO DISPOSE OF THE INSTRUMENTS
REPRESENTED BY THIS GLOBAL INSTRUMENT PRIOR TO THE TERMINATION OF THE 40 DAY
DISTRIBUTION COMPLIANCE PERIOD (AS DEFINED IN REGULATION S UNDER THE SECURITIES
ACT), BENEFICIAL INTERESTS IN THIS GLOBAL INSTRUMENT MAY BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED DIRECTLY OR INDIRECTLY ONLY IF REGISTERED OR
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH ANY APPLICABLE LAWS OF ANY STATE OF THE UNITED
STATES. ACCORDINGLY, ANY TRANSFER OF THE INSTRUMENTS PRIOR TO THE TERMINATION
OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD MAY ONLY BE MADE: (A) TO THE
ISSUER, (B) TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (C) TO OR FOR THE
ACCOUNT OR BENEFIT OF A U.S. PERSON (AS DEFINED IN REGULATION S) IN A TRANSACTION
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO PERSONS WHO ARE QUALIFIED
INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (D)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT. IN
THE CASE OF ANY SUCH TRANSFER PURSUANT TO CLAUSE (C), (1) THE TRANSFEREE WILL BE
REQUIRED TO HAVE THE NOTES SO TRANSFERRED BE REPRESENTED BY AN INTEREST IN THE
RULE 144A GLOBAL NOTES (AS DEFINED IN THE TRUST DEED) AND (2) THE TRANSFEROR WILL
BE REQUIRED TO DELIVER A TRANSFER CERTIFICATE (THE FORM OF WHICH IS ATTACHED TO
THE TRUST DEED AND IS AVAILABLE FROM THE REGISTRAR).
EACH PURCHASER AND TRANSFEREE OF THIS INSTRUMENT OR ANY INTEREST THEREIN, BY
ITS ACQUISITION OF SUCH INSTRUMENT, SHALL BE DEEMED TO REPRESENT, WARRANT AND
AGREE THAT EITHER (A) IT IS NOT AND FOR SO LONG AS IT HOLDS THIS INSTRUMENT WILL
NOT BE (I) AN “EMPLOYEE BENEFIT PLAN” AS DEFINED IN SECTION 3(3) OF THE UNITED
STATES EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)
WHICH IS SUBJECT THERETO OR A “PLAN” SUBJECT TO SECTION 4975 OF THE UNITED STATES
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), (II) ANOTHER EMPLOYEE
BENEFIT PLAN SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW SUBSTANTIALLY SIMILAR
TO SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAW”), (III) AN ENTITY
DEEMED TO BE USING THE ASSETS OF OR ACTING ON BEHALF OF SUCH AN EMPLOYEE
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BENEFIT PLAN SUBJECT TO ERISA OR PLAN SUBJECT TO SECTION 4975 OF THE CODE, OR (IV)
AN ENTITY WHOSE UNDERLYING ASSETS ARE DEEMED FOR PURPOSES OF ERISA, SECTION
4975 OF THE CODE, OR ANY SIMILAR LAW TO INCLUDE PLAN ASSETS OF ANY SUCH
EMPLOYEE BENEFIT PLAN, PLAN OR OTHER BENEFIT PLAN, OR (B) ITS PURCHASE AND
HOLDING OF THIS INSTRUMENT OR ANY INTEREST THEREIN WILL NOT RESULT IN A NON-
EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR SECTION 4975 OF THE CODE OR, AS
APPLICABLE, ANY SIMILAR LAW.
Unless determined otherwise by the Issuer in accordance with applicable law and so long as any class of Notes
is outstanding, an E Global Note and any definitive Note issued in exchange for an interest in it, will bear a
legend substantially set forth below and each purchaser will be deemed to have agreed:
NEITHER THIS NOTE NOR BENEFICIAL INTERESTS HEREIN HAVE BEEN OR ARE EXPECTED TO
BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR THE SECURITIES
LAWS OF ANY OTHER JURISDICTION AND MAY NOT BE OFFERED, SOLD PLEDGED OR
OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AT
ANY TIME.
EACH PURCHASER AND TRANSFEREE OF THIS INSTRUMENT OR ANY INTEREST THEREIN, BY
ITS ACQUISITION OF SUCH NOTE, SHALL BE DEEMED TO REPRESENT, WARRANT AND AGREE
THAT EITHER (A) IT IS NOT AND FOR SO LONG AS IT HOLDS THIS INSTRUMENT WILL NOT BE
(I) AN “EMPLOYEE BENEFIT PLAN” AS DEFINED IN SECTION 3(3) OF THE UNITED STATES
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”) WHICH IS
SUBJECT THERETO OR A “PLAN” SUBJECT TO SECTION 4975 OF THE UNITED STATES
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), (II) ANOTHER EMPLOYEE
BENEFIT PLAN SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SIMILAR TO
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAW”), (III) AN ENTITY
DEEMED TO BE USING THE ASSETS OF OR ACTING ON BEHALF OF SUCH AN EMPLOYEE
BENEFIT PLAN SUBJECT TO ERISA OR PLAN SUBJECT TO SECTION 4975 OF THE CODE, OR (IV)
AN ENTITY WHOSE UNDERLYING ASSETS ARE DEEMED FOR PURPOSES OF ERISA, SECTION
4975 OF THE CODE, OR ANY SIMILAR LAW TO INCLUDE PLAN ASSETS OF ANY SUCH
EMPLOYEE BENEFIT PLAN, PLAN OR OTHER BENEFIT PLAN, OR (B) ITS PURCHASE AND
HOLDING OF THIS NOTE OR ANY INTEREST THEREIN WILL NOT RESULT IN A NON-EXEMPT
PROHIBITED TRANSACTION UNDER ERISA, SECTION 4975 OF THE CODE OR, AS APPLICABLE,
ANY SIMILAR LAW.
1 EACH PURCHASER AND TRANSFEREE OF AN INTEREST IN THIS INSTRUMENT, SHALL BE
DEEMED TO REPRESENT, WARRANT AND AGREE THAT (I) IT IS NOT AND FOR SO LONG AS IT
HOLDS ANY INSTRUMENT OR INTEREST THEREIN WILL NOT BE AN “EMPLOYEE BENEFIT
PLAN” AS DEFINED IN SECTION 3 (3) OF ERISA AND SUBJECT THERETO, A “PLAN” AS DEFINED
IN SECTION 4975 OF THE CODE SUBJECT TO SECTION 4975 OF THE CODE, AN ENTITY USING
THE ASSETS OF OR ACTING ON BEHALF OF SUCH AN EMPLOYEE BENEFIT PLAN OR PLAN, OR
AN ENTITY WHOSE UNDERLYING ASSETS ARE DEEMED TO INCLUDE PLAN ASSETS OF ANY
SUCH EMPLOYEE BENEFIT PLAN OR PLAN, AND (II) IF IT IS OR IS ACTING ON BEHALF OF A
PERSON THAT IS OR WHILE ANY NOTE OR INTEREST THEREIN IS HELD THEREBY WILL BE AN
EMPLOYEE BENEFIT PLAN THAT IS NOT SUBJECT TO ERISA OR NOT A PLAN SUBJECT TO
SECTION 4975 OF THE CODE, THE PURCHASE AND HOLDING OF SUCH INSTRUMENT OR
INTEREST THEREIN WILL NOT VIOLATE ANY LAW SUBSTANTIALLY SIMILAR TO THE
PROHIBITED TRANSACTION PROVISIONS OF ERISA OR SECTION 4975 OF THE CODE.
Unless determined otherwise by the Issuer in accordance with applicable law and so long as any class of Notes
is outstanding, a Rule 144A Global Note and any definitive Note issued in exchange for interest in it, will bear a
legend substantially set forth below and each purchaser will be deemed to have agreed:
NEITHER THIS NOTE NOR BENEFICIAL INTERESTS HEREIN HAVE BEEN OR ARE EXPECTED TO
BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
1 To be included in the E1c Notes, the ETc Notes and Residual Certificates.
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ACT”), THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR THE SECURITIES
LAWS OF ANY OTHER JURISDICTION.
BY PURCHASING OR OTHERWISE ACQUIRING A BENEFICIAL INTEREST IN THIS NOTE, EACH
OWNER OF SUCH BENEFICIAL INTEREST WILL BE DEEMED TO HAVE REPRESENTED FOR THE
BENEFIT OF THE ISSUER AND FOR ANY AGENT OR SELLER WITH RESPECT TO THE NOTES
THAT IT (I)(A) IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT), (B) WILL HOLD AT LEAST THE MINIMUM DENOMINATION OF $100,000,
(C) WILL PROVIDE NOTICE OF APPLICABLE TRANSFER RESTRICTIONS TO ANY SUBSEQUENT
TRANSFEREE, (D) IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNTS OF ONE OR
MORE OTHER PERSONS EACH OF WHOM MEETS ALL THE PRECEDING REQUIREMENTS AND (E)
AGREES THAT IT WILL NOT REOFFER, RESELL, PLEDGE OR OTHERWISE TRANSFER THE NOTES
OR ANY BENEFICIAL INTEREST HEREIN TO ANY PERSON EXCEPT TO A PERSON THAT MEETS
ALL THE PRECEDING REQUIREMENTS AND AGREES NOT TO SUBSEQUENTLY TRANSFER THE
NOTES OR ANY BENEFICIAL INTEREST HEREIN EXCEPT IN ACCORDANCE WITH THIS CLAUSE
(E) OR (II) IS NOT A U.S. PERSON AND IS ACQUIRING THE NOTES IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF REGULATION S. IN THE CASE OF ANY SUCH
TRANSFER PURSUANT TO CLAUSE (II), (1) THE TRANSFEREE WILL BE REQUIRED TO HAVE THE
NOTES SO TRANSFERRED TO BE REPRESENTED BY AN INTEREST IN THE REG S GLOBAL NOTES
(AS DEFINED IN THE TRUST DEED) AND (2) THE TRANSFEROR WILL BE REQUIRED TO DELIVER
A TRANSFER CERTIFICATE (THE FORM OF WHICH IS ATTACHED TO THE TRUST DEED AND IS
AVAILABLE FROM THE REGISTRAR).
THE PURCHASER ACKNOWLEDGES THAT EACH OF THE ISSUER AND THE TRUSTEE RESERVES
THE RIGHT PRIOR TO ANY SALE OR OTHER TRANSFER TO REQUIRE THE DELIVERY OF SUCH
CERTIFICATIONS, LEGAL OPINIONS AND OTHER INFORMATION AS THE ISSUER OR THE
TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT THE PROPOSED SALE OR OTHER
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
EACH PURCHASER AND TRANSFEREE OF THIS NOTE OR ANY INTEREST THEREIN, BY ITS
ACQUISITION OF SUCH NOTE, SHALL BE DEEMED TO REPRESENT, WARRANT AND AGREE
THAT EITHER (A) IT IS NOT AND FOR SO LONG AS IT HOLDS THIS NOTE WILL NOT BE (I) AN
“EMPLOYEE BENEFIT PLAN” AS DEFINED IN SECTION 3(3) OF THE UNITED STATES EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”) WHICH IS SUBJECT
THERETO OR A “PLAN” SUBJECT TO SECTION 4975 OF THE UNITED STATES INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), (II) ANOTHER EMPLOYEE BENEFIT PLAN
SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW SUBSTANTIALLY SIMILAR TO SECTION 406
OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAW”), (III) AN ENTITY DEEMED TO BE
USING THE ASSETS OF OR ACTING ON BEHALF OF SUCH AN EMPLOYEE BENEFIT PLAN
SUBJECT TO ERISA OR PLAN SUBJECT TO SECTION 4975 OF THE CODE, OR (IV) AN ENTITY
WHOSE UNDERLYING ASSETS ARE DEEMED FOR PURPOSES OF ERISA, SECTION 4975 OF THE
CODE, OR ANY SIMILAR LAW TO INCLUDE PLAN ASSETS OF ANY SUCH EMPLOYEE BENEFIT
PLAN, PLAN OR OTHER BENEFIT PLAN, OR (B) ITS PURCHASE AND HOLDING OF THIS NOTE OR
ANY INTEREST THEREIN WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION
UNDER ERISA OR SECTION 4975 OF THE CODE OR, AS APPLICABLE, ANY SIMILAR LAW.
PROSPECTIVE PURCHASERS ARE HEREBY NOTIFIED THAT THE SELLERS OF THE NOTES MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A. TERMS WHICH ARE USED IN THIS LEGEND HAVE THE
MEANINGS GIVEN TO THEM UNDER SUCH RULE.
Initial Investors and Transferees of Interests in the Notes (excluding the E Notes)
Each Purchaser of the Notes (excluding the E Notes) will be deemed to have represented and agreed as follows:
(a)
Purchaser Requirements
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The Purchaser:
(i)
(A) is a Qualified Institutional Buyer (as defined in Rule 144A under the Securities Act), (B)
will hold at least the minimum denomination of $100,000, (C) will provide notice of
applicable transfer restrictions to any subsequent transferee, and (D) is purchasing for its own
account or for the accounts of one or more other persons each of whom meets all of the
requirements of clauses (A) through (C), or
(ii) is not a U.S. person and is acquiring the Notes pursuant to Rule 903 or 904 of Regulation S.
The Purchaser acknowledges that each of the Issuer and the Trustee reserves the right prior to any sale
or other transfer to require the delivery of such certifications, legal opinions and other information as
the Issuer or the Trustee may reasonably require to confirm that the proposed sale or other transfer
complies with the foregoing restrictions.
(b)
Notice of Transfer Restrictions
Each Purchaser acknowledges and agrees that (1) the Notes have not been and will not be registered
under the Securities Act, (2) neither the Notes nor any beneficial interest therein may be re-offered,
resold, pledged or otherwise transferred except in accordance with the provisions set forth above and
(3) the Purchaser will notify any transferee of such transfer restrictions and that each subsequent holder
will be required to notify any subsequent transferee of such Notes of such transfer restrictions.
(c)
Legends on Rule 144A Global Notes and the Reg S Global Notes
Each Purchaser acknowledges that the Rule 144A Global Notes and the Reg S Global Notes will bear
legends substantially to the effect set forth above under “Legend”.
(d)
Rule 144A Information
Each Purchaser of Notes offered and sold in the United States under Rule 144A is hereby notified that
the offer and sale of such Notes to it is being made in reliance upon the exemption from the registration
requirements of the Securities Act provided by Rule 144A. The Issuer has agreed to furnish to
investors upon request such information as may be required by Rule 144A.
(e)
Regulation S Transfers during the Distribution Compliance Period
If the Purchaser has acquired the Notes in a sale or other transfer being made in reliance upon
Regulation S, the Purchaser agrees that during the Distribution Compliance Period, it will not offer,
resell, pledge or otherwise transfer such Notes to or for the account or benefit of any U.S. person other
than to a person meeting the requirements set forth above and in the legend set forth above under
“Legend” appearing on the Reg S Global Notes.
(f)
ERISA
Each purchaser and transferee of an interest in the Notes (excluding the E Notes), shall be deemed to
represent, warrant and agree that either (a) it is not and for so long as it holds any Note or any interest
therein will not be (i) a Benefit Plan subject to ERISA or Section 4975 of the Code, (ii) another
employee benefit plan subject to any federal, state or local law substantially similar to Section 406 of
ERISA or Section 4975 of the Code (“Similar Law”), (iii) an entity using the assets of or acting on
behalf of such a Benefit Plan or Plan subject to Section 4975 of the Code, or (iv) an entity whose
underlying assets are deemed for purposes of ERISA, Section 4975 of the Code of any Similar Law to
include plan assets of any such Benefit Plan or other employee benefit plan, or (b) its purchase and
holding of any Note will not result in an non-exempt prohibited transaction under ERISA, Section 4975
of the Code or, as applicable, any Similar Law.
206

