REGISTRATION NO. 333 - 149591
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 20, 2008
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-3/A
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
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HOLMES FUNDING LIMITED
(Exact name of Registrant as specified in its charter)
ENGLAND AND WALES
(State or other jurisdiction of incorporation or organization)
ABBEY NATIONAL HOUSE CT CORPORATION SYSTEM
2 TRITON SQUARE, REGENT'S PLACE 111 EIGHTH AVENUE
LONDON NW1 3AN, UNITED KINGDOM NEW YORK, NEW YORK 10011
+44 (0)87 0607 6000 +1 (212) 894-8600
(Address and telephone number of (Name, address and telephone number
Registrant's principal executive offices) of agent for service)
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Copies to:
Chris Fielding Marc Hutchinson, Esq. Christopher Bernard, Esq.
Abbey National plc Slaughter and May Allen & Overy LLP
2 Triton Square One Bunhill Row 40 Bank Street, 32nd Floor
Regent's Place London EC1Y 8YY Canary Wharf
London, NW1 3AN, United Kingdom London E14 5DU,
United Kingdom United Kingdom
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time on or after the effective date of this Registation Statement, as
determined by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. {box}
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. {checked-box}
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. {box}
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. {box}
If this Form is a registration statement pursuant to General Instruction
I.D. or a post-effective amendment thereto that shall become effective upon
filing with the Commission pursuant to Rule 462(e) under the Securities Act,
check the following box. {box}
If this Form is a post-effective amendment to a registration statement
filed pursuant to General Instruction I.D. filed to register additional
securities or additional classes of securities pursuant to Rule 413(b) under
the Securities Act, check the following box. {box}
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CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1)(2)(4) PER UNIT(3) OFFERING PRICE(3) FEE (4)
- ------------------------------------- ------------------- ------------- --------------------- -----------
Callable asset- backed notes $3,047,300,000 100% $3,047,300,000 $119,758.89
Global intercompany loan(5)
Funding interest in the mortgages trust(5)
- ----------
(1) With respect to any securities issued with original issue discount, the
amount to be registered is calculated based on the initial public offering
price thereof.
(2) With respect to any securities denominated in any foreign currency, the
amount to be registered shall be the U.S. dollar equivalent thereof based
on the prevailing exchange rate at the time such security is first offered.
(3) Estimated solely for the purposes of computing the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act of
1933, as amended.
(4) $3,047,300,000 aggregate principal amount of asset-backed notes have been
registered by Holmes Funding Limited under Registration Statement No. 333 -
139944 on Form S-3 referred to below and have not been previously sold and
are hereby consolidated into this Registration Statement pursuant to Rule
429 and Rule 457(p). All registration fees in connection with such unsold
amount of asset- backed notes have been previously paid by Holmes Funding
Limited under the foregoing Registration Statement and the filing fee of
$119,758.89 is offset against the registration fees previously paid
thereunder.
(5) These items are not being offered directly to investors. Holmes Trustees
Limited is holding the Funding interest in the mortgages trust on behalf of
Holmes Funding Limited. The Funding interest in the mortgages trust will be
the primary source of payment on the global intercompany loan. The global
intercompany loan will be the primary source of payments on the notes being
registered hereby. Holmes Funding Limited is the registrant for the notes.
Holmes Master Issuer PLC will be the issuing entity for the notes.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
THIS REGISTRATION STATEMENT, WHICH IS A NEW REGISTRATION STATEMENT, ALSO
CONSTITUTES A POST-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT NO. 333 -
139944.
EXPLANATORY NOTE
This Registration Statement includes (i) a base prospectus and (ii) an
illustrative form of prospectus supplement for use in the offering of each
series of notes. Appropriate modifications will be made to the form of
prospectus supplement to disclose the specific terms of any particular series
of notes, the specific classes of notes to be offered thereby and the terms of
the related offering. Each base prospectus used (in either preliminary or
final form) will be accompanied by a prospectus supplement.
[SUBJECT TO COMPLETION AND AMENDMENT, DATED [__]]
PROSPECTUS SUPPLEMENT DATED [__]
(RELATING TO PROSPECTUS DATED 24 March 2008)
$[__] ISSUE [__]-[__] [CALLABLE] NOTES
HOLMES MASTER ISSUER PLC
ISSUING ENTITY
HOLMES FUNDING LIMITED ABBEY NATIONAL PLC
DEPOSITOR SPONSOR, SELLER, SERVICER, CASH MANAGER AND ACCOUNT BANK
The offering in respect of the issue [__]-[__] [callable] notes comprises the
following series and classes of issuing entity notes:
NET PROCEEDS TO UNDERWRITERS' UNDERWRITERS'
INITIAL PRINCIPAL PRICE TO PUBLIC ISSUING ENTITY PER MANAGEMENT AND SELLING
SERIES CLASS AMOUNT INTEREST RATE PER NOTE CLASS OF NOTES UNDERWRITING FEE COMMISSION
[__] [__] $[__] [__] [__] per cent. $[__] [__] per cent. [__] per cent.
[__] [__] $[__] [__] [__] per cent. $[__] [__] per cent. [__] per cent.
[__] [__] $[__] [__] [__] per cent. $[__] [__] per cent. [__] per cent.
[__] [__] $[__] [__] [__] per cent. $[__] [__] per cent. [__] per cent.
[__] [__] $[__] [__] [__] per cent. $[__] [__] per cent. [__] per cent.
[__] [__] $[__] [__] [__] per cent. $[__] [__] per cent. [__] per cent.
[__] [__] $[__] [__] [__] per cent. $[__] [__] per cent. [__] per cent.
[__] [__] $[__] [__] [__] per cent. $[__] [__] per cent. [__] per cent.
----------------- ----------------------------------------------------
Total: $[__] $[__] [__] per cent. [__] per cent.
SCHEDULED
REDEMPTION FINAL MATURITY
SERIES DATES DATE
[__] [__] [__]
[__] [__] [__]
[__] [__] [__]
[__] [__] [__]
[__] [__] [__]
[__] [__] [__]
[__] [__] [__]
[__] [__] [__]
Total:
The above series and classes of [__]-[__] [callable] notes (the OFFERED
NOTES) are part of the issue [__]-[__] notes of Holmes Master Issuer PLC.
Interest on, and principal of, the offered notes will be paid on the [the
l5th day of each of January, April, July and October (in the case of the series
[__] class [__] notes [INSERT SERIES AND CLASSES OF NOTES]) and] [the 15th day
of each calendar month (in the case of the series [__] class [__] notes [INSERT
SERIES AND CLASSES OF MONEY MARKET NOTES])], beginning in [__] [2008].
YOU SHOULD REVIEW AND CONSIDER THE DISCUSSION UNDER "RISK FACTORS" BEGINNING
ON PAGE S-[__] IN THIS PROSPECTUS SUPPLEMENT AND ON PAGE [__] OF THE
ACCOMPANYING PROSPECTUS BEFORE YOU PURCHASE ANY ISSUING ENTITY NOTES.
Application will be made to the Financial Services Authority in its capacity
as competent authority for the purposes of Part VI of the Financial Services
and Markets Act 2000 for the offered notes during the period of twelve months
from the date of this prospectus supplement to be admitted to the official list
maintained by the UK Listing Authority. Application will also be made to the
London Stock Exchange for such notes to be admitted to trading on the London
Stock Exchange's Regulated Market.
The offered notes are not insured or guaranteed by any United States, United
Kingdom or any other governmental agency or instrumentality, including the
Federal Deposit Insurance Corporation. The offered notes are obligations of
Holmes Master Issuer PLC only and are not obligations of the sponsor, the
depositor, any of their affiliates or any other person or entity. The primary
asset securing the offered notes is a loan made by Holmes Master Issuer PLC to
Holmes Funding Limited, which in turn is secured by a beneficial interest in a
portfolio of residential mortgage loans secured by properties located in
England, Wales and Scotland.
The offered notes will have the benefit of certain internal credit support,
such as the availability of reserve funds and subordination of certain note
classes to other note classes as described under "SUMMARY OF TRANSACTION" in
this prospectus supplement and under "CREDIT STRUCTURE" and "RISK FACTORS" in
the accompanying prospectus.
The offered notes will also have the benefit of the following derivative
instruments: (i) an interest rate swap agreement entered into between Santander
Global Bank & Markets, as interest rate swap provider, and Holmes Funding
Limited and (ii) issuing entity swap agreements to be entered into between
Holmes Master Issuer PLC and [__], as issuing entity swap provider in respect
of the offered notes.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE OFFERED NOTES OR DETERMINED THAT
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
The underwriters or affiliates of certain underwriters will pay and
subscribe for the offered notes at the price per note stated in the table
above. The net proceeds payable to the issuing entity from the sale of the
offered notes is expected to be approximately $[__].
UNDERWRITERS
[__] [__] [__]
[__] [__] [__]
TABLE OF CONTENTS
* Important notice about information presented in this prospectus supplement and the accompanying prospectus S-4
* Forward-looking statements................................................................................ S-5
* Summary .................................................................................................. S-6
- Issuing entity ..................................................................................... S-6
- Offered securities ................................................................................. S-6
- Sponsor ............................................................................................ S-6
- Seller, originator, servicer, cash manager and Funding swap provider ............................... S-6
- Depositor .......................................................................................... S-6
- Funding security trustee ........................................................................... S-6
- Issuing entity security trustee and note trustee ................................................... S-6
- Issuing entity swap providers ...................................................................... S-6
- Closing date ....................................................................................... S-6
- Interest payment dates ............................................................................. S-7
- Initial interest payment date....................................................................... S-7
- Interest ........................................................................................... S-7
- Principal .......................................................................................... S-7
- Flow of funds, allocations and payment priorities .................................................. S-8
- Bullet redemption dates ............................................................................ S-8
- Scheduled redemption dates ......................................................................... S-8
- Pass-through notes ................................................................................. S-8
- Issuance of future series and classes of issuing entity notes ...................................... S-8
- Subordination and credit enhancement ............................................................... S-8
- Required subordinated percentage ................................................................... S-9
- Funding reserve fund required amount ............................................................... S-9
- Losses ............................................................................................. S-11
- Product switches ................................................................................... S-11
- Optional redemption by the issuing entity .......................................................... S-11
- Security for the offered notes ..................................................................... S-12
- The issue [o]-[o] term advances .................................................................... S-12
- Note events of default ............................................................................. S-12
- Limited recourse ................................................................................... S-12
- The mortgages trust ................................................................................ S-12
- Compensation of the servicer ...................................................................... S-13
- Issuing entity accounts ........................................................................... S-14
S-2
- Mortgages trustee GIC account and the mortgages trustee GIC provider ............................... S-14
- Funding GIC account and the Funding GIC provider ................................................... S-14
- Other issuing entity notes ......................................................................... S-14
- Use of proceeds .................................................................................... S-15
- Stock exchange listing ............................................................................. S-15
- Ratings ............................................................................................ S-16
- Funding swap ....................................................................................... S-16
- Issuing entity swaps ............................................................................... S-16
- Remarketing arrangements, conditional purchase arrangements and 2a-7 swaps ......................... S-17
- Start-up loan ...................................................................................... S-17
- Denominations ...................................................................................... S-17
- Material United States tax consequences ............................................................ S-17
- ERISA considerations for investors ................................................................. S-17
- United States legal investment considerations ...................................................... S-17
- Payment and delivery ............................................................................... S-17
- Clearing and settlement ............................................................................ S-18
- Reports to noteholders ............................................................................. S-18
* Risk factors ............................................................................................. S-19
* US dollar presentation ................................................................................... S-20
* Scheduled redemption dates and bullet redemption dates ................................................... S-21
* Maturity and prepayment considerations ................................................................... S-22
* Funding swap provider .................................................................................... S-24
* Issuing entity swap providers ............................................................................ S-25
* Underwriting ............................................................................................. S-26
* Legal matters ............................................................................................ S-27
ANNEX A-1: Statistical information on the portfolio ........................................................... S-28
ANNEX A-2: Characteristics of the United Kingdom residential mortgage market .................................. S-37
ANNEX B: Notes issued by issuing entity and term advances advanced by issuing entity to
Funding in connection therewith .................................................................... S-43
ANNEX C: Series start-up loan and previous start-up loans to Funding ........................................ S-44
ANNEX D: Description of the previous issuing entities, the previous notes and the previous
intercompany loans .................................. .................................. ........... S-45
ANNEX E: Static pool data .................................. .................................. ............ S-78
S-3
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS
We provide information to you about the offered notes in two separate
documents that progressively provide more detail: this prospectus supplement
and the accompanying prospectus. This prospectus supplement provides the
specific terms of the offered notes. The accompanying prospectus provides
general information about each series and class of notes issued by Holmes
Master Issuer PLC, including information on the mortgages trust and the master
intercompany loan, which is essential to understanding how principal of and
interest on the offered notes is expected to be paid. Most of the information
provided in the accompanying prospectus does not appear in this prospectus
supplement.
The prospectus supplement contains information about the series and classes
of notes offered hereby that supplements the information contained in the
accompanying prospectus, and you should rely on that supplementary information
contained in this prospectus supplement for the particular terms of the offered
notes. Consequently, you should carefully read both the accompanying prospectus
and this prospectus supplement before you purchase any of the offered notes.
In deciding whether to purchase any offered notes you should rely solely on
the information contained in this prospectus supplement and the accompanying
prospectus, including information incorporated by reference. We have not
authorised anyone to give you different information about the offered notes.
The information in this prospectus supplement and the accompanying prospectus
is only accurate as of the dates on their respective covers.
This prospectus supplement may be used to offer and sell the offered notes
only if accompanied by the prospectus.
Neither this prospectus supplement nor the accompanying prospectus contains
all of the information included in the registration statement. The registration
statement also includes copies of the various material agreements and other
documents referred to in this prospectus supplement and the accompanying
prospectus. You may obtain copies of these documents for review. See
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" and "WHERE INVESTORS CAN
FIND MORE INFORMATION" in the accompanying prospectus.
We include cross-references in this prospectus supplement and in the
accompanying prospectus to captions in these documents where you can find
further related information. The preceding Table of Contents and the Table of
Contents included in the accompanying prospectus provide the pages on which
these captions are located.
To facilitate your review of this prospectus supplement and the accompanying
prospectus we have included definitions of certain defined terms used in this
prospectus supplement and the accompanying prospectus under the caption
"GLOSSARY" in the accompanying prospectus, beginning on page [__].
References in this prospectus supplement to WE, US or the ISSUING ENTITY
mean Holmes Master Issuer PLC and references to YOU mean each potential
investor in the offered notes.
S-4
FORWARD-LOOKING STATEMENTS
Some of the statements contained or incorporated by reference in this
prospectus supplement and the accompanying prospectus consist of
forward-looking statements relating to future economic performance or
projections and other financial items. These statements can be identified by
the use of forward-looking words such as "may", "will", "should",
"expects", "believes", "anticipates", "estimates", "assumed
characteristics", "structuring assumptions", "prepayment assumption" or
other comparable words.
Forward-looking statements are subject to a variety of risks and
uncertainties that could cause actual results to differ from the projected
results. Those risks and uncertainties include, among others, general economic
and business conditions, competition, changes in political, social and economic
conditions, regulatory initiatives and compliance with governmental
regulations, customer preferences and various other matters, many of which are
beyond our control.
Because we cannot predict the future what actually happens may be very
different from what we predict in our forward-looking statements.
S-5
SUMMARY
This summary highlights selected information from this prospectus supplement
and does not contain all of the information you may need to make an informed
investment decision. To understand all of the terms of an offering of the
offered notes, you should read this entire prospectus supplement and the
accompanying prospectus before you purchase any offered notes.
ISSUING ENTITY Holmes Master Issuer PLC, also referred to in this
prospectus supplement as the ISSUING ENTITY.
OFFERED SECURITIES The issuing entity will issue [__] [insert series and
classes (and sub-classes) of [callable] notes]
(referred to collectively in this prospectus
supplement as the OFFERED NOTES).
The offered notes are part of our issue [__]-[__]
notes. The offered notes are issued by us, are solely
our obligations and are not obligations of the
sponsor, the depositor, any of their affiliates or any
other person or entity.
The issue [__]-[__] notes also include other series
and classes (and sub-classes) of notes, which are not
being offered hereby. The series and classes (and sub-
classes) of the issue [__]-[__] notes not offered
hereby are described below under "-- OTHER ISSUING
ENTITY NOTES." Only the offered notes are being
offered pursuant to the accompanying prospectus and
this prospectus supplement. Any information contained
in this prospectus supplement with respect to the
notes other than the offered notes is provided only to
permit a better understanding of the offered notes.
We expect to issue in the future other series of
issuing entity notes of various classes. These issuing
entity notes may have interest rates, interest payment
dates, repayment terms and other characteristics that
differ from the offered notes. You will not receive
prior notice of any future issuance of issuing entity
notes and will not be asked for your consent to such
issuance. However, any future issuance of issuing
entity notes, as well as material changes to the
solicitation, credit-granting, underwriting,
origination or pool selection criteria used to
originate or select new loans to be sold to the
mortgages trust, will be reported in our periodic
reports on Form 10-D. You may access such reports as
described under "WHERE INVESTORS CAN FIND MORE
INFORMATION" in the accompanying prospectus.
SPONSOR Abbey National plc
SELLER, ORIGINATOR, Abbey National plc
SERVICER, CASH MANAGER
AND FUNDING SWAP
PROVIDER
DEPOSITOR Holmes Funding Limited, also referred to in this
prospectus supplement as FUNDING.
FUNDING SECURITY The Bank of New York, acting through its London branch
TRUSTEE
ISSUING ENTITY The Bank of New York, acting through its London branch
SECURITY TRUSTEE AND
NOTE TRUSTEE
ISSUING ENTITY SWAP See "ISSUING ENTITY SWAP PROVIDERS" in this prospectus
PROVIDERS supplement for information.
CLOSING DATE On or about [__].
S-6
INTEREST PAYMENT DATES Interest on, and principal of, the offered notes will
be paid [quarterly on the 15th day of each of January,
April, July and October (in the case of the series [__]
class [__] notes [insert series and class of notes
other than money market notes] in each year up to and
including the final maturity date) and] [monthly on the
15th day of each calendar month (in the case of series
[__] class [__] notes) [insert series and class of
money market notes] in each year up to and including
the final maturity date or, following the earlier of
the occurrence of a trigger event or enforcement of the
issuing entity security, the 15th day of each of
January, April, July and October in each year up to and
including the final maturity date] (or, in each case,
if such day is not a business day, the next succeeding
business day)(each, an interest payment date).
INITIAL INTEREST [In the case of the series [__] class [__] notes, the
PAYMENT DATE interest payment date falling in [__] and, in the case
of each other series and class of offered notes,] the
interest payment date falling in [__].
INTEREST Interest on the offered notes will be paid on each
monthly and quarterly interest payment date (as
applicable) up to and including the final maturity
date.
All offered notes [(other than the series [__] class
[__] notes) [insert series and class of money market
notes]] will accrue interest at the annual rate
specified on the cover of this prospectus supplement
up to (but excluding) the interest payment date
falling in [__] (the STEP-UP DATE). From and including
the step-up date, the offered notes [(other than the
series [__] class [__] notes) [Insert series and class
of money market notes]] will accrue interest at an
annual rate as follows: [__]. [Add disclosure for zero
coupon notes if applicable ]
Interest will accrue on the offered notes from the
closing date and will be calculated on the basis of a
day count fraction of [actual/360] [30/360] [actual/
actual].
On the second London business day prior to the start
of each interest period (an INTEREST DETERMINATION
DATE), the rate of interest payable in respect of each
class of offered notes will be determined by the agent
bank as follows: [__].
(a) in respect of the first interest period, [__]; and
(b) in respect of subsequent interest periods, [__].
PRINCIPAL We expect to repay the principal amount outstanding of
the series [__] class [__] notes [insert series and
classes of notes] on the scheduled redemption date for
each such series and class of offered notes in an
amount up to the redemption amount as set forth in
this prospectus supplement under "SCHEDULED REDEMPTION
DATES AND BULLET REDEMPTION DATES". We expect to repay
the principal amount outstanding of the series [__]
class [__] notes [insert series and classes of notes]
on the final maturity date for such classes of offered
notes. We are obliged to make such payments if we have
funds available for that purpose. If the principal
amount outstanding of any of the series [__] class
[__] notes [insert series and classes of notes]) is
not repaid in full on
S-7
the final scheduled redemption date for such series
and classes of the offered notes, noteholders
generally will not have any remedies against us until
the final maturity date of such classes of the offered
notes. In that case, any such series and class of the
offered notes, subject to the principal payment rules
described under "CASHFLOWS -- DISTRIBUTION OF FUNDING
AVAILABLE PRINCIPAL RECEIPTS PRIOR TO ENFORCEMENT OF
THE FUNDING SECURITY OR THE OCCURRENCE OF A TRIGGER
EVENT OR ENFORCEMENT OF THE ISSUING ENTITY SECURITY"
in the accompanying prospectus, will receive payments
of the principal to the extent of the shortfall on
each interest payment date thereafter in the amounts,
and to the extent available, until repaid in full.
Principal of the offered notes may be repaid earlier
than expected if a trigger event or a note event of
default occurs in respect of these notes. See
"MATURITY AND REPAYMENT CONSIDERATIONS" in this
prospectus supplement and "THE MORTGAGES TRUST --
MORTGAGES TRUST ALLOCATION AND DISTRIBUTION OF
PRINCIPAL RECEIPTS PRIOR TO THE OCCURRENCE OF A
TRIGGER EVENT" and "THE MORTGAGES TRUST -- MORTGAGES
TRUST ALLOCATION AND DISTRIBUTION OF PRINCIPAL
RECEIPTS AND RETAINED PRINCIPAL RECEIPTS AFTER THE
OCCURRENCE OF A TRIGGER EVENT" in the accompanying
prospectus.
FLOW OF FUNDS, A summary of the flow of funds, allocations among
ALLOCATIONS AMONG classes of issuing entity notes and payment priorities
CLASSES OF ISSUING is set forth in "OVERVIEW OF THE ISSUING ENTITY NOTES
ENTITY NOTES AND -- PAYMENT", "-- INTEREST", "-- DIAGRAM OF THE
PAYMENT PRIORITIES PRIORITY OF PAYMENTS BY THE ISSUING ENTITY AND
SUBORDINATION RELATIONSHIPS", "-- PAYMENT AND RANKING
OF THE ISSUING ENTITY NOTES", "-- INTERCOMPANY LOANS"
and "-- THE PREVIOUS ISSUING ENTITIES, NEW ISSUING
ENTITIES AND NEW FUNDING ENTITIES" in the accompanying
prospectus.
BULLET REDEMPTION In respect of the series [__] class [__] notes [insert
DATES series and classes of notes], the interest payment
date on which principal repayments are scheduled to be
made are as set forth under "SCHEDULED REDEMPTION
DATES AND BULLET REDEMPTION DATES" in this prospectus
supplement.
SCHEDULED REDEMPTION In respect of the series [__] class [__] notes [insert
DATES series and classes of notes], the interest payment
dates on which principal repayments are scheduled to
be made are as set forth under "SCHEDULED REDEMPTION
DATES AND BULLET REDEMPTION DATES" in this prospectus
supplement.
PASS-THROUGH NOTES In respect of the series [__] class [__] notes [insert
series and classes of notes], principal will be repaid
on the final maturity date specified for such classes
of offered notes on the cover of this prospectus
supplement or such earlier date on which payment is
received in respect of the corresponding term advance.
ISSUANCE OF FUTURE The offered notes (and any future series and class of
SERIES AND CLASSES OF issuing entity notes) issued by us are (and will be)
ISSUING ENTITY NOTES subject to the satisfaction of certain conditions
precedent, which are described under "OVERVIEW OF THE
ISSUING ENTITY NOTES -- ISSUANCE" in the accompanying
prospectus.
S-8
SUBORDINATION AND Payments of principal of, and interest on, the junior
CREDIT ENHANCEMENT classes of the offered notes are subordinated to
payments of principal of, and interest on, the more
senior classes of notes. In addition, amounts of
principal otherwise available to pay principal of the
junior classes of the offered notes may be used to pay
interest on more senior classes of notes. See "OVERVIEW
OF THE ISSUING ENTITY NOTES -- PAYMENT AND RANKING OF
THE ISSUING ENTITY NOTES" and "CREDIT STRUCTURE -- USE
OF FUNDING PRINCIPAL RECEIPTS TO PAY FUNDING INCOME
DEFICIENCY" in the accompanying prospectus.
As described in "CREDIT STRUCTURE" in the accompanying
prospectus, the offered notes will have the benefit of
the first reserve fund, the second reserve fund, the
mortgages trustee GIC account, the Funding GIC account,
the Funding reserve fund and, in certain circumstances,
a Funding liquidity reserve fund. It is also
anticipated that the Funding available revenue receipts
will exceed the interest and fees payable to the
issuing entities.
REQUIRED SUBORDINATED For the purposes of calculating the required
PERCENTAGE subordinated amount for each class of offered notes
(other than the class D notes), the class A required
subordinated percentage is [__]%, the class B required
subordinated percentage is [__]%, the class M required
subordinated percentage is [__]% and the class C
required subordinated percentage is [__]%.
FUNDING RESERVE FUND [GBP][__].
REQUIRED AMOUNT
FIRST RESERVE FUND As at the closing date, the definition of FIRST
RESERVE FUND ADDITIONAL REQUIRED AMOUNT will be an
amount equal to the sum of the first reserve fund
required amount and (a) if an arrears trigger event
has occurred under item (i) only of the arrears
trigger event definition, [GBP][__], (b) if an arrears
trigger event has occurred under item (ii) only of the
arrears trigger event definition, [GBP][__], or (c) if
an arrears trigger event has occurred under both items
(i) and (ii) of the arrears trigger event definition,
[GBP][__].
As at the closing date, the definition of FIRST
RESERVE FUND REQUIRED AMOUNT will be [GBP][__]
million, but if on the interest payment date falling
in April 2008, Holmes Financing (No. 6) PLC exercises
its option to redeem the previous notes issued by it
(other than the series 1 class A previous notes and
the series 2 class A previous notes), then the first
reserve fund required amount will decrease (subject to
rating agency approval) by an amount of approximately
[GBP]9,914,811. If, on the interest payment date
falling in April 2008, Holmes Financing (No. 7) PLC
exercises its option to redeem the previous notes
issued by it (other than the series 1 class A previous
notes and the series 2 class A previous notes), then
the first reserve fund required amount will decrease
(subject to rating agency approval) by an additional
amount of approximately [GBP]10,588,981. If, on the
interest payment date falling in January 2009, Holmes
Financing (No. 8) PLC exercises its option to redeem
the previous notes issued by it (other than the series
1 class A previous notes), then the first reserve fund
required amount and the first reserve fund additional
required amount will decrease (subject to rating
agency approval) by an additional amount of
approximately
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[GBP]32,253,845. If, on the interest payment date
falling in July 2010, Holmes Financing (No.9) PLC
exercises its option to redeem the previous notes
issued by it (other than the series 1 class A previous
notes), then the first reserve fund required amount
and the first reserve fund additional required amount
will each decrease (subject to rating agency approval)
by an additional amount of approximately
[GBP]44,737,030. If, on the interest payment date
falling in October 2010, Holmes Financing (No.10) PLC
exercises its option to redeem the previous notes
issued by it (other than the series 1 class A previous
notes), then the first reserve fund required amount
and the first reserve fund additional required amount
will each decrease (subject to rating agency approval)
by an additional amount of approximately
[GBP]51,509,438. If, on the interest payment date
falling in October 2012, the issuing entity exercises
its option to redeem the issue 2006-1 notes issued by
it, then the first reserve fund required amount and
the first reserve fund additional required amount will
each decrease (subject to rating agency approval) by
an additional amount of approximately [GBP]42,142,549.
If, on the interest payment date falling in October
2011, the issuing entity exercises its option to
redeem the issue 2007-2 notes issued by it, then the
first reserve fund required amount and the first
reserve fund additional required amount will each
decrease (subject to rating agency approval) by an
additional amount of approximately [GBP]94,253,341.
If, on the interest payment date falling in October
2012, the issuing entity exercises its option to
redeem the issue 2007-1 notes issued by it, then the
first reserve fund required amount and the first
reserve fund additional required amount will each
decrease (subject to rating agency approval) by an
additional amount of approximately [GBP]91,314,442.
If, on the interest payment date falling in July 2014,
the issuing entity exercises its option to redeem the
issue 2007-3 notes issued by it, then the first
reserve fund required amount and the first reserve
fund additional required amount will each decrease
(subject to rating agency approval) by an additional
amount of approximately [GBP]116,858,395. If, on the
interest payment date falling in [__], the issuing
entity exercises its option to redeem the [__]-[__]
notes issued by it, then the first reserve fund
required amount and the first reserve fund additional
required amount will each decrease (subject to rating
agency approval) by an additional amount of
approximately [GBP][__].
SECOND RESERVE FUND On the closing date, the second reserve fund means the
reserve fund established on 29 November 2000 and
funded from excess Funding available revenue receipts,
as described further in "CREDIT STRUCTURE -- SECOND
RESERVE FUND" in the accompanying prospectus, and
further funded on 5 July 2001 from part of the
proceeds of the previous term BB advance. On the
closing date, the second reserve fund required amount
shall be an amount calculated in accordance with the
formula set out in "CREDIT STRUCTURE -- SECOND RESERVE
FUND" in the accompanying prospectus.
ARREARS TRIGGER EVENT As at the closing date, ARREARS TRIGGER EVENT means
either (i) the outstanding principal balance of the
loans in arrears for more
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than 90 days divided by the outstanding principal
balance of all of the loans in the mortgages trust
(expressed as a percentage) exceeds 2 per cent. or
(ii) if the issuing entity, any new issuing entity or
any previous issuing entity does not exercise its
option to redeem the issuing entity notes (other than
pursuant to condition 5.5 (Optional redemption for tax
and other reasons) or condition 5.6 (Optional
redemption for implementation of EU Capital
Requirements Directive) of the issuing entity notes,
that is with reference to the issuing entity's ability
to redeem the issuing entity notes on specified dates,
but not to the post enforcement call option), any new
notes or any previous notes issued by the issuing
entity, any new issuing entity or any previous issuing
entity (as the case may be) on the relevant step-up
date pursuant to the Terms and conditions of the US
notes, any new notes or any previous notes.
NON-ASSET TRIGGER For the purposes of paragraph (d) of the definition of
EVENT AND SELLER SHARE non-asset trigger event and clause (a)(ii) of the
EVENT definition of seller share event, the aggregate
outstanding balance of loans comprising the trust
property must be: (i) in respect of the period up to
but excluding the interest payment date occurring in
[__], not less than [GBP][__]; and (ii) in respect of
the period from and including the interest payment
date falling in [__], not less than [GBP][__]. See
"THE MORTGAGES TRUST -- CASH MANAGEMENT AND ALLOCATION
OF TRUST PROPERTY -- PRINCIPAL RECEIPTS" in the
accompanying prospectus.
LOSSES Losses on the loans may reduce the amount of principal
available to repay principal of the offered notes.
Losses on the loans will be allocated to the term
advances in inverse order of seniority, beginning with
the term advances corresponding to the class [__]
notes. No losses will be allocated to the term
advances corresponding to the class [__] notes until
the aggregate amount of losses exceeds the principal
amount outstanding of each term advance which is
junior to the term advances corresponding to the class
[__] notes. See "THE MORTGAGES TRUST -- LOSSES" and
"CREDIT STRUCTURE -- PRINCIPAL DEFICIENCY LEDGER" in
the accompanying prospectus.
PRODUCT SWITCHES From time to time, a borrower may request or the
seller may offer, and the borrower may accept, a
variation in the financial terms and conditions
applicable to the borrower's loan. If a loan is
subject to a product switch, then the seller will be
required to repurchase the loan or loans under the
relevant mortgage account and their related security
from the mortgages trustee. See "RISK FACTORS -- LOANS
SUBJECT TO PRODUCT SWITCHES AND FURTHER ADVANCES WILL
BE REPURCHASED BY THE SELLER FROM THE MORTGAGES
TRUSTEE, WHICH WILL AFFECT THE PREPAYMENT RATE OF THE
LOANS, AND THIS MAY AFFECT THE YIELD TO MATURITY OF
THE ISSUING ENTITY NOTES" and "ASSIGNMENT OF THE LOANS
AND THEIR RELATED SECURITY" in the accompanying
prospectus. Any variation to the maturity date of a
loan which extends beyond July 2038 while the previous
intercompany loan made by Holmes Financing (No. 1) plc
is outstanding is a product switch and such loan must
be repurchased by the seller.
OPTIONAL REDEMPTION BY We have the right (subject to certain conditions) to
THE ISSUING ENTITY redeem the
S-11
offered notes at their aggregate principal amount
outstanding, together with any accrued interest in
respect thereof on the following dates:
* on any interest payment date on which the
aggregate principal amount outstanding of the
offered notes and all other series and classes of
the issue [__]-[__] notes is less than [10] per
cent. of the initial outstanding principal amount
of the offered notes and all such other series and
classes of the issue [__]-[__] notes; or
* on the interest payment date falling on the
step-up date and on any interest payment date
thereafter.
Further, we may redeem the offered notes for tax and
other reasons and in certain other circumstances as
more fully described under "TERMS AND CONDITIONS OF
THE US NOTES -- 5. REDEMPTION, PURCHASE AND
CANCELLATION" in the accompanying prospectus.
[OPTIONAL PURCHASE] [Abbey has the right, subject to [the following
conditions:], to require the relevant noteholders to
sell to Abbey or otherwise allow Abbey to be
substituted as the holder of all, but not some only,
of the class B notes and/or the class M notes and/or
the class C notes and/or the class D notes (the CALLED
NOTES) on any interest payment date prior to [__] (or
such later date as may be permitted by the FSA)
falling on or after the interest payment date
occurring in [__] for a price equal to the aggregate
redemption amount of any of the called notes, together
with any accrued and unpaid interest on the called
notes.]
SECURITY FOR THE The offered notes are secured primarily by our rights
OFFERED NOTES under the master intercompany loan agreement. In
addition, we have granted security for the benefit of
noteholders over (among other things) our bank
accounts. See "SECURITY FOR THE ISSUING ENTITY'S
OBLIGATIONS" in the accompanying prospectus.
THE ISSUE [__]-[__] We have entered into a master intercompany loan
TERM ADVANCES agreement with Funding. The proceeds of the offered
notes will fund the relevant issue [__]-[__] term
advances. The principal terms of such issue [__]-[__]
term advances are set out in Annex B to this
prospectus supplement. A description of the master
intercompany loan is set forth in the accompanying
prospectus under "THE MASTER INTERCOMPANY LOAN
AGREEMENT".
NOTE EVENTS OF DEFAULT The offered notes are subject to certain events of
default described under "TERMS AND CONDITIONS OF THE
US NOTES -- 9. EVENTS OF DEFAULT" in the accompanying
prospectus.
LIMITED RECOURSE The primary sources of payment for principal of or,
interest on, the offered notes are:
* repayments of principal of, or interest on, the
relevant issue [__]-[__] term advances of the
master intercompany loan; and
* funds in the issuing entity transaction account
that are allocable to the offered notes.
THE MORTGAGES TRUST Each issue [__]-[__] term advance is a tranche of the
master intercompany loan and made by us to Funding.
Funding has secured its obligation to repay the master
intercompany loan by
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granting security over its beneficial interest in the
mortgages trust. The assets of the mortgages trust
consist primarily of loans originated by the seller
secured over residential property located in England,
Wales and Scotland. The loans included in the trust
property were randomly selected from the seller's
portfolio of loans that meet the seller's selection
criteria for inclusion in the mortgages trust. These
criteria are discussed under "THE LOANS -- LENDING
CRITERIA" in the accompanying prospectus. The seller
has made and given representations and warranties to
the mortgages trustee in the mortgage sale agreement
that, among other things, the loans have been
originated in accordance with the seller's lending
criteria in effect at the time of origination. If a
loan or its related security does not materially
comply on the date of its assignment with the
representations and warranties made and given by the
seller under the mortgage sale agreement and the
seller does not remedy such breach within 20 days of
being given written notice of such breach by the
mortgages trustee, then the mortgages trustee (as
directed by Funding and the security trustee) will
require the seller to repurchase (i) the relevant loan
and its related security and (ii) any other loans of
the relevant borrower and their related security that
are included in the portfolio.
The seller may assign new loans and their related
security to the mortgages trustee in order to increase
or maintain the trust property. The seller may also
increase the size of the trust property from time to
time in connection with an issue of new notes by us,
the proceeds of which are applied ultimately to fund
the acquisition (by assignment in the case of English
and Welsh loans and Scottish declaration of trust in
the case of Scottish loans) of the new loans and their
related security by the mortgages trustee, or to
comply with the seller's obligations under the
mortgage sale agreement as described under "ASSIGNMENT
OF THE LOANS AND THEIR RELATED SECURITY -- ASSIGNMENT
OF LOANS AND THEIR RELATED SECURITY TO THE MORTGAGES
TRUSTEE" in the accompanying prospectus.
When new loans are assigned to the mortgages trustee,
the trust property will increase accordingly.
Depending on the circumstances, the increase in the
trust property may result in an increase in the seller
share of the trust property and/or the Funding share
of the trust property. For a description of how
adjustments are made to the seller share of the trust
property and the Funding share of the trust property,
see "THE MORTGAGES TRUST" in the accompanying
prospectus.
As at the closing date for the offered notes, the
minimum seller share will be approximately [GBP][__].
In the mortgage sale agreement, the seller has
undertaken in respect of each series to use all
reasonable efforts to offer to assign to the mortgages
trustee, and the mortgages trustee has undertaken to
use all reasonable efforts to acquire from the seller
and hold in accordance with the terms of the mortgages
trust deed, until the earlier of the interest payment
date occurring in [__] (or a later date as may be
notified by Funding) and the
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occurrence of a trigger event, sufficient new loans
and their related security so that the aggregate
outstanding principal balance of loans in the
mortgages trust is not less than [GBP][__] (or another
amount notified by Funding to the seller). See
"ASSIGNMENT OF THE LOANS AND THEIR RELATED SECURITY --
ASSIGNMENT OF LOANS AND THEIR RELATED SECURITY TO THE
MORTGAGES TRUSTEE" in the accompanying prospectus.
The aggregated outstanding current balance of loans in
the mortgages trust as of the cut-off date was
[GBP][__]. See Annex A-1 to this prospectus supplement
for detailed statistical and other information on the
loans.
COMPENSATION OF THE The mortgages trustee will pay the servicer for its
SERVICER services under the servicing agreement (as may be
amended and restated from time to time) an
administration fee of 0.12 per cent. per annum on the
aggregate outstanding amount of the Funding share of
the trust property as of the preceding interest
payment date. This fee is payable in arrears on each
distribution date only to the extent that the
mortgages trustee has sufficient funds to pay it. Any
unpaid balance will be carried forward until the next
distribution date and, if not paid earlier, will be
payable on the final repayment date of the previous
intercompany loans, the current intercompany loan and
all new intercompany loans, or on their earlier
repayment in full by Funding. See "THE SERVICING
AGREEMENT -- COMPENSATION OF THE SERVICER" in the
accompanying prospectus.
ISSUING ENTITY The issuing entity currently maintains the following
ACCOUNTS transaction accounts in its name: a sterling bank
account with Abbey at 21 Prescot Street, London E1
8AD; and a euro account and a dollar account with
Citibank, N.A., London Branch at Citigroup Centre,
Canada Square, London, E14 5LB.
MORTGAGES TRUSTEE GIC All amounts held by the mortgages trustee are
ACCOUNT/FUNDING GIC deposited in the mortgages trustee GIC account with
ACCOUNT the mortgages trustee GIC provider. This account is
subject to a guaranteed investment contract on terms
that the mortgages trustee GIC provider agrees to pay
a variable rate of interest, on funds held in the
mortgages trustee GIC account, based on LIBOR for
three-month sterling deposits.
Amounts held in alternative accounts do not have the
benefit of a guaranteed investment contract, but
following their receipt, are transferred into the
mortgages trustee GIC account on a regular basis and,
in any event, no later than the next business day
after they are deposited in the relevant alternative
account.
All amounts held by Funding are deposited in the
Funding GIC account in the first instance. The Funding
GIC account is maintained with the Funding GIC
provider. This account is subject to a guaranteed
investment contract on terms that the Funding GIC
provider agrees to pay a variable rate of interest, on
funds held in the Funding GIC account, based on LIBOR
for three-month sterling deposits.
Abbey National plc is both the mortgages trustee GIC
provider and the Funding GIC provider.
S-14
OTHER ISSUING ENTITY The offered notes are part of the issue [__]-[__]
NOTES notes issued by us. Only the offered notes are being
offered by this prospectus supplement and the
accompanying prospectus. On or about the closing date,
the issuing entity will also issue series [__] class
[__] notes [insert series and classes of notes] of the
issue [__]-[__] notes which are not being offered
hereby. Any information contained in this prospectus
supplement with respect to the issuing entity notes
other than the offered notes is provided only to
permit a better understanding of the offered notes.
As of the closing date, the aggregate principal amount
outstanding of issuing entity notes issued by us
(converted, where applicable, into sterling at the
applicable specified currency exchange rate),
including the offered notes, will be:
[__]
As used herein, specified currency exchange rate
means, in relation to a series and class of issuing
entity notes, the exchange rate specified in the
issuing entity swap agreement relating to such series
and class of issuing entity notes or, if the related
issuing entity swap agreement has been terminated, the
applicable spot rate.
As of the date of this prospectus supplement, the
aggregate principal amount outstanding of notes issued
by each previous issuing entity identified below and
the issuing entity (converted, where applicable, into
sterling at the applicable currency exchange rate) is:
(1) Holmes Financing (No. 1) PLC, [GBP][__];
(2) Holmes Financing (No. 6) PLC, [GBP][__];
(3) Holmes Financing (No. 7) PLC, [GBP][__];
(4) Holmes Financing (No. 8) PLC, [GBP][__];
(5) Holmes Financing (No. 9) PLC, [GBP][__];
(6) Holmes Financing (No. 10) PLC, [GBP][__];
(7) Holmes Master Issuer PLC (in respect of the issue
2006-1 notes), [GBP][__];
(8) Holmes Master Issuer PLC (in respect of the issue
2007-1 notes), [GBP][__];
(9) Holmes Master Issuer PLC (in respect of the issue
2007-2 notes), [GBP][__]; and
(10) Holmes Master Issuer PLC (in respect of the issue
2007-3 notes), [GBP][__].
For a description of the previous issuing entities,
see "OVERVIEW OF THE ISSUING ENTITY NOTES -- THE
PREVIOUS ISSUING ENTITIES, NEW ISSUING ENTITIES AND
NEW FUNDING ENTITIES" in the accompanying prospectus
and "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE
PREVIOUS NOTES AND THE PREVIOUS INTERCOMPANY LOANS" in
Annex D to this prospectus supplement.
USE OF PROCEEDS The gross proceeds from the issue of the issue [__]-
[__] notes will
S-15
equal approximately $[__] and (after exchanging, where
applicable, the proceeds of the notes for sterling,
calculated by reference to the applicable specified
currency exchange rate) will be used by the issuing
entity to make available term advances to Funding
pursuant to the terms of the master intercompany loan
agreement. Funding will use the gross proceeds of each
term advance to [pay the purchase price to the seller
for the sale of the new portfolio to the mortgages
trustee on the closing date][pay the purchase price to
the seller for the sale of part of its share in the
trust property to Funding on the closing date][make a
payment to the issuing entity to refinance an existing
loan tranche].
STOCK EXCHANGE LISTING Application will be made to the Financial Services
Authority in its capacity as competent authority for
the purposes of Part VI of FSMA for the offered notes
issued during the period of twelve months from the
date of this prospectus supplement to be admitted to
the official list maintained by the UK Listing
Authority. Application will also be made to the London
Stock Exchange for such notes to be admitted to
trading on the London Stock Exchange's Regulated
Market.
RATINGS It is a condition of the issuance of the offered notes
that they be assigned on the closing date the
following ratings by S&P, Moody's and Fitch,
respectively:
CLASS RATINGS
Class [__] [__]
Class [__] [__]
Class [__] [__]
Class [__] [__]
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- ISSUANCE"
and "RISK FACTORS -- RATINGS ASSIGNED TO THE NOTES MAY
BE LOWERED OR WITHDRAWN AFTER YOU PURCHASE THE ISSUING
ENTITY NOTES, WHICH MAY LOWER THE MARKET VALUE OF THE
ISSUING ENTITY NOTES" in the accompanying prospectus.
FUNDING SWAP The loans in the portfolio pay interest at a variety
of rates, for example at rates linked either to the
mortgages trustee SVR or linked to an interest rate
other than the mortgages trustee SVR as specified in
the accompanying prospectus. The amount of available
revenue receipts that Funding receives on the
portfolio will fluctuate according to (among other
things) the interest rates applicable to the loans in
the mortgages trust. The amount of interest payable by
Funding to us under the term advances advanced
pursuant to the master intercompany loan agreement,
from which amount we will fund, among other things,
our payment obligations under the issuing entity swap
agreements and the notes, will generally be calculated
by reference to an interest rate based upon three-
month sterling LIBOR.
To hedge its exposure against the possible variance
between the foregoing interest rates, Funding has
entered into an interest rate swap agreement with the
Funding swap provider. See "THE SWAP AGREEMENTS -- THE
FUNDING SWAP" in the accompanying prospectus.
ISSUING ENTITY SWAPS In respect of each series and class of offered notes,
we will enter
S-16
into a currency swap transaction (the ISSUING ENTITY
SWAPS) with an issuing entity swap provider in order
to hedge against any variance between the interest
received by us under the master intercompany loan
agreement, which will be calculated by reference to
three-month sterling LIBOR, and the interest which is
payable on the offered notes, which will be calculated
by reference to three-month USD- LIBOR (in the cases
of each series and class of offered notes other than
the series [__] class [__] notes) and one-month
USD-LIBOR (in the case of the series [__] class [__]
notes) or, following the earlier of the occurrence of
a trigger event or enforcement of the issuing entity
security, three- month USD-LIBOR and to hedge against
fluctuations in the exchange rate in respect of
principal received under the master intercompany loan
agreement, which will be paid in sterling, and
principal on the offered notes, which will be payable
in dollars. See "THE ISSUING ENTITY SWAP PROVIDERS" in
this prospectus supplement and "THE SWAP AGREEMENTS --
THE ISSUING ENTITY SWAPS" in the accompanying
prospectus.
[REMARKETING [Noteholders holding class [__] [__]-[__] notes have
ARRANGEMENTS, the benefit of [remarketing arrangements/conditional
CONDITIONAL PURCHASE purchase arrangements/ 2a-7 swap provider
ARRANGEMENTS AND 2A-7 arrangements] [Specify details of arrangement]. See
SWAPS] "OVERVIEW OF THE ISSUING ENTITY NOTES -- SERIES" and
"-- MONEY MARKET NOTES" in the accompanying
prospectus.]
START-UP LOAN [Pursuant to the start-up loan agreement, Abbey (in
its capacity as the start-up loan provider) has agreed
to make available to Funding a start-up loan on the
closing date, the principal terms of which are set out
in Annex C to this prospectus supplement.] [There will
not be a start-up loan in connection with the issue of
the [__]-[__] notes.] See "CREDIT STRUCTURE -- START-
UP LOAN AGREEMENTS" in the accompanying prospectus.
DENOMINATIONS The offered notes will be issued in minimum
denominations of $[__] and integral multiples of $[__]
in excess thereof.
MATERIAL UNITED STATES [As more fully discussed in the accompanying
TAX CONSEQUENCES prospectus, in the opinion of Cleary Gottlieb Steen &
Hamilton LLP, our US federal income tax counsel,
although there is no authority on the treatment of
instruments substantially similar to the offered
notes, the series [__] class [__] notes [list the
different classes] will be treated as debt for US
federal income tax purposes.] Further, in the opinion
of Cleary Gottlieb Steen & Hamilton LLP, assuming
compliance with the transaction documents, the
mortgages trustee acting in its capacity as trustee of
the mortgages trust, Funding and the issuing entity
will not be subject to US federal income tax as a
result of their contemplated activities. See "UNITED
STATES TAXATION" in the accompanying prospectus.
ERISA CONSIDERATIONS The offered notes will be eligible for purchase by
FOR INVESTORS employee benefit and other plans subject to Section 406
of ERISA or Section 4975 of the Code and by
governmental church or non-US plans that are subject
to US or non-US state, local or other federal law that
is substantially similar to Section 406 of ERISA
Section 4975 of the Code, subject to consideration of
the issues described in the accompanying prospectus
under "ERISA
S-17
CONSIDERATIONS".
UNITED STATES LEGAL None of the offered notes is a "MORTGAGE RELATED
INVESTMENT SECURITY" under the United States Secondary Mortgage
CONSIDERATIONS Market Enhancement Act of 1984, as amended. See
"UNITED STATES LEGAL INVESTMENT CONSIDERATIONS" in the
accompanying prospectus.
PAYMENT AND DELIVERY No later than the closing date, we will (a) cause the
global note for each of the offered notes to be
registered in the name of Cede & Co., as nominee for
DTC, for credit on the closing date to the account of
the lead underwriters with DTC or to such other
account with DTC as the lead underwriters may direct
and (b) deliver the global note for each of the
offered notes duly executed on our behalf and
authenticated in accordance with the issuing entity
paying agent and agent bank agreement to The Bank of
New York, New York Branch, N.A., as custodian for DTC.
Against delivery of the offered notes (i) the
underwriters will pay to the lead underwriters the
gross underwriting proceeds for the offered notes and
(ii) the lead underwriters will pay to us or to a
third party, as directed by us, the gross underwriting
proceeds for the offered notes.
CLEARING AND It is expected that on the closing date the offered
SETTLEMENT notes will be accepted for clearance through DTC,
Clearstream, Luxembourg and Euroclear under the
following CUSIP numbers, common codes and ISINs:
CLASS OF NOTES CUSIP ISIN COMMON
CODE
series [__] class [__] notes [__] [__] [__]
series [__] class [__] notes [__] [__] [__]
series [__] class [__] notes [__] [__] [__]
series [__] class [__] notes [__] [__] [__]
series [__] class [__] notes [__] [__] [__]
series [__] class [__] notes [__] [__] [__]
series [__] class [__] notes [__] [__] [__]
REPORTS TO NOTEHOLDERS The cash manager will prepare annual and monthly
reports that will contain information about the
offered notes as more fully described under "REPORTS
TO NOTEHOLDERS" in the accompanying prospectus.
Funding will file with the SEC annual reports on Form
10-K, periodic reports on Form 10-D and reports on
Form 8-K about the mortgages trust. See "WHERE
INVESTORS CAN FIND MORE INFORMATION" in the
accompanying prospectus.
S-18
RISK FACTORS
The principal risks associated with an investment in the offered notes are
set out in the "RISK FACTORS" section of the accompanying prospectus. These
risks are material to an investment in the offered notes and in the issuing
entity. [This section sets out certain additional risk factors associated with
an investment in the offered notes.] If you are considering purchasing any of
the offered notes, you should carefully read and consider all the information
contained in this prospectus supplement [(including the additional risk factors
set out below)] and the accompanying prospectus (including the "RISK FACTORS"
section) prior to making any investment decision.
[AN OPTIONAL PURCHASE OF THE SERIES [o] CLASS [o] NOTES MAY ADVERSELY
AFFECT NOTEHOLDERS
On any interest payment date commencing on the interest payment date in [__]
and ending on the interest payment date in [__] or such later date as may be
permitted by the FSA, Abbey has the right to require all of the holders of the
[class [__] notes] to sell their notes to Abbey or otherwise allow Abbey to be
substituted as noteholder of the [class [__] notes], subject to certain
specified conditions set forth under "OPTIONAL PURCHASE" in this prospectus
supplement. See "TERMS AND CONDITIONS OF THE US NOTES -- 5.9 OPTIONAL PURCHASE"
in the accompanying prospectus. If this occurs, the repurchase price paid by
Abbey will be passed through to the related noteholders. This could reduce the
yield on those notes. Any purchase of the [class [__] notes] by Abbey will not
result, however, in a termination of those notes. Such notes will remain
outstanding and continue to provide subordination to the more senior classes of
notes.]
S-19
US DOLLAR PRESENTATION
Unless otherwise stated in this prospectus supplement, any conversions of
sterling into US dollars have been made at the rate of [GBP]1 = US$[__], which
was the closing buying rate in the City of New York for cable transfers in
sterling per US$1.00 as certified for customs purposes by the Federal Reserve
Bank of New York on [__]. Use of this rate does not mean that sterling amounts
actually represent those US dollar amounts or could be converted into US
dollars at that rate at any particular time.
References throughout this prospectus supplement to [GBP], POUNDS or
STERLING are to the lawful currency for the time being of the United Kingdom of
Great Britain and Northern Ireland.
References throughout this prospectus supplement to $, US$, USD, US DOLLARS
or DOLLARS are to the lawful currency of the United States of America.
STERLING/US DOLLAR EXCHANGE RATE HISTORY
PERIOD
ENDED YEARS ENDED 31 DECEMBER
------ -----------------------------
[__] [__] [__] [__] [__] [__]
------ ---- ---- ---- ---- -----
Last(1)... [__] [__] [__] [__] [__] [__]
Average(2) [__] [__] [__] [__] [__] [__]
High...... [__] [__] [__] [__] [__] [__]
Low....... [__] [__] [__] [__] [__] [__]
Notes:
(1) The closing exchange rate on the last operating business day of each of the
periods indicated, years commencing from
1 January or the next operating business day.
(2) Average daily exchange rate during the period.
Source: Bloomberg page USCFBPS Crncy
S-20
SCHEDULED REDEMPTION DATES AND BULLET REDEMPTION DATES
The SCHEDULED AMORTISATION AMOUNT or the BULLET AMOUNT, as applicable, for
each series and class of the offered notes set out below for the interest
payment dates set out below is equal to the corresponding stated amount below.
SCHEDULED SCHEDULED
REDEMPTION DATE AMORTISATION
OR BULLET AMOUNT OR
SERIES AND CLASS TYPE OF NOTE REDEMPTION DATE BULLET AMOUNT
- ---------------------- ------------ --------------- ------- ----
([GBP]) ($)
------- ----
Series [__] class [__] [__] [__] [__] [__]
Series [__] class [__] [__] [__] [__] [__]
Series [__] class [__] [__] [__] [__] [__]
Series [__] class [__] [__] [__] [__] [__]
Series [__] class [__] [__] [__] [__] [__]
Series [__] class [__] [__] [__] [__] [__]
Series [__] class [__] [__] [__] [__] [__]
Series [__] class [__] [__] [__] [__] [__]
S-21
MATURITY AND PREPAYMENT CONSIDERATIONS
The average lives of each class of the offered notes cannot be stated, as
the actual rate of repayment of the loans and redemption of the mortgages and a
number of other relevant factors are unknown. However, calculations of the
possible average lives of each class of the offered notes can be made based on
certain assumptions. The assumptions used to calculate the possible average
lives of each class of the offered notes in the following table include that:
(1) neither the issuing entity security nor the Funding security has been
enforced;
(2) the seller is not in breach of the terms of the mortgage sale
agreement;
(3) the seller sells no new loans to the mortgages trustee after the
closing date and the loans are assumed to amortise in accordance with
the assumed constant payment rate indicated in the table below
(subject to assumption (4) below);
(4) the seller sells to the mortgages trustee sufficient new loans and
their related security (i) in the period up to (but excluding) the
interest payment date in [__], such that the aggregate principal
amount outstanding of loans in the portfolio at any time is not less
than [GBP][__] and [GBP][__] thereafter or (in each case) such higher
amount as may be required to be maintained as a result of the issuing
entity or any new issuing entities providing new term advances to
Funding which Funding uses as consideration for an increase in its
share of the trust property and/or to pay the seller for the sale of
new loans to the mortgages trustee;
(5) neither an asset trigger event nor a non-asset trigger event occurs;
(6) no event occurs that would cause payments on scheduled amortisation
term advances or pass-through term advances to be deferred (unless
such advances are deferred in accordance with Rule (1) or Rule (3) or
Rule (6) as set out in "CASHFLOWS" in the accompanying prospectus)
and no event occurs that would cause payments on the applicable
series and class (or sub-class) of issuing entity notes to be
deferred;
(7) the issuing entity exercises its option to redeem the offered notes
on the step-up date relating to the offered notes (where applicable);
(8) the closing date is [__];
(9) [the outstanding principal amount of the series [__] class [__] notes
is paid on the interest payment date in [__];]
(10) the annualised constant prepayment rate (or CPR) as at the closing
date is assumed to be the same as the various assumed rates in the
table below; and
(11) there is a balance of [GBP][__] in the cash accumulation ledger at
the closing date.
S-22
CPR AND POSSIBLE AVERAGE LIVES OF EACH SERIES AND CLASS OF OFFERED NOTES (IN
YEARS)
Based upon the foregoing assumptions, the approximate average life in years
of each series and class (or sub-class) of offered notes, at various assumed
rates of repayment of the loans, would be as follows:
CONSTANT SERIES [__] SERIES [__] SERIES [__] SERIES [__] SERIES [__] SERIES [__] SERIES [__]
PAYMENT RATE(1) CLASS [__] CLASS [__] CLASS [__] CLASS [__] CLASS [__] CLASS [__] CLASS [__]
(PER ANNUM) NOTES NOTES NOTES NOTES NOTES NOTES NOTES
- --------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
5 per cent..... [__] [__] [__] [__] [__] [__] [__]
10 per cent.... [__] [__] [__] [__] [__] [__] [__]
15 per cent.... [__] [__] [__] [__] [__] [__] [__]
20 per cent.... [__] [__] [__] [__] [__] [__] [__]
25 per cent.... [__] [__] [__] [__] [__] [__] [__]
30 per cent.... [__] [__] [__] [__] [__] [__] [__]
35 per cent.... [__] [__] [__] [__] [__] [__] [__]
(1) Includes both scheduled and unscheduled payments.
[Insert in the case of remarketable notes:
(2) This represents the average lives to the first class [__] note mandatory
transfer date in [__].
(3) This represents the average lives of all class [__] notes remarketed after
the first class [__] note mandatory transfer date in [__].]
Assumptions (1) to (6) and (8) relate to circumstances which are not
predictable. Assumption (7) relates to an event under the control of the
issuing entity but no assurance can be given that the issuing entity will be in
a position to redeem the notes on the step-up date. If the issuing entity does
not so exercise its option to redeem, then the average lives of the then
outstanding issue [__]-[__] notes would be extended.
The average lives of the [__]-[__] notes are subject to factors largely
outside the control of the issuing entity and consequently no assurance can be
given that these assumptions and estimates will prove in any way to be
realistic and they must therefore be viewed with considerable caution. For more
information in relation to the risks involved in the use of these estimated
average lives, see "RISK FACTORS -- THE YIELD TO MATURITY OF THE ISSUING ENTITY
NOTES MAY BE ADVERSELY AFFECTED BY PREPAYMENTS OR REDEMPTIONS ON THE LOANS" in
the accompanying prospectus.
S-23
FUNDING SWAP PROVIDER
Information in respect of the Funding swap provider and the Funding swap is
provided in the accompanying prospectus under the heading "THE SWAP AGREEMENTS
- -- THE FUNDING SWAP."
The sponsor has determined that the significance percentage for the Funding
swap in respect of the offered notes is less than 10 per cent.
The significance percentage of the Funding swap is the percentage equivalent
of (1) the amount of a reasonable good-faith estimate of maximum probable
exposure (made in substantially the same manner as that used in the sponsor's
internal risk management process in respect of similar derivative instruments)
divided by (2) the aggregate principal balance of the loans in the portfolio.
S-24
ISSUING ENTITY SWAP PROVIDERS
[Name of issuing entity swap provider] [Disclosure in respect of the issuing
entity swap provider -- organisational form, general characteristics of
business and ratings]
Except for the information provided in the preceding paragraphs, [name of
issuing entity swap provider] [and any affiliated entity described in this
section] have not been involved in the preparation of, and do not accept
responsibility for, this prospectus supplement.
Information in respect of the issuing entity swaps and the issuing entity
swap providers is provided in the accompanying prospectus under the heading
"THE SWAP AGREEMENTS -- THE ISSUING ENTITY SWAPS". The sponsor has determined
that the significance percentage for the issuing entity swaps in respect of the
offered notes is [less than 10 per cent.] [more than 10 per cent. but less than
20 per cent.] [20 per cent. or more].
The significance percentage of the issuing entity swaps in respect of the
offered notes is the percentage equivalent of (1) the amount of a reasonable
good-faith estimate of maximum probable exposure (made in substantially the
same manner as that used in the sponsor's internal risk management process in
respect of similar derivative instruments) divided by (2) the aggregate
principal amount of such classes of offered notes.
[Appropriate financial disclosure as contemplated in Item 1115 of Regulation
AB to be provided if the significance percentage is 10% or more]
[CREDIT ENHANCEMENT OR SUPPORT PROVIDERS]
[Provide disclosure in respect of any entity or group of affiliated entities
providing credit enhancement or other support described in Item 1114(a) of
Regulation AB that is liable or contingently liable to provide payments
representing 10% or more of the cash flow supporting any class of offered
notes: name of credit enhancement or support provider, organisational form,
general characteristics of business and ratings]
[Except for the information provided in the preceding paragraphs, [name of
credit enhancement or support provider] [and any affiliated entity described in
this section] have not been involved in the preparation of, and do not accept
responsibility for, this prospectus supplement.]
[Description of material terms of enhancement or support]
[Appropriate financial disclosure as contemplated in Item 1114(b)(2) of
Regulation AB to be provided if the credit enhancement or support provider is
liable or contingently liable to provide payments representing 10% or more of
the cash flow supporting any class of offered notes]
S-25
UNDERWRITING
UNITED STATES
We have agreed to sell, and [__] (the LEAD UNDERWRITERS) and the other
underwriters for the offered notes listed in the following table have agreed to
purchase on the closing date, the principal amount of those offered notes
listed in that table. The terms of these purchases are governed by an
underwriting agreement among us, the lead underwriters and the underwriters.
[Some of the underwriters are expected to make offers and sales both inside
and outside the United States through their respective selling agents. Any
offers or sales in the United States will be conducted by broker dealers
registered with the SEC. We have been advised by the underwriters that [__]
expects to make offers and sales in the United States through its registered
broker dealer affiliate [__] and that [insert any other relevant underwriters
expecting to make offers through agents]]. [Insert selling restrictions of
other countries not listed in the prospectus as applicable]
PRINCIPAL
AMOUNT OF
THE SERIES
[__] CLASS
UNDERWRITERS OF THE SERIES [__] CLASS [__] NOTES [__] NOTES
- ------------------------------------------------ ----------
[__]............................................ $[__]
[__]............................................ $[__]
[__]............................................ $[__]
[__]............................................ $[__]
[__]............................................ $[__]
[__]............................................ $[__]
----------
TOTAL:.......................................... $[__]
==========
The price to the public as a percentage of the principal balance of the
offered notes will be [__] per cent.
We have agreed to pay to the underwriters in respect of each class of
offered notes a selling commission and a management and underwriting fee (in
each case based on the aggregate principal amount of such class of offered
notes) as set forth in the table below:
MANAGEMENT
AND
SELLING UNDERWRITING
SERIES AND CLASS OF OFFERED NOTES COMMISSION FEE
- --------------------------------- -------------- --------------
series [__] class [__]........... [__] per cent. [__] per cent.
series [__] class [__]........... [__] per cent. [__] per cent.
series [__] class [__]........... [__] per cent. [__] per cent.
series [__] class [__]........... [__] per cent. [__] per cent.
series [__] class [__]........... [__] per cent. [__] per cent.
series [__] class [__]........... [__] per cent. [__] per cent.
series [__] class [__]........... [__] per cent. [__] per cent.
-------------- --------------
TOTAL:........................... [__] per cent. [__] per cent.
============== ==============
The issuing entity has agreed to pay an aggregate fee of [GBP][__] to [__]
for their services in connection with the issuance of the [__]-[__] notes.
The lead underwriters of the offered notes have advised us that the
underwriters propose initially to offer the offered notes to the public at the
offering price stated on the cover page of this prospectus supplement and to
some dealers at that price less a concession not in excess of [__] per cent.
per series [__] class [__] note [insert series and classes (and sub-classes) of
notes]. The underwriters may allow, and those dealers may re-allow, a
concession not in excess of [__] per cent. per series [__] class [__] note
[insert series and classes (and sub-classes) of notes] to certain other brokers
and dealers.
Additional out-of-pocket expenses (other than the commissions and fees
stated above) solely in relation to the offered notes are estimated to be
approximately $[__].
S-26
LEGAL MATTERS
Certain matters of English law regarding the issuing entity notes, including
matters relating to the validity of the issuance of the issuing entity notes,
will be opined upon to Abbey, Funding and the issuing entity by Slaughter and
May. Certain matters of United States law regarding matters of United States
federal income tax with respect to the offered notes will be opined upon to
Abbey, Funding and the issuing entity by Cleary Gottlieb Steen & Hamilton LLP.
Certain matters of English law and United States law will be opined upon to the
underwriters by Allen & Overy LLP.
S-27
ANNEX A-1
STATISTICAL INFORMATION ON THE PORTFOLIO
THE REFERENCE DATE MORTGAGE PORTFOLIO
The information provided in this Annex A-1 constitutes an integral part of
this prospectus supplement and is incorporated by reference into this
prospectus supplement. [For the purposes of this Annex A-1, all references to
"portfolio", unless the context otherwise requires, include the loans and their
related security expected to be sold to the mortgages trustee on the closing
date.]
The statistical and other information contained herein has been compiled by
reference to the loans and mortgage accounts in the portfolio as at [__] [2008]
(the REFERENCE DATE). The US dollar figures set forth in the tables below have
been calculated based on the currency exchange rate of [GBP]1 = $[__] and have
been rounded to the nearest cent. following their conversion from sterling.
Columns stating percentage amounts may not add up to 100 per cent. owing to
rounding. A loan will have been removed from any new portfolio (which comprises
a portion of the portfolio as at the reference date) if, in the period up to
(and including) the closing date relating to such new portfolio, the loan is
repaid in full or if the loan does not comply with the terms of the mortgage
sale agreement on or about the closing date. Once such loans are removed, the
seller will then randomly select from the loans remaining in the new portfolio
those loans to be assigned on the applicable closing date once the
determination has been made as to the anticipated principal balances of the
notes to be issued and the corresponding size of the trust that would be
required ultimately to support payments on the offered notes and all other
notes of the issuing entity and the previous issuing entities.
The loans in the mortgages trust that are selected for inclusion in the
mortgages trust will have been originated on the basis of the seller's lending
criteria. The material aspects of the seller's lending criteria are described
under "THE LOANS -- UNDERWRITING --" and "THE LOANS -- LENDING CRITERIA" in the
accompanying prospectus. Standardised credit scoring is not used in the United
Kingdom mortgage market. For an indication of the credit quality of borrowers
in respect of the loans, investors may refer to such lending criteria and to
the historical performance of the loans in the mortgages trust as set forth in
this Annex A-1 and in Annex E. One significant indicator of obligor credit
quality is arrears and losses. The information presented under "DELINQUENCY AND
LOSS EXPERIENCE OF THE PORTFOLIO" in this Annex A-1 reflects the arrears and
repossession experience for loans that were contained in the portfolio since
the inception of the mortgages trust. Abbey services all of the loans it
originates. Any material change to the seller's lending criteria, which could
lead to arrears and losses deviating from the historical experience presented
in the table under "DELINQUENCY AND LOSS EXPERIENCE OF THE PORTFOLIO", will be
reported by the seller on periodic reports filed with the SEC on Form 10-D. It
is not expected that the characteristics of the portfolio as at the closing
date will differ materially from the characteristics of the portfolio as at the
reference date. Except as otherwise indicated, these tables have been prepared
using the current balance as at the reference date, which includes all
principal and accrued interest for the loans in the portfolio.
The portfolio as at the reference date consisted of [__] mortgage accounts,
comprising loans originated by Abbey and secured over properties located in
England, Wales and Scotland and having an aggregate outstanding principal
balance of approximately [GBP][__] as at that date. The loans in the portfolio
as at the reference date were originated by the seller between August 1995 and
[__] [2008]. As at the reference date, approximately [__] per cent. of the
loans in the portfolio had an active direct debit instruction, the servicer, as
agent of the mortgages trustee, having specifically agreed to another specific
form of payment for the balance of the loans.
As at the reference date, approximately [__] per cent. of the mortgages
securing the loans in the portfolio were on freehold properties or the Scottish
equivalent, approximately [__] per cent. were on leasehold properties and [__]
per cent. were unknown.
As at the reference date, approximately [__] per cent. of the loans in the
portfolio were repayment loans and approximately [__] per cent. were interest-
only loans. Approximately [__] per cent. of the loans had an original loan-to-
value ratio of at least [__] per cent. as at the reference date.
As at the closing date:
* the Funding share of the trust property will be approximately
[GBP][__], representing approximately [__] per cent. of the trust
property; and
* the seller share of the trust property will be approximately
[GBP][__], representing approximately [__] per cent. of the trust
property.
S-28
The actual amounts of the Funding share of the trust property and the seller
share of the trust property as at the closing date will not be determined until
the day before the closing date which will be after the date of this prospectus
supplement.
OUTSTANDING PRINCIPAL BALANCES
The following table shows the range of outstanding principal balances
(including capitalised high loan-to-value fees and/or booking fees and/or
valuation fees).
RANGE OF OUTSTANDING PRINCIPAL CURRENT CURRENT
BALANCES (INCLUDING CAPITALISED HIGH PRINCIPAL PRINCIPAL NUMBER OF
LOAN-TO-VALUE FEES AND/OR BOOKING BALANCE BALANCE % OF TOTAL MORTGAGE
FEES AND/OR VALUATION FEES) ([GBP]) (US$) BALANCE ACCOUNTS % OF TOTAL
- ------------------------------------ --------- ---------- ---------- --------- ----------
Less than [GBP]0,000................ [__] [__] [__] [__] [__]
[GBP]0,000 -- [GBP]49,999........... [__] [__] [__] [__] [__]
[GBP]50,000 -- [GBP]99,999.......... [__] [__] [__] [__] [__]
[GBP]100,000 -- [GBP]149,999........ [__] [__] [__] [__] [__]
[GBP]150,000 -- [GBP]199,999........ [__] [__] [__] [__] [__]
[GBP]200,000 -- [GBP]249,999........ [__] [__] [__] [__] [__]
[GBP]250,000 -- [GBP]299,999........ [__] [__] [__] [__] [__]
[GBP]300,000 -- [GBP]349,999........ [__] [__] [__] [__] [__]
[GBP]350,000 -- [GBP]399,999........ [__] [__] [__] [__] [__]
[GBP]400,000 -- [GBP]449,999........ [__] [__] [__] [__] [__]
[GBP]450,000 -- [GBP]499,999........ [__] [__] [__] [__] [__]
[GBP]500,000 -- [GBP]549,999........ [__] [__] [__] [__] [__]
[GBP]550,000 -- [GBP]599,999........ [__] [__] [__] [__] [__]
[GBP]600,000 -- [GBP]649,999........ [__] [__] [__] [__] [__]
[GBP]650,000 -- [GBP]699,999........ [__] [__] [__] [__] [__]
[GBP]700,000 -- [GBP]749,999........ [__] [__] [__] [__] [__]
>=[GBP]750,000...................... [__] [__] [__] [__] [__]
--------- ---------- ---------- --------- ----------
TOTAL [__] [__] [__] [__] [__]
========= ========== ========== ========= ==========
The largest mortgage account has an outstanding principal balance of
[GBP][__] and the smallest mortgage account has an outstanding principal
balance of approximately [minus] [GBP][__]. The average outstanding principal
balance is approximately [GBP][__].
There are a small number of mortgage accounts in the portfolio with a
negative balance. In these cases, this is due to overpayment of the amount
required to redeem the mortgage account. The account status is set to
"REDEEMED" when the balance is zero and the overpaid amount has been refunded
which normally happens within two to three days of that overpayment.
LOAN-TO-VALUE RATIOS AT ORIGINATION
The following table shows the range of loan-to-value, or LTV, ratios, which
express the outstanding balance of a mortgage loan as at the date of the
original initial mortgage loan origination divided by the value of the property
securing that mortgage loan at the same date.
RANGE OF LOAN-TO-VALUE RATIOS AT CURRENT CURRENT
ORIGINATION (EXCLUDING CAPITALISED PRINCIPAL PRINCIPAL NUMBER OF
HIGH LOAN-TO-VALUE FEES AND/OR BALANCE BALANCE % OF TOTAL MORTGAGE % OF
BOOKING FEES AND/OR VALUATION FEES) ([GBP]) (US$) BALANCE ACCOUNTS TOTAL
- ----------------------------------- --------- --------- ---------- --------- -----
00.00% -- 24.99%................... [__] [__] [__] [__] [__]
25.00% -- 49.99%................... [__] [__] [__] [__] [__]
50.00% -- 74.99%................... [__] [__] [__] [__] [__]
75.00% -- 79.99%................... [__] [__] [__] [__] [__]
80.00% -- 84.99%................... [__] [__] [__] [__] [__]
85.00% -- 89.99%................... [__] [__] [__] [__] [__]
90.00% -- 95.00%................... [__] [__] [__] [__] [__]
--------- --------- ---------- --------- -----
TOTAL.............................. [__] [__] [__] [__] [__]
========= ========= ========== ========= =====
S-29
The weighted average loan-to-value ratio of the mortgage accounts (excluding
any capitalised high loan-to-value fees and/or capitalised booking fees and/or
capitalised valuation fees) at origination was approximately [__] per cent. The
highest loan-to-value ratio of any mortgage account (excluding any capitalised
high loan-to-value fees and/or any capitalised booking fees and/or capitalised
valuation fees) at origination was [__] per cent. and the lowest was [__] per
cent. The average value of capitalised high loan-to-value fees and/or
capitalised booking fees and/or capitalised valuation fees at origination was
approximately [GBP][__].
LTV RATIOS AT ORIGINATION INDEXED ACCORDING TO THE NATIONWIDE HOUSE PRICE INDEX
The following table shows the range of LTV ratios, which express the
outstanding balance of a mortgage loan as at the date of the original initial
mortgage origination divided by the indexed valuation of the property securing
that mortgage loan as at the reference date, based on the Nationwide House
Price Index.
RANGE OF LOAN-TO-VALUE RATIOS AT CURRENT CURRENT
ORIGINATION (EXCLUDING CAPITALISED PRINCIPAL PRINCIPAL NUMBER OF
HIGH LOAN-TO-VALUE FEES AND/OR BALANCE BALANCE % OF TOTAL MORTGAGE
BOOKING FEES AND/OR VALUATION FEES) ([GBP]) (US$) BALANCE ACCOUNTS % OF TOTAL
- ----------------------------------- --------- --------- ---------- --------- ----------
00.00% -- 24.99%................... [__] [__] [__] [__] [__]
25.00% -- 49.99%................... [__] [__] [__] [__] [__]
50.00% -- 74.99%................... [__] [__] [__] [__] [__]
75.00% -- 79.99%................... [__] [__] [__] [__] [__]
80.00% -- 84.99%................... [__] [__] [__] [__] [__]
85.00% -- 89.99%................... [__] [__] [__] [__] [__]
90.00% -- 95.00%................... [__] [__] [__] [__] [__]
--------- --------- ---------- --------- ----------
TOTAL.............................. [__] [__] [__] [__] [__]
========= ========= ========== ========= ==========
The weighted average loan-to-value ratio of the mortgage accounts (excluding
any capitalised high loan-to-value fees and/or capitalised booking fees and/or
capitalised valuation fees) at origination was approximately [__] per cent.
LTV RATIOS AT ORIGINATION INDEXED ACCORDING TO THE HALIFAX HOUSE PRICE INDEX
The following table shows the range of LTV ratios, which express the
outstanding balance of a mortgage loan as at the date of the original initial
mortgage origination divided by the indexed valuation of the property securing
that mortgage loan as at the reference date, based on the Halifax House Price
Index.
RANGE OF LOAN-TO-VALUE RATIOS AT CURRENT CURRENT
ORIGINATION (EXCLUDING CAPITALISED PRINCIPAL PRINCIPAL NUMBER OF
HIGH LOAN-TO-VALUE FEES AND/OR BALANCE BALANCE % OF TOTAL MORTGAGE
BOOKING FEES AND/OR VALUATION FEES) ([GBP]) (US$) BALANCE ACCOUNTS % OF TOTAL
- ----------------------------------- --------- --------- ---------- --------- ----------
00.00% -- 24.99%................... [__] [__] [__] [__] [__]
25.00% -- 49.99%................... [__] [__] [__] [__] [__]
50.00% -- 74.99%................... [__] [__] [__] [__] [__]
75.00% -- 79.99%................... [__] [__] [__] [__] [__]
80.00% -- 84.99%................... [__] [__] [__] [__] [__]
85.00% -- 89.99%................... [__] [__] [__] [__] [__]
90.00% -- 95.00%................... [__] [__] [__] [__] [__]
--------- --------- ---------- --------- ----------
TOTAL.............................. [__] [__] [__] [__] [__]
========= ========= ========== ========= ==========
The weighted average loan-to-value ratio of the mortgage accounts (excluding
any capitalised high loan-to-value fees and/or capitalised booking fees and/or
capitalised valuation fees) at origination was approximately [__] per cent.
S-30
GEOGRAPHICAL DISTRIBUTION
The following table shows the distribution of properties throughout England,
Wales and Scotland. No properties are situated outside England, Wales and
Scotland. The geographical location of a property has no impact upon the
seller's lending criteria and credit scoring tests.
CURRENT CURRENT
PRINCIPAL PRINCIPAL NUMBER OF
BALANCE BALANCE % OF TOTAL MORTGAGE % OF
REGION ([GBP]) (US$) BALANCE ACCOUNTS TOTAL
- ---------------------------- --------- --------- ---------- --------- -----
East Anglia................. [__] [__] [__] [__] [__]
East Midlands............... [__] [__] [__] [__] [__]
London...................... [__] [__] [__] [__] [__]
Northwest................... [__] [__] [__] [__] [__]
North....................... [__] [__] [__] [__] [__]
Scotland.................... [__] [__] [__] [__] [__]
Southeast (excluding London) [__] [__] [__] [__] [__]
Southwest................... [__] [__] [__] [__] [__]
Unknown..................... [__] [__] [__] [__] [__]
Wales....................... [__] [__] [__] [__] [__]
West Midlands............... [__] [__] [__] [__] [__]
Yorkshire and Humberside.... [__] [__] [__] [__] [__]
--------- --------- ---------- --------- -----
TOTAL....................... [__] [__] [__] [__] [__]
========= ========= ========== ========= =====
House prices and incomes vary throughout England, Scotland and Wales. The
table below summarises the average house price and the average income for each
region for the period ended [__] in order to produce a house price to earnings
ratio for each region.
AVERAGE
EARNINGS HOUSE PRICE/
([GBP] PER PRICE EARNINGS
REGIONS ANNUM)* ([GBP])** RATIO
- ------------------------ ---------- --------- --------
North East.............. [__] [__] [__]
North West.............. [__] [__] [__]
Yorkshire and Humberside [__] [__] [__]
East Midlands........... [__] [__] [__]
West Midlands........... [__] [__] [__]
East Anglia............. [__] [__] [__]
London.................. [__] [__] [__]
South East.............. [__] [__] [__]
South West.............. [__] [__] [__]
Wales................... [__] [__] [__]
Scotland................ [__] [__] [__]
*Average recorded income of borrowers
**Simple average house prices
[Source: www.communities.gov.uk/index.asp?id=1156110]
For a discussion of geographic concentration risks, see "RISK FACTORS -- THE
TIMING AND AMOUNT OF PAYMENTS ON THE LOANS COULD BE AFFECTED BY VARIOUS FACTORS
WHICH MAY ADVERSELY AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES" in the
accompanying prospectus.
SEASONING OF LOANS
The following table shows the time elapsed since the date of origination of
the loans. The ages (but not the balances) of the loans in this table have been
calculated up to the reference date of [__] for the purpose of calculating the
seasoning.
S-31
CURRENT CURRENT
PRINCIPAL PRINCIPAL NUMBER OF
BALANCE BALANCE % OF TOTAL MORTGAGE % OF
AGE OF LOANS IN MONTHS ([GBP]) (US$) BALANCE ACCOUNTS TOTAL
- ---------------------- --------- --------- ---------- --------- -----
6 to <12.............. [__] [__] [__] [__] [__]
12 to <18............. [__] [__] [__] [__] [__]
18 to <24............. [__] [__] [__] [__] [__]
24 to <30............. [__] [__] [__] [__] [__]
30 to <36............. [__] [__] [__] [__] [__]
36 to <42............. [__] [__] [__] [__] [__]
42 to <48............. [__] [__] [__] [__] [__]
48 to <54............. [__] [__] [__] [__] [__]
54 to <60............. [__] [__] [__] [__] [__]
60 to <66............. [__] [__] [__] [__] [__]
66 to <72............. [__] [__] [__] [__] [__]
72 to <78............. [__] [__] [__] [__] [__]
78 to <84............. [__] [__] [__] [__] [__]
84 to <90............. [__] [__] [__] [__] [__]
90 to <96............. [__] [__] [__] [__] [__]
96 to <102............ [__] [__] [__] [__] [__]
Greater than 102...... [__] [__] [__] [__] [__]
--------- --------- ---------- --------- -----
TOTAL................. [__] [__] [__] [__] [__]
========= ========= ========== ========= =====
The weighted average seasoning of loans was approximately [__] months and
the maximum seasoning of loans was [__] months. The minimum seasoning of loans
was [__] months.
YEARS TO MATURITY OF LOANS
The following table shows the number of years of the mortgage term which
remain unexpired:
CURRENT CURRENT
PRINCIPAL PRINCIPAL NUMBER OF
BALANCE BALANCE % OF TOTAL MORTGAGE % OF
YEARS TO MATURITY ([GBP]) (US$) BALANCE ACCOUNTS TOTAL
- ----------------- --------- --------- ---------- --------- -----
<0............... [__] [__] [__] [__] [__]
0 to <5.......... [__] [__] [__] [__] [__]
5 to <10......... [__] [__] [__] [__] [__]
10 to <15........ [__] [__] [__] [__] [__]
15 to <20........ [__] [__] [__] [__] [__]
20 to <25........ [__] [__] [__] [__] [__]
25 to <30........ [__] [__] [__] [__] [__]
30 to <38........ [__] [__] [__] [__] [__]
--------- --------- ---------- --------- -----
TOTAL............ [__] [__] [__] [__] [__]
========= ========= ========== ========= =====
The weighted average remaining term of loans was approximately [__] years
and the maximum remaining term was [__] years. The minimum remaining term was
[__] years.
S-32
PURPOSE OF LOAN
The following table shows the purpose of the loans on origination:
CURRENT CURRENT
PRINCIPAL PRINCIPAL % OF NUMBER OF
BALANCE BALANCE TOTAL MORTGAGE % OF
USE OF PROCEEDS ([GBP]) (US$) BALANCE ACCOUNTS TOTAL
- --------------- --------- --------- ------- ----------------- -----
Purchase....... [__] [__] [__] [__] [__]
Remortgage..... [__] [__] [__] [__] [__]
--------- --------- ------- ----------------- -----
TOTAL.......... [__] [__] [__] [__] [__]
========= ========= ======= ================= =====
As at the reference date, the average balance of loans used to finance the
purchase of a new property was [GBP][__] and the average balance of loans used
to remortgage a property already owned by the borrower was [GBP][__].
PROPERTY TYPE
The following table shows the types of properties to which the mortgage
accounts relate.
CURRENT CURRENT
PRINCIPAL PRINCIPAL % OF NUMBER OF
BALANCE BALANCE TOTAL MORTGAGE % OF
PROPERTY TYPE ([GBP]) (US$) BALANCE ACCOUNTS TOTAL
- --------------------------------- --------- --------- ------- --------- -----
Converted flat/maisonette........ [__] [__] [__] [__] [__]
Detached house................... [__] [__] [__] [__] [__]
Detached or chalet bungalow...... [__] [__] [__] [__] [__]
Purpose-built flat/maisonette.... [__] [__] [__] [__] [__]
Self contained maisonette........ [__] [__] [__] [__] [__]
Semi-detached bungalow........... [__] [__] [__] [__] [__]
Semi-detached/link-detached house [__] [__] [__] [__] [__]
Terraced house/bungalow.......... [__] [__] [__] [__] [__]
Other/unknown.................... [__] [__] [__] [__] [__]
--------- --------- ------- --------- -----
TOTAL............................ [__] [__] [__] [__] [__]
========= ========= ======= ========= =====
As at the reference date, the average balance of loans secured by semi-
detached/link-detached house, detached house and terraced house/bungalow
properties was [GBP][__], [GBP][__] and [GBP][__], respectively.
ORIGINATION CHANNEL
The following table shows the origination channel for the initial loan in a
mortgage account.
CURRENT
CURRENT PRINCIPAL % OF NUMBER OF
PRINCIPAL BALANCE BALANCE TOTAL MORTGAGE % OF
ORIGINATION CHANNEL ([GBP]) (US$) BALANCE ACCOUNTS TOTAL
- ------------------- ----------------- --------- ------- --------- -----
Direct origination. [__] [__] [__] [__] [__]
Intermediaries..... [__] [__] [__] [__] [__]
Other channels..... [__] [__] [__] [__] [__]
----------------- --------- ------- --------- -----
TOTAL.............. [__] [__] [__] [__] [__]
================= ========= ======= ========= =====
As at the reference date, the average balance of loans originated through
direct origination, intermediaries and other channels was [GBP][__], [GBP][__]
and [GBP][__], respectively.
S-33
REPAYMENT TERMS
The following table shows the repayment terms for the loans in the mortgage
accounts as at the reference date. Where any loan in a mortgage account is
interest-only, then that entire mortgage account is classified as interest-
only.
CURRENT CURRENT
PRINCIPAL PRINCIPAL % OF NUMBER OF
BALANCE BALANCE TOTAL MORTGAGE % OF
REPAYMENT TERMS [GBP]) (US$) BALANCE ACCOUNTS TOTAL
- --------------- --------- --------- ------- --------- -----
Endowment...... [__] [__] [__] [__] [__]
Interest only.. [__] [__] [__] [__] [__]
Repayment...... [__] [__] [__] [__] [__]
--------- --------- ------- --------- -----
TOTAL.......... [__] [__] [__] [__] [__]
========= ========= ======= ========= =====
As at the reference date, the average balance of endowment loans, interest-
only loans and repayment loans in the portfolio was [GBP][__], [GBP][__] and
[GBP][__] respectively.
PRODUCT TYPE
The following table shows the distribution of product type as at the
reference date.
CURRENT CURRENT
PRINCIPAL PRINCIPAL % OF NUMBER OF
BALANCE BALANCE TOTAL MORTGAGE % OF
PRODUCT TYPE ([GBP]) (US$) BALANCE ACCOUNTS TOTAL
- ------------------- --------- --------- ------- --------- -----
Non-flexible loans:
Tracker loans...... [__] [__] [__] [__] [__]
Fixed loans........ [__] [__] [__] [__] [__]
Variable loans..... [__] [__] [__] [__] [__]
Flexible loans:
Tracker loans...... [__] [__] [__] [__] [__]
Fixed loans........ [__] [__] [__] [__] [__]
Variable loans..... [__] [__] [__] [__] [__]
--------- --------- ------- --------- -----
TOTAL.............. [__] [__] [__] [__] [__]
========= ========= ======= ========= =====
PAYMENT METHODS
The following table shows the payment methods for the mortgage accounts as
at the reference date.
CURRENT CURRENT
PRINCIPAL PRINCIPAL % OF NUMBER OF
BALANCE BALANCE TOTAL MORTGAGE % OF
PAYMENT METHODS ([GBP]) (US$) BALANCE ACCOUNTS TOTAL
- --------------------------------- --------- --------- ------- --------- -----
Direct debit (Abbey bank account) [__] [__] [__] [__] [__]
Direct debit (other bank account) [__] [__] [__] [__] [__]
Other *.......................... [__] [__] [__] [__] [__]
--------- --------- ------- --------- -----
TOTAL............................ [__] [__] [__] [__] [__]
========= ========= ======= ========= =====
* External standing orders, internal standing orders and payments made at Abbey
branches.
DISTRIBUTION OF FIXED RATE LOANS
As at the reference date, approximately [__] per cent. of the loans in the
portfolio were fixed rate loans. Fixed rate loans remain at the relevant fixed
rate for a period of time as specified in the offer conditions, after which
they move to the SVR or some other rate as specified in the offer conditions.