Initial Investors and Transferees of Interests in the E Notes and the Residual Certificates
Each purchaser of the E Notes and the Residual Certificates will be deemed to have represented and agreed as
follows:
(a)
Purchaser Requirements
The Purchaser is not a U.S. person and is acquiring the Instruments in a transaction meeting the
requirements of Rule 903 or 904 of Regulation S. The Purchaser acknowledges that each of the Issuer
and the Trustee reserves the right prior to any sale or other transfer to require the delivery of such
certifications, legal opinions and other information as the Issuer or the Trustee may reasonably require
to confirm that the proposed sale or other transfer complies with the foregoing restrictions.
(b)
Notice of Transfer Restrictions
Each Purchaser acknowledges and agrees that (1) the Instruments have not been and will not be
registered under the Securities Act, (2) neither the Instruments nor any beneficial interest therein may
be re-offered, resold, pledged or otherwise transferred to a U.S. Person at any time and (3) the
Purchaser will notify any transferee of such transfer restrictions and that each subsequent holder will be
required to notify any subsequent transferee of such Instruments of such transfer restrictions.
(c)
Legends on the E Reg S Global Notes and the Residual Certificates
Each Purchaser acknowledges that the E Reg S Global Notes and the Residual Certificates will bear
legends substantially to the effect set forth above under “Legend”.
(d)
Regulation S Transfers
The Purchaser agrees that it will not offer, resell, pledge or otherwise transfer such Instruments to or
for the account or benefit of any U.S. person at any time.
(e)
ERISA
Each purchaser and Transferee of an interest in the Instruments, shall be deemed to represent, warrant
and agree that it is not and for so long as it holds any Note or interest therein will not be an “Employee
Benefit Plan” as defined in Section 3(3) of ERISA and subject thereto or a Plan subject to Section 4975
of the Code, an entity using the assets of or acting on behalf of such an Employee Benefit Plan or Plan,
or an entity whose underlying assets are deemed to include plan assets of any such Employee Benefit
Plan or Plan.
207

CERTAIN ERISA CONSIDERATIONS
Subject to the considerations discussed below, the Instruments (excluding the E Notes and the Residual
Certificates) and any interests in an Instrument (excluding the E Notes and the Residual Certificates) are eligible
for purchase by employee benefit plans subject to the U.S. Employee Retirement Income Security Act of 1974,
as amended (“ERISA”) or Section 4975 of the Code. Section 406 of ERISA and/or Section 4975 of the Code,
prohibits a pension, profit-sharing or other employee benefit plan, as well as individual retirement accounts and
certain types of Keogh Plans subject to ERISA or Section 4975 of the Code (each, a “Benefit Plan”) from
engaging in certain transactions with persons that are “parties in interest” under ERISA or “disqualified
persons” under the Code with respect to such Benefit Plan. A violation of these “prohibited transaction” rules
may result in an excise tax or other penalties and liabilities under ERISA and the Code for such persons. Title I
of ERISA also requires that fiduciaries of a Benefit Plan subject to ERISA make investments that are consistent
with their fiduciary responsibilities thereunder, including but not limited to, investments which are prudent,
diversified and in accordance with governing plan documents.
Certain transactions involving the purchase, holding or transfer of the Instruments or any interest in any
Instrument might be deemed to constitute prohibited transactions under ERISA and Section 4975 of the Code if
assets of the Issuer were deemed to be assets of a Benefit Plan. Under Section 3(42) of ERISA and a regulation
issued by the United States Department of Labor (collectively, the “Plan Assets Regulation”), the assets of the
Issuer would be treated as plan assets of a Benefit Plan for the purposes of ERISA and the Code only if the
Benefit Plan acquires an “equity interest” in the Issuer and none of the exceptions contained in the Plan Assets
Regulation is applicable. An equity interest for purposes of the Plan Assets Regulation is an interest in an entity
other than an instrument which is treated as indebtedness under applicable local law and which has no
substantial equity features. Although there is little pertinent authority on how this definition applies, the Issuer
is not initially treating the Instruments (excluding the E Notes and the Residual Certificates) as “equity
interests” in the Issuer for the purposes of the Plan Assets Regulation. This treatment is based in part upon the
traditional debt features of such Instruments and the reasonable expectation that such Instruments will be repaid
when due (as evidenced by the ratings assigned to such Instruments by the Rating Agencies) and the absence of
conversion rights, warrants or other similar equity features. Although there is no guidance on the issue, it is
possible that changes in the capitalisation of the Issuer, including as a result of losses relating to the Issuer,
could affect the characterisation of such Instruments as not being equity interests under the Plan Assets
Regulation. The risk of recharacterization is greater for the more subordinate classes of such Instrument. The
Issuer is treating the E Notes and the Residual Certificates as classes of equity interests in the Issuer for
purposes of the Plan Assets Regulation. If the underlying assets of the Issuer are deemed to be Benefit Plan
assets, the obligations and other responsibilities of Benefit Plan sponsors, Benefit Plan fiduciaries and Benefit
Plan administrators, and of “parties in interest” and “disqualified persons” (as defined under ERISA and the
Code), under Parts 1 and 4 of Subtitle B of Title I of ERISA and Section 4975 of the Code, as applicable, may
be expanded, and there may be an increase in their liability under these and other provisions of ERISA and the
Code (except to the extent (if any) that a favourable statutory or administrative exemption or exception applies).
In addition, various providers of fiduciary or other services to the entity, and any other parties with authority or
control with respect to the entity, could be deemed to be Benefit Plan fiduciaries or otherwise parties in interest
or disqualified persons by virtue of their provision of such services (and there could be an improper delegation
of authority to such providers).
Regardless of whether the assets of the Issuer are deemed to be Benefit Plan assets, prohibited transactions
could arise in connection with the purchase and holding of a Note or any interest therein by a Benefit Plan.
Such investment may, however, be subject to a statutory or administrative exemption, including Prohibited
Transaction Class Exemption (“PTCE”) 90-1, which exempts certain transactions involving insurance company
pooled separate accounts; PTCE 91-38, which exempts certain transactions involving bank collective investment
funds; PTCE 84-14, which exempts certain transactions effected on behalf of a Benefit Plan by a “qualified
professional asset manager”, PTCE 95-60, which exempts certain transactions involving insurance company
general accounts; and PTCE 96-23, which exempts certain transactions effected on behalf of a Benefit Plan by
an “in-house asset manager”, and Section 408(b)(17) of ERISA or Section 4975(d)(20) of the Code, which
exempts certain transactions between a Benefit Plan and a service provider. Such exemptions may not,
however, apply to all of the transactions that could be deemed to be prohibited transactions in connection with
an investment in the Instruments by a Benefit Plan.
Each purchaser and Transferee of an Instrument (excluding the E Notes and the Residual Certificates) or any
interest therein will be deemed to have represented and agreed that (a) it is not and for so long as it holds any
such Instrument or any interest therein will not be (i) a Benefit Plan subject to ERISA or Section 4975 of the
208

Code, (ii) another employee benefit plan subject to any federal, state or local law substantially similar to Section
406 of ERISA or Section 4975 of the Code (“Similar Law”), (iii) an entity using the assets of or acting on behalf
of such a Benefit Plan or Plan subject to Section 4975 of the Code, or (iv) an entity whose underlying assets are
deemed for purposes of ERISA, Section 4975 of the Code or any Similar Law to include plan assets of any such
Benefit Plan or other employee benefit plan, or (b) its purchase and holding of any Instrument will not result in a
non-exempt prohibited transaction under ERISA, Section 4975 of the Code or, as applicable, any Similar Law.
The E Notes and the Residual Certificates are not eligible for purchase by Benefit Plans and each purchaser and
Transferee thereof will be deemed to have represented and agreed that (i) it is not and for so long as it is a holder
thereof will not be a Benefit Plan or any other entity deemed to hold assets of a Benefit Plan or (ii) if it is not
and will not be a Benefit Plan or any other entity deemed to hold assets of a Benefit Plan but is a plan subject to
Similar Law, the purchase and holding of any such E Notes or Residual Certificates, as the case may be, will not
violate any such Similar Law.
Any insurance company proposing to invest assets of its general account in the Instruments should consider the
extent to which such investment would be subject to the requirements of ERISA in light of the U.S. Supreme
Court’s decision in John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank, 510 U.S. 86
(1993). In particular, such an insurance company should consider the extent of the relief granted by the U.S.
Department of Labor in Prohibited Transaction Class Exemption 95-60, and the effect of Section 401(c) of
ERISA as interpreted by the regulations issued thereunder by the U.S. Department of Labor in January 2000.
Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA) and certain church
plans (as defined in Section 3(33) of ERISA), non-U.S. and certain other plans are not subject to ERISA
requirements, but may be subject to other requirements applicable to employee benefit plans.
PRIOR TO MAKING AN INVESTMENT IN INSTRUMENTS, PROSPECTIVE EMPLOYEE BENEFIT
PLAN INVESTORS (WHETHER OR NOT SUBJECT TO ERISA OR SECTION 4975 OF THE CODE)
SHOULD CONSULT WITH THEIR LEGAL AND OTHER ADVISORS CONCERNING THE IMPACT OF
ERISA AND THE CODE (AND, PARTICULARLY IN THE CASE OF NON-ERISA PLANS AND
ARRANGEMENTS, ANY OTHER U.S. STATE AND LOCAL, AND NON-U.S., LAW
CONSIDERATIONS), AS APPLICABLE, AND THE POTENTIAL CONSEQUENCES IN THEIR SPECIFIC
CIRCUMSTANCES OF AN INVESTMENT IN INSTRUMENTS, AS THE CASE MAY BE.
209