S-34
CURRENT CURRENT
PRINCIPAL PRINCIPAL % OF NUMBER OF % OF
BALANCE BALANCE TOTAL MORTGAGE TOTAL FIXED
FIXED RATE % ([GBP]) (US$) BALANCE ACCOUNTS RATE LOANS
- ------------ --------- --------- ------- --------- -----------
2.00 -- 2.99 [__] [__] [__] [__] [__]
3.00 -- 3.99 [__] [__] [__] [__] [__]
4.00 -- 4.99 [__] [__] [__] [__] [__]
5.00 -- 5.99 [__] [__] [__] [__] [__]
6.00 -- 6.99 [__] [__] [__] [__] [__]
7.00 -- 7.99 [__] [__] [__] [__] [__]
8.00 -- 8.99 [__] [__] [__] [__] [__]
--------- --------- ------- --------- -----------
TOTAL....... [__] [__] [__] [__] [__]
========= ========= ======= ========= ===========
CURRENT CURRENT
PRINCIPAL PRINCIPAL % OF NUMBER OF
BALANCE BALANCE TOTAL MORTGAGE % OF
YEAR IN WHICH FIXED PERIOD ENDS ([GBP]) (US$) BALANCE ACCOUNTS TOTAL
- ------------------------------- --------- --------- ------- --------- -----
<2008.......................... [__] [__] [__] [__] [__]
2007........................... [__] [__] [__] [__] [__]
2008........................... [__] [__] [__] [__] [__]
2009........................... [__] [__] [__] [__] [__]
2010........................... [__] [__] [__] [__] [__]
2011........................... [__] [__] [__] [__] [__]
2012........................... [__] [__] [__] [__] [__]
2013........................... [__] [__] [__] [__] [__]
2014........................... [__] [__] [__] [__] [__]
2015........................... [__] [__] [__] [__] [__]
2016........................... [__] [__] [__] [__] [__]
2017........................... [__] [__] [__] [__] [__]
2018........................... [__] [__] [__] [__] [__]
2019........................... [__] [__] [__] [__] [__]
2020........................... [__] [__] [__] [__] [__]
2021........................... [__] [__] [__] [__] [__]
2022........................... [__] [__] [__] [__] [__]
2023........................... [__] [__] [__] [__] [__]
2024........................... [__] [__] [__] [__] [__]
2025........................... [__] [__] [__] [__] [__]
>=2026......................... [__] [__] [__] [__] [__]
--------- --------- ------- --------- -----
TOTAL.......................... [__] [__] [__] [__] [__]
--------- --------- ------- --------- -----
S-35
PAYMENT RATE ANALYSIS
The following table shows the annualised payment rate for the most recent 1-
, 3- and 12-month period for the loans in the portfolio.
1-MONTH 3-MONTH 12-MONTH
AS OF ANNUALISED ANNUALISED ANNUALISED
- --------- ---------- ---------- ----------
[__] [__]% [__]% [__]%
In the table above,
* 1-month annualised CPR is calculated as 1 -- ((1 -- R) ^ 12),
* 3-month annualised CPR is calculated as the average of the 1-month
annualised CPR for the most recent 3 months, and
* 12-month annualised CPR is calculated the average of the 1-month
annualised CPR for the most recent 12 months,
where R is (i) total principal receipts received plus the principal balance of
loans repurchased by the seller (primarily due to further advances) during the
relevant period, divided by (ii) the aggregate outstanding principal balance of
the loans in the portfolio as at the start of that period.
DELINQUENCY AND LOSS EXPERIENCE OF THE PORTFOLIO
The following table shows the arrears and repossession experience in respect
of the portfolio as at the dates indicated.
The loans used in the table below are administered in accordance with Abbey's
administration policies. The method by which Abbey classifies loans as being in
arrears is described in the accompanying prospectus under "THE SERVICER --
ARREARS AND DEFAULT PROCEDURES" and is important in helping to understand the
arrears and repossession information in respect of the portfolio, as at the
dates indicated, set forth in the following table.
AS AT OR FOR THE YEARS ENDED
-------------------------------------------------------------------------------------------------------------
DECEMBER 8, 2005 DECEMBER 8, 2006 DECEMBER 10, 2007 JANUARY 8, 2008
-------------------------- ------------------------- ---------------------------- ------------------------
[GBP](M) $(M) % [GBP](M) $(M) % [GBP](M) $(M) % [GBP](M) $(M) %
--------- -------- ----- -------- -------- ---- -------- -------- -------- -------- -------- -----
Outstanding balance 29,959.81 59,506.17 [__]% 30,057.09 59,699.39 [__]% 38,063.34 75,601.41 [__]% 39,726.46 78,904.69 [__]%
Number of loan
outstanding 397.38 397.38 [__]% 379.72 379.72 [__]% 432.47 432.47 [__]% 442.90 442.90 [__]%
Outstanding balance of
loans in arrears
1 -- 2 months 466.58 926.72 1.56% 434.28 862.57 1.44% 697.57 1,385.52 1.83% 786.66 1,562.46 1.98%
2 -- 3 months 154.32 306.51 0.52% 150.37 298.67 0.50% 214.32 425.68 0.56% 252.61 501.74 0.64%
3 -- 4 months 78.86 156.63 0.26% 77.26 153.46 0.26% 93.94 186.58 0.25% 112.13 222.71 0.28%
4 -- 5 months 39.46 78.37 0.13% 35.70 70.91 0.12% 46.80 92.96 0.12% 52.34 103.96 0.13%
5 -- 6 months 24.50 48.65 0.08% 25.17 49.98 0.08% 25.45 50.55 0.07% 36.70 72.89 0.09%
6 -- 12 months 52.67 104.61 0.18% 48.97 97.26 0.16% 50.24 99.79 0.13% 57.41 114.03 0.14%
Over 12 months 5.83 11.58 0.02% 5.93 11.78 0.02% 6.22 12.35 0.02% 7.42 14.74 0.02%
Total outstanding
balance of loans in
arrears 822.21 1,633.08 2.74% 777.69 1,544.64 2.59% 1,134.54 2,253.43 2.98% 1,305.27 2,592.53 3.29%
Number of loans
outstanding in arrears
1 -- 2 months 5.53 5.53 1.39% 5.53 5.53 1.46% 7.13 7.13 1.65% 8.08 8.08 1.82%
2 -- 3 months 2.09 2.09 0.53% 1.89 1.89 0.50% 2.33 2.33 0.54% 2.70 2.70 0.61%
3 -- 4 months 1.08 1.08 0.27% 0.95 0.95 0.25% 1.03 1.03 0.24% 1.21 1.21 0.27%
4 -- 5 months 0.51 0.51 0.13% 0.43 0.43 0.11% 0.49 0.49 0.11% 0.56 0.56 0.13%
5 -- 6 months 0.33 0.33 0.08% 0.30 0.30 0.80% 0.28 0.28 0.06% 0.36 0.36 0.08%
6 -- 12 months 0.66 0.66 0.17% 0.58 0.58 0.15% 0.49 0.49 0.11% 0.57 0.57 0.13%
Over 12 months 0.08 0.08 0.02% 0.07 0.07 0.02% 0.06 0.06 0.01% 0.07 0.07 0.02%
Total number of loans
outstanding in arrears 10.27 10.27 2.58% 9.75 9.75 2.57% 11.81 11.81 2.73% 13.54 13.54 3.06%
Repossessions 206 206 0.05% 243 243 0.06% 319 319 0.07% 310 310 0.07%
Amount of loan losses 0.69 1.36 [__]% 2.86 2.86 [__]% 1.60 3.19 [__]% 0.16 0.32 [__]%
Loan losses as % of
total current balance 0.00% 0.00% [__]% 0.00% 0.00% [__]% 0.00% 0.00% 0.00% 0.00% 0.00% [__]%
S-36
"Repossessions" expresses the number of mortgaged properties that the
servicer has taken into possession during the period, as a percentage of the
number of loans in the portfolio outstanding at the end of the period.
S-37
ANNEX A-2
CHARACTERISTICS OF THE UNITED KINGDOM RESIDENTIAL MORTGAGE MARKET
The information provided in this Annex A-2 constitutes an integral part of
this prospectus supplement and is incorporated by reference into this
prospectus supplement.
According to the Council of Mortgage Lenders, at the end of [__], mortgage
loans outstanding in the United Kingdom amounted to [GBP][__] billion, with
banks and building societies holding approximately [__] per cent. and
approximately [__] per cent. of the total, respectively, and in [__]
outstanding mortgage debt in the United Kingdom grew by approximately [__] per
cent.
Set out in the following tables are a number of characteristics of the
United Kingdom mortgage market.
CPR RATES
In the following tables, quarterly CPR data was calculated by dividing the
amount of scheduled and unscheduled repayments of mortgages originated by
building societies in a quarter by the quarterly balance of mortgages
outstanding owed to building societies in the United Kingdom. These quarterly
repayment rates were then annualised using standard methodology.
AGGREGATE AGGREGATE AGGREGATE AGGREGATE AGGREGATE
QUARTERS QUARTERS QUARTERS QUARTERS QUARTERS
OVER 40 OVER 40 OVER 40 OVER 40 OVER 40
CPR (%) YEARS CPR (%) YEARS CPR (%) YEARS CPR (%) YEARS CPR (%) YEARS
- --------- --------- ------- --------- ------- --------- ------- --------- ------- ---------
7.0...... [__] 11.0 [__] 15.0 [__] 19.0 [__] 23.0 [__]
7.5...... [__] 11.5 [__] 15.5 [__] 19.5 [__] 23.5 [__]
8.0...... [__] 12.0 [__] 16.0 [__] 20.0 [__] 24.0 [__]
8.5...... [__] 12.5 [__] 16.5 [__] 20.5 [__] 24.5 [__]
9.0...... [__] 13.0 [__] 17.0 [__] 21.0 [__]
9.5...... [__] 13.5 [__] 17.5 [__] 21.5 [__]
10.0..... [__] 14.0 [__] 18.0 [__] 22.0 [__]
10.5..... [__] 14.5 [__] 18.5 [__] 22.5 [__]
Source: The Bank of England
Over the past 40 years, the highest single quarter CPR experienced in
respect of residential mortgage loans originated by building societies was
recorded in September 2002 at a level of 22.40 per cent. The lowest level was
7.94 per cent. in March and June of 1974.
The highest 12-month rolling average CPR over the same 40-year period was
21.07 per cent. The lowest was 8.84 per cent.
CPR RATE 12-MONTH CPR RATE 12-MONTH
FOR THE ROLLING FOR THE ROLLING
QUARTER QUARTER (%) AVERAGE (%) QUARTER QUARTER (%) AVERAGE (%)
- ------------- ----------- ----------- -------------- -------------- -----------
June 1966.... 11.39 11.00 September 1966 11.71 11.27
December 1966 10.60 11.04 March 1967.... 9.51 10.80
June 1967.... 10.96 10.69 September 1967 11.67 10.68
December 1967 11.52 10.91 March 1968.... 10.19 11.08
June 1968.... 10.59 10.99 September 1968 10.92 10.81
December 1968 10.25 10.49 March 1969.... 9.16 10.23
June 1969.... 10.24 10.14 September 1969 10.66 10.08
December 1969 10.02 10.02 March 1970.... 8.93 9.96
June 1970.... 10.69 10.07 September 1970 11.61 10.31
December 1970 11.47 10.67 March 1971.... 9.33 10.77
June 1971.... 11.45 10.96 September 1971 12.18 11.11
December 1971 12.31 11.32 March 1972.... 10.73 11.67
June 1972.... 11.82 11.76 September 1972 12.25 11.78
December 1972 11.74 11.63 March 1973.... 10.12 11.48
June 1973.... 10.54 11.16 September 1973 11.06 10.87
December 1973 10.56 10.57 March 1974.... 7.95 10.03
June 1974.... 7.95 9.38 September 1974 9.59 9.01
December 1974 10.83 9.08 March 1975.... 9.96 9.58
June 1975.... 12.23 10.65 September 1975 12.76 11.45
December 1975 12.22 11.79 March 1976.... 10.10 11.83
June 1976.... 11.48 11.64 September 1976 11.86 11.42
December 1976 11.70 11.29 March 1977.... 8.00 10.76
June 1977.... 9.85 10.35 September 1977 12.13 10.42
December 1977 12.66 10.66 March 1978.... 11.30 11.49
S-38
CPR RATE 12-MONTH CPR RATE 12-MONTH
FOR THE ROLLING FOR THE ROLLING
QUARTER QUARTER (%) AVERAGE (%) QUARTER QUARTER (%) AVERAGE (%)
- ------------- ----------- ----------- -------------- -------------- -----------
June 1978.... 12.19 12.07 September 1978 11.72 11.97
December 1978 11.19 11.60 March 1979.... 9.34 11.11
June 1979.... 10.13 10.59 September 1979 11.36 10.50
December 1979 11.07 10.47 March 1980.... 8.04 10.15
June 1980.... 8.66 9.78 September 1980 9.87 9.41
December 1980 10.48 9.26 March 1981.... 9.97 9.75
June 1981.... 11.78 10.53 September 1981 12.53 11.19
December 1981 11.83 11.53 March 1982.... 9.63 11.44
June 1982.... 12.91 11.73 September 1982 13.97 12.08
December 1982 14.20 12.68 March 1983.... 12.55 13.41
June 1983.... 12.76 13.37 September 1983 12.48 13.00
December 1983 11.86 12.41 March 1984.... 10.40 11.88
June 1984.... 12.14 11.72 September 1984 12.40 11.70
December 1984 11.88 11.70 March 1985.... 10.02 11.61
June 1985.... 11.67 11.49 September 1985 13.46 11.76
December 1985 13.68 12.21 March 1986.... 11.06 12.47
June 1986.... 15.53 13.43 September 1986 17.52 14.45
December 1986 15.60 14.93 March 1987.... 10.75 14.85
June 1987.... 15.13 14.75 September 1987 17.06 14.63
December 1987 16.41 14.84 March 1988.... 13.74 15.58
June 1988.... 16.24 15.86 September 1988 18.46 16.21
December 1988 12.76 15.30 March 1989.... 8.96 14.11
June 1989.... 13.12 13.33 September 1989 11.60 11.61
December 1989 10.44 11.03 March 1990.... 8.96 11.03
June 1990.... 9.42 10.11 September 1990 9.71 9.63
December 1990 10.58 9.67 March 1991.... 9.07 9.69
June 1991.... 10.69 10.01 September 1991 11.57 10.48
December 1991 10.24 10.39 March 1992.... 9.14 10.41
June 1992.... 9.12 10.02 September 1992 9.75 9.56
December 1992 7.96 8.99 March 1993.... 8.53 8.84
June 1993.... 9.97 9.05 September 1993 10.65 9.28
December 1993 10.01 9.79 March 1994.... 8.97 9.90
June 1994.... 10.48 10.03 September 1994 11.05 10.13
December 1994 10.68 10.29 March 1995.... 9.15 10.34
June 1995.... 10.51 10.35 September 1995 11.76 10.53
December 1995 11.61 10.76 March 1996.... 10.14 11.00
June 1996.... 11.32 11.21 September 1996 13.20 11.57
December 1996 12.58 11.81 March 1997.... 9.75 11.71
June 1997.... 15.05 12.65 September 1997 12.18 12.39
December 1997 11.17 12.04 March 1998.... 10.16 12.14
June 1998.... 12.05 11.39 September 1998 13.79 11.79
December 1998 13.44 12.36 March 1999.... 11.14 12.60
June 1999.... 14.39 13.19 September 1999 15.59 13.64
December 1999 14.94 14.02 March 2000.... 13.82 14.69
June 2000.... 13.87 14.55 September 2000 14.89 14.38
December 2000 15.55 14.53 March 2001.... 15.47 14.94
June 2001.... 17.36 15.81 September 2001 19.12 16.87
December 2001 19.01 17.74 March 2002.... 18.68 18.54
June 2002.... 19.88 19.17 September 2002 22.40 19.99
December 2002 22.16 20.78 March 2003.... 19.51 20.99
June 2003.... 20.18 21.06 September 2003 21.65 20.88
December 2003 21.33 20.67 March 2004.... 19.90 20.77
June 2004.... 21.42 21.21 September 2004 21.41 21.01
December 2004 18.71 20.36 March 2005.... 17.76 19.83
June 2005.... 17.75 18.91 September 2005 20.24 18.62
December 2005 20.36 19.03 March 2006.... 19.65 19.50
June 2006.... 19.37 19.90 September 2006 21.25 20.16
December 2006 21.07 20.34 March 2007 19.57 20.23
June 2007.... 19.25 20.29 September 2007 21.22 20.28
December 2007 18.63 19.67
Source of repayment and outstanding mortgage information: The Bank of England.
The CPR table above presents the historical CPR experience only of building
societies formed in the United Kingdom. During the late 1990s, a number of
former building societies formed in the United Kingdom became banks, and the CPR
experience of these banks is therefore not included in the foregoing building
society CPR data. According to the Council of Mortgage Lenders, the 12 month
rolling average CPR experience of banks during each of the years 1999 through
2007 was 16.08 per cent., 15.34 per cent., 18.69 per cent., 21.81 per cent.,
23.81 per cent., 22.88 per cent., 22.93 per cent., 24.94 per cent. and [__]
respectively.
S-39
REPOSSESSION RATE
In January 2008, the Council of Mortgage Lenders published repossession
figures for 2008, which showed that the repossession rate in the United Kingdom
for that year was 0.10%. No assurance can be given as to whether, or for how
long, these low levels of repossessions will continue.
REPOSSESSIONS REPOSSESSIONS REPOSSESSIONS
YEAR (%) YEAR (%) YEAR (%)
- ---------- ------------- ---------- ------------- ---------- -------------
1982...... 0.11 1991...... 0.77 2000...... 0.20
1983...... 0.12 1992...... 0.69 2001...... 0.16
1984...... 0.17 1993...... 0.58 2002...... 0.11
1985...... 0.25 1994...... 0.47 2003...... 0.07
1986...... 0.30 1995...... 0.47 2004...... 0.07
1987...... 0.32 1996...... 0.40 2005...... 0.13
1988...... 0.22 1997...... 0.31 2006...... 0.19
1989...... 0.17 1998...... 0.31 2007...... 0.23
1990...... 0.47 1999...... 0.27
Source: Council of Mortgage Lenders
HOUSE PRICE TO EARNINGS RATIO
The following table shows the ratio for any one year of the average annual
value of houses compared to the average annual salary in the United Kingdom as
calculated from the weekly earnings in April of the same year of male employees
whose earnings were not affected by their absence from work (as recorded by the
government of the United Kingdom). While this is a good indication of house
affordability, it does not take into account the fact that the majority of
households have more than one income to support a mortgage loan.
HOUSE HOUSE
PRICE TO PRICE TO
EARNINGS EARNINGS
YEAR RATIO YEAR RATIO
- ------------------------------ -------- ---------------------------- --------
1971.......................... 3.21 1990......................... 4.62
1972.......................... 3.83 1991......................... 4.23
1973.......................... 4.58 1992......................... 3.84
1974.......................... 4.21 1993......................... 3.63
1975.......................... 3.52 1994......................... 3.59
1976.......................... 3.30 1995......................... 3.53
1977.......................... 3.26 1996......................... 3.57
1978.......................... 3.34 1997......................... 3.79
1979.......................... 3.74 1998......................... 4.04
1980.......................... 3.75 1999......................... 4.28
1981.......................... 3.51 2000......................... 4.65
1982.......................... 3.29 2001......................... 4.73
1983.......................... 3.40 2002......................... 5.33
1984.......................... 3.50 2003......................... 5.90
1985.......................... 3.52 2004......................... 6.29
1986.......................... 3.71 2005......................... 6.43
1987.......................... 4.02 2006......................... 6.47
1988.......................... 4.64 2007......................... [__]
1989.......................... 5.14
Source: Council of Mortgage Lenders
HOUSE PRICE INDEX
United Kingdom residential property prices, as measured by the Nationwide
House Price Index and Halifax House Price Index (collectively, the HOUSING
INDICES), have generally followed the United Kingdom Retail Price Index over an
extended period. Nationwide is a United Kingdom building society and Halifax is
a United Kingdom bank.
The United Kingdom housing market has been through various economic cycles
in the recent past, with large year-to-year increases in the Housing Indices
occurring in the late 1980s and large decreases occurring in the early 1990s.
S-40
The housing indices have generally increased since 1996.
NATIONWIDE HALIFAX HOUSE
RETAIL HOUSE PRICE PRICE
PRICE INDEX INDEX INDEX
% ANNUAL % ANNUAL % ANNUAL
QUARTER INDEX CHANGE1 INDEX CHANGE1 INDEX CHANGE1
- -------------- -------------- -------- ----- -------- ----- --------
March 1981.... 280.4 11.96% 47.3 4.54% NA NA
June 1981..... 294.0 11.07% 48.1 3.16% NA NA
September 1981 299.1 10.67% 48.3 2.34% NA NA
December 1981. 306.5 11.25% 47.5 1.27% NA NA
March 1982.... 311.6 10.55% 48.2 1.87% NA NA
June 1982..... 321.5 8.94% 49.2 2.38% NA NA
September 1982 323.0 7.68% 49.8 3.18% NA NA
December 1982. 325.4 5.98% 51.0 7.22% NA NA
March 1983.... 327.0 4.84% 52.5 8.45% 95.9 NA
June 1983..... 333.7 3.71% 54.6 10.41% 99.9 NA
September 1983 338.0 4.54% 56.2 12.08% 102.2 NA
December 1983. 341.8 4.93% 57.1 11.24% 102.4 NA
March 1984.... 343.9 5.03% 59.2 12.05% 102.9 7.05%
June 1984..... 350.9 5.02% 61.5 11.85% 106.5 6.40%
September 1984 353.9 4.61% 62.3 10.37% 109.2 6.62%
December 1984. 358.3 4.72% 64.9 12.83% 111.0 8.06%
March 1985.... 362.9 5.37% 66.2 11.23% 112.2 8.65%
June 1985..... 375.3 6.73% 68.2 10.29% 115.9 8.46%
September 1985 376.3 6.13% 69.2 10.46% 117.6 7.41#%
December 1985. 378.1 5.38% 70.7 8.52% 120.7 8.38%
March 1986.... 380.8 4.82% 71.1 7.11% 122.5 8.78%
June 1986..... 385.7 2.73% 73.8 7.99% 128.6 10.40%
September 1986 386.1 2.58% 76.3 9.74% 133.1 12.38%
December 1986. 391.0 3.35% 79.0 11.09% 136.9 12.59%
March 1987.... 100.3 NA 81.6 13.70% 140.6 13.78%
June 1987..... 101.9 NA 85.8 14.96% 147.3 13.58%
September 1987 102.1 NA 88.6 14.98% 152.6 13.67%
December 1987. 103.2 NA 88.5 11.36% 158.2 14.46%
March 1988.... 103.7 3.33% 90.0 9.80% 164.9 15.94%
June 1988..... 106.2 4.13% 97.6 12.95% 180.2 20.16%
September 1988 107.7 5.34% 108.4 20.15% 198.9 26.50%
December 1988. 109.9 6.29% 114.2 25.51% 212.0 29.27%
March 1989.... 111.7 7.43% 118.8 27.79% 217.8 27.82%
June 1989..... 114.9 7.87% 124.2 24.06% 226.8 23.00%
September 1989 116.0 7.42% 125.2 14.42% 227.3 13.35%
December 1989. 118.3 7.37% 122.7 7.16% 222.8 4.97%
March 1990.... 120.4 7.50% 118.9 0.09% 220.7 1.32%
June 1990..... 126.0 9.22% 117.7 -5.38% 224.3 -1.11%
September 1990 128.1 9.92% 114.2 -9.23% 224.2 -1.37%
December 1990. 130.1 9.51% 109.6 -11.31% 222.9 0.04%
March 1991.... 130.8 8.28% 108.8 -8.84% 220.2 -0.23%
June 1991..... 133.6 5.86% 110.6 -6.23% 223.2 -0.49%
September 1991 134.2 4.65% 109.5 -4.18% 220.8 -1.53%
December 1991. 135.5 4.07% 107.0 -2.37% 217.5 -2.45%
March 1992.... 136.2 4.05% 104.1 -4.42% 210.6 -4.46%
June 1992..... 139.1 4.03% 105.1 -5.10% 210.4 -5.91%
September 1992 139.0 3.51% 104.2 -4.97% 208.4 -5.78%
December 1992. 139.6 2.98% 100.1 -6.68% 199.3 -8.74%
March 1993.... 138.7 1.82% 100.0 -4.02% 196.9 -6.73%
June 1993..... 140.9 1.29% 103.6 -1.42% 203.2 -3.48%
September 1993 141.3 1.64% 103.2 -0.96% 204.2 -2.04%
December 1993. 141.8 1.56% 101.8 1.74% 202.5 1.59%
March 1994.... 142.0 2.35% 102.4 2.36% 202.3 2.71%
S-41
NATIONWIDE HALIFAX HOUSE
RETAIL HOUSE PRICE PRICE
PRICE INDEX INDEX INDEX
% ANNUAL % ANNUAL % ANNUAL
QUARTER INDEX CHANGE1 INDEX CHANGE1 INDEX CHANGE1
- -------------- -------------- -------- ----- -------- ----- --------
June 1994..... 144.5 2.52% 102.5 -1.08% 204.3 0.54%
September 1994 144.6 2.31% 103.2 -0.03% 204.3 0.05%
December 1994. 145.5 2.58% 104.0 2.06% 200.9 -0.79%
March 1995.... 146.8 3.32% 101.9 -0.47% 200.3 -0.99%
June 1995..... 149.5 3.40% 103.0 0.53% 201.0 -1.63%
September 1995 149.9 3.60% 102.4 -0.77% 199.0 -2.63%
December 1995. 150.1 3.11% 101.6 -2.30% 197.8 -1.56%
March 1996.... 150.9 2.75% 102.5 0.55% 200.9 0.30%
June 1996..... 152.8 2.18% 105.8 2.67% 208.6 3.71%
September 1996 153.1 2.11% 107.7 5.08% 209.8 5.28%
December 1996. 154.0 2.57% 110.1 8.00% 212.6 7.22%
March 1997.... 154.9 2.62% 111.3 8.30% 215.3 6.92%
June 1997..... 156.9 2.65% 116.5 9.65% 222.6 6.50%
September 1997 158.4 3.40% 121.2 11.77% 223.6 6.37%
December 1997. 159.7 3.63% 123.3 11.40% 224.0 5.22%
March 1998.... 160.2 3.36% 125.5 11.96% 226.4 5.03%
September 1998 163.2 3.94% 130.1 11.04% 234.9 5.38%
June 1998..... 163.7 3.29% 132.4 8.84% 236.1 5.44%
December 1998. 164.4 2.90% 132.3 7.00% 236.3 5.35%
March 1999.... 163.7 2.16% 134.6 7.02% 236.3 4.28%
June 1999..... 165.5 1.40% 139.7 7.09% 247.7 5.31%
September 1999 165.6 1.15% 144.4 8.65% 256.7 8.37%
December 1999. 166.8 1.45% 148.9 11.83% 263.4 10.86%
March 2000.... 167.5 2.29% 155.0 14.10% 270.5 13.52%
June 2000..... 170.6 3.04% 162.0 14.83% 275.6 10.67%
September 2000 170.9 3.15% 161.5 11.20% 277.6 7.83%
December 2000. 172.0 3.07% 162.8 8.95% 278.3 5.50%
March 2001.... 171.8 2.53% 167.5 7.77% 279.0 3.09%
June 2001..... 173.9 1.92% 174.8 7.63% 297.0 7.48%
September 2001 174.0 1.80% 181.6 11.77% 305.0 9.41%
December 2001. 173.8 1.04% 184.6 12.54% 310.9 11.08%
March 2002.... 173.9 1.21% 190.2 12.71% 324.3 15.05%
June 2002..... 176.0 1.20% 206.5 16.64% 346.6 15.44%
September 2002 176.6 1.48% 221.1 19.66% 369.1 19.08%
December 2002. 178.2 2.50% 231.3 22.55% 393.0 23.43%
March 2003.... 179.2 3.00% 239.3 22.94% 400.1 21.00%
June 2003..... 181.3 2.97% 250.1 19.18% 422.5 19.80%
September 2003 181.8 2.90% 258.9 15.77% 437.6 17.02%
December 2003. 182.9 2.60% 267.1 14.40% 453.5 14.32%
March 2004.... 183.8 2.53% 277.3 14.77% 474.0 16.95%
June 2004..... 186.3 2.72% 296.2 16.90% 513.2 19.45%
September 2004 187.4 3.03% 306.2 16.79% 527.2 18.63%
December 2004. 189.2 3.39% 304.1 12.98% 522.0 14.07%
March 2005.... 189.7 3.16% 304.8 9.44% 520.2 9.30%
June 2005..... 191.9 2.96% 314.2 5.91% 532.1 3.62%
September 2005 192.6 2.74% 314.4 2.67% 543.1 2.97%
December 2005. 193.7 2.35% 314.0 3.18% 548.4 4.93%
March 2006.... 194.2 2.34% 319.8 4.81% 552.6 6.04%
June 2006..... 197.6 2.93% 329.2 4.68% 582.1 8.98%
September 2006 199.3 3.42% 336.1 6.65% 586.7 7.72%
December 2006. 201.4 3.90% 343.2 8.92% 602.8 9.46%
March 2007.... 203.0 4.43% 350.2 9.08% 613.9 10.52%
June 2007..... 206.3 4.31% 362.7 9.68% 644.1 10.12%
September 2007 207.1 3.84% 367.3 8.89% 647.3 10.14%
December 2007. [o] [o] [o] [o]
Source: Office of National Statistics, Council of Mortgage Lenders and Halifax
Bank of Scotland. "NA" indicates that the relevant figure is not available.
1 The percentage annual change is calculated in accordance with the following
formula:
Ln (x/y) where "x" is equal to the current quarter's index value and "y" is
equal to the index value of the previous year's corresponding quarter.
All information contained in this prospectus supplement in respect of the
Nationwide House Price Index has been accurately reproduced from information
published by Nationwide Building Society. All
S-42
information contained in this prospectus supplement in respect of the Halifax
House Price Index has been accurately reproduced from information published by
HBOS plc. So far as the issuing entity is aware and is able to ascertain from
information published by Nationwide Building Society and HBOS plc respectively,
no facts have been omitted which would render the reproduced information
inaccurate or misleading.
Note, however, that the issuing entity has not participated in the
preparation of the information in this section entitled "CHARACTERISTICS OF THE
UNITED KINGDOM RESIDENTIAL MORTGAGE MARKET" nor made any enquiry with respect
to such information. Neither the issuing entity nor Nationwide Building Society
nor HBOS plc makes any representation as to the accuracy of the information in
this section entitled "CHARACTERISTICS OF THE UNITED KINGDOM RESIDENTIAL
MORTGAGE MARKET" or has any liability whatsoever to you in connection with such
information. Anyone relying on such information does so at their own risk.
S-43
ANNEX B
NOTES ISSUED BY ISSUING ENTITY AND TERM ADVANCES ADVANCED BY ISSUING ENTITY TO
FUNDING IN CONNECTION THEREWITH
The information provided in this Annex B constitutes an integral part of
this prospectus supplement and is incorporated by reference into this
prospectus supplement.
As at the closing date, the aggregate principal amount outstanding of notes
issued by the issuing entity (converted, where applicable, into sterling at the
applicable specified currency exchange rate), including the offered notes
described herein, will be:
class [__] notes.................................................... [GBP][__]
class [__] notes.................................................... [GBP][__]
class [__] notes.................................................... [GBP][__]
class [__] notes.................................................... [GBP][__]
As at the closing date, the aggregate outstanding principal balance of term
advances advanced by the issuing entity to Funding under the master
intercompany loan agreement, including the term advances described herein, will
be:
[AAA] Term Advances................................................. [GBP][__]
[AA] Term Advances.................................................. [GBP][__]
[A] Term Advances................................................... [GBP][__]
[BBB] Term Advances................................................. [GBP][__]
S-44
ANNEX C
SERIES START-UP LOAN AND PREVIOUS START-UP LOANS TO FUNDING
[Pursuant to the new start-up loan agreement, Abbey (in its capacity as the
start-up loan provider) has agreed to make available to Funding a start-up loan
on the closing date with the following terms: [Describe terms of the new start-
up loan.]]
[There will not be a new start-up loan in connection with the issue of the
[__]-[__] notes.]
PREVIOUS START-UP LOANS TO FUNDING
The following start-up loans have been made available to Funding by Abbey
(in its capacity as the start-up loan provider) in connection with the issues
of previous notes, by the issuing entity and previous issuing entities set out
below, for the stated current outstanding principal balance.
CURRENT
OUTSTANDING
PRINCIPAL INTEREST
ISSUING ENTITY BALANCE RATE
- --------------------------------------------------------------- ----------- --------
Holmes Financing (No. 1) PLC................................... [GBP][__] [__]%
Holmes Financing (No. 2) PLC................................... [GBP][__] [__]%
Holmes Financing (No. 3) PLC................................... [GBP][__] [__]%
Holmes Financing (No. 4) PLC................................... [GBP][__] [__]%
Holmes Financing (No. 5) PLC................................... [GBP][__] [__]%
Holmes Financing (No. 6) PLC................................... [GBP][__] [__]%
Holmes Financing (No. 7) PLC................................... [GBP][__] [__]%
Holmes Financing (No. 8) PLC................................... [GBP][__] [__]%
Holmes Financing (No. 9) PLC................................... [GBP][__] [__]%
Holmes Financing (No. 10) PLC.................................. [GBP][__] [__]%
Holmes Master Issuer PLC (in respect of the issue 2006-1 notes) [GBP][__] [__]%
Holmes Master Issuer PLC (in respect of the issue 2007-1 notes) [GBP][__] [__]%
Holmes Master Issuer PLC (in respect of the issue 2007-2 notes) [GBP][__] [__]%
Holmes Master Issuer PLC (in respect of the issue 2007-3 notes) [GBP][__] [__]%
S-45
ANNEX D
DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND THE
PREVIOUS INTERCOMPANY LOANS
The previous issuing entities, Holmes Financing (No. 1) PLC, Holmes
Financing (No. 2) PLC, Holmes Financing (No. 3) PLC, Holmes Financing (No. 4)
PLC, Holmes Financing (No. 5) PLC, Holmes Financing (No. 6) PLC, Holmes
Financing (No. 7) PLC, Holmes Financing (No. 8) PLC, Holmes Financing (No. 9)
PLC and Holmes Financing (No. 10) PLC are each a public limited company
incorporated in England and Wales. The registered office of each previous
issuing entity is Abbey National House, 2 Triton Square, Regent's Place, London
NW1 3AN. The contact telephone number for the previous issuing entities is +44
(0) 870 607 6000. Each of the previous issuing entities is a special purpose
company whose purpose is to have issued the previous notes that represent their
respective residential mortgage-backed obligations and to have lent an amount
equal to the proceeds of the previous notes to Funding under their respective
previous intercompany loans. Each of the previous issuing entities does not
engage in any activities that are unrelated to these purposes.
The seller has been appointed as the cash manager for each of the previous
issuing entities to manage its bank accounts, to determine the amounts of and
arrange payments of monies to be made by it and keep certain records on its
behalf. The seller has also been appointed as an account bank for each of the
previous issuing entities to provide banking services to it.
The following tables summarise the principal features of the previous notes.
In each table, references to PREVIOUS NOTES are references to the previous
notes issued by the relevant previous issuing entity and the issuing entity,
previous notes of which are described in that table where a series and class of
previous notes has been redeemed in full, the table indicates such redemption
by an asterisk ("*") next to the relevant series and class of previous notes.
Each prospectus supplement will set forth the aggregate amount of previous
notes outstanding of each previous issuing entity and the issuing entity as of
the date indicated in the prospectus supplement.
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 1) PLC
-------------------------------------------------------------------------------------------------
SERIES 1 SERIES 1 SERIES 1 SERIES 2 SERIES 2
CLASS A* CLASS B* CLASS C* CLASS A* CLASS B*
------------------ ------------------ ----------------- ------------------ ------------------
Principal amount: $900,000,000 $31,500,000 $42,000,000 $975,000,000 $34,500,000
Credit enhancement: Subordination of Subordination of Subordination of Subordination of Subordination of
the class B notes, the class M notes, the class D notes the class B notes, the class M notes,
the class M notes, the class C notes, and the reserve the class M notes, the class C notes,
the class C notes, the class D notes funds the class C notes, the class D notes
the class D notes and the reserve the class D notes and the reserve
and the reserve funds and the reserve funds
funds funds
Interest rate: Three-month Three-month Three-month Three-month Three-month
USD-LIBOR + USD-LIBOR + USD-LIBOR + USD-LIBOR + USD-LIBOR +
margin margin margin margin margin
Margin: 0.14% p.a. 0.38% p.a. 1.03% p.a. 0.19% p.a. 0.41% p.a.
Until interest payment July 2010 July 2010 July 2010 July 2010 July 2010
date falling in:
And thereafter: N/A 1.38% p.a. 2.03% p.a. N/A 1.41% p.a.
Scheduled redemption July 2003 N/A N/A July 2005 N/A
date:
Outstanding balance at Nil Nil Nil Nil Nil
last payment date:
Interest accrual method: Actual/360 Actual/360 Actual/360 Actual/360 Actual/360
Interest payment dates: Quarterly in arrear on the interest payment dates falling in January, April, July and October of
each year
First interest payment October 2000 October 2000 October 2000 October 2000 October 2000
date:
Final maturity date: July 2005 July 2040 July 2040 July 2007 July 2040
Listing: UK Listing UK Listing UK Listing UK Listing UK Listing
Authority and Authority and Authority and Authority and Authority and
London Stock London Stock London Stock London Stock London Stock
Exchange Exchange Exchange Exchange Exchange
Ratings as at date of AAA/Aaa /AAA AA/Aa3/AA BBB/Baa2/BBB AAA/Aaa/AAA AA/Aa3/AA
issue (S&P/Moody's/
Fitch):
Current ratings (where N/A N/A N/A N/A N/A
relevant)(S&P/Moody's/
Fitch):
-----------------
SERIES 2
CLASS C*
-----------------
Principal amount: $45,000,000
Credit enhancement: Subordination of
the class D notes
and the reserve
funds
Interest rate: Three-month
USD- LIBOR +
margin
Margin: 1.15% p.a.
Until interest payment July 2010
date falling in:
And thereafter: 2.15% p.a.
Scheduled redemption N/A
date:
Outstanding balance at Nil
last payment date:
Interest accrual method: Actual/360
Interest payment dates: Quarterly in
arrear on the
interest payment
dates falling in
January, April,
July and October
of each year
First interest payment October 2000
date:
Final maturity date: July 2040
Listing: UK Listing
Authority and
London Stock
Exchange
Ratings as at date of BBB/Baa2/BBB
issue (S&P/Moody's/
Fitch):
Current ratings (where N/A
relevant)(S&P/Moody's/
Fitch):
S-46
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 1) PLC
---------------------------------------------------------------------------------------------------------
SERIES 3 SERIES 3 SERIES 3 SERIES 3 SERIES 4 SERIES 4
CLASS A1* CLASS A2* CLASS B* CLASS C* CLASS A LASS B
---------------- ---------------- ---------------- --------------- ---------------- ----------------
Principal amount: [GBP]375,000,000 [e]320,000,000 [GBP]24,000,000 [GBP]30,000,000 [GBP]250,000,000 [GBP]11,000,000
Credit enhancement: Subordination Subordination Subordination Subordination Subordination Subordination
of the class B of the class B of the class M of the class D of the class B of the class M
notes, the class notes, the class notes, the class notes and the notes, the class notes, the class
M notes, the M notes, the C notes, the reserve funds M notes, the C notes, the
class C notes, class C notes, class D notes class C notes, class D notes
the class D the class D and the reserve the class D and the reserve
notes and the notes and the funds notes and the funds
reserve funds reserve funds reserve funds
Interest rate: Three-month Three-month Three-month Three-month 6.62% p.a. until Three-month
sterling LIBOR EURIBOR + sterling LIBOR sterling LIBOR the interest sterling LIBOR
+ margin margin + margin + margin payment date + margin
in July 2010
and then three-
month sterling
LIBOR +
margin
Margin: 0.26% p.a. 0.26% p.a. 0.45% p.a. 1.60% p.a. N/A 0.62% p.a.
Until interest payment July 2010 July 2010 July 2010 July 2010 July 2010 July 2010
date falling in:
And thereafter: N/A N/A 1.45% p.a. 2.60% p.a. 1.25% p.a. 1.62% p.a.
Scheduled redemption July 2007 July 2007 N/A N/A July 2010 N/A
date:
Outstanding balance at Nil Nil Nil Nil [GBP]250,000,000 [GBP]11,000,000
last payment date:
Interest accrual method: Actual/365 Actual/360 Actual/365 Actual/365 Actual/365 Actual/365
Interest payment dates: For the series 3 previous notes, the series 4 class B previous notes and the series 4 class C previous
notes, quarterly in arrear on the interest payment dates falling in January, April, July and October of
each year. For the series 4 class A previous notes, until (and including) the interest payment in July
2010, interest will be paid semi-annually in arrear on the 15th day in January and July of each year
(subject to payment being made on business days). If a trigger event occurs or the Financing security is
enforced prior to the interest payment date in July, 2010, principal amounts due and payable on the
series 4 class A previous notes will be paid quarterly on the interest payment dates falling in January,
April, July and October of each year. After the interest payment date in July, 2010 interest and
principal on the series 4 class A previous notes will be paid quarterly in arrear on the interest payment
dates falling in January, April, July and October of each year.
First interest payment October 2000 October 2000 October 2000 October 2000 January 2001 October 2000
date:
Final maturity date: July 2010 July 2010 July 2040 July 2040 July 2013 July 2040
Listing: UK Listing UK Listing UK Listing UK Listing UK Listing UK Listing
Authority and Authority and Authority and Authority and Authority and Authority and
London Stock London Stock London Stock London Stock London Stock London Stock
Exchange Exchange Exchange Exchange Exchange Exchange
Ratings as at date of AAA/Aaa/AAA AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/ AAA/Aaa/AAA AA/Aa3/AA
issue (S&P/ Moody's/ BBB
Fitch):
Current ratings (where N/A N/A N/A N/A AAA/Aaa/AAA AA/Aa3/AA
relevant) (S&P/Moody's/
Fitch):
---------------
SERIES 4
CLASS C
---------------
Principal amount: [GBP]14,000,000
Credit enhancement: Subordination
of the class D
notes and the
reserve funds
Interest rate: Three-month
sterling LIBOR
+ margin
Margin: 1.75% p.a.
Until interest payment July 2010
date falling in:
And thereafter: 2.75% p.a.
Scheduled redemption N/A
date:
Outstanding balance at [GBP]14,000,000
last payment date:
Interest accrual method: Actual/365
Interest payment dates: For the series 3 previous notes, the series 4 class B previous notes and the series 4 class C previous
notes, quarterly in arrear on the interest payment dates falling in January, April, July and October of
each year. For the series 4 class A previous notes, until (and including) the interest payment in July
2010, interest will be paid semi-annually in arrear on the 15th day in January and July of each year
(subject to payment being made on business days). If a trigger event occurs or the Financing security is
enforced prior to the interest payment date in July, 2010, principal amounts due and payable on the
series 4 class A previous notes will be paid quarterly on the interest payment dates falling in January,
April, July and October of each year. After the interest payment date in July, 2010 interest and
principal on the series 4 class A previous notes will be paid quarterly in arrear on the interest payment
dates falling in January, April, July and October of each year.
First interest payment October 2000
date:
Final maturity date: July 2040
Listing: UK Listing
Authority and
London Stock
Exchange
Ratings as at date of BBB/Baa2/
issue (S&P/ Moody's/ BBB
Fitch):
Current ratings (where BBB/Baa2/
relevant) (S&P/Moody's/ BBB
Fitch):
S-47
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 2) PLC
-------------------------------------------------------------------------------------------------
SERIES 1 SERIES 1 SERIES 1 SERIES 2 SERIES 2
CLASS A* CLASS B* CLASS C* CLASS A* CLASS B*
------------------ ------------------ ----------------- ------------------ ------------------
Principal amount: $1,000,000,000 $37,000,000 $49,000,000 $1,000,000,000 $37,000,000
Credit enhancement: Subordination of Subordination of Subordination of Subordination of Subordination of
the class B notes, the class M notes, the class D notes the class B notes, the class M notes,
the class M notes, the class C notes, and the reserve the class M notes, the class C notes,
the class C notes, the class D notes funds the class C notes, the class D notes
the class D notes and the reserve the class D notes and the reserve
and the reserve funds and the reserve funds
funds funds
Interest rate: Three-month Three-month Three-month Three-month Three-month
USD-LIBOR + margin USD-LIBOR + USD-LIBOR + USD-LIBOR + margin USD-LIBOR +
margin margin margin
Margin: 0.09% p.a. 0.35% p.a. 1.20% p.a. 0.18% p.a. 0.44% p.a.
Until interest payment October 2007 October 2007 October 2007 October 2007 October 2007
date falling in:
And thereafter: N/A 1.35% p.a. 2.20% p.a. 0.36% p.a. 1.44% p.a.
Scheduled redemption July 2002 N/A N/A October 2003, N/A
date: January 2004,
April 2004 and
July 2004
Outstanding balance at Nil Nil Nil Nil Nil
last payment date:
Interest accrual method: Actual/360 Actual/360 Actual/360 Actual/360 Actual/360
Interest payment dates: Quarterly in arrear on the interest payment dates falling in January, April, July and October of
each year
First interest payment date: 16 January, 2001 16 January, 2001 16 January, 2001 16 January, 2001 16 January, 2001
Final maturity date: July 2004 July 2040 July 2040 July 2017 July 2040
Listing: UK Listing UK Listing UK Listing UK Listing UK Listing
Authority and Authority and Authority and Authority and Authority and
London Stock London Stock London Stock London Stock London Stock
Exchange Exchange Exchange Exchange Exchange
Ratings as at date of AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB AAA/Aaa/AAA AA/Aa3/AA
issue (S&P/Moody's/
Fitch):
Current ratings (where N/A N/A N/A N/A N/A
relevant) (S&P/Moody's/
Fitch):
------------------
SERIES 2
CLASS C*
------------------
Principal amount: $49,000,000
Credit enhancement: Subordination of
the class D notes
and the reserve
funds
Interest rate: Three-month
USD-LIBOR + margin
Margin: 1.35% p.a.
Until interest payment October 2007
date falling in:
And thereafter: 2.35% p.a.
Scheduled redemption N/A
date:
Outstanding balance at Nil
last payment date:
Interest accrual method: Actual/360
Interest payment dates: Quarterly in arrear on the interest payment dates falling in January, April, July and October of
each year
First interest payment date: 16 January, 2001
Final maturity date: July 2040
Listing: UK Listing
Authority and
London Stock
Exchange
Ratings as at date of BBB/Baa2/BBB
issue (S&P/Moody's/
Fitch):
Current ratings (where N/A
relevant) (S&P/Moody's/
Fitch):
S-48
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 2) PLC
-------------------------------------------------------------------------
SERIES 3 SERIES 3 SERIES 3 SERIES 4
CLASS A* CLASS B* CLASS C* CLASS A*
----------------- ---------------- ----------------- -----------------
Principal amount: [GBP]500,000,000 [GBP]19,000,000 [GBP]25,000,000 [e]500,000,000
Credit enhancement: Subordination of Subordination of Subordination of Subordination of
the class B the class M the class D notes the class B
notes, the class notes, the class and the reserve notes, the class
M notes, the C notes, the funds M notes, the
class C notes, class D notes class C notes,
the class D notes and the reserve the class D notes
and the reserve funds and the reserve
funds funds
Interest rate: Three-month Three-month Three-month Three-month
sterling LIBOR + sterling LIBOR + sterling LIBOR + EURIBOR + margin
margin margin margin
Margin: 0.24% p.a. 0.45% p.a. 1.50% p.a. 0.27% p.a.
Until interest payment date October 2007 October 2007 October 2007 October 2007
falling in:
And thereafter: 0.48% p.a. 1.45% p.a. 2.50% p.a. 0.54% p.a.
Scheduled redemption date: October 2005, N/A N/A N/A
January 2006,
April 2006 and
July 2006
Outstanding balance at last Nil Nil Nil Nil
payment date:
Interest accrual method: Actual/365 Actual/365 Actual/365 Actual/360
Interest payment dates: Quarterly in arrear on the interest payment dates falling in January,
April, July and October of each year
First interest payment date: 16 January, 2001 16 January, 2001 16 January, 2001 16 January, 2001
Final maturity date: July 2023 July 2040 July 2040 July 2040
Listing: UK Listing UK Listing UK Listing UK Listing
Authority and Authority and Authority and Authority and
London Stock London Stock London Stock London Stock
Exchange Exchange Exchange Exchange
Ratings as at date of issue AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB AAA/Aaa/AAA
(S&P/Moody's/Fitch)
Current ratings (where N/A N/A N/A N/A
relevant) (S&P/Moody's/Fitch):
------------------------------------------------
SERIES 4 SERIES 4
CLASS B* CLASS C*
----------------------------- -----------------
Principal amount: [e]21,000,000 [e]35,000,000
Credit enhancement: Subordination of Subordination of
the class M the class D notes
notes, the class C notes, the and the reserve
class D notes funds
and the reserve
funds
Interest rate: Three-month Three-month
EURIBOR + margin EURIBOR + margin
Margin: 0.50% p.a. 1.60% p.a.
Until interest payment date October 2007 October 2007
falling in:
And thereafter: 1.50% p.a. 2.60% p.a.
Scheduled redemption date: N/A N/A
Outstanding balance at last Nil Nil
payment date:
Interest accrual method: Actual/360 Actual/360
Interest payment dates: Quarterly in arrear on the interest payment
dates falling in January, April, July and
October of each year
First interest payment date: 16 January, 2001 16 January, 2001
Final maturity date: July 2040 July 2040
Listing: UK Listing UK Listing
Authority and Authority and
London Stock London Stock
Exchange Exchange
Ratings as at date of issue AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch)
Current ratings (where N/A N/A
relevant) (S&P/Moody's/Fitch):
S-49
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 3) PLC
------------------------------------------------------------------------------------------
SERIES 1 SERIES 1 SERIES 1 SERIES 2 SERIES 2
CLASS A* CLASS B* CLASS C* CLASS A* CLASS B*
----------------- ---------------- ---------------- ----------------- ----------------
Principal amount: $1,060,000,000 $32,500,000 $53,000,000 $1,060,000,000 $32,500,000
Credit enhancement: Subordination of Subordination of Subordination of Subordination of Subordination of
the class B the class M the class D the class B the class M
notes, the class notes, the class notes and the notes, the class notes, the class
M notes, the C notes, the reserve funds M notes, the C notes, the
class C notes, class D notes class C notes, class D notes
the class D notes and the reserve the class D notes and the reserve
and the reserve funds and the reserve funds
funds funds
Interest rate: Three-month Three-month Three-month Three-month Three-month
USD-LIBOR + USD-LIBOR + USD-LIBOR + USD-LIBOR + USD-LIBOR +
margin margin margin margin margin
Margin: 0.12% p.a. 0.35% p.a. 1.20% p.a. 0.16% p.a. 0.40% p.a.
Until interest payment date July 2006 July 2006 July 2006 July 2006 July 2006
falling in:
And thereafter: N/A 0.70% p.a. 2.20% p.a. 0.16% p.a. 0.80% p.a.
Scheduled redemption date: January 2003 N/A N/A January 2005 N/A
Outstanding balance at Nil Nil Nil Nil Nil
last payment date:
Interest accrual method: Actual/360 Actual/360 Actual/360 Actual/360 Actual/360
Interest payment dates: Quarterly in arrear on the interest payment dates falling in January, April, July and
October of each year
First interest payment date: 16 July, 2001 16 July, 2001 16 July, 2001 16 July, 2001 16 July, 2001
Final maturity date: January 2005 July 2040 July 2040 January 2007 July 2040
Listing: UK Listing UK Listing UK Listing UK Listing UK Listing
Authority and Authority and Authority and Authority and Authority and
London Stock London Stock London Stock London Stock London Stock
Exchange Exchange Exchange Exchange Exchange
Ratings as at date of issue AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB AAA/Aaa/AAA AA/Aa3/AA
(S&P/ Moody's/Fitch):
Current ratings (where N/A N/A N/A N/A N/A
relevant) (S&P/Moody's/Fitch):
-----------------
SERIES 2
CLASS C*
-----------------
Principal amount: $53,000,000
Credit enhancement: Subordination of
the class D notes
and the reserve
funds
Interest rate: Three-month
USD-LIBOR +
margin
Margin: 1.27% p.a.
Until interest payment date July 2006
falling in:
And thereafter: 2.27% p.a.
Scheduled redemption date: N/A
Outstanding balance at Nil
last payment date:
Interest accrual method: Actual/360
Interest payment dates: Quarterly in arrear on the interest payment dates falling in January, April, July and
October of each year
First interest payment date: 16 July, 2001
Final maturity date: July 2040
Listing: UK Listing
Authority and
London Stock
Exchange
Ratings as at date of issue BBB/Baa2/BBB
(S&P/ Moody's/Fitch):
Current ratings (where N/A
relevant) (S&P/Moody's/Fitch):
S-50
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 3) PLC
------------------------------------------------------------------------
SERIES 3 CLASS A* SERIES 3 CLASS B*
----------------------------------- -----------------------------------
Principal amount: [e]805,000,000 [e]24,000,000
Credit enhancement: Subordination of the class B Subordination of the class M notes,
notes, the class M notes, the class the class C notes, the class D
C notes, the class D notes and the notes and the reserve funds
reserve funds
Interest rate: Three-month EURIBOR + margin Three-month EURIBOR + margin
Margin: 0.24% p.a. 0.40% p.a.
Until interest payment date falling in: July 2006 July 2006
And thereafter: 0.48% p.a. 0.80% p.a.
Scheduled redemption date: N/A N/A
Outstanding balance at last payment Nil Nil
date:
Interest accrual method: Actual/360 Actual/360
Interest payment dates: Quarterly in arrear on the interest
payment dates falling in January,
April,
July and October of each year
First interest payment date: 16 July, 2001 16 July, 2001
Final maturity date: July 2040 July 2040
Listing: UK Listing Authority and London UK Listing Authority and London
Stock Exchange Stock Exchange
Ratings as at date of issue AAA/Aaa/AAA AA/Aa3/AA
(S&P/Moody's/Fitch):
Current ratings (where relevant) N/A N/A
(S&P/Moody's/Fitch):
----------------------------------
SERIES 3 CLASS C*
----------------------------------
Principal amount: [e]50,000,000
Credit enhancement: Subordination of the class D notes
and the reserve funds
Interest rate: Three-month EURIBOR + margin
Margin: 1.50% p.a.
Until interest payment date falling in: July 2006
And thereafter: 2.50% p.a.
Scheduled redemption date: N/A
Outstanding balance at last payment Nil
date:
Interest accrual method: Actual/360
Interest payment dates: Quarterly in arrear on the
interest payment dates falling in
January, April,
July and October of each year
First interest payment date: 16 July, 2001
Final maturity date: July 2040
Listing: UK Listing Authority and London
Stock Exchange
Ratings as at date of issue BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where relevant) N/A
(S&P/Moody's/Fitch):
S-51
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 4) PLC
------------------------------------------------------
SERIES 1 SERIES 1 SERIES 1
CLASS A* CLASS B* CLASS C*
----------------- ---------------- -----------------
Principal amount: $1,050,000,000 $36,500,000 $54,500,000
Credit enhancement: Subordination of Subordination of Subordination of
the class B the class M the class D notes
notes, the class notes, the class and the reserve
M notes, the C notes, and the funds
class C notes class D notes
and the class D and the reserve
notes and the funds
reserve funds
Interest rate: Three-month Three-month Three-month
USD- LIBOR + USD- LIBOR + USD- LIBOR +
margin margin margin
Margin: 0.19% p.a. 0.39% p.a. 1.20% p.a.
Until interest payment date July 2006 July 2006 July 2006
falling in:
And thereafter: 0.38% p.a. 0.78% p.a. 2.20% p.a.
Scheduled redemption date(s): October 2003, N/A N/A
January 2004,
April 2004,
July 2004
Outstanding balance at last Nil Nil Nil
payment date:
Interest accrual method: Actual/360 Actual/360 Actual/360
Interest payment dates: For all of these previous notes (other than the series 2 class A previous notes),
quarterly in arrear on the interest payment dates falling in January, April, July and
October of each year. For the series 2 class A previous notes, until (and including)
the interest payment date falling in July 2006, interest will be payable annually in
arrear on the 15th day in July of each year (subject to payment being made on business
days). If a trigger event occurs or the previous Financing security is enforced prior
to the interest payment date falling in July 2006, principal and interest amounts due
and payable on the series 2 class A previous notes will be payable quarterly in arrear
on the interest payment dates falling in January, April, July and October of each
year. After the interest payment date falling in July 2006, interest and principal on
the series 2 class A previous notes will be payable quarterly in arrear on the
interest payment dates falling in January, April, July and October of each year.
First interest payment date: 15 October, 2001 15 October, 2001 15 October, 2001
Final maturity date: July 2015 July 2040 July 2040
Listing: UK Listing UK Listing UK Listing
Authority and Authority and Authority and
London Stock London Stock London Stock
Exchange Exchange Exchange
Ratings as at date of issue AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where N/A N/A N/A
relevant) (S&P/Moody's/Fitch):
------------------------------------------------------
SERIES 2 SERIES 2 SERIES 2
CLASS A* CLASS B* CLASS C*
----------------- ---------------- -----------------
Principal amount: [e]800,000,000 [e]35,800,000 [e]53,800,000
Credit enhancement: Subordination of Subordination of Subordination of
the class B the class M the class D notes
notes, the class notes, the class and the reserve
M notes, the C notes and the funds
class C notes class D notes
and the class D and the reserve
notes and the funds
reserve funds
Interest rate: 5.05% until the Three-month Three-month
interest payment EURIBOR + EURIBOR +
date in July 2006 margin margin
and then three-
month EURIBOR
+ margin
Margin: N/A 0.40% p.a. 1.45% p.a.
Until interest payment date July 2006 July 2006 July 2006
falling in:
And thereafter: 0.48% p.a. 0.80% p.a. 2.45% p.a.
Scheduled redemption date(s): July 2006 N/A N/A
Outstanding balance at last Nil Nil Nil
payment date:
Interest accrual method: Actual/Actual Actual/360 Actual/360
(ISMA) until the
interest payment
date in July 2006
and then Actual/
360
Interest payment dates: For all of these previous notes (other than the series 2 class A previous notes),
quarterly in arrear on the interest payment dates falling in January, April, July and
October of each year. For the series 2 class A previous notes, until (and including)
the interest payment date falling in July 2006, interest will be payable annually in
arrear on the 15th day in July of each year (subject to payment being made on business
days). If a trigger event occurs or the previous Financing security is enforced prior
to the interest payment date falling in July 2006, principal and interest amounts due
and payable on the series 2 class A previous notes will be payable quarterly in arrear
on the interest payment dates falling in January, April, July and October of each
year. After the interest payment date falling in July 2006, interest and principal on
the series 2 class A previous notes will be payable quarterly in arrear on the
interest payment dates falling in January, April, July and October of each year.
First interest payment date: 15 July, 2002 15 October, 2001 15 October, 2001
Final maturity date: July 2008 July 2040 July 2040
Listing: UK Listing UK Listing UK Listing
Authority and Authority and Authority and
London Stock London Stock London Stock
Exchange Exchange Exchange
Ratings as at date of issue AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where N/A N/A N/A
relevant) (S&P/Moody's/Fitch):
S-52
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 4) PLC
----------------------------------------------------------------------------------------
SERIES 3 SERIES 3 SERIES 3 SERIES 3 SERIES 3
CLASS A1* CLASS A2* CLASS B* CLASS C* CLASS D1*
---------------- ---------------- ---------------- ---------------- ----------------
Principal amount: [GBP]550,000,000 $410,000,000 $34,500,000 $49,500,000 [GBP]30,000,000
Credit enhancement: Subordination Subordination Subordination Subordination The reserve
of the class B of the class B of the class M of the class D funds
notes, the class notes, the class notes, the class notes and the
M notes, the M notes, the C notes and reserve funds
class C notes class C notes the class D
and the class D and the class D notes and the
notes and the notes and the reserve funds
reserve funds reserve funds
Interest rate: Three-month Three-month Three-month Three-month Three-month
sterling LIBOR USD-LIBOR + USD-LIBOR + USD-LIBOR + sterling LIBOR
+ margin margin margin margin + margin
Margin: 0.23% p.a. 0.23% p.a. 0.44% p.a. 1.30% p.a. 4.75% p.a.
Until interest payment July 2006 July 2006 July 2006 July 2006 July 2006
date falling in:
And thereafter: 0.46% p.a. 0.46% p.a. 0.88% p.a. 2.30% p.a. 5.75% p.a.
Scheduled redemption N/A N/A N/A N/A N/A
date:
Outstanding balance at Nil Nil Nil Nil Nil
last payment date:
Interest accrual method: Actual/365 Actual/360 Actual/360 Actual/360 Actual/365
Interest payment dates: For all of these previous notes, quarterly in arrear on the interest payment dates
falling in January, April, July and October of each year
First interest payment 15 October, 2001 15 October, 2001 15 October, 2001 15 October, 2001 15 October, 2001
date:
Final maturity date: July 2040 July 2040 July 2040 July 2040 July 2040
Listing: UK Listing UK Listing UK Listing UK Listing UK Listing
Authority and Authority and Authority and Authority and Authority and
London Stock London Stock London Stock London Stock London Stock
Exchange Exchange Exchange Exchange Exchange
Ratings as at date of AAA/Aaa/AAA AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB BB/Ba2/BB
issue (S&P/Moody's/Fitch):
Current ratings (where N/A N/A N/A N/A N/A
relevant) (S&P/Moody's/Fitch):
----------------------------------
SERIES 3 SERIES 3
CLASS D2* CLASS D3*
---------------- ----------------
Principal amount: [e]27,000,000 $5,000,000
Credit enhancement: The reserve The reserve
funds funds
Interest rate: Three-month Three-month
EURIBOR + USD-LIBOR +
margin margin
Margin: 4.50% p.a. 4.50% p.a.
Until interest payment July 2006 July 2006
date falling in:
And thereafter: 5.50% p.a. 5.50% p.a.
Scheduled redemption N/A N/A
date:
Outstanding balance at Nil Nil
last payment date:
Interest accrual method: Actual/360 Actual/360
Interest payment dates: For all of these previous notes,
quarterly in arrear on the
interest payment dates falling in
January, April, July and October
of each year
First interest payment 15 October, 2001 15 October, 2001
date:
Final maturity date: July 2040 July 2040
Listing: UK Listing UK Listing
Authority and Authority and
London Stock London Stock
Exchange Exchange
Ratings as at date of BB/Ba2/BB BB/Ba2/BB
issue (S&P/Moody's/Fitch):
Current ratings (where N/A N/A
relevant) (S&P/Moody's/Fitch):
S-53
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 4) PLC
------------------------------------------------------------------------
SERIES 4 CLASS A* SERIES 4 CLASS B*
----------------------------------- -----------------------------------
Principal amount: CHF850,000,000 [GBP]11,000,000
Credit enhancement: Subordination of the class B notes, Subordination of the class M notes,
the class M notes, the class C the class C notes and the class D
notes and the class D notes and notes and the reserve funds
the reserve funds
Interest rate: 3.50% until the interest payment Three-month sterling LIBOR +
date in October 2006 and then margin
three-month CHF-LIBOR + margin
Margin: N/A 0.43% p.a.
Until interest payment date falling in: October 2006 October 2006
And thereafter: 0.36% p.a. 0.86% p.a.
Scheduled redemption date: October 2006 N/A
Outstanding balance at last payment Nil Nil
date:
Interest accrual method: 30/360 until the interest payment Actual/365
date in October 2006 and then
Actual/360
Interest payment dates: For all of these previous notes
(other than the series 4 class A
previous notes), quarterly in
arrear on the interest payment
dates falling in January, April,
July and October of each year. For
the series 4 class A previous
notes, until (and including) the
interest payment date falling in
October 2006, interest will be
payable annually in arrear on the
15th day in October of each year
(subject to payment being made on
business days). If a trigger event
occurs or the Financing security is
enforced prior to the interest
payment date falling in October
2006, principal and interest
amounts due and payable on the
series 4 class A previous notes
will be payable quarterly in arrear
on the interest payment dates
falling in January, April, July and
October of each year. After the
interest payment date falling in
October 2006, interest and
principal on the series 4 class A
previous notes will be payable
quarterly in arrear on the interest
payment dates falling in January,
April, July and October of each
year.
First interest payment date: 15 October, 2001 15 October, 2001
Final maturity date: October 2009 July 2040
Listing: SWX Swiss Exchange UK Listing Authority and London
Stock Exchange
Ratings as at date of issue AAA/Aaa/AAA AA/Aa3/AA
(S&P/Moody's/Fitch):
Current ratings (where relevant) N/A N/A
(S&P/Moody's/Fitch):
----------------------------------
SERIES 4 CLASS C*
----------------------------------
Principal amount: [GBP]19,000,000
Credit enhancement: Subordination of the class D notes
and the reserve funds
Interest rate: Three-month sterling LIBOR +
margin
Margin: 1.50% p.a.
Until interest payment date falling in: October 2006
And thereafter: 2.50% p.a.
Scheduled redemption date: N/A
Outstanding balance at last payment Nil
date:
Interest accrual method: Actual/365
Interest payment dates: For all of these previous notes
(other than the series 4 class A
previous notes), quarterly in arrear
on the interest payment dates falling
in January, April, July and October of
each year. For the series 4 class A
previous notes, until (and including)
the interest payment date falling in
October 2006, interest will be payable
annually in arrear on the 15th day in
October of each year (subject to
payment being made on business days).
If a trigger event occurs or the
Financing security is enforced prior
to the interest payment date falling
in October 2006, principal and
interest amounts due and payable on
the series 4 class A previous notes
will be payable quarterly in arrear
on the interest payment dates falling
in January, April, July and October of
each year. After the interest payment
date falling in October 2006, interest
and principal on the series 4 class A
previous notes will be payable
quarterly in arrear on the interest
payment dates falling in January,
April, July and October of each year.
First interest payment date: 15 October, 2001
Final maturity date: July 2040
Listing: UK Listing Authority and London
Stock Exchange
Ratings as at date of issue BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where relevant) N/A
(S&P/Moody's/Fitch):
S-54
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 5) PLC
SERIES 1 SERIES 1 SERIES 1 SERIES 2 SERIES 2
CLASS A* CLASS B* CLASS C* CLASS A1* CLASS A2*
----------------- ---------------- ----------------- ----------------- -----------------
Principal amount: $1,000,000,000 $35,000,000 $52,000,000 $750,000,000 CHF400,000,000
Credit enhancement: Subordination of Subordination of Subordination of Subordination of Subordination of
the class B the class M the class D notes the class B the class B
notes, the class notes, the class and the reserve notes, the class notes, the class
M notes, the C notes, the funds M notes, the M notes, the
class C notes, class D notes class C notes, class C notes,
the class D notes and the reserve the class D notes the class D notes
and the reserve funds and the reserve and the reserve
funds funds funds
Interest rate: One-month USD- Three-month Three-month Three-month 2.5% p.a. until
LIBOR + margin USD-LIBOR + USD-LIBOR + USD-LIBOR + the interest
margin margin margin payment date in
October 2004
and then three-
month CHF LIBOR
+ margin
Margin: 0.01% p.a. 0.35% p.a. 1.35% p.a. 0.20% p.a. N/A
Until interest payment date October 2002 October 2006 October 2006 October 2006 October 2004
falling in:
And thereafter: N/A 0.70% p.a. 2.35% p.a. N/A 0.22% p.a.
Scheduled redemption date(s): July 2002 and N/A N/A October 2004 October 2004
October 2002
Outstanding balance at last Nil Nil Nil Nil Nil
payment date:
Interest accrual method: Actual/360 Actual/360 Actual/360 Actual/360 30/360 until the
interest payment
date in October
2004 and then
Actual/360
Interest payment dates: For the series 1 class A previous notes, monthly in arrear on the interest payment date falling in
each consecutive month. For the other series 1 previous notes and for all of the series 2 previous
notes (other than the series 2 class A2 previous notes), quarterly in arrear on the interest
payment dates falling in January, April, July and October of each year. For the series 2 class A2
previous notes, until (and including) the interest payment date falling in October 2004, interest
will be payable annually in arrear on the 15th day in October of each year (subject to payment
being made on business days). If a trigger event occurs or the previous Financing security is
enforced prior to the interest payment date falling in October 2002, interest and principal due
and payable on the series 1 class A previous notes will be payable quarterly in arrear on the
interest payment dates falling in January, April, July and October in 2002, as applicable. If a
trigger event occurs or the previous Financing security is enforced prior to the interest payment
date falling in October 2004, interest and principal due and payable on the series 2 class A2
previous notes will be payable quarterly in arrear on the interest payment dates falling in
January, April, July and October of each year. After the interest payment date falling in October
2004, interest and principal on the series 2 class A2 previous notes will be payable quarterly in
arrear on the interest payment dates falling in January, April, July and October of each year.
First interest payment date: 17 December, 15 January, 2002 15 January, 2002 15 January, 2002 15 October, 2002
2001
Final maturity date: October 2002 July 2040 July 2040 October 2006 October 2006
Listing: UK Listing UK Listing UK Listing UK Listing SWX Swiss
Authority and Authority and Authority and Authority and Exchange
London Stock London Stock London Stock London Stock
Exchange Exchange Exchange Exchange
Ratings as at date of issue A-1+/P-1/F1+ AA/Aa3/AA BBB/Baa2/BBB AAA/Aaa/AAA AAA/Aaa/AAA
(S&P/Moody's/Fitch):
Current ratings (where N/A N/A N/A N/A N/A
relevant) (S&P/Moody's/Fitch):
----------------
SERIES 2
CLASS B*
----------------
Principal amount: $35,000,000
Credit enhancement: Subordination of
the class M
notes, the class
C notes, the
class D notes
and the reserve
funds
Interest rate: Three-month
USD-LIBOR +
margin
Margin: 0.43% p.a.
Until interest payment date October 2006
falling in:
And thereafter: 0.86% p.a.
Scheduled redemption date(s): N/A
Outstanding balance at last Nil
payment date:
Interest accrual method: Actual/360
Interest payment dates: For the series 1 class A previous notes, monthly in arrear on the interest payment date falling in
each consecutive month. For the other series 1 previous notes and for all of the series 2 previous
notes (other than the series 2 class A2 previous notes), quarterly in arrear on the interest
payment dates falling in January, April, July and October of each year. For the series 2 class A2
previous notes, until (and including) the interest payment date falling in October 2004, interest
will be payable annually in arrear on the 15th day in October of each year (subject to payment
being made on business days). If a trigger event occurs or the previous Financing security is
enforced prior to the interest payment date falling in October 2002, interest and principal due and
payable on the series 1 class A previous notes will be payable quarterly in arrear on the interest
payment dates falling in January, April, July and October in 2002, as applicable. If a trigger
event occurs or the previous Financing security is enforced prior to the interest payment date
falling in October 2004, interest and principal due and payable on the series 2 class A2 previous
notes will be payable quarterly in arrear on the interest payment dates falling in January, April,
July and October of each year. After the interest payment date falling in October 2004, interest
and principal on the series 2 class A2 previous notes will be payable quarterly in arrear on the
interest payment dates falling in January, April, July and October of each year.
First interest payment date: 15 January, 2002
Final maturity date: July 2040
Listing: UK Listing
Authority and
London Stock
Exchange
Ratings as at date of issue AA/Aa3/AA
(S&P/Moody's/Fitch):
Current ratings (where N/A
relevant) (S&P/Moody's/Fitch):
S-55
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-----------------------------------------------------------------
SERIES 2 SERIES 3 SERIES 3
CLASS C* CLASS A1* CLASS A2*
----------------- -------------------------- ------------------
Principal amount: $52,000,000 [e]600,000,000 [GBP]500,000,000
Credit enhancement: Subordination of Subordination of Subordination of
the class D notes the class B notes, the class B notes,
and the reserve the class M notes, the class M notes,
funds the class C notes, the class C notes,
the class D notes the class D notes
and the reserve and the reserve
funds funds
Interest rate: Three-month 4.25% p.a. until Three-month
USD-LIBOR + the interest sterling LIBOR +
margin payment date in margin
October 2006 and
then three-month
EURIBOR +
margin
Margin: 1.45% p.a. N/A 0.23% p.a.
Until interest payment date falling in: October 2006 October 2006 October 2006
And thereafter: 2.45% p.a. 0.42% p.a. 0.46% p.a.
Scheduled redemption date(s): N/A October 2006 N/A
Outstanding balance at last payment date: Nil Nil Nil
Interest accrual method: Actual/360 Actual/Actual Actual/365
(ISMA) until the
interest payment
date in October
2006 and then
Actual/360
Interest payment dates: For all of the series 3 previous notes (other than the series 3 class A1 previous
notes), quarterly in arrear on the interest payment dates falling in January, April,
July and October of each year. For the series 3 class A1 previous notes, until (and
including) the interest payment date in October 2006, interest will be payable annually
in arrear on the 15th day in October of each year (subject to payment being made on
business days). If a trigger event occurs or the previous Financing security is enforced
prior to the interest payment date in October 2006, interest and principal due and
payable on the series 3 class A1 previous notes will be payable quarterly in
arrear on the interest payment dates falling in January, April, July and October of
each year. After the interest payment date falling in October 2006, interest and
principal on the series 3 class A1 previous notes will be payable quarterly in arrear
on the interest payment dates falling in January, April, July and October of each year.
First interest payment date: 15 January, 2002 15 October, 2002 15 January, 2002
Final maturity date: July 2040 October 2008 July 2040
Listing: UK Listing UK Listing UK Listing
Authority and Authority and Authority and
London Stock London Stock London Stock
Exchange Exchange Exchange
Ratings as at date of issue BBB/Baa2/BBB AAA/Aaa/AAA AAA/Aaa/AAA
(S&P/Moody's/Fitch):
Current ratings (where relevant) (S&P/ N/A N/A N/A
Moody's/Fitch):
-------------------------------------
SERIES 3 SERIES 3
CLASS B* CLASS C*
------------------ -----------------
Principal amount: [e]53,000,000 [e]76,000,000
Credit enhancement: Subordination of Subordination of
the class M notes, the class D notes
the class C notes, and the reserve
the class D notes funds
and the reserve
funds
Interest rate: Three-month Three-month
EURIBOR + EURIBOR + margin
margin
Margin: 0.40% p.a. 1.47% p.a.
Until interest payment date falling in: October 2006 October 2006
And thereafter: 0.80% p.a. 2.47% p.a.
Scheduled redemption date(s): N/A N/A
Outstanding balance at last payment date: Nil Nil
Interest accrual method: Actual/360 Actual/360
Interest payment dates: For all of the series 3 previous notes (other than the series 3 class A1 previous
notes), quarterly in arrear on the interest payment dates falling in January, April,
July and October of each year. For the series 3 class A1 previous notes, until (and
including) the interest payment date in October 2006, interest will be payable annually
in arrear on the 15th day in October of each year (subject to payment being made on
business days). If a trigger event occurs or the previous Financing security is
enforced prior to the interest payment date in October 2006, interest and principal due
and payable on the series 3 class A1 previous notes will be payable quarterly in arrear
on the interest payment dates falling in January, April, July and October of each year.
After the interest payment date falling in October 2006, interest and principal on the
series 3 class A1 previous notes will be payable quarterly in arrear on the interest
payment dates falling in January, April, July and October of each year.
First interest payment date: 15 January, 2002 15 January, 2002
Final maturity date: July 2040 July 2040
Listing: UK Listing UK Listing
Authority and Authority and
London Stock London Stock
Exchange Exchange
Ratings as at date of issue AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where relevant) (S&P/ N/A N/A
Moody's/Fitch):
S-56
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----------------------------------------------------------------------------
SERIES 1 CLASS A* SERIES 1 CLASS B* SERIES 1 CLASS C* SERIES 2 CLASS A*
------------------- ----------------- ----------------- -----------------
Principal amount: $1,500,000,000 $50,000,000 $86,000,000 $1,250,000,000
Credit enhancement: Subordination of Subordination of Subordination of Subordination of
the class B the class M the class D the class B
notes, the class notes, the class notes and the notes, the class
M notes, the C notes, the reserve funds M notes, the
class C notes, class D notes class C notes,
the class D notes and the reserve the class D notes
and the reserve funds and the reserve
funds funds
Interest rate: One-month USD-LIBOR Three-month Three-month Three-month
+ margin USD-LIBOR + USD-LIBOR + USD-LIBOR +
margin margin margin
Margin: 0.00% p.a. 0.375% p.a. 1.35% p.a. 0.17% p.a.
Until interest payment date October 2003 April 2008 April 2008 April 2008
falling in:
And thereafter: N/A 0.75% p.a. 2.35% p.a. N/A
Scheduled redemption date(s): July 2003 and N/A N/A April 2005
October 2003
Outstanding balance at last Nil Nil Nil Nil
payment date:
Interest accrual method: Actual/360 Actual/360 Actual/360 Actual/360
Interest payment dates: For the series 1 class A previous notes, monthly in arrear on the interest payment date
falling in each consecutive month. For the other series 1 Financing notes and for all
of the series 2 previous notes, quarterly in arrear on the interest payment dates
falling in January, April, July and October of each year. If a trigger event occurs or
the Financing security is enforced prior to the interest payment date falling in
October 2003, interest and principal due and payable on the series 1 class A previous
notes will be payable quarterly in arrear on the interest payment dates falling in
January, April, July and October, as applicable.
First interest payment date: 15 December, 2002 15 January, 2003 15 January, 2003 15 January, 2003
Final maturity date: October 2003 July 2040 July 2040 April 2008
Listing: UK Listing UK Listing UK Listing UK Listing
Authority and Authority and Authority and Authority and
London Stock London Stock London Stock London Stock
Exchange Exchange Exchange Exchange
Ratings as at date of issue A-1+/P-1/F1+ AA/Aa3/AA BBB/Baa2/BBB AAA/Aaa/AAA
(S&P/Moody's/Fitch):
Current ratings (where N/A N/A N/A N/A
relevant) (S&P/Moody's/Fitch):
------------------------------------
SERIES 2 CLASS B* SERIES 2 CLASS C*
----------------- -----------------
Principal amount: $42,000,000 $71,000,000
Credit enhancement: Subordination of Subordination of
the class M the class D notes
notes, the class and the reserve
C notes, the funds
class D notes
and the reserve
funds
Interest rate: Three-month Three-month
USD-LIBOR + USD-LIBOR +
margin margin
Margin: 0.41% p.a. 1.45% p.a.
Until interest payment date April 2008 April 2008
falling in:
And thereafter: 0.82% p.a. 2.45% p.a.
Scheduled redemption date(s): N/A N/A
Outstanding balance at last Nil Nil
payment date:
Interest accrual method: Actual/360 Actual/360
Interest payment dates: For the series 1 class A previous notes, monthly in arrear on the interest payment date falling in
each consecutive month. For the other series 1 Financing notes and for all of the series 2 previous
notes, quarterly in arrear on the interest payment dates falling in January, April, July and
October of each year. If a trigger event occurs or the Financing security is enforced prior to the
interest payment date falling in October 2003, interest and principal due and payable on the
series 1 class A previ ous notes will be payable quarterly in arrear on the interest payment dates
falling in January, April, July and October, as applicable.
First interest payment date: 15 January, 2003 15 January, 2003
Final maturity date: July 2040 July 2040
Listing: UK Listing UK Listing
Authority and Authority and
London Stock London Stock
Exchange Exchange
Ratings as at date of issue AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where N/A N/A
relevant) (S&P/Moody's/Fitch):
S-57
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 6) PLC
---------------------------------------------------------------------
SERIES 3 CLASS A* SERIES 3 CLASS B* SERIES 3 CLASS C*
-------------------- --------------------- ------------------------
Principal amount: [e]1,000,000,000 [e]34,000,000 [e]57,000,000
Credit enhancement: Subordination of the Subordination of the Subordination of the
class B notes, class M notes, class D notes
the class M notes, the class C notes, and the reserve funds
the class C the class D notes
notes, the class D and the reserve funds
notes and the
reserve funds
Interest rate: Three-month Three-month Three-month
EURIBOR + margin EURIBOR + margin EURIBOR + margin
Margin: 0.24% p.a. 0.50% p.a. 1.50% p.a.
Until interest payment date April 2008 April 2008 April 2008
falling in:
And thereafter: 0.48% p.a. 1.00% p.a. 2.50% p.a.
Scheduled redemption date(s): April 2007 N/A N/A
Outstanding balance at last Nil Nil Nil
payment date:
Interest accrual method: Actual/360 Actual/360 Actual/360
Interest payment dates: For all of the series 3 previous notes,
quarterly in arrear on the interest payment
dates falling in January, April, July and
October of each year.
First interest payment date: 15 January 2003 15 January, 2003 15 January, 2003
Final maturity date: October 2009 July 2040 July 2040
Listing: UK Listing Authority UK Listing Authority UK Listing Authority and
and London and London London Stock Exchange
Stock Exchange Stock Exchange
Ratings as at date of issue AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where relevant) N/A N/A N/A
(S&P/Moody's/Fitch):
S-58
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 6) PLC
------------------------------------------------------------------------------------
SERIES 4 CLASS A1* SERIES 4 CLASS A2* SERIES 4 CLASS B SERIES 4 CLASS C
-------------------- ------------------ -------------------- --------------------
Principal amount: $1,000,000,000 CHF300,000,000 $40,000,000 $69,000,000
Credit enhancement: Subordination of Subordination of Subordination of Subordination of
the class B the class B notes, the class M notes, the class D notes
notes, the class the class M notes, the class C notes, and the reserve
M notes, the the class C notes, the class D notes funds
class C notes, the class D notes and the reserve
the class D and the reserve funds
notes and the funds
reserve funds
Interest rate: Three-month USD- 2.50% p.a. until Three-month USD- Three-month USD-
LIBOR + margin the interest LIBOR + margin LIBOR + margin
payment date
in October 2007
and then three-
month CHF-
LIBOR + margin
Margin: 0.24% p.a. N/A 0.52% p.a. 1.55% p.a.
Until interest payment date April 2008 October 2007 April 2008 April 2008
falling in:
And thereafter: 0.48% p.a. 0.35% p.a. 1.04% p.a. 2.55% p.a.
Scheduled redemption date(s): October 2007 October 2007 N/A N/A
Outstanding balance at last Nil Nil $40,000,000 $69,000,000
payment date:
Interest accrual method: Actual/360 30/360 until Actual/360 Actual/360
the interest
payment date
in October
2007 and then
Actual/360
Interest payment dates: For the series 4 previous notes (other than the series 4 class A2 previous notes), quarterly in
arrear on the interest payment dates falling in January, April, July and October of each year.
For the series 4 class A2 previous notes, until (and including) the interest payment date falling
in October 2007 interest will be payable annually in arrear on the 15th day in October of each
year (subject to payment being made on business days). If a trigger event occurs or the Financing
security is enforced prior to the interest payment date falling in October 2007, interest and
principal due and payable on the series 4 class A2 previous notes will be payable quarterly in
arrear on the interest payment dates falling in January, April, July and October of each year.
After the interest payment date falling in October 2007 interest and principal on the series 4
class A2 previous notes will be payable quarterly in arrear on the interest payment dates
falling in January, April, July and October of each year.
First interest payment date: 15 January, 2003 15 October, 2003 15 January, 2003 15 January, 2003
Final maturity date: October 2009 October 2009 July 2040 July 2040
Listing: UK Listing Authority SWX Swiss Exchange UK Listing Authority UK Listing Authority
and London Stock and London Stock and London Stock
Exchange Exchange Exchange
Ratings as at date of issue AAA/Aaa/AAA AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where relevant) N/A N/A AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
S-59
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 6) PLC
----------------------------------------------------------------
SERIES 5 CLASS A SERIES 5 CLASS B SERIES 5 CLASS C
-------------------- -------------------- --------------------
Principal amount: [GBP]500,000,000 [GBP]17,000,000 [GBP]29,000,000
Credit enhancement: Subordination of Subordination of Subordination of
the class B notes, the class M notes, the class D
the class M notes, the class C notes, notes and the
the class C notes, the class D notes reserve funds
the class D notes and the reserve
and the reserve funds
funds
Interest rate: Three-month Three-month Three-month
sterling-LIBOR sterling-LIBOR + sterling-LIBOR
+ margin margin + margin
Margin: 0.24% p.a. 0.52% p.a. 1.55% p.a.
Until interest payment date falling in: April 2008 April 2008 April 2008
And thereafter: 0.48% p.a. 1.04% p.a. 2.55% p.a.
Scheduled redemption date(s): N/A N/A N/A
Outstanding balance at last payment date: [GBP]500,000,000 [GBP]17,000,000 [GBP]29,000,000
Interest accrual method: Actual/365 Actual/365 Actual/365
Interest payment dates: For all of the series 5 previous notes, quarterly in arrear on
the interest payment dates falling in January, April, July and
October of each year.
First interest payment date: 15 January, 2003 15 January, 2003 15 January, 2003
Final maturity date: July 2040 July 2040 July 2040
Listing: UK Listing Authority UK Listing Authority UK Listing Authority
and London Stock and London Stock and London Stock
Exchange Exchange Exchange
Ratings as at date of issue AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where relevant) AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
S-60
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 7) PLC
-------------------------------------------------------------------------
SERIES 1 CLASS A* SERIES 1 CLASS B* SERIES 1 CLASS M*
--------------------------- -------------------- ----------------------
Principal amount: $750,000,000 $22,500,000 $38,250,000
Credit enhancement: Subordination of Subordination of Subordination of
the class B notes, the class M notes, the class C notes, the
the class M notes, the class C notes, class D notes and
the class C notes, the class D notes the reserve funds
the class D notes and the reserve
and the reserve funds
funds
Interest rate: One-month USD- Three-month USD- Three-month USD-
LIBOR + margin LIBOR + margin LIBOR + margin
Margin: Minus 0.04% p.a. 0.23% p.a. 0.75% p.a.
Until interest payment date April 2004 April 2008 April 2008
falling in:
And thereafter: N/A 0.46% p.a. 1.50% p.a.
Scheduled redemption date(s): January 2004 and April 2004 N/A January 2006
Outstanding balance at Nil Nil Nil
last payment date:
Interest accrual method: Actual/360 Actual/360 Actual/360
Interest payment dates: For the series 1 class A notes, monthly in arrear on the interest payment date falling in each
consecutive month. For the other series 1 notes and for all of the series 2 notes, quarterly in
arrear on the interest payment dates falling in January, April, July and October of each year.
If a trigger event occurs or the Financing security is enforced prior to the interest payment
date falling in April 2004, interest and principal due and payable on the series 1 class A notes
will be payable quarterly in arrear on the interest payment dates falling in January, April,
July and October, as applicable.
First interest payment date: 15 April, 2003 15 July, 2003 15 July, 2003
Final maturity date: April 2004 July 2040 July 2040
Listing: UK Listing Authority UK Listing Authority UK Listing Authority
and London Stock and London Stock and London Stock
Exchange Exchange Exchange
Ratings as at date of issue A-1+/P-1/F1+ AA/Aa3/AA A/A2/A
(S&P/Moody's/Fitch):
Current ratings (where relevant) N/A N/A N/A
(S&P/Moody's/Fitch):
--------------------------------------------------------------------------------
SERIES 2 CLASS A* SERIES 2 CLASS B* SERIES 2 CLASS M*
------------------------------------ -------------------- --------------------
Principal amount: $1,250,000,000 $37,500,000 $63,750,000
Credit enhancement: Subordination of the Subordination of the Subordination of the
class B notes, the class M notes, the class C notes, the
class M notes the class C notes, the class C notes, the class D notes and
class D notes and class D notes and the reserve funds
the reserve funds the reserve funds
Interest rate: Three-month USD- Three-month USD- Three-month USD-
LIBOR + margin LIBOR + margin LIBOR + margin
Margin: 0.15% p.a. 0.35% p.a. 0.80% p.a.
Until interest payment date January 2008 April 2008 April 2008
falling in:
And thereafter: N/A 0.70% p.a. 1.60% p.a.
Scheduled redemption date(s): N/A N/A N/A
Outstanding balance at Nil Nil Nil
last payment date:
Interest accrual method: Actual/360 Actual/360 Actual/360
Interest payment dates: For the series 1 class A notes, monthly in arrear on the interest payment date falling in each
consecutive month. For the other series 1 notes and for all of the series 2 notes, quarterly in
arrear on the interest payment dates falling in January, April, July and October of each year.
If a trigger event occurs or the Financing security is enforced prior to the interest payment
date falling in April 2004, interest and principal due and payable on the series 1 class A notes
will be payable quarterly in arrear on the interest payment dates falling in January, April,
July and October, as applicable.
First interest payment date: 15 July, 2003 15 July, 2003 15 July, 2003
Final maturity date: January 2008 July 2040 July 2040
Listing: UK Listing Authority UK Listing Authority UK Listing Authority
and London Stock and London Stock and London Stock
Exchange Exchange Exchange
Ratings as at date of issue AAA/Aaa/AAA AA/Aa3/AA A/A2/A
(S&P/Moody's/Fitch):
Current ratings (where relevant) N/A N/A N/A
(S&P/Moody's/Fitch):
S-61
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-----------------------------------------------------------------------
SERIES 3 CLASS A* SERIES 3 CLASS B* SERIES 3 CLASS M*
--------------------------- -------------------- --------------------
Principal amount: $500,000,000 [GBP]15,000,000 [GBP]20,000,000
Credit enhancement: Subordination of Subordination of Subordination of
the class B notes, the class M notes, the class C notes,
the class M notes, class C notes, the class D notes
the class C notes, class D notes and and the reserve
the class D notes the reserve funds funds
and the reserve
funds
Interest rate: Three-month Three-month Three-month
USD-LIBOR + sterling-LIBOR + sterling-LIBOR +
margin margin margin
Margin: 0.23% p.a. 0.50% p.a. 0.80% p.a.
Until interest payment date falling in: April 2008 April 2008 April 2008
And thereafter: 0.46% p.a. 1.00% p.a. 1.60% p.a.
Scheduled redemption date(s): January 2007 and April 2007 N/A N/A
Outstanding balance at last payment date: Nil Nil Nil
Interest accrual method: Actual/360 Actual/365 Actual/365
Interest payment dates: For all of the series 3 notes, quarterly
in arrear on the interest
payment dates falling in January, April,
July and October of each year.
First interest payment date: 15 July, 2003 15 July, 2003 15 July, 2003
Final maturity date: July 2020 July 2040 July 2040
Listing: UK Listing Authority UK Listing Authority UK Listing Authority
and London Stock and London Stock and London Stock
Exchange Exchange Exchange
Ratings as at date of issue AAA/Aaa/AAA AA/Aa3/AA A/A2/A
(S&P/Moody's/Fitch):
Current ratings (where relevant) N/A N/A N/A
(S&P/Moody's/Fitch):
S-62
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 7) PLC
--------------------------------------------------------------------------------------
SERIES 4 CLASS A1 SERIES 4 CLASS A2 SERIES 4 CLASS B SERIES 4 CLASS M
-------------------- -------------------- -------------------- --------------------
Principal amount: [e]500,000,000 [GBP]250,000,000 [e]41,000,000 [e]56,000,000
Credit enhancement: Subordination of Subordination of Subordination of Subordination of
the class B notes, the class B notes, the class M notes, the class C notes,
the class M notes, the class M notes, the class C notes, the class D notes
the class C notes, the class C notes, the class D notes and the reserve
the class D notes the class D notes and the reserve funds
and the reserve and the reserve funds
funds funds
Interest rate: Three-month Three-month Three-month Three-month
EURIBOR + margin sterling- EURIBOR EURIBOR
LIBOR + margin + margin + margin
Margin: 0.26% p.a. 0.26% p.a. 0.53% p.a. 0.80% p.a.
Until interest payment date April 2008 April 2008 April 2008 April 2008
falling in:
And thereafter: 0.52% p.a. 0.52% p.a. 1.06% p.a. 1.60% p.a.
Scheduled redemption date(s): N/A N/A N/A N/A
Outstanding balance at last [e]500,000,000 [GBP]250,000,000 [e]41,000,000 [e]56,000,000
payment date:
Interest accrual method: Actual/360 Actual/365 Actual/360 Actual/360
Interest payment dates: For all of the series 4 notes, quarterly in arrear on the interest payment dates
falling in January, April, July and October of each year.
First interest payment date: 15 July, 2003 15 July, 2003 15 July, 2003 15 July, 2003
Final maturity date: July 2040 July 2040 July 2040 July 2040
Listing: UK Listing Authority UK Listing Authority UK Listing Authority UK Listing Authority
and London Stock and London Stock and London Stock and London Stock
Exchange Exchange Exchange Exchange
Ratings as at date of issue AAA/Aaa/AAA AAA/Aaa/AAA AA/Aa3/AA A/A2/A
(S&P/Moody's/Fitch):
Current ratings (where relevant) AAA/Aaa/AAA AAA/Aaa/AAA AA/Aa3/AA A/A2/A
(S&P/Moody's/Fitch):
S-63
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--------------------------------------------------------------------------------------
SERIES 1 CLASS A* SERIES 1 CLASS B* SERIES 1 CLASS C* SERIES 2 CLASS A*
-------------------- -------------------- -------------------- --------------------
Principal amount: $1,850,000,000 $62,900,000 $107,300,000 $1,500,000,000
Credit enhancement: Subordination of Subordination of Subordination of Subordination of
the class B notes, the class M notes, the class D notes the class B notes,
the class M notes, the class C notes, and the reserve the class M notes,
the class C notes, the class D notes funds the class C notes,
the class D notes and the reserve the class D notes
and the reserve funds and the reserve
funds funds
Interest rate: One-month USD- Three-month USD- Three-month USD- Three-month USD-
LIBOR + margin LIBOR + margin LIBOR + margin LIBOR + margin
Margin: Minus 0.05% p.a. 0.13% p.a. 0.62% p.a. 0.08% p.a.
Until interest payment date April 2005 January 2009 January 2009 January 2009
falling in:
And thereafter: N/A 0.26% p.a. 1.62% p.a. 0.16% p.a.
Scheduled redemption date(s): April 2005 N/A N/A January 2007
Outstanding balance at last Nil Nil Nil Nil
payment date:
Interest accrual method: Actual/360 Actual/360 Actual/360 Actual/360
Interest payment dates: For the series 1 class A notes, monthly in arrear starting with the interest payment
date falling in May 2004 and then on the interest payment date falling in each
consecutive month. For the other series 1 notes and for all of the series 2 notes,
quarterly in arrear on the interest payment dates falling in January, April, July and
October of each year. If a trigger event occurs or the Financing security is enforced
prior to the interest payment date falling in April 2005, interest and principal due
and payable on the series 1 class A notes will be payable quarterly in arrear on the
interest payment dates falling in January, April, July and October, as applicable.
First interest payment date: 17 May, 2004 15 July, 2004 15 July, 2004 15 July, 2004
Final maturity date: April 2005 July 2040 July 2040 April 2011
Listing: UK Listing Authority UK Listing Authority UK Listing Authority UK Listing Authority
and London Stock and London Stock and London Stock and London Stock
Exchange Exchange Exchange Exchange
Ratings as at date of issue A-1+/P-1/F1+ AA/Aa3/AA BBB/Baa2/BBB AAA/Aaa/AAA
(S&P/Moody's/Fitch):
Current ratings (where relevant) N/A N/A N/A N/A
(S&P/Moody's/Fitch):
-----------------------------------------------
SERIES 2 CLASS B* SERIES 2 CLASS C*
------------------------- --------------------
Principal amount: $51,000,000 $87,000,000
Credit enhancement: Subordination of Subordination of the
the class M notes, class D notes and
the class C notes, the reserve funds
the class D notes
and the reserve
funds
Interest rate: Three-month USD- Three-month USD-
LIBOR + margin LIBOR + margin
Margin: 0.17% p.a. 0.72% p.a.
Until interest payment date January 2009 January 2009
falling in:
And thereafter: 0.34% p.a. 1.72% p.a.
Scheduled redemption date(s): N/A N/A
Outstanding balance at last Nil Nil
payment date:
Interest accrual method: Actual/360 Actual/360
Interest payment dates: For the series 1 class A notes, monthly in
arrear starting with the interest payment date
falling in May 2004 and then on the interest
payment date falling in each consecutive month.
For the other series 1 notes and for all of the
series 2 notes, quarterly in arrear on the
interest payment dates falling in January,
April, July and October of each year. If a
trigger event occurs or the Financing security
is enforced prior to the interest payment date
falling in April 2005, interest and principal
due and payable on the series 1 class A notes
will be payable quarterly in arrear on the
interest payment dates falling in January,
April, July and October, as applicable.
First interest payment date: 15 July, 2004 15 July, 2004
Final maturity date: July 2040 July 2040
Listing: UK Listing Authority UK Listing Authority
and London Stock Exchange and London Stock
Exchange
Ratings as at date of issue AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where relevant) N/A N/A
(S&P/Moody's/Fitch):
S-64
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 8) PLC
---------------------------------------------------------------------
SERIES 3 CLASS A SERIES 3 CLASS B SERIES 3 CLASS C
------------------------- -------------------- --------------------
Principal amount: [e]990,000,000 [e]34,000,000 [e]57,500,000
Credit enhancement: Subordination of Subordination of Subordination of
the class B notes, the class M notes, the class D notes
the class M notes, the class C notes, and the reserve
the class C notes, the class D notes funds
the class D notes and the reserve
and the reserve funds
funds
Interest rate: Three-month Three-month Three-month
EURIBOR + EURIBOR + EURIBOR +
margin margin margin
Margin: 0.15% p.a. 0.27% p.a. 0.85% p.a.
Until interest payment date falling in: January 2009 January 2009 January 2009
And thereafter: 0.30% p.a. 0.54% p.a. 1.85% p.a.
Scheduled redemption date(s): April 2008, July 2008 and N/A N/A
October 2008
Outstanding balance at last payment [e]990,000,000 [e]34,000,000 [e]57,500,000
date:
Interest accrual method: Actual/360 Actual/360 Actual/360
Interest payment dates: For all of the series 3 notes, quarterly
in arrear on the interest payment dates
falling in January, April, July and October
of each year.
First interest payment date: 15 July, 2004 15 July, 2004 15 July, 2004
Final maturity date: April 2020 July 2040 July 2040
Listing: UK Listing Authority UK Listing Authority UK Listing Authority
and London and London and London
Stock Exchange Stock Exchange Stock Exchange
Ratings as at date of issue AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where relevant) AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
S-65
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 8) PLC
------------------------------------------------------------------------------------------
CLASS OF NOTES SERIES 4 CLASS A1 SERIES 4 CLASS A2 SERIES 4 CLASS B SERIES 4 CLASS C
-------------------- -------------------- -------------------- ------------------------
Principal amount: [GBP]900,000,000 $500,000,0000 [GBP]39,900,000 [GBP]68,000,000
Credit enhancement: Subordination of Subordination of Subordination of Subordination of the
the class B notes, the class B notes, the class M notes, class D notes and the
the class M notes, the class M notes, the class C notes, reserve funds
the class C notes, the class C notes, the class D notes
the class D notes the class D notes and the reserve
and the reserve and the reserve funds
funds funds
Interest rate: Three-month Three-month USD- Three-month Three-month sterling -
sterling- LIBOR + margin sterling - LIBOR + margin
LIBOR + margin LIBOR + margin
Margin: 0.15% p.a. 0.14% p.a. 0.30% p.a. 0.90% p.a.
Until interest payment date January 2009 January 2009 January 2009 January 2009
falling
in:
And thereafter: 0.30% p.a. 0.28% p.a. 0.60% p.a. 1.90% p.a.
Scheduled redemption date(s): N/A N/A N/A N/A
Outstanding balance at [GBP]900,000,000 $500,000,0000 [GBP]39,900,000 [GBP]68,000,000
last payment date:
Interest accrual method: Actual/365 Actual/360 Actual/365 Actual/365
Interest payment dates: For all of the series 4 notes, quarterly in arrear on the interest payment dates falling
in January, April, July and October of each year.
First interest payment date: 15 July, 2004 15 July, 2004 15 July, 2004 15 July, 2004
Final maturity date: July 2040 July 2040 July 2040 July 2040
Listing: UK Listing Authority UK Listing Authority UK Listing Authority UK Listing Authority and
and London Stock and London Stock and London Stock London Stock Exchange
Exchange Exchange Exchange
Ratings as at date of issue AAA/Aaa/AAA AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings(where relevant) AAA/Aaa/AAA AAA/Aaa/AAA AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
S-66
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 9) PLC
--------------------------------------------------------------------------------------------------
SERIES 1 CLASS A* SERIES 2 CLASS A SERIES 3 CLASS A1 SERIES 3 CLASS A2 SERIES 4 CLASS A
------------------ ------------------ ------------------ ------------------ ------------------
Principal amount: $1,740,000,000 $2,175,000,000 [e]740,000,000 [GBP]400,000,000 [GBP]600,000,000
Credit enhancement: Subordination of Subordination of Subordination of Subordination of Subordination of
the class B notes, the class B notes, the class B notes, the class B notes, the class B notes,
the class M notes, the class M notes, the class M notes, the class M notes, the class M notes,
the class C notes, the class C notes, the class C notes, the class C notes, the class C notes,
the class D notes the class D notes the class D notes the class D notes the class D notes
and the reserve and the reserve and the reserve and the reserve and the reserve
funds funds funds funds funds
Interest rate: One-month Three-month Three-month Three-month Three-month
USD-LIBOR USD-LIBOR EURIBOR sterling sterling
+ margin + margin + margin LIBOR + margin LIBOR + margin
Margin: Minus 0.03% p.a. 0.06% p.a. 0.10% p.a. 0.09% p.a. 0.09% p.a.
Until interest payment December 2006 October 2010 October 2010 October 2010 October 2010
date falling in:
And thereafter: N/A 0.12% p.a. 0.20% p.a. 0.18% p.a. 0.18% p.a.
Scheduled redemption December 2006 October 2008 January 2010 January 2010 July 2010
date(s): and April 2010 and April 2010
Outstanding balance at Nil $2,175,000,000 [e]740,000,000 [GBP]400,000,000 [GBP]600,000,000
last payment date:
Interest accrual method: Actual/360 Actual/360 Actual/360 Actual/365 Actual/365
Interest payment dates: For the series 1 class A Financing notes, monthly in arrear starting with the interest payment
date falling in January 2006 and then on the interest payment date falling in each consecutive
month. For the series 2 class A Financing notes, series 3 class A Financing notes and series 4
class A Financing notes, quarterly in arrear on the interest payment dates falling in January,
April, July and October of each year. If a trigger event occurs or the Financing security is
enforced prior to the interest payment date falling in December 2006, interest and principal due
and payable on the series 1 Financing notes will be payable in arrear on the interest payment
dates falling in April, July, October and December 2006 as applicable.
First interest payment 17 January 2006 18 April 2006 18 April 2006 18 April 2006 18 April 2006
date:
Final maturity date: December 2006 July 2013 January 2021 January 2021 January 2016
Listing: UK Listing UK Listing UK Listing UK Listing UK Listing
Authority and Authority and Authority and Authority and Authority and
London Stock London Stock London Stock London Stock London Stock
Exchange Exchange Exchange Exchange Exchange
Ratings as at date of issue A-1 +/P 1/F1 + AAA/Aaa/AAA AAA/Aaa/AAA AAA/Aaa/AAA AAA/Aaa/AAA
(S&P/ Moody's/Fitch):
Current ratings (where N/A AAA/Aaa/AAA AAA/Aaa/AAA AAA/Aaa/AAA AAA/Aaa/AAA
relevant) (S&P/Moody's/
Fitch):
S-67
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 10) PLC
-------------------------------------------------------------------------------
SERIES 1 CLASS A* SERIES 1 CLASS B* SERIES 1 CLASS C* SERIES 2 CLASS A
----------------- ----------------- ----------------- ----------------------
Principal amount: $1,260,000,000 $47,000,000 $47,000,000 $1,440,000,000
Credit enhancement: Subordination of Subordination of Subordination of Subordination of
the class B the class M the class D the class B
notes, the class notes, the class notes and the notes, the class
M notes, the C notes, the reserve funds M notes, the
class C notes, class D notes, class C notes,
the class D and the reserve the class D
notes and the funds notes and the
reserve funds reserve funds
Interest rate: One-month Three-month Three-month Three-month
USD-LIBOR USD-LIBOR USD-LIBOR USD-LIBOR
+ margin + margin + margin + margin
Margin: Minus 0.03% p.a. 0.08% p.a. 0.27% p.a. 0.03% p.a.
Until interest payment date October 2010 October 2010 October 2010 October 2010
falling in:
And thereafter: N/A 0.16% p.a. 0.54% p.a. 0.06% p.a.
Scheduled redemption date(s) July 2007, N/A N/A April 2008 and
and amounts: $1,260,000,000 July 2008,
$720,000,000
and $720,000,000
Designation of corresponding Bullet Pass-through Pass-through Scheduled amortisation
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION NOTES" AND "-
THE MASTER INTERCOMPANY LOAN AGREEMENT" for a description of the timing of
principal payments on the notes and cash accumulation periods relating to bullet
term advances and scheduled amortisation instalments.
Outstanding balance at last Nil Nil Nil $1,440,000,000
payment date:
Interest accrual method: Actual/360 Actual/360 Actual/360 Actual/360
Interest payment dates: For the series 1 class A previous notes, monthly in arrear starting with the
interest payment date falling in September 2006 and then on the interest
payment date falling in each consecutive month. For the other series 1 previous
notes and for all of the series 2 previous notes, quarterly in arrear on the
interest payment dates falling in January, April, July and October of each
year. If a trigger event occurs or the issuing entity security is enforced
prior to the interest payment date falling in June 2007, interest and principal
due and payable on the series 1 class A previous notes will be payable
quarterly in arrear on the interest payment dates falling in January, April,
July and October, as applicable.
First interest payment date: 15 September 2006 16 October 2006 16 October 2006 16 October 2006
Final maturity date: July 2007 July 2040 July 2040 January 2021
Listing: UK Listing UK Listing UK Listing UK Listing
Authority and Authority and Authority and Authority and
London Stock London Stock London Stock London Stock
Exchange Exchange Exchange Exchange
Ratings as at the date of issue A-1+/P-1/F1+ AA/Aa3/AA BBB/Baa2/BBB AAA/Aaa/AAA
(S&P/Moody's/Fitch):
Current ratings (where relevant) N/A N/A N/A AAA/Aaa/AAA
(S&P/Moody's/Fitch):
--------------------------------------
SERIES 2 CLASS B SERIES 2 CLASS C
------------------ ------------------
Principal amount: $55,000,000 $55,000,000
Credit enhancement: Subordination of Subordination of
the class M the class D
notes the class notes and the
C notes, the reserve funds
class D notes
and the
reserve funds
Interest rate: Three-month Three-month
USD-LIBOR + margin USD-LIBOR + margin
Margin: 0.09% p.a. 0.35% p.a.
Until interest payment date October 2010 October 2010
falling in:
And thereafter: 0.18% p.a. 0.70% p.a.
Scheduled redemption date(s) N/A N/A
and amounts:
Designation of corresponding Pass-through Pass-through
term advance:
See "OVERVIEW OF THE ISSUING ENTITY
NOTES -- SCHEDULED REDEMPTION NOTES"
AND "-THE MASTER INTERCOMPANY LOAN
AGREEMENT" for a description of the
timing of principal payments on the
notes and cash accumulation periods
relating to bullet term advances and
scheduled amortisation instalments.
Outstanding balance at last $55,000,000 $55,000,000
payment date:
Interest accrual method: Actual/360 Actual/360
Interest payment dates: For the series 1 class A previous
notes, monthly in arrear starting with
the interest payment date falling in
September 2006 and then on the interest
payment date falling in each
consecutive month. For the other series
1 previous notes and for all of the
series 2 previous notes, quarterly in
arrear on the interest payment dates
falling in January, April, July and
October of each year. If a trigger
event occurs or the issuing entity
security is enforced prior to the
interest payment date falling in June
2007, interest and principal due and
payable on the series 1 class A
previous notes will be payable
quarterly in arrear on the interest
payment dates falling in January,
April, July and October, as applicable.
First interest payment date: 16 October 2006 16 October 2006
Final maturity date: July 2040 July 2040
Listing: UK Listing UK Listing
Authority and Authority and
London Stock London Stock
Exchange Exchange
Ratings as at the date of issue AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where relevant) AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch):
S-68
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 10) PLC
-------------------------------------------------------------------------------
SERIES 3 CLASS A SERIES 3 CLASS B1 SERIES 3 CLASS B2 SERIES 3 CLASS M1
---------------------- ----------------- ----------------- -----------------
Principal amount: [e]1,000,000,000 [e]37,000,000 [GBP]27,500,000 [e]34,000,000
Credit enhancement: Subordination of Subordination of Subordination Subordination
the class B the class M the class M of the class C
notes, the class notes, the class notes, the notes, the
M notes, the C notes, the class C notes, class D notes
class C notes, class D notes the class D and the
the class D and the notes, and reserve funds
notes and the reserve funds the reserve
reserve funds funds
Interest rate: Three-month Three-month Three-month Three-month
EURIBOR + margin EURIBOR + margin sterling EURIBOR +
LIBOR margin
+ margin
Margin: 0.07% p.a. 0.12% p.a. 0.12% p.a. 0.20% p.a.
Until interest payment date October 2010 October 2010 October 2010 October 2010
falling in:
And thereafter: 0.14% p.a. 0.24% p.a. 0.24% p.a. 0.40% p.a.
Scheduled redemption date(s) April 2009 and N/A N/A N/A
and amounts: July 2009,
[e]500,000,000
and
[e]500,000,000
Designation of corresponding Scheduled amortisation Pass-through Pass-through Pass-through
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION NOTES" and
"- THE MASTER INTERCOMPANY LOAN AGREEMENT" for a description of the timing of
principal payments on the notes and cash accumulation periods relating to
bullet term advances and scheduled amortisation instalments.
Outstanding balance at last [e]1,000,000,000 [e]37,000,000 [GBP]27,500,000 [e]34,000,000
payment date:
Interest accrual method: Actual/360 Actual/360 Actual/365 Actual/360
Interest payment dates: For all the series 3 previous notes, quarterly in arrear on the interest
payment dates falling in January, April, July and October of each year.
First interest payment date: 16 October 2006 16 October 2006 16 October 2006 16 October 2006
Final maturity date: July 2021 July 2040 July 2040 January 2021
Listing: UK Listing UK Listing UK Listing UK Listing
Authority and Authority and Authority and Authority and
London Stock London Stock London Stock London Stock
Exchange Exchange Exchange Exchange
Ratings as at the date of AAA/Aaa/AAA AA/Aa3/AA AA/Aa3/AA A/A2/A
issue (S&P/Moody's/Fitch):
Current ratings (where relevant) AAA/Aaa/AAA AA/Aa3/AA AA/Aa3/AA A/A2/A
(S&P/Moody's/Fitch):
-------------------------------------------------------
SERIES 3 CLASS M2 SERIES 3 CLASS C1 SERIES 3 CLASS C2
----------------- ----------------- -----------------
Principal amount: [GBP]20,000,000 [e]52,500,000 [GBP]22,000,000
Credit enhancement: Subordination Subordination Subordination
of the class C of the class of the class
notes, the D notes and D notes and
class D notes the reserve the reserve
and the funds funds
reserve funds
Interest rate: Three-month Three-month Three-month
sterling EURIBOR + sterling
LIBOR + margin LIBOR +
margin margin
Margin: 0.20% p.a. 0.40% p.a. 0.40% p.a.
Until interest payment date October 2010 October 2010 October 2010
falling in:
And thereafter: 0.40% p.a. 0.80% p.a. 0.80% p.a.
Scheduled redemption date(s) N/A N/A N/A
and amounts:
Designation of corresponding Pass-through Pass-through Pass-through
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED
REDEMPTION NOTES" and "-THE MASTER INTERCOMPANY LOAN
AGREEMENT" for a description of the timing of
principal payments on the notes and cash accumulation
periods relating to bullet term advances and scheduled
amortisation instalments.
Outstanding balance at last [GBP]20,000,000 [e]52,500,000 [GBP]22,000,000
payment date:
Interest accrual method: Actual/365 Actual/360 Actual/365
Interest payment dates: For all the series 3 previous notes, quarterly in
arrear on the interest payment dates falling in
January, April, July and October of each year.
First interest payment date: 16 October 2006 16 October 2006 16 October 2006
Final maturity date: July 2040 July 2040 July 2040
Listing: UK Listing UK Listing UK Listing
Authority and Authority and Authority and
London Stock London Stock London Stock
Exchange Exchange Exchange
Ratings as at the date of A/A2/A BBB/Baa2/BBB BBB/Baa2/BBB
issue (S&P/Moody's/Fitch):
Current ratings (where relevant) A/A2/A BBB/Baa2/BBB BBB/Baa2/BBB
(S&P/Moody's/Fitch):
S-69
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 10) PLC
-------------------------------------------------
SERIES 4 CLASS A1
-------------------------------------------------
Principal amount: $1,440,000,000
Credit enhancement: Subordination of the class B notes, the class M
notes, the class C notes, the class D notes and
the reserve funds
Interest rate: Three-month USD -- LIBOR + margin
Margin: 0.08% p.a.
Until interest payment date falling in: October 2010
And thereafter: 0.16% p.a.
Scheduled redemption date(s) and amounts: N/A
Designation of corresponding term advance: Pass-through
See "OVERVIEW OF THE ISSU ING ENTITY NOTES --
SCHEDULED REDEMPTION NOTES" and "THE MASTER
INTERCOMPANY LOAN AGREEMENT" for a description of
the timing of principal payments on the notes
and cash accumulation periods relating to bullet
term advances and scheduled amortisation
instalments.
Outstanding balance at last payment date: $1,440,000,000
Interest accrual method: Actual/360
Interest payment dates: For all the series 4 previous notes, quarterly in
arrear on the interest payment dates falling in
January, April, July and October of each year.
First interest payment date: 16 October 2006
Final maturity date: July 2040
Listing: UK Listing Authority and London Stock
Exchange
Ratings as at the date of issue AAA/Aaa/AAA
(S&P/Moody's/Fitch):
Current ratings (where relevant) AAA/Aaa/AAA
(S&P/Moody's/Fitch):
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES FINANCING (NO. 10) PLC
-----------------------------------------------
SERIES 4 CLASS A2
-----------------------------------------------
Principal amount: [GBP]750,000,000
Credit enhancement: Subordination of the class B notes, the class M
notes, the class C notes, the class D notes and
the reserve funds
Interest rate: Three-month sterling-LIBOR + margin
Margin: 0.09% p.a.
Until interest payment date falling in: October 2010
And thereafter: 0.18 % p.a.
Scheduled redemption date(s) and amounts: N/A
Designation of corresponding term advance: Pass-through
See "OVERVIEW OF THE ISSUING ENTITY NOTES --
SCHEDULED REDEMPTION NOTES" and "THE MASTER
INTERCOMPANY LOAN AGREEMENT" for a description
of the timing of principal payments on the
notes and cash accumulation periods relating
to bullet term advances and scheduled
amortisation instalments.
Outstanding balance at last payment date: [GBP]750,000,000
Interest accrual method: Actual/365
Interest payment dates:
First interest payment date: 16 October 2006
Final maturity date: July 2040
Listing: UK Listing Authority and London Stock
Exchange
Ratings as at the date of issue AAA/Aaa/AAA
(S&P/Moody's/Fitch):
Current ratings (where relevant) AAA/Aaa/AAA
(S&P/Moody's/Fitch):
S-70
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2006-1 NOTES
----------------------------------------------------------------
SERIES 1 CLASS A* SERIES 1 CLASS B* SERIES 1 CLASS C*
-------------------- -------------------- --------------------
Principal amount: $1,500,000,000 $45,000,000 $45,000,000
Credit enhancement: Subordination of the Subordination of the Subordination of the
class B notes, the class M notes, the class D notes and
class M notes, the class C notes, the the reserve funds
class C notes, the class D notes and
class D notes and he reserve funds
the reserve funds
Interest rate: One-month Three-month Three-month
USD-LIBOR + USD-LIBOR + USD-LIBOR +
margin margin margin
Margin: Minus 0.02% p.a. 0.09% p.a. 0.24% p.a.
prior to the first
transfer date; not
greater than
0.05% p.a. following
the first transfer
date
Until interest payment date falling in: N/A October 2010 October 2010
And thereafter: N/A 0.18% p.a. 0.48% p.a.
Scheduled redemption date(s) and N/A N/A N/A
amounts:
Designation of corresponding term Bullet Pass-through Pass-through
advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION
NOTES" and "THE MASTER INTERCOMPANY LOAN AGREEMENT" for a
description of the timing of principal payments on the notes and
cash accumulation periods relating to bullet term advances and
scheduled amortisation instalments.
Outstanding balance at last payment Nil Nil Nil
date:
Interest accrual method: Actual/360 Actual/360 Actual/360
Interest payment dates: For the series 1 class A previous notes, on the 15th day of each
calendar month in each year up to and including the final
maturity date or, following the earlier of the occurrence of a
trigger event or enforcement of the issuing entity security,
quarterly in arrear on the interest payment dates falling in
January, April, July and October, as applicable. For the other
series 1 previous notes and for all of the series 2 previous
notes, quarterly in arrear on the interest payment dates falling
in January, April, July and October of each year.
First interest payment date: 15 January 2007 15 January 2007 15 January 2007
Final maturity date: January 2016 July 2040 July 2040
Listing: London Stock London Stock London Stock
Exchange's Exchange's Exchange's
Regulated Market Regulated Market Regulated Market
Ratings as at the date of issue F1+/P-1/A-1+ AA/Aa3/AA BBB/Baa2/BBB
(S&P/Moody's/Fitch): AAA/Aaa/AAA
Current ratings (where relevant) N/A N/A N/A
(S&P/Moody's/Fitch):
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2006-1 NOTES
----------------------------------------------------------------
SERIES 2 CLASS A SERIES 2 CLASS B SERIES 2 CLASS M
-------------------- -------------------- --------------------
Principal amount: $1,500,000,000 $35,000,000 $30,000,000
Credit enhancement: Subordination of the Subordination of the Subordination of the
class B notes, the class M notes, the class M notes, the
class M notes, the class C notes, the class C notes, the
class C notes, the class D notes and class D notes and
class D notes and the reserve funds the reserve funds
the reserve funds
Interest rate: Three-month Three-month Three-month
USD-LIBOR + USD-LIBOR + USD-LIBOR +
margin margin margin
Margin: 0.06% p.a. 0.12% p.a. 0.19% p.a.
Until interest payment date falling in: October 2010 October 2010 October 2010
And thereafter: 0.12% p.a. 0.24% p.a. 0.38% p.a.
Scheduled redemption date(s) and July 2009 and N/A N/A
amounts: October 2009
Designation of corresponding term Scheduled Pass-through Pass-through
advance: Amortisation
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION
NOTES" and "THE MASTER INTERCOMPANY LOAN AGREEMENT" for a
description of the timing of principal payments on the notes and
cash accumulation periods relating to bullet term advances and
scheduled amortisation instalments.
Outstanding balance at last payment $1,500,000,000 $35,000,000 $30,000,000
date:
Interest accrual method: Actual/360 Actual/360 Actual/360
Interest payment dates: For the series 1 class A previous notes, on the 15th day of each
calendar month in each year up to and including the final
maturity date or, following the earlier of the occurrence of a
trigger event or enforcement of the issuing entity security,
quarterly in arrear on the interest payment dates falling in
January, April, July and October, as applicable. For the other
series 1 previous notes and for all of the series 2 previous
notes, quarterly in arrear on the interest payment dates falling
in January, April, July and October of each year.
First interest payment date: 15 January 2007 15 January 2007 15 January 2007
Final maturity date: July 2021 July 2040 July 2040
Listing: London Stock London Stock London Stock
Exchange's Exchange's Exchange's
Regulated Regulated Regulated
Market Market Market
Ratings as at the date of issue AAA/Aaa/AAA AA/Aa3/AA A/A2/A
(S&P/Moody's/Fitch):
Current ratings (where relevant) AAA/Aaa/AAA AA/Aa3/AA A/A2/A
(S&P/Moody's/Fitch):
S-71
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2006-1 NOTES
---------------------------------------------------------------------------------
SERIES 2 CLASS C1 SERIES 3 CLASS A1 SERIES 3 CLASS A2
--------------------- --------------------- -----------------------------------
Principal amount: $40,000,000 $900,000,000 [e]670,000,000
Credit Subordination of the Subordination of the Subordination of the
enhancement: class D notes and the class B notes, the class B notes, the
reserve funds class M notes, the class M notes, the
class C notes, the class C notes, the
class D notes and the class D notes and the reserve funds
reserve funds
Interest rate: Three-month Three-month Three-month EURIBOR + margin
USD-LIBOR + margin USD-LIBOR + margin
Margin: 0.39% p.a. 0.08% p.a. 0.10% p.a.
Until interest October 2010 October 2010 October 2010
payment date
falling in:
And thereafter: 0.78% p.a. 0.16% p.a. 0.20% p.a.
Scheduled N/A N/A N/A
redemption
date(s) and
amounts:
Designation of Pass-through Pass-through Pass-through
corresponding
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION NOTES" and "THE
MASTER INTERCOMPANY LOAN AGREEMENT" for a description of the timing of principal payments
on the notes and cash accumulation periods relating to bullet term advances and scheduled
amortisation instalments.
Outstanding $40,000,000 $900,000,000 [e]670,000,000
balance at last
payment date:
Interest accrual Actual/360 Actual/360 Actual/360
method:
Interest payment For all the series 2 and series 3 previous notes, quarterly in arrear on the
dates: interest payment dates falling in January, April, July and October of each year.
First interest 15 January 2007 15 January 2007 15 January 2007
payment date:
Final maturity July 2040 July 2040 July 2040
date:
Listing: London Stock London Stock London Stock
Exchange's Exchange's Exchange's
Regulated Regulated Regulated
Market Market Market
Ratings as at the BBB/Baa2/BBB AAA/Aaa/AAA AAA/Aaa/AAA
date of issue
(S&P/Moody's/Fitch):
Current ratings BBB/Baa2/BBB AAA/Aaa/AAA AAA/Aaa/AAA
(where relevant) (S&P/Moody's/Fitch):
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2006-1 NOTES
-----------------------------------------------------------------
SERIES 3 CLASS A3 SERIES 3 CLASS B2
----------------------------------- ----------------------------
Principal amount: [GBP]700,000,000 [e]37,500,000
Credit Subordination of the Subordination of the
enhancement: class B notes, the class M notes, the
class M notes, the class C notes, the
class C notes, the class D notes and the
class D notes and the reserve funds
reserve funds
Interest rate: Three-month sterling LIBOR + margin Three-month EURIBOR + margin
Margin: 0.10% p.a. 0.15% p.a.
Until interest October 2010 October 2010
payment date
falling in:
And thereafter: 0.20% p.a. 0.30% p.a.
Scheduled N/A N/A
redemption
date(s) and
amounts:
Designation of Pass-through Pass-through
corresponding
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION
NOTES" and "THE MASTER INTERCOMPANY LOAN AGREEMENT" for a
description of the timing of principal payments on the notes and
cash accumulation periods relating to bullet term advances and
scheduled amortisation instalments.
Outstanding [GBP]700,000,000 [e]37,500,000
balance at last
payment date:
Interest accrual Actual/365 Actual/360
method:
Interest payment For all the series 2 and series 3 previous notes, quarterly in
dates: arrear on the interest payment dates falling in January, April,
July and October of each year.
First interest 15 January 2007 15 January 2007
payment date:
Final maturity July 2040 July 2040
date:
Listing: London Stock London Stock
Exchange's Exchange's
Regulated Regulated
Market Market
Ratings as at the AAA/Aaa/AAA AA/Aa3/AA
date of issue
(S&P/Moody's/Fitch):
Current ratings AAA/Aaa/AAA AA/Aa3/AA
(where relevant) (S&P/Moody's/Fitch):
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2006-1 NOTES
-----------------------------------------------------------------
SERIES 3 CLASS B3 SERIES 3 CLASS M2
----------------------------------- ----------------------------
Principal amount: [GBP]20,000,000 [e]35,500,000
Credit Subordination of the Subordination of -the
enhancement: class M notes, the class C notes, the
class C notes, the class D notes and the
class D notes and the reserve funds
reserve funds
Interest rate: Three-month sterling LIBOR + margin Three-month EURIBOR + margin
Margin: 0.15% p.a. 0.22% p.a.
Until interest October 2010 October 2010
payment date
falling in:
And thereafter: 0.30% p.a. 0.44% p.a.
Scheduled N/A N/A
redemption
date(s) and
amounts:
Designation of Pass-through Pass-through
corresponding
term advance:
See "SUMMARY OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION
NOTES" and "THE MASTER INTERCOMPANY LOAN AGREEMENT" for a description
of the timing of principal payments on the notes and cash accumulation periods
relating to bullet term advances and scheduled amortisation instalments.
Outstanding [GBP]20,000,000 [e]35,500,000
balance at last
payment date:
Interest accrual Actual/365 Actual/360
method:
Interest payment For all the series 2 and series 3 previous notes, quarterly in
dates: arrear on the interest payment dates falling in January, April,
July and October of each year.
First interest 15 January 2007 15 January 2007
payment date:
Final maturity July 2040 July 2040
date:
Listing: London Stock London Stock
Exchange's Exchange's
Regulated Regulated
Market Market
Ratings as at the AA/Aa3/AA A/A2/A
date of issue
(S&P/Moody's/Fitch):
Current ratings AA/Aa3/AA A/A2/A
(where relevant) (S&P/Moody's/Fitch):
S-72
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2006-1 NOTES
-------------------------------------------------------------------------
SERIES 3 CLASS M3 SERIES 3 CLASS C2
------------------------------------- ----------------------------------
Principal amount: [GBP]12,000,000 [e]61,500,000
Credit enhancement: Subordination of the class C notes, Subordination of the class D notes
the class D notes and the reserve and the reserve funds
funds
Interest rate: Three-month sterling LIBOR + Three-month EURIBOR + margin
margin
Margin: 0.22% p.a. 0.42% p.a.
Until interest payment date October 2010 October 2010
falling in:
And thereafter: 0.44% p.a. 0.84% p.a.
Scheduled redemption date(s) N/A N/A
and amounts:
Designation of corresponding Pass-through Pass-through
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION NOTES"
and "THE MASTER INTERCOMPANY LOAN AGREEMENT" for a description of the
timing of principal payments on the notes and cash accumulation periods
relating to bullet term advances and scheduled amortisation instalments.
Outstanding balance at last [GBP]12,000,000 [e]61,500,000
payment date:
Interest accrual method: Actual/365 Actual/360
Interest payment dates: For all the series 3 previous notes,
quarterly in arrear on the interest
payment dates falling in January,
April, July and October of each year.
First interest payment date: 15 January 2007 15 January 2007
Final maturity date: July 2040 July 2040
Listing: London Stock Exchange's London Stock Exchange's
Regulated Market Regulated Market
Ratings as at the date of issue A/A2/A BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings A/A2/A BBB/Baa2/BBB
(where relevant)
(S&P/Moody's/Fitch):
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2006-1 NOTES
----------------------------------
SERIES 3 CLASS C3
----------------------------------
Principal amount: [GBP]12,500,000
Credit enhancement: Subordination of the class D notes
and the reserve funds
Interest rate: Three-month sterling LIBOR +
margin
Margin: 0.42% p.a.
Until interest payment date October 2010
falling in:
And thereafter: 0.84% p.a.
Scheduled redemption date(s) N/A
and amounts:
Designation of corresponding Pass-through
term advance:
See "OVERVIEW OF THE ISSUING ENTITY
NOTES -- SCHEDULED REDEMPTION NOTES"
and "THE MASTER INTERCOMPANY LOAN
AGREEMENT" for a description of the
timing of principal payments on the
notes and cash accumulation periods
relating to bullet term advances and
scheduled amortisation instalments.
Outstanding balance at last [GBP]12,500,000
payment date:
Interest accrual method: Actual/365
Interest payment dates:
First interest payment date: 15 January 2007
Final maturity date: July 2040
Listing: London Stock Exchange's
Regulated Market
Ratings as at the date of issue BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings BBB/Baa2/BBB
(where relevant)
(S&P/Moody's/Fitch):
S-73
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-1 NOTES
--------------------------------------------------------------------------------------
SERIES 1 CLASS A1 SERIES 1 CLASS A3 SERIES 1 CLASS B1 SERIES 1 CLASS B2
-------------------- -------------------- -------------------- --------------------
Principal amount: $1,500,000,000 [GBP]600,000,000 $57,200,000 [e]21,400,000
Credit enhancement: Subordination of the Subordination of the Subordination of the Subordination of the
class B notes, the class B notes, the class M notes, the class M notes, the
class M notes, the class M notes, the class C notes, the class C notes, the
class C notes, the class C notes, the class D notes and class D notes and
class D notes and class D notes and the reserve funds the reserve funds
the reserve funds the reserve funds
Interest rate: One-month Three-month Three-month Three-month
USD-LIBOR + Sterling LIBOR + USD-LIBOR + EURIBOR + margin
margin margin margin
Margin: Minus 0.02% p.a. 0.03% p.a. 0.09% p.a. 0.09% p.a.
prior to the first
transfer date
Until interest payment date falling in: N/A January 2011 January 2011 January 2011
And thereafter: N/A 0.06% p.a. 0.18% p.a. 0.18% p.a.
Scheduled redemption date(s) and N/A N/A N/A N/A
amounts:
Designation of corresponding term Bullet Bullet Pass-through Pass-through
advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION NOTES" and "THE
MASTER INTERCOMPANY LOAN AGREEMENT" for a description of the timing of principal
payments on the notes and cash accumulation periods relating to bullet term advances
and scheduled amortisation instalments.
Outstanding balance at last payment $1,500,000,000 [GBP]600,000,000 $57,200,000 [e]21,400,000
date:
Interest accrual method: Actual/360 Actual/365 Actual/360 Actual/360
Interest payment dates: For the series 1 class A1 previous notes, on the 15th day of each calendar month in
each year up to and including the final maturity date or, following the earlier of the
occurrence of a trigger event or enforcement of the issuing entity security, quarterly
in arrear on the interest payment dates falling in January, April, July and October,
as applicable. For the other series 1 previous notes, quarterly in arrear on the
interest payment dates falling in January, April, July and October of each year.
First interest payment date: 15 April 2007 15 April 2007 15 July 2007 15 July 2007
Final maturity date: March 2008 July 2020 July 2040 July 2040
Listing: London Stock London Stock London Stock London Stock
Exchange's Exchange's Exchange's Exchange's
Regulated Regulated Regulated Regulated
Market Market Market Market
Ratings as at the date of issue A-1+/P1/F1+ AAA/Aaa/AAA AA/Aa3/AA AA/Aa3/AA
(S&P/Moody's/Fitch):
Current ratings (where relevant) A-1+/P1/F1+ AAA/Aaa/AAA AA/Aa3/AA AA/Aa3/AA
(S&P/Moody's/Fitch):
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-1 NOTES
------------------------------------------
SERIES 1 CLASS C1 SERIES 1 CLASS C2
-------------------- --------------------
Principal amount: $30,300,000 [e]22,700,000
Credit enhancement: Subordination of the Subordination of the
class D notes and class D notes and
the reserve funds the reserve funds
Interest rate: Three-month Three-month
USD-LIBOR + EURIBOR + margin
margin
Margin: 0.28% p.a. 0.28% p.a.
Until interest payment date falling in: January 2011 January 2011
And thereafter: 0.56% p.a. 0.56% p.a.
Scheduled redemption date(s) and N/A N/A
amounts:
Designation of corresponding term Pass-through Pass-through
advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES
-- SCHEDULED REDEMPTION NOTES" and "THE
MASTER INTERCOMPANY LOAN AGREEMENT" for a
description of the timing of principal
payments on the notes and cash
accumulation periods relating to bullet
term advances and scheduled amortisation
instalments.
Outstanding balance at last payment $30,300,000 [e]22,700,000
date:
Interest accrual method: Actual/360 Actual/360
Interest payment dates: For the series 1 class A1 previous notes,
on the 15th day of each calendar month in
each year up to and including the final
maturity date or, following the earlier of
the occurrence of a trigger event or
enforcement of the issuing entity
security, quarterly in arrear on the
interest payment dates falling in January,
April, July and October, as applicable.
For the other series 1 previous notes,
quarterly in arrear on the interest
payment dates falling in January, April,
July and October of each year.
First interest payment date: 15 July 2007 15 July 2007
Final maturity date: July 2040 July 2040
Listing: London Stock London Stock
Exchange's Exchange's
Regulated Regulated
Market Market
Ratings as at the date of issue BBB/Baa2/BBB BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where relevant) BBB/Baa2/BBB BBB/Baa2/BBB
(S&P/Moody's/Fitch):
S-74
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-1 NOTES
-------------------------------------------------------------------------------------------------
SERIES 1 CLASS C3 SERIES 2 CLASS A SERIES 2 CLASS B2 SERIES 2 CLASS M2 SERIES 2 CLASS M3
----------------- ------------------ ------------------ ------------------ ------------------
Principal amount: [GBP]15,550,000 $1,500,000,000 [e]26,300,000 [e]10,600,000 [GBP]10,800,000
Credit Subordination of Subordination of Subordination of Subordination of Subordination of
enhancement: the class D notes the class B notes, the class M notes, the class C notes, the class C notes,
and the reserve the class M notes, the class C notes, the class D notes the class D notes
funds the class C notes, the class D notes and the reserve and the reserve
the class D notes and the reserve funds funds
and the reserve funds
funds
Interest rate: Three-month Three-month Three-month Three-month Three-month
Sterling LIBOR + USD-LIBOR + EURIBOR + EURIBOR + Sterling LIBOR +
margin margin margin margin margin
Margin: 0.28% p.a. 0.05% p.a. 0.14% p.a. 0.22% p.a. 0.22% p.a.
Until interest January 2011 January 2011 January 2011 January 2011 January 2011
payment date
falling in:
And thereafter: 0.56% p.a. 0.10% p.a. 0.28% p.a. 0.44% p.a. 0.44% p.a.
Scheduled N/A January 2010 and N/A N/A N/A
redemption date(s) April 2010
and amounts:
Designation of corresponding Pass-through Scheduled Pass-through Pass-through Pass-through
term advance: Amortisation
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION NOTES" and "THE MASTER
INTERCOMPANY LOAN AGREEMENT" for a description of the timing of principal payments on the notes
and cash accumulation periods relating to bullet term advances and scheduled amortisation
instalments.
Outstanding [GBP]15,550,000 $1,500,000,000 [e]26,300,000 [e]10,600,000 [GBP]10,800,000
balance at last
payment date:
Interest accrual Actual/365 Actual/360 Actual/360 Actual/360 Actual/365
method:
Interest payment For the series 1 class C3 previous notes and all the series 2 previous notes, quarterly in arrear
dates: on the interest payment dates falling in January, April, July and October of each year.
First interest 15 July 2007 15 July 2007 15 July 2007 15 July 2007 15 July 2007
payment date:
Final maturity date: July 2040 July 2021 July 2040 July 2040 July 2040
Listing: London Stock London Stock London Stock London Stock London Stock
Exchange's Exchange's Exchange's Exchange's Exchange's
Regulated Regulated Regulated Regulated Regulated
Market Market Market Market Market
Ratings as at the BBB/Baa2/BBB AAA/Aaa/AAA AA/Aa3/AA A/A2/A A/A2/A
date of issue
(S&P/Moody's/Fitch):
Current ratings BBB/Baa2/BBB AAA/Aaa/AAA AA/Aa3/AA A/A2/A A/A2/A
(where relevant)
(S&P/Moody's/Fitch):
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-1 NOTES
-------------------------------------------------------
SERIES 2 CLASS C1 SERIES 2 CLASS C2 SERIES 2 CLASS C3
----------------- ----------------- -----------------
Principal amount: $9,800,000 [e]21,900,000 [GBP]5,000,000
Credit Subordination of Subordination of Subordination of
enhancement: the class D notes the class D notes the class D notes
and the reserve and the reserve and the reserve
funds funds funds
Interest rate: Three-month Three-month Three-month
USD-LIBOR + EURIBOR + Sterling LIBOR +
margin margin margin
Margin: 0.42% p.a. 0.42% p.a. 0.42% p.a.
Until interest January 2011 January 2011 January 2011
payment date
falling in:
And thereafter: 0.84% p.a. 0.84% p.a. 0.84% p.a.
Scheduled N/A N/A N/A
redemption date(s)
and amounts:
Designation of corresponding Pass-through Pass-through Pass-through
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED
REDEMPTION NOTES" and "THE MASTER INTERCOMPANY LOAN
AGREEMENT" for a description of the timing of
principal payments on the notes and cash accumulation
periods relating to bullet term advances and scheduled
amortisation instalments.
Outstanding $9,800,000 [e]21,900,000 [GBP]5,000,000
balance at last
payment date:
Interest accrual Actual/360 Actual/360 Actual/365
method:
Interest payment For the series 1 class C3 previous notes and all the
dates: series 2 previous notes, quarterly in arrear on the
interest payment dates falling in January, April, July
and October of each year.
First interest 15 July 2007 15 July 2007 15 July 2007
payment date:
Final maturity date: July 2040 July 2040 July 2040
Listing: London Stock London Stock London Stock
Exchange's Exchange's Exchange's
Regulated Regulated Regulated
Market Market Market
Ratings as at the BBB/Baa2/BBB BBB/Baa2/BBB BBB/Baa2/BBB
date of issue
(S&P/Moody's/Fitch):
Current ratings BBB/Baa2/BBB BBB/Baa2/BBB BBB/Baa2/BBB
(where relevant)
(S&P/Moody's/Fitch):
S-75
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-1 NOTES
------------------------------------------------------------------------------------------
SERIES 3 CLASS A1 SERIES 3 CLASS A2 SERIES 3 CLASS A3 SERIES 3 CLASS B2
--------------------- --------------------- --------------------- ---------------------
Principal amount: $1,600,000,000 [e]1,500,000,000 [GBP]800,000,000 [e]46,700,000
Credit Subordination of the Subordination of the Subordination of the Subordination of the
enhancement: class B notes, the class B notes, the class B notes, the class M notes, the
class M notes, the class M notes, the class M notes, the class C notes, the
class C notes, the class C notes, the class C notes, the class D notes and the
class D notes and the class D notes and the class D notes and the reserve funds
reserve funds reserve funds reserve funds
Interest rate: Three-month Three-month Three-month sterling Three-month
USD-LIBOR + margin EURIBOR margin LIBOR + margin EURIBOR + margin
Margin: 0.08% p.a. 0.10% p.a. 0.10% p.a. 0.14% p.a.
Until interest April 2011 April 2011 April 2011 January 2011
payment date
falling in:
And thereafter: 0.16% 0.20% 0.20% 0.28%
Scheduled N/A N/A N/A N/A
redemption date(s) and
amounts:
Designation of Pass-through Pass-through Pass-through Pass-through
corresponding
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION NOTES" and "THE MASTER
INTERCOMPANY LOAN AGREEMENT" for a description of the timing of principal payments on the
notes and cash accumulation periods relating to bullet term advances and scheduled
amortisation instalments.
Outstanding balance at last $1,600,000,000 [e]1,500,000,000 [GBP]800,000,000 [e]46,700,000
payment date:
Interest accrual Actual/360 Actual/360 Actual/365 Actual/360
method:
Interest payment For all the series 3 previous notes, quarterly in arrear on the interest payment dates
dates: falling in January, April, July and October of each year.
First interest 15 July 2007 15 July 2007 15 July 2007 15 July 2007
payment date:
Final maturity July 2040 July 2040 July 2040 July 2040
date:
Listing: London Stock London Stock London Stock London Stock
Exchange's Exchange's Exchange's Exchange's
Regulated Regulated Regulated Regulated
Market Market Market Market
Ratings as at the AAA/Aaa/AAA AAA/Aaa/AAA AAA/Aaa/AAA AA/Aa3/AA
date of issue (S&P/Moody's/Fitch):
Current ratings AAA/Aaa/AAA AAA/Aaa/AAA AAA/Aaa/AAA AA/Aa3/AA
(where relevant)
(S&P/Moody's/Fitch):
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-1 NOTES
-------------------------------------------------------------------
SERIES 3 CLASS B3 SERIES 3 CLASS M2 SERIES 3 CLASS M3
--------------------- --------------------- ---------------------
Principal amount: [GBP]48,000,000 [e]28,000,000 [GBP]28,800,000
Credit Subordination of the Subordination of the Subordination of the
enhancement: class M notes, the class C notes, the class C notes, the
class C notes, the class D notes and the class D notes and the
class D notes and the reserve funds reserve funds
reserve funds
Interest rate: Three-month sterling Three-month Three-month sterling
LIBOR + margin EURIBOR + margin LIBOR + margin
Margin: 0.14% p.a. 0.22% p.a. 0.22% p.a.
Until interest January 2011 January 2011 January 2011
payment date
falling in:
And thereafter: 0.28% 0.44% 0.44%
Scheduled N/A N/A N/A
redemption date(s) and
amounts:
Designation of Pass-through Pass-through Pass-through
corresponding
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION
NOTES" and "THE MASTER INTERCOMPANY LOAN AGREEMENT" for a description
of the timing of principal payments on the notes and cash
accumulation periods relating to bullet term advances and scheduled
amortisation instalments.
Outstanding balance at last [GBP]48,000,000 [e]28,000,000 [GBP]28,800,000
payment date:
Interest accrual Actual/365 Actual/360 Actual/365
method:
Interest payment For all the series 3 previous notes, quarterly in arrear on the
dates: interest payment dates falling in January, April, July and October
of each year.
First interest 15 July 2007 15 July 2007 15 July 2007
payment date:
Final maturity July 2040 July 2040 July 2040
date:
Listing: London Stock London Stock London Stock
Exchange's Exchange's Exchange's
Regulated Regulated Regulated
Market Market Market
Ratings as at the AA/Aa3/AA A/A2/A A/A2/A
date of issue (S&P/Moody's/Fitch):
Current ratings AA/Aa3/AA A/A2/A A/A2/A
(where relevant)
(S&P/Moody's/Fitch):
S-76
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-1 NOTES
----------------------------------------------------------------------
SERIES 3 CLASS C2 SERIES 3 CLASS C3
---------------------------------- ----------------------------------
Principal amount: [e]86,900,000 [GBP]25,500,000
Credit enhancement: Subordination of the class D notes Subordination of the class D notes
and the reserve funds and the reserve funds
Interest rate: Three-month EURIBOR + margin Three-month Sterling LIBOR +
margin
Margin: 0.42% p.a. 0.42% p.a.
Until interest payment date January 2011 January 2011
falling in:
And thereafter: 0.84% p.a. 0.84% p.a.
Scheduled redemption date(s) N/A N/A
and amounts:
Designation of corresponding Pass-through Pass-through
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION NOTES"
and "THE MASTER INTERCOMPANY LOAN AGREEMENT" for a description of the
timing of principal payments on the notes and cash accumulation periods
relating to bullet term advances and scheduled amortisation instalments.
Outstanding balance at last [e]86,900,000 [GBP]25,500,000
payment date:
Interest accrual method: Actual/360 Actual/365
Interest payment dates: For all the series 3 and series 4 previous notes, quarterly in arrear
on the interest payment dates falling in January, April, July and
October of each year.
First interest payment date: 15 July 2007 15 July 2007
Final maturity date: July 2040 July 2040
Listing: London Stock Exchange's London Stock Exchange's
Regulated Market Regulated Market
Ratings as at the date of issue BBB/Baa2/BBB BBB/Baa2/BBB
(S&P/Moody's/Fitch):
Current ratings (where BBB/Baa2/BBB BBB/Baa2/BBB
relevant) (S&P/Moody's/Fitch):
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-1 NOTES
-------------------------------------
SERIES 4 CLASS A
-------------------------------------
Principal amount: $1,000,000,000
Credit enhancement: Subordination of the class B notes,
the class M notes, the class C notes,
the class D notes and the reserve
funds
Interest rate: Three-month USD-LIBOR + margin
Margin: 0.10% p.a.
Until interest payment date October 2012
falling in:
And thereafter: 0.20% p.a.
Scheduled redemption date(s) October 2012
and amounts:
Designation of corresponding Bullet
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES
-- SCHEDULED REDEMPTION NOTES" and "THE
MASTER INTERCOMPANY LOAN AGREEMENT" for a
description of the timing of principal
payments on the notes and cash
accumulation periods relating to bullet
term advances and scheduled amortisation
instalments.
Outstanding balance at last $1,000,000,000
payment date:
Interest accrual method: Actual/360
Interest payment dates: For all the series 3 and series 4 previous
notes, quarterly in arrear on the interest
payment dates falling in January, April,
July and October of each year.
First interest payment date: 15 July 2007
Final maturity date: July 2030
Listing: London Stock Exchange's
Regulated Market
Ratings as at the date of issue AAA/Aaa/AAA
(S&P/Moody's/Fitch):
Current ratings (where AAA/Aaa/AAA
relevant) (S&P/Moody's/Fitch):
S-77
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-2 NOTES
-------------------------------------------------------------------------------------------
SERIES 1 CLASS A1 SERIES 1 CLASS A2 SERIES 1 CLASS B
----------------------------- ----------------------------- -----------------------------
Principal amount: $1,225,000,000 [e]1,200,000,000 $82,000,000
Credit enhancement: Subordination of the class B Subordination of the class B Subordination of the class M
notes, the class M notes, the notes, the class M notes, the notes, the class C notes, the
class C notes, the class D class C notes, the class D class D notes and the
notes and the reserve funds notes and the reserve funds reserve funds
Interest rate: One-month USD-LIBOR + Three-month EURIBOR + Three-month USD-LIBOR +
margin margin margin
Margin: -/+0.03% +0.04% p.a. +0.07% p.a.
Until interest payment October 2011 October 2011 October 2011
date falling in:
And thereafter: +0.06% +0.08% p.a. +0.14%p.a.
Scheduled redemption Interest payment date falling Interest payment date falling N/A
date(s) and amounts: in April 2008 and July 2008 in April 2008 and July 2008
Designation of Scheduled Amortisation Scheduled Amortisation Pass-through
corresponding term
advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION NOTES" and "THE MASTER
INTERCOMPANY LOAN AGREEMENT" for a description of the timing of principal payments on the
notes and cash accumulation periods relating to bullet term advances and scheduled
amortisation instalments.
Outstanding balance at $1,225,000,000 [e]1,200,000,000 $82,000,000
last payment date:
Interest accrual Actual/360 Actual/360 Actual/360
method:
Interest payment For the series 1 class A1 previous notes, on the 15th day of each calendar month in each
dates: year up to and including the final maturity date or, following the earlier of the occurrence of a
trigger event or enforcement of the issuing entity security, quarterly in arrear on the interest
payment dates falling in January, April, July and October, as applicable. For the other series 1
previous notes, quarterly in arrear on the interest payment dates falling in January, April, July
and October of each year.
First interest payment 15 July 2007 15 October 2007 15 October 2007
date:
Final maturity date: July 2021 July 2021 July 2040
Listing: London Stock Exchange's London Stock Exchange's London Stock Exchange's
Regulated Market Regulated Market Regulated Market
Ratings as at the AAA/Aaa/AAA AAA/Aaa/AAA AA/Aa3/AA
date of issue
(S&P/Moody's/Fitch):
Current ratings AAA/Aaa/AAA AAA/Aaa/AAA AA/Aa3/AA
(where relevant)
(S&P/Moody's/Fitch):
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-2 NOTES
-----------------------------
SERIES 2 CLASS C
-----------------------------
Principal amount: $128,400,000
Credit enhancement: Subordination of the class D
notes and the reserve funds
Interest rate: Three-month USD-LIBOR +
margin
Margin: +0.41% p.a.
Until interest payment October 2011
date falling in:
And thereafter: +0.46% p.a.
Scheduled redemption N/A
date(s) and amounts:
Designation of Pass-through
corresponding term
advance:
See "OVERVIEW OF THE ISSUING
ENTITY NOTES -- SCHEDULED
REDEMPTION NOTES" and "THE
MASTER INTERCOMPANY LOAN
AGREEMENT" for a description
of the timing of principal
payments on the notes and cash
accumulation periods relating
to bullet term advances and
scheduled amortisation
instalments.
Outstanding balance at $128,400,000
last payment date:
Interest accrual Actual/360
method:
Interest payment For the series 1 class A1
dates: previous notes, on the 15th
day of each calendar month in
each year up to and including
the final maturity date or,
following the earlier of the
occurrence of a trigger event
or enforcement of the issuing
entity security, quarterly in
arrear on the interest payment
dates falling in January,
April, July and October, as
applicable. For the other
series 1 previous notes,
quarterly in arrear on the
interest payment dates falling
in January, April, July and
October of each year.
First interest payment 15 October 2007
date:
Final maturity date: July 2040
Listing: London Stock Exchange's
Regulated Market
Ratings as at the BBB/Baa2/BBB
date of issue
(S&P/Moody's/Fitch):
Current ratings BBB/Baa2/BBB
(where relevant)
(S&P/Moody's/Fitch):
S-78
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-2 NOTES
--------------------------------------------------------------------------------------------------
SERIES 2 CLASS A SERIES 2 CLASS A1 SERIES 2 CLASS B1 SERIES 2 CLASS B2 SERIES 2 CLASS B3
------------------ ------------------ ------------------ ------------------ ------------------
Principal amount: CAN$600,000,000 $2,750,000,000 $25,000,000 [e]95,000,000 [GBP]50,000,000
Credit Subordination of Subordination of Subordination of Subordination of Subordination of
enhancement: the class B notes, the class B notes, the class M notes, the class M notes, the class M notes,
the class M notes, the class M notes, the class C notes, the class C notes, the class C notes,
the class C notes, the class C notes, the class D notes the class D notes the class D notes
the class D notes the class D notes and the reserve and the reserve and the reserve
and the reserve and the reserve funds funds funds
funds funds
Interest rate: One month CDOR Three-month Three-month USD Three-month Three-month
+ margin USD-LIBOR + LIBOR + margin EURIBOR + Sterling LIBOR +
margin margin margin
Margin: +0.08% p.a. +0.05% p.a. +0.12% p.a. +0.13% p.a. +0.14% p.a.
Until interest October 2011 October 2011 October 2011 October 2011 October 2011
payment date
falling in:
And thereafter: +0.16% p.a. +0.10% p.a. +0.24% p.a. +0.26% p.a. +0.28% p.a.
Scheduled N/A N/A N/A N/A N/A
redemption date(s)
and amounts:
Designation of Bullet Bullet Pass-through Pass-through Pass-through
corresponding
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION NOTES" and "THE MASTER
INTERCOMPANY LOAN AGREEMENT" for a description of the timing of principal payments on the notes and
cash accumulation periods relating to bullet term advances and scheduled amortisation instalments.
Outstanding CAN$600,000,000 $2,750,000,000 $25,000,000 [e]95,000,000 [GBP]50,000,000
balance at last
payment date:
Interest accrual Actual/365 Actual/360 Actual/360 Actual/360 Actual/365
method:
Interest payment For the series 2 class A previous notes, on the 15th day of each calendar month in each year up to
dates: and including the final maturity date or, following the earlier of the occurrence of a trigger event
or enforcement of issuing entity security, quarterly in arrear on the interest payment dates
falling in January, April, July and October, as applicable. For the other series 1 previous notes,
quarterly in arrear on the interest payment dates falling in January, April, July and October of
each year.
First interest 15 July 2007 15 October 2007 15 October 2007 15 October 2007 15 October 2007
payment date:
Final maturity date: July 2020 July 2020 July 2040 July 2040 July 2040
Listing: London Stock London Stock London Stock London Stock London Stock
Exchange's Exchange's Exchange's Exchange's Exchange's
Regulated Regulated Regulated Regulated Regulated
Market Market Market Market Market
Ratings as at the AAA/Aaa/AAA AAA/Aaa/AAA A/AAa3/AA A/Aa3/AA A/Aa3/AA
date of issue
(S&P/Moody's/Fitch):
Current ratings AAA/Aaa/AAA AAA/Aaa/AAA A/AAa3/AA A/Aa3/AA A/Aa3/AA
(where relevant)
(S&P/Moody's/Fitch):
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-2 NOTES
----------------------------------------------------------
SERIES 2 CLASS M1 SERIES 2 CLASS M2 SERIES 2 CLASS M3
------------------ ------------------ ------------------
Principal amount: $10,000,000 [e]20,000,000 [GBP]38,000,000
Credit Subordination of Subordination of Subordination of
enhancement: the class C notes, the class C notes, the class C notes,
the class D notes the class D notes the class D notes
and the reserve and the reserve and the reserve
funds funds funds
Interest rate: Three-month Three-month Three-month
USD-LIBOR + EURIBOR + Sterling LIBOR +
margin margin margin
Margin: +0.22% p.a. +0.22% p.a. +0.24% p.a.
Until interest October 2011 October 2011 October 2011
payment date
falling in:
And thereafter: +0.44% p.a. +0.44% p.a. +0.48% p.a.
Scheduled N/A N/A N/A
redemption date(s)
and amounts:
Designation of Pass-through Pass-through Pass-through
corresponding
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED
REDEMPTION NOTES" and "THE MASTER INTERCOMPANY LOAN
AGREEMENT" for a description of the timing of principal
payments on the notes and cash accumulation periods
relating to bullet term advances and scheduled
amortisation instalments.
Outstanding $10,000,000 [e]20,000,000 [GBP]38,000,000
balance at last
payment date:
Interest accrual Actual/360 Actual/360 Actual/365
method:
Interest payment For the series 2 class A previous notes, on the 15th day
dates: of each calendar month in each year up to and including
the final maturity date or, following the earlier of the
occurrence of a trigger event or enforcement of issuing
entity security, quarterly in arrear on the interest
payment dates falling in January, April, July and October,
as applicable. For the other series 1 previous notes,
quarterly in arrear on the interest payment dates falling
in January, April, July and October of each year.
First interest 15 October 2007 15 October 2007 15 October 2007
payment date:
Final maturity date: July 2040 July 2040 July 2040
Listing: London Stock London Stock London Stock
Exchange's Exchange's Exchange's
Regulated Regulated Regulated
Market Market Market
Ratings as at the A/A2/A A/A2/A A/A2/A
date of issue
(S&P/Moody's/Fitch):
Current ratings A/A2/A A/A2/A A/A2/A
(where relevant)
(S&P/Moody's/Fitch):
S-79
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-2 NOTES
-------------------------------------------------------------------------------------------
SERIES 2 CLASS C1 SERIES 2 CLASS C2 SERIES 2 CLASS C3 SERIES 3 CLASS A1
--------------------- --------------------- --------------------- ----------------------
Principal amount: $34,000,000 [e]106,000,000 [GBP]45,000,000 $1,250,000,000
Credit Subordination of the Subordination of the Subordination of the Subordination of the
enhancement: class D notes and the class D notes and the class D notes and the class B notes, the
reserve funds reserve funds reserve funds class M notes, the
class C notes, the
class D notes and the
reserve funds
Interest rate: Three-month Three-month Three-month Sterling Three-month USD
USD-LIBOR + margin EURIBOR margin LIBOR + margin LIBOR + margin
Margin: 0.41% p.a. 0.41% p.a. +0.43% p.a. +0.08% p.a.
Until interest October 2011 October 2011 October 2011 October 2011
payment date
falling in:
And thereafter: +0.82% +0.82% +0.86% +0.08%
Scheduled N/A N/A N/A Interest payment
redemption dates falling in April
date(s) and 2011, July 2011 and
amounts: October 2011
Designation of Pass-through Pass-through Pass-through Scheduled
corresponding Amortisation
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION NOTES" and "THE MASTER
INTERCOMPANY LOAN AGREEMENT" for a description of the timing of principal payments on
the notes and cash accumulation periods relating to bullet term advances and scheduled
amortisation instalments.
Outstanding $34,000,000 [e]106,000,000 [GBP]45,000,000 $1,250,000,000
balance at last
payment date:
Interest accrual Actual/360 Actual/360 Actual/365 Actual/360
method:
Interest payment For all the series 2 class C1 to class C3 and all of the series 3 and 4 notes, quarterly in
dates: arrear on the interest payment dates falling in January, April, July and October of
each year.
First interest 15 October 2007 15 October 2007 15 October 2007 15 October 2007
payment date:
Final maturity July 2040 July 2040 July 2040 July 2021
date:
Listing: London Stock London Stock London Stock London Stock
Exchange's Exchange's Exchange's Exchange's
Regulated Regulated Regulated Regulated
Market Market Market Market
Ratings as at the BBB/Baa2/BBB BBB/Baa2/BBB BBB/Baa2/BBB AAA/Aaa/AAA
date of issue
(S&P/Moody's/Fitch):
Current ratings BBB/Baa2/BBB BBB/Baa2/BBB BBB/Baa2/BBB AAA/Aaa/AAA
(where relevant)
(S&P/Moody's/Fitch):
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-2 NOTES
---------------------------------------------------------------------
SERIES 3 CLASS A2 SERIES 3 CLASS A3 SERIES 4 CLASS A
---------------------- ---------------------- ---------------------
Principal amount: [e]1,300,000,000 [GBP]450,000,000 $750,000,000
Credit Subordination of the Subordination of the Subordination of the
enhancement: class B notes, the class B notes, the class B notes, the
class M notes, the class M notes, the class M notes, the
class C notes, the class C notes, the class C notes, the
class D notes and the class D notes and the class D notes and the
reserve funds reserve funds reserve funds
Interest rate: Three-month Three-month Sterling Three-month USD
EURIBOR + margin LIBOR + margin LIBOR + margin
Margin: +0.09% p.a. +0.09% p.a. +0.10% p.a.
Until interest October 2011 October 2011 July 2011
payment date
falling in:
And thereafter: +0.09% +0.09% +0.10%
Scheduled Interest payment Interest payment N/A
redemption dates falling in April dates falling in April
date(s) and 2011 July 2011 and 2011, July 2011 and
amounts: October 2011 October 2011
Designation of Scheduled Scheduled Bullet
corresponding Amortisation Amortisation
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION
NOTES" and "THE MASTER INTERCOMPANY LOAN AGREEMENT" for a description
of the timing of principal payments on the notes and cash accumulation
periods relating to bullet term advances and scheduled amortisation
instalments.
Outstanding [e]1,300,000,000 [GBP]450,000,000 $750,000,000
balance at last
payment date:
Interest accrual Actual/360 Actual/365 Actual/360
method:
Interest payment For all the series 2 class C1 to class C3 and all of the series 3 and
dates: 4 notes, quarterly in arrear on the interest payment dates falling in
January, April, July and October of each year.
First interest 15 October 2007 15 October 2007 15 October 2007
payment date:
Final maturity July 2021 July 2021 July 2040
date:
Listing: London Stock London Stock London Stock
Exchange's Exchange's Exchange's
Regulated Regulated Regulated
Market Market Market
Ratings as at the AAA/Aaa/AAA AAA/Aaa/AAA AAA/Aaa/AAA
date of issue
(S&P/Moody's/Fitch):
Current ratings AAA/Aaa/AAA AAA/Aaa/AAA AAA/Aaa/AAA
(where relevant)
(S&P/Moody's/Fitch):
S-80
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-3 NOTES
-------------------------------------------------------------------------
SERIES 1 CLASS A1 SERIES 1 CLASS A2 SERIES 1 CLASS A3
----------------------- ----------------------- -----------------------
Principal amount: [E]3,854,466,000 [E]3,114,720,000 [E]2,491,776,000
Credit enhancement: Subordination of the Subordination of the Subordination of the
class B notes, the class B notes, the class M notes, the
class M notes, the class M notes, the class C notes, the
class C notes, the class C notes, the class D notes and the
class D notes and the class D notes and the reserve funds
reserve funds reserve funds
Interest rate: TWELVE-MONTH TWELVE-MONTH TWELVE-MONTH
EURIBOR + MARGIN EURIBOR + MARGIN EURIBOR + MARGIN
FOR EACH INTEREST FOR EACH INTEREST FOR EACH INTEREST
PERIOD UP TO AND PERIOD UP TO AND PERIOD UP TO AND
INCLUDING THE INCLUDING THE INCLUDING THE
INTEREST PERIOD THAT INTEREST PERIOD THAT INTEREST PERIOD THAT
ENDS ON 15 JULY ENDS ON 15 OCTOBER ENDS ON 15 JANUARY
2011 AND, FOR 2012 AND, FOR 2014 AND, FOR
INTEREST PERIODS INTEREST PERIODS INTEREST PERIODS
THEREAFTER, THREE THEREAFTER, THREE THEREAFTER, THREE
MONTH EURIBOR + MONTH EURIBOR + MONTH EURIBOR +
MARGIN. MARGIN. MARGIN.
Margin: 0.29% p.a. 0.31% p.a. 0.32% p.a.
Until interest payment date N/A N/A N/A
falling in:
And thereafter: N/A N/A N/A
Scheduled redemption N/A N/A N/A
date(s) and amounts:
Designation of corresponding Scheduled Scheduled Scheduled
term advance: Amortisation Amortisation Amortisation
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION NOTES"
and "THE MASTER INTERCOMPANY LOAN AGREEMENT" for a description of the
timing of principal payments on the notes and cash accumulation periods
relating to bullet term advances and scheduled amortisation instalments.
Outstanding balance at last [e]3,854,466,000 [e]3,114,720,000 [e]2,491,776,000
payment date:
Interest accrual method: Actual/360 Actual/360 Actual/360
Interest payment dates: 15th day of July in 15th day of October 15th day of January
each year up to and in each year up to in each year up to
including July 2011 and including and including
and, thereafter, 15th October 2012 and, January 2014 and,
day of January, April, thereafter, 15th day thereafter, 15th day
July and October in of January, April, July of January, April, July
each year up to and and October in each and October in each
including the Final year up to and year up to and
Maturity Date, including the Final including the Final
provided always that Maturity Date, Maturity Date,
if, prior to July 2011, provided always that provided always that
an Asset Trigger if, prior to October if, prior to January
Event or a Non-Asset 2012, an Asset 2014, an Asset
Trigger Event occurs, Trigger Event or a Trigger Event or a
the Interest Payment Non-Asset Trigger Non-Asset Trigger
Dates will be, from Event occurs, the Event occurs, the
(and including) the Interest Payment Interest Payment
occurrence of such Dates will be, from Dates will be, from
event, 15th day of (and including) the (and including) the
January, April, July occurrence of such occurrence of such
and October in each event, 15th day of event, 15th day of
year up to and January, April, July January, April, July
including the Final and October in each and October in each
Maturity Date year up to and year up to and
including the Final including the Final
Maturity Date Maturity Date
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-3 NOTES
-------------------------------------------------------------------
SERIES 1 CLASS B SERIES 1 CLASS M SERIES 1 CLASS C
--------------------- --------------------- ---------------------
Principal amount: [GBP]124,000,000 [GBP]127,000,000 [GBP]250,000,000
Credit enhancement: Subordination of the Subordination of the Subordination of the
class M notes, the class D notes and the class D notes and the
class C notes, the reserve funds reserve funds
class D notes and the
reserve funds
Interest rate: Three-month sterling Three-month sterling Three-month sterling
LIBOR + margin LIBOR + margin LIBOR + margin
Margin: 1.00% p.a. 1.60% p.a. 2.25% p.a.
Until interest payment date N/A N/A N/A
falling in:
And thereafter: N/A N/A N/A
Scheduled redemption N/A N/A N/A
date(s) and amounts:
Designation of corresponding Pass-through Pass-through Pass-through
term advance:
See "OVERVIEW OF THE ISSUING ENTITY NOTES -- SCHEDULED REDEMPTION
NOTES" and "THE MASTER INTERCOMPANY LOAN AGREEMENT" for a description
of the timing of principal payments on the notes and cash accumulation
periods relating to bullet term advances and scheduled amortisation
instalments.
Outstanding balance at last [GBP]124,000,000 [GBP]127,000,000 [GBP]250,000,000
payment date:
Interest accrual method: Actual/365 Actual/365 Actual/365
Interest payment dates: 15th day of January, April, July and October in each year up to and
including the Final Maturity Date
S-81
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-3 NOTES
-------------------------------------------------------------------------
SERIES 1 CLASS A1 SERIES 1 CLASS A2 SERIES 1 CLASS A3
----------------------- ----------------------- -----------------------
First interest payment date: 15 July 2008 15 July 2008 15 July 2008
Final maturity date: July 2040 July 2040 July 2040
Listing: Irish Stock Irish Stock Irish Stock
Exchange's Exchange's Exchange's
Regulated Market Regulated Market Regulated Market
Ratings as at the date of issue (S&P/Moody's/Fitch): AAA/Aaa/AAA AAA/Aaa/AAA AAA/Aaa/AAA
Current ratings AAA/Aaa/AAA AAA/Aaa/AAA AAA/Aaa/AAA
(where relevant)
(S&P/Moody's/Fitch):
CLASS OF PREVIOUS NOTES ISSUED BY HOLMES MASTER ISSUER PLC ISSUE 2007-3 NOTES
-------------------------------------------------------------------
SERIES 1 CLASS B SERIES 1 CLASS M SERIES 1 CLASS C
--------------------- --------------------- ---------------------
First interest payment date: 15 January 2008 15 January 2008 15 January 2008
Final maturity date: July 2040 July 2040 July 2040
Listing: Irish Stock Irish Stock Irish Stock
Exchange's Exchange's Exchange's
Regulated Market Regulated Market Regulated Market
Ratings as at the date of issue (S&P/Moody's/Fitch): AA/Aa3/AA A/A2/A BBB/Baa2/BBB
Current ratings AA/Aa3/AA A/A2/A BBB/Baa2/BBB
(where relevant)
(S&P/Moody's/Fitch):
S-82
Each of the issuing entity's and the previous issuing entities' obligations
to pay principal and interest on its previous notes are funded primarily from
the payments of principal and interest received by it from Funding under the
relevant previous intercompany loan. Each of the issuing entity's and the
previous issuing entities' primary asset is the relevant previous intercompany
loan. None of the issuing entity, previous issuing entities or the previous
noteholders have any direct interest in the trust property, although the
issuing entity and the previous issuing entities share the security interest
under the Funding deed of charge in Funding's share of the trust property.
Each of the previous intercompany loans is split into separate previous term
advances to match the underlying series and classes (or sub-classes) of
previous notes (for this purpose, the series 3 class A1 previous notes, the
series 3 class A2 previous notes and the series 3 class A3 previous notes
issued by each of Holmes Financing (No. 1) PLC, Holmes Financing (No. 4) PLC,
Holmes Financing (No. 5) PLC, Holmes Financing (No. 9) PLC, Holmes Financing
(No. 10) PLC and the issuing entity are treated as one class of series 3
previous notes; and the series 4 class A1 previous notes and the series 4 class
A2 previous notes issued by Holmes Financing (No. 6) PLC, Holmes Financing (No.
7) PLC, Holmes Financing (No. 8) PLC and Holmes Financing (No. 10) PLC are
treated as one class of series 4 previous notes of Holmes Financing (No. 6)
PLC, Holmes Financing (No. 7) PLC, Holmes Financing (No. 8) PLC and Holmes
Financing (No. 10) PLC respectively); the previous AAA term advances, matching
the issue of the class A previous notes of each series; the previous AA term
advances, matching the issue of the class B previous notes of each series; the
previous A term advances, matching the issue of the class M previous notes of
each series; the previous BBB term advances, matching the issue of the class C
previous notes of each series; and the previous BB term advances, matching the
issue of the class D previous notes of each series. Together these advances are
referred to in this prospectus supplement as the previous term advances.
The previous AAA term advances reflect the rating assigned to the class A
previous notes by the rating agencies (being, in the case of the series 1 class
A previous notes issued by Holmes Financing (No. 6) PLC, Holmes Financing (No.
7) PLC, Holmes Financing (No. 8) PLC, Holmes Financing (No. 9) PLC, Holmes
Financing (No. 10) PLC and the issuing entity, A-1+ by Standard & Poor's, P-1
by Moody's and F1+ by Fitch and, in the case of all other class A previous
notes, AAA by Standard & Poor's, Aaa by Moody's and AAA by Fitch). The previous
AA term advances reflect the rating assigned to the class B previous notes by
the rating agencies (being AA by Standard & Poor's, Aa3 by Moody's and AA by
Fitch), the previous A term advances reflect the rating assigned to the class M
previous notes by the rating agencies (being A by Standard & Poor's, A2 by
Moody's and A by Fitch), the previous BBB term advances reflect the rating
assigned to the class C previous notes by the rating agencies (being BBB by
Standard & Poor's, Baa2 by Moody's and BBB by Fitch) and the previous term BB
advances reflected the rating assigned to the class D previous notes by the
rating agencies (being BB by Standard and Poor's, Ba2 by Moody's and BB by
Fitch).
Funding used the proceeds of the previous intercompany loan from Holmes
Financing (No. 1) PLC to pay the seller for loans and their related security
assigned to the mortgages trustee which comprised its original share of the
trust property. Funding used the proceeds of the previous intercompany loans
from Holmes Financing (No. 2) PLC, Holmes Financing (No. 4) PLC, Holmes
Financing (No. 7) PLC, Holmes Financing (No. 9) PLC, Holmes Financing (No. 10)
PLC and the issuing entity to pay the seller for an increase in Funding's share
of the trust property (resulting in a corresponding decrease in the seller's
share of the trust property). Funding used the proceeds of the previous
intercompany loans from Holmes Financing (No. 3) PLC, Holmes Financing (No. 5)
PLC, Holmes Financing (No. 6) PLC and Holmes Financing (No. 8) PLC to pay the
seller for loans and their related security assigned to the mortgages trustee
which constituted an addition to Funding's existing share of the trust
property.
For the purposes of the principles described in rules 1 to 6 in the base
prospectus under "CASHFLOWS -- DISTRIBUTION OF FUNDING AVAILABLE PRINCIPAL
RECEIPTS PRIOR TO ENFORCEMENT OF THE FUNDING SECURITY OR THE OCCURRENCE OF A
TRIGGER EVENT OR ENFORCEMENT OF THE ISSUING ENTITY SECURITY -- RULES FOR
APPLICATION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS AND FUNDING PRINCIPAL
RECEIPTS", except where specified in the prospectus supplement, an amount will
become due and payable on an interest payment date in respect of any pass-
through term advance in an amount equal to the principal balance of such pass-
through term advance if on or immediately preceding an interest payment date
any term advances advanced by the same issuing entity and which are repayable
prior to such pass-through term advance have been repaid in full except that:
* in the case of the series 1 term AA advance under the previous
intercompany loan made by Holmes Master Issuer PLC in respect of
the issue 2007-3 notes, an amount will become due and payable on
the interest payment date falling in July 2014;
S-83
* in the case of the series 1 term A advance under the previous
intercompany loan made by Holmes Master Issuer PLC in respect of
the issue 2007-3 notes, an amount will become due and payable on
the interest payment date falling in July 2014;
* in the case of the series 1 term BBB advance under the previous
intercompany loan made by Holmes Master Issuer PLC in respect of
the issue 2007-3 notes, amounts will become due and payable on
the interest payment date falling in July 2014;
* in the case of the series 1 term AA advance under the previous
intercompany loan made by Holmes Master Issuer PLC in respect of
the issue 2007-2 notes, amounts will become due and payable on the
interest payment dates falling in April 2008 and July 2008;
* in the case of the series 1 term BBB advance under the previous
intercompany loan made by Holmes Master Issuer PLC in respect of
the issue 2007-2 notes, amounts will become due and payable on
the interest payment dates falling in April 2008 and July 2008;
* in the case of the series 2 AAA term advances under the previous
intercompany loan made by Holmes Financing (No. 10) PLC, amounts
will become due and payable on the interest payment dates falling
in April 2008 and July 2008;
* in the case of the series 3 AAA term advances under the previous
intercompany loan made by Holmes Financing (No. 10) PLC, amounts
will become due and payable on the interest payment dates falling
in April 2009 and July 2009;
* in the case of the series 4 AAA term advance under the previous
intercompany loan made by Holmes Financing (No. 10) PLC, an amount
will become due and payable on the interest payment date falling in
October 2010;
* in the case of the series 4 AAA term advance under the previous
intercompany loan made by Holmes Financing (No. 9) PLC, an amount
will become due and payable on the interest payment date falling in
July 2010;
* in the case of the series 3A1 AAA term advances under the previous
intercompany loan made by Holmes Financing (No. 9) PLC, amounts
will become due and payable on the interest payment dates falling
in January 2010 and April 2010;
* in the case of the series 3A2 AAA term advances under the previous
intercompany loan made by Holmes Financing (No. 9) PLC, amounts
will become due and payable on the interest payment dates falling
in January 2010 and April 2010;
* in the case of the series 3 term AA advance under the previous
intercompany loan made by Holmes Financing (No. 8) PLC, amounts
will become due and payable on the interest payment date falling on
or after each scheduled repayment date on which the applicable
scheduled repayment in respect of the series 3 term AAA advance
made under the previous intercompany loan made by Holmes Financing
(No. 8) PLC is paid in full up to the applicable series 3 AA term
advances repayment amount and, in the case of the series 3 term BBB
advance under the previous intercompany loan made by Holmes
Financing (No. 8) PLC, amounts will become due and payable on the
interest payment date falling on or after each scheduled repayment
date on which the applicable scheduled repayment in respect of the
series 3 term AAA advance made under the previous intercompany loan
made by Holmes Financing (No. 8) PLC is paid in full up to the
applicable series 3 BBB term advances repayment amount, provided
that the series 3 term AA advance under the previous intercompany
loan made by Holmes Financing (No. 8) PLC has been paid up to the
applicable series 3 AA term advances repayment amount;
* in the case of the series 4 AAA term advances under the previous
intercompany loan made by Holmes Financing (No. 8) PLC, amounts
will become due and payable on the interest payment date falling in
January 2009;
* in the case of the series 5 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 6) PLC, an amount
will become due and payable on the interest payment date falling in
April 2008; and
* in the case of the series 4 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 1) PLC, an amount
will become due and payable on the interest payment date falling in
July 2010,
in each case ignoring for these purposes any provisions deferring payment
if Funding has insufficient funds to pay such amount on an interest
payment date.