GENERAL INFORMATION
1. The creation and issue of the Instruments has been authorised by resolution of the Board of Directors of
the Issuer passed on or about 12 July 2007.
2. It is expected that listing of the Instruments on the Official List of the Irish Stock Exchange will be
granted on or around 13 July 2007, subject only to the issue of the Global Notes and the Global
Residual Certificates. It is estimated that the total fees and expenses related to the admission to trading
will be approximately £2,460,000 (which includes (i) the combined management, underwriting and
selling commission payable to the Managers, (ii) the listing fees payable to the Irish Stock Exchange,
(iii) legal fees and expenses and (iv) fees payable to the Rating Agencies) which it is intended will be
met, on the Closing Date, by the Issuer from the Transaction Account. The issue will be cancelled if
the Global Notes or the Global Residual Certificates are not issued. Transactions in respect of the
Instruments will normally be effected for settlement in sterling, and for delivery on the third Business
Day after the date of the transaction.
3. Application has been made by the Issuer to have the Instruments admitted to trading on the regulated
market of the Irish Stock Exchange. Arthur Cox Listing Services Limited is acting solely in its
capacity as listing agent for the Issuer in connection with the Instruments and is not itself seeking
admission of the Instruments to the Official List of the Irish Stock Exchange or to trading on the Irish
Stock Exchange for the purposes of the Prospectus Directive.
4. The Notes sold in offshore transactions in reliance on Regulation S and represented by Reg S Global
Notes and the Residual Certificates have been accepted for clearance through Euroclear and
Clearstream, Luxembourg and the Notes sold in reliance on Rule 144A have been accepted for
clearance by DTC. The table below lists the CUSIP Numbers, Common Codes and the International
Securities Identification Numbers (“ISIN”) for the Instruments.
Common Code ISIN CUSIP Number
A1b Rule 144A Notes 31023106 US29880YAB56 29880YAB5
A1b Reg S Notes 030864930 XS0308649309
A1c Rule 144A Notes 31023904 US29880YAC30 29880YAC3
A1c Reg S Notes 030865324 XS0308653244
A2a Rule 144A Notes 31024366 US29880YAD13 29880YAD1
A2a Reg S Notes 030864867 XS0308648673
A2b Rule 144A Notes 31024617 US29880YAE95 29880YAE9
A2b Reg S Notes 030865022 XS0308650224
A2c Rule 144A Notes 31024846 US29880YAF60 29880YAF6
A2c Reg S Notes 030865979 XS0308659795
A3a Rule 144A Notes 31025281 US29880YAG44 29880YAG4
A3a Reg S Notes 030866649 XS0308666493
A3c Rule 144A Notes 31025800 US29880YAJ82 29880YAJ8
A3c Reg S Notes 030871014 XS0308710143
B1a Rule 144A Notes 31026024 US29880YAK55 29880YAK5
B1a Reg S Notes 030867238 XS0308672384
B1c Rule 144A Notes 31026113 US29880YAM12 29880YAM1
B1c Reg S Notes 030871642 XS0308716421
C1a Rule 144A Notes 31026423 US29880YAN94 29880YAN9
C1a Reg S Notes 030867319 XS0308673192
C1c Rule 144A Notes 31026628 US29880YAQ26 29880YAQ2
C1c Reg S Notes 030871804 XS0308718047
D1a Rule 144A Notes 31026741 US29880YAR09 29880YAR0
D1a Reg S Notes 030867394 XS0308673945
E1c Reg S Notes 030872584 XS0308725844
ETc Reg S Notes 030931254 XS0309312543
Residual Certificates 030939158 XS0309391588
210

5. The Issuer is not and has not been involved in any governmental, legal or arbitration proceedings
(including any such proceedings which are pending or threatened of which the Issuer is aware) which
may have or have had since its date of incorporation a significant effect on its financial position.
6. The Issuer has applied for a consumer credit licence under the CCA and is registered as a data
controller under the Data Protection Act 1998.
7. The financial year end of the Issuer is 30 November 2007. Since the date of incorporation, the Issuer
has not commenced operation and no financial statements have been made up as at the date of this
document. The first statutory financial statements of the Issuer will be prepared for the period ended
30 November 2007.
8. Since 8 May 2007 (being the date of incorporation of the Issuer), there has been no material adverse
change in the financial position or prospects of the Issuer and no significant change in the trading or
financial position of the Issuer.
9. The auditors of the Issuer are, as at the date of this Prospectus, Ernst & Young LLP, who are regulated
by a number of authorities, but primarily by The Institute of Chartered Accountants in England &
Wales, of which they are members, in respect of the audit. In addition, Ernst & Young LLP is
authorised and regulated by the Financial Services Authority in respect of activities regulated by the
FSMA.
10. Copies of the following documents in physical form may be inspected during normal business hours on
any day (excluding Saturdays, Sundays and public holidays) at the offices of the Issuer, c/o
Wilmington Trust SP Services (London) Limited, Tower 42 (Level 11), 25 Old Broad Street, London
EC2N 1HQ and at the specified office of the Irish Paying Agent in Dublin for so long as the
Instruments are listed on the Irish Stock Exchange:
(a)
(b)
(c)
the Memorandum and Articles of Association of the Issuer;
the Subscription Agreement;
prior to the Closing Date, drafts (subject to minor amendment), and after the Closing Date,
copies, of the following legal documents:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
the Master Securitisation Agreement (incorporating the Master Definitions Schedule,
the Common Terms, the Paying Agency Agreement, the Cash/Bond Administration
Agreement, the Mortgage Administration Agreement, the Bank Agreement, the
Liquidity Facility Agreement, the GIC and the Post Enforcement Call Option
Agreement);
the Trust Deed;
the Deed of Charge;
the Mortgage Sale Agreement;
the Collection Account Declarations of Trust;
the Bullet Cap Agreement;
the Bullet Cap Guarantee;
the Currency Swap Agreements;
the Currency Swap Guarantee;
the Fixed/Floating Swap Agreement;
211

(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
the Fixed/Floating Swap Guarantee;
the BBR Swap Agreement;
the BBR Swap Guarantee;
the Scottish Trusts;
the Corporate Services Agreement; and
the Investment Administration Agreement (upon execution).
11. The Issuer does not intend to provide post issuance information to Instrumentholders in respect of the
Mortgage Pool or the Instruments.
12. Any certificate or report of the auditors of the Issuer, or any other person called for by or provided to
the Trustee in accordance with or for the purposes of the Transaction Documents, may be relied upon
by the Trustee as sufficient evidence of the facts stated therein (whether or not such certificate or report
and/or any engagement letter or other document entered into by the Trustee in connection therewith
contains a monetary or other limit on the liability of the auditors of the Issuer or such other person in
respect thereof).
212