It is expected that the earliest dates on which the previous term
advances will fall due and payable are those set out below:
* in respect of the series 4 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 1) PLC, the
interest payment date falling in July 2010;
S-84
* in respect of the series 4 term AA advance under the previous
intercompany loan made by Holmes Financing (No. 1) PLC, the
interest payment date falling in July 2010;
* in respect of the series 4 term BBB advance under the previous
intercompany loan made by Holmes Financing (No. 1) PLC, the
interest payment date falling in July 2010;
* in respect of the series 5 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 6) PLC, the
interest payment date falling in April 2008;
* in respect of the series 5 term AA advance under the previous
intercompany loan made by Holmes Financing (No. 6) PLC, the
interest payment date falling in April 2008;
* in respect of the series 5 term BBB advance under the previous
intercompany loan made by Holmes Financing (No. 6) PLC, the
interest payment date falling in April 2008;
* in respect of the series 4 AAA term advances under the previous
intercompany loan made by Holmes Financing (No. 7) PLC, the
interest payment date falling in April 2008;
* in respect of the series 4 term AA advance under the previous
intercompany loan made by Holmes Financing (No. 7) PLC, the
interest payment date falling in April 2008;
* in respect of the series 4 term A advance under the previous
intercompany loan made by Holmes Financing (No. 7) PLC, the
interest payment date falling in April 2008;
* in respect of the series 3 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 8) PLC, the
interest payment dates falling in April 2008, July 2008 and October
2008;
* in respect of the series 3 term AA advance under the previous
intercompany loan made by Holmes Financing (No. 8) PLC, the
interest payment dates falling in April 2008, July 2008 and October
2008;
* in respect of the series 3 BBB term advances under the previous
intercompany loan made by Holmes Financing (No. 8) PLC, the
interest payment dates falling in April 2008, July 2008 and October
2008;
* in respect of the series 4 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 8) PLC, the
interest payment date falling in January 2009;
* in respect of the series 4 term AA advance under the previous
intercompany loan made by Holmes Financing (No. 8) PLC, the
interest payment date falling in January 2009;
* in respect of the series 4 term BBB advance under the previous
intercompany loan made by Holmes Financing (No. 8) PLC, the
interest payment date falling in January 2009;
* in respect of the series 2 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 9) PLC, the
interest payment date falling in October 2008;
* in respect of the series 3A1 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 9) PLC, the
interest payment dates falling in January 2010 and April 2010;
* in respect of the series 3A2 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 9) PLC, the
interest payment dates falling in January 2010 and April 2010;
* in respect of the series 4 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 9) PLC, the
interest payment date falling in July 2010;
* in respect of the series 2 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 10) PLC, the
interest payment dates falling in April 2008 and July 2008;
* in respect of the series 2 term AA advance under the previous
intercompany loan made by Holmes Financing (No. 10) PLC, the
interest payment date falling in July 2008;
* in respect of the series 2 term BBB advance under the previous
intercompany loan made by Holmes Financing (No. 10) PLC, the
interest payment date falling in July 2008;
* in respect of the series 3 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 10) PLC, the
interest payment dates falling in April 2009 and July 2009;
S-85
* in respect of the series 3 term AA advance under the previous
intercompany loan made by Holmes Financing (No. 10) PLC, the
interest payment date falling in July 2009;
* in respect of the series 3 term A advance under the previous
intercompany loan made by Holmes Financing (No. 10) PLC, the
interest payment date falling in July 2009;
* in respect of the series 3 term BBB advance under the previous
intercompany loan made by Holmes Financing (No. 10) PLC, the
interest payment date falling in July 2009;
* in respect of the series 4A1 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 10) PLC, the
interest payment date falling in October 2010;
* in respect of the series 4A2 term AAA advance under the previous
intercompany loan made by Holmes Financing (No. 10) PLC, the
interest payment date falling in October 2010;
* in respect of the series 2 term AAA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the Issue
2006-1 Notes, the interest payment dates falling in July 2009 and
October 2009;
* in respect of the series 2 term AA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the Issue
2006-1 Notes, the interest payment date on which all the 2006-1
series 2 term advances of a higher rating have been repaid in full;
* in respect of the series 2 term A advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the Issue
2006-1 Notes, the interest payment date on which all the 2006-1
series 2 term advances of a higher rating have been repaid in full;
* in respect of the series 2 term BBB advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the Issue
2006-1 Notes, the interest payment date on which all the 2006-1
series 2 term advances of a higher rating have been repaid in full;
* in respect of the series 3 term AAA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the Issue
2006-1 Notes, the interest payment date falling in October 2010;
* in respect of the series 3 term AA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the Issue
2006-1 Notes, the interest payment date on which all the 2006-1
series 3 term advances of a higher rating have been repaid in full;
* in respect of the series 3 term A advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the Issue
2006-1 Notes, the interest payment date on which all the 2006-1
series 3 term advances of a higher rating have been repaid in full;
* in respect of the series 3 term BBB advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the Issue
2006-1 Notes, the interest payment date on which all the 2006-1
series 3 term advances of a higher rating have been repaid in full;
* in respect of the series 1A1 term AAA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-1 notes, the interest payment date falling in March 2008;
* in respect of the series 1A3 term AAA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-1 notes, the interest payment date falling in April 2008;
* in respect of the series 1 term AA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-1 notes, the interest payment date on which all the 2007-1
series 1 term advances of a higher rating for the issue 2007-1
notes have been repaid in full;
* in respect of the series 1 term BBB advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-1 notes, the interest payment date on which all the 2007-1
series 1 term advances of a higher rating for the issue 2007-1
notes have been repaid in full;
* in respect of the series 2 term AAA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-1 notes, the interest payment dates falling in January 2010;
S-86
* in respect of the series 2 term AA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-1 notes, the interest payment date on which all the 2007-1
series 2 term advances of a higher rating for the issue 2007-1
notes have been repaid in full;
* in respect of the series 2 term A advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-1 notes, the interest payment date on which all the 2007-1
series 2 term advances of a higher rating for the issue 2007-1
notes have been repaid in full;
* in respect of the series 2 term BBB advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-1 notes, the interest payment date on which all the 2007-1
series 2 term advances of a higher rating for the issue 2007-1
notes have been repaid in full;
* in respect of the series 3 term AAA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-1 notes, the interest payment date falling in April 2011;
* in respect of the series 3 term AA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-1 notes, the interest payment date falling in January 2011;
* in respect of the series 3 term A advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-1 notes, the interest payment date on which all the 2007-1
series 3 term advances of a higher rating for the issue 2007-1
notes, other than the 2007-1 series 3 term AAA advances, have been
repaid in full;
* in respect of the series 3 term BBB advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-1 notes, the interest payment date on which all the 2007-1
series 3 term advances of a higher rating for the issue 2007-1
notes, other than the 2007-1 series 3 term AAA advances, have been
repaid in full;
* in respect of the series 4 term AAA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-1 notes, the interest payment date falling in October 2012;
and
* in respect of the series 1A3 term AAA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-2 notes, the interest payment date falling in April 2008;
* in respect of the series 1 term AA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-2 notes, the interest payment date on which all the 2007-1
series 1 term advances of a higher rating for the issue 2007-2
notes have been repaid in full;
* in respect of the series 1 term BBB advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-2 notes, the interest payment date on which all the 2007-1
series 1 term advances of a higher rating for the issue 2007-2
notes have been repaid in full;
* in respect of the series 2 term AAA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-2 notes, the interest payment date falling in April 2010;
* in respect of the series 2 term AA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-2 notes, the interest payment date on which all the 2007-1
series 2 term advances of a higher rating for the issue 2007-2
notes have been repaid in full;
* in respect of the series 2 term A advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-2 notes, the interest payment date on which all the 2007-1
series 2 term advances of a higher rating for the issue 2007-2
notes have been repaid in full;
* in respect of the series 2 term BBB advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-2 notes, the interest payment date on which all
S-87
the 2007-1 series 2 term advances of a higher rating for the issue
2007-2 notes have been repaid in full;
* in respect of the series 3 term AAA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-2 notes, the interest payment date falling in April 2011;
* in respect of the series 4 term AAA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-2 notes, the interest payment date falling in October 2012;
* in respect of the series 1A1 term AAA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-3 notes, the interest payment date falling in January 2012;
* in respect of the series 1A2 term AA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-3 notes, the interest payment date falling in January 2013;
* in respect of the series 1A3 term BBB advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-3 notes, the interest payment date falling in January 2014;
* in respect of the series 1B term AAA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-3 notes, the interest payment date falling in July 2014;
* in respect of the series 1M term AA advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-3 notes, the interest payment date falling in July 2014; and
* in respect of the series 1C term A advance under the previous
intercompany loan made by Holmes Master Issuer PLC for the issue
2007-3 notes, the interest payment date falling in July 2014.
[list to be updated with most recent information]
S-88
ANNEX E
STATIC POOL DATA
This annex sets out, to the extent material, certain static pool information
with respect to the loans in the mortgages trust.
Static pool information on prepayments has not been included because changes
in prepayment and payment rates historically have not affected repayment of the
issuing entity notes, and are not anticipated to have a significant effect on
future payments on the issuing entity notes for a number of reasons. The
mechanics of the mortgages trust require an extended cash accumulation period
when prepayment rates fall below certain minima required by the rating
agencies, serving to limit the extent to which slow prepayments would cause the
average lives of the issuing entity notes to extend. Conversely, rapid
prepayments should not cause the average lives of the issuing entity notes to
shorten so long as the seller maintains the minimum required mortgages trust
size. Furthermore, only a limited amount of note principal in relation to the
very large mortgages trust size is actually due to be repaid on any particular
interest payment date.
One of the characteristics of the mortgages trust is that the seller is able
to sell more loans to the mortgages trustee over time, whether in connection
with an issuance of issuing entity notes or in order to maintain the minimum
seller share. To aid in understanding changes to the mortgages trust over time,
the following table sets out information relating to each sale of loans by the
seller to the mortgages trustee pursuant to the mortgage sale agreement.
BALANCE OF LOANS NUMBER OF LOANS IN CONNECTION WITH
DATE SUBSTITUTED OR SOLD SUBSTITUTED OR SOLD PREVIOUS ISSUE BY
- ---------------- ------------------- ------------------- --------------------------------------
26 July 2000.... [GBP]6,399,214,137 115,191 Holmes Financing (No. 1) PLC
29 November 2000 [GBP]0 0 Holmes Financing (No. 2) PLC
23 May 2001..... [GBP]5,675,174,662 90,088 Holmes Financing (No. 3) PLC
5 July 2001..... [GBP]0 0 Holmes Financing (No. 4) PLC
8 November 2001. [GBP]6,316,801,008 88,154 Holmes Financing (No. 5) PLC
7 November 2002. [GBP]7,721,958,214 100,534 Holmes Financing (No. 6) PLC
26 March 2003... [GBP]0 0 Holmes Financing (No. 7) PLC
1 April 2004.... [GBP]6,903,977,960 80,529 Holmes Financing (No. 8) PLC
8 December 2005. [GBP]0 0 Holmes Financing (No. 9) PLC
8 August 2006... [GBP]0 0 Holmes Financing (No. 10) PLC
28 November 2006 [GBP]0 0 Holmes Master Issuer PLC
(in respect of the issue 2006-1 notes)
28 March 2007... [GBP]10,749,721,703 98,169 Holmes Master Issuer PLC
(in respect of the issue 2007-1 notes)
20 June 2007.... [GBP]0 0 Holmes Master Issuer PLC
(in respect of the issue 2007-2 notes)
21 December 2007 [GBP]0 0 Holmes Master Issuer PLC
(in respect of the issue 2007-3 notes)
[to be updated on each new issue]
The sale of new loans by the seller to the mortgages trustee is subject to
conditions, including ones required by the rating agencies, designed to
maintain certain credit-related and other characteristics of the mortgages
trust. These include limits on loans in arrears in the mortgages trust at the
time of sale, limits on the aggregate balance of loans sold, limits on changes
in the weighted average repossession frequency and the weighted average loss
severity, minimum yield for the loans in the mortgages trust after the sale and
maximum loan-to-value ratio for the loans in the mortgages trust after the
sale. See a description of these conditions in "ASSIGNMENT OF THE LOANS AND
THEIR RELATED SECURITY" in the accompanying prospectus.
PORTFOLIO ARREARS BY YEAR OF ORIGINATION
The following tables show, for each of the last five years of origination,
the distribution of loans in the mortgages trust originated in that year by
delinquency category as at each year-end starting in 2003. The tables include
loans that are secured by mortgaged properties subject to foreclosure
proceedings and in possession.
Static pool information is not deemed part of this prospectus supplement to
the extent that the static pool information relates to loans originated by
Abbey before January 1, 2006. No loans in the mortgages trust were originated
after [__].
S-89
LOANS ORIGINATED IN 2001 AS AT EACH SPECIFIED DATE
31 DECEMBER 2004 31 DECEMBER 2005
------------------------------------------- ------------------------------------------
PRINCIPAL % BY % BY PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- ------- ------ ---------------- ------- -------
<1 month 56,681 4,089,499,203.03 96.50% 96.49% 44,745 3,133,454,781.33 95.87% 95.70%
1 -- <2 months 1,089 79,724,693.10 1.85% 1.88% 1,170 85,662,605.90 2.51% 2.62%
2 -- <3 months 447 31,658,127.58 0.76% 0.75% 307 21,730,234.54 0.66% 0.66%
3 -- <4 months 224 16,186,855.46 0.38% 0.38% 158 11,748,091.15 0.34% 0.36%
4 -- <5 months 125 8,743,561.96 0.21% 0.21% 97 6,671,144.79 0.21% 0.20%
5 -- <6 months 50 3,611,631.33 0.09% 0.09% 64 5,080,987.13 0.14% 0.16%
6 -- <12 months 120 8,718,632.75 0.20% 0.21% 108 7,998,770.00 0.23% 0.24%
12+ months 3 239,769.18 0.01% 0.01% 23 1,892,794.05 0.05% 0.06%
------ ---------------- ------- ------- ------ ---------------- ------- -------
TOTAL 58,739 4,238,382,474.39 100.00% 100.00% 46,672 3,274,239,408.89 100.00% 100.00%
====== ================ ======= ======= ====== ================ ======= =======
31 DECEMBER 2006 31 DECEMBER 2007
------------------------------------------ ------------------------------------------
PRINCIPAL % BY % BY PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- ------- ------ ---------------- ------- -------
<1 month 30,294 2,120,079,455.87 96.68% 96.49% 27,059 1,889,879,625.04 96.52% 96.35%
1 -- <2 months 514 36,199,841.59 1.64% 1.65% 506 37,197,660.07 1.80% 1.90%
2 -- <3 months 197 14,227,031.80 0.63% 0.65% 218 15,498,646.76 0.78% 0.79%
3 -- <4 months 106 8,754,343.81 0.34% 0.40% 95 6,445,234.61 0.34% 0.33%
4 -- <5 months 72 5,459,807.25 0.23% 0.25% 53 4,102,767.93 0.19% 0.21%
5 -- <6 months 46 4,131,865.40 0.15% 0.19% 22 1,889,790.49 0.08% 0.10%
6 -- <12 months 83 6,659,922.37 0.26% 0.30% 61 4,619,684.42 0.22% 0.24%
12+ months 23 1,592,205.46 0.07% 0.07% 21 1,772,758.11 0.07% 0.09%
------ ---------------- ------- ------- ------ ---------------- ------- -------
TOTAL 31,335 2,197,104,473.55 100.00% 100.00% 28,035 1,961,406,167.43 100.00% 100.00%
====== ================ ======= ======= ====== ================ ======= =======
31 JANUARY 2008
------------------------------------------
PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- -------
<1 month 26,663 1,854,147,632.16 96.40% 96.12%
1 -- <2 months 513 39,087,506.86 1.85% 2.03%
2 -- <3 months 213 15,773,361.05 0.77% 0.82%
3 -- <4 months 114 8,351,087.88 0.41% 0.43%
4 -- <5 months 55 3,697,761.35 0.20% 0.19%
5 -- <6 months 24 1,785,573.31 0.09% 0.09%
6 -- <12 months 52 4,441,727.68 0.19% 0.23%
12+ months 24 1,693,571.57 0.09% 0.09%
------ ---------------- ------- -------
TOTAL 27,658 1,928,978,221.86 100.00% 100.00%
====== ================ ======= =======
LOANS ORIGINATED IN 2002 AS AT EACH SPECIFIED DATE
31 DECEMBER 2004 31 DECEMBER 2005
------------------------------------------ ------------------------------------------
PRINCIPAL % BY % BY PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- ------- ------ ---------------- ------- -------
<1 month 81,425 6,201,216,713.87 97.91% 97.76% 60,690 4,534,054,148.90 97.70% 97.40%
1 -- <2 months 1,007 81,446,481.26 1.21% 1.28% 720 57,710,963.59 1.16% 1.24%
2 -- <3 months 353 30,470,170.15 0.42% 0.48% 317 27,639,843.92 0.51% 0.59%
3 -- <4 months 154 12,147,353.46 0.19% 0.19% 141 11,967,835.60 0.23% 0.26%
4 -- <5 months 84 6,526,065.09 0.10% 0.10% 72 6,876,254.82 0.12% 0.15%
5 -- <6 months 47 4,012,861.64 0.06% 0.06% 64 6,136,813.80 0.10% 0.13%
6 -- <12 months 90 7,079,235.10 0.11% 0.11% 95 8,828,223.83 0.15% 0.19%
12+ months 5 317,397.58 0.01% 0.01% 19 1,770,446.88 0.03% 0.04%
------ ---------------- ------- ------- ------ ---------------- ------- -------
TOTAL 83,165 6,343,216,278.15 100.00% 100.00% 62,118 4,654,984,531.34 100.00% 100.00%
====== ================ ======= ======= ====== ================ ======= =======
31 DECEMBER 2006 31 DECEMBER 2007
------------------------------------------ ------------------------------------------
PRINCIPAL % BY % BY PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- ------- ------ ---------------- ------- -------
<1 month 43,373 3,212,951,645.81 97.73% 97.43% 34,496 2,507,096,479.87 97.37% 96.72%
1 -- <2 months 484 40,932,489.74 1.09% 1.24% 485 42,695,862.37 1.37% 1.65%
2 -- <3 months 222 18,268,892.54 0.50% 0.55% 212 19,388,554.55 0.60% 0.75%
3 -- <4 months 117 9,411,626.57 0.26% 0.29% 95 9,764,519.15 0.27% 0.38%
4 -- <5 months 61 5,627,306.58 0.14% 0.17% 39 3,896,794.24 0.11% 0.15%
5 -- <6 months 27 2,325,441.07 0.06% 0.07% 26 2,688,160.70 0.07% 0.10%
6 -- <12 months 70 5,939,544.60 0.16% 0.18% 57 5,009,202.44 0.18% 0.19%
12+ months 26 2,377,157.92 0.06% 0.07% 17 1,466,291.76 0.05% 0.06%
------ ---------------- ------- ------- ------ ---------------- ------- -------
TOTAL 44,380 3,297,834,104.83 100.00% 100.00% 35,427 2,592,005,865.08 100.00% 100.00%
====== ================ ======= ======= ====== ================ ======= =======
31 JANUARY 2008
------------------------------------------
PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- -------
<1 month 33,728 2,436,888,790.93 97.24% 96.61%
1 -- <2 months 492 41,233,864.31 1.42% 1.63%
2 -- <3 months 218 19,619,338.85 0.63% 0.78%
3 -- <4 months 91 8,729,815.76 0.26% 0.35%
4 -- <5 months 52 5,582,949.17 0.15% 0.22%
5 -- <6 months 30 3,143,441.21 0.09% 0.12%
6 -- <12 months 51 4,990,712.94 0.15% 0.20%
12+ months 25 2,118,406.03 0.07% 0.08%
------ ---------------- ------- -------
TOTAL 34,687 2,522,307,319.20 100.00% 100.00%
====== ================ ======= =======
S-90
LOANS ORIGINATED IN 2003 AS AT EACH SPECIFIED DATE
31 DECEMBER 2004 31 DECEMBER 2005
------------------------------------------------ ------------------------------------------------
PRINCIPAL % BY % BY PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- ------------- ------ ---------------- ------- -------------
<1 MONTH 96,873 8,869,159,460.97 98.57% 98.52% 67,437 5,701,583,594.29 97.39% 97.13%
1 -- <2 MONTHS 981 92,702,569.91 1.00% 1.03% 977 89,581,391.05 1.41% 1.53%
2 -- <3 MONTHS 235 21,824,046.81 0.24% 0.24% 358 30,833,452.34 0.52% 0.53%
3 -- <4 MONTHS 95 8,740,005.59 0.10% 0.10% 177 17,536,924.90 0.26% 0.30%
4 -- <5 MONTHS 43 4,500,393.49 0.04% 0.05% 89 9,424,291.04 0.13% 0.16%
5 -- <6 MONTHS 23 2,347,958.56 0.02% 0.03% 55 5,450,816.16 0.08% 0.09%
6 -- <12 MONTHS 24 2,926,961.06 0.02% 0.03% 141 14.963,486.43 0.20% 0.25%
12+ MONTHS 1 126,830.87 0.00% 0.00% 8 938,676.60 0.10% 0.02%
------ ---------------- ------- ------------- ------ ---------------- ------- -------------
TOTAL 98,275 9,002,328,227.26 100.00% 100.00% 69,242 5,870,312,532.82 100.00% 100.00%
====== ================ ======= ============= ====== ================ ======= =============
31 DECEMBER 2006 31 DECEMBER 2007
------------------------------------------------ ------------------------------------------
PRINCIPAL % BY % BY PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- ------------- ------ ---------------- ------- -------
<1 MONTH 50,330 4,241,572,056.10 97.29% 97.04% 47,212 4,115,732,220.39 97.13% 96.63%
1 -- <2 MONTHS 661 58,691,922.00 1.28% 1.34% 705 69,588,822.20 1.45% 1.63%
2 -- <3 MONTHS 302 27,632,557.39 0.58% 0.63% 324 33,374,217.20 0.67% 0.78%
3 -- <4 MONTHS 136 12,298,625.43 0.26% 0.28% 124 13,209,112.96 0.26% 0.31%
4 -- <5 MONTHS 90 8,120,400.22 0.17% 0.19% 68 7,746,568.37 0.14% 0.18%
5 -- <6 MONTHS 50 5,289,612.08 0.10% 0.12% 51 5,276,997.52 0.10% 0.12%
6 -- <12 MONTHS 130 14,084,058.02 0.25% 0.32% 91 10,936,062.15 0.19% 0.26%
12+ MONTHS 31 3,336,417.11 0.06% 0.08% 31 3,261,127.27 0.06% 0.08%
------ ---------------- ------- ------------- ------ ---------------- ------- -------
TOTAL 51,730 4,371,005,648.35 100.00% 100.00% 48,606 4,259,125,128.06 100.00% 100.00%
====== ================ ======= ============= ====== ================ ======= =======
31 JANUARY 2008
------------------------------------------
PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- -------
<1 MONTH 46,536 4,048,378,919.84 96.94% 96.36%
1 -- <2 MONTHS 732 75,377,763.65 1.52% 1.79%
2 -- <3 MONTHS 313 30,720,401.49 0.65% 0.73%
3 -- <4 MONTHS 164 17,333,470.05 0.34% 0.41%
4 -- <5 MONTHS 57 5,884,083.71 0.12% 0.14%
5 -- <6 MONTHS 59 6,902,828,79 0.12% 0.16%
6 -- <12 MONTHS 104 12,561,815.10 0.22% 0.30%
12+ MONTHS 41 4,272,228.76 0.09% 0.10%
------ ---------------- ------- -------
TOTAL 48,006 4,201,431,511.39 100.00% 100.00%
====== ================ ======= =======
LOANS ORIGINATED IN 2004 AS AT EACH SPECIFIED DATE
31 DECEMBER 2004 31 DECEMBER 2005
--------------------------------------------- -----------------------------------------------
PRINCIPAL % BY % BY PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- ---------- ------ ---------------- ------- ------------
< 1 MONTH 19,395 1,858,143,858.65 98.98% 98.99% 86,242 8,412,198,446.40 98.68% 98.66%
1 -- <2 MONTHS 160 14,925,884.27 0.82% 0.80% 771 77,031,962.24 0.88% 0.90%
2 -- <3 MONTHS 26 3,009,986.86 0.13% 0.16% 199 19,495,552.43 0.23% 0.23%
3 -- <4 MONTHS 8 435,131.51 0.04% 0.02% 83 7,139,842.78 0.09% 0.08%
4 -- <5 MONTHS 4 414,997.35 0.02% 0.02% 37 3,561,935.58 0.04% 0.04%
5 -- <6 MONTHS 1 57,002.74 0.01% 0.00% 20 2,184,137.69 0.02% 0.03%
6 -- <12 MONTHS 1 127,958.01 0.01% 0.01% 42 4,205,832.56 0.05% 0.05%
12+ MONTHS 0.00% 0.00% 3 213,936.61 0.00% 0.00%
------ ---------------- ------- ---------- ------ ---------------- ------- ------------
TOTAL 19,595 1,877,114,819.39 100.00% 100.00% 87,397 8,526,031,646.29 100.00% 100.00%
====== ================ ======= ========== ====== ================ ======= ============
31 DECEMBER 2006 31 DECEMBER 2007
----------------------------------------------- ------------------------------------------
PRINCIPAL % BY % BY PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- ------------ ------ ---------------- ------- -------
< 1 MONTH 52,812 4,901,040,405.66 97.70% 97.53% 46,686 491,880,044.80 97.20% 96.83%
1 -- <2 MONTHS 584 54,806,784.18 1.08% 1.09% 723 77,981,648.25 1.51% 1.68%
2 -- <3 MONTHS 274 26,997,716.81 0.51% 0.54% 260 27,698,648.82 0.54% 0.60%
3 -- <4 MONTHS 153 16,524,010.39 0.28% 0.33% 117 12,987,370.38 0.24% 0.28%
4 -- <5 MONTHS 73 7,590,279.34 0.14% 0.15% 61 7,440,749.94 0.13% 0.16%
5 -- <6 MONTHS 45 4,971,075.64 0.08% 0.10% 50 5,143,831.41 0.10% 0.11%
6 -- <12 MONTHS 105 11,602,620.98 0.19% 0.23% 97 11,383,068.33 0.20% 0.25%
12+ MONTHS 12 1,452,433.82 0.02% 0.03% 35 4,280,261.82 0.07% 0.09%
------ ---------------- ------- ------------ ------ ---------------- ------- -------
TOTAL 54,058 5,024,985,326.82 100.00% 100.00% 48,029 4,638,795,623.75 100.00% 100.00%
====== ================ ======= ============ ====== ================ ======= =======
31 JANUARY 2008
-----------------------------------------------
PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- ------------
< 1 MONTH 46,086 4,430,777,393.67 97.04% 96.66%
1 -- <2 MONTHS 751 80,770,646.10 1.58% 1.76%
2 -- <3 MONTHS 297 30,394,412.71 0.63% 0.66%
3 -- <4 MONTHS 104 10,935,976.56 0.22% 0.24%
4 -- <5 MONTHS 65 8,062,344.49 0.14% 0.18%
5 -- <6 MONTHS 57 6,749,582.89 0.12% 0.15%
6 -- <12 MONTHS 95 11,165,123,53 0.20% 0.24%
12+ MONTHS 37 4,869,800.67 0.08% 0.11%
------ ---------------- ------- ------------
TOTAL 47,492 4,583,725,280.62 100.00% 100.00%
====== ================ ======= ============
S-91
LOANS ORIGINATED IN 2005 AS AT EACH SPECIFIED DATE
31 DECEMBER 2006 31 DECEMBER 2007
------------------------------------------ ------------------------------------------
PRINCIPAL % BY % BY PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- ------- ------ ---------------- ------- -------
< 1 month 55,564 6,382,284,578.00 99.14% 99.15% 53,471 5,999,821,494.96 97.74% 97.53%
1 -- <2 months 328 35,729,018.02 0.59% 0.56% 736 89,976,591.55 1.35% 1.46%
2 -- <3 months 99 12,151,297.65 0.18% 0.19% 251 29,971,253.48 0.46% 0.49%
3 -- <4 months 27 3,280,988.46 0.05% 0.05% 93 11,716,343.22 0.17% 0.19%
4 -- <5 months 14 1,736,683.34 0.02% 0.03% 50 5,853,764.74 0.09% 0.10%
5 -- <6 months 3 249,321.66 0.01% 0.00% 33 4,352,315.81 0.06% 0.07%
6 -- <12 months 11 1,316,070.99 0.02% 0.02% 63 9,088,059.33 0.12% 0.15%
12+ months 1 70,159.46 0.00% 0.00% 9 1,194,745.13 0.02% 0.02%
------ ---------------- ------- ------- ------ ---------------- ------- -------
TOTAL 56,047 6,436,818,117.58 100.00% 100.00% 54,706 6,151,974,568.22 100.00% 100.00%
====== ================ ======= ======= ====== ================ ======= =======
31 JANUARY 2008
------------------------------------------
PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE
------ ---------------- ------- -------
< 1 month 46,898 5,190,208,070.49 97.36% 97.09%
1 -- <2 months 712 85,092,109.77 1.48% 1.59%
2 -- <3 months 269 33,777,165.34 0.56% 0.63%
3 -- <4 months 107 12,859,052.03 0.22% 0.24%
4 -- <5 months 80 7,171,527.78 0.12% 0.13%
5 -- <6 months 36 4,282,426.85 0.07% 0.08%
6 -- <12 months 80 11,534,403.92 0.17% 0.22%
12+ months 9 1,070,279.56 0.02% 0.02%
------ ---------------- ------- -------
TOTAL 48,171 5,345,995,035.74 100.00% 100.00%
====== ================ ======= =======
Note: There were no loans originated in 2005 included in the portfolio as at 31
December 2005.
LOANS ORIGINATED IN 2006 AS AT EACH SPECIFIED DATE
31 DECEMBER 2006 31 DECEMBER 2007
--------------------------------------- -------------------------------------------
PRINCIPAL % BY % BY PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE
------ ------------- ------- ------- ------ ----------------- ------- -------
< 1 MONTH 91 10,759,178.71 100.00% 100.00% 88.858 11,083,487,970.26 98.46% 98.27%
1 -- <2 MONTHS 0.00% 0.00% 962 133,939,519.26 1.07% 1.19%
2 -- <3 MONTHS 0.00% 0.00% 243 34,454,955.46 0.27% 0.31%
3 -- <4 MONTHS 0.00% 0.00% 83 11,315,192.69 0.09% 0.10%
4 -- <5 MONTHS 0.00% 0.00% 41 5,715,344.51 0.05% 0.05%
5 -- <6 MONTHS 0.00% 0.00% 22 3,997,759.15 0.02% 0.04%
6 -- <12 MONTHS 0.00% 0.00% 41 5,497,737.55 0.05% 0.05%
12+ MONTHS 0.00% 0.00% 2 565,659.57 0.00% 0.01%
------ ------------- ------- ------- ------ ----------------- ------- -------
TOTAL 91 10,759,178.71 100.00% 100.00% 90.252 11,278,974,138.45 100.00% 100.00%
====== ============= ======= ======= ====== ================= ======= =======
31 JANUARY 2008
---------------------------------------------
PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE
------ ----------------- ------- -------
< 1 MONTH 92.115 11,495,492,025.98 98.38% 98.16%
1 -- <2 MONTHS 991 142,497,756.70 1.06% 1.22%
2 -- <3 MONTHS 295 39,308,157.92 0.32% 0.34%
3 -- <4 MONTHS 98 14,267,594.58 0.10% 0.12%
4 -- <5 MONTHS 56 7,884,600.42 0.06% 0.07%
5 -- <6 MONTHS 28 3,642,579.25 0.03% 0.03%
6 -- <12 MONTHS 48 6,821,688.80 0.05% 0.06%
12+ MONTHS 5 1,043,040.79 0.01% 0.01%
------ ----------------- ------- -------
TOTAL 93.636 11,710,957,444.44 100.00% 100.00%
====== ================= ======= =======
S-92
LOANS ORIGINATED IN 2007 AS AT EACH SPECIFIED DATE
31 JANUARY 2008
-------------------------------------------
PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE
------ ----------------- ------- -------
< 1 month 12,644 1,784,112,110.10 99.73% 99.65%
1 -- <2 months 34 6,315,115.67 0.27% 0.35%
2 -- <3 months 0 0 0% 0%
3 -- <4 months 0 0 0% 0%
4 -- <5 months 0 0 0% 0%
5 -- <6 months 0 0 0% 0%
6 -- <12 months 0 0 0% 0%
12+ months 0 0 0% 0%
------ ----------------- ------- -------
TOTAL 12,678 1,790,427,225.77 100.00% 100.00%
====== ================= ======= =======
S-93
ALL LOANS IN THE MORTGAGES TRUST AS AT EACH SPECIFIED DATE
31 DECEMBER 2004 31 DECEMBER 2005
-------------------------------------------- --------------------------------------------
PRINCIPAL % BY % BY PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE
------- ----------------- ------- ------- ------- ----------------- ------- -------
<1 month 374,448 28,051,118,706.28 97.09% 97.28% 361,246 27,642,121,931.48 96.34% 96.59%
1 -- <2 months 6,674 469,981,030.31 1.73% 1.63% 9,015 619,619,491.58 2.40% 2.17%
2 -- <3 months 2,221 156,420,805.82 0.58% 0.54% 2,103 154,748,821.99 0.56% 0.54%
3 -- <4 months 1,037 70,581,738.45 0.27% 0.24% 1,019 75,812,791.70 0.27% 0.26%
4 -- <5 months 557 37,444,319.60 0.14% 0.13% 542 41,137,402.02 0.14% 0.14%
5 -- <6 months 271 18,749,712.84 0.07% 0.07% 323 25,869,547.34 0.09% 0.09%
6 -- <12 months 440 30,826,722.88 0.11% 0.11% 617 50,902,070.08 0.16% 0.18%
12+ months 33 1,725,963.21 0.01% 0.01% 91 6,780,407.67 0.02% 0.02%
------- ----------------- ------- ------- ------- ----------------- ------- -------
TOTAL 385,681 28,836,848,999.39 100.00% 100.00% 374,956 28,616,992,463.86 100.00% 100.00%
======= ================= ======= ======= ======= ================= ======= =======
31 DECEMBER 2006 31 DECEMBER 2007
-------------------------------------------- --------------------------------------------
PRINCIPAL % BY % BY PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE NUMBER BALANCE
------- ----------------- ------- ------- ------- ----------------- ------- -------
<1 month 355,589 28,505,469,915.05 97.46% 97.53% 408,226 36,314,561,496.27 97.33% 97.23%
1 -- <2 months 5,039 373,322,777.27 1.38% 1.28% 6,308 585,387,867.80 1.50% 1.57%
2 -- <3 months 1,828 146,544,540.17 0.50% 0.50% 2,373 214,284,822.73 0.57% 0.57%
3 -- <4 months 908 74,222,128.03 0.25% 0.25% 981 88,328,337.27 0.23% 0.24%
4 -- <5 months 484 39,638,703.77 0.13% 0.14% 490 45,785,821.71 0.12% 0.12%
5 -- <6 months 280 24,672,588.91 0.08% 0.08% 321 30,528,732.79 0.08% 0.08%
6 -- <12 months 592 52,682,111.53 0.16% 0.18% 564 56,841,394.02 0.13% 0.15%
12+ months 137 12,213,319.24 0.04% 0.04% 149 15,258,133.83 0.04% 0.04%
------- ----------------- ------- ------- ------- ----------------- ------- -------
TOTAL 364,857 29,228,766,083.97 100.00% 100.00% 419,412 37,350,976,606.42 100.00% 100.00%
======= ================= ======= ======= ======= ================= ======= =======
31 JANUARY 2008
------------------------------------------------
PRINCIPAL % BY % BY
NUMBER BALANCE NUMBER BALANCE
-------- ----------------- ------- -------
<1 month 414,723 37,419,057,432.93 97.29% 97.17%
1 -- <2 months 6,417 609,517,704.17 1.51% 1.58%
2 -- <3 months 2,376 217,205,412.50 0.56% 0.56%
3 -- <4 months 1,113 98,628,431.10 0.26% 0.26%
4 -- <5 months 508 48,537,989.32 0.12% 0.13%
5 -- <6 months 347 33,911,830.25 0.08% 0.09%
6 -- <12 months 608 63,470,438.04 0.14% 0.16%
12+ months 179 18,324,244.47 0.04% 0.05%
--------- ----------------- ------- -------
TOTAL 426,271 38,508,653,482.78 100.00% 100.00%
========= ================= ======= =======
[list to be updated with most recent information]
S-94
HOLMES MASTER ISSUER PLC
$[__] ISSUE [__]-[__] [CALLABLE] NOTES
- -------------------------------------------------------------------------------
PROSPECTUS SUPPLEMENT
UNDERWRITERS
[__] [__] [__]
[__] [__] [__]
[__]
HOLMES MASTER ISSUER PLC
(incorporated in England and Wales with limited liability,
registered number 5953811)
Issuing entity
RESIDENTIAL MORTGAGE-BACKED NOTE ISSUANCE PROGRAMME
HOLMES FUNDING LIMITED
Depositor
ABBEY NATIONAL PLC
Sponsor, seller, servicer, cash manager and account bank
The issuing entity may from time to time issue class A notes, class B
notes, class M notes, class C notes and/or class D notes in one or more series
(together, the ISSUING ENTITY NOTES). Each series will consist of one or more
classes (or sub-classes) of issuing entity notes. One or more series or classes
(or sub-classes) of issuing entity notes may be issued at any one time.
The principal asset from which the issuing entity will make payments on
the issuing entity notes is a master intercompany loan to an affiliated company
called Holmes Funding Limited (FUNDING). The principal asset from which Funding
will make payments on the master intercompany loan is its interest in a master
trust over a pool of residential mortgage loans held by Holmes Trustees Limited
(the MORTGAGES TRUSTEE).
The residential mortgage loans were originated by Abbey National plc
(ABBEY) and are secured over properties located in England, Wales and Scotland.
Subject to the detailed description and limits set out in "CREDIT
STRUCTURE", the issuing entity notes will have the benefit of the following
credit enhancement or support: availability of excess portions of Funding's
available revenue receipts and of Funding's available principal receipts;
reserve funds that will be used in certain circumstances by Funding to meet any
deficit in revenue or to repay amounts of principal; and subordination of junior
classes of issuing entity notes. The issuing entity notes will also have the
benefit of certain derivatives instruments which may include currency and
interest rate swaps, if specified in the relevant prospectus supplement.
THE ISSUING ENTITY NOTES OFFERED BY THIS PROSPECTUS WILL BE OBLIGATIONS OF THE
ISSUING ENTITY ONLY. THE ISSUING ENTITY NOTES WILL NOT BE OBLIGATIONS OF, OR THE
RESPONSIBILITY OF, OR GUARANTEED BY, OR REPRESENT ANY INTEREST IN, THE SPONSOR,
THE DEPOSITOR OR ANY OF THEIR AFFILIATES.
PLEASE CONSIDER CAREFULLY THE RISK FACTORS DESCRIBED ON PAGES 42 TO 73 OF THIS
PROSPECTUS.
Application will be made to (i) the Financial Services Authority (the
FSA) in its capacity as competent authority (the UK LISTING AUTHORITY) under
Part VI of the Financial Services and Markets Act 2000 (FSMA) for issuing entity
notes issued during the period of 12 months from the date of this prospectus to
be admitted to the official list maintained by the UK Listing Authority (the
OFFICIAL LIST) and (ii) the London Stock Exchange plc (the LONDON STOCK
EXCHANGE) for the issued issuing entity notes to be admitted to trading on the
London Stock Exchange's Regulated Market (being a regulated
market for the purposes of Directive 2004/39/EC (the Markets in Financial
Instruments Directive)).
This prospectus may be used to offer and sell the issuing entity notes
only if accompanied by a prospectus supplement.
The issuing entity may offer the issuing entity notes through
underwriters or by other methods described in this prospectus under
"UNDERWRITING".
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE ISSUING ENTITY NOTES OR
DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENCE.
Prospectus dated 24 March 2008
TABLE OF CONTENTS
CLAUSE PAGE
Defined Terms ............................................................................................... 8
Forward-looking statements .................................................................................. 10
Important notice about information provided in this prospectus and the relevant prospectus supplement ....... 10
Overview of Transaction ..................................................................................... 12
Overview of the transaction .............................................................................. 12
Structural diagram of the securitisation by the issuing entity ........................................... 14
Diagram of ownership structure of special purpose companies ................................................. 15
The Main Parties ............................................................................................ 17
Overview of the Issuing Entity Notes ......................................................................... 20
Series ................................................................................................... 20
Payment .................................................................................................. 20
Interest ................................................................................................. 20
Ratings .................................................................................................. 21
Listing .................................................................................................. 21
Denominations of the issuing entity notes ................................................................ 21
Maturities ............................................................................................... 21
Currencies ............................................................................................... 21
Issue price .............................................................................................. 22
Selling restrictions ..................................................................................... 22
Relationship between the issuing entity notes and the master intercompany loan ........................... 22
Diagram of the priority of payments by the issuing entity and subordination relationships.. .............. 22
Operative documents concerning the issuing entity notes .................................................. 23
Payment and ranking of the issuing entity notes .......................................................... 24
Fixed rate notes ......................................................................................... 25
Floating rate notes ...................................................................................... 25
Zero coupon notes ........................................................................................ 25
Bullet redemption notes .................................................................................. 25
Scheduled redemption notes ............................................................................... 26
Pass-through notes ....................................................................................... 26
Money market notes ....................................................................................... 26
Redemption and repayment ................................................................................. 28
Optional redemption or repurchase of the issuing entity notes ............................................ 28
Post-enforcement call option ............................................................................. 29
Withholding tax .......................................................................................... 29
The programme date ....................................................................................... 29
Credit enhancement ....................................................................................... 29
Swap agreements .......................................................................................... 29
Funding principal deficiency ledger ...................................................................... 29
Trigger events ........................................................................................... 30
Acceleration ............................................................................................. 30
The loans ................................................................................................ 30
Assignment of the loans .................................................................................. 31
The mortgages trust ...................................................................................... 32
Intercompany loans ....................................................................................... 33
Security granted by Funding and the issuing entity ....................................................... 35
Swap providers ........................................................................................... 36
Swap agreements .......................................................................................... 37
The post-enforcement call option agreement ............................................................... 37
The previous issuing entities, new issuing entities and new funding entities ............................. 38
United Kingdom tax status ................................................................................ 40
United States tax status ................................................................................. 40
ERISA considerations for investors ....................................................................... 40
Fees ..................................................................................................... 41
Risk Factors ................................................................................................ 42
The Issuance of Issuing Entity Notes ........................................................................ 74
Use of Proceeds ............................................................................................. 78
The Issuing Entity .......................................................................................... 79
The Abbey Group of Companies ................................................................................ 82
Funding ..................................................................................................... 84
The Mortgages Trustee ....................................................................................... 86
Holdings .................................................................................................... 87
PECOH Limited ............................................................................................... 88
The Note Trustee and the Issuing Entity Security Trustee .................................................... 89
The Funding Swap Provider ................................................................................... 90
Affiliations and certain Relationships and Related Transactions of Transaction Parties ...................... 91
The Loans ................................................................................................... 92
The portfolio ............................................................................................ 92
Introduction ............................................................................................. 92
Characteristics of the loans ............................................................................. 92
Product switches ......................................................................................... 99
Origination of the loans ................................................................................. 99
Underwriting ............................................................................................. 100
Lending criteria ......................................................................................... 100
Changes to the underwriting policies and the lending criteria ............................................ 102
Insurance policies ....................................................................................... 102
Scottish loans ........................................................................................... 104
The Servicer ................................................................................................ 105
The servicer ............................................................................................. 105
Servicing of loans ....................................................................................... 105
Arrears and default procedures ........................................................................... 106
Arrears experience ....................................................................................... 107
The Servicing Agreement ..................................................................................... 108
Introduction ............................................................................................. 108
Powers ................................................................................................... 108
Undertakings by the servicer ............................................................................. 108
Compensation of the servicer ............................................................................. 110
Removal or resignation of the servicer ................................................................... 110
Right of delegation by the servicer ...................................................................... 111
Actual delegation by the servicer to EDS Credit Services Limited ......................................... 111
Servicer compliance ...................................................................................... 112
Liability of the servicer ................................................................................ 112
Governing law ............................................................................................ 112
Assignment of The Loans And Their Related Security .......................................................... 113
Introduction ............................................................................................. 113
Assignment of loans and their related security to the mortgages trustee .................................. 113
Legal assignment of the loans to the mortgages trustee ................................................... 117
Representations and warranties ........................................................................... 118
Repurchase of loans under a mortgage account ............................................................. 119
Drawings under flexible loans ............................................................................ 120
Product switches and further advances .................................................................... 120
Reasonable, prudent mortgage lender ...................................................................... 120
Governing law ............................................................................................ 120
The Mortgages Trust ......................................................................................... 122
General legal structure .................................................................................. 122
Fluctuation of the Funding's share/ seller's share...................... ................................. 123
Funding share of the trust property ...................................................................... 123
Seller share of the trust property ....................................................................... 125
Minimum seller share ..................................................................................... 125
Cash management of trust property - revenue receipts ..................................................... 126
Mortgages trust application of revenue receipts .......................................................... 126
Cash management and allocation of trust property - principal receipts .................................... 127
Mortgages trust allocation and distribution of principal receipts prior to the occurrence of a trigger
event .................................................................................................... 129
Mortgages trust allocation and distribution of principal receipts and retained principal receipts after
the occurrence of a trigger event ........................................................................ 131
Losses ................................................................................................... 131
Disposal of trust property ............................................................................... 131
Additions to the trust property .......................................................................... 132
Acquisition by Funding of a further interest in the trust property ....................................... 132
Acquisition by the seller of a further interest in the trust property .................................... 132
Payment by the seller to Funding of the amount outstanding under an intercompany loan .................... 133
Termination of mortgages trust ........................................................................... 134
Retirement of mortgages trustee .......................................................................... 134
Governing law ............................................................................................ 134
The Master Intercompany Loan Agreement ...................................................................... 135
The facility ............................................................................................. 135
Ratings designations of the term advances ................................................................ 135
Conditions to drawdown ................................................................................... 135
Representations and agreements ........................................................................... 136
Payments of interest ..................................................................................... 136
Repayment of principal on the term advances .............................................................. 136
Limited recourse ......................................................................................... 137
Master intercompany loan events of default ............................................................... 137
New intercompany loan agreements with new issuing entities ............................................... 138
Funding's bank accounts .................................................................................. 138
Governing law ............................................................................................ 139
Security for Funding's Obligations .......................................................................... 140
Covenants of Funding ..................................................................................... 140
Funding security ......................................................................................... 140
Funding pre-enforcement priority of payments ............................................................. 141
Following the creation of new intercompany loan agreements with new issuing entities ..................... 142
Enforcement .............................................................................................. 142
Funding post enforcement priority of payments ............................................................ 143
Following the creation of new intercompany loan agreements with new issuing entities...................... 143
Appointment, powers, responsibilities and liabilities of the security trustee ............................ 143
The security trustee's fees and expenses ................................................................. 143
Retirement and removal ................................................................................... 144
Additional provisions of the Funding deed of charge ...................................................... 144
Governing law ............................................................................................ 145
Security for the Issuing Entity's Obligations ............................................................... 146
Covenants of the issuing entity .......................................................................... 146
Issuing entity security .................................................................................. 146
Enforcement .............................................................................................. 147
Post enforcement priority of payments .................................................................... 148
New issuing entity secured creditors ..................................................................... 148
Appointment, powers, responsibilities and liabilities of the issuing entity security trustee ............. 148
Issuing entity security trustee's fees and expenses ...................................................... 149
Retirement and removal ................................................................................... 149
Additional provisions of the issuing entity deed of charge ............................................... 149
Governing law ............................................................................................ 151
Cashflows ................................................................................................... 152
Distribution of Funding available revenue receipts ....................................................... 152
Distribution of issuing entity revenue receipts .......................................................... 154
Distribution of issuing entity revenue receipts prior to enforcement of the issuing entity security ...... 155
Distribution of issuing entity revenue receipts after enforcement of the issuing entity security but prior
to enforcement of the Funding security ................................................................... 157
Distribution of Funding available principal receipts prior to enforcement of the Funding security or the
occurrence of a trigger event or enforcement of the issuing entity security .............................. 157
Rules for application of Funding available principal receipts and Funding principal receipts ............. 158
1. General rules ......................................................................................... 158
2. Prior to the occurrence of a trigger event and the enforcement of the Funding security, repayment of
the AAA term advances is determined by final maturity date if more than one AAA term advance is due and
payable on the same interest payment date ................................................................ 159
3. In certain circumstances, payment on all the BB term advances, all the BBB term advances, all the A
term advances and all the AA term advances is deferred ................................................... 159
4. Effect of cash accumulation period on term advances ................................................... 159
5. Repayment of pass-through term advances ............................................................... 160
6. Repayment tests ....................................................................................... 160
Repayment of term advances prior to a trigger event, enforcement of the issuing entity security or
enforcement of the Funding security ...................................................................... 161
Repayment of term advances of each series following the occurrence of a non-asset trigger event prior to
enforcement of the issuing entity security or the Funding security ....................................... 162
Repayment of term advances of each series following the occurrence of an asset trigger event prior to
enforcement of the issuing entity security or the Funding security ....................................... 162
Repayment of term advances of each series following enforcement of the issuing entity security ........... 163
Distribution of issuing entity principal receipts ........................................................ 163
Distribution of issuing entity principal receipts prior to enforcement of the issuing entity security .... 163
Distribution of issuing entity principal receipts following enforcement of the issuing entity security but
prior to enforcement of the Funding security ............................................................. 164
Distribution of Funding principal receipts and Funding revenue receipts following enforcement of the
Funding security ......................................................................................... 165
Collateral in the Funding post enforcement priority of payments .......................................... 167
Distribution of issuing entity principal receipts and issuing entity revenue receipts following
enforcement of the issuing entity security and enforcement of the Funding security ....................... 167
Collateral in the issuing entity post-enforcement priority of payments ................................... 168
Credit Structure ............................................................................................ 170
Credit support for the issuing entity notes provided by Funding available revenue receipts. .............. 170
Interest rate on the portfolio ........................................................................... 171
Level of arrears experienced ............................................................................. 171
Use of Funding principal receipts to pay Funding income deficiency ....................................... 171
First reserve fund ....................................................................................... 171
Second reserve fund ...................................................................................... 172
Funding reserve fund ..................................................................................... 173
Principal deficiency ledger .............................................................................. 173
Following the creation of new intercompany loan agreements ............................................... 174
Issuing entity available funds ........................................................................... 174
Priority of payments among the class A notes, the class B notes, the class M notes, the class C notes and
the class D notes ........................................................................................ 175
Mortgages trustee GIC account/Funding GIC account ........................................................ 175
Funding liquidity reserve fund ........................................................................... 175
The Swap Agreements ......................................................................................... 177
General .................................................................................................. 177
The Funding swap ......................................................................................... 177
The issuing entity swaps ................................................................................. 179
Ratings downgrade of swap providers ...................................................................... 180
Swap collateral .......................................................................................... 180
Termination of the swaps ................................................................................. 180
Transfer of the swaps .................................................................................... 181
Taxation ................................................................................................. 182
Governing law ............................................................................................ 182
Cash Management for the Mortgages Trustee and Funding ....................................................... 183
Cash management services provided in relation to the mortgages trust ..................................... 183
Cash management services to be provided to Funding ....................................................... 183
Compensation of cash manager ............................................................................. 184
Resignation of cash manager .............................................................................. 185
Termination of appointment of cash manager ............................................................... 185
Governing law ............................................................................................ 185
Cash Management for the Issuing Entity ...................................................................... 186
Cash management services to be provided to the issuing entity ............................................ 186
Issuing entity's bank accounts ........................................................................... 187
Compensation of issuing entity cash manager .............................................................. 187
Resignation of issuing entity cash manager ............................................................... 187
Termination of appointment of issuing entity cash manager ................................................ 187
Governing law ............................................................................................ 188
Description of the Trust Deed ............................................................................... 189
General .................................................................................................. 189
Trust Indenture Act prevails ............................................................................. 190
Governing law ............................................................................................ 190
The Issuing Entity Notes and the Global Notes ............................................................... 191
Payment .................................................................................................. 192
Clearance and settlement ................................................................................. 192
Global clearance and settlement procedures ............................................................... 194
Terms and Conditions of the US Notes ........................................................................ 196
Material Legal Aspects of the Loans ......................................................................... 220
English loans ............................................................................................ 220
Taking security over land ................................................................................ 220
Scottish loans ........................................................................................... 221
United Kingdom Taxation ..................................................................................... 224
Payment of interest on the issuing entity notes .......................................................... 224
EU Savings Directive ..................................................................................... 224
United States Taxation ...................................................................................... 226
General .................................................................................................. 226
Tax status of the issuing entity, Funding, mortgages trustee and the mortgages trust ..................... 226
Characterisation of the offered notes .................................................................... 227
Taxation of US holders of the offered notes .............................................................. 227
Offered notes as debt of Funding ......................................................................... 227
Information reporting and backup withholding ............................................................. 228
ERISA Considerations ........................................................................................ 229
Enforcement of foreign judgments in England and Wales ....................................................... 231
United States Legal Investment Considerations ............................................................... 232
Legal Matters ............................................................................................... 233
Underwriting ................................................................................................ 234
United States ............................................................................................ 234
United Kingdom ........................................................................................... 235
France ................................................................................................... 235
Italy .................................................................................................... 235
Spain .................................................................................................... 236
Canada ................................................................................................... 236
General .................................................................................................. 236
Reports to noteholders ...................................................................................... 237
Certain relationships ....................................................................................... 237
Incorporation of certain Information by reference ........................................................... 237
Where investors can find more information ................................................................... 238
Listing and General Information ............................................................................. 239
Authorisation ............................................................................................ 239
Listing of issuing entity notes .......................................................................... 239
Clearing and settlement .................................................................................. 239
Litigation ............................................................................................... 239
Accounts ................................................................................................. 239
Significant or material change ........................................................................... 240
Trustee Reliance ......................................................................................... 240
Documents available ...................................................................................... 240
Glossary .................................................................................................... 242
2
On 28 November 2006, Abbey National plc, in its capacity as sponsor,
established the residential mortgage-backed note issuance programme (the
PROGRAMME) whereby the issuing entity may from time to time issue the issuing
entity notes. Not all of the issuing entity notes issued under the programme
will be offered by this prospectus.
The issuing entity and certain other issuing entities (the PREVIOUS
ISSUING ENTITIES) have issued previous notes and used the proceeds thereof to
make intercompany loans to Funding. Subject to certain conditions described
further in this prospectus, from time to time new issuing entities may also be
established to issue new notes and make new intercompany loans to Funding. In
addition, new separate funding entities (each a NEW FUNDING ENTITY) may be
created in the future and new issuing entities may be established to issue new
notes and make new intercompany loans to such new funding entities. The previous
notes issued by the previous issuing entities and the issuing entity are, and
any new notes issued by such new issuing entities will be, ultimately secured by
the same trust property as the issuing entity notes offered by the issuing
entity under this prospectus and the relevant prospectus supplement. The
allocation of trust property as between Abbey (the SELLER) and Funding is
described in this prospectus under "THE MORTGAGES TRUST".
An issuing entity note is not a deposit and neither the issuing entity
notes nor the underlying receivables are insured or guaranteed by any United
Kingdom or United States governmental agency.
3
DEFINED TERMS
Terms used in this prospectus are defined in the glossary. Where terms
first appear in the text, they are also defined there or accompanied by a
reference to a definition elsewhere.
References herein to this PROSPECTUS are to this base prospectus and
references herein to PROSPECTUS SUPPLEMENT are to a supplement to this base
prospectus which forms part of this prospectus in relation to the relevant
series and class (or sub-class) of the issuing entity notes.
References in this prospectus to FINAL TERMS are to the final terms for
the issuing entity notes (including issuing entity notes not offered by this
prospectus) filed with the UK Listing Authority and made available to the public
in accordance with the Prospectus Rules made pursuant to the Financial Services
and Markets Act 2000. The final terms do not form a part of this prospectus and
will not be used to offer the issuing entity notes in the United States.
References in this document (other than in the Appendices) to the ISSUING
ENTITY mean Holmes Master Issuer PLC and references to YOU mean potential
investors in the issuing entity notes.
References in this prospectus to the DEPOSITOR or FUNDING mean Holmes
Funding Limited.
References in this prospectus to the SEC mean the United States
Securities and Exchange Commission.
References in this prospectus to (POUND), POUNDS 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 USD, US$, $, US DOLLARS or
DOLLARS are to the lawful currency of the United States of America. References
in this prospectus to (EURO), EURO or EURO are to the single currency introduced
at the third stage of European Economic and Monetary Union pursuant to the
Treaty establishing the European Communities, as amended from time to time.
Not all series and classes (or sub classes) of issuing entity notes will
be registered in the United States under the US Securities Act of 1933, as
amended (the SECURITIES ACT) and therefore will not be offered under this
prospectus. However, the term ISSUING ENTITY NOTES unless otherwise stated, when
used in this prospectus, includes all notes issued by the issuing entity.
Any series of the issuing entity notes which are registered in the United
States under the Securities Act and offered under this prospectus and the
relevant prospectus supplement are referred to in this prospectus as US NOTES or
OFFERED NOTES.
Because this transaction is connected, by virtue of its structure, with
several previous transactions and because it may be connected with future
transactions, it is necessary in this prospectus to refer to any or all of these
transactions.
In respect of notes or other terms derived from or related to them, the
word PREVIOUS is used when referring to the previous transactions, ISSUING
ENTITY when referring to a transaction set out in the accompanying prospectus
supplement (the PRESENT TRANSACTION), CURRENT when referring to both the
previous transactions, and the present transaction, NEW when referring to future
transactions, and ANY or ALL when referring to any or all of the previous
transactions, the present transaction and future transactions. For example, the
ISSUING ENTITY NOTES are the notes issued by Holmes Master Issuer PLC as set out
in the relevant prospectus supplement and the PREVIOUS NOTES are the notes
issued by Holmes Financing (No. 1) PLC, Holmes Financing (No. 2) PLC, Holmes
Financing (No. 3) PLC, Holmes Financing (No. 4) PLC, Holmes Financing (No. 5)
PLC, Holmes Financing (No. 6) PLC, Holmes Financing (No. 7) PLC, Holmes
Financing (No. 8) PLC, Holmes Financing (No. 9) PLC and Holmes Financing (No.
10) PLC, and the issuing entity notes issued by the issuing entity prior to the
date of the relevant prospectus supplement.
In respect of term advances or intercompany loans, the word PREVIOUS is
used when referring to any term advances or intercompany loans made available in
respect of a previous transaction either (i) by a previous issuing entity under
a previous intercompany loan agreement, or (ii) by the issuing entity under the
master intercompany loan agreement, CURRENT when referring to any term advances
or intercompany loans made available by the issuing entity under the master
intercompany loan agreement in respect of the present transaction, NEW when
referring to any term advances or intercompany loans made available in respect
of a future transaction either (i) by the issuing entity under the master
intercompany loan agreement, or (ii) by a new issuing entity under a new
intercompany loan agreement and ANY or ALL when referring to any of the
4
term advances or intercompany loans under the previous transactions, the present
transaction and future transactions.
Each term advance (being either (i) a previous term advance made by a
previous issuing entity or the issuing entity under a previous intercompany
loan, (ii) a current term advance made by the issuing entity to Funding under
the current intercompany loan, or (iii) a new term advance made by a new issuing
entity or the issuing entity under a new intercompany loan, in each case funded
from proceeds received by the relevant issuing entity from the issuance of a
series and class (or sub-class) of notes) carries a rating designation, which is
the rating assigned on issuance by the rating agencies (Moody's Investors
Service Limited, Standard & Poor's Rating Services and Fitch Ratings Ltd.) to
the corresponding notes used to fund that term advance. These rating
designations, from highest to lowest, are AAA, AA, A, BBB and BB. References to
higher or lower term advance rating designations should be construed
accordingly.
5
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements including, but not
limited to, statements made under the headings "RISK FACTORS", "THE LOANS", "THE
SERVICER" and "THE SERVICING AGREEMENT". These forward-looking statements can be
identified by the use of forward-looking terminology, such as the words
"believes", "expects", "may", "intends", "should" or "anticipates" or the
negative or other variations of those terms. These statements involve known and
unknown risks, uncertainties and other important factors that could cause the
actual results and performance of the issuing entity notes, Abbey or the UK
residential mortgage industry to differ materially from any future results or
performance expressed or implied in the forward-looking statements. These risks,
uncertainties and other factors include, among others general economic and
business conditions in the United Kingdom, currency exchange and interest rate
fluctuations, government, statutory, regulatory or administrative initiatives
affecting Abbey, changes in business strategy, lending practices or customer
relationships and other factors that may be referred to in this prospectus. Some
of the most significant of these risks, uncertainties and other factors are
discussed in this prospectus under the heading "RISK FACTORS", and you are
encouraged to carefully consider those factors prior to making an investment
decision in relation to the issuing entity notes.
These forward-looking statements speak only as of the date of this
prospectus. The issuing entity expressly disclaims any obligation or undertaking
to release publicly any updates or revisions to any forward-looking statement
contained herein to reflect any change in the issuing entity's expectations with
regard thereto or any change in events, conditions or circumstances after the
date of this prospectus on which any such statement is based. These statements
reflect the issuing entity's current views with respect to such matters.
IMPORTANT NOTICE ABOUT INFORMATION PROVIDED IN THIS PROSPECTUS
AND THE RELEVANT PROSPECTUS SUPPLEMENT
Information about each series and class (or sub-class) of issuing entity
notes is contained in two separate documents: (a) this prospectus, which
provides general information, some of which may not apply to a particular series
and class (or sub-class) of issuing entity notes; and (b) the relevant
prospectus supplement for a particular series and class (or sub-class) of
issuing entity notes, which describes the specific terms of the issuing entity
notes of that series and class (or sub-class), including:
o the timing of interest and principal payments;
o financial and other information about the assets of the issuing
entity;
o information about enhancement for the series or class (or
sub-class) of issuing entity notes;
o the ratings for the class of issuing entity notes;
o the method for selling the issuing entity notes; and
o other terms and conditions not contained herein that are
applicable to that series and class (or sub-class) of issuing
entity notes.
This prospectus may be used to offer and sell any series and class (or
sub-class) of issuing entity notes only if accompanied by the prospectus
supplement for that series and class (or sub-class).
Although the information in the relevant prospectus supplement for a
particular series and class (or sub-class) of issuing entity notes should not be
inconsistent with the information contained in this prospectus, insofar as the
prospectus supplement contains specific information about the series and class
(or sub-class) that differs from the more general information contained in this
prospectus, you should rely on the information in the relevant prospectus
supplement.
You should rely only on the information contained in this prospectus and
the relevant prospectus supplement, including the information incorporated by
reference. The issuing entity has not authorised anyone to provide you with
information that is different from that contained in this prospectus and the
relevant prospectus supplement. The information in this prospectus and the
relevant prospectus supplement is only accurate as of the dates on the
respective covers of those documents.
Cross-references are included in this prospectus and each relevant
prospectus supplement to headings in these materials under which you can find
further related discussions. The table of contents in
6
this prospectus and the table of contents included in each relevant prospectus
supplement provide the pages on which these headings are located.
If you require additional information, the mailing address of Funding's
principal executive offices is Abbey House, 2 Triton Square, Regent's Place,
London NW1 3AN, United Kingdom and the telephone number is +44 (0) 870 607 6000.
For other means of acquiring additional information about the issuing entity or
a series or class (or sub-class) of issuing entity notes, see "INCORPORATION OF
CERTAIN INFORMATION BY REFERENCE" in this prospectus.
7
OVERVIEW OF TRANSACTION
The information in this section of this prospectus is an overview of the
principal features of the issuing entity notes, including the transaction
documents and the loans that will generate the income for the issuing entity to
make payments on the issuing entity notes. This overview does not contain all of
the information that you should consider before investing in the issuing entity
notes. You should read this entire prospectus and the relevant prospectus
supplement carefully, especially the risks of investing in the issuing entity
notes discussed in this prospectus under the heading "RISK FACTORS" and in the
relevant prospectus supplement under the heading "RISK FACTORS".
OVERVIEW OF THE TRANSACTION
The following is a brief overview of the transaction and is further
illustrated by the "STRUCTURAL DIAGRAM OF THE SECURITISATION BY THE ISSUING
ENTITY" (the numbers in the diagram refer to the numbered paragraphs in this
section).
(1) On 26 July 2000 (the INITIAL CLOSING DATE) and on several
subsequent dates (in connection with previous transactions by the
issuing entity and by previous issuing entities), the seller
assigned the trust property to the mortgages trustee pursuant to a
mortgage sale agreement and retained an interest for itself in the
trust property, as further described in "ASSIGNMENT OF THE LOANS".
From time to time the seller may, subject to satisfaction of the
conditions to sale set out in "ASSIGNMENT OF THE LOANS AND THEIR
RELATED SECURITY - ASSIGNMENT OF LOANS AND THEIR RELATED SECURITY
TO THE MORTGAGES TRUSTEE", sell further loans and their related
security to the mortgages trustee. The loans will be residential
mortgage loans originated by Abbey and secured over properties
located in England, Wales and/or Scotland.
(2) The mortgages trustee holds, and will hold, the loans and other
property (the TRUST PROPERTY) on trust for the benefit of the
seller and Funding pursuant to a mortgages trust deed entered into
on 25 July 2000, as amended from time to time. The trust property
includes the portfolio, which at any time consists of the loans
and the other amounts derived from the loans and their related
security. Each of the seller and Funding has a joint and undivided
interest in the trust property but their respective entitlement to
the proceeds from the trust property is in proportion to their
respective shares of the trust property, as further described
under "THE MORTGAGES TRUST".
(3) The mortgages trustee distributes interest payments on the loans,
after payment of certain fees and expenses (including those of the
mortgages trustee, the servicer, the cash manager and the account
bank), to Funding according to the share that Funding has in the
trust property. The mortgages trustee distributes the remaining
interest receipts on the loans to the seller. The mortgages
trustee allocates losses in relation to the loans to the seller
and Funding according to the share that each of them then has in
the trust property, expressed as a percentage. These percentages
may fluctuate as described in "THE MORTGAGES TRUST". The mortgages
trustee distributes principal payments on the loans to the seller
and Funding according to the share that each of them has in the
trust property from time to time and a series of rules as
described in "THE MORTGAGES TRUST".
(4) Funding will use the proceeds of term advances received from time
to time from the issuing entity under the master intercompany loan
to:
(a) pay the seller part of the consideration for loans
(together with their related security) sold by the seller
to the mortgages trustee in connection with the relevant
issue by the issuing entity and the making of the relevant
term advances to Funding, which will result in an increase
in the amount of the trust property and a corresponding
adjustment to the value of the Funding share of the trust
property and the value of the seller share of the trust
property;
(b) acquire part of the seller share of the trust property,
which will result in a decrease of the seller share of the
trust property and a corresponding increase in the Funding
share of the trust property;
(c) fund or replenish the first reserve fund; and/or
(d) make a payment to the issuing entity or a previous issuing
entity or a new issuing entity to refinance a previous term
advance.
8
(5) Funding will use a portion of the amounts received from its share
in the trust property to meet its obligations to pay interest and
principal due to the issuing entity under the master intercompany
loan. Funding's obligations to the issuing entity under the master
intercompany loan will be secured under the Funding deed of charge
by, among other things, Funding's share of the trust property.
(6) The issuing entity's obligations to pay principal and interest on
the issuing entity notes will be funded primarily from the
payments of principal and interest received by it from Funding
under the master intercompany loan. The issuing entity's primary
asset will be its rights and interests under the master
intercompany loan agreement. Neither the issuing entity nor the
noteholders will have any direct interest in the trust property,
although the issuing entity will have a shared security interest
under the Funding deed of charge in respect of Funding's share of
the trust property. Prior to service of a note enforcement notice,
the issuing entity will only repay a class of issuing entity notes
(or part thereof) of any series on the relevant interest payment
date if it has received principal repayments in respect of the
term advance that was funded by the issue of such issuing entity
notes. The issuing entity will only receive a principal repayment
in respect of such term advance if, among other things, following
such repayment there would continue to be sufficient credit
enhancement on that date for each outstanding class of issuing
entity notes, either in the form of lower ranking classes of
issuing entity notes or other forms of credit enhancement.
Following service of a note enforcement notice, the issuing entity
will apply amounts received by it from Funding under the master
intercompany loan agreement to repay all classes of outstanding
issuing entity notes of any series (see "CASHFLOWS - DISTRIBUTION
OF ISSUING ENTITY PRINCIPAL RECEIPTS").
(7) Subject to satisfying certain conditions precedent, including:
(a) the issuing entity obtaining written confirmation from each
of the rating agencies that the then current ratings of the
issuing entity notes outstanding at that time, and the
implicit ratings of the term advances outstanding at that
time, will not be adversely affected because of the
proposed issue;
(b) that no event of default under any of the intercompany loan
agreements outstanding at that time has occurred which has
not been remedied or waived, and no event of default will
occur as a result of the proposed issue of the issuing
entity notes; and
(c) as at the most recent interest payment date, no deficiency
(which remains outstanding) is recorded on the principal
deficiency ledger in relation to the term advances
outstanding at that time,
the issuing entity will issue issuing entity notes in separate series
and classes (or sub-classes) (each such issue of issuing entity
notes issued under the programme being an ISSUE) and then lend the
proceeds to Funding under the master intercompany loan agreement
(see "OVERVIEW OF THE ISSUING ENTITY NOTES - RELATIONSHIP BETWEEN
THE ISSUING ENTITY NOTES AND THE MASTER INTERCOMPANY LOAN"). The
types of term advances (namely, bullet term advances, scheduled
amortisation term advances and pass-through term advances) are
described under "OVERVIEW OF THE ISSUING ENTITY NOTES -
INTERCOMPANY LOANS". Each series will consist of one or more
classes (or sub-classes) of issuing entity notes and may be
offered under this prospectus and the relevant prospectus
supplement setting out the terms of that series and those classes
(or sub-classes) of issuing entity notes. The issuing entity's
obligations under, among other things, the issuing entity notes
will be secured, under the issuing entity deed of charge entered
into on 28 November 2006 (as amended or restated from time to
time) by the issuing entity with, among others, the issuing entity
security trustee and the note trustee, over, among other things,
the issuing entity's rights under the master intercompany loan
agreement and the Funding deed of charge.
(8) The accounts, the reserve funds, any 2a-7 swap transactions, the
interest-rate swap transactions and the currency swap transactions
and their function in the programme structure are described later
in this prospectus and the relevant prospectus supplement. They
are included in the following diagram so that investors can refer
back to see where they fit into the structure.
9
STRUCTURAL DIAGRAM OF THE SECURITISATION BY THE ISSUING ENTITY
[GRAPHIC OMITTED]
10
DIAGRAM OF OWNERSHIP STRUCTURE OF SPECIAL PURPOSE COMPANIES
[GRAPHIC OMITTED]
This diagram illustrates the ownership structure of the principal special
purpose companies involved in the programme, as follows:
o Each of the mortgages trustee, Funding, the issuing entity and the
previous issuing entities is, and any new issuing entity or new
funding entity is expected to be, a wholly owned subsidiary of
Holmes Holdings Limited (HOLDINGS). See "FUNDING" and "OVERVIEW OF
THE ISSUING ENTITY NOTES - THE PREVIOUS ISSUING ENTITIES, NEW
ISSUING ENTITIES AND NEW FUNDING ENTITIES" in this prospectus and
"DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES
AND THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus
supplement.
o The entire issued share capital of Holdings is held on trust by a
professional trust company, not affiliated with the seller, under
the terms of a discretionary trust for the benefit of one or more
discretionary objects. Neither the seller nor any company
connected with the seller can direct the share trustees and none
of such companies has any control, direct or indirect, over
Holdings or the issuing entity. See "HOLDINGS". The entire issued
share capital of the post enforcement call option holder is held
on a separate trust by the same professional trust company under
the terms of a discretionary trust for the benefit of one or more
discretionary objects, different to those referred to in respect
of Holdings. Neither the seller nor any company connected with the
seller can direct the share trustees and none of such companies
has any control, direct or indirect, over the post enforcement
call option holder or the issuing entity. See "PECOH LIMITED".
o Abbey (who as the sponsor organises and initiates each transaction
under the programme, and who was the sponsor for the transactions
by the previous issuing entities) has no ownership interest in any
of the entities in the diagram above. This should ensure, among
other things, that none of the transactions under the programme
will be linked to the credit of Abbey, and that Abbey has no
obligation to support any such transaction financially, although
Abbey may still have a connection with such transaction for other
reasons (such as acting as servicer of the loans and as a
beneficiary under the mortgages trust). See "THE ABBEY GROUP OF
COMPANIES".
o The previous issuing entities are Holmes Financing (No. 1) PLC,
Holmes Financing (No. 2) PLC, Holmes Financing (No. 3) PLC, Holmes
Financing (No. 4) PLC, Holmes Financing (No. 5) PLC, Holmes
Financing (No. 6) PLC, Holmes Financing (No. 7) PLC, Holmes
Financing (No. 8) PLC, Holmes Financing (No. 9) PLC and Holmes
Financing (No. 10) PLC, all of which are wholly owned subsidiaries
of Holdings. The previous issuing entities and the issuing entity
issued the previous notes to investors and loaned the proceeds of
those issues to Funding pursuant to separate previous intercompany
loan agreements (in the case of the previous issuing entities) and
pursuant to the master intercompany loan agreement (in the case of
the issuing entity) in separate transactions between 26 July 2000
and 28 November 2006. Any issuing entity notes offered under this
prospectus and the relevant prospectus supplement will rank
behind, equally or ahead of the previous notes, as further
described under "- THE PREVIOUS ISSUING ENTITIES, NEW ISSUING
ENTITIES AND NEW FUNDING ENTITIES". The issuing entity, the
previous issuing entities and, if relevant, any new issuing
entities will share in the security granted by Funding for its
respective obligations to them under their respective intercompany
loans.
o Holdings may establish new issuing entities that issue new notes
that may rank behind, equally or ahead of the issuing entity
notes, depending on the ratings of the new notes as described
under "- THE PREVIOUS ISSUING ENTITIES, NEW ISSUING ENTITIES AND
NEW FUNDING ENTITIES". Any new
11
issuing entity established after the date of this prospectus is
expected to be a wholly owned subsidiary of Holdings.
o Holdings may establish new funding entities (each a NEW FUNDING
ENTITY), which may in the future issue new notes from time to time
and (subject to the agreement of the seller and Funding) use the
proceeds to make a payment to the seller to acquire an interest in
the trust property. Any new funding entity would be a wholly owned
subsidiary of Holdings as described in "- THE PREVIOUS ISSUING
ENTITIES, NEW ISSUING ENTITIES AND NEW FUNDING ENTITIES". The new
notes issued would be secured by the same trust property as the
issuing entity notes offered under this prospectus and the
relevant prospectus supplement. See "RISK FACTORS - HOLDINGS MAY
ESTABLISH NEW FUNDING ENTITIES, WHICH MAY BECOME ADDITIONAL
BENEFICIARIES UNDER THE MORTGAGES TRUST".
o In certain circumstances (including when new issuing entities are
established or new funding entities become beneficiaries under the
mortgages trust) the security trustee may, or will be obliged to,
consent to modifications being made to some of the transaction
documents. Your consent will not be obtained in relation to those
modifications. See "RISK FACTORS - THE SECURITY TRUSTEE, THE
ISSUING ENTITY SECURITY TRUSTEE AND/OR THE NOTE TRUSTEE MAY AGREE
TO MODIFICATIONS TO THE TRANSACTION DOCUMENTS WITHOUT YOUR PRIOR
CONSENT, WHICH MAY ADVERSELY AFFECT YOUR INTERESTS".
12
THE MAIN PARTIES
THE ISSUING ENTITY
Holmes Master Issuer PLC (the ISSUING ENTITY) is a public limited company
incorporated in England and Wales. Its registered office is Abbey National
House, 2 Triton Square, Regent's Place, London NW1 3AN. The contact telephone
number is +44 (0) 870 607 6000.
The issuing entity is a special purpose company created at the direction
of the sponsor. The purpose of the issuing entity is to issue the issuing entity
notes which represent its asset-backed obligations and to lend an amount equal
to the proceeds of the issuing entity notes to Funding pursuant to the master
intercompany loan agreement. The issuing entity will not engage in any
activities that are unrelated to this purpose. See also "THE ISSUING ENTITY".
THE DEPOSITOR
Holmes Funding Limited (FUNDING) is a private limited company
incorporated in England and Wales. Its registered office is Abbey National
House, 2 Triton Square, Regent's Place, London NW1 3AN. The contact telephone
number is +44 (0) 870 607 6000.
Funding is a special purpose company. Funding will borrow money from the
issuing entity pursuant to the terms of the master intercompany loan agreement.
Funding is a beneficiary under the mortgages trust and currently owns a share of
the trust property that it acquired in relation to the previous notes issued by
the previous issuing entities and the issuing entity. Funding will use the money
borrowed from the issuing entity to: (i) pay the seller part of the
consideration for loans (together with their related security) sold by the
seller to the mortgages trustee in connection with the relevant issue by the
issuing entity and the making of the relevant term advances to Funding, which
will result in an increase in the amount of the trust property and a
corresponding adjustment to the value of the Funding share of the trust property
and the value of the seller share of the trust property; (ii) pay the seller for
an increase in Funding's existing share of the trust property (resulting in a
corresponding decrease in the seller's share of the trust property); (iii) fund
or replenish the first reserve fund; and/or (iv) make a payment to the issuing
entity or a previous issuing entity or a new issuing entity to refinance a
previous term advance. Together, Funding and the seller are beneficially
entitled to all of the trust property. New funding entities may also acquire a
share of the trust property in the future. See also "FUNDING".
THE MORTGAGES TRUSTEE
Holmes Trustees Limited (the MORTGAGES TRUSTEE) is a private limited
company incorporated in England and Wales. See "THE MORTGAGES TRUSTEE". Its
registered office is Abbey National House, 2 Triton Square, Regent's Place,
London NW1 3AN. The contact telephone number is +44 (0) 870 607 6000.
The mortgages trustee is a special purpose company. The purpose of the
mortgages trustee is to hold the trust property. The mortgages trustee holds the
trust property on trust for the seller and Funding and, if applicable, new
funding entities, under the terms of the mortgages trust deed. See also "THE
MORTGAGES TRUST".
THE SPONSOR, THE SELLER, THE SERVICER, THE FUNDING SWAP PROVIDER, THE CASH
MANAGER, THE ISSUING ENTITY CASH MANAGER, THE ISSUING ENTITY ACCOUNT BANKS AND
THE ORIGINATOR
Abbey National plc (ABBEY) is a bank incorporated in England and Wales as
a public limited company. It is regulated by the FSA. Abbey's current rating for
its long term senior debt is AA- by Standard & Poor's, Aa3 by Moody's and AA- by
Fitch. Its registered office is Abbey National House, 2 Triton Square, Regent's
Place, London NW1 3AN. The contact telephone number is +44 (0) 870 607 6000. See
also "THE ABBEY GROUP OF COMPANIES".
Abbey will act as sponsor, being the entity that is organising and
initiating this residential mortgage-backed note issuance programme, and as
seller, by transferring the loans (and their related security) to the mortgages
trust, Funding's beneficial share of which backs the issuing entity notes to be
issued by the issuing entity.
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The seller originated all of the loans in the portfolio according to the
lending criteria applicable at the time of origination and has assigned those
loans together with their related security to the mortgages trustee under the
mortgage sale agreement. The seller's current lending criteria are described
later in this prospectus. The seller may from time to time sell additional loans
together with their related security to the mortgages trustee pursuant to the
terms of the mortgage sale agreement. See "ASSIGNMENT OF THE LOANS AND THEIR
RELATED SECURITY".
Although the loans have been assigned to the mortgages trustee, the
seller continues to perform administration and servicing functions in respect of
the loans on behalf of the mortgages trustee and the beneficiaries of the
mortgages trust, including collecting payments under the loans and taking steps
to recover arrears. The seller may not resign as servicer unless a successor
servicer has been appointed. In addition, the servicer may be replaced by a
successor servicer if it defaults in its obligations under the servicing
agreement. The seller has delegated some of the administration and servicing
functions in respect of the loans. See "THE SERVICING AGREEMENT - ACTUAL
DELEGATION BY THE SERVICER".
Abbey has also been appointed as the cash manager for the mortgages
trustee and Funding to manage their bank accounts, determine the amounts of and
arrange payments of monies to be made by them and keep certain records on their
behalf. See "CASH MANAGEMENT FOR THE MORTGAGES TRUSTEE AND FUNDING".
Abbey has also been appointed as the issuing entity cash manager to
manage the issuing entity's bank accounts, determine the amounts of and arrange
payments of monies to be made by the issuing entity and keep certain records on
the issuing entity's behalf. See "CASH MANAGEMENT FOR THE ISSUING ENTITY".
Additionally, Abbey has been appointed as an issuing entity account bank
(the STERLING ACCOUNT BANK) to provide banking services to the issuing entity,
and has been appointed as the account bank to Funding and the mortgages trustee.
The other issuing entity account bank (the NON-STERLING ACCOUNT BANK) is
Citibank, N.A., London Branch.
Citibank, N.A., London Branch, as an issuing entity account bank is a
national banking association organised under the National Bank Act of 1864. Its
address is Citigroup Centre, Canada Square, London E14 5LB. Its contact
telephone number is +44 (0) 20 7500 5000.
Although the seller has assigned the loans to the mortgages trustee, the
seller continues to have an interest in the loans as holder of the legal title
to the loans and as one of the beneficiaries of the mortgages trust under the
mortgages trust deed. See "THE MORTGAGES TRUST - SELLER SHARE OF THE TRUST
PROPERTY".
THE NOTE TRUSTEE
The Bank of New York, acting through its London branch is the note
trustee. Its address is One Canada Square, London E14 5AL. The note trustee will
act as trustee for the noteholders under the trust deed.
THE PAYING AGENTS, AGENT BANK, REGISTRAR AND TRANSFER AGENT
The Bank of New York, acting through its London branch is the principal
paying agent. Its address is One Canada Square, London E14 5AL. The Bank of New
York, acting through its New York branch is the US paying agent and its address
is 101 Barclay Street, New York NY 10286. The paying agents will make payments
on the issuing entity notes to noteholders.
The Bank of New York, acting through its London branch is the agent bank.
Its address is One Canada Square, London E14 5AL. The agent bank will calculate
the interest rate on the issuing entity notes.
The Bank of New York (Luxembourg) S.A. is the registrar and the transfer
agent. Its address is Aerogolf Center, 1A, Hoehenhof, L-1736 Senningerberg,
Luxembourg. The registrar will maintain a register in respect of the issuing
entity notes.
THE SECURITY TRUSTEE
The Bank of New York, acting through its London branch is the security
trustee. Its address is One Canada Square, London E14 5AL. The security trustee
will act as trustee for the Funding secured creditors under the Funding deed of
charge.
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THE ISSUING ENTITY SECURITY TRUSTEE
The Bank of New York, acting through its London branch is the issuing
entity security trustee. Its address is One Canada Square, London E14 5AL. The
issuing entity security trustee will act as trustee for the issuing entity
secured creditors under the issuing entity deed of charge.
THE PREVIOUS ISSUING ENTITIES AND NEW ISSUING ENTITIES
In connection with the loans (and their related security) sold to the
mortgages trustee prior to the programme date, the previous issuing entities
issued previous notes and used the sterling equivalent of the issue proceeds to
make previous intercompany loans to Funding on the respective previous closing
dates. Each of the previous issuing entities is a wholly owned subsidiary of
Holdings. In the future, new issuing entities may issue new notes and loan the
proceeds to Funding and/or to new funding entities, as the case may be. It is
not necessary to obtain your approval for any issuance of new notes, nor is it
necessary to provide you with notice of any such issuance.
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OVERVIEW OF THE ISSUING ENTITY NOTES
SERIES
The issuing entity may from time to time issue class A notes, class B
notes, class M notes, class C notes and class D notes in one or more series.
Each series will consist of one or more classes (or sub-classes) of issuing
entity notes. One or more series or classes (or sub-classes) of issuing entity
notes may be issued at one time. Each series and class (or sub-class) of issuing
entity notes will be secured over the same assets as all other issuing entity
notes offered under this prospectus and the relevant prospectus supplement as
well as all previous notes issued by previous issuing entities and the issuing
entity. The issuing entity notes issued from time to time by the issuing entity
will constitute direct, secured and unconditional obligations of the issuing
entity.
The issuing entity notes of a particular class in differing series (and
the issuing entity notes of differing sub-classes of the same class and series)
will not necessarily have all the same terms. Differences may include issue
price, principal amount, interest rates and interest rate calculations,
currency, permitted redemption dates, final maturity dates and ratings.
Noteholders holding certain issuing entity notes may have the benefit of
remarketing and conditional purchase arrangements or 2a-7 swap provider
arrangements specified in the applicable prospectus supplement. The terms of
each series and class (or sub-class) of issuing entity notes will be set out in
the relevant prospectus supplement.
For a summary of characteristics of the previous notes, see "DESCRIPTION
OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND THE PREVIOUS
INTERCOMPANY LOANS" in the relevant prospectus supplement.
PAYMENT
Some series of issuing entity notes will be paid ahead of others,
regardless of the ranking of the issuing entity notes. In particular, some
payments on some series of class B notes, class M notes, class C notes and class
D notes will be made before some series of class A notes, as described under
"OVERVIEW OF THE ISSUING ENTITY NOTES - PAYMENT AND RANKING OF THE ISSUING
ENTITY NOTES".
In addition, the occurrence of an asset trigger event or non-asset
trigger event (which are briefly described under "OVERVIEW OF THE ISSUING ENTITY
NOTES - TRIGGER EVENTS") will alter the payments on the issuing entity notes.
INTEREST
Interest will accrue on each series and class (or sub-class) of issuing
entity notes from its date of issue at the applicable interest rate specified in
the relevant prospectus supplement for that series and class (or sub-class) of
issuing entity notes, which may be fixed or floating rate or have a combination
of these characteristics. Interest on each series and class (or sub-class) of
issuing entity notes will be due and payable on the interest payment dates
specified in the relevant prospectus supplement up to and including the final
maturity date or early redemption date.
Any shortfall in payments of interest due on any series of the class B
notes (to the extent that any class A notes are outstanding), the class M notes
(to the extent that any class A notes and/or class B notes are outstanding), the
class C notes (to the extent that any class A notes and/-or class B notes and/or
class M notes are outstanding) or the class D notes (to the extent that any
class A notes and/or class B notes and/or class M notes and/or class C notes are
outstanding) on any interest payment date in respect of such issuing entity
notes will, unless it is the then most senior class of issuing entity notes of
that issue then outstanding, be deferred until the immediately succeeding
interest payment date in respect of such issuing entity notes. On that
immediately succeeding interest payment date, the amount of interest due on the
relevant class of issuing entity notes will be increased to take account of any
such deferred interest. If on that interest payment date there is still a
shortfall, that shortfall will be deferred again. This deferral process will
continue until the final maturity date of such issuing entity notes, at which
point all such deferred amounts will become due and payable. However, if there
are insufficient funds available to the issuing entity to pay interest on the
class B notes, the class M notes, the class C notes or the class D notes, then
noteholders may not receive all interest amounts due on those classes of issuing
entity notes. Payments of interest due on any interest payment date in respect
of the class A notes, or (if applicable) the most senior class of issuing entity
notes of that issue then outstanding in respect of which interest may not be
deferred and the failure to pay interest on such issuing entity notes will be a
note event of default.
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ISSUANCE
Issuing entity notes may only be issued upon the satisfaction of certain
conditions precedent. In particular, issuing entity notes may be issued only if
the following conditions (among others) are satisfied:
o the issuing entity obtaining a written confirmation from each of
the rating agencies that the then current ratings of the issuing
entity notes outstanding at that time, and the implicit ratings of
the term advances outstanding at that time, will not be adversely
affected because of the proposed issue (bearing in mind that the
term advances are not themselves rated);
o that no event of default under any of the intercompany loan
agreements outstanding at that time has occurred which has not
been remedied or waived and no event of default will occur as a
result of the proposed issue of the issuing entity notes; and
o as at the most recent interest payment date, that no principal
deficiency (which remains outstanding) is recorded on the
principal deficiency ledger in relation to the term advances
outstanding at that time.
There are no restrictions on the issuance of any issuing entity notes so
long as such conditions are satisfied.
RATINGS
The ratings assigned to each series and class (or sub-class) of issuing
entity notes will be specified in the relevant prospectus supplement.
A credit rating is not a recommendation to buy, sell or hold securities
and may be subject to revision, suspension or withdrawal at any time by the
assigning rating organisation if, in its judgment, circumstances in the future
so warrant.
Standard & Poor's, Moody's and Fitch together comprise the rating
agencies referred to in this prospectus. The term RATING AGENCIES also includes
any further or replacement rating agency appointed by the issuing entity with
the approval of the note trustee to give a credit rating to the issuing entity
notes of any series.
The issuing entity has agreed to pay ongoing surveillance fees to the
rating agencies, in exchange for which each rating agency will monitor the
ratings it has assigned to each series and class (or sub-class) of issuing
entity notes while they are outstanding.
LISTING
Application will be made to the UK Listing Authority for the issuing
entity notes issued during the period of 12 months from the date of this
prospectus to be admitted to the official list maintained by the UK Listing
Authority. Application will also be made to the London Stock Exchange for each
series and class (or sub-class) of the issuing entity notes to be admitted to
trading on the London Stock Exchange's Regulated Market.
DENOMINATIONS OF THE ISSUING ENTITY NOTES
The issuing entity notes (in either global or definitive form) will be
issued in the denominations specified in the relevant prospectus supplement,
save that the minimum denomination of each issuing entity note will be such as
may be allowed or required from time to time by the relevant central bank or
regulatory authority (or equivalent body) or any laws or regulations applicable
to the relevant currency and save that the minimum denomination of each US
dollar denominated issuing entity note will be $100,000 and in integral
multiples of $1,000 in excess thereof, each sterling denominated issuing entity
note will be issued in minimum denominations of (pound)50,000 and in integral
multiples of (pound)1,000 in excess thereof and each euro denominated issuing
entity note will be issued in minimum denominations of (euro)50,000 and in
integral multiples of (euro)1,000 in excess thereof.
MATURITIES
Issuing entity notes will be issued in such maturities as may be
specified in the relevant prospectus supplement, subject to compliance with all
applicable legal, regulatory and/or central bank requirements.
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CURRENCIES
Subject to compliance with all applicable legal, regulatory and/or
central bank requirements, a series and class (or sub-class) of issuing entity
notes may be denominated in such currency or currencies as may be agreed between
the relevant underwriters and/or dealers and the issuing entity as specified in
the relevant prospectus supplement.
ISSUE PRICE
Each series and class (or sub-class) of issuing entity notes may be
issued on a fully paid basis and at an issue price which is at par or at a
discount to, or a premium over, par.
SELLING RESTRICTIONS
For a description of certain restrictions on offers, sales and deliveries
of issuing entity notes and on the distribution of offering material in the
United Kingdom and certain other jurisdictions, see "UNDERWRITING" below and in
the relevant prospectus supplement.
RELATIONSHIP BETWEEN THE ISSUING ENTITY NOTES AND THE MASTER INTERCOMPANY LOAN
The gross proceeds of each issue of issuing entity notes will fund an
intercompany loan under the master intercompany loan agreement. Each such
intercompany loan will comprise multiple term advances, each relating to a
particular series and class (or sub-class) of issuing entity notes forming part
of the relevant issue. The repayment terms of each term advance (for example,
dates for payment of principal and the type of amortisation or redemption) will
reflect the terms of the related series and class (or sub-class) of issuing
entity notes. Subject to any swap agreements as described under "THE SWAP
AGREEMENTS" and the Funding priority of payments and the issuing entity priority
of payments, the issuing entity will make payments on the relevant series and
class (or sub-class) of issuing entity notes from payments received by it from
Funding under the corresponding term advance of the master intercompany loan
and, in each case where the relevant class (or sub-class) of issuing entity
notes is denominated in a currency other than sterling, after making the
appropriate currency exchange under the corresponding issuing entity swap
agreement.
The ability of Funding to make payments on the master intercompany loan
will depend to a large extent on (a) Funding receiving its share of collections
on the trust property, which will in turn depend principally on the collections
the mortgages trustee receives on the loans and the related security and (b) the
allocation of monies between the previous intercompany loans, the master
intercompany loan and any new intercompany loans. See "OVERVIEW OF THE ISSUING
ENTITY NOTES - INTERCOMPANY LOANS".