GLOSSARY
$.............................................................................................................................................................................iii
£.............................................................................................................................................................................iii
€.............................................................................................................................................................................iii
1985 Act ...............................................................................................................................................................23
1987 Act ...............................................................................................................................................................23
1999 Regulations...............................................................................................................................................117
A Currency Swap Agreement............................................................................................................................11
A Noteholders....................................................................................................................................................142
A Notes......................................................................................................................................................... 14, 134
A Principal Deficiency........................................................................................................................................42
A Principal Deficiency Ledger.............................................................................................................................7
A&L .......................................................................................................................................................................2
A&L Lending Criteria .......................................................................................................................................83
A&L Loans..........................................................................................................................................................98
A&L Mortgage Origination and Sale Agreement..........................................................................................100
A1 Notes....................................................................................................................................................... 14, 134
A1b Currency Swap Rate ..................................................................................................................................48
A1b Currency Swap Transaction............................................................................................................ 135, 170
A1b Notes ..........................................................................................................................................................134
A1b Reg S Global Note.....................................................................................................................................127
A1b Rule 144A Global Note.............................................................................................................................127
A1c Notes...........................................................................................................................................................134
A1c Reg S Global Note .....................................................................................................................................127
A1c Rule 144A Global Note .............................................................................................................................127
A2 Notes....................................................................................................................................................... 14, 134
A2a Currency Swap Rate...................................................................................................................................48
A2a Currency Swap Transaction ............................................................................................................ 135, 171
A2a Notes...........................................................................................................................................................134
A2a Reg S Global Note.....................................................................................................................................127
A2a Rule 144A Global Note.............................................................................................................................127
A2b Currency Swap Rate ..................................................................................................................................48
A2b Currency Swap Transaction....................................................................................................................135
A2b Notes ..........................................................................................................................................................134
A2b Reg S Global Note.....................................................................................................................................128
A2b Rule 144A Global Note.............................................................................................................................128
A2c Notes...........................................................................................................................................................134
A2c Reg S Global Note .....................................................................................................................................128
A2c Rule 144A Global Note .............................................................................................................................128
A3 Notes....................................................................................................................................................... 14, 134
A3a Currency Swap Rate...................................................................................................................................48
A3a Currency Swap Transaction ............................................................................................................ 135, 171
A3a Notes...........................................................................................................................................................134
A3a Reg S Global Note.....................................................................................................................................128
A3a Rule 144A Global Note.............................................................................................................................128
A3c Notes...........................................................................................................................................................134
A3c Reg S Global Note .....................................................................................................................................128
A3c Rule 144A Global Note .............................................................................................................................128
Account Bank........................................................................................................................................................5
Actual Loan Revenue Receipts ..........................................................................................................................33
Actual Newly-Originated Loans Interest Shortfall Amount...........................................................................50
Actual Prefunding Interest Shortfall Amount .................................................................................................52
Actual Redemption Funds ...............................................................................................................................135
Affiliate ...................................................................................................................................................... 135, 171
AFM...................................................................................................................................................................201
Agent Bank.................................................................................................................................... 4, 127, 134, 170
Aggregate Accrued Interest ...............................................................................................................................67
Amber ....................................................................................................................................................................2
Amber Collection Account...................................................................................................................................8
213

Amber Collection Account Declaration of Trust .............................................................................................40
Amber Intermediaries......................................................................................................................................100
Amber Intermediary ........................................................................................................................................100
Amber Lending Criteria ....................................................................................................................................79
Amber Loans.......................................................................................................................................................98
Amber Packagers..............................................................................................................................................100
Anticipated Newly-Originated Loans Interest Shortfall Amount ..................................................................50
Anticipated Prefunding Interest Shortfall Amount.........................................................................................51
Appointee................................................................................................................................................... 136, 171
Apportionment Factor ............................................................................................................................. 136, 171
Asset Yield...........................................................................................................................................................45
Authorised Investments .....................................................................................................................................41
Available Commitment ......................................................................................................................................36
Available Revenue Fund .......................................................................................................................... 144, 176
Available Revenue Ledger ......................................................................................................................... 33, 136
B Currency Swap Agreement............................................................................................................................11
B Noteholders....................................................................................................................................................142
B Notes......................................................................................................................................................... 14, 134
B Principal Deficiency ........................................................................................................................................42
B Principal Deficiency Ledger.............................................................................................................................7
B Principal Deficiency Limit..............................................................................................................................42
B1a Currency Swap Rate...................................................................................................................................48
B1a Currency Swap Transaction ............................................................................................................ 136, 171
B1a Notes...........................................................................................................................................................134
B1a Reg S Global Note .....................................................................................................................................128
B1a Rule 144A Global Note .............................................................................................................................128
B1c Notes ...........................................................................................................................................................134
B1c Reg S Global Note .....................................................................................................................................128
B1c Rule 144A Global Note .............................................................................................................................128
Bank Accounts ....................................................................................................................................................41
Bank Agreement ...................................................................................................................................................5
Barclays .................................................................................................................................................................8
Basic Terms Modification ........................................................................................................................ 136, 171
BBR Linked Loan...............................................................................................................................................43
BBR Linked Performing Balance......................................................................................................................46
BBR Notional Amount .......................................................................................................................................46
BBR Swap Agreement.................................................................................................................................. 10, 46
BBR Swap Counterparty ...............................................................................................................................6, 62
BBR Swap Counterparty Default Payment............................................................................................ 136, 171
BBR Swap Guarantee ....................................................................................................................................6, 11
BBR Swap Guarantor ....................................................................................................................................6, 62
BBR Swap Net Amount............................................................................................................................ 136, 171
BBR Swap Transaction ......................................................................................................................................46
Benefit Plan .......................................................................................................................................................208
Block Buildings Policy......................................................................................................................................112
Borrowers............................................................................................................................................................33
Branded Lender..................................................................................................................................................98
Building Policies................................................................................................................................................108
Bullet Cap Agreement ....................................................................................................................................9, 44
Bullet Cap Counterparty ...............................................................................................................................5, 62
Bullet Cap Guarantee.........................................................................................................................................10
Bullet Cap Guarantor ....................................................................................................................................5, 62
Bullet Cap Payment............................................................................................................................................44
Bullet Cap Proceeds Reserve Fund ...................................................................................................................44
Bullet Cap Proceeds Reserve Ledger ................................................................................................................44
Bullet Cap Transaction ......................................................................................................................................44
Business Day.............................................................................................................................................. 136, 171
Buy-to-Let Loans ................................................................................................................................................66
C Currency Swap Agreement............................................................................................................................11
C Noteholders....................................................................................................................................................142
214

C Notes......................................................................................................................................................... 14, 134
C Principal Deficiency........................................................................................................................................42
C Principal Deficiency Ledger.............................................................................................................................7
C Principal Deficiency Limit .............................................................................................................................42
C1a Currency Swap Rate...................................................................................................................................48
C1a Currency Swap Transaction ............................................................................................................ 136, 172
C1a Notes...........................................................................................................................................................134
C1a Reg S Global Note.....................................................................................................................................128
C1a Rule 144A Global Note.............................................................................................................................128
C1c Notes...........................................................................................................................................................134
C1c Reg S Global Note .....................................................................................................................................128
C1c Rule 144A Global Note .............................................................................................................................128
Capital and Interest Loans ................................................................................................................................66
Capstone ..........................................................................................................................................................3, 57
Cash/Bond Administration Agreement ..............................................................................................................3
Cash/Bond Administrator....................................................................................................................................3
CCA 2006 ..........................................................................................................................................................120
CCJ ......................................................................................................................................................................74
Charged Property..................................................................................................................................... 144, 176
Charitable Share Trust ........................................................................................................................................3
Class...................................................................................................................................................................134
Clearstream, Luxembourg..........................................................................................................................iv, 129
Closing Date ................................................................................................................................. iv, 129, 134, 170
CML...................................................................................................................................................................115
Code ................................................................................................................................................... 193, 203, 205
CODE ...........................................................................................................................................................iii, 204
Collateral Backed Notes............................................................................................................................. 14, 134
Collateral Ledger................................................................................................................................................47
Collateral Security.................................................................................................................................... 143, 175
collecting agent..................................................................................................................................................191
Collection Account..........................................................................................................................................8, 40
Collection Account Bank....................................................................................................................................40
Collection Account Banks ..................................................................................................................................40
Collection Accounts ........................................................................................................................................8, 40
Collection Accounts Declarations of Trust.......................................................................................................40
Co-Manager ..........................................................................................................................................................ii
Common Depositary....................................................................................................................................iv, 129
Conditions .........................................................................................................................................................135
Consumer Credit (Agreements) (Amendment) Regulations 2004................................................................119
Consumer Credit (Disclosure of Information) Regulations 2004.................................................................119
Consumer Credit (Early Settlement) Regulations 2004 ................................................................................119
control........................................................................................................................................................ 135, 171
Corporate Services Agreement............................................................................................................................6
Corporate Services Provider ...............................................................................................................................3
Correspondent Lender .......................................................................................................................................98
CPR....................................................................................................................................................................125
Currency Swap Agreements ..............................................................................................................................11
Currency Swap Guarantee ................................................................................................................................12
Currency Swap Rates.........................................................................................................................................48
Currency Swap Transactions ............................................................................................................................11
Currency Swaps Counterparty......................................................................................................................6, 62
Currency Swaps Counterparty Default Payment.................................................................................. 136, 172
Currency Swaps Guarantor...........................................................................................................................6, 62
Custodian......................................................................................................................................................iv, 129
D Currency Swap Agreement............................................................................................................................11
D Noteholders....................................................................................................................................................142
D Notes...............................................................................................................................................................134
D Principal Deficiency........................................................................................................................................42
D Principal Deficiency Limit .............................................................................................................................42
D1 Notes...............................................................................................................................................................14
215