DIAGRAM OF THE PRIORITY OF PAYMENTS BY THE ISSUING ENTITY AND SUBORDINATION
RELATIONSHIPS
The following diagram illustrates in a general way the payment priorities
for revenue receipts and principal receipts by the issuing entity before
acceleration of the intercompany loans and also indicates the subordination
relationship among the issuing entity notes of a particular issue. This diagram
does not indicate the priority of payments by Funding, nor does it indicate the
priority of payments by the issuing entity after acceleration of the
intercompany loans. For the sake of simplicity, this diagram omits material
details relating to the payment priorities. You should refer to "CASHFLOWS" for
a description of the priorities of payments by Funding and the issuing entity in
all circumstances.
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[GRAPHIC OMITTED]
* Includes scheduled amounts and, provided that termination of a swap is not
related to a default or rating downgrade of the related swap provider, early
termination amounts payable to the swap providers for the swaps entered into
by the issuing entity corresponding to the relevant class (or sub-class) of
issuing entity notes. Amounts received by the issuing entity from such swap
providers under the relevant swap will be used to make payments of interest
and principal on the corresponding class (or sub-class) of issuing entity
notes.
OPERATIVE DOCUMENTS CONCERNING THE ISSUING ENTITY NOTES
The issuing entity will issue each series of issuing entity notes under
the trust deed. The issuing entity notes will also be subject to the issuing
entity paying agent and agent bank agreement. The security for the issuing
entity notes will be created under the issuing entity deed of charge between the
issuing entity, the issuing entity security trustee and the issuing entity's
other secured creditors. Operative legal provisions
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relating to the issuing entity notes are included in the trust deed, the issuing
entity paying agent and agent bank agreement, the issuing entity deed of charge,
the issuing entity cash management agreement and the issuing entity notes
themselves, each of which are governed by English law.
PAYMENT AND RANKING OF THE ISSUING ENTITY NOTES
Payments of interest and principal on the class A notes of each series
due and payable on an interest payment date will rank ahead of payments of
interest and principal on the class B notes of any series, the class M notes of
any series, the class C notes of any series and the class D notes of any series
(in each case due and payable on such interest payment date). Payments of
interest and principal on the class B notes of each series will rank ahead of
payments of interest and principal on the class M notes of any series, the class
C notes of any series and the class D notes of any series (in each case due and
payable on such interest payment date). Payments of interest and principal on
the class M notes of each series will rank ahead of payments of interest and
principal on the class C notes of any series and the class D notes of any series
(in each case due and payable on such interest payment date). Payments of
interest and principal on the class C notes of each series will rank ahead of
payments of interest and principal on the class D notes of any series (in each
case due and payable on such interest payment date). For more information on the
priority of payments, see "CASHFLOWS" and see also "RISK FACTORS - SUBORDINATION
OF OTHER ISSUING ENTITY NOTE CLASSES MAY NOT PROTECT NOTEHOLDERS FROM ALL RISK
OF LOSS".
Payments of interest and principal on the class A notes of each series
rank equally (but subject to the interest payment dates, scheduled redemption
dates or permitted redemption dates of each series of class A notes). Payments
of interest and principal on the class B notes of each series rank equally (but
subject to the interest payment dates or permitted redemption dates of each
series of class B notes). Payments of interest and principal on the class M
notes of each series rank equally (but subject to the interest payment dates or
permitted redemption dates of each series of class M notes). Payments of
interest and principal on the class C notes of each series rank equally (but
subject to the interest payment dates or permitted redemption dates of each
series of class C notes). Payments of interest and principal on the class D
notes of each series rank equally (but subject to the interest payment dates or
permitted redemption dates of each series of class D notes). The interest
payment dates, scheduled redemption dates and permitted redemption dates for a
series and class (or sub-class) of issuing entity notes will be specified in the
relevant prospectus supplement.
Investors should note that subject as further described under
"CASHFLOWS":
o Issuing entity notes of different series and classes (or
sub-classes) are intended to receive payment of interest and
principal at different times, and therefore lower ranking classes
of issuing entity notes of one series may be paid interest and
principal before higher ranking classes of issuing entity notes of
a different series.
o No term advance other than the AAA term advances and,
consequently, no issuing entity notes of any class other than the
class A notes may be repaid principal if, following such
repayment, the amount of credit enhancement available from all
outstanding subordinated term advances, reserves and other forms
of credit enhancement is less than the required subordinated
amount for any class of issuing entity notes more senior to that
term advance. The required subordinated amount for each class of
US notes will be specified in the relevant prospectus supplement
and may change for new issues of issuing entity notes. The
repayment tests which determine whether the principal outstanding
of any term advance and, consequently, any series and class (or
sub-class) of issuing entity notes, may be repaid principal are
set out in "CASHFLOWS". The failure to repay principal in respect
of a term advance (other than the AAA term advances) and the
related issuing entity notes on the applicable interest payment
dates due to the repayment tests not being met will not constitute
an event of default in respect of such term advance or in respect
of the related issuing entity notes.
o If there is a debit balance on a principal deficiency sub-ledger
with respect to a particular lower ranking term advance or the
adjusted first reserve fund level is less than the first reserve
fund required amount or arrears in respect of loans in the
mortgages trust exceed a specified amount (each as described below
under "CASHFLOWS") and there is a more senior term advance and
related series and class (or sub-class) of issuing entity notes
outstanding, no amount of principal will be repayable in respect
of such lower ranking term advance and related series and class
(or sub-class) of issuing entity notes until such situation is
rectified. The failure to repay principal in respect of such lower
ranking term advance and the related issuing entity notes on the
applicable redemption dates for any of the aforementioned reasons
will not constitute an event of default in respect of such term
advance or in respect of the related issuing entity notes.
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To the extent required, but subject to certain limits and conditions,
Funding may apply amounts standing to the credit of the first reserve
fund and the Funding liquidity reserve fund (if any) in payment of, among
other things, amounts due to the issuing entity in respect of the term
advances.
o Prior to service of a note enforcement notice, a series and class
(or sub-class) of issuing entity notes may be redeemed on a
permitted redemption date only to the extent of the amount (if
any) repaid on the related term advance in respect of such date.
o If not redeemed earlier, each series and class (or sub-class) of
issuing entity notes will be redeemed by the issuing entity on the
final maturity date specified in the relevant prospectus
supplement. The failure to redeem a series and class (or
sub-class) of issuing entity notes on its final maturity date will
constitute a note event of default in respect of such issuing
entity notes.
o Following a trigger event or service of an intercompany loan
acceleration notice or a note enforcement notice, the priority of
payments will change and the issuing entity will make payments of
interest and principal in accordance with and subject to the
relevant priority of payments as described below under
"CASHFLOWS".
FIXED RATE NOTES
If issued, a series and class (or sub-class) of fixed rate notes would
bear interest at a fixed rate and the interest would be payable on the interest
payment dates and on redemption as specified in the relevant prospectus
supplement and would be calculated on the basis of the day count fraction
specified in the relevant prospectus supplement.
FLOATING RATE NOTES
If issued, a series and class (or sub-class) of floating rate notes would
bear interest in each case at the rate specified in the relevant prospectus
supplement. The margin, if any, relating to such series and class (or sub-class)
of issuing entity notes would be specified in the relevant prospectus
supplement. Interest on floating rate notes in respect of each interest period
would be payable on the interest payment dates and would be calculated on the
basis of the day count fraction specified in the relevant prospectus supplement.
ZERO COUPON NOTES
If issued, a series and class (or sub-class) of zero coupon notes would
be offered and sold at a discount to their nominal amount as specified in the
relevant prospectus supplement (ZERO COUPON NOTES).
BULLET REDEMPTION NOTES
If issued, a series and class (or sub-class) of bullet redemption notes
would be redeemable in full on the bullet redemption date specified in the
relevant prospectus supplement. However, Funding will seek to accumulate funds
relating to payment of principal on each bullet term advance over its cash
accumulation period in order to make a single payment to the issuing entity so
that the issuing entity can redeem the corresponding bullet redemption notes in
full on the relevant bullet redemption date.
A cash accumulation period in respect of a bullet term advance is the
period of time estimated to be the number of months prior to the relevant bullet
redemption date necessary for Funding to accumulate enough principal receipts
derived from its share of the trust property to repay that bullet term advance
to the issuing entity so that the issuing entity will be able to redeem the
corresponding bullet redemption notes in full on the relevant bullet redemption
date. The cash accumulation period is described under "THE MORTGAGES TRUST". To
the extent there are insufficient funds to redeem a series and class (or
sub-class) of bullet redemption notes on the relevant bullet redemption date,
then the issuing entity will be required to pay the shortfall, to the extent it
receives funds therefor, on subsequent interest payment dates in respect of such
issuing entity notes up until the final repayment date. No assurance can be
given that Funding will accumulate sufficient funds during the cash accumulation
period relating to any bullet term advance to enable it to repay the relevant
bullet term advance to the issuing entity so that the issuing entity is able to
repay principal of the related series and class (or sub-class) of bullet
redemption notes on the relevant bullet redemption date.
See "RISK FACTORS - THE YIELD TO MATURITY OF THE ISSUING ENTITY NOTES MAY
BE ADVERSELY AFFECTED BY PREPAYMENTS OR REDEMPTIONS ON THE LOANS" and "RISK
FACTORS - THE ISSUING ENTITY'S ABILITY TO
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REDEEM THE ISSUING ENTITY NOTES ON THEIR SCHEDULED REDEMPTION DATES IS AFFECTED
BY THE RATE OF PREPAYMENT ON THE LOANS".
Following the earlier to occur of a trigger event and the step-up date
(if any) in relation to a series and class (or sub-class) of bullet redemption
notes, such issuing entity notes will be deemed to be pass-through notes and the
issuing entity will repay such issuing entity notes to the extent that funds are
available and subject to the conditions referred to above regarding repayment on
subsequent interest payment dates.
For more information on the redemption of the issuing entity notes,
including a description of asset trigger events and non-asset trigger events,
see "THE MORTGAGES TRUST - CASH MANAGEMENT AND ALLOCATION OF TRUST PROPERTY -
PRINCIPAL RECEIPTS" and "CASHFLOWS".
SCHEDULED REDEMPTION NOTES
If issued, a series and class (or sub-class) of scheduled redemption
notes would be redeemable on scheduled redemption dates in two or more scheduled
amortisation amounts, the dates and amounts of which will be specified in the
relevant prospectus supplement. Prior to each scheduled redemption date, Funding
will seek to accumulate sufficient funds so that it may repay the issuing entity
each scheduled amortisation amount on the relevant scheduled redemption date so
that the issuing entity is able to repay principal on the related series and
class (or sub-class) of scheduled redemption notes on the relevant scheduled
redemption date.
A scheduled amortisation period in respect of a scheduled amortisation
amount is the period of time estimated to be the number of months prior to the
relevant scheduled redemption date necessary for Funding to accumulate enough
principal receipts derived from its share of the trust property to repay that
scheduled amortisation amount to the issuing entity on the relevant scheduled
redemption date. The scheduled amortisation period is described under "THE
MORTGAGES TRUST". If there are insufficient funds on a scheduled redemption date
for Funding to repay the issuing entity the relevant scheduled amortisation
amount, then the issuing entity will be required to pay the shortfall in respect
of the related series and class (or sub-class) of scheduled redemption notes, to
the extent it receives funds therefor, on subsequent interest payment dates in
respect of such issuing entity notes. No assurance can be given that Funding
will accumulate sufficient funds during the scheduled amortisation period
relating to any scheduled amortisation amount to enable it to repay the relevant
scheduled amortisation amount to the issuing entity so that the issuing entity
is able to repay principal of the related series of scheduled redemption notes
on the scheduled redemption date.
Following the earlier to occur of a trigger event and the step-up date
(if any) in relation to a series and class (or sub-class) of scheduled
redemption notes, such issuing entity notes will be deemed to be pass-through
notes and the issuing entity will repay such issuing entity notes to the extent
that funds are available and subject to the conditions referred to above
regarding repayment on subsequent interest payment dates.
PASS-THROUGH NOTES
If issued, a series and class (or sub-class) of pass-through notes would
be redeemable in full on the final maturity date specified in the relevant
prospectus supplement. On each interest payment date, Funding may make payments
of amounts equal to the pass-through requirement in respect of pass-through term
advances to the issuing entity so that the issuing entity may, on the applicable
interest payment date, repay all or part of the related series and class (or
sub-class) of pass-through notes prior to their final maturity dates.
Following the earlier to occur of a trigger event and the step-up date
(if any) in relation to a series and class (or sub-class) of pass-through notes,
the issuing entity will repay such pass-through notes to the extent that funds
are available and subject to the conditions referred to above for repayment on
subsequent interest payment dates.
MONEY MARKET NOTES
From time to time, the issuing entity may issue a series and class (or
sub-class) of issuing entity notes designated as money market notes in the
relevant prospectus supplement. MONEY MARKET NOTES are issuing entity notes
which will be "ELIGIBLE SECURITIES" within the meaning of Rule 2a-7 under the US
Investment Company Act of 1940, as amended (the INVESTMENT COMPANY ACT).
22
Money market notes will generally be bullet redemption notes or scheduled
redemption notes, the final maturity date of which will be fewer than 397 days
from the closing date on which such issuing entity notes were issued.
Such money market notes may have the benefit of remarketing arrangements
under which a remarketing bank and a conditional note purchaser (the REMARKETING
BANK and the CONDITIONAL NOTE PURCHASER respectively) enter into agreements
under which the remarketing bank agrees to seek purchasers of the relevant
issuing entity notes on specified dates throughout the term of such issuing
entity notes (each such date a TRANSFER DATE) and the conditional note purchaser
agrees to purchase any such issuing entity notes on the related transfer date if
purchasers for such issuing entity notes have not been found, provided that
certain events have not then occurred.
The transfer dates for any affected class (or sub-class) or series of
issuing entity notes will be specified in the relevant prospectus supplement but
are likely to be on every anniversary of issue of the relevant issuing entity
notes.
The circumstances in which a conditional note purchaser is not obliged to
purchase any affected issuing entity notes on a transfer date in circumstances
where purchasers for such issuing entity notes have not been found will likewise
be specified in the relevant prospectus supplement relating to the particular
issuing entity notes but will include the occurrence of an event of default and
may also include the occurrence of certain triggers related to the ratings of
the issuing entity notes (such events CONDITIONAL NOTE PURCHASER OBLIGATION
TERMINATION EVENTS).
If prior to any transfer date purchasers for any issuing entity notes of
the relevant series or class (or sub-class) have not been found, unless a
conditional note purchaser obligation termination event has occurred, the
remarketing bank will serve a notice on the conditional note purchaser to
purchase the issuing entity notes which remain unremarketed on the transfer date
for a price per note specified in such notice.
The rate of interest under the relevant issuing entity notes will be
re-set on each transfer date, either at a rate determined by the remarketing
bank or, if any issuing entity notes are to be acquired by the conditional note
purchaser, at a specified rate subject to a maximum re-set margin as specified
in such prospectus supplement.
If the conditional note purchaser has purchased all of the issuing entity
notes as of any transfer date, the rate of interest shall cease to be re-set on
future transfer dates and the remarketing bank shall cease to be under any
obligation to find purchasers of such issuing entity notes on any transfer date
following such purchase.
The appointment of the remarketing bank may be terminated by the issuing
entity if the remarketing bank becomes insolvent, no longer has the requisite
authority or ability to act in accordance with the terms of the relevant
documentation documenting the arrangements or a material breach of warranty or
covenant by the remarketing bank occurs and is outstanding under the relevant
documentation.
The remarketing bank will have the right to terminate its remarketing
obligations under the relevant documentation if a note event of default occurs
and is continuing, there occurs an event beyond the control of the remarketing
bank such that it is unable to perform its obligations under the relevant
documentation or which in its reasonable opinion represents a material market
change affecting the issuing entity notes to be re-marketed, the requirements of
rule 2a-7 of the Investment Company Act for purchase of the relevant issuing
entity notes by money market funds have changed since the closing date for the
relevant issuing entity notes or if the conditional note purchaser purchases all
relevant issuing entity notes pursuant to its obligations under the relevant
documentation.
No remarketing bank or conditional note purchaser shall have any recourse
to the issuing entity in respect of such arrangements.
Certain risks relating to repayment of money market notes by means of a
money market note subscriber are described under "RISK FACTORS - THE REMARKETING
BANK MAY NOT BE ABLE TO REMARKET MONEY MARKET NOTES AND PAYMENTS FROM A
CONDITIONAL NOTE PURCHASER MAY NOT BE SUFFICIENT TO REPAY MONEY MARKET NOTES".
No assurance can be given that any remarketing bank or any conditional note
purchaser will comply with and perform their respective obligations under the
remarketing documentation. Each remarketing bank will be required to make the
representations required of underwriters as described in "UNDERWRITING".
23
The issuing entity may also have the benefit of a 2a-7 swap provider
arrangement under which a swap provider (the 2A-7 SWAP PROVIDER) will be
required to make a principal payment under the relevant issuing entity swap
agreement to the issuing entity to enable the issuing entity to redeem a class
(or sub-class) of issuing entity notes in full on their bullet repayment date
(unless an asset trigger event has occurred on or prior to that date)
notwithstanding that it has not received the corresponding principal payment
required to be made by the issuing entity under the relevant issuing entity swap
agreement. A failure by the issuing entity to make the full principal repayment
on the bullet repayment date of the term advance corresponding to the relevant
class (or sub-class) of issuing entity notes for which the relevant issuing
entity swap was entered into will not constitute an event of default or a
termination event under the relevant issuing entity swap agreement. If such
arrangements apply to any money market notes, the relevant prospectus supplement
will, in addition to providing information regarding a series and class (or
sub-class) of money market notes, identify any 2a-7 swap provider in respect of
such money market notes and the terms of the applicable issuing entity swap
agreement.
Certain risks relating to repayment of money market notes in reliance on
such an arrangement with a 2a-7 swap provider are described under "RISK FACTORS
- - YOU MAY BE SUBJECT TO RISKS RELATING TO EXCHANGE RATES OR INTEREST RATES ON
THE ISSUING ENTITY NOTES OR RISKS RELATING TO RELIANCE ON A 2A-7 SWAP PROVIDER".
REDEMPTION AND REPAYMENT
If not redeemed earlier, each series and class (or sub-class) of issuing
entity notes will be redeemed by the issuing entity on the final maturity date
specified for such series and class (or sub-class) of issuing entity notes in
the relevant prospectus supplement.
For more information on the redemption of the issuing entity notes, see
"THE MORTGAGES TRUST - CASH MANAGEMENT AND ALLOCATION OF TRUST PROPERTY -
PRINCIPAL RECEIPTS" and "CASHFLOWS". See also "OVERVIEW OF THE ISSUING ENTITY
NOTES - PAYMENT AND RANKING OF THE ISSUING ENTITY NOTES".
OPTIONAL REDEMPTION OR REPURCHASE OF THE ISSUING ENTITY NOTES
The issuing entity may redeem all, but not a portion, of a series and
class (or sub-class) of issuing entity notes at their aggregate redemption
amount, together with any accrued and unpaid interest in respect thereof by
giving notice in accordance with the terms and conditions of the issuing entity
notes of that issue, subject to the issuing entity notes not having been
accelerated and the availability of sufficient funds, as described in detail in
NUMBER 5.5 or, as applicable and if specified in the relevant prospectus
supplement, NUMBER 5.6 under "TERMS AND CONDITIONS OF THE US NOTES" (subject to
certain conditions set out therein) in the following circumstances:
o if at any time it would become unlawful for the issuing entity to
make, fund or to allow to remain outstanding a term advance made
by it under the master intercompany loan agreement (SEE NUMBER 5.5
under "TERMS AND CONDITIONS OF THE US notes"); or
o on any interest payment date in the event of particular tax
changes affecting the issuing entity, the issuing entity notes or
the corresponding term advance under the master intercompany loan
agreement (see NUMBER 5.5 under "TERMS AND CONDITIONS OF THE US
NOTES"); or
o (if specified in the relevant prospectus supplement) if the new
regulatory capital framework known as the Basel II Framework has
been implemented in the United Kingdom (through the implementation
of the EU Capital Requirements Directive) (see NUMBER 5.6 under
"TERMS AND CONDITIONS OF THE US NOTES").
In addition, the issuing entity may redeem in the same manner as stated
in the previous paragraph a series and class (or sub-class) of issuing entity
notes outstanding:
o on the step-up date relating to such series and class (or
sub-class) of issuing entity notes (as specified in the relevant
prospectus supplement) and on any interest payment date thereafter
(see NUMBER 5.4 under "TERMS AND CONDITIONS OF THE US NOTES"); or
o on any interest payment date on which the aggregate principal
amount of such series and class (or sub-class) of issuing entity
notes and all other classes of issuing entity notes of the same
series is less than 10 per cent. of the aggregate principal amount
outstanding of such series of issuing entity notes as at the
relevant closing date on which such series of issuing entity notes
was issued (see NUMBER 5.4 under "TERMS AND CONDITIONS OF THE US
NOTES").
24
POST-ENFORCEMENT CALL OPTION
The note trustee is required at the request of the post-enforcement call
option holder, for a nominal consideration, to transfer or procure the transfer
of all of the class B notes and/or all of the class M notes and/or all of the
class C notes and/or all of the class D notes, as the case may be, to the
post-enforcement call option holder pursuant to the option granted to it by the
note trustee (as agent for the noteholders) under the terms of the
post-enforcement call option agreement. The post-enforcement call option may
only be exercised following enforcement and realisation of the issuing entity
security to the maximum extent possible (as certified by the issuing entity
security trustee) and the application of the proceeds of that enforcement. See
"PECOH LIMITED".
WITHHOLDING TAX
Payments of interest and principal with respect to the issuing entity
notes will be made subject to any withholding or deduction for or on account of
any taxes, and neither the issuing entity nor any other person will be obliged
to pay additional amounts in relation thereto. The applicability of any UK
withholding tax is discussed under "UNITED KINGDOM TAXATION".
THE PROGRAMME DATE
On 28 November 2006 (the PROGRAMME DATE) the issuing entity and other
principal transaction parties entered into the transaction documents in relation
to the establishment of the programme and the amendment and restatement of
certain transaction documents (some of which are also Funding transaction
documents).
CREDIT ENHANCEMENT
Subject to the detailed description and limits set forth under the
heading "CREDIT STRUCTURE", the issuing entity notes of each series will have
the benefit of the following credit enhancement or support:
o availability of excess portions of Funding available revenue
receipts (which consist of revenue receipts on the loans paid by
the mortgages trustee to Funding and other amounts as set forth
under the heading "CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE
REVENUE RECEIPTS") and of Funding available principal receipts
(which consist of principal receipts on the loans paid by the
mortgages trustee to Funding and other amounts as set forth under
the heading "CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE
PRINCIPAL RECEIPTS PRIOR TO ENFORCEMENT OF THE FUNDING SECURITY OR
THE OCCURRENCE OF A TRIGGER EVENT OR ENFORCEMENT OF THE ISSUING
ENTITY SECURITY - DEFINITION OF FUNDING AVAILABLE PRINCIPAL
RECEIPTS");
o reserve funds that will be used in certain circumstances by
Funding to meet any deficit in revenue or to repay amounts of
principal; and
o subordination of junior classes of notes.
SWAP AGREEMENTS
The issuing entity notes will also have the benefit of derivatives
instruments, namely the Funding swaps provided by Abbey, as the FUNDING SWAP
PROVIDER, and any issuing entity swaps in respect of the relevant series and
class (or sub-class) of issuing entity notes, as specified in the relevant
prospectus supplement. See "THE SWAP AGREEMENTS".
FUNDING PRINCIPAL DEFICIENCY LEDGER
A principal deficiency ledger has been established to record principal
losses on the loans allocated to Funding and the application of Funding
available principal receipts to meet any deficiency in Funding available revenue
receipts or to fund the Funding liquidity reserve fund (if any) up to the
Funding liquidity reserve required amount.
The Funding principal deficiency ledger has five sub-ledgers which will
correspond to each of the AAA term advances, the AA term advances, the A term
advances, the BBB term advances and the BB term advances, respectively. See
"CREDIT STRUCTURE - PRINCIPAL DEFICIENCY LEDGER".
25
TRIGGER EVENTS
If an asset trigger event or non-asset trigger event should occur, then
payments on the issuing entity notes may be altered, as described in
"CASHFLOWS".
An ASSET TRIGGER EVENT will occur when an amount is debited to the AAA
principal deficiency sub-ledger of Funding.
A NON-ASSET TRIGGER EVENT means the occurrence of any of the following:
(a) an insolvency event in relation to the seller; (b) the seller's role as
servicer under the servicing agreement is terminated and a new servicer is not
appointed within 60 days; (c) on the distribution date immediately succeeding a
seller share event distribution date, the current seller share is equal to or
less than the minimum seller share (determined using the amounts of the current
seller share and minimum seller share that would exist after making the
distributions of the principal receipts due on that distribution date on the
basis that the cash manager assumes that those principal receipts are
distributed in the manner described under "- MORTGAGES TRUST ALLOCATION AND
DISTRIBUTION OF PRINCIPAL RECEIPTS PRIOR TO THE OCCURRENCE OF A TRIGGER EVENT");
or (d) on the distribution date immediately succeeding a seller share event
distribution date, the aggregate outstanding principal balance of loans
comprising the trust property on such distribution date is less than the
required loan balance amount in effect at that time. The required loan balance
amount in effect at the time of an offering of US notes will be set forth in the
relevant prospectus supplement under the heading "SUMMARY - NON-ASSET TRIGGER
EVENT". The required loan balance amount may change at the time of any new issue
of notes. See "THE MORTGAGES TRUST - CASH MANAGEMENT AND ALLOCATION OF TRUST
PROPERTY - PRINCIPAL RECEIPTS".
A TRIGGER EVENT means an asset trigger event and/or a non-asset trigger
event.
ACCELERATION
All issuing entity notes will become enforceable immediately due and
payable and the issuing entity security will become enforceable on the service
on the issuing entity by the note trustee of a note enforcement notice. The
note trustee becomes entitled to serve a note enforcement notice at any time
after the occurrence of a note event of default in respect of a series and
class (or sub-class) of issuing entity notes (and it shall, subject to being
indemnified and/or secured to its satisfaction, do so on the instructions of
the noteholders of the applicable class of issuing entity notes across all
series (holding in aggregate at least one quarter in principal amount
outstanding of such class of notes) or if directed to do so by an extraordinary
resolution of the holders of the relevant class of notes then outstanding)
provided that, at such time, all issuing entity notes ranking in priority to
such class of notes have been repaid in full.
THE LOANS
The loans comprising the portfolio (included in the trust property) from
time to time have been and will be originated by the seller and secured by first
legal charges or first-ranking standard securities over residential property
located in England, Wales or Scotland.
The loans in the portfolio consist of several different types with a
variety of characteristics relating to, among other things, calculation of
interest and repayment of principal and comprise or will comprise:
o loans which are subject to variable rates of interest set by the
seller based on general interest rates and competitive forces in
the United Kingdom mortgage market from time to time;
o loans which track a variable rate of interest other than a
variable rate set by the seller (for example, a rate set at a
margin above sterling LIBOR or above rates set by the Bank of
England); and
o loans which are subject to fixed rates of interest, including
capped rate loans that are subject to the specified capped rate of
interest, set by reference to a predetermined rate or series of
rates for a fixed period or periods.
The loans in the portfolio will also include flexible loans. A flexible
loan allows the borrower to, among other things, make larger repayments than are
due on a given payment date (which may reduce the life of the loan) or draw
further amounts under the loan. A flexible loan also allows the borrower to make
under-payments or to take payment holidays. Any drawings under flexible loans
will be funded solely by the seller. This means that the drawings under flexible
loans will be added to the trust property and will be included in the seller's
share of the trust property for the purposes of allocating interest and
principal.
26
See "THE LOANS - CHARACTERISTICS OF THE LOANS" for a more detailed
description of the loans offered by the seller and see the relevant prospectus
supplement for statistical information on the portfolio.
The trust property may be supplemented by the seller assigning new loans
to the mortgages trustee from time to time after the date of this prospectus.
New loans assigned to the mortgages trustee will be required to comply
with specified criteria (see "ASSIGNMENT OF THE LOANS AND THEIR RELATED SECURITY
- - ASSIGNMENT OF LOANS AND THEIR RELATED SECURITY TO THE MORTGAGES TRUSTEE"). Any
new loans assigned to the mortgages trustee will increase the total size of the
trust property, and will increase the Funding share of the trust property to the
extent only that Funding has paid for an increased share of the trust property.
To the extent that Funding does not pay for an increased share, the seller share
of the trust property will increase by a corresponding amount.
All the loans in the portfolio are, and any new loans or drawings under
flexible loans added to the trust property will be, secured by first legal
charges over freehold or leasehold properties located in England or Wales or by
first-ranking standard securities over heritable or long leasehold properties
located in Scotland. Some flexible loans are or will be secured by both a first
and second legal charge or standard security in favour of the seller.
All loans are originated according to the seller's lending criteria for
mortgage loans applicable at the time of origination. The seller's current
lending criteria are described further in "THE LOANS - LENDING CRITERIA". The
seller may from time to time change its lending criteria and any other terms
applicable to new loans or their related security assigned to the mortgages
trustee after the date of this prospectus so that all new loans originated after
the date of that change will be subject to the new lending criteria.
Notwithstanding any change to the lending criteria or other terms applicable to
the loans, the loans and their related security may only be sold to the
mortgages trustee if they comply with the seller's warranties in the mortgage
sale agreement. If a loan or its related security does not materially comply
with these warranties, then the seller will have 20 days in which to cure the
default. If the default cannot be or is not cured within 20 days, then at
Funding's and the security trustee's direction the mortgages trustee may require
the seller to repurchase the loan or loans under the relevant mortgage account
and their related security from the mortgages trustee. If the seller does not
repurchase those loans and their related security, then the trust property will
be deemed to be reduced by an amount equal to the amount outstanding under those
loans. The size of the seller's share of the trust property will reduce by that
amount but the size of Funding's share of the trust property will not alter, and
the respective percentage shares of the seller and Funding in the trust property
will alter accordingly.
ASSIGNMENT OF THE LOANS
The seller assigned the portfolio to the mortgages trustee on the initial
closing date and on a number of subsequent dates pursuant to the terms of the
mortgage sale agreement. After the date of this prospectus, the seller may
assign further new loans and their related security to the mortgages trustee in
order to increase or maintain the size of the trust property. The seller may
increase the size of the trust property from time to time in relation to an
issue of issuing entity notes under the programme or new notes by a new issuing
entity, the proceeds of which are applied ultimately to fund the assignment of
the new loans and their related security to the mortgages trustee, or to comply
with its obligations under the mortgage sale agreement as described under
"ASSIGNMENT OF THE LOANS AND THEIR RELATED SECURITY".
Although the seller has sold or will sell the loans to the mortgages
trustee, the seller continues to have an interest in the loans as one of the
beneficiaries of the mortgages trust. The seller is the sponsor of the programme
in connection with which the issuing entity is issuing the issuing entity notes.
When new loans are assigned to the mortgages trustee, the amount of the
trust property will increase. Depending on the circumstances, the increase in
the trust property may result in an increase in either the seller's share of the
trust property or Funding's share of the trust property (or both). For a
description of how adjustments are made to the seller's share and Funding's
share of the trust property, see "THE MORTGAGES TRUST".
Some fees payable by the mortgage borrowers, such as early repayment
fees, will be given back to the seller and not included in the trust property.
For more information on the mortgage sale agreement, see "ASSIGNMENT OF THE
LOANS AND THEIR RELATED SECURITY".
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THE MORTGAGES TRUST
The mortgages trustee holds the trust property for both Funding and the
seller. Funding and the seller each has a joint and undivided beneficial
interest in the trust property. However, payments of interest and principal
arising from the loans in the trust property are allocated to Funding and the
seller according to Funding's share of the trust property and the seller's share
of the trust property, calculated periodically as described later in this
section. As at the date of this prospectus, the beneficiaries of the trust are
Funding and the seller only. At a later date, new funding entities may become
beneficiaries of the trust (subject to the agreement of the seller and Funding).
The trust property will be made up of the loans in the portfolio and
their related security and any income generated by the loans or their related
security. The trust property will also include any money in the mortgages
trustee guaranteed investment contract, or GIC, account and in any other bank
account or bank accounts held by the mortgages trustee (as agreed by the
mortgages trustee, Funding, the seller and the security trustee) from time to
time, called the alternative accounts. Any bank account of the mortgages trustee
will be managed by the cash manager under the cash management agreement. The
mortgages trustee GIC account is the bank account in which the mortgages trustee
holds any cash that is part of the trust property until it is distributed to the
beneficiaries. The alternative accounts are accounts into which payments by some
borrowers are paid initially. Amounts on deposit in the alternative accounts are
swept into the mortgages trustee GIC account on a regular basis but in any event
no later than the next London business day after they are deposited in the
relevant alternative account.
In addition, drawings under flexible loans, and any new loans and their
related security that the seller assigns to the mortgages trustee after the date
of this prospectus, will be part of the trust property, unless they are
repurchased by the seller. The seller will be solely responsible for funding
drawings under flexible loans. The composition of the trust property will
fluctuate as drawings under flexible loans and new loans are added and as the
loans that are already part of the trust property are repaid or mature or
default or are repurchased by the seller.
The relevant prospectus supplement will set out the approximate amounts
of Funding's share of the trust property and the seller's share of the trust
property as at the relevant closing date and will be calculated in accordance
with the formula described in "THE MORTGAGES TRUST - FUNDING SHARE OF THE TRUST
PROPERTY" and "THE MORTGAGES TRUST - SELLER SHARE OF THE TRUST PROPERTY".
Income (but not principal) from the trust property is distributed at
least monthly to Funding and the seller on each distribution date. A
distribution date is the eighth day (or if not a London business day, the next
succeeding London business day) of each month after the relevant closing date
(as specified in the relevant prospectus supplement) and any other day during a
month that Funding acquires a further interest in the trust property and/or the
mortgages trustee acquires new loans from the seller. On each of these
distribution dates, Funding's share and the seller's share of the trust
property, and the percentage of the total to which each relates, are
recalculated to take into account:
o principal payments on the loans distributed to Funding and/or the
seller since the last distribution date (in general, a principal
payment made to a party reduces that party's share of the trust
property);
o any drawings under flexible loans since the last distribution date
(these will be funded by the seller and, in general, the seller's
share of the trust property will increase accordingly);
o any increase in Funding's share of the trust property acquired
since the last distribution date and any corresponding decrease in
the seller's share (which happens when Funding receives additional
funds under a new intercompany loan and which, in general,
increases Funding's share of the trust property);
o the assignment of any new loans to the mortgages trustee which
increases the total size of the trust property (and the Funding
share or seller share of the trust property will increase
depending on whether Funding has provided consideration for all or
a portion of that assignment);
o any decrease in the interest charging balance of a flexible loan
due to a borrower making overpayments (which reduces the
outstanding balance of the relevant flexible loan at that time)
(see "THE MORTGAGES TRUST - FLUCTUATION OF THE FUNDING'S
SHARE/SELLER'S SHARE"); and
o any increase in the interest charging balance of a flexible loan
due to a borrower taking a payment holiday or making an
underpayment (which increases the share of Funding and the seller
in the trust property unless the seller has made a payment to
Funding to increase its share of the trust
28
property (see "THE MORTGAGES TRUST - ACQUISITION BY THE SELLER OF
A FURTHER INTEREST IN THE TRUST PROPERTY")).
On each distribution date, income (but not principal) from the trust
property is distributed to Funding and losses on the loans are allocated to
Funding, in each case in proportion to Funding's percentage of the trust
property calculated on the previous distribution date. Similarly, income (but
not principal) and losses from the trust property are distributed or, in the
case of losses, allocated to the seller in accordance with the seller's
percentage of the trust property calculated on the previous distribution date.
Whether the mortgages trustee distributes principal received on the loans
to Funding depends on a number of factors. In general, Funding receives payment
of principal in, inter alia, the following circumstances:
o when Funding is accumulating principal during a cash accumulation
period in order to repay the bullet term advances;
o when Funding is scheduled to make repayments on a scheduled
amortisation term advance or to accumulate funds in order to repay
the scheduled amortisation term advance (in which case principal
receipts on the loans in general will be paid to Funding during
the scheduled amortisation period based on the amounts required by
Funding to pay the amounts that will fall due and payable in
respect of the scheduled amortisation term advance on the next
following interest payment date) (see "THE MORTGAGES TRUST -
MORTGAGES TRUST ALLOCATION AND DISTRIBUTION OF PRINCIPAL RECEIPTS
PRIOR TO THE OCCURRENCE OF A TRIGGER EVENT");
o when Funding is required to pay any amounts which will fall due
and payable in respect of any other term advances;
o when, in relation to previous term advances and any new term
advances, Funding is either accumulating principal during a cash
accumulation period or a scheduled amortisation period or is
scheduled to make principal repayments (in which case principal
receipts will be paid to Funding based on the nature of those
previous term advances and/or new term advances and the terms of
the mortgages trust deed);
o when a non-asset trigger event has occurred and an asset trigger
event has not occurred (in which case principal receipts on the
loans will be allocated and paid to Funding first); or
o when an asset trigger event has occurred or the security granted
by Funding to the security trustee has been enforced (in which
case principal receipts on the loans will be paid to Funding in
proportion to its share of the trust property).
For more information on the mortgages trust, the cash accumulation
period, the scheduled amortisation period and the distribution of principal
receipts on the loans, including a description of when a non-asset trigger event
or an asset trigger event will occur, see "THE MORTGAGES TRUST".
INTERCOMPANY LOANS
The issuing entity has entered into the master intercompany loan
agreement with Funding. As used in this prospectus, term advances made by the
issuing entity to Funding under the master intercompany loan agreement in
respect of a particular issue will constitute an intercompany loan separate from
any previous intercompany loans and/or any new intercompany loans. As described
under "- RELATIONSHIP BETWEEN THE ISSUING ENTITY NOTES AND THE MASTER
INTERCOMPANY LOAN", each intercompany loan will consist of multiple term
advances, each corresponding to a particular series and class (or sub-class) of
issuing entity notes. The term advances may comprise AAA tranches, AA tranches,
A tranches, BBB tranches and BB tranches reflecting the designated credit rating
assigned to each term advance (see "THE MASTER INTERCOMPANY LOAN AGREEMENT -
RATINGS DESIGNATIONS OF THE RELEVANT TERM ADVANCES"). The term advance related
to a series and class (or sub-class) of issuing entity notes will be specified
for such series and class (or sub-class) of issuing entity notes in the relevant
prospectus supplement. The terms of each term advance will be set forth in the
relevant term advance supplement and the master intercompany loan agreement.
From time to time and subject to certain conditions, the issuing entity
will lend amounts to Funding using the proceeds of each issuance of or, as
applicable, the sterling equivalent to the proceeds of each issuance of, a
series and class (or sub-class) of issuing entity notes. Funding will use the
funds advanced under each such term advance under the master intercompany loan
to:
29
o make a payment to the seller as consideration for the sale of the
loans (together with their related security) sold by the seller to
the mortgages trustee in connection with the relevant issue by the
issuing entity and the making of the relevant term advances to
Funding, which will result in an increase in the amount of the
trust property and a corresponding adjustment to the value of the
Funding share of the trust property and the value of the seller
share of the trust property;
o acquire part of the seller share of the trust property which will
result in a corresponding decrease of the seller share of the
trust property and a corresponding increase in the Funding share
of the trust property;
o fund or replenish the first reserve fund; and/or
o make a payment to the issuing entity or a previous issuing entity
or a new issuing entity to refinance a previous term advance.
As described in "- THE ISSUING ENTITY NOTES - RELATIONSHIP BETWEEN THE
ISSUING ENTITY NOTES AND THE MASTER INTERCOMPANY LOAN", each current
intercompany loan under the master intercompany loan will be split into multiple
term advances to match the underlying series and classes (or sub-classes) of
issuing entity notes: the AAA term advances, matching the issue of the class A
notes of each series; the AA term advances, matching the issue of the class B
notes of each series; the A term advances, matching the issue of the class M
notes of each series; the BBB term advances, matching the issue of the class C
notes of each series; and the BB term advances, matching the issue of the class
D notes. Together these advances are referred to in this prospectus as the TERM
ADVANCES.
Subject to the provisions of the relevant Funding priority of payments
(see "CASHFLOWS"), Funding will repay each term advance under the master
intercompany loan agreement from payments received from Funding's share of the
trust property from the mortgages trustee, as described under "- THE MORTGAGES
TRUST". To the extent required, but subject to certain limits and conditions,
Funding may also apply amounts standing to the credit of the first reserve fund
and the Funding liquidity reserve fund (if any) in making payments of interest
and principal due under the master intercompany loan agreement. The issuing
entity will make payments of interest and principal on the issuing entity notes
primarily from payments of interest and principal made by Funding under the
master intercompany loan agreement. The repayment schedule for the series of
each term advance is as set out in the relevant prospectus supplement.
A term advance may be a bullet term advance, a scheduled amortisation
term advance or a pass-through term advance. A BULLET TERM ADVANCE is a term
advance that is scheduled to be repaid in full in one instalment on one interest
payment date. A SCHEDULED AMORTISATION TERM ADVANCE is a term advance that is
scheduled to be repaid in more than one instalment on more than one interest
payment date. Such instalments and interest payment dates are referred to as
SCHEDULED AMORTISATION AMOUNTS and SCHEDULED REPAYMENT DATES. A PASS-THROUGH
TERM ADVANCE is a term advance that has no scheduled repayment date other than
its final repayment date. Term advances with pass-through repayment will be
repaid on or after the interest payment date on which the term advances with the
same series designation and a higher rating designation in respect of the series
have been fully repaid. The designation and type of term advance and the
repayment schedule, if any, for the term advances advanced in connection with a
particular series and class (or sub-class) of issuing entity notes will be set
out in the relevant prospectus supplement.
Funding is generally required to repay principal on the term advances of
any intercompany loan based on their respective term advance ratings. This means
that the AAA term advances are repaid before the AA term advances, which in turn
are repaid before the A term advances, which in turn are repaid before the BBB
term advances and which in turn are repaid before the BB term advances. Prior to
the occurrence of a trigger event or notice of enforcement of the Funding
security or of the issuing entity security, there are a number of exceptions to
this priority of payments. For further information on such exceptions, see
"CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS PRIOR TO
ENFORCEMENT OF THE FUNDING SECURITY OR THE OCCURRENCE OF A TRIGGER EVENT OR
ENFORCEMENT OF THE ISSUING ENTITY SECURITY - RULES FOR APPLICATION OF FUNDING
AVAILABLE PRINCIPAL RECEIPTS AND FUNDING PRINCIPAL RECEIPTS". This means that
payments on the AAA term advances, the AA term advances, the A term advances,
the BBB term advances and the BB term advances under an intercompany loan, even
though they may have a lower term advance rating than the relevant bullet term
advance under another intercompany loan, should not be affected by the cash
accumulation period under that other intercompany loan.
During a cash accumulation period in respect of a bullet term advance or
a scheduled amortisation period in respect of a scheduled amortisation term
advance of an intercompany loan, no principal repayments will be made in respect
of any of the AA term advances, any of the A term advances, any of the
30
BBB term advances or any of the BB term advances made under that same
intercompany loan. If, however, Funding is in a cash accumulation period for a
bullet term advance or a scheduled amortisation period for a scheduled
amortisation term advance under an intercompany loan, then Funding will continue
to set aside amounts in respect of the bullet term advance or scheduled
amortisation term advance and make principal repayments in respect of any of the
AA term advances, any of the A term advances, any of the BBB term advances or
any of the BB term advances (or other pass-through term advances of the issuing
entity) of each series due and payable under any other intercompany loan based
on the amount of principal receipts paid by the mortgages trustee to Funding on
each distribution date and the share of those which is allocable to that other
intercompany loan (see "CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE PRINCIPAL
RECEIPTS PRIOR TO ENFORCEMENT OF THE FUNDING SECURITY OR THE OCCURRENCE OF A
TRIGGER EVENT OR ENFORCEMENT OF THE ISSUING ENTITY SECURITY - RULES FOR
APPLICATION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS AND FUNDING PRINCIPAL
RECEIPTS"). This means that payments on the AAA term advances, the AA term
advances, the A term advances, the BBB term advances and the BB term advances
under an intercompany loan, even though they may have a lower term advance
rating than the relevant bullet term advance or scheduled amortisation term
advance under another intercompany loan, should not be affected by the cash
accumulation period or the scheduled amortisation period, as the case may be,
under another intercompany loan.
During the cash accumulation period for any bullet term advance or the
scheduled amortisation period for any scheduled amortisation term advance under
an intercompany loan, Funding will continue to make principal repayments on the
term advances made under other intercompany loans if those term advances are
then due and scheduled to be paid, pro rata with any payment of an equal
priority subject to having sufficient funds therefor after meeting its
obligations with a higher priority.
When principal amounts are due and payable on a bullet term advance or
scheduled amortisation term advance under an intercompany loan, and principal
amounts are also due and payable on any of the AAA term advances, the AA term
advances, the A term advances, the BBB term advances or the BB term advances
under another intercompany loan, Funding will continue to make principal
repayments on those AAA term advances, AA term advances, A term advances, BBB
term advances, or BB term advances, based on the amount of principal receipts
paid by the mortgages trustee to Funding on each distribution date and the
portion thereof which is allocable to that other intercompany loans (see
"CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS PRIOR TO
ENFORCEMENT OF THE FUNDING SECURITY OR THE OCCURRENCE OF A TRIGGER EVENT OR
ENFORCEMENT OF THE ISSUING ENTITY SECURITY - RULES FOR APPLICATION OF FUNDING
AVAILABLE PRINCIPAL RECEIPTS AND FUNDING PRINCIPAL RECEIPTS").
If on an interest payment date in respect of which principal is scheduled
to be paid on any AA term advance, A term advance, BBB term advance or BB term
advance, the amount of principal due (or any part thereof) in respect of the AA
term advance, A term advance, BBB term advance or BB term advance, as the case
may be, will only be payable if, after giving effect to such payment and the
payment to be made on such date in respect of the related series and class (or
sub-class) of issuing entity notes, the required amount of subordination in
respect of the relevant series and class (or sub-class) of issuing entity notes
is maintained (see "CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE PRINCIPAL
RECEIPTS PRIOR TO ENFORCEMENT OF THE FUNDING SECURITY OR THE OCCURRENCE OF A
TRIGGER EVENT OR ENFORCEMENT OF THE ISSUING ENTITY SECURITY - RULES FOR
APPLICATION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS AND FUNDING PRINCIPAL
RECEIPTS - 6. REPAYMENT TESTS").
Whether Funding will have sufficient funds to repay the term advances, on
the dates described in the relevant prospectus supplement, will depend on a
number of factors (see "RISK FACTORS - THE YIELD TO MATURITY OF THE ISSUING
ENTITY NOTES MAY BE ADVERSELY AFFECTED BY PREPAYMENTS OR REDEMPTIONS ON THE
LOANS" and "RISK FACTORS - THE ISSUING ENTITY'S ABILITY TO REDEEM THE ISSUING
ENTITY NOTES ON THEIR SCHEDULED REDEMPTION DATES IS AFFECTED BY THE RATE OF
PREPAYMENT ON THE LOANS").
The circumstances under which the issuing entity can take action against
Funding if it does not make a repayment under the master intercompany loan
agreement are limited. In particular, it will not be an event of default in
respect of the master intercompany loan agreement if Funding does not repay
amounts due in respect of the master intercompany loan where Funding does not
have the money to make the relevant repayment. For more information on the
master intercompany loan agreement, see "THE MASTER INTERCOMPANY LOAN
AGREEMENT".
31
SECURITY GRANTED BY FUNDING AND THE ISSUING ENTITY
To secure its obligations to the issuing entity under the master
intercompany loan and to Funding's other secured creditors, Funding entered into
a deed of charge on 26 July 2000. On 29 November 2000, Funding entered into a
first deed of accession to the Funding deed of charge with Holmes Financing
(No. 2) PLC and the other parties who entered into the original deed of charge
on 26 July 2000. On 23 May 2001, Funding entered into a second deed of
accession with Holmes Financing (No. 3) PLC and the other parties who entered
into the first deed of accession on 29 November 2000. On 5 July 2001, Funding
entered into a third deed of accession with Holmes Financing (No. 4) PLC and
the other parties who entered into the second deed of accession on 23 May 2001.
On 8 November 2001, Funding entered into a fourth deed of accession with Holmes
Financing (No. 5) PLC and the other parties who entered into the third deed of
accession on 5 July 2001. On 7 November 2002, Funding entered into an amended
and restated Funding deed of charge with Holmes Financing (No. 6) PLC and the
other parties who entered into the previous deeds of accession. On 26 March
2003, Funding entered into a first deed of accession to the amended and
restated Funding deed of charge with Holmes Financing (No. 7) PLC and the other
parties who entered into the amended and restated Funding deed of charge. On 1
April 2004, Funding entered into a second deed of accession to the amended and
restated Funding deed of charge with Holmes Financing (No. 8) PLC and the
other parties who entered into the first deed of accession to the amended and
restated Funding deed of charge on 26 March 2003. On 8 December 2005, Funding
entered into a third deed of accession to the amended and restated Funding
deed of charge with Holmes Financing (No. 9) PLC and the other parties
who entered into the second deed of accession to the amended and restated
Funding deed of charge on 1 April 2004. On 8 August 2006, Funding entered into a
fourth deed of accession to the amended and restated Funding deed of charge with
Holmes Financing (No. 10) PLC and the other parties who entered into the third
deed of accession to the amended and restated Funding deed of charge. On 28
November 2006, Funding entered into a second amended and restated Funding deed
of charge with the issuing entity and the other parties who entered into the
fourth deed of accession to the amended and restated Funding deed of charge. On
28 March 2007, Funding entered into a third amended and restated Funding deed of
charge with the issuing entity and the other parties who entered into the fifth
deed of accession to the amended and restated Funding deed of charge. On 28
March 2007, Funding entered into a third amended and restated Funding deed of
charge with the issuing entity and the other parties who entered into the fifth
deed of accession to the amended and restated Funding deed of charge. The third
amended and restated Funding deed of charge is referred to as the FUNDING DEED
OF CHARGE. Pursuant to the Funding deed of charge, Funding grants security over
all of its assets in favour of the security trustee. Besides the issuing entity,
Funding's secured creditors as at the date of this prospectus are the previous
issuing entities (in relation to the previous intercompany loans), the Funding
swap provider, the cash manager, the account bank, the corporate services
provider, the security trustee, Abbey National plc (as the start-up loan
provider) and the seller. The security trustee holds that security for the
benefit of the secured creditors of Funding, including the issuing entity. This
means that Funding's obligations to the issuing entity under the master
intercompany loan and to the other secured creditors are and will be secured
over the same assets. Except in very limited circumstances, only the security
trustee is entitled to enforce the security granted by Funding. For more
information on the security granted by Funding, see "SECURITY FOR FUNDING'S
OBLIGATIONS". For details of post-enforcement priority of payments, see
"CASHFLOWS".
To secure the issuing entity's obligations to the noteholders and to its
other secured creditors, the issuing entity has granted security over all of its
assets in favour of the issuing entity security trustee. As at the date of this
prospectus, the issuing entity's secured creditors are the issuing entity
security trustee, the note trustee, the noteholders, the agent bank, the issuing
entity cash manager, the issuing entity account banks, the paying agents, the
issuing entity swap providers and the corporate services provider. The issuing
entity security trustee holds that security for the benefit of the issuing
entity's secured creditors, including the noteholders. This means that the
issuing entity's obligations to its other secured creditors are and will be
secured over the same assets that secure the issuing entity's obligations under
the issuing entity notes. Except in very limited circumstances, only the issuing
entity security trustee will be entitled to enforce the security granted by the
issuing entity. For more information on the security granted by the issuing
entity, see "SECURITY FOR THE ISSUING ENTITY'S OBLIGATIONS". For details of
post-enforcement priority of payments, see "CASHFLOWS".
SWAP PROVIDERS
The Funding swap provider is Santander Global Banking & Markets. Its
registered office is Abbey National House, 2 Triton Square, Regent's Place,
London NW1 3AN.
The Funding swap provider has entered into the Funding swap agreement
with Funding, which is a master agreement (including a schedule and a
confirmation) under which the Funding swap has been documented. To enable the
issuing entity to make payments in respect of series and classes (or
sub-classes) of issuing entity notes denominated in currencies other than
sterling, the issuing entity will enter into issuing entity currency swap
agreements, which are master agreements (each including a schedule and a
confirmation) in respect of the relevant currencies.
32
SWAP AGREEMENTS
Borrowers will make payments under the loans in pounds sterling. Some of
the loans carry variable rates of interest, some of the loans pay interest at a
fixed or capped rate or rates of interest and some of the loans pay interest at
a rate which tracks an interest rate other than the variable rate set by Abbey
or the mortgages trustee (for example the interest rate may be set at a margin
above sterling LIBOR or above rates set by the Bank of England). These interest
rates do not necessarily match the floating rate of interest payable on the term
advances under the intercompany loans and, accordingly, Funding has entered into
the Funding swap agreement with the Funding swap provider.
Under the Funding swap agreement, Funding makes quarterly payments to the
Funding swap provider based on the weighted average of the average variable rate
from several United Kingdom mortgage lenders and the different rates of interest
payable on the tracker rate loans and fixed rate loans (including capped rate
loans that are subject to the specified capped rate of interest) and the Funding
swap provider makes quarterly payments to Funding based on the floating rates of
interest payable on the intercompany loans outstanding at that time.
Payments made by the mortgages trustee to Funding under the mortgages
trust deed, payments made by Funding to the issuing entity under the master
intercompany loan agreement and any drawings under the Funding liquidity reserve
fund will be made in pounds sterling. To enable the issuing entity to make
payments on the interest payment dates in respect of a series of issuing entity
notes (other than sterling-denominated notes) in their respective currencies,
the issuing entity will enter into issuing entity currency swap agreements.
The term advances under the master intercompany loan will pay quarterly
interest equivalent to the weighted average of the floating rate of interest in
sterling calculated by reference to the London inter-bank offer rate for
three-month sterling deposits (also called three-month sterling LIBOR) in effect
on the relevant interest payment date plus a margin for each term advance. To
enable the issuing entity to make payments on issuing entity notes denominated
in sterling which accrue interest at a floating rate other than three-month
sterling LIBOR, the issuing entity will enter into basis rate swap agreements.
In the case of issuing entity notes denominated in a currency other than
sterling, the relevant currency swap agreement will also hedge such interest
rate exposure.
To enable it to make payments on issuing entity notes which accrue a
fixed rate of interest, the issuing entity will enter into interest rate swaps
in respect of each relevant series and class (and/or sub-class) of issuing
entity notes.
The terms of the swaps and certain additional information about the
relevant issuing entity swap providers will be described in greater detail under
the heading "THE SWAP AGREEMENTS" in this prospectus and under the heading "THE
SWAP AGREEMENTS" in the relevant prospectus supplement.
THE POST-ENFORCEMENT CALL OPTION AGREEMENT
A post-enforcement call option agreement has been entered into between
the issuing entity security trustee, as agent for the class B noteholders, the
class M noteholders, the class C noteholders and the class D noteholders, the
issuing entity and an entity called PECOH Limited. The terms of the option
require, upon exercise of the option by PECOH Limited, the transfer to PECOH
Limited of all of the class B notes and/or all of the class M notes and/or all
of the class C notes and/or all of the class D notes, as the case may be. The
class B noteholders, the class M noteholders, the class C noteholders and the
class D noteholders will be bound by the terms of the class B notes, the class M
notes, the class C notes and the class D notes, respectively, to transfer the
issuing entity notes to PECOH Limited in these circumstances. None of the class
B noteholders, the class M noteholders, the class C noteholders or the class D
noteholders will be paid for that transfer.
However, as the post-enforcement call option can be exercised only after
the issuing entity security trustee has enforced the security granted by the
issuing entity under the issuing entity deed of charge and determined that there
are no further assets available to pay amounts due and owing to the class B
noteholders, the class M noteholders, the class C noteholders and/or the class D
noteholders, as the case may be, the exercise of the post-enforcement call
option will not further disadvantage the economic position of those noteholders.
In addition, exercise of the post-enforcement call option and delivery by the
class B noteholders, the class M noteholders, the class C noteholders and/or the
class D noteholders of the class B notes, the class M notes, the class C notes
and/or the class D notes, respectively, to PECOH Limited will not extinguish any
other rights or claims other than the rights to payment of interest and
repayment of principal
33
under the class B notes, the class M notes, the class C notes and/or the class D
notes that such class B noteholders, the class M noteholders, class C
noteholders and/or class D noteholders may have against the issuing entity.
THE PREVIOUS ISSUING ENTITIES, NEW ISSUING ENTITIES AND NEW FUNDING ENTITIES
The previous issuing entities, each of which is a wholly owned subsidiary
of Holdings, issued previous notes and from those issue proceeds made previous
intercompany loans to Funding as follows:
o Holmes Financing (No. 1) PLC, on 26 July 2000;
o Holmes Financing (No. 2) PLC, on 29 November 2000;
o Holmes Financing (No. 3) PLC, on 23 May 2001;
o Holmes Financing (No. 4) PLC, on 5 July 2001;
o Holmes Financing (No. 5) PLC, on 8 November 2001;
o Holmes Financing (No. 6) PLC, on 7 November 2002;
o Holmes Financing (No. 7) PLC, on 26 March 2003;
o Holmes Financing (No. 8) PLC, on 1 April 2004;
o Holmes Financing (No. 9) PLC, on 8 December 2005; and
o Holmes Financing (No. 10) PLC, on 8 August 2006.
In addition, on the programme date the issuing entity issued previous
notes and from those issue proceeds made a previous intercompany loan to Funding
under the master intercompany loan agreement.
It is not necessary to obtain your approval for any issuance of issuing
entity notes or new notes, nor is it necessary to provide you notice of any such
issuance.
Funding's obligations under the previous intercompany loans made by the
previous issuing entities are secured by the same security that secures the
master intercompany loan. In addition, it is expected that in the future,
subject to satisfaction of certain conditions, Holdings may establish additional
wholly owned subsidiary companies to issue new notes to investors. One of these
conditions is that the ratings of the issuing entity notes will not be adversely
affected at the time a new issuing entity issues new notes. As set forth in
detail under "THE MASTER INTERCOMPANY LOAN AGREEMENT - NEW INTERCOMPANY LOAN
AGREEMENTS WITH NEW ISSUING ENTITIES", any new issuing entities will loan the
proceeds of any issue of new notes to Funding pursuant to the terms of a new
intercompany loan agreement. Funding will use the proceeds of a new intercompany
loan to do one or more of the following:
o pay the seller for new loans and their related security to be
assigned to the mortgages trustee, which will result in an
increase in Funding's share of the trust property;
o pay the seller for an increase in Funding's share of the trust
property (resulting in a corresponding decrease in the seller's
share of the trust property);
o refinance an intercompany loan or intercompany loans outstanding
at that time, which will not result in a change in the size of
Funding's share of the trust property. In these circumstances,
Funding will use the proceeds of the new intercompany loan to
repay an intercompany loan outstanding at that time, which the
relevant issuing entity will, provided that the terms of the
relevant issuing entity notes then permit such optional
redemption, use to repay the relevant noteholders. If any
intercompany loan to Funding is refinanced in these circumstances,
the holders of the relevant notes could be repaid early; and/or
o make a deposit in one or more of the reserve funds.
Regardless of which of these uses of proceeds is selected, the previous
notes, the issuing entity notes and any new notes will all be secured ultimately
over Funding's share of the trust property and will be subject to the ranking
described in the following paragraphs.
Funding will apply amounts it receives from the trust property to pay
amounts it owes under the previous term advances, the current term advances and
new term advances without distinguishing when the share in the trust property
was acquired or when the relevant term advance was made. Funding's obligations
34
to pay interest and principal to the issuing entity on its previous, current or
new term advances and to the previous issuing entities or new issuing entities
on their respective previous term advances or new term advances will rank either
equal with, ahead of or after each other, primarily depending on the relative
designated rating of each previous term advance, current term advance and new
term advance. The rating of a previous term advance, current term advance or new
term advance will be the rating assigned by the rating agencies to the previous
notes, the issuing entity notes or the new notes that are used to fund the
relevant term advance, on their date of issue. Funding will pay interest and
(subject to their respective scheduled repayment dates and the rules for
application of principal receipts described in "CASHFLOWS - DISTRIBUTION OF THE
FUNDING AVAILABLE PRINCIPAL RECEIPTS PRIOR TO ENFORCEMENT OF THE FUNDING
SECURITY OR THE OCCURRENCE OF A TRIGGER EVENT OR ENFORCEMENT OF THE ISSUING
ENTITY SECURITY - RULES FOR APPLICATION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS
AND FUNDING PRINCIPAL RECEIPTS") principal first on the previous term advances,
the current term advances and the new term advances with the highest rating, and
thereafter on the previous term advances, the current term advances and the new
term advances with the next highest rating, and so on down to the previous term
advances, the current term advances and the new term advances with the lowest
rating. Accordingly, any term advance in relation to previous notes or new notes
that have an AAA rating will rank equally with Funding's payments of interest
and (subject to their respective scheduled repayment dates and the rules
referred to in this paragraph) principal on the AAA term advances and will rank
ahead of Funding's payments of interest and principal on the AA term advances,
the A term advances, the BBB term advances and the BB term advances.
It should be noted, however, that although a previous term advance, a
current term advance and any new term advance may rank equally, principal
payments may be made earlier on the previous term advances, new term advances or
the current term advances, as the case may be, depending on their scheduled
repayment and final repayment dates. Further, as described in "CASHFLOWS -
DISTRIBUTION OF THE FUNDING AVAILABLE PRINCIPAL RECEIPTS PRIOR TO ENFORCEMENT OF
THE FUNDING SECURITY OR THE OCCURRENCE OF A TRIGGER EVENT OR ENFORCEMENT OF THE
ISSUING ENTITY SECURITY - RULES FOR APPLICATION OF FUNDING AVAILABLE PRINCIPAL
RECEIPTS AND FUNDING PRINCIPAL RECEIPTS", in some circumstances, Funding will
continue to make payments on term advances due and payable under the current
intercompany loan, any new intercompany loans and the previous intercompany
loans, irrespective of term advance rating. More specifically, if amounts are
due and payable on any of the pass-through term advances made under the previous
intercompany loans which have a term advance rating of AA, A, BBB or BB, and at
the same time amounts are due and payable on the pass-through term advance made
under any intercompany loan under the master intercompany loan agreement which
has a term advance rating of AAA, then Funding will allocate principal receipts
available to it to each of the previous issuing entities and the issuing entity
based on the outstanding principal balance of each of their respective
intercompany loans.
During a cash accumulation period or scheduled amortisation period to set
aside any bullet amount in respect of any bullet term advance or scheduled
amortisation amount in respect of any scheduled amortisation term advance under
an intercompany loan, Funding will continue to make principal repayments in
respect of amounts due and payable in respect of pass-through term advances and
scheduled amortisation term advances under other intercompany loans (for
example, one of the previous intercompany loans), based on the outstanding
principal balance of each of those intercompany loans.
If Funding enters into a new intercompany loan agreement, the terms of
the Funding swap agreement provide that the notional amount of the Funding swap
will be increased in order to address the potential mismatch between variable,
tracker and fixed rates of interest paid by borrowers on the loans and the
floating rate of interest paid by Funding on the intercompany loans outstanding
at that time (including the new intercompany loan), as described further in "THE
SWAP AGREEMENTS". The various margins on the fixed, floating and tracker
elements of the Funding swap will vary depending on the nature of the loans
constituting the trust property from time to time.
If Funding enters into new intercompany loan agreements, it will, if
required, simultaneously enter into new start-up loan agreements with a new
start-up loan provider which will provide for the costs and expenses of the
issue of the new notes and, if required in order to ensure no adverse impact on
the ratings of the notes, for extra amounts to be credited to one or both
reserve funds. A start-up loan may not be required in relation to an issue of
new notes if the costs and expenses associated with the issue of those new notes
can be met from amounts in the Funding reserve fund.
The terms of the Funding transaction documents may be amended upon a new
issue and your consent will not be required to such amendments, notwithstanding
that these changes may affect the cashflow from the mortgages trust and/or
Funding that is available to pay amounts due on the issuing entity notes.
35
Pursuant to its obligations under the Listing Rules of the UK Listing
Authority and the Exchange Act, if a new issuing entity is established to issue
new notes, then the issuing entity will notify or procure that notice is given
of that new issue.
Holdings may establish new funding entities, which may, in the future,
issue new notes from time to time and (subject to the agreement of the seller
and Funding) use the proceeds to make a payment to the seller to acquire an
interest in the trust property rather than lending the proceeds to Funding. Any
new funding entity would be a wholly owned subsidiary of Holdings and would be
organised as a special purpose company in compliance with Standard & Poor's
bankruptcy remoteness criteria and its proposed establishment would be notified
to Standard & Poor's. In that event, such new funding entity would become a
beneficiary of the mortgages trust subject to the satisfaction of certain
conditions (see "RISK FACTORS - HOLDINGS MAY ESTABLISH NEW FUNDING ENTITIES,
WHICH MAY BECOME ADDITIONAL BENEFICIARIES UNDER THE MORTGAGES TRUST").
UNITED KINGDOM TAX STATUS
Subject to important qualifications and conditions set out under "UNITED
KINGDOM TAXATION", Slaughter and May, UK tax advisers to the issuing entity, are
of the opinion that no UK withholding tax will be required on interest payments
to any holder of the issuing entity notes provided that such issuing entity
notes are, and remain at all times, listed on a recognised stock exchange (the
London Stock Exchange being a recognised stock exchange for such purposes).
UNITED STATES TAX STATUS
It is anticipated that Cleary Gottlieb Steen & Hamilton LLP, US tax
advisers to the issuing entity and Funding, will deliver their opinion which
will be contained in the relevant prospectus supplement that, although there is
no authority on the treatment of instruments substantially similar to the
offered notes, the issuing entity notes to which the relevant prospectus
supplement relate will be treated as debt for US federal income tax purposes. It
is intended that the offered notes will be treated as debt of the issuing
entity. The US Internal Revenue Service could seek to recharacterise the offered
notes as an ownership interest in the related debt of Funding. In that case, a
US holder of a class of offered notes generally would be treated as holding
Funding debt and a currency swap, which may be integrated as a synthetic debt
instrument having the characteristics of the applicable class of offered notes
and substantially the same tax treatment as if the class of offered notes were
characterised as debt of the issuing entity. See "UNITED STATES TAXATION -
OFFERED NOTES AS DEBT OF FUNDING".
The US tax advisers to the issuing entity have also provided their
opinion that, assuming compliance with the transaction documents, the mortgages
trustee acting in its capacity as trustee of the mortgages trust, Funding and
the issuing entity will not be subject to US federal income tax.
ERISA CONSIDERATIONS FOR INVESTORS
The offered notes will be eligible for purchase by employee benefit and
other plans subject to section 406 of the US Employee Retirement Income Security
Act of 1974, as amended (ERISA) or section 4975 of the US Internal Revenue Code
of 1986, as amended (the CODE), and by governmental, church or non-US plans that
are subject to any US or non-US state, local or other federal law that is
substantially similar to section 406 of ERISA or section 4975 of the Code
(SIMILAR LAW), subject to consideration of the issues described herein under
"ERISA CONSIDERATIONS". Each purchaser of any such issuing entity notes (and all
subsequent transferees thereof) will be deemed to have represented and warranted
that its purchase, holding and disposition of such issuing entity notes will not
result in a non-exempt prohibited transaction under ERISA or the Code (or in the
case of any governmental, church or non-US plan, a violation of any Similar
Law). In addition, any fiduciary of a plan subject to the fiduciary
responsibility provisions of ERISA or similar provisions of state, local or
other federal laws of the United States should consult with their counsel to
determine whether an investment in the offered notes satisfies the prudence,
investment diversification and other applicable requirements of those
provisions.
36
FEES
The following table sets out the on-going fees to be paid by the issuing
entity, Funding and the mortgages trustee to transaction parties.
TYPE OF FEE AMOUNT OF FEE PRIORITY IN CASHFLOW FREQUENCY
- ----------------------------- ---------------------------------- ------------------------------ --------------------------
Servicing fee 0.12% per year of Funding's Ahead of all revenue Each distribution date
share of trust property amounts payable to Funding
by the mortgages trustee
Funding cash management fee (pound)117,500 each year Ahead of all term advances Each interest payment date
Issuing entity cash Estimated (pound)117,500 each year Ahead of all outstanding Each interest payment date
management fee issuing entity notes
Corporate expenses of the Estimated (pound)20,000 each year Ahead of all revenue Each distribution date
mortgages trustee amounts payable to
Funding by the
mortgages trustee
Corporate expenses of Funding Estimated (pound)52,500 Ahead of all term advances Each interest payment date
each year
Corporate expenses of the Estimated (pound)52,500 Ahead of all outstanding Each interest payment date
issuing entity each year issuing entity notes
Fee payable by Funding to the $5,000 each year Ahead of all term advances Each interest payment date
security trustee
Fee payable by the issuing $6,000 each year Ahead of all outstanding Each interest payment date
entity to the issuing entity issuing entity notes
security trustee and the note
trustee
Each of the fees set out in the preceding table is, where applicable,
inclusive of VAT, which is currently assessed at 17.5 per cent. The fees will be
subject to adjustment if the applicable rate of VAT changes.
37
RISK FACTORS
This section describes the principal risk factors associated with an
investment in the issuing entity notes. If you are considering purchasing the
issuing entity notes, you should carefully read and consider all the information
contained in this prospectus and in the relevant prospectus supplement,
including the risk factors set out herein and (if applicable) in the relevant
prospectus supplement, prior to making any investment decision.
THE STRUCTURE OF THE TRANSACTION IN WHICH YOU ARE INVESTING IS SUBJECT TO CHANGE
WITHOUT YOUR CONSENT
The issuing entity notes represent an indirect investment in a portfolio
of mortgages held under a mortgages trust.
The underlying structure of the mortgages trust and the characteristics
of the trust property are subject to change. However, your consent may not be
required in relation to such changes. In particular (but without limitation),
your attention is drawn to the risk factors described in the following sections
set out below:
o "Holdings may establish new funding entities, which may become
additional beneficiaries under the mortgages trust";
o "If Funding enters into new intercompany loan agreements with new
issuing entities, then the new term advances may rank ahead of the
current term advances as to payment, and accordingly new notes may
rank ahead of the issuing entity notes as to payment";
o "As new loans are assigned to the mortgages trustee, the
characteristics of the trust property may change from those
existing at the date of this prospectus, and those changes may
adversely affect payments on the issuing entity notes"; and
o "The seller may change the lending criteria relating to loans that
are subsequently assigned to the mortgages trustee, which could
affect the characteristics of the trust property and which may
adversely affect payments on the issuing entity notes".
In addition, you should also be aware that the terms of the Funding
transaction documents may be amended upon a new issue of notes and that your
consent will not be required to such amendments, notwithstanding that these
changes may affect the cashflow from the mortgages trust and/or Funding that is
available to pay amounts due on the issuing entity notes.
This risk factor is without prejudice to those additional risk factors
outside the control of Funding, Holdings, the mortgages trustee, the issuing
entity and/or the seller, including but not limited to those listed below on
pages 45 to 79.
IF CERTAIN PARTIES TO THE TRANSACTION DOCUMENTS CEASE TO SATISFY VARIOUS
CRITERIA THEN THE RIGHTS AND OBLIGATIONS OF SUCH PARTY PURSUANT TO THE RELEVANT
TRANSACTION DOCUMENT MAY HAVE TO BE TRANSFERRED TO A REPLACEMENT ENTITY UNDER
TERMS THAT MAY NOT BE AS FAVOURABLE AS THOSE CURRENTLY OFFERED UNDER THE
RELEVANT TRANSACTION DOCUMENT.
Those parties to the transaction documents who receive and hold monies
pursuant to the terms of such documents are required to satisfy certain criteria
in order that they can continue to receive and hold monies.
These criteria include FSA requirements and/or provisions as well as
requirements in relation to the short-term, unguaranteed and unsecured ratings
ascribed to each such party by Standard & Poor's, Fitch and Moody's. The table
below sets out more particularly such rating requirements.
38
PARTY TRANSACTION DOCUMENTS REQUISITE REMEDY FOR BREACH OF RATING
RATING REQUIREMENT
- ----------------------------- ----------------------- --------------------------- ----------------------------
Abbey (in its capacity as the Bank account agreement The short-term, Within 30 days of the date
sterling account bank) unsubordinated, on which the downgrade in
unguaranteed and unsecured the rating is announced
ratings of the account bank publicly, the account bank:
are at least F1 by Fitch,
P-1 by Moody's or A-1+ by (i) transfers all of its
S&P, provided always that rights and obligations to
where the relevant deposit another entity whose
amount is less than 30 per short-term, unsecured,
cent. of the amount of the unsubordinated and
Funding share, then the unguaranteed debt
short-term, unsubordinated, obligations have a rating
unguaranteed and unsecured of at least the required
rating of the account bank rating;
required by S&P shall be at
least A-1 (ii) procures that an entity
with the required rating
becomes a co-obligor in
respect of the obligations
of the account bank;
(iii) procures that an
entity with the required
rating provides a guarantee
of the obligations of the
account bank; or
(iv) takes such other
actions to ensure that the
rating assigned to the
issuing entity notes is not
adversely affected by the
ratings downgrade, and in
each case provided that the
then current ratings of the
issuing entity notes shall
not be adversely affected by
each or any of the above
actions.
Abbey (in its capacity as Funding guaranteed As detailed in the As detailed in the
Funding GIC provider) investment contract provisions set out above provisions set out above
Abbey (in its capacity as Mortgages trustee As detailed in the As detailed in the
mortgages trustee GIC guaranteed investment provisions set out above provisions set out above
provider) contract
39
REQUISITE REMEDY FOR BREACH OF RATING
PARTY TRANSACTION DOCUMENTS RATING REQUIREMENT
- ----------------------------- ----------------------- --------------------------- ----------------------------
Abbey (in its capacity as the Issuing entity bank account As detailed in the As detailed in the
sterling account bank) agreement provisions set out above provisions set out above
Citibank N.A., London Branch Issuing entity bank account As detailed in the As detailed in the
(in its capacity as the agreement provisions set out above provisions set out above
non-sterling account bank)
Abbey (in its capacity as Funding swap The short-term unsecured As detailed in the
guarantor of the obligations and unsubordinated debt provisions set out above
of Santander Global Banking & obligations of Abbey are to
Markets as Funding swap be rated at least A-1 by
provider) S&P and the long-term
unsecured and unsubordinated
debt obligations of Abbey are
to be rated at least Aa3 by
Moody's and AA- by Fitch
If the party concerned ceases to satisfy the applicable criteria,
including the rating criteria detailed above, then the rights and obligations of
that party (including the right and/or obligation to receive monies) may need to
be transferred to another entity which does satisfy the applicable criteria. In
these circumstances, the terms agreed with the replacement entity may not be as
favourable as those provided by the original party pursuant to the relevant
transaction document.
In addition, you should also be aware that, should the applicable
criteria cease to be satisfied as detailed above, then the parties to the
relevant transaction document may agree to amend or waive certain of the terms
of such documents and the applicable criteria in order to avoid the need for a
replacement entity to be appointed. Your consent may not be required in relation
to such amendments and/or waivers.
YOU CANNOT RELY ON ANY PERSON OTHER THAN THE ISSUING ENTITY TO MAKE PAYMENTS ON
THE ISSUING ENTITY NOTES
The issuing entity notes will not represent an obligation or be the
responsibility of any of Abbey or any of its affiliates, any arranger, any
dealer, any underwriter, or any of their respective affiliates, the previous
issuing entities, any new issuing entity, the mortgages trustee, the security
trustee, the issuing entity security trustee, the note trustee or any other
party to the transaction other than the issuing entity.
YOU MAY NOT BE ABLE TO SELL THE OFFERED NOTES
Each issue of a new series and class (or sub-class) of issuing entity
notes will be a new issue of securities for which there will initially be no
market. Furthermore, none of the issuing entity, the arrangers, the dealers or
the underwriters intends to create a market for the issuing entity notes.
Accordingly, no assurance can be given as to the development or liquidity of any
market for the issuing entity notes. If no secondary market develops, you may
not be able to sell the offered notes prior to their maturity. The issuing
entity cannot offer any assurance that a secondary market will develop or, if
one does develop, that it will continue to exist. You must therefore be able to
bear the risks of your investment in the issuing entity notes for an indefinite
period of time.
LACK OF LIQUIDITY IN THE SECONDARY MARKET MAY ADVERSELY AFFECT THE MARKET
VALUE OF YOUR NOTES
As at the date of this prospectus, the secondary market for
mortgage-backed securities is experiencing disruptions resulting from reduced
investor demand for such securities. This has had a material adverse impact on
the market value of mortgage-backed securities and resulted in the secondary
market for mortgage-backed securities experiencing very limited liquidity.
Structured investment vehicles, hedge funds, issuers of collateralised debt
obligations and other similar entities that are currently
40
experiencing funding difficulties have been forced to sell mortgage-backed
securities into the secondary market. The price of credit protection on
mortgage-backed securities through credit derivatives has risen materially.
Limited liquidity in the secondary market may continue to have an adverse
effect on the market value of mortgage-backed securities, especially those
securities that are more sensitive to prepayment, credit or interest rate risk
and those securities that have been structured to meet the requirements of
limited categories of investors. Consequently, whilst these market conditions
persist, you may not be able to sell or acquire credit protection for your notes
readily and market values of the notes are likely to fluctuate. Any of these
fluctuations may be significant and could result in significant losses to you.
It is not known for how long these market conditions will continue or
whether they will worsen.
THE ISSUING ENTITY HAS LIMITED RESOURCES AVAILABLE TO IT TO MAKE PAYMENTS ON THE
ISSUING ENTITY NOTES
The issuing entity's ability to make payments of principal and interest
on the issuing entity notes and to pay its operating and administrative expenses
will depend primarily on the funds being received under the master intercompany
loan agreement. The payment of interest and principal on each series and class
(or sub-class) of issuing entity notes will primarily depend on funds being
received by the issuing entity under the related term advance. In addition, the
issuing entity will rely on the currency swaps to hedge the currency exposure
with respect to certain series and classes (or sub-classes) of issuing entity
notes.
If Funding is unable to pay in full on any interest payment date (a) the
interest on any term advance, (b) its operating and administrative expenses
and/or (c) the principal payments in respect of the Funding liquidity reserve
fund term advances, and in the event that the seller suffers a certain ratings
downgrade, Funding may draw money from the Funding liquidity reserve fund (see
"CREDIT STRUCTURE"). The issuing entity will not have any other significant
sources of funds available to meet the issuing entity's obligations under the
issuing entity notes and/or any other payments ranking in priority to the
issuing entity notes.
FUNDING IS NOT OBLIGED TO MAKE PAYMENTS ON THE TERM ADVANCES IF IT DOES NOT HAVE
ENOUGH MONEY TO DO SO, WHICH COULD ADVERSELY AFFECT PAYMENTS ON THE ISSUING
ENTITY NOTES
Funding's ability to pay amounts due on any term advances will depend
upon:
Funding receiving enough funds from the Funding share percentage of the
revenue and principal receipts on the loans included in the mortgages trust on
or before each interest payment date;
Funding receiving the required funds from the Funding swap provider;
o the amount of funds credited to the reserve funds (as described in
"CREDIT STRUCTURE - FIRST RESERVE FUND", "CREDIT STRUCTURE -
SECOND RESERVE FUND" and "CREDIT STRUCTURE - FUNDING LIQUIDITY
RESERVE FUND"); and
o the allocation of funds between the previous term advances, the
current term advances and any new term advances (as described in
"CASHFLOWS").
According to the terms of the mortgages trust deed, the mortgages trustee
is obliged to pay to Funding the Funding share percentage of revenue receipts on
the loans (subject to payment of prior ranking amounts) by crediting those
amounts to the Funding GIC account on each distribution date. The mortgages
trustee is obliged to pay to Funding principal receipts on the loans by
crediting those amounts to the Funding GIC account as and when required pursuant
to the terms of the mortgages trust deed.
Funding will be obliged to pay revenue receipts due to the issuing entity
under the master intercompany loan agreement only to the extent that it has
revenue receipts left over after making payments ranking in priority to the
payments due to the issuing entity, such as payments of certain fees and
expenses of Funding and payments on certain higher ranking previous term
advances under the previous intercompany loans or new term advances under any
new intercompany loan agreement.
Funding will be obliged to pay principal receipts due to the issuing
entity under the master intercompany loan agreement only to the extent that it
has principal receipts available for that purpose after repaying amounts ranking
in priority to the issuing entity (including repaying certain higher ranking
previous term advances or higher ranking new term advances), as described in
"CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS PRIOR TO
ENFORCEMENT OF THE FUNDING SECURITY OR THE OCCURRENCE OF A TRIGGER EVENT OR
ENFORCEMENT OF THE ISSUING ENTITY SECURITY - RULES FOR APPLICATION OF FUNDING
AVAILABLE PRINCIPAL RECEIPTS AND FUNDING PRINCIPAL RECEIPTS" in this prospectus
and "DESCRIPTION OF THE
41
PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND THE PREVIOUS INTERCOMPANY
LOANS" in the relevant prospectus supplement.
If there is a shortfall between the amounts payable by Funding to the
issuing entity in respect of a term advance under the master intercompany loan
agreement and the amounts payable by the issuing entity on the related series
and class (or sub-class) of issuing entity notes, you may, depending on what
other sources of funds are available to the issuing entity and to Funding, not
receive the full amount of interest and/or principal which would otherwise be
due and payable on the issuing entity notes.
FAILURE BY FUNDING TO MEET ITS OBLIGATIONS UNDER THE MASTER INTERCOMPANY LOAN
AGREEMENT WOULD ADVERSELY AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES
If Funding does not make payments due and payable on the master
intercompany loan, then the issuing entity may not have enough money to make
payments on the issuing entity notes, and in addition the issuing entity will
have only limited recourse to the assets of Funding. If Funding does not pay
amounts under the master intercompany loan because it does not have enough money
available, those amounts will be deemed not to be due and payable, so there will
not be an event of default under the master intercompany loan, and the issuing
entity will not have recourse to the assets of Funding in that instance.
ON THE FINAL REPAYMENT DATE OF AN INTERCOMPANY LOAN UNDER THE MASTER
INTERCOMPANY LOAN AGREEMENT, ANY OUTSTANDING AMOUNTS IN RESPECT OF THE AA TERM
ADVANCES, THE A TERM ADVANCES, THE BBB TERM ADVANCES AND THE BB TERM ADVANCES
WILL BE EXTINGUISHED, WHICH WOULD CAUSE A LOSS ON ANY CLASS B NOTES, ANY CLASS M
NOTES, ANY CLASS C NOTES AND ANY CLASS D NOTES STILL OUTSTANDING
If there is a shortfall between the amounts payable by Funding to the
issuing entity in respect of a term advance under the master intercompany loan
agreement and the amounts payable by the issuing entity on the related series
and class (or sub-class) of issuing entity notes, then the shortfall will be
deemed to be not due and payable under the master intercompany loan agreement
and the issuing entity will not have any claim against Funding for the
shortfall.
If there is such a shortfall in interest and/or principal payments under
the master intercompany loan agreement, you may not receive the full amount of
interest and/or principal which would otherwise be due and payable on the class
B notes, the class M notes, the class C notes or the class D notes outstanding.
ALTHOUGH ENFORCEMENT OF THE ISSUING ENTITY SECURITY WILL BE POSSIBLE FOLLOWING
THE OCCURRENCE OF AN EVENT OF DEFAULT IN THE ISSUING ENTITY'S OBLIGATIONS, THE
PROCEEDS OF THAT ENFORCEMENT MAY NOT BE ENOUGH TO MAKE ALL PAYMENTS DUE ON THE
ISSUING ENTITY NOTES
The issuing entity has no recourse to the assets of Funding unless
Funding has also defaulted on its obligations under the master intercompany loan
agreement and the Funding security has been enforced.
If the security created as required by the issuing entity deed of charge
is enforced, the proceeds of enforcement may be insufficient to pay all
principal and interest due on the issuing entity notes. The noteholders may
still have an unsecured claim against the issuing entity for the shortfall, but
there is no guarantee that the issuing entity will have sufficient (or any)
funds to pay that shortfall.
SUBORDINATION OF OTHER ISSUING ENTITY NOTE CLASSES MAY NOT PROTECT NOTEHOLDERS
FROM ALL RISK OF LOSS
The class B notes, the class M notes, the class C notes and class D notes
of any series are subordinated in right of payment of interest to the class A
notes of any series. The class M notes, the class C notes and the class D notes
are subordinated in right of payment of interest to the class B notes of any
series. The class C notes and the class D notes of any series are subordinated
in right of payment of interest to the class M notes of any series. The class D
notes of any series are subordinated in right of payment of interest to the
class C notes of any series.
The class B notes, the class M notes, the class C notes and the class D
notes of any series are subordinated in right of payment of principal to the
class A notes of any series. The class M notes, the class C notes and the class
D notes are subordinated in right of payment of principal to the class B notes
of any series. The class C notes and the class D notes of any series are
subordinated in right of payment of principal to the class M notes of any
series. The class D notes of any series are subordinated in right of payment of
principal to the class C notes of any series.
You should be aware however that not all classes of issuing entity notes
are scheduled to receive payments of principal on the same interest payment
dates. The interest payment dates for the payment of interest and principal in
respect of each series and class (or sub-class) of issuing entity notes will be
42
specified in the relevant prospectus supplement. Each series and class (or
sub-class) of issuing entity notes may have interest payment dates in respect of
interest and/or principal that are different from other issuing entity notes of
the same class (but of different series) or of the same series (but of different
class or sub-class). Despite the principal priority of payments described above,
subject to no trigger event having occurred and satisfaction of the repayment
tests, lower ranking classes of issuing entity notes may nevertheless be repaid
principal before higher ranking classes of issuing entity notes and a series and
class (or sub-class) of issuing entity notes may be repaid principal before
other series of issuing entity notes of the same class. Payments of principal
are expected to be made on each class of issuing entity notes in amounts up to
the amounts set forth under "CASHFLOWS - DISTRIBUTION OF ISSUING ENTITY
PRINCIPAL RECEIPTS PRIOR TO ENFORCEMENT OF THE ISSUING ENTITY SECURITY",
"CASHFLOWS - DISTRIBUTION OF ISSUING ENTITY PRINCIPAL RECEIPTS FOLLOWING
ENFORCEMENT OF THE ISSUING ENTITY SECURITY BUT PRIOR TO ENFORCEMENT OF THE
FUNDING SECURITY" and "CASHFLOWS - DISTRIBUTION OF ISSUING ENTITY PRINCIPAL
RECEIPTS AND ISSUING ENTITY REVENUE RECEIPTS FOLLOWING ENFORCEMENT OF THE
ISSUING ENTITY SECURITY AND FOLLOWING ENFORCEMENT OF THE FUNDING SECURITY".
However, there is no assurance that these subordination rules will
protect the class A noteholders from all risks of loss, the class B noteholders
from all risks of loss, the class M noteholders from all risks of loss or the
class C noteholders from all risks of loss. If the losses borne by the class D
notes are in an amount equal to the aggregate outstanding principal balances of
the class D notes, then losses on the loans will thereafter be borne by the
class C notes. Similarly, if the losses borne by the class D notes and the class
C notes are in an amount equal to the aggregate outstanding principal balances
of the class D notes and the class C notes, then losses on the loans will
thereafter be borne by the class M notes. Similarly, if the losses borne by the
class D notes, the class C notes and the class M notes are in an amount equal to
the aggregate outstanding principal balances of the class D notes, the class C
notes and the class M notes, then losses on the loans will thereafter be borne
by the class B notes. Finally, if the losses borne by the class D notes, the
class C notes, the class M notes and the class B notes are in an amount equal to
the aggregate outstanding principal balances of the class D notes, the class C
notes, the class M notes and the class B notes, then losses on the loans will
thereafter be borne by the class A notes, at which point there will be an asset
trigger event.
PAYMENTS OF CLASS B, CLASS M, CLASS C AND CLASS D NOTES MAY BE DEFERRED OR
REDUCED IN CERTAIN CIRCUMSTANCES
On any interest payment date on which a payment of principal is due on
any series of class B notes, class M notes, class C notes and class D notes, the
issuing entity's obligation to make such principal payments will be subject to
the satisfaction of the repayment tests described under "CASHFLOWS -
DISTRIBUTION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS PRIOR TO ENFORCEMENT OF THE
FUNDING SECURITY OR THE OCCURRENCE OF A TRIGGER EVENT OR ENFORCEMENT OF THE
ISSUING ENTITY SECURITY - RULES FOR APPLICATION OF FUNDING AVAILABLE PRINCIPAL
RECEIPTS AND FUNDING PRINCIPAL RECEIPTS - 1. GENERAL RULES", including an
arrears test, a general reserve fund requirement and a principal deficiency
sub-ledger test to the extent that any class A notes of any series or any other
senior ranking issuing entity notes of any series are outstanding on that
interest payment date.