D1 Principal Deficiency Ledger...........................................................................................................................7
D1a Currency Swap Rate...................................................................................................................................48
D1a Currency Swap Transaction ............................................................................................................ 137, 172
D1a Notes...........................................................................................................................................................134
D1a Reg S Global Note.....................................................................................................................................128
D1a Rule 144A Global Note.............................................................................................................................128
DBERR ..............................................................................................................................................................119
Deed of Charge.......................................................................................................................................... 134, 170
Default Rate ........................................................................................................................................................37
Deficiency ............................................................................................................................................................41
Definitive Instruments......................................................................................................................................130
Definitive Notes.................................................................................................................................................130
Definitive Residual Certificateholder..............................................................................................................174
Definitive Residual Certificates .......................................................................................................................130
Delegation Agreements.........................................................................................................................................8
Determination Date ............................................................................................................................ 35, 137, 172
Discount Standard Security ...............................................................................................................................23
Discounted Loans................................................................................................................................................50
Discounted Margin Reserve Fund.....................................................................................................................50
Discounted Margin Reserve Ledger..................................................................................................................50
Disputes ..................................................................................................................................................... 168, 189
Distribution Compliance Period........................................................................................................................15
DNB....................................................................................................................................................................200
Dollar Account ....................................................................................................................................................41
Dollar Currency Swap Transactions.................................................................................................................11
Dollar Notes................................................................................................................................................. 14, 141
dollars ...................................................................................................................................................................iii
DTC...............................................................................................................................................................iv, 129
Dutch Residents ................................................................................................................................................200
DUTCH RESIDENTS ......................................................................................................................................201
E Global Notes ..................................................................................................................................................128
E Noteholders....................................................................................................................................................142
E Notes......................................................................................................................................................... 14, 134
E1c Principal Deficiency ....................................................................................................................................42
E1c Principal Deficiency Ledger .........................................................................................................................7
E1c Principal Deficiency Limit..........................................................................................................................42
E1c Reg S Global Note .....................................................................................................................................128
EMPLOYEE BENEFIT PLAN .......................................................................................................................204
Enforcement Notice ..........................................................................................................................................163
Enforcement Procedures..................................................................................................................................109
English First Mortgage ......................................................................................................................................71
English Loan .......................................................................................................................................................72
English Mortgage................................................................................................................................................72
English Property.................................................................................................................................................71
English Second Mortgage...................................................................................................................................72
Enterprise Act.....................................................................................................................................................20
ERISA...................................................................................................................................iii, 203, 204, 205, 208
ES Investment .......................................................................................................................................................ii
ETc Notes ..........................................................................................................................................................134
ETc Reg S Global Note.....................................................................................................................................128
EURIBOR ...........................................................................................................................................................16
euro .......................................................................................................................................................................iii
Euro Account ......................................................................................................................................................41
Euro Currency Swap Transactions...................................................................................................................11
Euro Notes................................................................................................................................................... 14, 141
Euroclear......................................................................................................................................................iv, 129
Eurosail-UK 2007-3BL SPML Trust Collection Account .................................................................................8
Eurosail-UK 2007-3BL SPML Trust Collection Account Declaration of Trust ...........................................40
Eurosail-UK 2007-3BL SPPL Trust Collection Account ..................................................................................8
Eurosail-UK 2007-3BL SPPL Trust Collection Account Declaration of Trust.............................................40
216

Event of Default ................................................................................................................................................163
Excess Swap Collateral ............................................................................................................................ 137, 172
Excessive B Principal Deficiency.......................................................................................................................37
Excessive C Principal Deficiency.......................................................................................................................37
Excessive D Principal Deficiency.......................................................................................................................37
Excessive E1c Principal Deficiency ...................................................................................................................37
Exchange Act .......................................................................................................................................................vi
Exchange Agent ............................................................................................................................ 4, 127, 134, 170
Extraordinary Resolution ........................................................................................................................ 137, 172
Final Report ......................................................................................................................................................121
First Loan............................................................................................................................................................66
First Loans ..........................................................................................................................................................13
First Mortgage Collection Account.....................................................................................................................8
First Mortgage Collection Account Declaration of Trust ...............................................................................40
First Mortgage Redemption Account .................................................................................................................8
First Mortgage Redemption Account Declaration of Trust............................................................................40
Fitch .....................................................................................................................................................................18
Fixed Rate Loan..................................................................................................................................................43
Fixed/Floating Notional Amount.......................................................................................................................45
Fixed/Floating Swap Agreement ................................................................................................................. 10, 45
Fixed/Floating Swap Counterparty...............................................................................................................5, 62
Fixed/Floating Swap Counterparty Default Payment ........................................................................... 137, 172
Fixed/Floating Swap Guarantee....................................................................................................................5, 10
Fixed/Floating Swap Guarantor....................................................................................................................5, 62
Fixed/Floating Swap Net Amount ........................................................................................................... 137, 172
Fixed/Floating Swap Transaction......................................................................................................................45
Framework..........................................................................................................................................................30
FSA ....................................................................................................................................................................115
FSMA.................................................................................................................................................................115
GIC ........................................................................................................................................................................5
GIC Account .........................................................................................................................................................9
GIC Provider ..................................................................................................................................................5, 41
Global Instruments...........................................................................................................................................129
Global Notes ........................................................................................................................................ 15, 129, 141
Global Residual Certificate...................................................................................................................... 129, 174
Global Residual Certificateholder...................................................................................................................174
Guidance Note...................................................................................................................................................118
Guidelines..........................................................................................................................................................116
Hedge Counterparties ..........................................................................................................................................6
Hedge Counterparty.............................................................................................................................................6
Hedge Guarantor..................................................................................................................................................6
Hedging Agreement............................................................................................................................................46
Hedging Agreements ..........................................................................................................................................46
Hedging Transaction ..........................................................................................................................................46
Hedging Transactions.........................................................................................................................................46
HML ......................................................................................................................................................................3
HML Delegation Agreement................................................................................................................................8
holder of Notes ..................................................................................................................................................142
Home Owner Loans............................................................................................................................................66
HSBC .....................................................................................................................................................................8
Independent Director ............................................................................................................................... 137, 173
indirect participants .........................................................................................................................................130
Initial Mortgage Pool..........................................................................................................................................13
Instrumentholders ...................................................................................................................................... 14, 127
Instruments ......................................................................................................................................................i, 14
Intended U.S. Tax Treatment.................................................................................................................. 169, 189
Interest Amount................................................................................................................................................155
Interest Determination Date ...................................................................................................................... 16, 138
Interest Only Loans ...................................................................................................................................... 22, 66
Interest Payment Date........................................................................................................................ 16, 153, 185
217

Interest Period ............................................................................................................................................ 16, 138
Interest Shortfall...............................................................................................................................................162
Interim Report ..................................................................................................................................................121
Investment Administration Agreement ..............................................................................................................5
Investment Administrator....................................................................................................................................5
Irish Paying Agent........................................................................................................................ 4, 127, 134, 170
Irish Stock Exchange.............................................................................................................................................i
IRS ................................................................................................................................................................vi, 193
ISDA ......................................................................................................................................................................9
ISIN....................................................................................................................................................................210
Issuer.......................................................................................................................................................... 134, 170
Junior Notes ................................................................................................................................................ 14, 138
Landlord..............................................................................................................................................................23
Langersal...............................................................................................................................................................2
Lead Manager.......................................................................................................................................................ii
Ledger....................................................................................................................................................................7
Ledgers ..................................................................................................................................................................7
Legal Titleholder.................................................................................................................................................25
Lending Criteria .................................................................................................................................................86
LIBOR .................................................................................................................................................................11
LIBOR Linked Loan ..........................................................................................................................................43
Life Policies .......................................................................................................................................................113
Lightfoots...............................................................................................................................................................3
Lightfoots Delegation Agreement........................................................................................................................8
Liquidity Drawdown Date .................................................................................................................................38
Liquidity Drawn Amount.................................................................................................................................138
Liquidity Facility ................................................................................................................................................36
Liquidity Facility Agreement...............................................................................................................................5
Liquidity Facility Provider ..................................................................................................................................5
Liquidity Ledger.................................................................................................................................................36
Liquidity Maximum Amount.............................................................................................................................36
Loan Base Rate ...................................................................................................................................................43
Loan BBR...................................................................................................................................................... 28, 43
Loan BBR Fixing Date .......................................................................................................................................43
Loan LIBOR .......................................................................................................................................................43
Loan LIBOR Fixing Date...................................................................................................................................43
Loan Principal Receipts .....................................................................................................................................33
Loan Revenue Receipts ......................................................................................................................................33
Loans................................................................................................................................................................2, 98
London Business Day .......................................................................................................................................138
LTV................................................................................................................................................................ 70, 83
Manager.............................................................................................................................................................198
Managers.......................................................................................................................................................ii, 198
MARS 1 Lending Criteria..................................................................................................................................75
MARS 1 Loans....................................................................................................................................................99
Master Securitisation Agreement........................................................................................................................7
Matlock..................................................................................................................................................................2
MCCB................................................................................................................................................................115
MCOB................................................................................................................................................................115
Modelling Assumptions....................................................................................................................................125
Monthly Payment ...............................................................................................................................................50
Moody’s ...............................................................................................................................................................18
Mortgage Administration Agreement.................................................................................................................3
Mortgage Administrator......................................................................................................................................3
Mortgage Code..................................................................................................................................................115
Mortgage Conditions........................................................................................................................................107
Mortgage Pool.................................................................................................................................................2, 65
Mortgage Sale Agreement..................................................................................................................................20
Mortgages............................................................................................................................................................71
Most Senior Class of Notes...............................................................................................................................138
218

Newly-Originated Loans ....................................................................................................................................50
Newly-Originated Loans Amount .....................................................................................................................50
Newly-Originated Loans Interest Shortfall Amount Ledger..........................................................................50
Newly-Originated Loans Ledger .......................................................................................................................50
NIHE....................................................................................................................................................................23
Northern Irish Loan ...........................................................................................................................................71
Northern Irish Mortgage ...................................................................................................................................71
Northern Irish Property.....................................................................................................................................71
Note EURIBOR........................................................................................................................................... 16, 138
Note Principal Payment ...................................................................................................................................158
Note Sterling LIBOR.................................................................................................................................. 16, 138
Note USD-LIBOR....................................................................................................................................... 16, 138
Noteholder.........................................................................................................................................................142
Noteholders ......................................................................................................................................... 14, 127, 134
Notes ............................................................................................................................................................ 14, 134
Official List.............................................................................................................................................................i
OFT....................................................................................................................................................................116
OID ....................................................................................................................................................................194
OID Regulations ...............................................................................................................................................194
Ombudsman......................................................................................................................................................115
OptionCo ...............................................................................................................................................................3
Originator..............................................................................................................................................................2
Originators ............................................................................................................................................................2
Owner ........................................................................................................................................................ 168, 189
Parent ................................................................................................................................................................ii, 3
Part & Part Loans ........................................................................................................................................ 22, 67
participants .......................................................................................................................................................130
Paying Agency Agreement........................................................................................................... 4, 127, 134, 170
paying agent ......................................................................................................................................................191
Paying Agents.................................................................................................................................... 127, 134, 170
Performance Conditions ..................................................................................................................................138
Performing Balance............................................................................................................................................45
Permitted Activities .................................................................................................................................. 138, 173
Plan Assets Regulation .....................................................................................................................................208
PMCL ....................................................................................................................................................................ii
PMCL Collection Accounts ...........................................................................................................................8, 39
PMCL Specific Collection Account...................................................................................................................39
PMCL Specific Collection Account Declaration of Trust ...............................................................................40
PMCL/Barclays Collection Accounts................................................................................................................39
PMCL/Barclays General Collection Account Declaration of Trust...............................................................40
PML .......................................................................................................................................................................2
PML Insurance Contracts ...............................................................................................................................113
PML Lending Criteria .......................................................................................................................................75
PML Loans..........................................................................................................................................................98
PMP ...................................................................................................................................................................201
PMPs..................................................................................................................................................................200
Pool Factor ........................................................................................................................................................158
Ported Loan.........................................................................................................................................................69
Post Enforcement Call Option...........................................................................................................................12
Post Enforcement Call Option Agreement .......................................................................................................12
Post-Completion Activity Based Fees ...............................................................................................................33
Post-Completion Activity-Based Fees Ledger ..................................................................................................33
Post-Enforcement Priority of Payments ................................................................................................. 149, 181
pounds...................................................................................................................................................................iii
pounds sterling.....................................................................................................................................................iii
Pre-Enforcement Priority of Payments .................................................................................................. 144, 176
Prefunded Loans.................................................................................................................................................51
Prefunding Acquisition Date .............................................................................................................................51
Prefunding Amount............................................................................................................................................51
Prefunding Interest Shortfall Amount Ledger.................................................................................................51
219

Prefunding Ledger..............................................................................................................................................51
Prepayment Charges Ledger.............................................................................................................................33
Prepayment Charges Receipts...........................................................................................................................39
Principal Amount Outstanding .......................................................................................................................158
Principal Balance..............................................................................................................................................104
Principal Deficiency.................................................................................................................................... 42, 139
Principal Deficiency Ledger.................................................................................................................................7
Principal Ledger .................................................................................................................................................33
Principal Paying Agent ................................................................................................................ 4, 127, 134, 170
Priority of Payments................................................................................................................................. 149, 181
Proceedings ............................................................................................................................................... 168, 189
Professional Market Parties.............................................................................................................................200
Profit Ledger.......................................................................................................................................................43
Properties ............................................................................................................................................................71
Property...............................................................................................................................................................71
Prospectus ..............................................................................................................................................................i
Prospectus Directive ..............................................................................................................................................i
Provisional Mortgage Pool........................................................................................................................... 13, 65
PRS 1 Lending Criteria......................................................................................................................................78
PRS 1 Loans ........................................................................................................................................................99
PRS 3 Lending Criteria......................................................................................................................................78
PRS 3 Loans ........................................................................................................................................................99
PRS 4 Lending Criteria......................................................................................................................................78
PRS 4 Loans ........................................................................................................................................................99
PRS 5 Lending Criteria......................................................................................................................................78
PRS 5 Loans ........................................................................................................................................................99
PRS 6 Lending Criteria......................................................................................................................................78
PRS 6 Loans ........................................................................................................................................................99
Prudent Mortgage Lender .................................................................................................................................86
PTCE .................................................................................................................................................................208
Qualified Institutional Buyers .....................................................................................................................ii, 141
Rate of Interest..................................................................................................................................................153
Rating Agencies...................................................................................................................................................18
Rating Agency Confirmation.............................................................................................................................41
RC Distribution .......................................................................................................................................... 16, 185
RC Senior Distribution ............................................................................................................................ 139, 173
Reasonable and Prudent Mortgage Lender .....................................................................................................86
Record Date............................................................................................................................................... 162, 186
redeeming ..........................................................................................................................................................161
Redemption Priority.........................................................................................................................................156
Reference Banks ...............................................................................................................................................155
Reg S Global Note.............................................................................................................................................141
Reg S Global Notes ..................................................................................................................................... 15, 129
Reg S Notes..........................................................................................................................................................15
Register...................................................................................................................................................... 142, 174
Registered Social Landlord................................................................................................................................67
Registers of Northern Ireland............................................................................................................................71
Registrar........................................................................................................................................ 4, 127, 134, 170
Regulation S ..................................................................................................................................................ii, 141
Regulations........................................................................................................................................................117
Related Rights...................................................................................................................................................173
Relevant Amount ................................................................................................................................................44
Relevant Exchange Rate...................................................................................................................................139
Relevant Margin ...............................................................................................................................................139
Relevant Period...................................................................................................................................................45
Relevant Screen......................................................................................................................................... 168, 189
Remote Processor ...............................................................................................................................................98
Repossession Loans...........................................................................................................................................110
Reserve Fund ......................................................................................................................................................38
Reserve Fund Amortisation Conditions ................................................................................................... 38, 140
220