THERE MAY BE CONFLICTS BETWEEN YOUR INTERESTS AND THE INTERESTS OF ANY OF THE
ISSUING ENTITY'S OTHER SECURED CREDITORS (INCLUDING MORE SENIOR NOTEHOLDERS),
AND THE INTEREST OF THOSE ISSUING ENTITY SECURED CREDITORS MAY PREVAIL OVER YOUR
INTERESTS
The issuing entity deed of charge requires the issuing entity security
trustee to consider the interests of each of the issuing entity secured
creditors in the exercise of all of its powers, trusts, authorities, duties and
discretions, but requires the issuing entity security trustee, in the event of a
conflict between your interests and the interests of any of the other issuing
entity secured creditors, to consider only your interests, except in the event
of a proposed waiver of any breach of the provisions of the issuing entity
transaction documents or a proposed modification to any of the issuing entity
transaction documents. In these circumstances, the issuing entity security
trustee is required to consider whether the proposed waiver or modification
would be materially prejudicial to the interests of an issuing entity swap
provider(s) and, if so, the issuing entity security trustee is required to get
its or their written consent to the proposed waiver or modification.
THERE MAY BE CONFLICTS BETWEEN THE INTERESTS OF THE HOLDERS OF THE VARIOUS
CLASSES OF ISSUING ENTITY NOTES, AND THE INTERESTS OF THE HOLDERS OF OTHER
CLASSES OF ISSUING ENTITY NOTES MAY PREVAIL OVER YOUR INTERESTS
The trust deed provides and the terms of the issuing entity notes will
provide that the note trustee and the issuing entity security trustee are to
have regard to the interests of the holders of all the classes of
43
issuing entity notes. There may be circumstances, however, where the interests
of one class of the noteholders conflicts with the interests of another class or
classes of the noteholders. The trust deed provides and the terms of the issuing
entity notes will provide that where, in the opinion of the note trustee or the
issuing entity security trustee, there is such a conflict, then:
o the note trustee or the issuing entity security trustee is to have
regard only to the interests of the class A noteholders in the
event of a conflict between the interests of the class A
noteholders on the one hand and the class B noteholders, the class
M noteholders, the class C noteholders and/or the class D
noteholders on the other hand;
o (if there are no class A notes outstanding) the note trustee or
the issuing entity security trustee is to have regard only to the
interests of the class B noteholders in the event of a conflict
between the interests of the class B noteholders on the one hand
and the class M noteholders, the class C noteholders and/or the
class D noteholders on the other hand;
o (if there are no class A notes outstanding and no class B notes
outstanding) the note trustee or the issuing entity security
trustee is to have regard only to the interest of the class M
noteholders in the event of a conflict between the interests of
the class M noteholders on the one hand and the class C
noteholders and/or the class D noteholders on the other hand; and
o (if there are no class A notes outstanding, no class B notes
outstanding and no class M notes outstanding) the note trustee or
the issuing entity security trustee is to have regard only to the
interest of the class C noteholders in the event of a conflict
between the interests of the class C noteholders on the one hand
and the class D noteholders on the other hand.
THERE MAY BE A CONFLICT BETWEEN THE INTERESTS OF THE HOLDERS OF EACH SERIES
AND/OR SUB-CLASS OF THE CLASS A NOTES, THE HOLDERS OF EACH SERIES AND/OR
SUB-CLASS OF THE CLASS B NOTES, THE HOLDERS OF EACH SERIES AND/OR SUB-CLASS OF
THE CLASS M NOTES, THE HOLDERS OF EACH SERIES AND/OR SUB-CLASS OF THE CLASS C
NOTES AND THE HOLDERS OF EACH SERIES AND/OR SUB-CLASS OF THE CLASS D NOTES, AND
THE INTERESTS OF OTHER SERIES AND/OR SUB-CLASSES OF NOTEHOLDERS MAY PREVAIL OVER
YOUR INTERESTS
There may also be circumstances where the interests of the class A
noteholders of one series and/or sub-class of the issuing entity notes conflict
with the interests of the class A noteholders of another series and/or sub-class
of the issuing entity notes or there may be circumstances where the interests of
the class B noteholders of one series and/or sub-class of the issuing entity
notes conflict with the interests of the class B noteholders of another series
and/or sub-class of the issuing entity notes or where the interests of the class
M noteholders of one series and/or sub-class of the issuing entity notes
conflict with the interests of the class M noteholders of another series and/or
sub-class of the issuing entity notes or where the interests of the class C
noteholders of one series and/or sub-class of the issuing entity notes conflict
with the interests of the class C noteholders of another series and/or sub-class
of the issuing entity notes or where the interests of the class D noteholders of
one series and/or sub-class of the issuing entity notes conflict with the
interests of the class D noteholders of another series and/or sub-class of the
issuing entity notes.
The trust deed provides and the terms of the issuing entity notes will
provide that where, in the opinion of the note trustee or the issuing entity
security trustee, there is such a conflict, then a resolution directing the note
trustee or, as applicable, the issuing entity security trustee to take any
action must be passed at separate meetings of the holders of each series and/or
sub-class (as applicable) of the class A notes, or, as applicable, each series
and/or sub-class (as applicable) of the class B notes, each series and/or
sub-class (as applicable) of the class M notes, each series and/or sub-class (as
applicable) of the class C notes or each series and/or sub-class (as applicable)
of the class D notes. A resolution may only be passed at a single meeting of the
noteholders of each series and/or sub-class (as applicable) of the relevant
class if the note trustee or, as applicable, the issuing entity security trustee
is satisfied that there is no conflict between them.
Similar provisions will apply in relation to requests in writing from
holders of a specified percentage of the principal amount outstanding of the
issuing entity notes of each class (the principal amount outstanding being
converted into sterling for the purposes of making the calculation).
THE REQUIRED SUBORDINATION FOR A CLASS OF ISSUING ENTITY NOTES MAY BE CHANGED
The issuing entity may change the required subordinated amount for any
class of issuing entity notes, or the method of calculating the required
subordinated amount for such class, at any time without the consent of any
noteholders if certain conditions are met, including confirmation from each
rating agency that such change would not cause an adverse effect on its then
current rating of any outstanding issuing entity notes that would be affected by
such change.
44
IN CERTAIN CIRCUMSTANCES SOME OF THE CONDITIONS PRECEDENT TO THE ISSUANCE OF
ISSUING ENTITY NOTES MAY BE WAIVED
If the issuing entity obtains confirmation from each rating agency that
the issuance of a new series and class (or sub-class) of issuing entity notes
would not cause an adverse effect on the then current rating of any outstanding
issuing entity notes rated by that rating agency, then some of the other
conditions precedent to issuance of issuing entity notes (e.g., the absence of a
note event of default in respect of a series and/or class of issuing entity
notes) may be waived by the note trustee. For a description of the conditions
precedent to issuance and the waiver of such conditions see "THE ISSUANCE OF
ISSUING ENTITY NOTES".
THE SECURITY TRUSTEE, THE ISSUING ENTITY SECURITY TRUSTEE AND/OR THE NOTE
TRUSTEE MAY AGREE TO MODIFICATIONS TO THE TRANSACTION DOCUMENTS WITHOUT YOUR
PRIOR WRITTEN CONSENT, WHICH MAY ADVERSELY AFFECT YOUR INTERESTS
Pursuant to the terms of the trust deed and the issuing entity deed of
charge, the note trustee may, without the consent or sanction of the noteholders
at any time and from time to time:
o concur with the issuing entity or any other person; or
o direct the issuing entity security trustee to concur with the
issuing entity or any other person,
in making modifications (except a basic terms modification) to any of the
transaction documents which in the sole opinion of the note trustee it
may be proper to make, provided that (a) the note trustee is of the sole
opinion that such modification will not be materially prejudicial to the
interests of the holders of any class (or sub-class) of any series of
issuing entity notes, or (b) in the sole opinion of the note trustee,
such modification is of a formal, minor or technical nature or is
necessary to correct a manifest error or an error which is, in the
opinion of the note trustee, proven.
In the exercise of any of its powers, trusts, authorities and discretions
under the trust deed, the note trustee shall have regard to the interests of the
noteholders (subject to the provisions of the next paragraph), but in the event
of a conflict of interest it shall have regard to the interests of the holders
of the class of issuing entity notes with the highest rating.
The note trustee will be entitled to assume that the exercise of its
discretions will not be materially prejudicial to the interests of noteholders
if each of the rating agencies then rating the issuing entity notes has
confirmed in writing that the then current rating by it of such issuing entity
notes would not be adversely affected by such exercise.
In addition, the security trustee and the issuing entity security trustee
(as applicable) will give its consent to any modifications to the transaction
documents that are requested by Funding or the cash manager, provided that
Funding or the cash manager certifies to the security trustee or, as applicable,
the issuing entity security trustee in writing that such modifications are
required in order to accommodate, among other things new intercompany loan
agreements, the issue of new notes by new issuing entities, the addition of
relevant creditors, the issue (directly or indirectly) of new notes by Funding,
the sale of new types of loans to the mortgages trustee, changes to the Funding
reserve fund required amount or the Funding liquidity reserve required amount
and changes to the asset trigger events and non-asset trigger events and that
each of the rating agencies has confirmed in writing that the then current
rating by it of the current notes would not be adversely affected by such
modifications.
The modifications required to give effect to such matters may include,
among other matters, amendments to the provisions of the mortgages trust deed
and the Funding deed of charge relating to the allocation of and entitlement to
monies. There can be no assurance that the effect of such modifications to the
transaction documents will not ultimately adversely affect your interests.
HOLDINGS MAY ESTABLISH NEW FUNDING ENTITIES, WHICH MAY BECOME ADDITIONAL
BENEFICIARIES UNDER THE MORTGAGES TRUST
Holdings may establish new funding entities which may issue new notes
from time to time and use the proceeds to make a payment to the seller to
acquire an interest in the trust property rather than lending the proceeds to
Funding, subject to the agreement of the seller and Funding, as existing
beneficiaries of the mortgages trust. If a new funding entity becomes a
beneficiary of the mortgages trust then the percentage shares of Funding and the
seller in the trust property may decrease. The introduction of a new funding
entity will not cause a reduction in the principal amount of assets backing the
issuing entity notes. The security trustee will only be entitled to consent to
any modifications to the transaction documents caused by the introduction of a
new funding entity if it is satisfied that such modifications would not
adversely affect the then current ratings of the outstanding notes.
45
If new funding entities were to become beneficiaries of the mortgages
trust then the seller, Funding and such new funding entities would each have a
joint and undivided interest in the trust property but their entitlement to the
proceeds from the trust property would be in proportion to their respective
shares of the trust property. On each distribution date the mortgages trustee
would distribute interest and principal receipts to the beneficiaries in
accordance with the terms of the mortgages trust.
It is anticipated that any such new funding entity would issue new notes
directly to investors from time to time backed by its share of the trust
property. You would not have a direct or indirect interest in any new funding
entity's share of the trust property.
Amendments would be made to a number of the transaction documents as a
result of the inclusion of a new funding entity as a beneficiary of the
mortgages trust. In particular (but without limitation), amendments would be
made to:
o the mortgage sale agreement to enable the purchase by the new
funding entity of interests in the trust property by paying the
purchase price for new loans and their related security sold by
the seller from time to time and to give the new funding entity
the benefit of the covenants in the mortgage sale agreement;
o the mortgages trust deed (i) to establish the new funding entity
as a beneficiary of the trust, (ii) to enable changes in the new
funding entity's share of the trust property from time to time and
(iii) to regulate the distribution of interest and principal
receipts in the trust property to the new funding entity and the
other beneficiaries; and
o the cash management agreement to regulate the application of
monies to the new funding entity.
There may be conflicts of interest between Funding and new funding
entities, in which case it is expected that the mortgages trustee would follow
the directions given by the relevant beneficiary that has the largest share of
the trust property at that time. The interests of Funding may not prevail, which
may adversely affect your interests.
IF FUNDING ENTERS INTO NEW INTERCOMPANY LOAN AGREEMENTS WITH NEW ISSUING
ENTITIES, THEN THE NEW TERM ADVANCES MAY RANK AHEAD OF THE CURRENT TERM ADVANCES
AS TO PAYMENT, AND ACCORDINGLY NEW NOTES MAY RANK AHEAD OF THE ISSUING ENTITY
NOTES AS TO PAYMENT
Subject to satisfaction of certain conditions, Holdings may, in the
future, establish additional wholly owned subsidiary companies that will issue
new notes to investors. The proceeds of such issue of new notes may be advanced
by way of a new intercompany loan to Funding. Funding will use the proceeds of
the new intercompany loan to:
o pay the seller for new loans and their related security to be
assigned to the mortgages trustee;
o pay the seller for a part of the seller's share of the trust
property to be assigned to Funding;
o refinance an intercompany loan or intercompany loans outstanding
at that time (and if any intercompany loan (or any part thereof)
is refinanced, noteholders could be repaid early); and/or
o deposit funds in one or more of the reserve funds.
The order in which Funding pays principal and interest to the issuing
entity on the term advances made by the issuing entity and to any new issuing
entity on the new term advances made by that new issuing entity will depend
primarily on the designated ratings of those term advances. In general, term
advances with the highest term advance rating will be paid ahead of lower rated
term advances, subject to their relative scheduled repayment dates. For example,
Funding will pay interest due on the AAA term advances proportionally and
equally with the interest due on any new AAA term advances and ahead of payments
of interest due on any term advance with a lower term advance rating than AAA
(including, for the avoidance of doubt, any AA term advance, any A term advance,
any BBB term advance and any BB term advance). Similarly, Funding will, in
general, repay principal amounts due on the term advances (including any new
term advances) in accordance with their respective term advance ratings, subject
to their relative scheduled repayment dates. For example, principal repayments
due on a AAA term advance generally will be made before principal repayments due
on a new AA term advance. This principle is subject to a number of exceptions,
however, which are designed primarily to provide some protection that scheduled
repayments of principal on current term advances will not materially affect
payments of principal on previous or new term advances and in turn would not be
materially affected by payments of principal on previous or new term advances.
These exceptions are described in "CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE
PRINCIPAL RECEIPTS PRIOR TO ENFORCEMENT OF THE FUNDING SECURITY OR THE
OCCURRENCE OF A TRIGGER EVENT OR
46
ENFORCEMENT OF THE ISSUING ENTITY SECURITY - RULES FOR APPLICATION OF FUNDING
AVAILABLE PRINCIPAL RECEIPTS AND FUNDING PRINCIPAL RECEIPTS".
The term advance ratings designated to the term advances on the relevant
closing date will not change even if the ratings assigned to the corresponding
classes of issuing entity notes change.
It is expected that the payment of the amounts owing by Funding under any
new intercompany loan will be funded from amounts received by Funding from the
trust property. Noteholders should note that the obligation to make such
payments may rank equally or in priority with payments made by Funding to the
issuing entity under other intercompany loan agreements. The terms of the new
notes issued by any new issuing entity and the related new intercompany loan may
result in such new notes and such new intercompany loan being repaid prior to
the repayment of the issuing entity notes issued by the issuing entity under
this prospectus and the relevant prospectus supplement and prior to the
repayment of the related intercompany loans.
You will not have any right of prior review or consent with respect to
those new intercompany loans or the corresponding issuance by new issuing
entities of new notes. Similarly, the terms of the Funding transaction documents
(including, but not limited to, the mortgage sale agreement, the mortgages trust
deed, the Funding deed of charge, the definitions of the trigger events and the
criteria for the assignment of new loans to the mortgages trustee) may be
amended to reflect such new issuance. Your consent to these changes will not be
required. There can be no assurance that these changes will not affect cashflow
available to pay amounts due on the issuing entity notes.
Before issuing new notes, however, a new issuing entity will be required
to satisfy a number of conditions, including:
o obtaining a written confirmation from each of the rating agencies
that the then current ratings of the issuing entity notes
outstanding at that time, and the implicit ratings of the term
advances outstanding at that time, will not be adversely affected
because of the new issue (bearing in mind that the term advances
are not themselves rated);
o that no event of default under any of the intercompany loan
agreements outstanding at that time has occurred which has not
been remedied or waived and no event of default will occur as a
result of the issue of the new notes; and
o as at the most recent interest payment date, that no principal
deficiency (which remains outstanding) is recorded on the
principal deficiency ledger in relation to the term advances
outstanding at that time.
THE ISSUING ENTITY AND THE PREVIOUS ISSUING ENTITIES HAVE MADE PREVIOUS
INTERCOMPANY LOANS TO FUNDING, AND SOME OF THE PREVIOUS TERM ADVANCES IN THOSE
PREVIOUS INTERCOMPANY LOANS MAY RANK AHEAD OF SOME OF THE TERM ADVANCES IN THE
CURRENT INTERCOMPANY LOAN AS TO PAYMENT, AND ACCORDINGLY SOME OF THE PREVIOUS
NOTES ISSUED BY THE ISSUING ENTITY AND THE PREVIOUS ISSUING ENTITIES MAY RANK
AHEAD OF SOME OF THE OFFERED NOTES AS TO PAYMENT
The issuing entity and the previous issuing entities have issued previous
notes to investors, the proceeds of which were used to make previous
intercompany loans to Funding. Funding used the proceeds of the previous
intercompany loan from Holmes Financing (No. 1) PLC to pay the seller for loans
and their related security assigned to the mortgages trustee which comprised its
original share of the trust property. Funding used the proceeds of the previous
intercompany loans from Holmes Financing (No. 2) PLC, Holmes Financing (No. 4)
PLC, Holmes Financing (No. 7) PLC, Holmes Financing (No. 9) PLC, Holmes
Financing (No. 10) PLC and the issuing entity to pay the seller for an increase
in Funding's share of the trust property (resulting in a corresponding decrease
in the seller's share of the trust property). Funding used the proceeds of the
previous intercompany loans from Holmes Financing (No. 3) PLC, Holmes Financing
(No. 5) PLC, Holmes Financing (No. 6) PLC and Holmes Financing (No. 8) PLC to
pay the seller for loans and their related security assigned to the mortgages
trustee, which constituted an increase in Funding's existing share of the trust
property.
The order in which Funding pays principal and interest to the issuing
entity on the term advances made by the issuing entity and to the previous
issuing entities on the previous term advances made by the previous issuing
entities depends primarily on the designated ratings of those term advances. See
"DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND THE
PREVIOUS INTERCOMPANY LOANS" in the accompanying prospectus supplement. In
general, term advances with the highest term advance rating will be paid ahead
of lower rated term advances subject to their relative scheduled repayment
dates. For example, Funding will pay interest due on the AAA term advances
proportionally and equally with
47
the interest due on any previous AAA term advances and ahead of payments of
interest due on any term advance with a lower term advance rating than AAA
(including, for the avoidance of doubt, any AA term advance, A term advance, BBB
term advance or BB term advance). Similarly, Funding will, in general, repay
principal amounts due on the term advances in accordance with their respective
term advance ratings. For example, principal repayments due on a AAA term
advance generally will be made before principal repayments due on a previous AA
term advance. This principle is subject to a number of exceptions, however,
which are designed primarily to provide some protection that scheduled
repayments of principal on current term advances will not materially affect
payments of principal on previous term advances and in turn would not be
materially affected by payments of principal on new term advances. These
exceptions are described in "CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE
PRINCIPAL RECEIPTS PRIOR TO ENFORCEMENT OF THE FUNDING SECURITY OR THE
OCCURRENCE OF A TRIGGER EVENT OR ENFORCEMENT OF THE ISSUING ENTITY SECURITY -
RULES FOR APPLICATION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS AND FUNDING
PRINCIPAL RECEIPTS".
The term advance ratings designated to the previous term advances on the
previous closing dates will not change even if the ratings assigned to the
corresponding classes of previous notes change.
IF THE CURRENT INTERCOMPANY LOAN (OR ANY PART THEREOF) IS REFINANCED THE ISSUING
ENTITY NOTES COULD BE REPAID EARLY
Funding may refinance some or all of the term advances through proceeds
received from the issuing entity under the current intercompany loan, a new
issuing entity under new intercompany loans or payments received from the seller
and/or a new funding entity. The issuing entity or the new issuing entity would
fund such term advances through the issuance of new series and classes (or
sub-classes) of further issuing entity notes or new notes, as the case may be.
For example, an existing term advance might be refinanced in order to provide
the issuing entity with funds to redeem a class of issuing entity notes after
their step-up date. If the proceeds of a refinanced term advance were used by
the issuing entity to effect an optional redemption of issuing entity notes
prior to their expected maturity, those issuing entity notes would be repaid
early. This, in turn, could have an adverse effect on the yield to maturity on
the affected issuing entity notes. See "TERMS AND CONDITIONS OF US NOTES -
REDEMPTION, PURCHASE AND CANCELLATION".
THE CRITERIA FOR THE SALE OF NEW LOANS TO THE MORTGAGES TRUSTEE MAY CHANGE OVER
TIME WITHOUT YOUR CONSENT
The criteria for new loans to be sold to the mortgages trustee may be
amended in the future without your consent. As a result, the mortgages trust may
include types of loans in the future with different characteristics from those
currently in the mortgages trust. This may occur, for example, due to the
development of new mortgage loan products in response to changing market
conditions. Any such amendments, as provided in the mortgage sale agreement,
would require the consent of the parties to the mortgage sale agreement,
including the security trustee.
NEW ISSUING ENTITIES AND NEW START-UP LOAN PROVIDERS WILL SHARE IN THE SAME
SECURITY GRANTED BY FUNDING TO THE ISSUING ENTITY, AND THIS MAY ADVERSELY AFFECT
PAYMENTS ON THE ISSUING ENTITY NOTES
If Funding enters into any new intercompany loan agreements, then if
required it may also enter into new start-up loan agreements with new start-up
loan providers and the security trustee. If Funding is required, in order to
ensure no adverse impact on the ratings of the notes, to further fund one or
more of the existing reserve funds, Funding may use part of the proceeds of the
new start-up loans.
Any new issuing entities may become parties to the Funding deed of charge
and, if so, will be entitled to share in the security granted by Funding for the
issuing entity's benefit (and the benefit of the other Funding secured
creditors) under the Funding deed of charge. This could ultimately cause a
reduction in the payments noteholders receive on the issuing entity notes.
THE PREVIOUS ISSUING ENTITIES, THE FUNDING SWAP PROVIDER AND THE START-UP LOAN
PROVIDER ALREADY SHARE IN THE SECURITY BEING GRANTED BY FUNDING TO THE ISSUING
ENTITY, WHICH MAY ADVERSELY AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES
Funding has entered into the previous intercompany loan agreements and,
as at the date of this prospectus, it has also entered into eight start-up loan
agreements with the start-up loan provider and the security trustee. Funding
used part of the proceeds of these start-up loans to fund the first reserve
fund.
The previous issuing entities and the start-up loan provider are parties
to the Funding deed of charge and are entitled to share in the security granted
by Funding for the benefit of the Funding secured creditors (including, as from
the programme date, the issuing entity) under the Funding deed of charge. In
addition,
48
the liabilities owed to the Funding swap provider which are secured by the
Funding deed of charge may increase each time that Funding enters into a new
intercompany loan agreement. These factors could ultimately cause a reduction in
the payments noteholders receive on the issuing entity notes.
THERE MAY BE CONFLICTS BETWEEN THE ISSUING ENTITY, THE PREVIOUS ISSUING ENTITIES
AND ANY NEW ISSUING ENTITIES, AND THE ISSUING ENTITY'S INTERESTS MAY NOT
PREVAIL, WHICH MAY ADVERSELY AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES
The security trustee will exercise its rights under the Funding deed of
charge only in accordance with directions given by the issuing entities (which
could be the issuing entity, the previous issuing entities and, if Funding
enters into new intercompany loans, any new issuing entity) that have the
highest-ranking outstanding term advances at that time, provided that the
security trustee is indemnified to its satisfaction.
If the security trustee receives conflicting directions, it will follow
the directions given by the relevant issuing entities representing the largest
principal amount outstanding of relevant term advances. If the issuing entity is
not in the group representing that largest principal amount, then its interests
may not prevail. This could ultimately cause a reduction in the payments
noteholders receive on the issuing entity notes. For example, if the term
advances with the highest designated term advance rating at the time of a
direction are the AAA term advances, then, in the event of conflicting
directions being given by issuing entities with outstanding AAA term advances,
the security trustee will follow the direction given by those issuing entities
owed the largest principal amount outstanding of AAA term advances.
THE INCLUSION OF CERTAIN TYPES OF LOANS MAY AFFECT THE RATE OF REPAYMENT AND
PREPAYMENT OF THE LOANS
The portfolio contains flexible loans. Flexible loans provide the
borrower with a range of options that give that borrower greater flexibility in
the timing and amount of payments made under the loans. Subject to the terms and
conditions of the loans (which may require in some cases notification to the
seller and in other cases the consent of the seller), under a flexible loan a
borrower may (among other things) redraw amounts that have been repaid
exercising available options set out in the relevant flexible option agreement.
For a detailed summary of the characteristics of the flexible loans, see "THE
LOANS - CHARACTERISTICS OF THE LOANS - FLEXIBLE LOANS".
To the extent that borrowers under flexible loans exercise any of the
options available to them, the timing of payments on the issuing entity notes
may be adversely affected.
COMPETITION IN THE UNITED KINGDOM MORTGAGE LOAN INDUSTRY COULD INCREASE THE RISK
OF AN EARLY REDEMPTION OF THE ISSUING ENTITY NOTES
The mortgage loan industry in the United Kingdom is highly competitive.
Both traditional and new lenders use heavy advertising, targeted marketing,
aggressive pricing competition and loyalty schemes in an effort to expand their
presence in or to facilitate their entry into the market and compete for
customers. For example, certain of the seller's competitors have implemented
loyalty discounts for long-time customers to reduce the likelihood that these
customers would refinance their mortgage loans with other lenders such as the
seller.
This competitive environment may affect the rate at which the seller
originates new mortgage loans and may also affect the level of loss of the
seller's existing borrowers as customers. If the rate at which new mortgage
loans are originated declines significantly or if existing borrowers refinance
their mortgage loans with lenders other than the seller, then the risk of a
trigger event occurring increases, which could result in an early redemption of
the issuing entity notes.
IF PROPERTY VALUES DECLINE, PAYMENTS ON THE ISSUING ENTITY NOTES COULD BE
ADVERSELY AFFECTED
The security granted by Funding in respect of the master intercompany
loan, which is the principal source of funding for the issuing entity notes,
consists, among other things, of Funding's interest in the mortgages trust.
Since the value of the portfolio held by the mortgages trustee may increase or
decrease, the value of that security may decrease and will decrease if there is
a general decline in property values. The issuing entity cannot give any
assurance that the value of a mortgaged property will remain at the same level
as on the date of origination of the related loan. If the residential property
market in the United Kingdom experiences an overall decline in property values,
the value of the security created by the mortgage could be significantly reduced
and, ultimately, may result in an adverse effect on the payments on the issuing
entity notes if the security is required to be enforced.
The principal source of income for repayment of the issuing entity notes
by the issuing entity is the master intercompany loan agreement. The principal
source of income for repayment by Funding of each term advance under the master
intercompany loan agreement is its interest in the loans held on trust by the
49
mortgages trustee for Funding and the seller. If the timing and payment of the
loans is adversely affected by any of the risks described in this section, then
the payments on the issuing entity notes could be reduced and/or delayed.
AS NEW LOANS ARE ASSIGNED TO THE MORTGAGES TRUSTEE, THE CHARACTERISTICS OF THE
TRUST PROPERTY MAY CHANGE FROM THOSE EXISTING AT THE DATE OF THIS PROSPECTUS,
AND THOSE CHANGES MAY ADVERSELY AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES
There is no guarantee that any new loans assigned to the mortgages
trustee will have the same characteristics as the loans in the portfolio as at
the date of this prospectus. In particular, new loans may have different payment
characteristics from the loans in the portfolio as at the date of this
prospectus. The ultimate effect of this could be to delay or reduce the payments
noteholders receive on the issuing entity notes. However, the new loans will be
required to meet the criteria described in "ASSIGNMENT OF THE LOANS AND THEIR
RELATED SECURITY". These criteria may be modified after the closing date and
your consent to such modifications will not be obtained provided that the
security trustee is satisfied that the then current ratings of the outstanding
notes will not be adversely affected by the proposed modifications.
THE YIELD TO MATURITY OF THE ISSUING ENTITY NOTES MAY BE ADVERSELY AFFECTED BY
PREPAYMENTS OR REDEMPTIONS ON THE LOANS
The yield to maturity of the issuing entity notes of each class (and
sub-class) will depend mostly on (a) the amount and timing of payment of
principal on the loans and (b) the price paid by the noteholders of each class
(and sub-class) of issuing entity notes.
The yield to maturity of the issuing entity notes of each class (and
sub-class) may be adversely affected by a higher or lower than anticipated rate
of prepayments on the loans. The factors affecting the rate of prepayment on the
loans are described in "- THE ISSUING ENTITY'S ABILITY TO REDEEM THE ISSUING
ENTITY NOTES ON THEIR SCHEDULED REDEMPTION DATES IS AFFECTED BY THE RATE OF
PREPAYMENT ON THE LOANS". See also "CHARACTERISTICS OF THE UNITED KINGDOM
RESIDENTIAL MORTGAGE MARKET" in the relevant prospectus supplement.
No assurance can be given that Funding will accumulate sufficient funds
during the cash accumulation periods relating to bullet term advances or
scheduled amortisation term advances owed to the issuing entity to enable it to
repay these bullet term advances or scheduled amortisation term advances owed to
the issuing entity so that the corresponding series and class (or sub-class) of
the issuing entity notes will be redeemed in accordance with their bullet
redemption dates or scheduled redemption dates respectively.
The extent to which sufficient funds are accumulated by Funding during a
cash accumulation period or a scheduled amortisation period or received by it
from its share in the mortgages trust on a scheduled repayment date will depend
on whether the actual principal prepayment rate of the loans is the same as the
assumed principal prepayment rate. If Funding is not able to accumulate enough
money during a cash accumulation period or a scheduled amortisation period or
does not receive enough money from its share in the mortgages trust to pay the
full amount scheduled to be repaid on a bullet term advance or scheduled
amortisation term advance and the issuing entity is therefore unable to redeem
the corresponding series and class (or sub-class) of issuing entity notes on
their scheduled redemption date(s), then Funding will be required to pay to the
issuing entity on those scheduled redemption dates only the amount that it has
actually accumulated. Any shortfall will be deferred and paid on subsequent
interest payment dates when Funding has money available to make the payment. In
these circumstances, there may be a variation in the yield to maturity of the
relevant class of issuing entity notes.
THE ISSUING ENTITY'S ABILITY TO REDEEM THE ISSUING ENTITY NOTES ON THEIR
SCHEDULED REDEMPTION DATES OR THEIR FINAL MATURITY DATES IS AFFECTED BY THE RATE
OF PREPAYMENT ON THE LOANS
The rate of prepayment of loans is influenced by a wide variety of
economic, social and other factors, including prevailing mortgage market
interest rates, the availability of alternative financing programs, local and
regional economic conditions and homeowner mobility. For instance, prepayments
on the loans may be due to borrowers refinancing their loans and sales of
properties by borrowers (either voluntarily or as a result of enforcement action
taken). In addition, if the seller is required to repurchase a loan or loans
under a mortgage account and their related security because, for example, one of
the loans does not comply with the loan warranties in the mortgage sale
agreement, then the payment received by the mortgages trustee will have the same
effect as a prepayment of all of the loans under the mortgage account. Because
these factors are not within the issuing entity's control or the control of
Funding or the mortgages trustee, the issuing entity cannot give any assurances
as to the level of prepayments that the portfolio may experience.
50
Variation in the rate of prepayments of principal on the loans may affect
each series and class (or sub-class) of issuing entity notes differently
depending upon amounts already repaid by Funding to the issuing entity in
respect of the corresponding term advance and whether a trigger event has
occurred, or a loan is subject to a product switch or a further advance or the
security granted by the issuing entity under the issuing entity deed of charge
has been enforced.
If prepayments on the loans occur less frequently than anticipated, then
there may not be sufficient funds available to redeem the issuing entity notes
of any series in full on their respective scheduled redemption dates or final
maturity dates.
THE SELLER MAY CHANGE THE LENDING CRITERIA RELATING TO LOANS THAT ARE
SUBSEQUENTLY ASSIGNED TO THE MORTGAGES TRUSTEE, WHICH COULD AFFECT THE
CHARACTERISTICS OF THE TRUST PROPERTY AND WHICH MAY ADVERSELY AFFECT PAYMENTS ON
THE ISSUING ENTITY NOTES
Each of the loans was originated in accordance with the seller's lending
criteria at the time of origination. The current lending criteria are set out in
the section "THE LOANS - LENDING CRITERIA". These lending criteria consider a
variety of factors such as a potential borrower's credit history, employment
history and status and repayment ability, as well as the value of the property
to be mortgaged. In the event of the assignment of any new loans and new related
security to the mortgages trustee, the seller will warrant that those new loans
and new related security were originated in accordance with the seller's lending
criteria at the time of their origination. However, the seller retains the right
to revise its lending criteria as determined from time to time, and so the
lending criteria applicable to any loan at the time of its origination may not
be or have been the same as those set out in the section "THE LOANS - LENDING
CRITERIA".
If new loans that have been originated under revised lending criteria are
assigned to the mortgages trustee, the characteristics of the trust property
could change. This could lead to a delay or a reduction in the payments received
on the issuing entity notes.
THE SELLER HAS INTRODUCED PROCEDURES RELATING TO INVESTIGATIONS AND SEARCHES FOR
REMORTGAGES WHICH COULD AFFECT THE CHARACTERISTICS OF THE TRUST PROPERTY AND
WHICH MAY ADVERSELY AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES
The seller no longer requires a solicitor or licensed or qualified
conveyancer to conduct a full investigation of the title to a property in all
cases. Where the borrower is remortgaging there will be a more limited form of
investigation of title for properties located in England, Wales and Scotland, in
particular in the case of registered land in England and Wales (e.g. confirming
that the borrower is the registered proprietor of the property and the
description of the property corresponds with the entries on the Land Registry's
register) and confirming such other matters as are required by a reasonable,
prudent mortgage lender. Properties which have undergone such a limited
investigation may be subject to matters which would have been revealed by a full
investigation of title and which may have been remedied or, if incapable of
remedy, may have resulted in the properties not being accepted as security for a
loan had such matters been revealed. The introduction of loans secured by such
properties into the trust property could result in a change of the
characteristics of the trust property. This could lead to a delay or a reduction
in the payments received on the issuing entity notes.
THE TIMING AND AMOUNT OF PAYMENTS ON THE LOANS COULD BE AFFECTED BY VARIOUS
FACTORS WHICH MAY ADVERSELY AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES
The loans are affected by credit, liquidity and interest rate risks.
Various factors influence mortgage delinquency rates, prepayment rates,
repossession frequency and the ultimate payment of interest and principal, such
as changes in the national or international economic climate, regional economic
or housing conditions, changes in tax laws, interest rates, inflation, the
availability of financing, yields on alternative investments, political
developments and government policies. Other factors in borrowers' individual,
personal or financial circumstances may affect the ability of borrowers to repay
loans. Loss of earnings, illness, divorce and other similar factors may lead to
an increase in delinquencies by and bankruptcies of borrowers, and could
ultimately have an adverse impact on the ability of borrowers to repay loans.
If a borrower fails to repay its loan and the related property is
repossessed, the likelihood of there being a net loss on disposition of the
property is adversely affected by a higher loan-to-value ratio. In addition, the
ability of a borrower to sell a property given as security for a loan at a price
sufficient to repay the amounts outstanding under the loan will depend upon a
number of factors, including the availability of buyers for that property, the
value of that property and property values in general at the time. The relevant
prospectus supplement will provide information on the distribution of the
loan-to-value ratios at origination of the loans sold to the mortgages trustee,
see "STATISTICAL INFORMATION ON THE PORTFOLIO" in Annex A-1 of the relevant
prospectus supplement.
51
The portfolio may also be subject to geographic concentration risks. To
the extent that specific geographic regions within the United Kingdom have
experienced or may experience in the future weaker regional economic conditions
and housing markets than other regions, a concentration of the loans in such a
region may be expected to exacerbate all risks relating to the loans described
in this section. The economy of each geographic region within the United Kingdom
is dependent on different mixtures of industries. Any downturn in a local
economy or particular industry may adversely affect the regional employment
levels and consequently the repayment ability of the borrowers in that region or
the region that relies most heavily on that industry. Any natural disasters in a
particular region may reduce the value of affected mortgaged properties. This
may result in a loss being incurred upon sale of the mortgaged property. These
circumstances could affect receipts on the loans and ultimately result in losses
on the issuing entity notes. For an overview of the geographical distribution of
the loans sold to the mortgages trustee in connection with the issuance of the
relevant series of issuing entity notes, see "STATISTICAL INFORMATION ON THE
PORTFOLIO" in Annex A-1 of the relevant prospectus supplement.
The principal source of income for repayment of the issuing entity notes
by the issuing entity is the master intercompany loan agreement. The principal
source of income for repayment by Funding of each term advance under the master
intercompany loan agreement is its interest in the loans held on trust by the
mortgages trustee for Funding and the seller. If the timing and payment of the
loans is adversely affected by any of the risks described in this section, then
the payments on the issuing entity notes could be reduced and/or delayed.
THE OCCURRENCE OF AN ASSET TRIGGER EVENT AND ENFORCEMENT OF THE ISSUING ENTITY
SECURITY MAY ADVERSELY AFFECT THE REPAYMENT OF CERTAIN ISSUING ENTITY NOTES
AND/OR DELAY THE REPAYMENT OF OTHER ISSUING ENTITY NOTES
If an asset trigger event has occurred, the mortgages trustee will
distribute principal receipts on the loans to Funding and the seller
proportionally and equally based on their percentage shares of the trust
property (that is, the Funding share percentage and the seller share
percentage). When an asset trigger event has occurred, Funding will repay:
first, the AAA term advances and the previous AAA term advances of each
series proportionally and equally, until all of those AAA term advances
are fully repaid;
then, the AA term advances and the previous AA term advances of each
series proportionally and equally, until all of those AA term advances
are fully repaid;
then, the A term advances and the previous A term advances of each series
proportionally and equally, until all of those A term advances are fully
repaid;
then, the BBB term advances and the previous BBB term advances of each
series proportionally and equally, until all of those BBB term advances
are fully repaid; and
then, the BB term advances and the previous BB term advances of each
series proportionally and equally, until all of those BB term advances
are fully repaid.
The above order of priority of payments may cause certain series and
classes (or sub-classes) of issuing entity notes to be repaid more rapidly than
expected and other series and classes (or sub-classes) of issuing entity notes
to be repaid more slowly than expected and there is a risk that such issuing
entity notes may not be repaid by their final maturity date.
THE OCCURRENCE OF A NON-ASSET TRIGGER EVENT MAY ACCELERATE THE REPAYMENT OF
CERTAIN ISSUING ENTITY NOTES AND/OR DELAY THE REPAYMENT OF OTHER ISSUING ENTITY
NOTES
If a non-asset trigger event has occurred, the mortgages trustee will
distribute all principal receipts to Funding until the Funding share percentage
of the trust property is zero. When a non-asset trigger event has occurred,
Funding will repay:
first, the AAA term advances in order of final repayment date, beginning
with the earliest final repayment date;
then, the AA term advances until each of those AA term advances is fully
repaid;
then, the A term advances until each of those A term advances is fully
repaid;
then, the BBB term advances until each of those BBB term advances is
fully repaid; and
then, the BB term advances until each of those BB term advances is fully
repaid.
52
The above order of priority of payments may cause certain series and
classes (or sub-classes) of issuing entity notes to be repaid more rapidly than
expected and other series and classes (or sub-classes) of issuing entity notes
to be repaid more slowly than expected and there is a risk that such issuing
entity notes may not be repaid on their scheduled redemption dates.
LOANS SUBJECT TO PRODUCT SWITCHES AND FURTHER ADVANCES WILL BE REPURCHASED BY
THE SELLER FROM THE MORTGAGES TRUSTEE, WHICH WILL AFFECT THE PREPAYMENT RATE OF
THE LOANS, AND THIS MAY AFFECT THE YIELD TO MATURITY OF THE ISSUING ENTITY NOTES
If a loan is subject to a product switch or a further advance, then the
seller will be required to repurchase the loan or loans under the relevant
mortgage account and their related security from the mortgages trustee at a
price equal to the outstanding principal balance of those loans together with
any arrears of interest and accrued and unpaid interest and expenses to the date
of purchase.
A loan will be subject to a product switch if the borrower and the seller
agree on or the servicer issues an offer for, and the borrower accepts, a
variation in the financial terms and conditions applicable to the relevant
borrower's loan, other than:
o any variation agreed with a borrower to control or manage arrears
on the loan;
o any variation in the maturity date of the loan unless, while the
previous intercompany loan made by Holmes Financing (No. 1) PLC is
outstanding, it is extended beyond July 2038;
o any variation imposed by statute;
o any variation of the principal available and/or the rate of
interest payable in respect of the loan where that rate is offered
to the borrowers of more than 10 per cent. by outstanding
principal amount of loans comprised in the trust property in any
interest period; or
o any variation in the frequency with which the interest payable in
respect of the loan is charged.
A loan will be subject to a further advance if an existing borrower
requests a further amount to be lent to him or her under the mortgage in
circumstances where the seller has discretion to, and does, grant that request.
A drawing under a flexible loan will not constitute a further advance.
The yield to maturity of the issuing entity notes may be affected by the
repurchase of loans subject to product switches and further advances.
RATINGS ASSIGNED TO THE ISSUING ENTITY NOTES MAY BE LOWERED OR WITHDRAWN AFTER
YOU PURCHASE THE ISSUING ENTITY NOTES, WHICH MAY LOWER THE MARKET VALUE OF THE
ISSUING ENTITY NOTES
The ratings assigned by Standard & Poor's and Fitch to each class (or
sub-class) of issuing entity notes address the likelihood of full and timely
payment to you of all payments of interest on each interest payment date under
that class (or sub-class) of issuing entity notes in accordance with the terms
of the issuing entity transaction documents and the conditions of the issuing
entity notes. The ratings also address the likelihood of "ULTIMATE" payment of
principal by the final maturity date of each class (or sub-class) of issuing
entity notes. The ratings assigned by Moody's to each class (or sub-class) of
issuing entity notes address the expected loss in proportion to the initial
principal amount of such class (or sub-class) and express Moody's opinion that
the structure allows for timely payment of interest and ultimate payment of
principal at par on or before the rated final legal maturity date. The expected
ratings of each class (or sub-class) of issuing entity notes on the relevant
closing date are set out in the relevant prospectus supplement. Any rating
agency may lower, qualify or withdraw its rating if, in the sole judgment of the
rating agency, the credit quality of the issuing entity notes has declined or is
in question. If any rating assigned to the issuing entity notes is lowered,
qualified or withdrawn, the market value of the issuing entity notes may be
reduced and, in the case of money market notes, such money market notes may no
longer be eligible for investment by money market funds. A change to the ratings
assigned to each class (or sub-class) of issuing entity notes will not affect
the term advance ratings assigned to each relevant term advance under the master
intercompany loan agreement.
THE REMARKETING BANK MAY NOT BE ABLE TO REMARKET MONEY MARKET NOTES AND PAYMENTS
FROM A CONDITIONAL NOTE PURCHASER MAY NOT BE SUFFICIENT TO REPAY MONEY MARKET
NOTES
The ability of the remarketing bank to procure payment of the transfer
price on a transfer date will depend upon the remarketing bank either (a)
procuring third party purchasers for any tendered notes prior to the relevant
transfer date and obtaining the transfer price from those third party purchasers
or (b) exercising
53
its rights under the conditional purchase agreement to require the conditional
note purchaser to acquire the unremarketed notes.
There can be no assurance that the remarketing bank will be able to
identify purchasers willing to acquire the tendered notes on a transfer date. In
such event the transfer of any unremarketed notes would be dependent upon the
ability of the conditional note purchaser to pay the transfer price and acquire
the unremarketed notes.
You should consider carefully the risk posed if your tendered notes
cannot be remarketed on a transfer date and either (a) the conditions to the
conditional note purchaser's obligation to purchase unremarketed notes are not
satisfied or (b) the conditional note purchaser defaults in its obligation to
purchase unremarketed notes under the conditional purchase agreement. In those
situations noteholders may be unable to sell the issuing entity notes on the
relevant transfer date or at any other time.
In addition, you will have no recourse against the issuing entity, the
conditional note purchaser or the remarketing bank for any default or failure to
purchase by the conditional note purchaser under the conditional purchase
agreement or default or failure to remarket by the remarking bank under the
remarketing agreement. Although the parties to these agreements may be able to
enforce them, they have no obligation to do so.
Neither the issuing entity nor any of the underwriters, any remarketing
bank or any conditional note purchaser will make any representation as to the
suitability of the money market notes for investment by money market funds
subject to Rule 2a-7 under the Investment Company Act. Any determination as to
such suitability or compliance with Rule 2a-7 under the Investment Company Act,
is solely your responsibility.
ISSUANCE OF FURTHER ISSUING ENTITY NOTES MAY AFFECT THE TIMING AND AMOUNTS OF
PAYMENTS TO YOU
The issuing entity expects to issue further issuing entity notes from
time to time. Further issuing entity notes may be issued without prior notice to
existing noteholders and without their consent, and may have different terms
from outstanding issuing entity notes. For a description of the conditions that
must be satisfied before the issuing entity can issue further issuing entity
notes, see "OVERVIEW OF THE ISSUING ENTITY NOTES - ISSUANCE".
The issuance of further issuing entity notes could adversely affect the
timing and amount of payments on the outstanding issuing entity notes. For
example, if further issuing entity notes of the same class (or sub-class) as the
issuing entity notes (issued after such issuing entity notes) have a higher
interest rate than the issuing entity notes, this could result in a reduction in
the available funds used to pay interest on the issuing entity notes. Also, when
further issuing entity notes are issued, the voting rights attaching to the
issuing entity notes will be diluted.
YOU MAY BE SUBJECT TO RISKS RELATING TO EXCHANGE RATES OR INTEREST RATES ON THE
ISSUING ENTITY NOTES OR RISKS RELATING TO RELIANCE ON A 2A-7 SWAP PROVIDER
Repayments of principal and payments of interest on a series and class
(or sub-class) of issuing entity notes may be made in a currency other than
sterling but the loan made by the issuing entity to Funding and repayments of
principal and payments of interest by Funding to the issuing entity under the
master intercompany loan agreement will be in sterling. In addition, interest
due and payable by Funding to the issuing entity on any term advance under the
master intercompany loan agreement will be calculated by reference to LIBOR for
three-month sterling deposits or, for some term advances, such other sterling
LIBOR rate as may be specified in the relevant term advance supplement but
interest due and payable on a series and class (or sub-class) of issuing entity
notes may be calculated by reference to a fixed or floating rate (as set out in
the relevant prospectus supplement).
To hedge the issuing entity's currency exchange rate exposure and/or
interest rate exposure in such cases, on the relevant closing date for a series
and class (or sub-class) of issuing entity notes, the issuing entity will, where
applicable, enter into appropriate currency and/or interest rate swap
transactions for such issuing entity notes with an issuing entity swap provider
as specified in the relevant prospectus supplement. See "THE SWAP AGREEMENTS".
Each issuing entity swap provider is obliged to make payments under a
swap only for so long as and to the extent that the issuing entity makes timely
payments under it. If such issuing entity swap provider is not obliged to make
payments of, or if it defaults in its obligations to make payments of, amounts
equal to the full amount scheduled to be paid to the issuing entity on the dates
for payment specified under the relevant
54
swap or such swap is otherwise terminated, the issuing entity will be exposed to
changes in the exchange rates between sterling and the currency in which such
issuing entity notes are denominated and in the relevant interest rates. Unless
a replacement swap transaction is entered into, the issuing entity may have
insufficient funds to make payments due on the corresponding series and class
(or sub-class) of issuing entity notes.
If a 2a-7 swap provider swap arrangement is specified as applying to a
certain series and class (or sub-class) of issuing entity notes in the relevant
prospectus supplement, the 2a-7 swap provider will be required to make a
principal payment under the relevant issuing entity swap agreement to the
issuing entity to enable the issuing entity to redeem a class of issuing entity
notes in full on their bullet repayment date (unless an asset trigger event has
occurred prior to that date) notwithstanding that the 2a-7 swap provider has not
received the corresponding principal payment required to be made by the issuing
entity under the relevant issuing entity swap agreement. A failure by the
issuing entity to make the full principal repayment on the bullet repayment date
of the term advance corresponding to the relevant class (or sub-class) of
issuing entity notes for which the relevant issuing entity swap was entered into
will not constitute an event of default or a termination event under that swap.
In such circumstances, noteholders in respect of such issuing entity notes will
be dependent on the performance of the 2a-7 swap provider and no assurance can
be given that the issuing entity will have sufficient funds to make payments due
on the corresponding series and class (or sub-class) of issuing entity notes.
TERMINATION PAYMENTS ON THE SWAPS MAY ADVERSELY AFFECT THE FUNDS AVAILABLE TO
MAKE PAYMENTS ON THE ISSUING ENTITY NOTES
If any of the swaps terminates, the issuing entity may as a result be
obliged to pay a termination payment to the relevant issuing entity swap
provider. The amount of the termination payment will be based on the cost of
entering into a replacement swap. Under the master intercompany loan agreement,
Funding will be required to pay the issuing entity an amount equal to any
termination payment due from the issuing entity to the relevant issuing entity
swap provider. Funding will also be obliged to pay the issuing entity any extra
amounts which it may be required to pay to enter into a replacement swap.
No assurance can be given that Funding will have the funds available to
make such payments or that the issuing entity will have sufficient funds
available to make any termination payment under any of its swaps or to make
subsequent payments to you in respect of the relevant series and class (or
sub-class) of issuing entity notes. Nor can any assurance be given that the
issuing entity will be able to enter into a replacement swap or, if one is
entered into, that the credit rating of the replacement issuing entity swap
provider will be sufficiently high to prevent a downgrading of the then current
ratings of the issuing entity notes by the rating agencies.
Except where the relevant issuing entity swap provider has caused the
relevant swap to terminate by its own default or following a downgrade
termination event, any termination payment due from the issuing entity will rank
equally not only with payments due to the holders of the series and class (or
sub-class) of issuing entity notes to which the relevant swap relates but also
with payments due to the holders of any other series and class (or sub-class) of
issuing entity notes which rank equally with the series and class (or sub-class)
of issuing entity notes to which the relevant swap relates. Any additional
amounts required to be paid by the issuing entity following termination of the
relevant swap (including any extra costs incurred (for example, from entering
into spot currency or interest rate swaps) if the issuing entity cannot
immediately enter into a replacement swap) will also rank equally not only with
payments due to the holders of the series and class (or sub-class) of issuing
entity notes to which the relevant swap relates but also with payments due to
the holder of any other series and class (or sub-class) of issuing entity notes
which rank equally with the series and class (or sub-class) of issuing entity
notes to which the relevant swap relates. Furthermore, any termination payment
or additional payment or additional amounts required to be paid by the issuing
entity following termination of a swap will rank ahead of payments due to the
holders of any series and class (or sub-class) of issuing entity notes which
ranks below the series and class (or sub-class) of issuing entity notes to which
the relevant swap relates. Therefore, if the issuing entity is obliged to make a
termination payment to the relevant issuing entity swap provider or to pay any
other additional amount as a result of the termination of the relevant swap,
this may affect the funds which the issuing entity has available to make
payments on the issuing entity notes of any class and any series.
PAYMENTS BY FUNDING TO THIRD PARTIES IN RELATION TO THE PREVIOUS ISSUING
ENTITIES MAY AFFECT PAYMENTS DUE TO THE ISSUING ENTITY AND ACCORDINGLY THE
ISSUING ENTITY'S ABILITY TO MAKE PAYMENTS ON THE ISSUING ENTITY NOTES
55
Under the previous intercompany loan agreements, Funding is required to
make payments to the previous issuing entities in respect of the previous
issuing entities' obligations to make payments to their respective own security
trustee, note trustee, agent bank, paying agents, cash manager, corporate
services provider and account bank and to other third parties to whom the
previous issuing entities owe money. These payments rank in priority to amounts
due by Funding to the issuing entity on the term advances. For further
information regarding Funding's payment obligations to the previous issuing
entities, see "CASHFLOWS".
Funding's obligations to make the payments described in the preceding
paragraph to the previous issuing entities may affect Funding's ability to make
payments to the issuing entity under the master intercompany loan agreement.
This in turn may affect the issuing entity's ability to make payments on the
issuing entity notes.
The issuing entity relies on third parties to perform services in
relation to the issuing entity notes, and you may be adversely affected if they
fail to perform their obligations.
The issuing entity is, and will be, a party to contracts with a number of
third parties that have agreed or will agree to perform services in relation to
the issuing entity notes. For example, the issuing entity swap providers have
agreed or will agree to provide their respective swaps, the corporate services
provider has agreed to provide corporate services and the paying agents and the
agent bank have agreed to provide payment and calculation services in connection
with the issuing entity notes. In the event that any of these parties were to
fail to perform their obligations under the respective agreements to which they
are a party, you may be adversely affected.
THE ISSUING ENTITY MAY BE UNABLE TO PAY, IN FULL OR AT ALL, INTEREST DUE ON THE
ISSUING ENTITY NOTES IF THERE IS AN INCOME OR PRINCIPAL DEFICIENCY
If, on any interest payment date, revenue receipts available to Funding
(including the reserve funds) are insufficient to enable Funding to pay interest
on previous term advances, term advances and any new term advances and other
expenses of Funding ranking higher in seniority to interest due on these term
advances, then Funding may use principal receipts on the loans received by it in
the mortgages trust to make up the shortfall.
Funding will use principal receipts that would have been applied to repay
the term advances with the lowest term advance rating to pay interest on those
other term advances and senior expenses described in the preceding paragraph
where there is a shortfall of monies to pay those amounts.
However, it is expected that these principal deficiencies will be
recouped from subsequent excess revenue receipts and amounts standing to the
credit of the first reserve fund.
However, if there are insufficient funds available because of income or
principal deficiencies, this will affect the funds which the issuing entity has
available to make payments on the issuing entity notes of any series or class
(or sub-class) and, as a consequence, you may receive later than anticipated,
and/or you may not receive in full, repayment of the principal amount
outstanding on the issuing entity notes.
For more information on principal deficiencies, see "CREDIT STRUCTURE -
PRINCIPAL DEFICIENCY LEDGER".
THE SELLER SHARE OF THE TRUST PROPERTY DOES NOT PROVIDE CREDIT ENHANCEMENT FOR
THE ISSUING ENTITY NOTES
Any losses from loans included in the trust property will be allocated
proportionately between Funding and the seller on each distribution date
depending on their respective shares of the trust property. The seller's share
of the trust property therefore does not provide credit enhancement for the
Funding share of the trust property or the issuing entity notes.
THE ISSUING ENTITY WILL ONLY HAVE RECOURSE TO THE SELLER IF THERE IS A BREACH OF
WARRANTY OR OTHER OBLIGATION BY THE SELLER, BUT OTHERWISE THE SELLER'S ASSETS
WILL NOT BE AVAILABLE TO THE ISSUING ENTITY AS A SOURCE OF FUNDS TO MAKE
PAYMENTS ON THE ISSUING ENTITY NOTES
After a master intercompany loan enforcement notice under the master
intercompany loan agreement is given (as described in "SECURITY FOR FUNDING'S
OBLIGATIONS"), the security trustee may sell the Funding share of the trust
property. There is no assurance that a buyer would be found or that such a sale
would realise enough money to repay amounts due and payable under the master
intercompany loan agreement.
The issuing entity, Funding and the mortgages trustee will not have any
recourse to the seller of the loans, other than in respect of a breach of
warranty or other obligation under the mortgage sale agreement.
56
The issuing entity, the mortgages trustee, Funding and the security
trustee will not undertake any investigations, searches or other actions on any
loan or its related security and each of them will rely instead on the
warranties given in the mortgage sale agreement by the seller.
If any of the warranties given by the seller is materially untrue on the
date on which a loan is assigned to the mortgages trustee, then the seller may
be required by the mortgages trustee to remedy the breach within 20 days of the
seller becoming aware of the same or of receipt by it of a notice from the
mortgages trustee.
If the seller fails to remedy the breach within 20 days, the mortgages
trustee may require the seller to repurchase the loan or loans under the
relevant mortgage account and their related security together with any arrears
of interest and accrued and unpaid interest and expenses. There can be no
assurance that the seller will have the financial resources to repurchase the
loan or loans under the relevant mortgage account and their related security.
However, if the seller does not repurchase those loans and their related
security when required, then the seller's share of the trust property will be
deemed to be reduced by an amount equal to the principal amount outstanding of
those loans together with any arrears of interest and accrued and unpaid
interest and expenses.
Other than as described here, neither you nor the issuing entity will
have any recourse to the assets of the seller.
THERE CAN BE NO ASSURANCE THAT A BORROWER WILL REPAY PRINCIPAL AT THE END OF THE
TERM ON AN INTEREST ONLY LOAN, WHICH MAY ADVERSELY AFFECT REPAYMENTS ON THE
ISSUING ENTITY NOTES
Each loan in the portfolio is repayable either on a principal repayment
basis or an interest only basis. For interest only loans, because the principal
is repaid in a lump sum at the maturity of the loan, the borrower is recommended
to have some repayment mechanism such as an investment plan in place to help
ensure that funds will be available to repay the principal at the end of the
term. However, the seller does not take security over these repayment
mechanisms. The borrower is also recommended to take out a life insurance policy
in relation to the loan but, as with repayment mechanisms, the seller does not
take security over these life insurance policies.
The ability of a borrower to repay the principal on an interest only loan
at maturity depends on the borrower's responsibility to ensure that sufficient
funds are available from an investment plan or another source, such as ISAs,
pension policies, personal equity plans or endowment policies, as well as the
financial condition of the borrower, tax laws and general economic conditions at
the time. There can be no assurance that the borrower will have the funds
required to repay the principal at the end of the term. If a borrower cannot
repay the loan and a loss occurs on the loan, then this may affect repayments of
principal on the issuing entity notes if that loss cannot be cured by amounts
standing to the credit of the first reserve fund or the application of excess
Funding available revenue receipts. In respect of loans sold to the mortgages
trustee, the relevant prospectus supplement will state the amount of the loans
in the expected portfolio that are interest only loans. See "STATISTICAL
INFORMATION ON THE PORTFOLIO" in Annex A-1 of the relevant prospectus
supplement.
SET-OFF RISKS IN RELATION TO FLEXIBLE LOANS, DELAYED CASHBACKS AND REWARD
CASHBACKS MAY ADVERSELY AFFECT THE FUNDS AVAILABLE TO THE ISSUING ENTITY TO
REPAY THE ISSUING ENTITY NOTES
As described in "- THERE MAY BE RISKS ASSOCIATED WITH THE FACT THAT THE
MORTGAGES TRUSTEE HAS NO LEGAL TITLE TO THE MORTGAGES, WHICH MAY ADVERSELY
AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES", the seller has made, and in the
future may make, an equitable assignment of the mortgages, or in the case of
Scottish mortgages a transfer of the beneficial interest in the Scottish
mortgages, to the mortgages trustee, with legal title being retained by the
seller. Therefore, the rights of the mortgages trustee may be subject to the
direct rights of the borrowers against the seller, including rights of set-off
existing prior to notification to the borrowers of the assignment of the
mortgages. These set-off rights may occur if the seller fails to advance to a
borrower a drawing under a flexible loan when the borrower is entitled to draw
additional amounts under a flexible loan or if the seller fails to pay to a
borrower any delayed cashback or reward cashback which the seller had agreed to
pay to that borrower after completion of the relevant loan.
If the seller fails to advance the drawing or pay the delayed cashback or
reward cashback, then the relevant borrower may set off any damages claim (or
analogous rights in Scotland) arising from the seller's breach of contract
against the seller's (and, as assignee of the mortgages, the mortgages
trustee's) claim for payment of principal and/or interest under the loan as and
when it becomes due. These set-off claims will constitute transaction set-off as
described in the risk factor entitled "INDEPENDENT SET-OFF RISKS WHICH A
57
BORROWER HAS AGAINST THE SELLER MAY ADVERSELY AFFECT THE FUNDS AVAILABLE TO THE
ISSUING ENTITY TO REPAY THE ISSUING ENTITY NOTES".
The amount of the claim in respect of a drawing will, in many cases, be
the cost to the borrower of finding an alternative source of finance (although,
in the case of flexible loan drawing, a delayed cashback or reward cashback in
respect of a Scottish loan, it is possible, though regarded as unlikely, that
the borrower's right of set-off could extend to the whole amount of the
additional drawing). The borrower may obtain a loan elsewhere in which case the
damages would be equal to any difference in the borrowing costs together with
any consequential losses, namely the associated costs of obtaining alternative
funds (for example, legal fees and survey fees). If the borrower is unable to
obtain an alternative loan, he or she may have a claim in respect of other
losses arising from the seller's breach of contract where there are special
circumstances communicated by the borrower to the seller at the time the
mortgage was taken out.
In respect of a delayed cashback or reward cashback, the claim is likely
to be in an amount equal to the amount due under the delayed cashback or reward
cashback together with interest and expenses and consequential losses (if any).
A borrower may also attempt to set off against his or her mortgage
payments an amount greater than the amount of his or her damages claim (or
analogous rights in Scotland). In that case, the servicer will be entitled to
take enforcement proceedings against the borrower, although the period of
non-payment by the borrower is likely to continue until a judgment is obtained.
The exercise of set-off rights by borrowers would reduce the incoming
cashflow to the mortgages trustee during such exercise. However, the amounts set
off will be applied to reduce the seller share of the trust property only.
See also "- IF A SIGNIFICANT NUMBER OF BORROWERS ATTEMPT TO SET OFF
CLAIMS FOR DAMAGES BASED ON CONTRAVENTION OF AN FSA RULE AGAINST THE AMOUNT
OWING BY THE BORROWER UNDER A LOAN, THERE COULD BE A MATERIAL DECREASE IN
RECEIPTS TO THE ISSUING ENTITY FROM THE MORTGAGES TRUST" and "- IF THE ISSUING
ENTITY'S INTERPRETATION OF CERTAIN TECHNICAL RULES UNDER THE CCA WERE HELD TO BE
INCORRECT BY A COURT OR THE OMBUDSMAN OR WAS CHALLENGED BY A SIGNIFICANT NUMBER
OF BORROWERS, OR BORROWERS WERE TO EXERCISE RIGHTS OF SET-OFF TO THE EXTENT
AVAILABLE UNDER THE CCA, THERE COULD BE MATERIAL DISRUPTION TO THE INCOME FLOW
FROM THE MORTGAGES TRUST".
The minimum seller share has been sized in an amount expected to cover
this risk, although there is no assurance that it will. If the minimum seller
share is not sufficient in this respect, then there is a risk that noteholders
may not receive all amounts due on the issuing entity notes.
THERE MAY BE RISKS ASSOCIATED WITH THE FACT THAT THE MORTGAGES TRUSTEE HAS NO
LEGAL TITLE TO THE MORTGAGES, WHICH MAY ADVERSELY AFFECT PAYMENTS ON THE ISSUING
ENTITY NOTES
The sale by the seller to the mortgages trustee of the English mortgages
has taken effect (and any sale of English mortgages in the future will take
effect) in equity only. The sale by the seller to the mortgages trustee of the
Scottish mortgages has taken effect by declarations of trust by the seller (and
any sale of Scottish mortgages in the future will be given effect by further
declarations of trust) by which the beneficial interest in the Scottish
mortgages is transferred to the mortgages trustee. In each case this means that
legal title to the loans in the trust property remains with the seller, but the
mortgages trustee has all the other rights and benefits relating to ownership of
each loan and its related security (which rights and benefits are subject to the
trust in favour of the beneficiaries). The mortgages trustee has the right to
demand that the seller give it legal title to the loans and the related security
in the circumstances described in "ASSIGNMENT OF THE LOANS AND THEIR RELATED
SECURITY - LEGAL ASSIGNMENT OF THE LOANS TO THE MORTGAGES TRUSTEE". Until then
the mortgages trustee will not apply to the Land Registry or the Central Land
Charges Registry to register or record its equitable interest in the English
mortgages, and cannot in any event apply to the Registers of Scotland to
register or record its beneficial interest in the Scottish mortgages. For more
information on the Scottish mortgages see "THE LOANS - SCOTTISH LOANS" and
"MATERIAL LEGAL ASPECTS OF THE LOANS - SCOTTISH LOANS".
Because the mortgages trustee has not obtained legal title to the loans
or their related security, there are risks, as follows:
o firstly, if the seller wrongly sold a loan to another person which
has already been assigned to the mortgages trustee, and that
person acted in good faith and did not have notice of the
interests of the mortgages trustee or the beneficiaries in the
loan, then she or he might obtain good title to the loan, free
from the interests of the mortgages trustee and the beneficiaries.
If this occurred then
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the mortgages trustee would not have good title to the affected
loan and its related security and it would not be entitled to
payments by a borrower in respect of that loan. This may affect
the ability of the issuing entity to repay the issuing entity
notes; and
o secondly, the rights of the mortgages trustee and the
beneficiaries may be subject to the rights of the borrowers
against the seller, such as the rights of set-off (see in
particular "RISK FACTORS - SET-OFF RISKS IN RELATION TO FLEXIBLE
LOANS, DELAYED CASHBACKS AND REWARD CASHBACKS MAY ADVERSELY AFFECT
THE FUNDS AVAILABLE TO THE ISSUING ENTITY TO REPAY THE ISSUING
ENTITY NOTES") which occur in relation to transactions or deposits
made between some borrowers and the seller and the rights of
borrowers to redeem their mortgages by repaying the loan directly
to the seller. If these rights were exercised, the mortgages
trustee may receive less money than anticipated from the loans,
which may affect the ability of the issuing entity to repay the
issuing entity notes.
However, if a borrower exercises any set-off rights, then an amount equal
to the amount set off will reduce the total amount of the seller share of the
trust property only, and the minimum seller share has been sized in an amount
expected to cover this risk (although there is no assurance that it will).
INDEPENDENT SET-OFF RISKS WHICH A BORROWER HAS AGAINST THE SELLER MAY ADVERSELY
AFFECT THE FUNDS AVAILABLE TO THE ISSUING ENTITY TO REPAY THE ISSUING ENTITY
NOTES
Once notice has been given to borrowers of the transfer of the loans and
their related security to the mortgages trustee, independent set-off rights
which a borrower has against the seller will crystallise and further rights of
independent set-off would cease to accrue from that date and no new rights of
independent set-off could be asserted following that notice. Set-off rights
arising under transaction set-off (which are set-off claims arising out of a
transaction connected with the loan (for example, a savings account maintained
by a borrower pursuant to the terms of a flexible plus loan)) will not be
affected by that notice.
IF THE SERVICER IS REMOVED, THERE IS NO GUARANTEE THAT A SUBSTITUTE SERVICER
WOULD BE FOUND, WHICH COULD DELAY COLLECTION OF PAYMENTS ON THE LOANS AND
ULTIMATELY COULD ADVERSELY AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES
The seller has been appointed by the mortgages trustee and the
beneficiaries as servicer to service the loans. If the servicer breaches the
terms of the servicing agreement, then the mortgages trustee and the
beneficiaries will be entitled to terminate the appointment of the servicer and
appoint a new servicer in its place.
There can be no assurance that a substitute servicer would be found who
would be willing and able to service the loans on the terms of the servicing
agreement. The ability of a substitute servicer fully to perform the required
services would depend, among other things, on the information, software and
records available at the time of the appointment. Any delay or inability to
appoint a substitute servicer may affect payments on the loans and hence the
issuing entity's ability to make payments when due on the issuing entity notes.
You should note that the servicer has no obligation itself to advance
payments that borrowers fail to make in a timely fashion.
Neither the security trustee nor the note trustee is obliged in any
circumstances to act as a servicer or to monitor the performance by the servicer
of its obligations.
FUNDING MAY NOT RECEIVE THE BENEFIT OF ANY CLAIMS MADE ON THE BUILDINGS
INSURANCE WHICH COULD ADVERSELY AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES
The practice of the seller in relation to buildings insurance is
described under "THE LOANS - INSURANCE POLICIES". As described in that section,
no assurance can be given that Funding will always receive the benefit of any
claims made under any applicable insurance contracts. This could reduce the
principal receipts received by Funding according to the Funding share percentage
and could adversely affect the issuing entity's ability to redeem the issuing
entity notes. You should note that buildings insurance is renewed annually.
FAILURE BY THE SELLER OR THE SERVICER TO HOLD RELEVANT AUTHORISATIONS AND
PERMISSION UNDER FMSA IN RELATION TO REGULATED MORTGAGE CONTRACTS MAY HAVE AN
ADVERSE EFFECT ON ENFORCEMENT OF MORTGAGE CONTRACTS
In the United Kingdom, regulation of residential mortgage business by the
FSA under the Financial Services and Markets Act 2000 (FSMA) came into force on
31 October 2004, the date known as N(M). Entering into, arranging or advising in
respect of, and administering, regulated mortgage contracts, and agreeing to do
any of these things, are (subject to certain exemptions) regulated activities
under FSMA.
59
A regulated mortgage contract under FSMA is one where, at the time it is
entered into on or after N(M): (i) the borrower is an individual or trustee;
(ii) the contract provides for the obligation of the borrower to repay to be
secured by a first legal mortgage or, in Scotland, a first-ranking standard
security on land (other than timeshare accommodation) in the United Kingdom; and
(iii) at least 40 per cent. of that land is used, or is intended to be used, as
or in connection with a 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. No person may carry on a regulated activity in the United
Kingdom unless that person is an authorised person. Breach of this prohibition
is a criminal offence.
The main effects are that, on or after N(M), unless an exclusion or
exemption applies: (a) each entity carrying on a regulated mortgage activity by
way of business has to hold authorisation and permission from the FSA to carry
on that activity; and (b) generally, each financial promotion in respect of an
agreement relating to qualifying credit has to be issued or approved by a person
holding authorisation and permission from the FSA. 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.
An unauthorised person who administers a regulated mortgage contract entered
into on or after N(M) may commit a criminal offence, but this will not render
the contract unenforceable against the borrower.
Any credit agreement intended to be a regulated mortgage contract under
FSMA might instead be wholly or partly regulated by the Consumer Credit Act 1974
(CCA) or treated as such or unregulated by the CCA, and any credit agreement
intended to be regulated by the CCA or unregulated by the CCA might instead be a
regulated mortgage contract under FSMA, because of technical rules on: (a)
determining whether the credit agreement or any part of it falls within the
definition of "REGULATED MORTGAGE CONTRACT"; and (b) changes to credit
agreements.
The seller is required to hold, and holds, authorisation and permission
to enter into and to administer and, where applicable, to advise in respect of
regulated mortgage contracts. Subject to any exemption, brokers will be required
to hold authorisation and permission to arrange and, where applicable, to advise
in respect of regulated mortgage contracts.
The issuing entity and the mortgages trustee are not and do not propose
to be authorised persons under FSMA. The issuing entity and the mortgages
trustee do not require authorisation in order to acquire legal or beneficial
title to a regulated mortgage contract. The issuing entity and the mortgages
trustee do not carry on the regulated activity of administering in relation to
regulated mortgage contracts by having them administered pursuant to an
administration agreement by an entity having the required FSA authorisation and
permission. If such administration agreement terminates, however, the issuing
entity and the mortgages trustee will have a period of not more than one month
in which to arrange for mortgage administration to be carried out by a
replacement administrator having the required FSA authorisation and permission.
In addition, on and after N(M) no variation has been or will be made to the
loans and no further advance or product switch has been or will be made in
relation to a loan, where it would result in the issuing entity, Funding or the
mortgages trustee arranging or advising in respect of, administering or entering
into a regulated mortgage contract or agreeing to carry on any of these
activities, if the issuing entity, Funding or the mortgages trustee would be
required to be authorised under FSMA to do so.
IF A SIGNIFICANT NUMBER OF BORROWERS ATTEMPT TO SET OFF CLAIMS FOR DAMAGE BASED
ON CONTRAVENTION OF AN FSA RULE AGAINST THE AMOUNT OWING BY THE BORROWER UNDER A
LOAN, THERE COULD BE A MATERIAL DECREASE IN RECEIPTS TO THE ISSUING ENTITY FROM
THE MORTGAGES TRUST
The FSA Mortgages and Home Finance: Conduct of Business Sourcebook
(MCOB), sets out its rules for firms that carry on home finance activities which
applies to regulated mortgage contracts, home purchase plans and home reversion
plans. These rules cover, among other things, certain pre-origination matters
such as financial promotion and pre-application illustrations, pre-contract and
start-of-contract and post-contract disclosure, contract changes, charges, and
arrears and repossessions. FSA rules for prudential and authorisation
requirements for mortgage firms and for extending the appointed representatives
regime to mortgages, came into force on 31 October 2004.
A borrower who is a private person is entitled to claim damages for loss
suffered as a result of any contravention by an authorised person of an FSA
rule, and may set off the amount of the claim against the amount owing by the
borrower under a loan or any other loan that the borrower has taken (or exercise
analogous rights in Scotland). Any such set-off may adversely affect the issuing
entity's ability to make payments on the issuing entity notes.
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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)
and constitutes a regulated mortgage contract. In November 2007, HM Treasury and
the Department for Business, Enterprise and Regulatory Reform (DBERR), formerly
the Department of Trade and Industry, published a joint consultation on
additional clarification on the question of dual regulation. A court order under
section 126 of the CCA is, however, necessary to enforce a land mortgage
(including, in Scotland, a standard security) securing a regulated mortgage
contract to the extent that it would, apart from this exemption, be regulated by
the CCA or be treated as such.
No assurance can be given that additional regulatory changes by the OFT,
the FSA or any other regulatory authority will not arise with regard to the
mortgage market in the United Kingdom generally, the seller's particular sector
in that market or specifically in relation to the seller. Any such action or
developments or compliance costs may have a material adverse effect on the
seller, the issuing entity, the servicer, the mortgages trustee, Funding and
their respective businesses and operations. This may adversely affect the
issuing entity's ability to make payments in full on the issuing entity notes
when due.
The seller has given or, as applicable, will give warranties to the
mortgages trustee in the mortgage sale agreement that, among other things, each
loan and its related security is enforceable (subject to certain exceptions). If
a loan or its related security does not comply with these warranties, and if the
default (if capable of being cured) cannot be or is not cured within 20 London
business days, then the seller, upon receipt of notice from the mortgages
trustee, will be required to repurchase the loan and its related security from
the mortgages trustee.
IF THE ISSUING ENTITY'S INTERPRETATION OF CERTAIN TECHNICAL RULES UNDER THE CCA
WERE HELD TO BE INCORRECT BY A COURT OR THE OMBUDSMAN OR WAS CHALLENGED BY A
SIGNIFICANT NUMBER OF BORROWERS, OR BORROWERS WERE TO EXERCISE RIGHTS OF SET-OFF
TO THE EXTENT AVAILABLE UNDER THE CCA, THERE COULD BE MATERIAL DISRUPTION TO THE
INCOME FLOW FROM THE MORTGAGES TRUST
In the United Kingdom, the Office of Fair Trading (the OFT) is
responsible for the issue of licences under, and the superintendence of the
working and the enforcement of, the CCA, related consumer credit regulations and
other consumer protection legislation. The OFT may review businesses and
operations, provide guidelines to follow and take actions when necessary with
regard to the consumer credit and mortgage markets in the United Kingdom. If the
OFT considers that a licence-holder is no longer fit to hold its licence, the
OFT may commence formal proceedings for the revocation of the licence. In the
event of such revocation the former licence-holder would no longer be permitted
to carry on activities licensable under the CCA.
A credit agreement is regulated by the CCA where: (a) the borrower is or
includes an "INDIVIDUAL" (as defined in the CCA); (b) if the credit agreement is
made before the financial limit, as described below is removed the amount of
"credit" as defined in the CCA does not exceed the financial limit, which is
(pound)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 as defined in the CCA.
Any credit agreement that is wholly or partly regulated by the CCA or
treated as such has to comply with the 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 is unenforceable against the
borrower: (a) without an order of the OFT, if the lender or any broker does not
hold the required licence at the relevant time; (b) totally, if the credit
agreement is made before 6 April 2007 and if the form to be signed by the
borrower is not signed by the borrower personally or omits or mis-states 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 by the
lender.
There is a risk that any credit agreement intended to be a regulated
mortgage contract under FSMA or unregulated under FSMA might instead be wholly
or partly regulated by the CCA or treated as such because of technical rules on:
(a) determining whether any credit under the CCA arises, or (where applicable)
whether the financial limit of the CCA is exceeded; (b) determining whether the
credit agreement is an exempt agreement under the CCA; and (c) changes to credit
agreements.
A court order under section 126 of the CCA is necessary to enforce a land
mortgage (including, in Scotland, a standard security) securing a credit
agreement to the extent that the credit agreement is
61
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;
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 the claim against the lender
against the amount owing by the borrower under the loan or under any other loan
that the borrower has taken. Any such set-off may adversely affect the issuing
entity's ability to make payments in full on the issuing entity notes when due.
The Consumer Credit Act 2006 (the CCA 2006) received the Royal Assent on
30 March 2006. As and when implemented, the CCA 2006 updates and augments the
CCA.
The "EXTORTIONATE CREDIT" regime has been replaced by the "UNFAIR
RELATIONSHIP" test. The new test applies to credit agreements made on or after 6
April 2007, and will apply retrospectively to existing credit agreements on and
after 6 April 2008. The new test explicitly imposes liability on the originator
(and any assignee) to repay the borrower. In applying the new unfair
relationship test, the courts will be able to consider a wider range of
circumstances surrounding the transaction, including the creditor's conduct
before and after making the agreement. There is no statutory definition of the
word "UNFAIR" as the intention is for the test to be flexible and subject to
judicial discretion. However the word "UNFAIR" is not an unfamiliar term in
United Kingdom law due to the Unfair Contract Terms Act 1977 and the Unfair
Terms in Consumer Contracts Regulations 1999 (SI 1999/2083). The courts may, but
are not obliged to, look solely to the CCA 2006 for guidance. The FSA principles
may also be relevant and apply to the way contract terms are used in practice
and not just the way they are drafted. Once the debtor alleges that an unfair
relationship exists, the burden of proof is on the creditor to prove the
contrary.
An alternative dispute resolution scheme for consumer credit matters is
to be run by the Ombudsman. The scheme is mandatory for all businesses licensed
under the CCA. The CCA 2006 also introduces an Independent Consumer Appeals
Tribunal.
The financial limit of (pound)25,000 for CCA regulation for credit
agreements is expected to be removed for credit agreements made on or after 6
April 2008, except in relation to businesses and high net worth individuals;
credit agreements in respect of buy-to-let loans are, subject to consultation,
intended to be effectively excluded from CCA regulation.
The OFT is given far broader powers under the CCA 2006: for instance they
can apply civil penalties, have far greater powers of investigation and can
issue indefinite standard licences. The CCA 2006 obliges creditors to comply
with more stringent information requirements. From 1 October 2008, lenders will
be obliged to give customers clearer and more regular information on their
credit accounts.
The seller has 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 the Ombudsman, then a credit agreement,
to the 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 mortgages trustee. 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.
The seller has given or, as applicable, will give warranties to the
mortgages trustee in the mortgage sale agreement that, among other things, each
loan and its related security is enforceable (subject to certain exceptions). If
a loan or its related security does not comply with these warranties, and if the
default cannot be or is not cured within 20 days, then the seller will be
required to repurchase the loans under the relevant mortgage account and their
related security from the mortgages trustee.
UNDER DISTANCE MARKETING REGULATIONS, SOME OF THE LOANS MAY BE CANCELLABLE,
WHICH MAY HAVE AN ADVERSE EFFECT ON THE ISSUING ENTITY'S ABILITY TO MAKE
PAYMENTS ON THE ISSUING ENTITY NOTES
In the United Kingdom, the Financial Services (Distance Marketing)
Regulations 2004 apply, among other things, to 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 originator and the borrower).
A regulated mortgage contract under FSMA, if originated by a UK lender from an
establishment in
62
the United Kingdom, will not be cancellable under these regulations. Certain
other credit agreements will 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, the borrower may
send notice of cancellation at any time before the end of the 14th day after the
day on which the cancellable agreement is made, where all the prescribed
information has been received, or, if later, the borrower receives the last of
the prescribed information.
If the borrower cancels the credit agreement under these regulations,
then: (a) the borrower is liable to repay the principal and any other sums paid
by the originator 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 originator receiving notice of cancellation;
(b) 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 (c) any security is to be treated as never having had
effect for the cancelled agreement.
REGULATIONS IN THE UNITED KINGDOM COULD LEAD TO SOME TERMS OF THE LOANS BEING
UNENFORCEABLE, WHICH MAY ADVERSELY AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES
In the United Kingdom, the Unfair Terms in Consumer Contracts Regulations
1999, as amended (the 1999 REGULATIONS) and (in so far as applicable) the Unfair
Terms in Consumer Contracts Regulations 1994 (together with the 1999
Regulations, the UTCCR) apply to agreements entered into on or after 1 July 1995
and affect all of the loans. The Regulations provide that:
o a consumer may challenge a standard term in an agreement on the
basis that it is an "UNFAIR" term within the UTCCR and therefore
not binding on the consumer; and
o 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 from using or recommending the use of unfair
terms.
The UTCCR will not generally affect "CORE TERMS" which set out the main
subject-matter of the contract, such as the borrower's obligation to repay the
principal. However, they may affect terms that are not considered to be core
terms, such as the right of the lender to vary the interest rate.
For example, if a term permitting a lender to vary the interest rate (as
the seller is permitted to do) is found to be unfair, the borrower will not be
liable to pay the increased rate or, to the extent that she or he has paid it,
will be able, as against the lender, or any assignee such as the mortgages
trustee, to claim repayment of the extra interest amounts paid or to set-off the
amount of the claim against the amount owing by the borrower under the loan or
under any other loan that the borrower has taken. Any such non-recovery, claim
or set-off may adversely affect the issuing entity's ability to make payments on
the issuing entity notes.
Under concordats agreed between the FSA and the OFT, responsibility for
the enforcement of the UTCCR in mortgage agreements was agreed to be allocated
by them, normally, to the FSA in relation to regulated mortgage contracts (in
respect of the activities of firms authorised by the FSA) and to the OFT in
relation to other mortgage contracts. It should be noted that in the context of
the OFT's investigation into credit card default charges, 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 should apply (or are
likely to apply) to analogous default charges in other agreements, including
those for mortgages. In May 2005, the FSA issued a statement of good practice on
fairness of terms in consumer contracts, which is relevant to firms authorised
and regulated by the FSA in relation to products and services within the FSA's
regulatory scope. This statement considers, among other things, borrowers who
are locked in, for example by an early repayment charge that is considered to be
a penalty. This statement provides that, for locked-in borrowers, a firm may
consider drafting the contract to permit a change in the contract to be made
only where any lock-in clause is not exercised. In January 2007, the FSA issued
a statement of good practice on mortgage exit administration fees, which
provides that the lender should ensure that the fee represents in fact the cost
of the lender's administration services on the borrower's exit.
In July 2007, the FSA published the Unfair Contract Terms Regulatory
Guide which is designed to explain the FSA's policy on how it will use its
powers under the 1999 Regulations.
In August 2002, the Law Commission for England and Wales and the Scottish
Law Commission issued a joint consultation LCCP No. 166/SLCDP 119 on proposals
to rationalise the Unfair Contract Terms Act 1977 and the 1999 Regulations into
a single piece of legislation and 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
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"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 or a
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 tell how the proposals, if enacted, would affect the loans.
No assurance can be given that changes in the 1999 Regulations, if
enacted, or changes to guidance on interest variation terms, if adopted, will
not have a material adverse effect on the seller, the issuing entity, the
mortgages trustee, Funding and their respective businesses and operations. This
may adversely affect the issuing entity's ability to make payments in full on
the issuing entity notes when due.
DECISIONS OF THE OMBUDSMAN COULD LEAD TO SOME TERMS OF THE LOANS BEING VARIED,
WHICH MAY ADVERSELY AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES
Under FSMA, the Financial Ombudsman Service (the OMBUDSMAN) is required
to make decisions on, among other things, complaints relating to activities and
transactions under its jurisdiction, including the loans, on the basis of what,
in the Ombudsman's opinion, would be fair and reasonable in all circumstances of
the case, taking into account, among other things, law and guidance. By
transitional provisions, the Ombudsman is also required to deal with certain
complaints relating to breach of the Mortgage Code, which was a voluntary code
issued by the Council of Mortgage Lenders and in force until N(M). 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
is first 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.
No Ombudsman decision against the seller has had a material adverse
effect on the issuing entity's ability to make payments on the issuing entity
notes. As, however, the Ombudsman is required to make decisions on the basis of,
among other things, the principles of fairness, and may make a money award to
the borrower, it is not possible to predict how any future decision of the
Ombudsman would affect the issuing entity's ability to make payments in full on
the issuing entity notes when due.
PROPOSED EUROPEAN DIRECTIVE ON CONSUMER CREDIT AND MORTGAGE CREDIT MAY ADVERSELY
AFFECT THE LOANS AND PAYMENTS ON THE ISSUING ENTITY NOTES AS AND WHEN
IMPLEMENTED
A proposed consumer credit Directive which completed its second reading
in the European Parliament in January 2008, provides that (subject to certain
conditions) loans not exceeding Euro 75,000 will be regulated, but loans secured
by a land mortgage will be excluded from the proposed Directive. As and when
adopted, member states will have two years in which to bring national
implementing legislation into force. In December 2007, the European Commission
published a White Paper on mortgage credit setting out its view that it is too
early to decide on whether a Directive regulating mortgage credit would be
appropriate.
THE UNFAIR COMMERCIAL PRACTICES DIRECTIVE MAY ADVERSELY AFFECT THE LOANS AND
PAYMENTS ON THE ISSUING ENTITY NOTES AS AND WHEN IMPLEMENTED
On 11 May 2005 the European Parliament and the Council adopted a
Directive (2005/29/EC) regarding unfair business-to-consumer commercial
practices (the UNFAIR PRACTICES DIRECTIVE). Generally, this Directive applies
full harmonisation, which means that member states may not impose more stringent
provisions in the fields to which full harmonisation applies. By way of
exception, this Directive permits member states to impose more stringent
provisions in the fields of financial services and immovable property, such as
mortgage loans.
The Unfair Practices Directive provides that enforcement bodies may take
administrative action or legal proceedings in relation to a commercial practice
on the basis that it is "unfair" within the Directive. This Directive is
intended to protect only collective interests of consumers, and so is not
intended to give any claim, defence or right of set-off to an individual
consumer.
The DBERR published a consultation paper on implementing the Unfair
Practices Directive into United Kingdom law on 14 December 2005. Member states
had until 12 December 2007 to bring national implementing legislation into
force, subject to a transitional period until 12 June 2013 for applying full
harmonisation in the fields to which it applies. Notwithstanding the required
implementation date, the Unfair Practices Directive is expected to be
implemented in the United Kingdom in mid-2008. It is too early to predict what
effect the implementation of the Unfair Practices Directive would have on the
loans.
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TAX PAYABLE BY FUNDING OR THE ISSUING ENTITY MAY ADVERSELY AFFECT THE ISSUING
ENTITY'S ABILITY TO MAKE PAYMENTS ON THE ISSUING ENTITY NOTES
Funding and the issuing entity will generally be subject to United
Kingdom corporation tax, currently at a rate of 30 per cent., on the profit
reflected in their respective applicable profit and loss accounts as increased
by the amount of any non-deductible expenses or losses. If the tax payable by
Funding or the issuing entity is greater than expected because, for example,
non-deductible expenses or losses are greater than expected, the funds available
to make payments on the issuing entity notes will be reduced and this may
adversely affect the issuing entity's ability to make payments on the issuing
entity notes.
The UK corporation tax position of the issuing entity and Funding,
however, also depends to a significant extent on the accounting treatment
applicable to it. The accounts of the issuing entity are required to comply with
new UK Financial Reporting Standards reflecting International Financial
Reporting Standards (NEW UK GAAP), and they may be required to comply with
International Financial Reporting Standards (IFRS) if the issuing entity chooses
to adopt IFRS. Funding may also choose to comply with IFRS. There is a concern
that companies such as the issuing entity and Funding might, under either IFRS
or new UK GAAP, suffer timing differences that could result in profits or losses
for accounting purposes, and accordingly for tax purposes (unless tax
legislation provides otherwise), which bear little or no relationship to the
company's cash position. However, the Finance Act 2005 (as amended by the
Finance Act 2006) established an interim regime under which a "SECURITISATION
COMPANY" is required to prepare tax computations for accounting periods
beginning on or after 1 January 2005 and ending before 1 January 2008 on the
basis of UK GAAP as applicable up to 31 December 2004, notwithstanding the
requirement to prepare statutory accounts under IFRS or new UK GAAP. On the
basis of the definition of "SECURITISATION COMPANY" as currently drafted for
these purposes, the issuing entity and Funding will each qualify as such a
company.