Reserve Fund Required Amount............................................................................................................... 38, 139
Reserve Interest Rate .......................................................................................................................................154
Reserve Ledger ...................................................................................................................................................38
Residual Certificate Conditions................................................................................................................. 26, 170
Residual Certificateholders..............................................................................................................................127
Residual Certificates................................................................................................................................. 170, 174
Residual Revenue................................................................................................................................ 39, 140, 173
Residual Revenue Deficiency .............................................................................................................................36
Responsible Person ...............................................................................................................................................ii
Revenue Backed Notes ............................................................................................................................... 14, 134
Revenue Ledger ..................................................................................................................................................33
Right to Buy ........................................................................................................................................................23
Right to Buy Loans.............................................................................................................................................66
RSA 421-B ............................................................................................................................................................. v
Rule 144A ......................................................................................................................................................ii, 141
Rule 144A Global Note.....................................................................................................................................141
Rule 144A Global Notes ............................................................................................................................. 15, 129
Rule 144A Notes..................................................................................................................................................15
S&P ......................................................................................................................................................................18
Scottish First Mortgage......................................................................................................................................71
Scottish Loan.......................................................................................................................................................72
Scottish Mortgage...............................................................................................................................................72
Scottish Property ................................................................................................................................................71
Scottish Second Mortgage..................................................................................................................................72
Scottish Trusts ..................................................................................................................................................101
Screen Rate........................................................................................................................................................154
SEC ........................................................................................................................................................................ii
Second Loan ........................................................................................................................................................66
Second Loans ......................................................................................................................................................13
Second Mortgage Collection Account.................................................................................................................8
Second Mortgage Collection Account Declaration of Trust ...........................................................................40
Secured Creditors..................................................................................................................................... 143, 175
Securities Act ................................................................................................................ ii, 141, 198, 203, 204, 205
Security........................................................................................................................................................ 18, 142
Seller ......................................................................................................................................................................2
Sellers.....................................................................................................................................................................2
Share Trust............................................................................................................................................................3
Share Trustee ........................................................................................................................................................3
Shared Ownership Loans...................................................................................................................................66
Shared Ownership Scheme ................................................................................................................................67
Shared Ownership Scheme Borrower...............................................................................................................67
Similar Law.......................................................................................................................................................206
SIMILAR LAW ................................................................................................................................................204
SPML.....................................................................................................................................................................2
SPML Branded Loans........................................................................................................................................98
SPML Collection Accounts Declarations of Trust...........................................................................................40
SPML Collection Sweep Account......................................................................................................................41
SPML Collection Sweep Account Declaration of Trust ..................................................................................40
SPML Lending Criteria .....................................................................................................................................69
SPML Loans........................................................................................................................................................98
SPML Title Insurance ......................................................................................................................................112
SPPL ......................................................................................................................................................................2
SPS C Lending Criteria .....................................................................................................................................75
SPS C Loans........................................................................................................................................................99
SPS D Lending Criteria .....................................................................................................................................75
SPS D Loans........................................................................................................................................................99
SPS E Lending Criteria......................................................................................................................................75
SPS E Loans ........................................................................................................................................................99
SSP Act ..............................................................................................................................................................202
Stabilised Margin..............................................................................................................................................112
221

Stabilising Manager.............................................................................................................................................iii
staircasing provisions .........................................................................................................................................68
Standard Conditions.........................................................................................................................................103
Standby Cash/Bond Administrator.....................................................................................................................4
Stand-by Drawing...............................................................................................................................................37
Standby Mortgage Administrator.......................................................................................................................3
sterling ..................................................................................................................................................................iii
Sterling Equivalent Principal Amount Outstanding .....................................................................................140
Sterling Notes .............................................................................................................................................. 14, 141
Subordinated Costs Ledger .............................................................................................................................124
Subscription Agreement...................................................................................................................................198
Subsidiary............................................................................................................................................................53
Substitute Loan.................................................................................................................................................110
Swap Replacement Premium................................................................................................................... 140, 173
TARGET Business Day............................................................................................................................ 140, 173
TEFRA D Rules ................................................................................................................................................199
Title Deeds Holder ............................................................................................................................................101
Total Number Oustanding ...............................................................................................................................173
Total Number Outstanding..............................................................................................................................140
Transaction Account ..........................................................................................................................................41
Transaction Document ............................................................................................................................. 140, 174
Transaction Documents ........................................................................................................................... 140, 173
Transaction Parties...............................................................................................................................................6
Transaction Party.................................................................................................................................................6
Transfer Agent......................................................................................................................................................4
Transfer Agents ................................................................................................................................ 127, 134, 170
Trigger Condition....................................................................................................................................... 38, 140
Trust Deed..................................................................................................................................... 4, 127, 134, 170
Trustee........................................................................................................................................... 4, 127, 134, 170
U.S. Dollar ............................................................................................................................................................iii
U.S. Holder........................................................................................................................................................193
U.S. Offered Foreign Currency Notes.............................................................................................................195
U.S. Offered Notes ............................................................................................................................................193
U.S. Paying Agent ......................................................................................................................... 4, 127, 134, 170
U.S. Tax Counsel...............................................................................................................................................194
U.S.$......................................................................................................................................................................iii
UK Group............................................................................................................................................................53
Unfair Practices Directive................................................................................................................................122
USD-LIBOR........................................................................................................................................................16
Vertex ....................................................................................................................................................................3
Vertex Delegation Agreement..............................................................................................................................8
WAFF ................................................................................................................................................................111
WALS ................................................................................................................................................................111
WAM .................................................................................................................................................................111
Warranties...........................................................................................................................................................20
Warranty.............................................................................................................................................................20
WASM ...............................................................................................................................................................112
Weighted Average BBR Rate ............................................................................................................................46
Weighted Average Fixed Rate ...........................................................................................................................45
Wells Fargo .....................................................................................................................................................3, 57
Wells Fargo Delegation Agreement.....................................................................................................................8
222

ISSUER
Eurosail-UK 2007-3BL PLC
c/o Wilmington Trust SP Services (London) Limited
Tower 42 (Level 11)
25 Old Broad Street
London EC2N 1HQ
England
TRUSTEE
BNY Corporate Trustee Services Limited
One Canada Square
London E14 5AL
PRINCIPAL PAYING AGENT, AGENT BANK
AND EXCHANGE AGENT
The Bank of New York, London Branch
One Canada Square
London E14 5AL
IRISH PAYING AGENT U.S. PAYING AGENT REGISTRAR AND TRANSFER
AGENT
BNY Financial Services PLC
70 Sir John Rogerson’s Quay
Dublin 2
Ireland
The Bank of New York, New
York Branch
101 Barclay Street
New York
NY 10286
U.S.A.
ARRANGER
Lehman Brothers International (Europe)
25 Bank Street
London E14 5LE
LEGAL ADVISERS
The Bank of New York
(Luxembourg) S.A.
Aerogolf Center
1A Hoehenhof
L-1736 Senningerberg
Luxembourg
To the Issuer and the Managers as to English and U.S.
law
Weil, Gotshal & Manges
One South Place
London EC2M 2WG
To the Issuer as to Scots law
Tods Murray LLP
Edinburgh Quay
133 Fountainbridge
Edinburgh EH3 9AG
AUDITORS TO THE ISSUER
Ernst & Young LLP
1 More London Place
London SE1 2AF
To the Trustee as to English law
Allen & Overy LLP
One Bishops Square
London E1 6AO
To the Issuer as to Northern Irish law
Cleaver Fulton Rankin
50 Bedford Street
Belfast BT2 7FW
IRISH LISTING AGENT
Arthur Cox Listing Service Limited
Earlsfort Centre
Earlsfort Terrace
Dublin 2, Ireland