The stated policy of H.M. Revenue & Customs is that the tax neutrality of
securitisation special purpose companies in general should not be disrupted as a
result of the transition to IFRS or new UK GAAP. The Finance Act 2005 enables
regulations to be made to establish a permanent regime for the taxation of such
companies, and regulations were made pursuant to this on 11 December 2006. Under
the regulations, the interim regime described above is replaced for periods of
account beginning on or after 1 January 2007 by a permanent regime of specific
rules for securitisation companies (as defined for the purposes of the
regulations), which will, broadly, be taxed by reference to their "RETAINED
PROFIT". Companies, such as the issuing entity and Funding, that previously fell
within the interim regime and which qualify for the permanent regime are
required under the regulations to elect irrevocably into the permanent regime
within 18 months of the end of the company's first accounting period beginning
after 31 December 2006. It is expected that the issuing entity and Funding
should each qualify as a securitisation company for the purposes of the
regulations, and also that they will elect into the permanent regime in
accordance with the regulations. But if they do not, or cease to qualify, then
profits or issues could arise in Funding and/or the issuing entity which could
have tax effects not contemplated in the cashflows for the transactions
described in this prospectus and as such adversely effect the tax treatment of
Funding and/or the issuing entity and consequently payment on the notes.
EUROPEAN COUNCIL DIRECTIVE 2003/48/EC ON THE TAXATION OF SAVINGS INCOME MAY
ADVERSELY AFFECT YOUR INTERESTS
Under European Council Directive (2003/48/EC) regarding the taxation of
savings income, member states are required to provide to the tax authorities of
other member states details of payments of, interest and other similar income
paid by a person within a member state's jurisdiction to an individual in
another member state, except that Austria, Belgium and Luxembourg will instead
impose a withholding system for a transitional period, unless during such period
they elect otherwise (the ending of such transitional period being dependent
upon the conclusion of certain other agreements relating to information exchange
with certain other countries). A number of non-EU countries and territories,
including Switzerland, have agreed to adopt similar measures (a withholding
system in the case of Switzerland).
Payments of interest on the issuing entity notes which are made or
collected through a member state or any other relevant country may be subject to
withholding tax which would prevent holders of the issuing entity notes from
receiving interest on their issuing entity notes in full.
YOUR INTERESTS MAY BE ADVERSELY AFFECTED IF THE UNITED KINGDOM JOINS THE
EUROPEAN MONETARY UNION
It is possible that, prior to the maturity of the issuing entity notes,
the United Kingdom may become a participating member state in the European
economic and monetary union and the euro may become the lawful currency of the
United Kingdom. In that event (a) all amounts payable in respect of the issuing
entity notes denominated in pounds sterling may become payable in euro, (b)
applicable provisions of law may require or allow the issuing entity to
redenominate such issuing entity notes into euro and take additional measures in
respect of such issuing entity notes and (c) 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 such issuing entity notes or changes in the way those rates
are
65
calculated, quoted and published or displayed. The introduction of the euro
could also be accompanied by a volatile interest rate environment which could
adversely affect investors. It cannot be said with certainty what effect, if
any, adoption of the euro by the United Kingdom will have on investors in the
issuing entity notes.
CHANGES OF LAW MAY ADVERSELY AFFECT YOUR INTERESTS
The transactions described in this prospectus (including the issue of the
notes) and the ratings which are to be assigned to the notes are based on the
relevant law and administrative practice in effect as at the date hereof, and
having regard to the expected tax treatment of all relevant entities under such
law and practice. No assurance can be given as to the impact of any possible
change to the law (including any change in regulation which may occur without a
change in primary legislation), administrative practice or tax treatment after
the date of this document nor can any assurance be given as to whether any such
change would adversely affect the ability of the Issuer to make payments under
the notes.
INSOLVENCY ACT 2000
Significant changes to the insolvency regime in England and Wales and
Scotland have recently been enacted, including the Insolvency Act 2000. The
Insolvency Act 2000 allows certain "SMALL" companies to seek protection from
their creditors for a period of 28 days, for the purposes of putting together a
company voluntary arrangement, with the option for creditors to extend the
moratorium for a further two months. A "SMALL" company is defined as one which
satisfies, in any financial year, two or more of the following criteria: (i) its
turnover is not more than (pound)5.6 million, (ii) its balance sheet total is
not more than (pound)2.8 million and (iii) the number of employees is not more
than 50. Whether or not a company is a "SMALL" company may change from period to
period and consequently no assurance can be given that the issuing entity, the
mortgages trustee or Funding will not, at any given time, be determined to be a
"SMALL" company. The Secretary of State for Trade and Industry may by regulation
modify the eligibility requirements for "SMALL" companies and has the power to
make different provisions for different cases. No assurance can be given that
any such modification or different provisions will not be detrimental to the
interests of noteholders.
Secondary legislation has now been enacted which excludes certain special
purpose companies in relation to capital markets transactions from the optional
moratorium provisions. Such exceptions include (amongst other matters): (i) a
company which is a party to an agreement which is or forms part of a capital
market arrangement (as defined in the secondary legislation) under which (a) a
party has incurred or when the agreement was entered into was expected to incur
a debt of at least (pound)10 million under the arrangement and (b) the
arrangement involves the issue of a capital market investment (also defined, but
generally, a rated, listed or traded bond) and (ii) a company which has incurred
a liability (including a present, future or contingent liability) of at least
(pound)10 million. While the issuing entity, the mortgages trustee and Funding
should fall within the exceptions, there is no guidance as to how the
legislation will be interpreted by a court and the Secretary of State for Trade
and Industry may by regulation modify the exception. No assurance may be given
that any modification of the eligibility requirements for "SMALL" companies
and/or the exceptions will not be detrimental to the interests of noteholders.
If the issuing entity and/or the mortgages trustee and/or Funding is
determined to be a "SMALL" company and determined not to fall within one of the
exceptions (by reason of modification of the exceptions or otherwise), then the
enforcement of the issuing entity security by the security trustee may, for a
period, be prohibited by the imposition of a moratorium.
ENTERPRISE ACT 2002
On 15 September 2003, the corporate insolvency provisions of the
Enterprise Act 2002 (the ENTERPRISE ACT) came into force, amending certain
provisions of the Insolvency Act 1986 as amended (the INSOLVENCY ACT). These
provisions introduced significant reforms to corporate insolvency law. In
particular the reforms restrict the right of the holder of a floating charge
created after 15 September 2003 to appoint an administrative receiver (unless an
exception applies) and instead gives primacy to collective insolvency procedures
(in particular, administration).
The holder of a floating charge created before 15 September 2003 over the
whole or substantially the whole of the assets of a company (such as the
security trustee under the Funding deed of charge) retains the ability to block
the appointment of an administrator by appointing an administrative receiver,
who has a duty to act primarily in the interests of the floating charge holder.
The Insolvency Act contains provisions which continue to allow for the
appointment of an administrative receiver in relation to certain transactions in
the capital markets. The right to appoint an administrative receiver is retained
for certain types of security (such as the issuing entity security) that form
part of a capital markets arrangement (as defined in the Insolvency Act) that
involves (i) indebtedness of at least (pound)50,000,000 (or, when the relevant
security document was entered into (being in respect of the transactions
described in this prospectus, the issuing entity deed of charge), a party to the
relevant transaction (such as the issuing entity) was expected to incur a debt
of at least (pound)50,000,000) and (ii) the issue of a capital markets
investment (also defined but generally a rated, listed or traded bond). The
Secretary of State for Trade and Industry may, by secondary legislation, modify
this exception and/or provide that the exception shall cease to have effect. No
assurance can be given that any such modification or provision in respect of the
capital market exception, or its ceasing to be applicable to the transactions
described in this prospectus, will not adversely affect payments on the issuing
entity notes. While the issuing entity security should fall within the relevant
66
exception, as the provisions of the Enterprise Act have never been considered
judicially, no assurance can be given as to whether the Enterprise Act could
have a detrimental effect on the transactions described in this prospectus or on
the interests of noteholders.
The Insolvency Act also contains a new out-of-court route into
administration for a qualifying floating charge holder, the directors or the
company itself. The relevant provisions provide for a notice period during which
the holder of the floating charge can either agree to the administrator proposed
by the directors of the company or appoint an alternative administrator,
although the moratorium will take effect immediately after notice is given. If
the qualifying floating charge holder does not respond to the directors' notice
of intention to appoint, the directors', or as the case may be, the company's
appointee will automatically take office after the notice period has elapsed.
Where the holder of a qualifying floating charge within the context of a capital
market transaction retains the power to appoint an administrative receiver, such
holder may prevent the appointment of an administrator (either by the new
out-of-court route or by the court based procedure), by appointing an
administrative receiver prior to the appointment of the administrator being
completed.
The new provisions of the Insolvency Act give primary emphasis to the
rescue of the company as a going concern. The purpose of realising property to
make a distribution to one or more secured creditors is subordinated to the
primary purposes of rescuing the company as a going concern or achieving a
better result for the creditors as a whole than would be likely if the company
were wound up. No assurance can be given that the primary purposes of the new
provisions will not conflict with the interests of noteholders were the issuing
entity or Funding ever subject to administration.
In addition to the introduction of a prohibition on the appointment of an
administrative receiver as set out above, section 176A of the Insolvency Act
provides that in relation to floating charges created after 15 September 2003
any receiver (including an administrative receiver), liquidator or administrator
of a company is required to make a "PRESCRIBED PART" of the company's "NET
PROPERTY" available for the satisfaction of unsecured debts in priority to the
claims of the floating charge holder. The company's "NET PROPERTY" is defined as
the amount of the chargor's property which would be available for satisfaction
of debts due to the holder(s) of any debentures secured by a floating charge and
so refers to any floating charge realisations less any amounts payable to the
preferential creditors or in respect of the fees or expenses of administration.
The "PRESCRIBED PART" is defined in the Insolvency Act 1986 (Prescribed Part)
Order 2003 (SI 2003/2097) to be an amount equal to 50 per cent. of the first
(pound)10,000 of floating charge realisations plus 20 per cent. of the floating
charge realisations thereafter, provided that such amount may not exceed
(pound)600,000.
This obligation does not apply if the net property is less than a
prescribed minimum and the relevant officeholder is of the view that the cost of
making a distribution to unsecured creditors would be disproportionate to the
benefits. The relevant officeholder may also apply to court for an order that
the provisions of section 176A of the Insolvency Act should not apply on the
basis that the cost of making a distribution would be disproportionate to the
benefits.
Floating charge realisations upon the enforcement of the issuing entity
security may be reduced by the operation of the "RING FENCING" provisions
described above.
YOU WILL NOT RECEIVE ISSUING ENTITY NOTES IN PHYSICAL FORM, WHICH MAY CAUSE
DELAYS IN DISTRIBUTIONS AND HAMPER YOUR ABILITY TO PLEDGE OR RESELL THE ISSUING
ENTITY NOTES
Unless the global notes are exchanged for definitive notes, which will
only occur under a limited set of circumstances, your beneficial ownership of
the issuing entity notes will only be recorded in book-entry form with DTC,
Euroclear or Clearstream, Luxembourg. The lack of issuing entity notes in
physical form could, among other things:
o result in payment delays on the issuing entity notes because the
issuing entity will be sending distributions on the issuing entity
notes to DTC, Euroclear or Clearstream, Luxembourg instead of
directly to you;
o make it difficult for you to pledge the issuing entity notes if
issuing entity notes in physical form are required by the party
demanding the pledge; and
o hinder your ability to resell the issuing entity notes because
some investors may be unwilling to buy issuing entity notes that
are not in physical form.
IF YOU HAVE A CLAIM AGAINST THE ISSUING ENTITY IT MAY BE NECESSARY FOR YOU TO
BRING SUIT AGAINST THE ISSUING ENTITY IN ENGLAND AND WALES TO ENFORCE YOUR
RIGHTS
The issuing entity has agreed to submit to the non-exclusive jurisdiction
of the courts of England and Wales, and it may be necessary for you to bring a
suit in England and Wales to enforce your rights against the issuing entity.
67
IMPLEMENTATION OF THE BASEL II RISK-WEIGHTED ASSET FRAMEWORK MAY RESULT IN
CHANGES TO THE RISK-WEIGHTING OF THE ISSUING ENTITY NOTES
Following the issue of proposals from the Basel Committee on Banking
Supervision for reform of the 1988 Capital Accord, a framework has been
developed which places enhanced emphasis on market discipline and sensitivity to
risk. A comprehensive version of the text of the proposed framework was
published in June 2006 under the title "INTERNATIONAL CONVERGENCE OF CAPITAL
MEASUREMENT AND CAPITAL STANDARDS: A REVISED FRAMEWORK (COMPREHENSIVE VERSION)"
(the FRAMEWORK). The Framework is being implemented in stages: the Basel II
standard approach and the Foundation IRB approach for credit risk was
implemented from 1 January 2007 and the most advanced Basel II IRB approach and
the advanced measurement approached (AMA) for operational risks was introduced
from 1 January 2008. However, the Framework is not self-implementing and,
accordingly, implementation dates in participating countries are dependent on
the relevant national implementation process in those countries. In the UK
Basel II and the EU Capital Requirements Directive have been implemented through
the Prudential Sourcebook for Banks, Building Societies and Investment Firms
(BIPRU) and the Capital Requirements Regulations 2006 SI 2006/3221, although the
most advanced approaches referred to above were only available from 1 January
2008. As and when implemented, the Framework could affect risk-weighting of the
notes for investors who are subject to capital adequacy requirements that follow
the Framework. Consequently, investors should consult their own advisers as to
the consequences to and effect on them of the application of the Framework and
any relevant implementing measures (including in the EEA, the EU Capital
Requirements Directive). Proposals and guidelines for implementing the Framework
in certain participating jurisdictions are still in development and no
predictions can be made as to the precise effects of potential changes to the
notes, the issuing entity, any investor or otherwise.
In the United States, the federal banking regulators have proposed to
require about the 20 largest US banking organisations to use the most advanced
approaches of Basel II; other US banks with sophisticated systems may
voluntarily elect to adopt Basel II advanced approaches subject to regulatory
approval. Most US banks initially would not be subject to Basel II and would
continue to follow existing US risk-based capital rules with certain
modifications to be determined (a proposal known as BASEL I-A.). The United
States is not adopting Basel II's simpler approaches, as the existing US
framework based on Basel I is not equivalent to Basel II. Implementation of
Basel II in the United States is also targeted to begin on 1 January 2009, one
year later than in Europe. This one year "GAP" and other differences in the
application or interpretation between the United States, the EU and other
jurisdictions in which the Abbey group has operations could represent challenges
for the bank in implementing Basel II.
As and when fully implemented, the Basel II Framework may affect the
risk-based capital treatment of the issuing entity notes for investors who are
subject to bank capital adequacy requirements that follow the Basel II
Framework. Consequently, investors should consult their own advisers as to the
consequences to and effect on them of the implementation of the Basel II
Framework. Proposals and guidelines for implementing Basel II in certain
participating jurisdictions are still in development, and no predictions can be
made as to the precise effects of potential changes on the Abbey group, the
issuing entity notes or any investor.
FIXED CHARGES SUBSEQUENTLY RE-CHARACTERISED AS FLOATING CHARGES MAY ADVERSELY
AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES
Fixed charges over bank accounts may take effect under English law as
floating charges. Under the terms of the issuing entity deed of charge and the
Funding deed of charge respectively, the issuing entity and Funding will purport
to grant, among other things, fixed charges in favour of the issuing entity
security trustee and, in the case of Funding, the security trustee over, in the
case of the issuing entity, the issuing entity's interest in the transaction
account and, in the case of Funding, Funding's interest in the Funding
transaction account.
The law in England and Wales relating to the re-characterisation of fixed
charges is unsettled. The fixed charges purported to be granted by the issuing
entity and Funding (other than by way of assignment in security) will take
effect under English law only as floating charges if it is determined that the
issuing entity security trustee or, in the case of Funding, the security
trustee, does not exert sufficient control over the relevant account, or the
proceeds thereof, for the security to be said to "FIX" over those assets. As the
issuing entity and Funding are signatories to the accounts, there is a risk that
a court will consider that the issuing entity security trustee does not exert a
sufficient degree of control to ensure that the charges over those accounts are
held to be fixed charges. If the charges take effect as floating charges instead
of fixed charges, then certain matters, which are given priority over floating
charges by law, will be given priority over the claims of the floating
chargeholder.
68
In addition, if assets in respect of which the issuing entity or Funding
has granted a fixed charge are paid into a bank account the charge over which is
subsequently re-characterised as a floating charge, the original fixed charge in
relation to the assets may also be re-characterised as a floating charge.
69
THE ISSUANCE OF ISSUING ENTITY NOTES
The issuing entity notes will be issued pursuant to the trust deed. The
following summary and the information set out in "OVERVIEW OF THE ISSUING ENTITY
NOTES" and "TERMS AND CONDITIONS OF THE US NOTES" summarise the material terms
of the issuing entity notes and the trust deed. These summaries do not purport
to be complete and are subject to the provisions of the trust deed and the terms
and conditions of the issuing entity notes.
GENERAL
The issuing entity notes will be issued in series. Each series will
comprise one or more classes and one or more sub-classes of class A notes, class
B notes, class M notes, class C notes and/or class D notes issued on a single
issue date. A class designation determines the relative seniority for receipt of
cash flows. The issuing entity notes of a particular class in different series
(and the issuing entity notes of differing sub-classes of the same class and
series) will not necessarily have the same terms. Differences may include
principal amount, interest rates, interest rate calculations, currency,
permitted redemption dates, final maturity dates and ratings. Each series and
class (or sub-class) of issuing entity notes will be secured over the same
property as the issuing entity notes offered by this prospectus and the previous
notes. The terms of each series and class (or sub-class) of US notes will be set
forth in the relevant prospectus supplement.
ISSUANCE
The issuing entity may issue new series and classes (or sub-classes) of
further issuing entity notes and advance new term advances to Funding from time
to time without obtaining the consent of existing noteholders. As a general
matter the issuing entity may only issue a new series and class (or sub-class)
of further issuing entity notes if sufficient subordination is provided for that
new series and class (or sub-class) of issuing entity notes by one or more
subordinate classes of issuing entity notes and/or the first reserve fund and/or
the second reserve fund maintained by Funding. The required subordinated
percentage, which is used to calculate the required subordination amount for
each class of issuing entity notes other than the class D notes, will be set
forth in the relevant prospectus supplement for each series of that class (or
sub-class) of US notes under the heading "SUMMARY - REQUIRED SUBORDINATED
PERCENTAGE". Similarly, the Funding reserve fund required amount in effect at
the time of an offering of US notes will be specified in the relevant prospectus
supplement under the heading "SUMMARY - FUNDING RESERVE FUND REQUIRED AMOUNT".
The required subordinated percentage and the Funding reserve fund required
amount are subject to change. The conditions and tests (including the required
levels of subordination) necessary to issue a series and class (or sub-class) of
issuing entity notes, or the "ISSUANCE TESTS", include the following:
ALL CLASSES OF ISSUING ENTITY NOTES
Issuing entity notes may only be issued upon satisfaction of certain
conditions precedent. In particular, new notes may be issued only if the
following conditions (among others) are satisfied:
o the issuing entity has obtained a written confirmation from each
of the rating agencies that the then current ratings of the
issuing entity notes outstanding at that time will not be
adversely affected as a consequence of such issuance;
o no note event of default under any of the intercompany loan
agreements outstanding at that time shall have occurred which has
not been remedied or waived and no event of default will occur as
a consequence of such issuance; and
o as at the most recent interest payment date, no principal
deficiency (which remains outstanding) is recorded on the
principal deficiency ledger in relation to the term advances
outstanding at that time,
AND,
FOR THE CLASS A NOTES OF ANY SERIES,
70
On the closing date for that series of issuing entity notes and after
giving effect to the issuance of that series of issuing entity notes, the class
A available subordinated amount must be equal to or greater than the class A
required subordinated amount.
The CLASS A REQUIRED SUBORDINATED AMOUNT is calculated, on any date, as
the product of:
A x B
where:
A = the class A required subordinated percentage as specified in the
most recent prospectus supplement for that issuance of issuing
entity notes for AAA term advances of any series; and
B = the principal amount outstanding of all term advances on such
date (after giving effect to any repayments of principal to be
made on the term advances on such date) less the amounts standing
to the credit of the cash accumulation ledger and the principal
ledger available on such date for the repayment of principal on
the term advances (after giving effect to any repayments of
principal to be made on the term advances on such date).
The CLASS A AVAILABLE SUBORDINATED AMOUNT is calculated, on any date, as:
(a) the sum of (i) the aggregate of the principal amounts outstanding
of the AA term advances of all series, the A term advances of all
series, the BBB term advances of all series and the BB term
advances of all series (after giving effect to repayments of
principal to be made on those term advances on such date); and
(ii) the aggregate amount of the first reserve fund and the second
reserve fund on such date and (iii) stressed excess spread;
less
(b) the amounts standing to the credit of the principal ledger
available on such date for the payment of principal on AA term
advances, A term advances, BBB term advances and BB term advances
(after giving effect to any repayments of principal to be made on
the term advances on such date).
FOR THE CLASS B NOTES OF ANY SERIES,
On the closing date for that series of issuing entity notes and after
giving effect to the issuance of that series of issuing entity notes, the class
B available subordinated amount must be equal to or greater than the class B
required subordinated amount.
The CLASS B REQUIRED SUBORDINATED AMOUNT is calculated, on any date, as
the product of:
A x B
where:
A = the class B required subordinated percentage as specified in the
most recent prospectus supplement for that issuance of issuing
entity notes for AA term advances of any series; and
B = the principal amount outstanding of all term advances on such
date (after giving effect to any repayments of principal to be
made on the term advances on such date) less the amounts standing
to the credit of the cash accumulation ledger and the principal
ledger available on such date for the repayment of principal on
the term advances (after giving effect to any repayments of
principal to be made on the term advances on such date).
The CLASS B AVAILABLE SUBORDINATED AMOUNT is calculated, on any date, as:
(a) the sum of (i) the aggregate of the principal amounts outstanding
of the A term advances of all series, the BBB term advances of all
series and the BB term advances of all series (after giving effect
to repayments of principal to be made on those term advances on
such date); and (ii) the aggregate amount of the first reserve
fund and the second reserve fund on such date and (iii) stressed
excess spread;
71
less
(b) the amounts standing to the credit of the principal ledger
available on such date for the payment of principal on A term
advances, BBB term advances and BB term advances (after giving
effect to any repayments of principal to be made on the term
advances on such date).
FOR THE CLASS M NOTES OF ANY SERIES,
On the closing date for that series of issuing entity notes and after
giving effect to the issuance of that series of issuing entity notes, the class
M available subordinated amount must be equal to or greater than the class M
required subordinated amount.
The CLASS M REQUIRED SUBORDINATED AMOUNT is calculated, on any date, as
the product of:
A x B
where:
A = the class M required subordinated percentage as specified in the
most recent prospectus supplement for that issuance of issuing
entity notes for A term advances of any series; and
B = the principal amount outstanding of all term advances on such
date (after giving effect to any repayments of principal to be
made on the term advances on such date) less the amounts standing
to the credit of the cash accumulation ledger and the principal
ledger available on such date for the repayment of principal on
the term advances (after giving effect to any repayments of
principal to be made on the term advances on such date).
The CLASS M AVAILABLE SUBORDINATED AMOUNT is calculated, on any date, as:
(a) the sum of (i) the aggregate of the principal amounts outstanding
of the BBB term advances of all series and the BB term advances of
all series (after giving effect to repayments of principal to be
made on those term advances on such date); and (ii) the aggregate
amount of the first reserve fund and the second reserve fund on
such date and (iii) stressed excess spread;
less
(b) the amounts standing to the credit of the principal ledger
available on such date for the payment of principal on BBB term
advances and BB term advances (after giving effect to any
repayments of principal to be made on the term advances on such
date).
FOR THE CLASS C NOTES OF ANY SERIES,
On the closing date for that series of issuing entity notes and after
giving effect to the issuance of that series of issuing entity notes, the class
C available subordinated amount must be equal to or greater than the class C
required subordinated amount.
The CLASS C REQUIRED SUBORDINATED AMOUNT is calculated, on any date, as
the product of:
A x B
where:
A = the class C required subordinated percentage as specified in the
most recent prospectus supplement for that issuance of issuing
entity notes for BBB term advances of any series; and
B = the principal amount outstanding of all term advances on such
date (after giving effect to any repayments of principal to be
made on the term advances on such date) less the amounts standing
to the credit of the cash accumulation ledger and the principal
ledger available on such date for the repayment of principal on
the term advances (after giving effect to any repayments of
principal to be made on the term advances on such date).
The CLASS C AVAILABLE SUBORDINATED AMOUNT is calculated, on any date, as:
(a) the sum of (i) the aggregate of the principal amounts outstanding
of the BB term advances of all series (after giving effect to
repayments of principal to be made on those term advances on such
date); and (ii) the aggregate amount of the first reserve fund and
the second reserve fund on such date and (iii) stressed excess
spread;
72
less
(b) the amounts standing to the credit of the principal ledger
available on such date for the payment of principal on BB term
advances (after giving effect to any repayments of principal to be
made on the term advances on such date).
FOR THE CLASS D NOTES OF ANY SERIES
The class D notes are supported by surplus available revenue receipts and
amounts standing to the credit of the first reserve fund and the second reserve
fund.
In relation to the above, the amounts available on any date for the
payment of principal on any term advance shall be calculated in accordance with
the Funding pre-enforcement principal priority of payments (as set out in
"CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS PRIOR TO
ENFORCEMENT OF THE FUNDING SECURITY OR THE OCCURRENCE OF A TRIGGER EVENT OR
ENFORCEMENT OF THE ISSUING ENTITY SECURITY") and shall be calculated without
reference to the rules for the application of Funding available principal
receipts (as set out in "CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE PRINCIPAL
RECEIPTS PRIOR TO ENFORCEMENT OF THE FUNDING SECURITY OR THE OCCURRENCE OF A
TRIGGER EVENT OR ENFORCEMENT OF THE ISSUING ENTITY SECURITY").
STRESSED EXCESS SPREAD is calculated, on any date, as:
(a) the product of:
X + Y
-----
2
and the aggregate outstanding principal balance of the term
advances advanced under the master intercompany loan agreement
less the amount debited to the principal deficiency ledger at such
date; less
(b) the product of the weighted average interest rate of the
outstanding issuing entity notes at such date, including any
issuing entity notes issued on such date (subject to adjustment
where the step-up date occurs for any series and class (or
sub-class) of issuing entity notes and taking into account the
margins on the issuing entity swaps as at such date and the
expenses of the issuing entity ranking in priority to payments on
such issuing entity notes) and the aggregate principal amount
outstanding of such issuing entity notes at such date.
where:
x = the weighted average yield on the loans in the portfolio at such
date, together with new loans (if any) to be assigned to the
mortgages trustee on such date (taking into account the margins on
the Funding swaps as at such date)
y = LIBOR for 3 month sterling deposits plus 0.5 per cent.
The required subordinated amount for any class (or sub-class) of issuing
entity notes or the method of computing the required subordinated amount may be
changed at any time without the consent of any noteholders provided confirmation
has been obtained from each rating agency then rating any outstanding notes that
the change will not result in an adverse effect on the then current rating of
any outstanding notes.
In addition, if confirmation is obtained from each rating agency then
rating any outstanding notes that the issuance of a new series and class (or
sub-class) of new notes will not cause an adverse effect on the then current
rating of any outstanding notes rated by that rating agency, then some of the
other conditions to issuance described above may be waived by the note trustee.
For example, the note trustee may, in accordance with and subject to the
provisions of the trust deed, without the consent of the noteholders, but only
if and so far as in its opinion the interests of the noteholders of any series
and class (or sub-class) of issuing entity notes shall not be materially
prejudiced thereby, determine at the request of the issuing entity that any note
event of default in respect of a series and class (or sub-class) of issuing
entity notes (the absence of which constitutes a condition to issuance of new
notes or further issuing entity notes) shall not be treated as such.
73
USE OF PROCEEDS
An indication of the application of the proceeds from each issue of
issuing entity notes will be described in the relevant prospectus supplement.
74
THE ISSUING ENTITY
INTRODUCTION
The issuing entity was incorporated in England and Wales on 3 October
2006 (registered number 5953811) and is a public limited company under the
Companies Act 1985. The authorised share capital of the issuing entity comprises
50,000 ordinary shares of (pound)1 each. The issued share capital of the issuing
entity comprises 50,000 ordinary shares of (pound)1 each, 49,998 of which are
partly paid to (pound)0.25 each and two of which are fully paid and all of which
are beneficially owned by Holdings (see HOLDINGS). The registered office of the
issuing entity is Abbey National House, 2 Triton Square, Regent's Place, London
NW1 3AN. The contact telephone number is +44 (0) 870 607 6000.
The issuing entity is organised as a special purpose company. The issuing
entity has no subsidiaries. The seller does not own directly or indirectly any
of the share capital of Holdings or the issuing entity.
The principal objects of the issuing entity are set out in its memorandum
of association and include among other things:
o lending money and giving credit, secured or unsecured;
o borrowing or raising money and securing the payment of money;
o granting security over its property for the performance of its
obligations or the payment of money; and
o to acquire or enter into financial instruments including
derivative instruments.
The issuing entity was established to issue the issuing entity notes and
to make the AAA term advances, the AA term advances, the A term advances, the
BBB term advances and the BB term advances to Funding. The activities of the
issuing entity are limited to making term advances under the master intercompany
loan agreement, issuing the issuing entity notes and other activities incidental
thereto.
The issuing entity has not engaged, since its incorporation, in any
material activities other than those incidental to its incorporation and
re-registration as a public company under the Companies Act 1985, to the issue
of the issuing entity notes and making the term advances to Funding and to the
authorisation and performance of the other transaction documents and activities
referred to in this prospectus.
Under the Companies Act 1985, the issuing entity's constitutional
documents, including the principal objects of the issuing entity, may be altered
by a special resolution of the shareholders.
The activities of the issuing entity are and will be restricted by the
terms and conditions of the issuing entity notes and are limited to the issue of
the issuing entity notes, making the term advances to Funding, the exercise of
related rights and powers, and other activities referred to in this prospectus
or incidental to those activities.
There is no intention to accumulate surplus cash in the issuing entity
except in the circumstances set out in "SECURITY FOR THE ISSUING ENTITY'S
OBLIGATIONS".
The accounting reference date of the issuing entity is the last day of
December.
DIRECTORS AND SECRETARY
The following table sets out the directors of the issuing entity and
their respective business addresses and occupations.
75
BUSINESS
NAME BUSINESS ADDRESS OCCUPATION AGE TERM OF OFFICE
- ------------- ----------------- --------------------- --- --------------------
Martin McDermott Tower 42 Executive Director of 45 Indefinite, subject
International Wilmington Trust SP to resignation or
Financial Centre 25 Services (London) disqualification
Old Broad Street Limited under the Companies
London EC2N 1HQ Act of 1985
Wilmington Trust SP Tower 42 Management of Special -- Indefinite, subject
Services (London) International Purpose Companies to resignation or
Limited Financial Centre 25 disqualification
Old Broad Street under the Companies
London EC2N 1HQ Act of 1985
Ruth Samson Tower 42 Solicitor 35 Indefinite, subject
International to resignation or
Financial Centre 25 disqualification
Old Broad Street under the Companies
London EC2N 1HQ Act of 1985
David Green Abbey National House Finance Director, 52 Indefinite, subject
2 Triton Square Banking Entities to resignation or
Regent's Place disqualification
London NW1 3AN under the Companies
Act of 1985
Mark Filer Tower 42 Executive Director of 40 Indefinite, subject
International Wilmington Trusts to resignation or
Financial Centre Services (London) disqualification
25 Old Broad Street Limited under the Companies
London EC2N 1HQ Act of 1985
The sponsor has caused David Green, an employee of the seller, to be a
director of the issuing entity. David Green does not receive any compensation
for acting as director.
The sponsor has caused Wilmington Trust SP Services (London) Limited, a
company specialising in acting as directors of special purpose companies, to be
a director of the issuing entity.
The directors of Wilmington Trust SP Services (London) Limited are set
out under the section "HOLDINGS" in this prospectus.
The directors' (other than David Green's) principal activities include
the provision of directors and corporate management services to structured
finance transactions as directors on the board of Wilmington Trust SP Services
(London) Limited.
The company secretary of the issuing entity is:
Abbey National Secretariat Services Limited
Abbey National House
2 Triton Square
Regent's Place
London NW1 3AN
In accordance with the issuing entity corporate services agreement,
Wilmington Trust SP Services (London) Limited will provide to the directors of
the issuing entity a registered and administrative office, the service of a
company secretary, the arrangement of meetings of directors and shareholders and
the procurement of book-keeping services and preparation of accounts. No other
remuneration is paid by the issuing entity to or in respect of any director or
officer of the issuing entity for acting as such.
76
Under the issuing entity corporate services agreement, Holdings has
agreed to comply with all requests of the issuing entity security trustee in
relation to the appointment and/or removal by Holdings of any of the directors
of the issuing entity.
The issuing entity has no employees.
77
CAPITALISATION STATEMENT
The following table shows the capitalisation of the issuing entity as at
[o] 2008:
AS AT
31 DECEMBER
2007
(POUND)
---------
AUTHORISED SHARE CAPITAL
Ordinary shares of (pound)1 each.............................. 50,000
ISSUED SHARE CAPITAL
2 ordinary shares of (pound)1 each fully paid................. 2.00
49,998 ordinary shares each one quarter paid.................. 12,499.50
---------
12,501.50
=========
Other than the relevant previous notes, the issuing entity has no loan
capital, term loans, other borrowings or indebtedness or contingent liabilities
or guarantees as at 20 March 2008.
It is not intended that there be any further payment of the issued share
capital.
There has been no material change in the capitalisation, indebtedness,
guarantees or contingent liabilities of the issuing entity since 31 December
2007.
78
THE ABBEY GROUP OF COMPANIES
THE SPONSOR AND THE SELLER
Background
The sponsor and the seller, a public limited company, was incorporated in
England and Wales on 12 September 1988 with registered number 2294747. The
registered office of Abbey is at Abbey National House, 2 Triton Square, Regent's
Place, London, NW1 3AN. The telephone number of Abbey's registered office is +44
(0) 870 607 6000.
The seller and its subsidiaries (the ABBEY GROUP) provide a comprehensive
range of personal financial services, including savings and investments,
mortgages, unsecured lending, banking, pensions, life and general insurance
products to customers throughout the United Kingdom. The Abbey group also has
offshore operations in Jersey and the USA. The Abbey group is regulated by the
Financial Services Authority.
On 12 November 2004, Banco Santander, S.A. (BANCO SANTANDER) completed
the acquisition of the entire issued share capital of the seller, implemented by
means of a scheme of arrangement under Section 425 of the Companies Act 1985,
making the seller a wholly owned subsidiary of Banco Santander. Banco Santander
is one of the largest banks in the world by market capitalisation. Founded in
1857, Banco Santander has approximately 69 million customers, over 11,000
branches and a presence in over 40 countries.
In addition to being the sponsor of the asset-backed securities
transactions in connection with which the issuing entity notes will be issued,
Abbey is also the seller, the originator, the servicer, the cash manager, the
issuing entity cash manager, the account bank and the Funding swap provider in
the transaction.
As at the date of this prospectus, there are no legal or arbitration
proceedings pending (or known by Abbey to be contemplated by governmental
authorities) against the seller or in which any property of the seller is the
subject that is material to holders of the issuing entity notes.
Corporate Purpose and Strategy
The seller's purpose and goal is to maximise value for its shareholder,
Banco Santander, by focusing on offering a full commercial banking service in
the United Kingdom. The Abbey group is already a leading participant in its core
mortgage and savings market and continues to target consolidation of these
positions and growth in personal banking and investments. Over the last two
years, the Abbey group has made good progress in restructuring its business,
disposing of and exiting assets and businesses that were deemed non-core and
investing in the ongoing personal financial services operations. As part of the
Banco Santander group of companies, the focus in the future will be on its
ongoing retail banking business. With the continuing support of Banco
Santander, the seller aims to be the best commercial bank in the United Kingdom.
Organisational Structure
The seller's structure consists of four business divisions (Retail
Banking, Global Banking and Markets, Corporate Banking and Wealth Management)
and five support divisions (Retail Products and Marketing, Human Resources,
Manufacturing, Risk and Internal Audit).
79
Mortgage business
The seller has been engaged in the origination and servicing of
residential mortgage loans since 1989, when, as the successor company to the
Abbey National Building Society, it took a transfer of the latter's business,
the core of which had always been the origination and servicing of residential
mortgage loans. The seller remains one of the largest lenders in the U.K.
residential mortgage market with an estimated market share of 9.3% of all
outstanding residential mortgages as at 31 December 2007. Statistical
information regarding the recent size and growth of the portfolio of residential
mortgage loans serviced by the seller (all of which were originated by the
seller) may be found in Annex A-1 of the accompanying prospectus supplement
under "STATISTICAL INFORMATION ON THE PORTFOLIO". The total value of the Abbey
group's mortgage stock as at 31 December 2007 was (pound)110.5 billion and as at
31 December 2006 was approximately (pound)101.7 billion. The Abbey group
achieved net mortgage lending of approximately (pound)8.8 billion in 2007,
equating to a net mortgage lending market share of approximately 8.1 per cent.
Securitisation
The seller became engaged in the securitisation of residential mortgage
loans in 1997. To date, it has completed 17 residential mortgage securitisation
transactions in which an aggregate initial principal amount of (pound)54.6
billion of notes has been issued. No prior securitisation completed by the
seller has experienced an event of default to date.
In general, the seller is responsible for the selection of the pool of
loans to be securitised in the seller's mortgage loan securitisation programme
and for ongoing servicing, reporting and cash management in accordance with the
applicable documentation. The seller also acts as sponsor of these
securitisations and is responsible for structuring of the transaction, cash flow
modelling, arranging distribution and marketing of the securities and arranging
currency, interest rate and other hedge providers. The seller is responsible for
liaising with rating agencies, engaging various third party service providers
and advisors as well as overall transaction management.
For further information on the loans, see "DESCRIPTION OF THE PREVIOUS
ISSUING ENTITIES, THE PREVIOUS NOTES AND THE PREVIOUS INTERCOMPANY LOANS" in
Annex D of the accompanying prospectus supplement. For further information on
the portfolio, see "STATIC POOL DATA" in Annex E of the relevant prospectus
supplement.
ABBEY NATIONAL TREASURY SERVICES PLC TRADING AS SANTANDER GLOBAL BANKING
& MARKETS
Abbey National Treasury Services plc was incorporated in England and
Wales on 24 January 1989 with registered number 2338548 and is an authorised
person with permission to accept deposits under FSMA. Abbey National Treasury
Services plc is a direct wholly owned subsidiary of the seller, which has given
a full and unconditional guarantee in respect of the liabilities of Abbey
National Treasury Services plc.
Abbey National Treasury Services plc comprises:
o Santander Global Banking & Markets;
o Asset & Liability Management; and
o Corporate Banking.
Santander Global Banking and Markets is the brand name under which the
Abbey National Treasury Services plc derivatives trading and securities finance
activities operate. Santander Global Banking & Markets engages in derivatives
trading and securities financing activities (including providing structured
products to members of the Abbey group, other financial services companies and
professional counterparties) and is active in the international money markets
and capital markets.
Asset and Liability Management manages the Abbey group's funding,
liquidity and balance sheet requirements. Corporate Banking encompasses the
seller's corporate and social housing lending business.
BAKER STREET RISK AND INSURANCE (GUERNSEY) LIMITED (BAKER STREET RISK)
Baker Street Risk was incorporated in Guernsey on 12 March 1993. Baker
Street Risk is a wholly owned subsidiary of the seller and its registered office
is at Fourth Floor, The Albany, South Esplanade, St Peter Port, Guernsey GY1
4NF. The principal business activity of Baker Street Risk is that of an insurer.
80
FUNDING
INTRODUCTION
Funding was incorporated in England and Wales on 28 April 2000
(registered number 3982428) as a private limited company under the Companies Act
1985. The authorised share capital of Funding comprises 100 ordinary shares of
(pound)1 each. The issued share capital of Funding comprises two ordinary shares
of (pound)1 each, both of which are beneficially owned by Holdings (see
"HOLDINGS"). The registered office of Funding is at Abbey National House, 2
Triton Square, Regent's Place, London NW1 3AN. Its contact telephone number is
+44 (0) 870 607 6000.
Funding was established to act as a depositor for the securitisation of
residential mortgages originated by the seller, and it has acted as such for
each securitisation by the previous issuing entities and the issuing entity.
Funding is organised as a special purpose company. Funding has no subsidiaries.
The seller does not own directly or indirectly any of the share capital of
Holdings or Funding.
The principal objects of Funding are set out in its memorandum of
association and are, among other things, to:
o carry on the business of a property investment company and an
investment holding company;
o acquire trust property and enter into loan arrangements;
o invest, buy, sell and otherwise acquire and dispose of mortgage
loans, advances and other investments and all forms of security;
o carry on business as a money lender, financier and investor;
o enter into financial instruments, including derivative
instruments; and
o undertake and carry on all kinds of loan, financial and other
operations.
Since its incorporation, Funding has not engaged in any material
activities, other than those relating to the previous issues by the previous
issuing entities and the issuing entity and those incidental to the
authorisation and performance of the transaction documents referred to in this
prospectus to which it is or will be a party and other matters which are
incidental to those activities. Funding has no employees.
At the date of this prospectus, Funding has not failed to meet its
payment obligations under any intercompany loan agreement.
After the issuance of any series of issuing entity notes, Funding will
have no continuing duties with respect to such issuing entity notes but will
receive payments in respect of the Funding share of the trust property and
distribute such receipts as payments on the intercompany loans in accordance
with the priorities of payment set forth under "CASHFLOWS" in this prospectus.
The accounting reference date of Funding is the last day of December.
81
DIRECTORS AND SECRETARY
The following table sets out the directors of Funding and their
respective business addresses and occupations.
NAME BUSINESS ADDRESS BUSINESS OCCUPATION
- ------------------------------------- -------------------------------------- ----------------------------------
Martin McDermott Tower 42 International Financial Executive Director of Wilmington
Centre 25 Old Broad Street London EC2N Trust SP Services (London) Limited
1HQ
Wilmington Trust SP Services (London) Tower 42 International Financial Management of Special Purpose
Limited Centre 25 Old Broad Street London EC2N Companies
1HQ
David Green Abbey National House 2 Triton Square Finance Director, Banking Entities
Regent's Place London NW1 3AN
Ruth Samson Tower 42 International Financial Solicitor
Centre 25 Old Broad Street London EC2N
1HQ
Mark Filer Tower 42 Executive Director of Wilmington
International Financial Centre Trusts Services (London) Limited
25 Old Broad Street
London EC2N 1HQ
David Green is an employee of the seller. There are no other potential
conflicts between any duties owed to Funding by the persons referred to above
and their private interests and or other duties.
The directors of Wilmington Trust SP Services (London) Limited are set
out under the section "HOLDINGS" in this prospectus.
The company secretary of Funding is:
Abbey National Secretariat Services Limited
Abbey National House
2 Triton Square
Regent's Place
London NW1 3AN
In accordance with the corporate services agreement, the corporate
services provider will provide to Funding directors a registered and
administrative office, the service of a company secretary, the arrangement of
meetings of directors and shareholders and the procurement of book-keeping
services and preparation of accounts. No other remuneration is paid by Funding
to or in respect of any director or officer of Funding for acting as such.
82
THE MORTGAGES TRUSTEE
The mortgages trustee was incorporated in England and Wales on 28 April
2000 (registered number 3982431) as a private limited company under the
Companies Act 1985. The authorised share capital of the mortgages trustee
comprises 100 ordinary shares of (pound)1 each. The issued share capital of the
mortgages trustee comprises two ordinary shares of (pound)1 each, both of which
are beneficially owned by Holdings (see "HOLDINGS"). The registered office of
the mortgages trustee is at Abbey National House, 2 Triton Square, Regent's
Place, London NW1 3AN.
The mortgages trustee is organised as a special purpose company. The
mortgages trustee has no subsidiaries. The seller does not own directly or
indirectly any of the share capital of Holdings or the mortgages trustee.
Any profits received by the mortgages trustee, after payment of the costs
and expenses of the mortgages trustee, will, ultimately, be paid for the benefit
of certain discretionary objects. Neither the seller nor any company connected
with the seller can direct the share trustees and none of such companies has any
control, direct or indirect, over the mortgages trustee or the issuing entity
selected at the discretion of Wilmington Trust SP Services (London) Limited. The
payments on the issuing entity notes will not be affected by this arrangement.
The mortgages trustee was established to act as trustee of the mortgages
trust, and it has acted as such in connection with each securitisation by the
previous issuing entities and the issuing entity. The mortgages trust is a bare
trust.
The principal objects of the mortgages trustee are set out in its
memorandum of association and are, among other things, to:
o invest and deal in mortgage loans secured on residential or other
properties within England, Wales and Scotland;
o invest in, buy, sell and otherwise acquire and dispose of mortgage
loans, advances, other similar investments and all forms of
security;
o carry on business as a money lender, financier and investor;
o undertake and carry on all kinds of loan, financial and other
operations; and
o act as trustee in respect of carrying on any of these objects.
The mortgages trustee has not engaged, since its incorporation, in any
material activities other than those incidental to the settlement of the trust
property on the mortgages trustee or relating to the issue of previous notes by
the previous issuing entities and the issuing entity, changing its name from
Trushelfco (No. 2655) Ltd. on 6 June 2000, the authorisation and performance of
the transaction documents referred to in this prospectus to which it is or will
be a party and other matters which are incidental or ancillary to the foregoing.
The mortgages trustee has no employees.
The accounting reference date of the mortgages trustee is the last day of
December.
83
HOLDINGS
Holdings was incorporated in England and Wales on 29 December 1998
(registered number 3689577) as a private limited company under the Companies Act
1985. The registered office of Holdings is at Abbey National House, 2 Triton
Square, Regent's Place, London NW1 3AN.
Holdings has an authorised share capital of (pound)100 divided into 100
ordinary shares of (pound)1 each, of which two shares of (pound)1 each have been
issued. Limited recourse loans were made by Wilmington Trust SP Services
(London) Limited to Holdings in order for Holdings to acquire all of the issued
share capital of the previous issuing entities, Funding and the mortgages
trustee. A further limited recourse loan has been made by Wilmington Trust SP
Services (London) Limited to Holdings in order for Holdings to acquire all of
the issued share capital of the issuing entity. Wilmington Trust SP Services
(London) Limited, a professional trust company, holds all of the beneficial
interest in the issued shares in Holdings on a discretionary trust for certain
discretionary objects. Neither the seller nor any company connected with the
seller can direct the share trustees and none of such companies has any
control, direct or indirect, over Holdings or the issuing entity. The payments
on the issuing entity notes will not be affected by this arrangement.
Any profits received by Holdings, after payment of the costs and expenses
of Holdings, will, following the payment of dividends to the share trustee, be
paid for such of those discretionary objects as are selected at the discretion
of Wilmington Trust SP Services (London) Limited. The payments on the issuing
entity notes will not be affected by this arrangement.
Holdings is organised as a special purpose company.
The principal objects of Holdings are set out in its memorandum of
association and are, among other things, to:
o acquire and hold, by way of investments or otherwise; and
o deal in or exploit in such manner as may from time to time be
considered expedient,
all or any of the shares, stocks, debenture stocks, debentures or other
interests of or in any company (including the previous issuing entities, the
issuing entity, the mortgages trustee and Funding).
Holdings has acquired all of the issued share capital of the issuing
entity, the previous issuing entities, the mortgages trustee and Funding.
Holdings has not engaged in any other activities since its incorporation other
than those incidental to the authorisation and performance of the previous
transaction documents and the transaction documents and other matters which are
incidental to those activities. Holdings has no employees.
The accounting reference date of Holdings is the last day of December.
The directors of Wilmington Trust SP Services (London) Limited and their
principal activities are as follows:
NAME FUNCTION PRINCIPAL ACTIVITIES
- --------------------------- ------------------------------------- ---------------------
Martin McDermott Managing Director/Chief Executive Company Director
Mark Filer Executive Director Company Director
James Fairrie Managing Director/Sales and Marketing Company Director
Nicolas Patch Executive Director Company Director
David Dupert Non-Executive Chairman Banker
William Farrell II Non-Executive Deputy Chairman Banker
John Beeson Non-Executive Director Banker
Jean-Christophe Schroeder Company Director Company Director
The company secretary of Wilmington Trust SP Services (London) Limited is
Clifford Chance Secretaries (CCA) Limited.
84
PECOH LIMITED
The post enforcement call option holder was incorporated in England and
Wales on 28 April 2000 (registered number 3982397) as a private limited company
under the Companies Act 1985. The registered office of the post enforcement call
option holder is Abbey National House, 2 Triton Square, Regent's Place, London
NW1 3AN.
The authorised share capital of the post enforcement call option holder
comprises 100 ordinary shares of (pound)1 each. The issued share capital of the
post enforcement call option holder comprises two ordinary shares of (pound)1
each, both of which are beneficially owned by Wilmington Trust SP Services
(London) Limited on a discretionary trust for certain discretionary objects.
Neither the seller nor any company connected with the seller can direct the
share trustees and none of such companies has any control, direct or indirect,
over the post enforcement call option holder or the issuing entity. This is a
separate trust with different beneficiaries to that declared by Wilmington Trust
SP Services (London) Limited in respect of all the issued share capital of
Holdings.
The post enforcement call option holder is organised as a special purpose
company. The post enforcement call option holder has no subsidiaries. The seller
does not own directly or indirectly any of the share capital of the post
enforcement call option holder.
The principal objects of the post enforcement call option holder are as
set out in its memorandum of association and are, among others, to hold bonds,
notes, obligations and securities issued or guaranteed by any company and any
options or rights in respect of them. The post enforcement call option holder
has not engaged since its incorporation in any material activities other than
changing its name from Trushelfco (No. 2657) Ltd. on 6 June 2000 and those
activities relating to the previous issues by the previous issuing entities and
the issuing entity and those incidental to the authorisation and performance of
the transaction documents referred to in this prospectus to which it is or will
be a party and other matters which are incidental to those activities. The post
enforcement call option holder has no employees.
The accounting reference date of the post enforcement call option holder
is the last day of December.
Pursuant to the terms of an option granted to the post enforcement call
option holder under the post-enforcement call option agreement, following the
enforcement, realisation and payment of the proceeds of the issuing entity
security granted by the issuing entity pursuant to the issuing entity deed of
charge, the post enforcement call option holder can require the transfer to it
of all of the class B notes and/or all of the class M notes and/or all of the
class C notes and/or the class D notes, as the case may be, for a nominal
amount.
As the post enforcement call option granted pursuant to the
post-enforcement call option agreement can be exercised only after the issuing
entity security trustee has enforced and realised the issuing entity security
granted by the issuing entity under the issuing entity deed of charge and has
determined that there are no further assets available to pay amounts due and
owing to the class B noteholders, the class M noteholders, the class C
noteholders and/or the class D noteholders, as the case may be, the exercise of
the post enforcement call option and delivery by the class B noteholders, the
class M noteholders, the class C noteholders and/or the class D noteholders of
the class B notes, the class M notes, the class C notes and/or the class D notes
to the post enforcement call option holder will not extinguish any other rights
or claims other than the rights to payment of interest and repayment of
principal under the class B notes, the class M notes, the class C notes and/or
the class D notes that such class B noteholders, class M noteholders, class C
noteholders and/or class D noteholders, as the case may be, may have against the
issuing entity.
85
THE NOTE TRUSTEE, THE SECURITY TRUSTEE AND THE ISSUING ENTITY SECURITY TRUSTEE
The note trustee, the security trustee and the issuing entity security
trustee, The Bank of New York, acting through its London branch, is a banking
institution incorporated under the laws of the State of New York registered with
the Registrar of Companies for England and Wales under Company Number FC005522
and Branch Number BR000818, acting through its offices located at One Canada
Square, London, E14 5AL.
The Bank of New York, acting through its London branch, has served and is
currently serving as trustee for numerous securitisation transactions and
programmes involving pools of mortgage loans.
Pursuant to the trust deed, the note trustee is required to take certain
actions as described under "TERMS AND CONDITIONS OF THE US NOTES". Pursuant to
the Funding deed of charge, the security trustee is required to take certain
actions as described under "SECURITY FOR FUNDING'S OBLIGATIONS". Pursuant to the
trust deed and the issuing entity deed of charge, the issuing entity security
trustee is required to take certain actions as described under "TERMS AND
CONDITIONS OF THE US NOTES".
The limitations on liability of and indemnifications available to the
note trustee and the issuing entity security trustee are described under "TERMS
AND CONDITIONS OF THE US NOTES". The limitations on liability of the security
trustee are described under "SECURITY FOR FUNDING'S OBLIGATIONS - APPOINTMENT,
POWERS, RESPONSIBILITIES AND LIABILITIES OF THE SECURITY TRUSTEE".
Provisions for the removal of the issuing entity security trustee are
described under "SECURITY FOR THE ISSUING ENTITY'S OBLIGATIONS - RETIREMENT AND
REMOVAL". Provisions for the removal of the security trustee are described under
"SECURITY FOR FUNDING'S OBLIGATIONS - RETIREMENT AND REMOVAL".
86
THE FUNDING SWAP PROVIDER
Information in respect of the Funding swap is provided in this prospectus
under the heading "THE SWAP AGREEMENTS".
The Funding swap provider is Santander Global Banking & Markets. A
description of the Funding swap provider is included in this prospectus under
the heading "THE ABBEY GROUP OF COMPANIES".
87
AFFILIATIONS AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF TRANSACTION
PARTIES
Abbey is the sponsor of the programme. In addition, Abbey has several
other roles in the programme. Abbey is the originator of the loans. Abbey is
the only seller of loans to the mortgages trustee and is the servicer of all of
the loans. Abbey also provides the services of (a) cash manager to the
mortgages trustee and Funding, (b) issuing entity cash manager, (c) account
bank to the mortgages trustee and Funding and (d) sterling account bank to the
issuing entity. Abbey National Treasury Services plc (trading as Santander
Global Banking & Markets), a wholly owned subsidiary of Abbey, is the Funding
swap provider and may act as an issuing entity swap provider in relation to a
series and class (or sub-class) of issuing entity notes.
Except as described in the preceding paragraph, there are no other
affiliations or relationships or related transactions involving the transaction
parties under the programme.
88
THE LOANS
THE PORTFOLIO
Each prospectus supplement issued in connection with the issuance of a
series and class (or sub-class) of issuing entity notes will contain tables
summarising information in relation to the relevant EXPECTED PORTFOLIO. The
tables will contain information in relation to various criteria in respect of
the expected portfolio as at the applicable cut-off date (as defined in the
relevant prospectus supplement). Tables will indicate, among other things,
composition by type of property, seasoning, period to maturity, geographical
distribution, LTV ratios, outstanding balance and repayment terms. The portfolio
as at the cut-off date, for which statistics are presented in the relevant
prospectus supplement, and the portfolio as at the relevant closing date may
differ owing to, among other things, amortisation of loans in the portfolio.
Each prospectus supplement relating to the issuance of a series and class
(or sub-class) of issuing entity notes also will contain tables summarising
certain characteristics of the United Kingdom mortgage market. Tables will
provide historical information on, among other things, repossession rates, house
price to earnings ratios, as well as other information that may be described
from time to time.
INTRODUCTION
The following is a description of some of the characteristics of the
loans currently or previously offered by the seller including details of loan
types, the underwriting process, lending criteria and selected statistical
information. The issuing entity believes the loans in the portfolio at any time
will have characteristics that demonstrate the capacity to produce funds to
service any payments due and payable on the issuing entity notes.
The portfolio of loans currently making up the trust property, together
with their related security, accrued interest and other amounts derived from the
loans as they make up the trust property on the date of this prospectus, are
called the CURRENT PORTFOLIO. These items as they make up the trust property at
other times are referred to simply as the PORTFOLIO.
Each loan in the current portfolio may incorporate one or more of the
features referred to in this section but each loan will have only one method of
repayment. Each borrower may have more than one loan incorporating different
features (including different repayment methods), but all loans secured on the
same property will be incorporated in a single account with the seller which is
called the mortgage account. A mortgage account may therefore be part interest
only and part repayment if it consists of two or more loans with different
methods of repayment. Each loan is secured by a first legal charge over a
residential property in England or Wales or a first-ranking standard security
over a residential property in Scotland. Some flexible loans are secured by both
a first and a second legal charge or standard security in favour of the seller.
Unless otherwise indicated, the description that follows relates to types
of loans that have been or could be assigned to the mortgages trustee, either as
part of the current portfolio or as a new loan assigned to the mortgages trustee
at a later date.
The seller may assign new loans and their related security to the
mortgages trustee from time to time. The seller reserves the right to amend its
lending criteria and to assign to the mortgages trustee new loans which are
based upon mortgage terms (as defined in the glossary) different from those upon
which loans forming the portfolio as at any date are based. Those new loans may
include loans which are currently being offered to borrowers which may or may
not have some of the characteristics described here, but may also include loans
with other characteristics that are not currently being offered to borrowers or
that have not yet been developed. All new loans will be required to comply with
the representations and warranties set out in the mortgage sale agreement from
time to time. All the material representations and warranties in the mortgage
sale agreement as at the date of this prospectus are described in this
prospectus. See "ASSIGNMENT OF THE LOANS AND THEIR RELATED SECURITY".
CHARACTERISTICS OF THE LOANS
The following is a description of some of the characteristics of the
loans currently or previously originated by the seller, including details of
loan types, the underwriting process, lending criteria and selected statistical
information. The issuing entity believes the loans in the portfolio at any time
will have
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characteristics that demonstrate the capacity to produce funds to service any
payments due and payable on the issuing entity notes.
REPAYMENT TERMS
Loans are typically repayable on one of the following bases:
o "REPAYMENT": the borrower makes monthly payments of both interest
and principal so that, when the loan matures, the full amount of
the principal of the loan will have been repaid; and
o "INTEREST-ONLY": the borrower makes monthly payments of interest
but not of principal; when the loan matures, the entire principal
amount of the loan is still outstanding and is payable in one lump
sum.
In the case of either repayment loans or interest-only loans, the
required monthly payment may alter from month to month for various reasons,
including changes in interest rates.
For interest-only loans, because the principal is repaid in a lump sum at
the maturity of the loan, the borrower is recommended to have some repayment
mechanism (such as an investment plan) in place to help ensure that funds will
be available to repay the principal at the end of the term. However, the seller
does not take security over these repayment mechanisms.
Principal prepayments may be made in whole or in part at any time during
the term of a loan. A prepayment of the entire outstanding balance of all loans
under a mortgage account discharges the mortgage. Any prepayment in full must be
made together with all accrued interest, arrears of interest, any unpaid
expenses and any early repayment fee(s).
Each of the English loans is governed by English law and each of the
Scottish loans is governed by Scots law.
PAYMENT METHODS
Various methods are available to borrowers for making payments on the
loans, including:
o internal transfer from an Abbey current account or other account
the borrower may have with Abbey;
o direct debit instruction from another bank or building society
account;
o external standing order from another bank or building society
account;
o internal standing order from an account at Abbey; and
o payments made at an Abbey branch.
EARLY REPAYMENT FEES
Borrowers who have received the benefit of some of the interest rates
and/or features referred to in this section may in certain circumstances be
required to pay an early repayment fee if they repay all or part of their loans,
or if they make a product switch, before a date specified in the offer
conditions. The right to receive such early repayment fees is retained by the
seller. The seller also retains discretion to waive or enforce early repayment
fees in accordance with the seller's policy from time to time (unless it is
necessary to waive such fees in order to effect a change in the interest rate
and the seller has not complied with its obligations to buy back the affected
loan, in which case the mortgages trustee is authorised to waive early repayment
fees on behalf of the seller). For example, the seller's current policy is to
waive early repayment fees in circumstances where the amount of the principal
repayment in any calendar year (other than scheduled repayments of principal on
a repayment loan) is less than ten per cent. of the sum of the principal balance
of the loan at the beginning of that calendar year and the principal balance on
any further advance completed during that year. The mortgages trustee has not
agreed to purchase any early repayment fees from the seller and so any sums
received will be for the seller's account and not for the account of the
mortgages trustee
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CASHBACKS
Certain loans offered by the seller include a cashback feature under
which a borrower is offered a sum of money that is paid (i) on completion of the
loan, known as a "COMPLETION CASHBACK", or (ii) after the loan has been advanced
for a specific period, called a "DELAYED CASHBACK", or (iii) at periodic
intervals whilst the loan is outstanding, known as a "REWARD CASHBACK". Where
any loan is subject to a completion cashback or a delayed cashback, if there is
an unscheduled principal repayment or a product switch (as described in "PRODUCT
SWITCHES"), in either case before a date specified in the offer conditions, then
all or some of the cashback must be repaid to the seller. This repayment request
may, however, be waived at the discretion of the seller.
For relevant loans originated before N(M), the seller offered a reward
cashback, equal to one per cent. of the then outstanding principal balance of
the relevant loan, paid for every two completed years of its life, and which is
not subject to the repayment requirement described above. For loans originated
on and after N(M), the seller has not offered any reward cashback. For any
future new reward cashback mortgage product, the amount and payment frequency of
any reward cashback, and whether it is subject to any repayment requirement, may
differ from the reward cashback for relevant loans originated before N(M).
Borrowers may request that a reward cashback is paid in cash and/or is
applied by the seller in partial repayment of the related reward loan, in each
case after deduction of any amounts that are overdue on their mortgage account.
The obligation to pay any delayed cashback or reward cashback remains an
obligation of the seller and will not pass to the mortgages trustee. See "RISK
FACTORS - SET-OFF RISKS IN RELATION TO FLEXIBLE LOANS, DELAYED CASHBACKS AND
REWARD CASHBACKS MAY ADVERSELY AFFECT THE FUNDS AVAILABLE TO THE ISSUING ENTITY
TO REPAY THE ISSUING ENTITY NOTES".
INTEREST PAYMENTS AND INTEREST RATE SETTING
Interest on each loan is payable monthly in arrear. Interest on loans is
computed daily on balances which are recalculated on a daily, monthly or annual
basis.
The basic rate of interest set by the seller for loans beneficially owned
by the seller outside the mortgages trust is either the Abbey SVR or a rate
directly linked to a rate set from time to time by the Bank of England. The
Abbey SVR is determined by the terms set forth in the 2002 mortgage conditions,
the 2004 mortgage conditions, the 2006 mortgage conditions and the 2007 mortgage
conditions and is, in the case of the 2002 mortgage conditions, the 2004
mortgage conditions and the 2006 mortgage conditions, subject to a cap which is
currently set at a margin of 2.5 per cent. above the Bank of England's base
rate. The Abbey SVR is also subject to the variances as set forth below.
Loans may combine one or more of the features listed in this section. In
respect of the interest rates which last for a period of time specified in the
offer conditions, after the expiration of that period a loan associated with
that interest rate may (a) move to some other interest rate type or (b) become a
tracker loan (as described in the following bulleted list) with a variable rate
of interest linked to a rate set from time to time by the Bank of England or (c)
revert to, or remain at, the SVR. The features that apply to a particular loan
are specified in the offer conditions (as varied from time to time). The
features are as follows:
o "LARGE LOAN DISCOUNTS" allows some borrowers to pay interest at a
discretionary discount to the SVR, based on the aggregate size of
the loans under the mortgage account (i) at origination or (ii)
when a further advance is made;
o "DISCOUNTED VARIABLE RATE LOANS" allow the borrower to pay
interest at a specified discount to the SVR;
o "CAPPED RATE LOANS" are subject to a maximum rate of interest and
charge interest at the lesser of the SVR (or, as the case may be,
the tracker rate) or the specified capped rate;
o "TRACKER LOANS" are subject to a variable rate of interest that is
linked to an interest rate other than the SVR - for example the
rate may be set at a fixed or variable margin above or below
sterling LIBOR or above or below rates set from time to time by
the Bank of England;
o "MINIMUM RATE LOANS" are subject to an interest rate that is the
greater of the SVR (or, as the case may be, the tracker rate) or a
specified minimum rate;
o "HIGHER VARIABLE RATE LOANS" are subject to an interest rate that
is set at a margin above the SVR; and
o "FIXED RATE LOANS" are subject to a fixed rate of interest.
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Except in limited circumstances as set out in "THE SERVICING AGREEMENT -
UNDERTAKINGS BY THE SERVICER", the servicer is responsible for setting the
mortgages trustee SVR on the loans in the current portfolio as well as on any
new loans that are assigned to the mortgages trustee. The 1995 mortgage
conditions applicable to SVR loans provide that the SVR may only be varied for
certain reasons, which are specified in those mortgage conditions. These reasons
include:
o to maintain the competitiveness of the seller's business as a
whole, taking into account actual or expected changes in market
conditions;
o to reflect actual or expected changes in the cost of funds used by
the seller in its mortgage lending business;
o to ensure that the seller's business is run prudently;
o to reflect a change in the general practice of mortgage lenders;
o to reflect any regulatory requirements or guidance or any change
in the law or decision or recommendation by a court or an
ombudsman; or
o to reflect a change which the seller reasonably believes has
occurred or is likely to occur in the risk it runs in connection
with its security or the recovery of the sums due from the
borrower.
The term "SELLER" in these six bullet points means Abbey and its
successors and assigns.
In respect of the loans with these 1995 mortgage conditions, the servicer
may also change the mortgages trustee SVR for any other reason which is valid.
The 2002 mortgage conditions, the 2004 mortgage conditions, the 2006
mortgage conditions and the 2007 mortgage conditions applicable to SVR loans
provide that the SVR may be varied for one or more of the following reasons,
which are specified in those mortgage conditions:
o to maintain the competitiveness of the seller's personal banking
business, taking account of actual or anticipated changes in the
interest rates which other financial institutions charge to
personal mortgage borrowers;
o to reflect actual or expected changes in the cost of funds used by
the seller in making loans to its personal mortgage borrowers;
o to ensure that the seller's business is run in a way which
complies with the requirements of its regulator or of any central
bank or other monetary authority; or
o to enable the seller to ensure that the SVR does not exceed the
cap.
The term "SELLER" in these four bullet points means Abbey and its
successors and assigns.
In respect of the loans with these 2002 mortgage conditions, the 2004
mortgage conditions or the 2006 mortgage conditions, the servicer may also:
o change the mortgages trustee SVR for any reason which is valid; or
o increase or reduce the margin creating the cap on the SVR,
provided that in each case not less than 30 days' notice of an increase is given
and not less than seven days' notice of a reduction is given. If, in the case of
loans under the 2002 mortgage conditions, the 2004 mortgage conditions or the
2006 mortgage conditions, the mortgages trustee SVR is increased for a valid
reason or if the margin creating the cap on the SVR is increased, then an
affected borrower will be entitled to repay all the sums due from that borrower
under the mortgage terms within three months from the date on which the increase
takes effect without paying any early repayment fee that would otherwise apply.
The 2007 mortgage conditions applicable to SVR loans provide that the SVR
may be varied for one or more of the following reasons, which are specified in
those mortgage conditions:
o to maintain the competitiveness of the seller's personal banking
business, taking account of actual or anticipated changes in the
interest rates which other financial institutions charge to
personal mortgage borrowers;
o to reflect actual or expected changes in the cost of funds used by
the seller in making loans to its personal mortgage borrowers; and
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o to ensure that the seller's business is run in a way which
complies with the requirements of its regulator or of any central
bank or other monetary authority.
The term "SELLER" in these four bullet points means Abbey and its
successors and assigns.
In respect of the loans with the 2007 mortgage conditions, the servicer
may also change the mortgage trust SVR for any reason which is valid, provided
that in each case not less than 30 days' notice of an increase is given and not
less than seven days' notice of a reduction is given. If, in the case of the
2007 mortgage conditions, the mortgage trust SVR is increased for a valid
reason, then an affected borrower will be entitled to repay all the sums due
from that borrower under the mortgage terms within three months from the date on
which the increase takes effect without paying any early repayment fee that
would otherwise apply.
The need to change the Abbey SVR is considered at least monthly by the
pricing committee of Abbey, which includes a number of senior Abbey executives,
and is additionally considered immediately in the light of all changes to Bank
of England rates. In maintaining, determining or setting the mortgages trustee
SVR, the servicer will apply the factors set out here and, except in limited
circumstances as set out in "THE SERVICING AGREEMENT - UNDERTAKINGS BY THE
SERVICER", has undertaken to maintain, determine or set the mortgages trustee
SVR at a rate which is not higher than the Abbey SVR from time to time.
The servicer is also responsible for setting any variable margins in
respect of tracker loans in the current portfolio as well as on any new tracker
loans that are assigned to the mortgages trustee. However, in maintaining,
determining or setting these variable margins, except in the limited
circumstances as set out in "THE SERVICING AGREEMENT - UNDERTAKINGS BY THE
SERVICER", the servicer has undertaken to maintain, determine or set the
variable margins at a level which is not higher than the variable margins set in
accordance with the seller's policy from time to time.
FURTHER ADVANCES
If a borrower wishes to take out a further loan secured by the same
mortgage (but excluding a drawdown under a flexible loan as described under "-
FLEXIBLE LOANS"), the borrower will need to make a further application and the
seller will use the lending criteria applicable to further advances at that time
in determining whether to approve the application. All further advances will be
funded solely by the seller. The seller will also reassess the value of the
property by a valuer approved by the seller or, where appropriate, according to
a methodology which would meet the standards of a reasonable, prudent mortgage
lender (as referred to under "THE SERVICING AGREEMENT - UNDERTAKINGS BY THE
SERVICER") and which has been approved by the Director of Group Property and
Survey of the seller. A new loan-to-value ratio will be calculated by dividing
the aggregate of the outstanding amount and the further advance by the
reassessed valuation. The aggregate of the outstanding amount of the loan and
the further advance may be greater than the original amount of the loan.
However, no loans will be assigned to the mortgages trust where the LTV ratio at
the time of origination or further advance is in excess of 95 per cent.
Unless otherwise specified in the relevant prospectus supplement, none of
the loans in an expected portfolio obliges the seller to make further advances
(other than drawdowns under flexible loans as described under "- FLEXIBLE
LOANS"). However, some loans in an expected portfolio at that time may have had
further advances made on them prior to their assignment to the mortgages
trustee, and new loans added to the portfolio in the future, may have had
further advances made on them in the past. If a loan becomes subject to a
further advance after that loan has been assigned to the mortgages trustee, then
the seller will be required to repurchase the loan or loans under the relevant
mortgage account and their related security from the mortgages trustee. See
"RISK FACTORS - LOANS SUBJECT TO PRODUCT SWITCHES AND FURTHER ADVANCES WILL BE
REPURCHASED BY THE SELLER FROM THE MORTGAGES TRUSTEE, WHICH WILL AFFECT THE
PREPAYMENT RATE OF THE LOANS, AND THIS MAY AFFECT THE YIELD TO MATURITY OF THE
ISSUING ENTITY NOTES" and "ASSIGNMENT OF THE LOANS AND THEIR RELATED SECURITY".
FLEXIBLE LOANS
General
A flexible loan typically incorporates features that give the borrower
options to make further drawings on the loan account and/or to overpay or to
underpay principal and interest in a given month. The seller offers flexible
loans to its borrowers, and it has the right to assign to the mortgages trustee
new loans that may be flexible loans. In addition to the flexible loans offered
to date, the seller may offer flexible loans in the future (that may be assigned
to the mortgages trustee) that have different features from those described
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here. See "THE MORTGAGES TRUST - ADDITIONS TO THE TRUST PROPERTY". The seller
has also offered loans to its borrowers which may, after the expiry of a period
of time specified in the offer conditions, acquire features of flexible loans
other than the ability to make further drawings.
Currently the total amount outstanding at any time on a flexible loan as
described below cannot exceed an LTV ratio of 95 per cent., or exceed an LTV
ratio of 90 per cent. if an available funds facility exists. The loan and, where
applicable, the available funds facility are secured by a first legal charge
over a property in England and Wales or a first-ranking standard security over a
property in Scotland. Some of the flexible loans are secured by both a first and
second charge or standard security in favour of the seller.
Flexible loans - offer dated on or before 2 July 2002
In respect of flexible loans where the seller's offer to lend is dated on
or before 2 July 2002, there are three basic elements: the initial loan, the
available funds facility and the overpaid funds account. The amount of the
initial loan is agreed at origination. Borrowers may, during the life of these
flexible loans, draw additional amounts from the available funds facility on
request to the seller, up to the amount available and subject to the mortgage
conditions.
The agreement for the available funds facility is regulated by the CCA,
which prescribes the form and procedure and (insofar as will be applicable)
pre-contract disclosure for making an agreement regulated by the Act.
Subject to the provisions for underpayments and payment holidays,
borrowers are required to make a monthly payment on the initial loan and (if a
drawdown has been made) on the available funds facility. A borrower may make an
overpayment at any time. If a borrower makes an overpayment, it is used for the
following purposes and in the following order:
o to reduce any part of the initial loan which is then overdue;
o to reduce any part of the drawdown debt in the available funds
facility which is then overdue;
o to reduce the remainder of the drawdown debt in the available
funds facility, if specifically requested by the borrower, or if
the overpaid funds account has been closed; and
o to create or to increase a credit balance in the overpaid funds
account.
The credit balance in the overpaid funds account can be used by the
borrower to fund an underpayment or a payment holiday or it can be used to
reduce the balance owing on the initial loan. If the overpaid funds account has
been closed, which will occur when the initial loan is repaid, the balance of
any overpayment which would otherwise have been credited to the overpaid funds
account will be repaid to the borrower.
Borrowers may make an underpayment or miss a monthly payment entirely if
there is a credit balance on the overpaid funds account that is equal to or
greater than the amount to be underpaid or the missed monthly payment.
Alternatively, a borrower may make an underpayment or miss a monthly payment if
there is an amount available for drawdown in the available funds facility that
is at least as much as the amount to be underpaid or the missed monthly payment.
The "REPAYMENT" basis (as set out in "- REPAYMENT TERMS") applies to the
whole of the drawdown debt under the available funds facility.
The seller may increase or reduce the credit limit for the available
funds facility for one of the reasons specified in the credit agreement for the
available funds facility.
Flexible loans - offer dated on or after 3 July 2002
In respect of flexible loans where the seller's offer to lend is dated on
or after 3 July 2002, there is a flexible loan facility with a credit limit. The
amount of the credit limit and the "AMOUNT AVAILABLE" (that is, the credit limit
less the monies owing to the seller) are agreed at origination. Borrowers may,
during the life of these flexible loans, draw additional amounts from the
flexible loan facility on request to the seller, up to the amount available and
subject to the mortgage conditions.
The agreement for the flexible loan facility has been designed by the
seller with the intention that it is not regulated by the CCA.
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Subject to the provisions for underpayments and payment holidays,
borrowers are required to make monthly payments on the flexible loan facility. A
borrower may make an overpayment at any time. Any such overpayment will
immediately reduce the balance owing on the flexible loan facility.
The "AMOUNT AVAILABLE" can be used by the borrower to fund an
underpayment or a payment holiday or a further drawdown, subject to the mortgage
conditions.
In respect of further drawdowns, unless the borrower gives the seller
instructions to the contrary (as set out below):
o if the offer conditions specify that the "repayment" basis (as set
out in "- REPAYMENT TERMS") applies to the whole of the first
drawdown, then the "repayment" basis will also apply to the whole
of each further drawdown made under that flexible loan facility;
o if the offer conditions specify that the "interest-only" basis (as
set out in "- REPAYMENT TERMS") applies to the whole of the first
drawdown, then the "interest-only" basis will also apply to the
whole of each further drawdown made under that flexible loan
facility; and
o if the offer conditions specify that the "interest-only" basis (as
set out in "- REPAYMENT TERMS") applies to part only of the first
drawdown, then the "repayment" basis will apply to the whole of
each further drawdown made under that flexible loan facility.
A borrower's request to the seller for a further drawdown may include
instructions to the seller that, as from the date when the borrower makes the
further drawdown:
o the "repayment" basis is to apply to the whole or a specified part
of the balance owing in place of the "interest-only" basis; or
o the "interest-only" basis is to apply to the whole or a specified
part of the balance owing in place of the "repayment" basis.
o The seller may increase the credit limit if:
o the borrower writes to the seller asking the seller to exercise
its power to increase the credit limit;
o the borrower pays any credit limit review charge; and
o if requested to do so, the borrower pays for a new valuation
report on the property and provides the seller with further
information in relation to the borrower's financial position.
The seller may reduce the credit limit:
o to ensure that the monies owing to the seller under the flexible
loan facility and the amount available do not together exceed 90
per cent. of the current market value of the property;
o to ensure that the amount available at any time does not exceed
the amount available as at the date of completion of the flexible
loan facility;
o if the borrower is in breach of the mortgage terms;
o if the seller is reasonably of the opinion that, because of a
change in the borrower's financial position, the borrower could
not afford to repay present or future drawdowns up to the existing
credit limit; or
o to ensure that the seller's business is run in a way that complies
with the requirements of the seller's regulator or of any central
bank or other monetary authority.
If a reduction in the credit limit means that the monies owing to the
seller exceed the reduced credit limit for the flexible loan facility, then the
borrower must pay off the excess within three months after the date on which the
seller gives the borrower notice of the reduction.
Flexible loans - flexible plus loans
Flexible loans include flexible plus loans, which are documented under
the flexible plus loan conditions 2003, the flexible plus mortgage conditions
2006 and the flexible plus mortgage conditions 2007. These conditions mirror
those for other flexible loans where the seller's offer to lend is dated on or
after 3 July 2002, save for the following material differences in relation to
the borrower's savings account, overpayments, payment holidays and
underpayments, the interest rate tracking differential and further drawdowns:
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o Flexible plus loans contain a savings account element. No interest
is paid by the seller on the savings. Instead, interest is charged
each day on the amount which, at the end of the day, represents
the capital owing on the mortgage account, less any savings in the
savings account. As a result, when the borrower has savings in the
savings account, the amount of interest charged on the mortgage
account will be reduced.
o Any savings held in the savings account do not affect the amount
of the borrower's monthly payment. As a result, when there are
savings, the monthly payment the borrower makes will exceed the
amount actually charged to the mortgage account and the seller
will treat this excess as an overpayment.
o The seller will use these overpayments to reduce or pay off any
part of the mortgage balance which is overdue at that date. The
remainder will be credited to the savings account. The borrower
may also opt to make a series of regular overpayments with the
borrower's monthly payment, and these overpayments will be used by
the seller in the same way.
o The borrower may also make one-off overpayments in the form of a
deposit. The seller will, on instructions from the borrower,
credit this deposit to the mortgage account in order to reduce the
mortgage balance. In the absence of such instructions, the deposit
will be used to reduce or pay off any part of the mortgage balance
which is overdue at that date and the remainder will be credited
to the savings account.
o The borrower may withdraw money from the savings account or
instruct the seller to use some or all of the money in the savings
account to reduce the mortgage balance. The borrower may also
instruct the seller to use the savings to fund a payment holiday
or make up a shortfall on an underpayment.
o The savings in the savings account must not exceed the mortgage
balance.
o The borrower must not overdraw on the savings account. If the
savings account becomes overdrawn, the seller will add the amount
overdrawn to the mortgage balance.
o The seller may use the savings at any time to pay off any of the
following items which the borrower has failed to pay when they
have become due: a monthly payment, an administration charge, a
credit limit review charge, other items of costs and the mortgage
balance if it becomes immediately payable.
o The borrower may continue to make drawdowns until the end of the
mortgage repayment period, even if the mortgage balance has been
repaid. The mortgage will remain in force during the repayment
period as security for money which may become owing under the
borrower's facility to make drawdowns up to the credit limit.
PRODUCT SWITCHES
From time to time, borrowers may request or the seller may offer, and the
borrowers may accept, a variation in the financial terms and conditions
applicable to the borrower's loan. If a loan is subject to a product switch,
then the seller will be required to repurchase the loan or loans under the
relevant mortgage account and their related security from the mortgages trustee.
See "RISK FACTORS - LOANS SUBJECT TO PRODUCT SWITCHES AND FURTHER ADVANCES WILL
BE REPURCHASED BY THE SELLER FROM THE MORTGAGES TRUSTEE, WHICH WILL AFFECT THE
PREPAYMENT RATE OF THE LOANS, AND THIS MAY AFFECT THE YIELD TO MATURITY OF THE
ISSUING ENTITY NOTES" and "ASSIGNMENT OF THE LOANS AND THEIR RELATED SECURITY".
ORIGINATION OF THE LOANS
The seller currently derives its mortgage-lending business from the
following sources: through a branch network throughout the United Kingdom,
through intermediaries incorporating electronic commerce channels, and from
telephone sales. In terms of value of mortgage-lending business generated, the
current principal intermediaries are Bankhall (Premier Mortgage Service),
Countrywide Assured Group (CAG), Legal and General, Openwork, SESAME, and The
Mortgage Alliance. The relevant prospectus supplement will specify the
percentage of loans in the expected portfolio as at the relevant date originated
through direct channels, through intermediaries and through other channels.
The seller is subject to the Financial Ombudsman Service and follows the
Code of Banking Practice and followed the Council of Mortgage Lenders' Mortgage
Code, which was in force until N(M).
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UNDERWRITING
The decision to offer a loan to a potential borrower is made either
pursuant to an automated process or by underwriters located in branches, head
office sites, telephone operations centres or business development units, who
liaise with the intermediaries.
Each underwriter must pass a formal training programme conducted by the
seller to gain the authority to approve loans. The seller has established
various levels of authority for its underwriters who approve loan applications.
The levels are differentiated by, among other things, degree of risk and the
ratio of the loan amount to the value of the property in the relevant
application. An underwriter wishing to move to the next level of authority must
first take and pass a further training course. The seller also monitors the
quality of underwriting decisions on a regular basis.
The seller introduced the automated process in May 2005. The automated
process reduces the manual assessment of loans by underwriters in relation to
those segments of the seller's mortgages business that have historically
performed well and that meet the relevant lending criteria. The introduction of
the automated process has not affected the substance of the decisioning process.
The seller is continually reviewing the way in which it conducts its
mortgage origination business, in order to ensure that it remains up-to-date and
cost effective in a competitive market.
Furthermore, notwithstanding any of the changes described in this
section, the seller will continue to retain exclusive control over the
underwriting policies and lending criteria to be applied to the origination of
each loan.
LENDING CRITERIA
Each loan in the current portfolio was originated according to the
seller's lending criteria applicable at the time the loan was offered, which
included some or all of the criteria set out in this section. New loans may only
be included in the portfolio if they are originated in accordance with the
lending criteria applicable at the time the loan is offered and if the
conditions contained in "ASSIGNMENT OF THE LOANS AND THEIR RELATED SECURITY"
have been satisfied. However, the seller retains the right to revise its lending
criteria from time to time and so the criteria applicable to new loans may not
be the same as those currently used. Some of the factors currently used in
making a lending decision are as follows:
(1) Type of property
Properties may be either freehold or leasehold or the Scottish
equivalents. In the case of leasehold properties, the unexpired portion of the
lease must in most cases not expire earlier than 30 years after the term of the
loan.
All properties have been valued by a valuer approved by the seller or,
where appropriate, according to a methodology which would meet the standards of
a reasonable, prudent mortgage lender (as referred to under "THE SERVICING
AGREEMENT - UNDERTAKINGS BY THE SERVICER"). Such methodology may involve a form
of valuation which is less comprehensive than the traditional full valuation and
may involve an external viewing only by the valuer or a desktop valuation. All
valuations are carried out in a manner which has been approved by the Chief
Surveyor of the seller.
(2) Term of loan
There is a minimum term of 5 years on the loans and the maximum term is
normally 35 years. For interest-only loans where the borrower is using a pension
plan as the relevant repayment mechanism to repay the loan at maturity, the
maximum term is extended to 57 years to reflect the long-term nature of pension
plans. For these "PENSION-LINKED LOANS", if the property is a leasehold and the
lease has 55 or fewer years unexpired as at the date of completion of the
mortgage, the maximum term is 25 years. Otherwise, the maximum term of a loan
secured on a leasehold property may not exceed the unexpired residue of the term
of the relevant lease.
(3) Age of applicant
All borrowers must be aged 18 or over. There is no maximum age limit
unless the loan is a pension-linked loan, in which case the loan must mature no
later than the time when the borrower reaches 75 years of age.
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(4) Loan-to-value (or "LTV") ratio
The maximum original LTV ratio of loans in the current portfolio is 95
per cent., excluding any capitalised (as defined in the glossary) high
loan-to-value fee and/or booking fee and/or valuation fee (these fees are also
defined in the glossary).
Value is determined, in the case of a remortgage, on the basis of the
valuer's valuation only and, in the case of a property which is being purchased,
on the lower of the valuer's valuation and the purchase price and, in the case
of a further advance, on the basis of the valuer's valuation or, where
appropriate, according to a methodology which would meet the standards of a
reasonable, prudent mortgage lender and which has been approved by the Chief
Surveyor of the seller (or his successors or predecessors).
(5) Status of applicant(s)
The maximum amount of the aggregate loan(s) under a mortgage account is
determined by a number of factors, including the applicant's income. In
determining income, the seller includes basic salary as primary income and also
the following which it considers to be regular: allowances, mortgage subsidies,
pensions and annuities (for self-employed applicants income is derived from the
net profit of the business). If theses payments are not considered regular, they
are treated as secondary income.
In the case of loans of equal to or less than (pound)1,000,000 with an
LTV ratio of equal to and less than 85 per cent., borrowers (whether employed or
self employed) may certify as to their own income. The income stated is assessed
for reasonableness by age, job type and geographical location and must be less
than or equal to the 80th percentile of the distribution of incomes for
borrowers who have verified their income.
Income must be evidenced or be able to be proved on every application
that Abbey receives. Abbey will continue to allow Intermediary and Telephone
Distribution Additional Loan mortgage applications that meet certain criteria to
be Fast Tracked, i.e. submitted without proof of income, in order to simplify
the paperwork requirements and speed up the mortgage process. However, this
agreement is on the basis that the income declared is accurate and that evidence
has been captured.
The highest risk cases (those that historically did not score as `Low
Risk') will not be eligible for Fast Track.
Where cases are not eligible to be Fast Tracked, self-employed applicants
must provide one of the following to certify as to their own income: an
accountant's letter; minimum 2 years' signed accounts; or minimum 2 years'
self-assessment returns and tax calculation forms. Employed borrowers must
submit documentation (such as pay slips or bank statements) to certify as to
their own income.
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The seller may exercise discretion within its lending criteria in
applying those factors which are used to determine the maximum amount of the
loan(s). Accordingly, these parameters may vary for some loans.
All loans are subject to affordability, based on the income and outgoings
of applicants.
(6) Credit history
(a) Credit search
With the exception, in some circumstances, of then existing Abbey
mortgage loan borrowers, a credit search is carried out in respect
of all applicants. Applications may be declined where an adverse
credit history (for example, county court judgment (or the
Scottish equivalent), default or bankruptcy notice) is revealed.
(b) Existing lender's reference
The seller may also seek a reference from any existing and/or
previous lender. Any reference must satisfy the seller that the
account has been properly conducted and that no history of
material arrears exists.
(c) First time buyers/applicants in rented accommodation
Where applicants currently reside in rented accommodation, a
landlord's reference may be sought by the seller. In addition, if
considered appropriate, a further reference may be taken in
connection with any other property rented by the applicant(s)
within the three preceding years.
(d) Bank reference
A bank reference may be sought or the applicant may be required to
provide bank statements in support of his or her application.
(7) Scorecard and policy rules
With the exception of some additional loans made to existing borrowers,
the seller uses some of the criteria described here and various other criteria
to produce an overall score for the application which reflects a statistical
analysis of the risk of advancing the loan. The score is used in conjunction
with a number of policy rules to determine the lending decision.
CHANGES TO THE UNDERWRITING POLICIES AND THE LENDING CRITERIA
The seller's underwriting policies and lending criteria are subject to
change within the seller's sole discretion. New loans and further advances that
are originated under lending criteria that are different from the criteria set
out here may be assigned to the mortgages trustee. The score is used in
conjunction with a number of policy rules to determine the lending decision.
Neither the issuing entity nor the seller will revalue (a) any of the
mortgaged properties in the portfolio or (b) any new loans and their related
security which are to be sold to the mortgages trustee from time to time for the
purposes of any issue.
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INSURANCE POLICIES
INSURANCE ON THE PROPERTY
A borrower is required to provide for insurance on the mortgaged property
for an amount equal to the estimated rebuilding cost of the property. The
borrower may either purchase the insurance through the seller or the borrower or
landlord (for a leasehold property) may arrange for the insurance independently.
Where borrower- or landlord-arranged insurance fails without the knowledge of
the seller, a properties in possession policy issued in favour of the seller by
Baker Street Risk and Insurance (Guernsey) Limited, a wholly owned insurance
subsidiary of the seller, provides cover for the seller (but not the borrower)
for any losses or costs which the insured is unable to recover, and the seller
can claim under the properties in possession policy once the relevant property
has been repossessed by the seller.
ABBEY POLICIES
If a borrower asks the seller to arrange insurance on their behalf, a
policy will be issued by an insurance underwriter in favour of that borrower.
The policy will provide the borrower with rebuilding insurance up to an amount
equal to the actual rebuilding cost subject to the valuation. Standard policy
conditions apply, which are renegotiated periodically by the seller with the
insurance underwriter(s) selected from time to time by the seller to provide the
insurance. Generally the seller is named as an insured in a schedule to the
policy, but successors in title and assigns, including the mortgages trustee,
are not covered. However, the insurer has confirmed or will confirm to the
seller, the mortgages trustee, Funding and the security trustee that,
notwithstanding the fact that the seller has agreed to assign the seller's
interest in a number of properties which are covered by Abbey policies to the
mortgages trustee, the insurer will continue to process and pay claims in
respect of those properties in the same way and in the same amount as it would
have done had the mortgage sale agreement not been entered into. Amounts paid
under the insurance policy are generally utilised to fund the reinstatement of
the property or are otherwise paid to the seller to reduce the amount of the
loan(s).
In the mortgage sale agreement, the seller has agreed to transfer the
proceeds of all relevant claims made under the Abbey policies (but not the right
to make and enforce claims) to the mortgages trustee. The seller has also agreed
to make and enforce claims and to hold the proceeds of claims on trust for the
mortgages trustee or as the mortgages trustee may direct. In the servicing
agreement, the seller, acting in its capacity as servicer, has also agreed to
deal with claims under the Abbey policies in accordance with its normal
procedures. If the seller, acting in its capacity as servicer, receives any
claim proceeds relating to a loan which has been assigned to the mortgages
trustee, these will be required to be paid into the mortgages trustee's, rather
than the seller's, accounts.
SELLER-INTRODUCED INSURANCE
If the Abbey insurer is unwilling to provide insurance to a borrower, the
seller has ad hoc arrangements with other insurers who may provide the borrower
with insurance. If it transpires that the property thought to be covered by
seller-introduced insurance is not so covered, and the property is damaged while
uninsured, the seller is entitled (once the property has gone into possession)
to make a claim under the properties in possession policy (described later in
this section).
BORROWER OR LANDLORD-ARRANGED INSURANCE
If a borrower elects not to take up an Abbey policy, or if a borrower who
originally had an Abbey policy confirms that the borrower no longer requires
that insurance, that borrower is either sent an "ALTERNATIVE INSURANCE
REQUIREMENTS - NEW BUSINESS" form or an "ALTERNATIVE INSURANCE REQUIREMENTS"
form, whichever is appropriate. This varies the insurance provisions of the
mortgage conditions, the most significant variation being the fact that they do
not stipulate a level of insurance cover. Once an alternative insurance
requirements form has been dispatched, it is assumed that the borrower is making
arrangements in accordance with those requirements.
THE PROPERTIES IN POSSESSION POLICIES
If it transpires that a borrower has not complied with the borrower- or
landlord-arranged insurance requirements set out in the alternative insurance
requirements and if the property is damaged while uninsured, the seller is
entitled (once the property is in possession) to make a claim under the
properties in
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possession policy. The properties in possession policy is an insurance policy
provided to the seller by Baker Street Risk and Insurance (Guernsey) Limited
that insures the seller against loss relating to properties after those
properties have been repossessed by the seller. It is not possible for the
properties in possession policy from Baker Street Risk and Insurance (Guernsey)
Limited to provide cover for any company outside the Abbey group, including for
the mortgages trustee. However, the insurer has confirmed to the seller, the
mortgages trustee, Funding and the security trustee that, notwithstanding the
fact that the seller has agreed to assign the seller's interest in a number of
properties which are covered by the properties in possession policy to the
mortgages trustee, the insurer will continue to process and pay claims in
respect of those properties in the same way and in the same amount as it would
have done had the mortgage sale agreement not been entered into. The servicer
will make claims in accordance with the seller's policy and pay proceeds
relating to the loans into the mortgages trustee's accounts.
In the case of leasehold properties where the lease requires the landlord
to insure the property, provision is made to deal with the insurance in the
mortgage conditions or the "GENERAL INSTRUCTIONS TO SOLICITORS" or the "CML'S
LENDERS' HANDBOOK FOR ENGLAND & WALES" or other comparable or successor
instructions or guidelines. Again, if it transpires that the property is not
insured and is damaged, the seller can claim under the properties in possession
policy once the property has been repossessed by the seller.
If a borrower who originally had Abbey-arranged insurance fails to pay a
premium, but does not notify the seller that it wishes to make alternative
arrangements, it is assumed that the borrower requires Abbey-arranged insurance
to continue and no alternative insurance requirements form is sent to that
borrower. The unpaid premium is added to the balance of the relevant loan.
As with its interest in the Abbey policies, the seller has agreed to
assign the proceeds of any claims under any borrower or landlord-arranged
insurance to the mortgages trustee and, to the extent that any proceeds are
received by the servicer, it has agreed to pay these into the mortgages
trustee's accounts.
In the mortgage sale agreement the seller has agreed to make and enforce
claims under the relevant policies and to hold the proceeds of claims on trust
for the mortgages trustee or as the mortgages trustee may direct.
MIG POLICIES
A MIG policy is an agreement between a lender and an insurance company to
underwrite the amount of each relevant mortgage account which exceeds a certain
LTV ratio. Until and including 31 December 2001, Abbey required MIG policies for
all mortgaged properties with an LTV ratio of more than 75 per cent. (with the
exception of some flexible loans). These MIG policies were underwritten by
Carfax Insurance Limited, or Carfax, a wholly owned subsidiary of the seller.
However, on 14 October 2005, Abbey exercised its right to cancel all
relevant MIG policies and, as at the date of this prospectus, none of the
mortgage loans in the available portfolio is covered by a MIG policy. The seller
may choose at some point in the future to reintroduce MIG cover (underwritten by
Carfax or otherwise) for some or all of its mortgage loans but has no obligation
to do so.
If MIG cover were reintroduced, the seller would retain the right to
cancel the MIG policies at any time. If the seller exercised its right to cancel
any such reintroduced MIG policies, the trust property would not then have the
benefit of such MIG policies.
SCOTTISH LOANS
A proportion of the loans in the current portfolio is secured over
properties in Scotland. Under Scots law, the only means of creating a fixed
charge or security over heritable or long leasehold property is the statutorily
prescribed standard security. In relation to Scottish loans, references in this
prospectus to a MORTGAGE are to be read as references to such a standard
security and references to a MORTGAGEE are to be read as references to the
security holder (termed in Scots law the HERITABLE CREDITOR).
In practice, the seller has advanced and intends to advance loans on a
similar basis both in England and Wales and in Scotland. While there are certain
differences in law and procedure in connection with the enforcement and
realisation of Scottish mortgages the seller does not consider that these
differences make Scottish mortgages significantly different or less effective
than those secured over properties in England and Wales. For more information on
the Scottish loans, see "MATERIAL LEGAL ASPECTS OF THE LOANS - SCOTTISH LOANS".
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THE SERVICER
THE SERVICER
Under the servicing agreement, Abbey has been appointed as the initial
servicer of the loans. The day-to-day servicing of the loans is performed by the
servicer through the servicer's retail branches, telephone and electronic
banking centres and operations centres which are subject to the arrangements
described in "THE SERVICING AGREEMENT - ACTUAL DELEGATION BY THE SERVICER". The
servicer's registered office is Abbey National House, 2 Triton Square, Regent's
Place, London NW1 3AN.
This section describes the servicer's procedures in relation to mortgage
loans generally. A description of the servicer's obligations under the servicing
agreement follows in the next section.
Abbey is continually reviewing the way in which it conducts its mortgage
loan servicing business in order to ensure that it remains up-to-date and cost
effective in a competitive market, and the servicer may therefore change any of
its servicing processes and arrangements from time to time. However, Abbey will
retain exclusive control over the underwriting policies and lending criteria and
will agree the servicing standards to be applied in the course of servicing
mortgage loans. It will also seek to ensure that any changes to its servicing
arrangements are made with the minimum level of business interruption.
SERVICING OF LOANS
Servicing procedures include responding to customer enquiries, monitoring
compliance with and servicing the loan features and facilities applicable to the
loans and management of loans in arrears. See "THE SERVICING AGREEMENT".
Pursuant to the terms and conditions of the loans, borrowers must pay the
monthly amount required under the terms and conditions of the loans on or before
each monthly instalment due date. Interest accrues in accordance with the terms
and conditions of each loan and is collected from borrowers monthly.
In the case of variable rate loans, the servicer sets the mortgages
trustee SVR and any variable margin applicable to any tracker loan on behalf of
the mortgages trustee and the beneficiaries, except in the limited circumstances
as set out in the servicing agreement. In the case of some loans that are not
payable at the mortgages trustee SVR, for example loans at a fixed rate, the
borrower will continue to pay interest at the relevant fixed rate until the
relevant period ends in accordance with the borrower's offer conditions. After
that period ends, and unless the seller issues an offer, which the borrower
accepts, of another option with an incentive, interest will be payable at the
mortgages trustee SVR. In addition, some other types of loans are payable or may
change so as to become payable by reference to other rates not under the control
of the servicer such as LIBOR or rates set by the Bank of England, which rates
may also include a fixed or variable rate margin set by the servicer.
The servicer will take all steps necessary under the mortgage terms to
notify borrowers of any change in the interest rates applicable to the loans,
whether due to a change in the mortgages trustee SVR or any variable margin or
as a consequence of any provisions of those terms.
Payments of interest and, in the case of repayment loans, principal, are
payable in arrear monthly. The servicer is responsible for collecting all
payments made by the relevant borrower either directly to the mortgages trustee
GIC account held in the name of the mortgages trustee or to the relevant
alternative account or cleared through the relevant Abbey account and credited
to the mortgages trustee GIC account, as appropriate. All payments from
borrowers are made by direct debits unless the servicer, as agent of the
mortgages trustee, has specifically agreed to another form of payment with that
borrower. The servicer initially credits the mortgages trustee GIC account and
the alternative accounts with the full amount of the direct debit requests.
However, a few days after the due date for payment the unpaid direct debits
begin to be returned, at which time the servicer is permitted to reclaim from
the mortgages trustee GIC account or the relevant alternative account, as
appropriate, the corresponding amounts previously credited. In these
circumstances the usual arrears procedures described in "- ARREARS AND DEFAULT
PROCEDURES" will be taken.
All amounts which are credited and paid to an alternative account are
transferred into the mortgages trustee GIC account on a regular basis and in any
event no later than the next business day after they are deposited in the
relevant alternative account. Any amounts which are due to be paid to the
mortgages trustee GIC account but which are credited in error to an account of
the seller will initially be held on trust by
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the seller for the mortgages trustee. The seller will then transfer those
amounts to the mortgages trustee GIC account as soon as reasonably practicable.
A borrower of a reward loan may request that a reward cashback is paid in
cash and/or is applied by the seller in partial repayment of the related reward
loan. If a borrower of a reward loan that forms part of the trust property
requests that a reward cashback (or a proportion of it) should be so applied
against the relevant reward loan, the seller will transfer an amount equal to
the relevant reward cashback (or the relevant proportion thereof) to the
mortgages trustee GIC account as soon as reasonably practicable after it falls
due for payment and, pending such transfer, will hold such amount on trust for
the mortgages trustee. Any such reward cashback shall be applied first against
any overdue amounts on the relevant mortgage account and then against the
principal amount of the relevant reward loan.
ARREARS AND DEFAULT PROCEDURES
The servicer regularly gives to the mortgages trustee and the
beneficiaries written details of loans that are in arrears. A loan is identified
as being IN ARREARS when the aggregate of all amounts overdue is at least equal
to the monthly payment then due. In general, the servicer attempts to collect
all payments due under or in connection with the loans, having regard to the
circumstances of the borrower in each case.
The arrears are reported between 1 and 14 days after the amount has been
identified unless the arrears have been reduced in the meantime to an amount
less than the monthly payment then due. After the arrears are first reported the
borrower is contacted and asked for payment of the arrears. The servicer then
continues to contact the borrower asking for payment of the arrears.
Where considered appropriate, the servicer may enter into arrangements
with the borrower regarding the arrears, including:
o arrangements to make each monthly payment as it falls due plus an
additional amount to pay the arrears over a period of time;
o arrangements to pay only a portion of each monthly payment as it
falls due; and
o a deferment for a period of time of all payments, including
interest and principal or parts of any of them.
Any arrangements may be varied from time to time at the discretion of the
servicer, the primary aim being to rehabilitate the borrower and recover the
situation.
Legal proceedings do not usually commence until the arrears become
equivalent to at least three times the monthly payment then due. However, in
many cases legal proceedings may commence later than this. Once legal
proceedings have commenced, the servicer may send further letters to the
borrower encouraging the borrower to enter into discussions to pay the arrears.
The servicer may still enter into an arrangement with a borrower at any time
prior to a court hearing, or it may apply to the court to adjourn a court
hearing. If a court order is made for payment and the borrower subsequently
defaults in making the payment, then the servicer may take action as it
considers appropriate, including entering into an arrangement with the borrower.
If the servicer applies to the court for an order for repossession, the court
has discretion as to whether it will grant the order.
The servicer has discretion to deviate from these procedures. In
particular, the servicer may deviate from these procedures where a borrower
suffers from a mental or physical infirmity, is deceased or where the borrower
is otherwise prevented from making payment due to causes beyond the borrower's
control. This is the case for both sole and joint borrowers.
After repossession, the servicer may take action as it considers
appropriate, including to:
o secure, maintain or protect the property and put it into a
suitable condition for sale;
o create (other than in Scotland) any estate or interest on the
property, including a leasehold;
o dispose of the property (in whole or in parts) or of any interest
in the property, by auction, private sale or otherwise, for a
price it considers appropriate; and
o let the property for any period of time.
The servicer has discretion as to the timing of any of these actions,
including whether to postpone the action for any period of time. The servicer
may also carry out works on the property as it considers appropriate, including
the demolition of the whole or any part of it.
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It should also be noted that the servicer's ability to exercise its power
of sale in respect of the property is dependent upon mandatory legal
restrictions as to notice requirements. In addition, there may be factors
outside the control of the servicer, such as whether the borrower contests the
sale and the market conditions at the time of sale, that may affect the length
of time between the decision of the servicer to exercise its power of sale and
final completion of the sale.
The net proceeds of sale of the property are applied against the sums
owed by the borrower to the extent necessary to discharge the mortgage including
any accumulated fees and interest. Any amounts owed by the borrower not covered
by the net proceeds of sale will be written off at that date and the account
closed. However, the borrower is still liable for any deficit left over after
the property is sold. The servicer attempts to recover as much of this deficit
as possible from the borrower.
These arrears and security enforcement procedures may change over time as
a result of a change in the servicer's business practices or legislative and
regulatory changes.
ARREARS EXPERIENCE
The prospectus supplement relating to an issue will contain tables
summarising the then up-to-date information on the levels of arrears and
repossession experience in respect of the loans comprising the mortgages trust.
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THE SERVICING AGREEMENT
The following section contains a summary of the material terms of the
servicing agreement. The summary does not purport to be complete and is subject
to the provisions of the servicing agreement.
INTRODUCTION
On 26 July 2000, Abbey was appointed by the mortgages trustee, Funding
and the seller under the servicing agreement to be their agent to service the
loans and their related security and the security trustee consented to the
appointment. Abbey has undertaken that in its role as servicer it will comply
with any proper directions and instructions that the mortgages trustee, Funding,
the seller or the security trustee may from time to time give to Abbey in
accordance with the provisions of the servicing agreement. The servicer is
required to administer the loans in the following manner:
o in accordance with the servicing agreement; and
o as if the loans and mortgages had not been assigned to the
mortgages trustee but remained with the seller, and in accordance
with the seller's procedures and administration and enforcement
policies as they apply to those loans from time to time.
The servicer's actions in servicing the loans in accordance with its
procedures are binding on the mortgages trustee. The servicer may, in some
circumstances, delegate or sub-contract some or all of its responsibilities and
obligations under the servicing agreement. However, the servicer remains liable
at all times for servicing the loans and for the acts or omissions of any
delegate or sub-contractor. The servicer has delegated some of its
responsibilities and obligations under the servicing agreement as described in
"- ACTUAL DELEGATION BY THE SERVICER".
POWERS
Subject to the guidelines for servicing set forth in the preceding
section, the servicer has the power, among other things:
o to exercise the rights, powers and discretions of the mortgages
trustee, the seller and Funding in relation to the loans and their
related security and to perform their duties in relation to the
loans and their related security; and
o to do or cause to be done any and all other things which it
reasonably considers necessary or convenient or incidental to the
administration of the loans and their related security or the
exercise of such rights, powers and discretions.
UNDERTAKINGS BY THE SERVICER
The servicer has undertaken, among other things, the following:
(a) To maintain approvals, authorisations, consents, and licences
required for itself in order to properly service the loans and
their related security and to perform or comply with its
obligations under the servicing agreement.
(b) To determine and set the mortgages trustee SVR and any variable
margin applicable to any tracker loan in relation to the loans
(including the relevant tracker loans) comprising the trust
property except in the limited circumstances described in this
paragraph (b) when the mortgages trustee will be entitled to do
so. It will not at any time, without the prior consent of the
mortgages trustee, Funding and the security trustee, set or
maintain:
(i) the mortgages trustee SVR at a rate which is higher than
(although it may be lower than) the then prevailing Abbey
SVR which applies to loans beneficially owned by the seller
outside the mortgages trust;
(ii) a margin in respect of any tracker loan which, where the
offer conditions for that loan provide that the margin
shall be the same as the margin applicable to all other
loans having the same offer conditions in relation to
interest rate setting, is higher than the margin then
applying to those loans beneficially owned by the seller
outside the mortgages trust; and
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(iii) a margin in respect of any other tracker loan which is
higher than the margin which would then be set in
accordance with the seller's policy from time to time in
relation to that loan.
In particular, the servicer will determine on each interest
payment date, having regard to:
(i) the income which Funding would expect to receive during the
next succeeding interest period;
(ii) the mortgages trustee SVR, any variable margins applicable
in relation to any tracker loans and the variable mortgage
rates in respect of the loans which the servicer proposes
to set under the servicing agreement; and
(iii) the other resources available to Funding including the
Funding swap agreement and the reserve funds,
whether Funding would receive an amount of income during that loan
interest period which is less than the amount which is the
aggregate of (A) the amount of interest which will be payable in
respect of all AAA term advances on the interest payment date
falling at the end of that loan interest period and (B) the other
senior expenses of Funding ranking in priority to interest due on
all those AAA term advances. If the servicer determines that there
will be a shortfall in the foregoing amounts, it will give written
notice to the mortgages trustee, Funding and the security trustee,
within one London business day, of the amount of the shortfall and
the SVR and any variable margins applicable in relation to any
tracker loans which would, in the servicer's opinion, need to be
set in order for no shortfall to arise, having regard to the
date(s) on which the change to the SVR and any variable margins
would take effect and at all times acting in accordance with the
standards of a reasonable, prudent mortgage lender as regards the
competing interests of borrowers with SVR loans and borrowers with
tracker loans. If the mortgages trustee, Funding and the security
trustee notify the servicer that, having regard to the obligations
of Funding, the SVR and/or any variable margins should be
increased, the servicer will take all steps which are necessary to
increase the SVR and/or any variable margins including publishing
any notice which is required in accordance with the mortgage
terms.
The mortgages trustee and/or Funding and the security trustee may
terminate the authority of the servicer to determine and set the
mortgages trustee SVR and any variable margins on the occurrence
of a SERVICER TERMINATION EVENT as defined under "- REMOVAL OR
RESIGNATION OF THE SERVICER", in which case the mortgages trustee
will set the mortgages trustee SVR and any variable margins itself
in accordance with this paragraph (b) and Abbey will have the
right to make representations to the mortgages trustee with
respect to changes to the variable margin.
(c) To the extent so required by the relevant mortgage terms and
applicable law, to notify borrowers of any change in interest
rates, whether due to a change in the mortgages trustee SVR, the
margin applicable to any tracker loan or as a consequence of any
provisions of the mortgage conditions or the offer conditions. It
will also notify the mortgages trustee, the security trustee and
the beneficiaries of any change in the mortgages trustee SVR.
(d) To execute all documents on behalf of the mortgages trustee, the
seller and Funding which are necessary or desirable for the
efficient provision of services under the servicing agreement.
(e) To keep records and accounts on behalf of the mortgages trustee in
relation to the loans.
(f) To keep the customer files and (if applicable) title deeds in safe
custody and maintain records necessary to enforce each mortgage.
It will ensure that (if applicable) each title deed is capable of
identification and retrieval and that each title deed is
distinguishable from information held by the servicer for other
persons. If the servicer's short-term, unsecured, unsubordinated
and unguaranteed debt is rated less than A-1 by Standard & Poor's,
P-1 by Moody's and F1 by Fitch, it will use reasonable endeavours
to ensure the customer files and (if applicable) title deeds are
located separately from customer files and any title deeds which
relate to loans held outside the trust property.
(g) To provide the mortgages trustee, Funding and the security trustee
with access to records relating to the administration of the loans
and mortgages and (if applicable) the title deeds.
(h) To make available to beneficial owners of the issuing entity
notes, who have provided the beneficial ownership certification as
described in the servicing agreement, on a monthly basis a report
containing information about the loans in the mortgages trust.
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(i) To assist the cash manager in the preparation of a quarterly
report substantially in the form set out in the cash management
agreement on, among other things, arrears.
(j) To take all reasonable steps, in accordance with the usual
procedures undertaken by a reasonable, prudent mortgage lender, to
recover all sums due to the mortgages trustee, including
instituting proceedings and enforcing any relevant loan or
mortgage.
(k) To enforce any loan which is in default in accordance with its
enforcement procedures or, to the extent that the enforcement
procedures are not applicable having regard to the nature of the
default in question, with the usual procedures undertaken by a
reasonable, prudent mortgage lender on behalf of the mortgages
trustee.
(l) Not knowingly to fail to comply with any legal requirements in the
performance of its obligations under the servicing agreement.
(m) To ensure that at all times the loans (including the flexible
loans) comply with the terms of the CCA (to the extent that such
loans are regulated by that Act or treated as such).
The requirement for any action to be taken according to the standards of
a REASONABLE, PRUDENT MORTGAGE LENDER is as defined in the glossary and shall be
satisfied by the servicer taking the relevant action in accordance with the
seller's policy from time to time.
COMPENSATION OF THE SERVICER
The servicer receives a fee for servicing the loans. The mortgages
trustee pays to the servicer a servicing fee of 0.12 per cent. per annum on the
aggregate outstanding amount of the Funding share of the trust property as of
the preceding interest payment date. The fee is payable in arrear on each
distribution date only to the extent that the mortgages trustee has sufficient
funds to pay it. Any unpaid balance will be carried forward until the next
distribution date and, if not paid earlier, will be payable on the final
repayment date of the previous intercompany loans, the current intercompany loan
and all new intercompany loans or on their earlier repayment in full by Funding.
REMOVAL OR RESIGNATION OF THE SERVICER
The mortgages trustee and/or Funding and the security trustee may, upon
written notice to the servicer, terminate the servicer's rights and obligations
immediately if any of the following events (each a SERVICER TERMINATION EVENT)
occurs:
o the servicer defaults in the payment of any amount due and fails
to remedy that default for a period of three London business days
after becoming aware of the default;
o the servicer fails to comply with any of its other material
obligations under the servicing agreement which in the opinion of
the security trustee is materially prejudicial to noteholders of
the previous issuing entities, the issuing entity or any new
issuing entities, respectively and does not remedy that failure
within 20 days after becoming aware of the failure;
o an insolvency event (as defined in the glossary) occurs in
relation to the servicer; or
o neither the servicer nor a wholly owned subsidiary of the servicer
is servicing the loans pursuant to the servicing agreement.
Subject to the fulfilment of a number of conditions, the servicer may
voluntarily resign by giving not less than 12 months' notice to the mortgages
trustee and the beneficiaries, provided that a substitute servicer has been
appointed. The substitute servicer is required to have a management team which
has experience of administering mortgages in the United Kingdom and to enter
into a servicing agreement with the mortgages trustee, Funding and the security
trustee substantially on the same terms as the relevant provisions of the
servicing agreement. It is a further condition precedent to the resignation of
the servicer that the current ratings of the issuing entity notes are not
adversely affected as a result of the resignation, unless the relevant classes
of noteholders otherwise agree by an extraordinary resolution.
If the appointment of the servicer is terminated, the servicer must
deliver the borrower files relating to the loans and (if applicable) title deeds
to, or at the direction of, the mortgages trustee. The servicing agreement will
terminate when Funding no longer has an interest in the trust property.
No provision has been made in the servicing agreement or otherwise for
any costs and expenses associated with the transfer of servicing to a substitute
servicer, and such costs and expenses will be borne
107
by the seller and Funding as beneficiaries of the mortgages trust. The servicing
fee payable to a substitute servicer will be agreed with that substitute
servicer prior to its appointment.
RIGHT OF DELEGATION BY THE SERVICER
The servicer may subcontract or delegate the performance of its duties
under the servicing agreement, provided that it meets particular conditions,
including that:
o Funding and the security trustee consent to the proposed
sub-contracting or delegation; and
o Funding and the security trustee have no liability for any costs,
charges or expenses in relation to the proposed sub-contracting or
delegation.
The consent of Funding and the security trustee referred to here will not
be required in respect of any delegation to a wholly owned subsidiary of Abbey
from time to time or to persons such as receivers, lawyers or other relevant
professionals.
If the servicer sub-contracts or delegates the performance of its duties,
it will nevertheless remain responsible for the performance of those duties to
Funding, the mortgages trustee and the security trustee and, in particular, will
remain liable at all times for servicing the loans and for the acts or omissions
of any delegate or subcontractor.
ACTUAL DELEGATION BY THE SERVICER
On 2 May 2001 a joint venture arrangement involving two companies, Abbey
National Credit and Payment Services Limited (ANCAPS) and EDS Credit Services
Limited (ECSL), was set up as part of a structure whereby mortgage
administration and processing services were provided to the servicer through the
joint venture arrangement where these services had previously been undertaken by
the servicer itself. The consent of the mortgages trustee and Funding was
obtained to the delegation to the joint venture of such services.
Following Abbey's acquisition by Banco Santander in November 2004, the
joint venture arrangement with ECSL required realignment to take into account
Banco Santander's strategy, leading to a renegotiation of the arrangement with
ECSL. On 3 August 2005, the joint venture structure was dismantled and ANCAPS
became a wholly owned subsidiary of the servicer. The original arrangement was
formally terminated and the servicer entered into a business processing
outsourcing agreement (BPOA) whereby the arrangement was redefined along the
model of a more traditional outsourcing arrangement. Under the BPOA, ECSL had
management responsibility for ANCAPS in the provision of mortgage administration
and processing services to the servicer.
The consent of the security trustee was obtained to the entering into of
the restructured arrangement and Electronic Data Systems Corporation has given
Abbey an unconditional and irrevocable guarantee of ECSL's performance of its
obligations under the BPOA.
Neither the original joint venture arrangement nor the restructured
arrangement affected the underwriting procedure described in "THE LOANS -
UNDERWRITING" nor did the delegated services include managing of arrears or
enforcement and handling of relevant insurance claims, both of which remain with
the servicer.
In December 2006, the servicer reached an agreement with ECSL whereby the
management responsibility for ANCAPS was transferred back to the servicer, with
ECSL just continuing to provide IT support services under the BPOA. The BPOA was
amended and restated on 1 March 2007 to reflect such change in ECSL's
responsibilities.
In December 2007, as part of the process to align Abbey's mortgage
administration and loan processing operations with Banco Santander's operations,
the entire issued share capital of ANCAPS was transferred to Geoban, S.A., which
is a wholly owned subsidiary of Banco Santander. On the same date, ANCAPS
changed its name to Geoban UK Limited (GEOBAN).
The consent of the security trustee was obtained on 29 November 2007,
under Clause 3.2(a)(i) of the servicing agreement, to the continued delegation
of the performance of certain of Abbey's servicing obligations under the
servicing agreement to Geoban.
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As Geoban is a wholly owned subsidiary of Banco Santander (the servicer's
parent), there is no sub-delegation and full operational and management
responsibility for Geoban is with Abbey.
The servicer will at all times remain primarily liable for the
performance of the servicing obligations under the servicing agreement and it is
not expected that any delegation of administration and processing services to
Geoban will materially and adversely impact on the provision of the loan
administration services under the servicing agreement.
SERVICER COMPLIANCE
The servicer will be required pursuant to the servicing agreement to
deliver to Funding and the mortgages trustee, on or before 31 March of each
year, an officer's certificate stating that:
o a review of the activities of the servicer and of its performance
under the servicing agreement during the preceding year has been
made under the supervision of that officer; and
o to the best of that officer's knowledge, based on the review, the
servicer has fulfilled all its obligations under the servicing
agreement, or, if there has been a failure in the fulfilment of
any obligation, specifying such failure known to that officer and
the nature and status thereof.
Any other servicer that satisfies the criteria in item 1108(a)(2) of
Regulation AB will be similarly required to deliver such an officer's
certificate.
The officer's certificate will be accompanied by a report on an
assessment of compliance with the minimum servicing criteria established in item
1122(d) of Regulation AB, which include specific criteria relating to general
servicing considerations, cash collection and administration, investor
remittances and reporting and mortgage administration. The report will indicate
that the servicing criteria were used to test compliance and will set out any
material instances of non-compliance.
The servicer will also deliver with its report on assessment of
compliance an attestation report from a firm of independent public accountants,
prepared in accordance with the attestation engagement standards of the Public
Company Accounting Oversight Board, on the assessment of compliance with the
servicing criteria. This attestation report will contain the accounting firm's
opinion as to whether the related servicing criteria assessment was fairly
stated in all material respects or a statement that the firm cannot express such
an opinion.
These annual reports of assessment of compliance, attestation reports and
statements of compliance will be filed with Funding's annual reports on Form
10-K.
LIABILITY OF THE SERVICER
The servicer will indemnify the mortgages trustee and the beneficiaries
against all losses, liabilities, claims, expenses or damages incurred as a
result of negligence or wilful default by the servicer in carrying out its
functions or as a result of a breach of the terms of the servicing agreement. If
the servicer does breach the terms of the servicing agreement and thereby causes
loss to the beneficiaries, then the seller share of the trust property will be
reduced by an amount equal to the loss.
GOVERNING LAW
The servicing agreement is governed by English law.
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ASSIGNMENT OF THE LOANS AND THEIR RELATED SECURITY
The following section contains a summary of the material terms of the
mortgage sale agreement. The summary does not purport to be complete and is
subject to the provisions of the mortgage sale agreement.
INTRODUCTION
Loans and their related security have been, and will continue to be,
assigned to the mortgages trustee pursuant to the terms of a mortgage sale
agreement which was originally entered into on 26 July 2000 between the seller,
the mortgages trustee, the security trustee and Funding, amended on 29 November
2000 and amended and restated on 23 May 2001, 5 July 2001, 8 November 2001, 7
November 2002, 26 March 2003, 1 April 2004, 8 December 2005, on 8 August 2006
and on 28 November 2006. The mortgage sale agreement has six primary functions:
o it provides for the sale of loans;
o it sets out the circumstances under which new loans can be added
to the mortgages trust;
o it provides for the equitable, beneficial and (in certain
circumstances) legal assignment of the loans to the mortgages
trustee;
o it sets out the representations and warranties given by the
seller;
o it provides for the repurchase of mortgage accounts and related
security which have loans (a) which are subject to a product
switch or (b) in respect of which a further advance is made or (c)
which cause the seller to be in breach of any of its warranties in
respect of the loans; and
o it provides for drawings in respect of flexible loans contained in
the trust property.
ASSIGNMENT OF LOANS AND THEIR RELATED SECURITY TO THE MORTGAGES TRUSTEE
Under the mortgage sale agreement, on 26 July 2000 the seller transferred
by way of equitable assignment to the mortgages trustee its interest in a
portfolio of loans, together with all of the related security to those loans.
Further assignments of loans took place on subsequent distribution dates. Full
legal assignment of the loans will be deferred until a later date, as described
under "- LEGAL ASSIGNMENT OF THE LOANS TO THE MORTGAGES TRUSTEE". On the date of
this prospectus, the consideration paid to the seller will have consisted of:
o the sum of (pound)2,256,000,000 paid by Funding on 26 July 2000
pursuant to the terms of the mortgage sale agreement (from the
proceeds of the previous intercompany loan made by Holmes
Financing (No. 1) PLC) and a covenant by Funding to pay, at a
later date, the deferred consideration;
o the sum of (pound)2,404,516,000 paid by Funding on 29 November
2000 pursuant to the terms of the mortgages trust deed (from the
proceeds of the previous intercompany loan made by Holmes
Financing (No. 2) PLC) and a covenant by Funding to pay, at a
later date, the deferred consideration;
o the sum of (pound)2,167,000,000 paid by Funding on 23 May 2001
pursuant to the terms of the mortgage sale agreement (from the
proceeds of the previous intercompany loan made by Holmes
Financing (No. 3) PLC) and a covenant by Funding to pay, at a
later date, the deferred consideration;
o the sum of (pound)2,667,000,000 paid by Funding on 5 July 2001
pursuant to the terms of the mortgages trust deed (from the
proceeds of the previous intercompany loan made by Holmes
Financing (No. 4) PLC) and a covenant by Funding to pay, at a
later date, the deferred consideration;
o the sum of (pound)2,479,000,000 paid by Funding on 8 November 2001
pursuant to the terms of the mortgage sale agreement (from the
proceeds of the previous intercompany loan made by Holmes
Financing (No. 5) PLC) and a covenant by Funding to pay, at a
later date, the deferred consideration;
o the sum of (pound)3,999,221,000 paid by Funding on 7 November 2002
pursuant to the terms of the mortgages trust deed (from the
proceeds of the previous intercompany loan made by Holmes
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Financing (No. 6) PLC) and a covenant by Funding to pay, at a
later date, the deferred consideration;
o the sum of (pound)2,403,500,000 paid by Funding on 26 March 2003
pursuant to the terms of the mortgages trust deed (from the
proceeds of the previous intercompany loan made by Holmes
Financing (No. 7) PLC) and a covenant by Funding to pay, at a
later date, the deferred consideration;
o the sum of (pound)3,983,790,310 paid by Funding on 1 April 2004
pursuant to the terms of the mortgages trust deed (from the
proceeds of the previous intercompany loan made by Holmes
Financing (No. 8) PLC) and a covenant by Funding to pay, at a
later date, the deferred consideration;
o the sum of (pound)3,796,807,000 paid by Funding on 8 December 2005
pursuant to the terms of the mortgages trust deed (from the
proceeds of the previous intercompany loan made by Holmes
Financing (No. 9) PLC) and a covenant by Funding to pay, at a
later date, the deferred consideration;
o the sum of (pound)3,929,390,000 paid by Funding on 8 August 2006
pursuant to the terms of the mortgages trust deed (from the
proceeds of the previous intercompany loan made by Holmes
Financing (No. 10) PLC) and a covenant by Funding to pay, at a
later date, the deferred consideration;
o the sum of (pound)3,460,130,000 paid by Funding on 28 November
2006 pursuant to the terms of the mortgages trust deed (from the
proceeds of the 2006-1 intercompany loan made by Holmes Master
Issuer PLC) and a covenant by Funding to pay, at a later date, the
deferred consideration;
o the sum of (pound)5,672,130,000 paid by Funding on 28 March 2007
pursuant to the terms of the mortgages trust deed (from the
proceeds of the 2007-1 intercompany loan made by Holmes Master
Issuer PLC) and a covenant by Funding to pay, at a later date, the
deferred consideration;
o the sum of (pound)5,854,684,405 paid by Funding on 20 June 2007
pursuant to the terms of the mortgages trust deed (from the
proceeds of the 2007-2 intercompany loan made by Holmes Master
Issuer PLC) and a covenant by Funding to pay, at a later date, the
deferred consideration;
o the sum of (pound)7,258,830,000 paid by Funding on 21 December
2007 pursuant to the terms of the mortgages trust deed (from the
proceeds of the 2007-3 intercompany loan made by Holmes Master
Issuer PLC) and a covenant by Funding to pay, at a later date, the
deferred consideration; and
o the promise by the mortgages trustee to hold the trust property on
trust for the seller (as to the seller share) and Funding (as to
the Funding share) in accordance with the terms of the mortgages
trust deed.
The deferred consideration is paid in accordance with the priority of
payments set out in "CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE REVENUE
RECEIPTS" and "CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS
PRIOR TO ENFORCEMENT OF THE FUNDING SECURITY OR THE OCCURRENCE OF A TRIGGER
EVENT OR ENFORCEMENT OF THE ISSUING ENTITY SECURITY". Funding and the seller (as
beneficiaries of the mortgages trust) are not entitled to retain any early
repayment fees received by the mortgages trustee, which, upon receipt and
identification by the servicer, the mortgages trustee returns to the seller.
The mortgage sale agreement provides that the seller may assign new loans
and their related security to the mortgages trustee, which may have the effect
of increasing or maintaining the overall size of the trust property. New loans
and their related security can only be assigned if certain conditions, as
described in this section, are met. The mortgages trustee will hold the new
loans and their related security on trust for the seller and Funding pursuant to
the terms of the mortgages trust deed. Full legal assignment or assignation (as
appropriate) of the loans will be deferred until a later date, as described
under "LEGAL ASSIGNMENT OF THE LOANS TO THE MORTGAGES TRUSTEE".
On the date of each relevant sale, the consideration for the assignment
of the new loans and their related security (in all cases at their face value)
to the mortgages trustee will consist of:
o a payment by Funding to the seller of the proceeds of any new term
advance borrowed from the issuing entity pursuant to the master
intercompany loan agreement (or, as the case may be, the proceeds
of any new term advance borrowed from any new issuing entity
pursuant to a new intercompany loan agreement) and deferred
consideration; and/or
111
o the promise of the mortgages trustee to hold the trust property
(including the new loans and their related security) on trust for
the seller (as to the seller share) and Funding (as to the Funding
share) in accordance with the terms of the mortgages trust deed.
The assignment of new loans and their related security to the mortgages
trustee will in all cases be subject to conditions, including the following
conditions (which may be varied or waived by the mortgages trustee where it has
received written confirmation from the rating agencies that such variation or
waiver will not cause the ratings of the outstanding notes to be reduced,
withdrawn or qualified), being satisfied on the relevant date of assignment
(ASSIGNMENT DATE):
(a) each new loan complies with the loan warranties in the mortgage
sale agreement at the assignment date of that new loan to the
mortgages trustee;
(b) the seller's lending criteria applicable at the time of
origination of the relevant new loan have been applied to the new
loan and to the circumstances of the borrower at the time the new
loan was made;
(c) the total amount of arrears in respect of all the loans in the
mortgages trust, as a percentage of the total amount of gross
interest due to the mortgages trustee during the previous 12
months on all loans outstanding during all or part of that period,
does not exceed 2 per cent.; ARREARS for this purpose in respect
of a loan on any date means the aggregate amount overdue on the
loan on that date but only where the aggregate amount overdue
equals or exceeds an amount equal to twice the monthly payments
then due on the loan;
(d) as at the relevant assignment date, the aggregate outstanding
principal balance of loans in the mortgages trust, in respect of
which the aggregate amount in arrears is more than three times the
monthly payment then due, is less than 4 per cent. of the
aggregate outstanding principal balance of loans in the mortgages
trust;
(e) no new loan has on the relevant assignment date an aggregate
amount in arrears which is more than the amount of the monthly
payment then due, and each new loan was made at least three
calendar months prior to the relevant assignment date;
(f) each new loan is secured by a mortgage constituting a valid and
subsisting first charge by way of legal mortgage or (in Scotland)
standard security over the relevant property (except in the case
of some flexible loans in respect of which the mortgage
constitutes valid and subsisting first and second charges by way
of legal mortgage or (in Scotland) standard security over the
relevant property), subject only (in appropriate cases) to
registration at the Land Registry or the Registers of Scotland;
(g) no outstanding principal balance on any new loan is, at the
relevant assignment date, greater than (pound)750,000;
(h) for so long as amounts are owed by Funding to Holmes Financing
(No. 1) PLC under the previous intercompany loan agreement made by
Holmes Financing (No. 1) PLC, no new loan has a final maturity
date beyond July 2038;
(i) each borrower has made at least one full monthly payment in
respect of the relevant new loan;
(j) no event of default under the transaction documents shall have
occurred which is continuing as at the relevant assignment date;
(k) as at the most recent interest payment date, the principal
deficiency ledger does not have a debit balance at the relevant
assignment date (for a description of the principal deficiency
ledger, see "CREDIT STRUCTURE - PRINCIPAL DEFICIENCY LEDGER");
(l) the mortgages trustee is not aware that the purchase of the
portfolio of new loans on the assignment date would adversely
affect the then current ratings by Moody's, Standard & Poor's or
Fitch of the current notes or any of them;
(m) unless otherwise agreed by Moody's, Standard and Poor's or Fitch,
as the case may be, the short-term, unsecured, unguaranteed and
unsubordinated debt obligations of the seller are rated at least
P-1 by Moody's, A-1 by Standard & Poor's and F1 by Fitch at the
time of, and immediately following, the assignment of new loans to
the mortgages trustee;
(n) except where Funding is paying amounts to the seller with respect
to any new loans to be assigned to the mortgages trustee, at least
85 per cent. of the number of loans and their related security
that are in the portfolio at the expiry of any one interest period
must have been in the portfolio at the beginning of that interest
period;
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(o) the assignment of new loans on the relevant assignment date does
not result in the product of the weighted average repossession
frequency (WAFF) and the weighted average loss severity (WALS) for
the loans constituting the mortgages trust after such purchase
calculated on such assignment date in the same way as for the
loans constituting the mortgages trust as at the initial closing
date (or as agreed by the servicer and the rating agencies from
time to time) exceeding the product of the WAFF and WALS for the
loans constituting the mortgages trust calculated on the most
recent previous closing date, plus 0.25 per cent.;
(p) the yield on the loans in the mortgages trust together with the
new loans to be assigned to the mortgages trustee on the relevant
assignment date is not less than LIBOR for three-month sterling
deposits plus 0.50 per cent., taking into account the average
yield on the loans which are variable rate loans, tracker loans
and fixed rate loans and the margins on the Funding swap and
amounts standing to the credit of the second reserve fund
(calculated as a percentage of the outstanding balance of the
portfolio in the mortgages trust), in each case as at the relevant
assignment date;
(q) the assignment of new loans does not result in the Moody's
portfolio variation test value of the loans in the mortgages
portfolio after such assignment, (calculated by applying the
Moody's portfolio variation test to such loans on such assignment
date), exceeding the most recently determined Moody's portfolio
variation test value as calculated in relation to the mortgage
loans in the mortgage portfolio as at the most recent date on
which Moody's performed a full pool analysis on the mortgages
portfolio (not to be less frequent than annually) plus 0.3 per
cent.;
(r) the assignment of new loans on the relevant assignment date does
not result in the loans (other than fixed-rate loans) with a
discount of more than 0.8 per cent. to the stabilised rate as at
the relevant assignment date that have more than two years
remaining on their incentive period in aggregate accounting for
more than 20 per cent. of the aggregate outstanding principal
balance of loans constituting the trust property;
(s) no assignment of new loans may occur after any interest payment
date on which the issuing entity, any new issuing entity or any
previous issuing entity does not exercise its option to redeem the
issuing entity notes (other than pursuant to NUMBER 5.5 of the
issuing entity notes (Optional redemption for tax and other
reasons) or, as applicable and if specified in the relevant
prospectus supplement, NUMBER 5.6 of the issuing entity notes
(Optional redemption for implementation of EU Capital Requirements
Directive)), that is with reference to the issuing entity's
ability to redeem the issuing entity notes on specified dates, but
not to the post enforcement call option), any new notes or any
previous notes issued by the issuing entity, such new issuing
entity or such previous issuing entity (as the case may be) on the
relevant step-up date pursuant to the terms and conditions of the
US notes, those new notes or those previous notes;
(t) the first reserve fund has not been debited on or prior to the
relevant assignment date for the purposes of curing a principal
deficiency in respect of the outstanding BB term advances and/or
the outstanding BBB term advances and/or outstanding A term
advances and/or the outstanding AA term advances and where the
first reserve fund has not been replenished by a corresponding
amount by the relevant assignment date; and
(u) if the assignment of loans to the mortgages trustee would include
an assignment of types of loan products which have not previously
been assigned to the mortgages trustee, the security trustee has
received written confirmation from each of the rating agencies
that such new types of loan products may be assigned to the
mortgages trustee and that such assignment of new types of loan
products would not have an adverse effect on the then current
ratings by Moody's, Standard & Poor's or Fitch of the current
notes or any of them.
In the mortgage sale agreement, the seller has undertaken in respect of
each series to use all reasonable efforts to offer to assign to the mortgages
trustee, and the mortgages trustee has undertaken to use all reasonable efforts
to acquire from the seller and hold in accordance with the terms of the
mortgages trust deed, until the earlier of a specified interest payment date (or
a later date as may be notified by Funding) and the occurrence of a trigger
event, sufficient new loans and their related security so that the aggregate
outstanding principal balance of loans in the mortgages trust is not less than a
specified amount specified in the relevant prospectus supplement (or another
amount notified by Funding to the seller). In the case of any issuance of US
notes, the relevant interest payment date and minimum principal balance will be
specified in the relevant prospectus supplement under the heading "SUMMARY - THE
MORTGAGES TRUST". The relevant interest payment date and minimum principal
balance may change at the time of any new issue of
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notes or as otherwise notified by Funding. However, the seller is not obliged on
any distribution date to assign to the mortgages trustee, and the mortgages
trustee is not obliged to acquire, new loans and their related security if, in
the opinion of the seller, that assignment would adversely affect the business
of the seller. If Funding enters into a new intercompany loan, then the period
during which the seller covenants to use reasonable efforts to maintain the
aggregate outstanding principal balance of loans in the mortgages trust at a
specified level prior to a trigger event may be extended.
The seller selects the new loans in the expected portfolio, and any loans
to be substituted into the expected portfolio, using an internally developed
system containing defined data on each of the qualifying loans in the seller's
overall portfolio of loans available for selection. This system allows the
setting of exclusion criteria, among others, corresponding to relevant
representations and warranties that the seller makes in the mortgage sale
agreement in relation to the loans. Once the criteria have been determined, the
system identifies all loans owned by the seller that are consistent with the
criteria. From this subset, loans are selected at random until the target
balance for new loans has been reached, or the subset has been exhausted. After
a pool of new loans is selected in this way, the constituent loans are monitored
so that they continue to comply with the relevant criteria on the date of
transfer.
LEGAL ASSIGNMENT OF THE LOANS TO THE MORTGAGES TRUSTEE
The English loans in the current portfolio were assigned, and any new
English loans will be assigned, to the mortgages trustee by way of equitable
assignment. The transfer of the beneficial interest in the Scottish loans in the
current portfolio to the mortgages trustee has been given effect by declarations
of trust by the seller, and the transfer of the beneficial interest in any new
Scottish loans will be given effect by further declarations of trust (and in
relation to Scottish loans, references in this prospectus to the ASSIGNMENT of
loans are in the context of an equitable assignment to read as references to the
making of such declarations of trust). In each case this means that legal title
to the loans and their related security remains with the seller until notice of
the assignment or, in Scotland, until assignations are executed and delivered
and notice of such assignation, is given by the seller to the borrowers. Legal
assignment or assignation of the loans and their related security (including,
where appropriate, their registration) to the mortgages trustee will remain
deferred, save in the limited circumstances described in this section. See "RISK
FACTORS - THERE MAY BE RISKS ASSOCIATED WITH THE FACT THAT THE MORTGAGES TRUSTEE
HAS NO LEGAL TITLE TO THE MORTGAGES, WHICH MAY ADVERSELY AFFECT PAYMENTS ON THE
ISSUING ENTITY NOTES" and "RISK FACTORS - SET-OFF RISKS IN RELATION TO FLEXIBLE
LOANS, DELAYED CASHBACKS AND REWARD CASHBACKS MAY ADVERSELY AFFECT THE FUNDS
AVAILABLE TO THE ISSUING ENTITY TO REPAY THE ISSUING ENTITY NOTES".
Legal assignment or assignation of the loans and their related security
to the mortgages trustee will be completed on the fifth London business day
after the earliest of the following:
(a) the service of an intercompany loan enforcement notice in relation
to any intercompany loan or a note enforcement notice in relation
to any previous notes, the issuing entity notes or any new notes;
(b) the seller being required, by an order of a court of competent
jurisdiction, or by a regulatory authority of which the seller is
a member or any organisation whose members comprise, but are not
necessarily limited to, mortgage lenders with whose instructions
it is customary for the seller to comply, to perfect legal title
to the mortgages;
(c) it being rendered necessary by law to take any of those actions;
(d) the security under the Funding deed of charge or any material part
of that security being in jeopardy and the security trustee
deciding to take that action to reduce materially that jeopardy;
(e) unless otherwise agreed by the rating agencies and the security
trustee, the termination of the seller's role as servicer under
the servicing agreement;
(f) the seller requesting that transfer by notice to the mortgages
trustee, Funding and the security trustee;
(g) the date on which the seller ceases to be assigned a long-term
unsecured, unsubordinated debt obligation rating by Moody's of at
least Baa3 or by Standard & Poor's of at least BBB- or by Fitch of
at least BBB-; and
(h) the latest of the last repayment dates of the current intercompany
loan, the previous intercompany loans and any new intercompany
loans.
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Pending completion of the transfer, the right of the mortgages trustee to
exercise the powers of the legal owner of the mortgages has been secured by an
irrevocable power of attorney granted by the seller in favour of the mortgages
trustee, Funding and the security trustee.
The customer files relating to the loans and (if applicable) the title
deeds are currently held by or to the order of the seller or by solicitors
acting for the seller in connection with the creation of the loans and their
related security. The seller has undertaken that all customer files and, save
in respect of dematerialised loans, title deeds relating to the loans which
are at any time in its possession or under its control or held to its order be
held to the order of the mortgages trustee.
REPRESENTATIONS AND WARRANTIES
None of the mortgages trustee, Funding, the security trustee, any
previous issuing entity or the issuing entity has made or has caused to be made
on its behalf any enquiries, searches or investigations in respect of the loans
and their related security. Instead, each is relying entirely on the
representations and warranties by the seller contained in the mortgage sale
agreement. The parties to the mortgage sale agreement may, with the prior
consent of the security trustee (which consent shall be given if the rating
agencies confirm to it and to the issuing entity that the ratings of the notes
as at that time will not be adversely affected as a result), amend the
representations and warranties in the mortgage sale agreement. The material
representations and warranties are as follows:
o each loan was originated by the seller in pounds sterling and is
denominated in pounds sterling (or was originated in pounds
sterling or euro, as applicable, and is denominated in euro if the
euro has been adopted as the lawful currency of the United
Kingdom);
o no loan has an outstanding principal balance of more than
(pound)750,000;
o prior to the making of each advance under a loan, the lending
criteria and all preconditions to the making of any loan were
satisfied in all material respects subject only to exceptions as
would be acceptable to a reasonable, prudent mortgage lender;
o other than with respect to monthly payments, no borrower is or
has, since the date of the relevant mortgage, been in material
breach of any obligation owed in respect of the relevant loan or
under the related security and accordingly no steps have been
taken by the seller to enforce any related security;
o the total amount of arrears of interest or principal, together
with any fees, commissions and premiums payable at the same time
as that interest payment or principal repayment, on any loan is
not on the assignment date more than the monthly payment payable
in respect of that loan in respect of the month in which that
assignment date falls and has at no date in the past been more
than two times the then monthly payment payable in respect of that
loan;
o all of the borrowers are individuals;
o each borrower has made at least one monthly payment;
o the whole of the outstanding principal balance on each loan and
any arrears of interest and all accrued interest is secured by a
mortgage;
o each mortgage constitutes a valid and subsisting first charge by
way of legal mortgage or (in Scotland) standard security over the
relevant property, except in the case of some flexible loans in
respect of which a mortgage may constitute a valid and subsisting
first and second charge by way of legal mortgage or (in Scotland)
standard security over the relevant property, and subject only in
certain appropriate cases to applications for registrations at the
Land Registry or the Registers of Scotland;
o all of the properties are in England, Wales or Scotland;
o not more than six months (or a longer period as may be acceptable
to a reasonable, prudent mortgage lender) prior to the grant of
each mortgage (excluding mortgages granted in relation to flexible
loans as a result of that loan being the subject matter of a
product switch to that flexible loan), the seller received a
valuation report on the relevant property (or another form of
valuation concerning the relevant property as would be acceptable
to a reasonable, prudent mortgage lender), the contents of which
were such as would be acceptable to a reasonable, prudent mortgage
lender;
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o the benefit of all valuation reports, any other valuation report
referred to in this section (if any) and certificates of title can
be validly assigned to the mortgages trustee without obtaining the
consent of the relevant valuer, solicitor or licensed or qualified
conveyancer;
o prior to the taking of each mortgage (excluding mortgages granted
in relation to flexible loans as a result of that loan being the
subject matter of a product switch to that flexible loan), the
seller instructed its solicitor or licensed or qualified
conveyancer (a) to carry out an investigation of title to the
relevant property and to undertake other searches, investigations,
enquiries and other actions on behalf of the seller as are set out
in the "GENERAL INSTRUCTIONS TO SOLICITORS" or the "CML'S LENDERS'
HANDBOOK" for England & Wales or Scotland (as applicable)
contained in the standard documentation (or other comparable or
successor instructions and/or guidelines as may for the time being
be in place), subject only to those variations as would be
acceptable to a reasonable, prudent mortgage lender or (b) in the
case of a remortgage to carry out a more limited form of
investigation of title for properties located in England, Wales
and Scotland, in particular in the case of registered land in
England and Wales (e.g. confirming that the borrower is the
registered proprietor of the property and the description of the
property corresponds with the entries on the Land Registry's
register) and confirming such other matters as are required by a
reasonable, prudent mortgage lender;
o insurance cover for each property is or will at all relevant times
be available under either a policy arranged by the borrower or an
Abbey policy or a seller-introduced insurance policy or a policy
arranged by the relevant landlord or the properties in possession
policy;
o the seller has good title to, and is the absolute unencumbered
legal and beneficial owner of, all property, interests, rights and
benefits agreed to be sold by the seller to the mortgages trustee
under the mortgage sale agreement;
o the seller has, since the making of each loan, kept or procured
the keeping of full and proper accounts, books and records showing
clearly all transactions, payments, receipts, proceedings and
notices relating to such loan;
o there are no authorisations, approvals, licences or consents
required as appropriate for the seller to enter into or to perform
the obligations under the mortgage sale agreement or to make the
mortgage sale agreement legal, valid, binding and enforceable; and
o the seller is under no obligation to make further advances or to
release retentions or to pay fees or other sums relating to any
loan or its related security to any borrower (other than flexible
loan drawings, delayed cashbacks and/or reward cashbacks).
REPURCHASE OF LOANS UNDER A MORTGAGE ACCOUNT
Under the mortgage sale agreement, if a loan does not materially comply
on the assignment date with the representations and warranties made under the
mortgage sale agreement:
(i) the seller is required to remedy the breach within 20 days of the
seller being given written notice of such breach by the mortgages
trustee; or
(ii) if the breach is not remedied within the 20-day period then, at
the direction of Funding and the security trustee, the mortgages
trustee will require the seller to repurchase the loan or loans
under the relevant mortgage account and their related security
from the mortgages trustee at a price equal to their outstanding
principal balances, together with any arrears of interest and
accrued interest and expenses to the date of repurchase.
The seller is also required to repurchase the loan or loans under any
mortgage account and their related security if a court, tribunal or any
ombudsman makes any determination in respect of any loan and its related
security that:
(a) any material term which relates to the recovery of interest under
the standard documentation applicable to that loan and its related
security is unfair; or
(b) the treatment of any borrower in relation to the interest payable
by that borrower under any loan is unfair; or
(c) the interest payable under any loan is to be set by reference to
the Abbey SVR (and not that of its successors or assigns or those
deriving title from them) and at any time on or after the
determination the Abbey SVR shall be below or shall fall below the
SVR set by those successors or assigns or those deriving title
from them; or
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(d) the variable margin under any tracker loan must be set by the
seller (rather than by its successors or assigns or those deriving
title from them); or
(e) the interest payable under any loan is to be set by reference to
an interest rate other than that set or purported to be set by
either the servicer or the mortgages trustee as a result of the
seller having more than one variable mortgage rate; or
(f) a borrower should be or should have been offered the opportunity
to switch to an interest rate other than that required by the
servicer or the mortgages trustee for that borrower as a result of
the seller having more than one variable rate; or
(g) there has been a breach of or non-observance or non-compliance
with any obligation, undertaking, covenant or condition on the
part of the seller relating to the interest payable by or
available to a borrower under any loan.
If the seller fails to pay the consideration due for the repurchase (or
otherwise fails to complete the repurchase), then the seller share of the trust
property shall be deemed to be reduced by an amount equal to that consideration.
DRAWINGS UNDER FLEXIBLE LOANS
The seller is solely responsible for funding all future drawings in
respect of flexible loans contained in the trust property. The amount of the
seller's share of the trust property will increase by the amount of the drawing.
PRODUCT SWITCHES AND FURTHER ADVANCES
If a loan is subject to a product switch or an offer of a further
advance, then the seller is required to repurchase the loan or loans under the
relevant mortgage account and the related security from the mortgages trustee at
a price equal to their aggregate outstanding principal balances together with
any arrears of interest and accrued interest and expenses to the date of
purchase.
A loan will be subject to a PRODUCT SWITCH if the borrower and the seller
agree or the servicer issues an offer of, and the borrower accepts, a variation
in the financial terms and conditions applicable to the relevant borrower's loan
other than:
o any variation agreed with a borrower to control or manage arrears
on that loan;
o any variation in the maturity date of the loan unless, while the
previous intercompany loan made by Holmes Financing (No. 1) PLC is
outstanding, it is extended beyond July 2038;
o any variation imposed by statute;
o subject to the mortgage sale agreement, any variation of the
principal available and/or the rate of interest payable in
respect of that loan where that rate is offered to the
borrowers of loans which constitute more than 10 per cent. by
outstanding principal amount of the loans comprising the
trust property in any interest period; or
o any variation in the frequency with which the interest payable in
respect of the loan is charged.
For these purposes only, a loan is subject to a FURTHER ADVANCE if an
existing borrower requests a further amount to be lent to him or her under the
mortgage in circumstances where the seller has discretion to make that further
amount available to the relevant borrower and it grants that request. However,
any drawings pursuant to a flexible loan shall not be a further advance for
these purposes.
REASONABLE, PRUDENT MORTGAGE LENDER
References in the documents to the seller and/or the servicer acting to
the standard of a reasonable, prudent mortgage lender mean the seller and/or the
servicer, as applicable, acting in accordance with the seller's policy from time
to time.
GOVERNING LAW
The mortgage sale agreement is governed by English law (other than
certain aspects relating to the Scottish loans and their related security, which
are governed by Scots law).
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THE MORTGAGES TRUST
The following section contains a summary of the material terms of the
mortgages trust deed. The summary does not purport to be complete and is subject
to the provisions of the mortgages trust deed.
GENERAL LEGAL STRUCTURE
The mortgages trust was formed under English law with the mortgages
trustee as trustee for the benefit of the seller and Funding as beneficiaries.
The mortgages trust was formed for the financings of the previous issuing
entities and the issuing entity, for the financings described in this prospectus
and for the financings of new issuing entities and new funding entities. This
section describes the material terms of the mortgages trust, including how money
is distributed from the mortgages trust to Funding and the seller.
If new issuing entities are established or a new funding entity becomes a
beneficiary of the mortgages trust (subject to the agreement of the seller and
Funding) or new types of loans are added to the mortgages trust, then the terms
of the mortgages trust may be amended. Such amendments may affect the timing of
payments on the issuing entity notes. The prior consent of noteholders will not
be sought in relation to any of the proposed amendments to the mortgages trust
deed, provided (amongst other things) that the rating agencies confirm that the
ratings of the outstanding notes will not be adversely affected by such
amendments. There can be no assurance that the effect of any such amendments
will not ultimately adversely affect your interests.
Under the terms of the mortgages trust deed, the mortgages trustee holds
all the trust property on trust absolutely for Funding (as to Funding's share
percentage) and for the seller (as to the seller's share percentage). The TRUST
PROPERTY is:
o the sum of (pound)100 settled by Wilmington Trust SP Services
(London) Limited on trust on the date of the mortgages trust deed;
o the current portfolio of loans and their related security assigned
to the mortgages trustee by the seller;
o new loans and their related security assigned to the mortgages
trustee by the seller after the date of this prospectus;
o any increase in the outstanding principal balance of a loan due to
capitalised interest, capitalised expenses, capitalised arrears or
a borrower making a drawing under any flexible loan;
o any interest and principal paid by borrowers on their loans;
o any other amounts received under the loans and related security
excluding third party amounts;
o [rights under any insurance policies of which the Mortgages
Trustee has the benefit;]
o amounts on deposit (and interest earned on those amounts) in the
mortgages trustee GIC account and in the alternative accounts; and
o any other property representing or derived from the above,
less
o any actual losses in relation to the loans and any actual
reductions occurring in respect of the loans as described in
paragraph (a) in "- FUNDING SHARE OF THE TRUST PROPERTY"; and
o distributions of revenue receipts and principal receipts made from
time to time to the beneficiaries of the mortgages trust.
Funding is not entitled to particular loans and their related security
separately from the seller; rather each of them has an undivided interest in all
of the loans and their related security forming part of the trust property. The
beneficial interests of Funding and the seller represent pro rata interests in
the trust property, according to the Funding share and the seller share
respectively, in the trust property.
The relevant prospectus supplement will set out approximately Funding's
share of the trust property and the seller's share of the trust property as at
the relevant closing date.
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FLUCTUATION OF THE FUNDING'S SHARE/ SELLER'S SHARE
Funding's share and the seller's share of the trust property fluctuate
depending on a number of factors including:
o the allocation of principal receipts on the loans to Funding
and/or the seller;
o losses arising on the loans;
o if new loans and their related security are assigned to the
mortgages trustee;
o if Funding acquires part of the seller's share (as described under
"- ACQUISITION BY FUNDING OF AN INCREASED INTEREST IN THE TRUST
PROPERTY");
o if a borrower makes a drawing under a flexible loan;
o if a borrower makes underpayments or takes payment holidays under
a flexible loan;
o if a borrower exercises a right of set-off in relation to a loan,
the seller fails or is unable to repurchase a loan in
circumstances when it is required to do so under the mortgage sale
agreement, or the seller materially breaches any other obligation
or warranty in the mortgage sale agreement or (whilst it is the
servicer) the servicing agreement (as described under" - FUNDING
SHARE OF THE TRUST PROPERTY"); and
o if the seller acquires part of Funding's share, as described in" -
ACQUISITION BY THE SELLER OF AN INCREASED INTEREST IN THE TRUST
PROPERTY".
The Funding share and the seller share are recalculated by the cash
manager on each distribution date. A distribution date is the eighth day (or, if
not a London business day, the next succeeding London business day) of each
month and any other date on which Funding acquires a further interest in the
trust property and/or the mortgages trustee acquires new loans from the seller.
The recalculation is based on the total outstanding principal balance of the
loans in the portfolio as at the close of business on the business day
immediately preceding the relevant distribution date. The period from (and
including) one distribution date, to (but excluding) the next distribution date,
is known as a DISTRIBUTION PERIOD.
The reason for the recalculation is to determine the new Funding share
percentage and the seller share percentage. The Funding share percentage and the
seller share percentage determine their entitlement to revenue receipts and
principal receipts from the loans in the trust property and also the allocation
of losses arising on the loans. The method for determining those new percentage
shares is set out in the next two sections.
FUNDING SHARE OF THE TRUST PROPERTY
On each distribution date and the date when the mortgages trust
terminates (each case also referred to in this section as the RELEVANT
DISTRIBUTION DATE), the interest of Funding in the trust property is
recalculated in accordance with the following formula:
The current share of Funding is an amount equal to:
A-B-C+D+E+F-G
The current percentage share of Funding is an amount equal to:
(A-B-C+D+E+F-G) x 100
---------------------
H
in the latter case expressed as a percentage and rounded upwards to five
decimal places,
where:
A = the amount of the Funding share on the immediately preceding
distribution date;
B = the amount of any principal receipts on the loans to be
distributed to Funding on the relevant distribution date (as
described under "- MORTGAGES TRUST ALLOCATION AND DISTRIBUTION OF
PRINCIPAL RECEIPTS PRIOR TO THE OCCURRENCE OF A TRIGGER EVENT" and
"- MORTGAGES TRUST ALLOCATION AND DISTRIBUTION OF PRINCIPAL
RECEIPTS AND RETAINED PRINCIPAL RECEIPTS AFTER THE OCCURRENCE OF A
TRIGGER EVENT");
119
C = the amount of losses sustained on the loans in the period from
(and including) the last distribution date to (but excluding) the
relevant distribution date and the amount of any reductions
occurring in respect of the loans as described in paragraph (a)
below, in each case allocated to Funding in the immediately
preceding distribution period according to Funding's percentage
share at the previous distribution date;
D = the amount of any consideration (excluding deferred
consideration) to be paid by Funding to the seller with respect to
any new loans assigned to the mortgages trustee on the relevant
distribution date;
E = the amount of any consideration (excluding deferred
consideration) to be paid by Funding to the seller in relation to
the acquisition by Funding from the seller on the relevant
distribution date of an interest in the trust property;
F = the amount equal to Funding's share of any capitalised interest,
capitalised expenses and capitalised arrears accruing on a
flexible loan due to borrowers taking payment holidays or making
underpayments since the last distribution date less the amount to
be paid by the seller to Funding on the relevant distribution date
in an amount up to but not exceeding Funding's share of that
capitalised interest, capitalised expenses and capitalised
arrears as described in "- ACQUISITION BY THE SELLER OF AN
INCREASED INTEREST IN THE TRUST PROPERTY";
G = an amount equal to any payment to be received by Funding from
the seller in relation to any acquisition by the seller from
Funding on such distribution date of an interest in the trust
property; and
H = the amount of the retained principal receipts (as defined below)
(if any) plus the aggregate outstanding principal balance of all
the loans in the trust property as at the relevant distribution
date including after making the distributions, allocations and
additions referred to in "B", "C", "D", "E", "F" and "G", taking
account of (a) any distribution of principal receipts to Funding
and the seller to be made on that distribution date, (b) the
amount of any losses allocated to Funding and the seller, (c) any
increase in the loan balances due to capitalised interest,
capitalised expenses and capitalised arrears or borrowers taking
payment holidays and/or making underpayments under flexible loans,
(d) the adjustments referred to in paragraphs (a) to (e) below (or
if the seller share is zero, the adjustments referred to in (a)
only), and (e) the amount of any other additions or subtractions
to the trust property.
If any of the following events occurs during a distribution period, then
the aggregate total outstanding principal balance of the loans in the trust
property is reduced or deemed to be reduced for the purposes of the calculation
of "H":
(a) any borrower exercises a right of set-off so that the amount of
principal and interest owing under a loan is reduced but no
corresponding payment is received by the mortgages trustee. In
this event, the aggregate outstanding principal balance of the
loans in the trust property is reduced by an amount equal to the
amount of that set-off; and/or
(b) a loan or its related security is (i) in breach of the loan
warranties contained in the mortgage sale agreement or (ii) the
subject of a product switch or further advance or other obligation
of the seller to repurchase, and in each case the seller fails to
repurchase the loan or loans under the relevant mortgage account
and their related security to the extent required by the terms of
the mortgage sale agreement. In this event, the aggregate
outstanding principal balance of the loans in the trust property
is deemed to be reduced for the purposes of the calculation in "H"
by an amount equal to the outstanding principal balance of the
relevant loan or loans under the relevant mortgage account
(together with arrears of interest and accrued interest); and/or
(c) the seller would be required to repurchase a loan and its related
security as required by the terms of the mortgage sale agreement,
but the loan is not capable of being repurchased. In this event,
the aggregate outstanding principal balance of the loans in the
trust property is deemed to be reduced for the purposes of the
calculation in "H" by an amount equal to the outstanding principal
balance of the relevant loan or loans under the relevant mortgage
account (with arrears of interest and accrued interest); and/or
(d) the seller materially breaches any other obligation or warranty
under the mortgage sale agreement and/or (for so long as the
seller is the servicer) the servicing agreement, which is
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also grounds for terminating the appointment of the servicer. In
this event, the aggregate outstanding principal balance of the
loans in the trust property is deemed to be reduced by an amount
equal to the resulting loss incurred by the beneficiaries; and/or
(e) the seller share of the mortgages trustee revenue receipts is less
than the loss amount payable to the mortgages trustee and/or
Funding. In this event, the trust property is deemed to be reduced
for the purposes of the calculation in "H" by an amount equal to
the shortfall in the loss amount. The "LOSS AMOUNT" means any
costs, expenses, losses or other claims suffered by the mortgages
trustee and/or Funding as a result of any of the matters listed at
(C) to (I) (inclusive) in "ASSIGNMENT OF THE LOANS AND THEIR
RELATED SECURITY - REPURCHASE OF LOANS UNDER A MORTGAGE ACCOUNT"
and where such costs, expenses, losses or other claims are in
connection with any recovery of interest on the loans to which the
seller, the mortgages trustee or Funding was not entitled or could
not enforce.
The reductions or deemed reductions set out in paragraphs (a) to (e) are
made to the seller's share (including the minimum seller share) and thereafter
(in respect of paragraph (a) only) will be made to the Funding share only.
Any subsequent recoveries in respect of loans which have been subject to
a set-off (as set out in paragraph (a)) belong to the seller (and to the extent
received by the mortgages trustee will be returned to the seller).
SELLER SHARE OF THE TRUST PROPERTY
The current share of the seller on each distribution date and the date on
which the mortgages trust terminates (the SELLER SHARE) is an amount equal to:
the aggregate outstanding principal balance of all the loans in the trust
property as at the relevant distribution date (adjusted as provided in item "H"
of "Funding Share" above) minus the Funding share as calculated on the relevant
distribution date
The current percentage share of the seller in the trust property is an
amount equal to:
100% - current Funding percentage share.
Neither the Funding share nor the seller share of the trust property may
be reduced below zero.
MINIMUM SELLER SHARE
The seller share includes an amount known as the MINIMUM SELLER SHARE.
The relevant prospectus supplement will set out the approximate minimum seller
share. The amount of the minimum seller share fluctuates depending on changes to
the characteristics of the loans in the trust property. The seller is not
entitled to receive principal receipts which would reduce the seller share to an
amount less than the minimum seller share unless and until the Funding share is
zero or an asset trigger event has occurred. The minimum seller share is the
amount determined on each distribution date in accordance with the following
formula:
W+X+Y+Z+AA
where:
W = 100 per cent. of the aggregate cleared credit balances of all
savings accounts opened in respect of flexible plus loans in the
trust property;
X = 4.0 per cent. of the aggregate outstanding principal balance of
loans in the trust property;
Y = the product of p, q and r where:
p = 8.0 per cent.;
q = the FLEXIBLE DRAW CAPACITY, being an amount equal to the
excess of (a) the maximum amount that borrowers may draw
under flexible loans included in the trust property
(whether or not drawn) over (b) the aggregate principal
balance of actual flexible loan advances in the trust
property on the relevant distribution date; and
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r = 3;
Z = the aggregate sum of reductions deemed made (if any) in
accordance with paragraphs (b), (c) and (d) as described in "-
FUNDING SHARE OF THE TRUST PROPERTY"; and
AA = the aggregate entitlement of borrowers to receive reward
cashbacks and delayed cashbacks in respect of the remaining life
of the reward loans in the trust property.
The purpose of X is to mitigate the risks relating to the loans (see
"RISK FACTORS - THERE MAY BE RISKS ASSOCIATED WITH THE FACT THAT THE MORTGAGES
TRUSTEE HAS NO LEGAL TITLE TO THE MORTGAGES, WHICH MAY ADVERSELY AFFECT PAYMENTS
ON THE ISSUING ENTITY notes"). The amount of X may be varied from time to time
at the request of the seller or Funding (acting reasonably) provided that the
security trustee has received written confirmation from the rating agencies that
there will be no adverse effect on the then current ratings of the notes as a
result thereof. The purpose of Y is to mitigate the risk of the seller failing
to fund a drawing under a flexible loan. The purpose of Z is to mitigate the
risk of the seller not repurchasing loans where the interest rate is set lower
than the Abbey SVR. The purpose of AA is to mitigate the risk of the seller
failing to pay a reward cashback or a delayed cashback.
CASH MANAGEMENT OF TRUST PROPERTY - REVENUE RECEIPTS
Under the cash management agreement, the cash manager is responsible for
distributing revenue receipts on behalf of the mortgages trustee on each
distribution date in accordance with the order of priority described in the
following section. For further information on the role of the cash manager, see
"CASH MANAGEMENT FOR THE MORTGAGES TRUSTEE AND FUNDING".
MORTGAGES TRUST APPLICATION OF REVENUE RECEIPTS
Mortgages trust available revenue receipts is calculated by the cash
manager two London business days prior to each distribution date and is an
amount equal to the sum of:
o revenue receipts on the loans (but excluding principal receipts);
and
o interest payable to the mortgages trustee on the mortgages trustee
GIC account and on the alternative accounts;
less
amounts due to third parties (also known as THIRD PARTY AMOUNTS)
including:
(a) payments of high loan-to-value fees due to the seller;
(b) amounts under a direct debit which are repaid to the bank making
the payment if that bank is unable to recoup that amount itself
from its customer's account; or
(c) payments by borrowers of early repayment fees and other charges
which are due to the seller,
which amounts may be paid daily from monies on deposit in the
mortgages trustee GIC account or, as applicable, the alternative
accounts.
On each distribution date, the cash manager will apply mortgages trust
available revenue receipts in the following order of priority:
(a) subject to the loss amounts applicable to Funding and the seller
(see "- LOSSES"), without priority among them but in proportion to
the respective amounts due, to pay amounts due to:
o the mortgages trustee under the provisions of the mortgages
trust deed; and
o third parties from the mortgages trustee in respect of the
mortgages trust but only if:
(i) payment is not due as a result of a breach by the
mortgages trustee of the documents to which it is a
party; and/or
(ii) payment has not already been provided for elsewhere;
(b) in payment of amounts due to the servicer or to become due to the
servicer during the following distribution period under the
provisions of the servicing agreement; and
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(c) subject to the loss amounts applicable to Funding and the seller
(see "- LOSSES"), without priority among them but in proportion to
the respective amounts due, to allocate and pay the remaining
mortgages trust available revenue receipts to:
Funding in an amount determined by multiplying the total amount of the
remaining mortgages trust available revenue receipts by Funding's
percentage share (as determined on the immediately preceding distribution
date);
the seller in an amount equal to the mortgages trust available revenue
receipts remaining after determining Funding's share of the mortgages
trust available revenue receipts.
The seller's share of mortgages trustee available revenue receipts will
be reduced by an amount equal to the seller loss amount and from such reduced
amount an amount shall be allocated and paid to the mortgages trustee and/or
Funding (as applicable).
Amounts due to the mortgages trustee and the servicer are inclusive of
VAT. At the date of this prospectus, VAT is calculated at the rate of 17.5 per
cent. of the amount to be paid.
CASH MANAGEMENT AND ALLOCATION OF TRUST PROPERTY - PRINCIPAL RECEIPTS
Under the cash management agreement, the cash manager is also responsible
for allocating and distributing principal receipts on behalf of the mortgages
trustee on each distribution date in accordance with the order of priority
described in the next two following sections. The cash accumulation period (as
defined below) will be calculated separately for each bullet term advance and
for each series 1 term AAA cash amount. To understand how the cash manager
distributes principal receipts on the loans on each distribution date you need
to understand the following definitions:
ANTICIPATED CASH ACCUMULATION PERIOD means (a) the anticipated number of
months required to accumulate sufficient principal receipts to pay the
relevant bullet amount or (b) the anticipated number of months required
to accumulate sufficient principal receipts to set aside the relevant
series 1 term AAA cash amount which, in each case, is equal to:
J+K-L
-------------
M x N x (O-P)
calculated in months and rounded up to the nearest whole number, where:
J = (a) the relevant bullet amount (as defined later in this
section) or (b) the relevant series 1 term AAA cash amount (as
defined later in this section);
K = (a) the aggregate outstanding principal balance of any bullet
amount and/or scheduled amortisation amount that was not fully
repaid on its scheduled repayment date, plus any other bullet
amount and/or scheduled amortisation amount the scheduled
repayment date of which falls on or before the scheduled repayment
date of the relevant bullet amount; or (b) the aggregate amount
outstanding of any series 1 term AAA cash amount that was not set
aside in full on the interest payment date on which it was due to
be set aside plus any other series 1 term AAA cash amount the
relevant interest payment date of which falls on or before the
relevant interest payment date of the relevant series 1 term AAA
cash amount;
L = the amount of any available cash already standing to the credit
of the cash accumulation ledger;
M = the principal payment rate (as defined later in this section);
N = 0.90;
O = the aggregate outstanding principal balance of the loans
comprised in the trust property; and
P = the principal amount outstanding of any pass-through outstanding
term advance (and, as the case may be, any new term advance which
is a pass-through term advance) which is then due and payable.
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An ASSET TRIGGER EVENT will occur when an amount is debited to the AAA
principal deficiency sub-ledger of Funding. For more information on the
principal deficiency ledger, see "CREDIT STRUCTURE - PRINCIPAL DEFICIENCY
LEDGER".
CASH ACCUMULATION LEDGER is a ledger maintained by the cash manager for
Funding, which records the amount accumulated by Funding to be set aside
as a series 1 term AAA cash amount on the relevant interest payment date
in the cash accumulation sub-ledger for the relevant issuing entity
and/or to pay the amounts due on the relevant bullet term advances
and/or, as applicable, the scheduled amortisation advances.
CASH ACCUMULATION SUB-LEDGER is a sub-ledger of such name on the cash
accumulation ledger in the name of the relevant issuing entity, which
records any series 1 term AAA cash amount in relation to such issuing
entity on the relevant interest payment dates.
CASH ACCUMULATION PERIOD means the period beginning on the earlier of:
the commencement of the anticipated cash accumulation period; and
four months prior to the scheduled repayment date of the relevant
bullet amount and/or four months prior to the interest payment
date on which the relevant series 1 term AAA cash amount is to be
set aside by Funding but, in the case of each series 1 term AAA
cash amount, if the portfolio CPR falls below 15 per cent., such
period shall be extended to eight months or such shorter period
prior to the interest payment date on which such series 1 term AAA
cash amount is to be set aside by Funding,
and ending when Funding has accumulated an amount equal to the
relevant bullet amount for payment to the relevant issuing entity
(as shown on the cash accumulation ledger) and/or an amount equal
to the relevant series 1 term AAA cash amount (as recorded on the
cash accumulation sub-ledger for the relevant issuing entity).
A NON-ASSET TRIGGER EVENT will occur if:
(a) an insolvency event occurs in relation to the seller;
(b) the seller's role as servicer is terminated and a new servicer is
not appointed within 60 days;
(c) on the distribution date immediately succeeding a seller share
event distribution date, the current seller share is equal to or
less than the minimum seller share (determined using the amounts
of the current seller share and minimum seller share that would
exist after making the distributions of the principal receipts due
on that distribution date on the basis that the cash manager
assumes that those principal receipts are distributed in the
manner described under "- MORTGAGES TRUST ALLOCATION AND
DISTRIBUTION OF PRINCIPAL RECEIPTS PRIOR TO THE OCCURRENCE OF A
TRIGGER EVENT"); or
(d) on the distribution date immediately succeeding a seller share
event distribution date, the aggregate outstanding principal
balance of loans comprised in the trust property on such
distribution date is less than the required loan balance amount in
effect at that time. The required loan balance amount in effect at
the time of an offering of US notes will be set forth in the
relevant prospectus supplement under the heading "SUMMARY -
NON-ASSET TRIGGER EVENT". The required loan balance amount may
change at the time of any new issue of notes.
The terms of the asset trigger event and the non-asset trigger event may
be amended without your prior consent following entry by Funding into a
new intercompany loan agreement. A change in these terms may affect the
timing of payments on the issuing entity notes.
PAYMENT RATE DATE is the eighth day (or, if not a London business day,
the next succeeding London business day) of each month.
PAYMENT RATE PERIOD is the period from and including a payment rate date
to but excluding the next payment rate date.
PRINCIPAL PAYMENT RATE means the average monthly rolling principal
payment rate on the loans for the 12 months immediately preceding the
relevant distribution date, calculated on each payment rate date. The
principal payment rate is calculated by:
(a) dividing (a) the aggregate principal receipts received in relation
to the loans in the portfolio during the payment rate period
ending on the payment rate date which is the same as or, if not
the same, immediately preceding, the relevant distribution date by
(b) the aggregate outstanding principal balance of the loans on
the previous payment rate date;
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(b) aggregating the result of the foregoing calculation with the
results of the equivalent calculation made on or for each of the
eleven most recent prior distribution dates during the relevant
twelve month period; and
(c) dividing the aggregated result by 12.
RELEVANT BULLET AMOUNT means, in relation to a bullet term advance, the
relevant bullet amount specified in the relevant prospectus in relation
to the related series and class (or sub-class) of previous notes and, (in
the case of the issuing entity notes) the amount specified as the
relevant bullet amount in the relevant prospectus supplement.
SCHEDULED AMORTISATION AMOUNT means, in relation to a scheduled
amortisation term advance, the scheduled amortisation amounts in relation
to the related series and class (or sub-class) of previous notes and, in
the case of the issuing entity notes, the amount specified as the
scheduled amortisation amount in the relevant prospectus supplement.
SCHEDULED AMORTISATION PERIOD means the period commencing on the
distribution date falling 3 months prior to the scheduled repayment date
of a scheduled amortisation amount, and which ends on the date that an
amount equal to the relevant scheduled amortisation amount has been
accumulated by Funding.
SCHEDULED REPAYMENT DATE means, in respect of a term advance, the
interest payment date(s) specified in the relevant prospectus or (in the
case of the issuing entity notes) the relevant prospectus supplement and
term advance supplement for the scheduled repayment of principal.
SELLER SHARE EVENT will occur if, on a distribution date, (a) either (i)
the result of the calculation of the current seller share on that
distribution date would be equal to or less than the minimum seller share
for such distribution date (determined using the amounts of the current
seller share and the minimum seller share that would exist after making
the distributions of principal receipts due on that distribution date on
the basis that the cash manager assumes that those principal receipts are
distributed in the manner described under "- MORTGAGES TRUST ALLOCATION
AND DISTRIBUTION OF PRINCIPAL RECEIPTS PRIOR TO THE OCCURRENCE OF A
TRIGGER EVENT") or (ii) the aggregate outstanding principal balance of
loans comprised in the trust property on such distribution date is less
than the required loan balance amount in effect at that time and (b)
neither of the events described in (a) above has occurred on the
immediately preceding distribution date. The required loan balance amount
in effect at the time of an offering of US notes will be set forth in the
relevant prospectus supplement under the heading "Summary - Non-asset
trigger event and seller share event". The required loan balance amount
may change at the time of any new issue of notes.
SELLER SHARE EVENT DISTRIBUTION DATE is a distribution date on which a
seller share event occurs.
SERIES 1 TERM AAA CASH AMOUNT means the cash amount to be accumulated and
set aside by Funding in relation to a term advance related to series 1
class A notes, which is recorded in the cash accumulation sub-ledger of
the relevant issuing entity.
TRIGGER EVENT means an asset trigger event and/or a non-asset trigger
event.
MORTGAGES TRUST ALLOCATION AND DISTRIBUTION OF PRINCIPAL RECEIPTS PRIOR TO THE
OCCURRENCE OF A TRIGGER EVENT
Prior to the occurrence of a trigger event, the mortgages trustee will
allocate and distribute or (as the case may be) retain and reinvest mortgages
trust available principal receipts on each distribution date as follows:
(a) first, the mortgage trust available principal receipts will be
allocated and distributed to Funding in respect of the Funding
share (as determined on the previous distribution date) in an
amount up to the aggregate of (i) the amounts required to
replenish the first reserve fund to the extent that amounts have
been drawn from the first reserve fund to make scheduled
repayments of principal and (ii) to the extent that there is a
shortfall in the Funding liquidity reserve required amount, an
amount equal to the shortfall;
(b) second, from and including the start of a cash accumulation
period, any remaining mortgages trust available principal receipts
will be allocated and distributed to Funding in respect of the
remaining Funding share (as determined on the previous
distribution date) after making the distributions in (a) above,
until an amount equal to the relevant bullet amount or the
relevant series 1 term AAA cash amount has been or will have been
accumulated by Funding, as
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shown on the cash accumulation ledger and on the relevant cash
accumulation sub-ledger, as applicable;
(c) third, during a schedule amortisation period, the cash manager on
behalf of the mortgages trustee shall allocate and distribute any
remaining mortgages trust available principal receipts, to Funding
in an amount in respect of the remaining Funding share (as
determined on the previous distribution date) after making the
distributions in (a) and (b) above, in an amount up to the
scheduled amortisation amount due on the relevant scheduled
amortisation term advance on the immediately succeeding interest
payment date;
(d) fourth, from and including the date when amounts are or will
become outstanding on the next following interest payment date in
respect of one or more pass-through term advances that are due and
payable (the PAYABLE PASS-THROUGH TERM ADVANCES) under an
intercompany loan, ignoring for these purposes the deferral of
repayment of any term BB advance, any term BBB advance, any term A
advance and any term AA advance any remaining mortgages trust
available principal receipts shall be allocated and distributed to
Funding in respect of the Funding share (as determined on the
previous distribution date) after making the distributions in (a),
(b) and (c) above, in an amount up to the aggregate of the
following amounts in respect of each intercompany loan under which
such payable pass-through term advances arise until all of such
payable pass-through term advances are fully repaid or will on the
next following interest payment date be fully repaid. The amounts
referred to above shall be determined in respect of each
intercompany loan advanced by the issuing entity, any previous
issuing entity or any new issuing entity to Funding which then
comprises a payable pass-through term advance (INTERCOMPANY LOAN
X) and shall be:
(i) prior to the occurrence of any option to redeem the notes
(other than pursuant to NUMBER 5.5 of the notes (Optional
redemption for tax and other reasons) or, as applicable and
if specified in the relevant prospectus supplement, NUMBER
5.6 of the notes (Optional redemption for implementation of
EU Capital Requirements Directive) or pursuant to the post
enforcement call option) related to such intercompany loan
X, the outstanding principal balance of each payable
pass-through term advance forming part of such intercompany
loan X; and
(ii) after the occurrence of any option to redeem the notes
(other than pursuant to NUMBER 5.5 of the notes (Optional
redemption for tax and other reasons) or, as applicable and
if specified in the relevant prospectus supplement, NUMBER
5.6 of the notes (Optional redemption for implementation of
EU Capital Requirements Directive) or pursuant to the post
enforcement call option) related to such intercompany loan
X, an amount calculated as follows:
OUTSTANDING PRINCIPAL
BALANCE OF INTERCOMPANY
LOAN AGREEMENT X
FUNDING SHARE PERCENTAGE -----------------------
X PRINCIPAL RECEIPTS X
AGGREGATE OUTSTANDING
PRINCIPAL BALANCE OF
ALL INTERCOMPANY LOANS
(but in each case, taking into account any amounts
available to Funding in the Funding principal ledger to
make such payments); and
(e) fifth, if such distribution date is a seller share event
distribution date then the cash manager shall, on behalf of the
mortgages trustee, retain and reinvest the remaining balance of
the mortgages trust available principal receipts (the RETAINED
PRINCIPAL RECEIPTS) by deposit in the mortgages trustee GIC
account and make a corresponding credit to the principal ledger
and, (ii) where such distribution date is not a seller share event
distribution date, any excess mortgages trust available principal
receipts shall be paid to the seller in respect of the seller
share (as determined on the previous distribution date).
If Funding borrows new intercompany loans, then the terms of the
mortgages trust, including the provisions regarding the way in which the
mortgages trustee distributes principal receipts, may change.
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MORTGAGES TRUST ALLOCATION AND DISTRIBUTION OF PRINCIPAL RECEIPTS AND RETAINED
PRINCIPAL RECEIPTS AFTER THE OCCURRENCE OF A TRIGGER EVENT
On each distribution date after the occurrence of an asset trigger event,
all principal receipts plus an amount equal to the current retained principal
receipts (if any) will be allocated and distributed by the cash manager, on
behalf of the mortgages trustee, as follows:
(a) if the immediately preceding distribution date was a seller share
event distribution date, an amount equal to the retained principal
receipts to Funding until the Funding share is zero; and then
(b) with no order of priority between them but in proportion to the
respective amounts due, to Funding and the seller according to the
Funding percentage share of the trust property and the seller
percentage share of the trust property respectively, until the
Funding share is zero. When the Funding share is zero, the
remaining principal receipts (if any) will be allocated to the
seller.
On each distribution date after the occurrence of a non-asset trigger
event but prior to the occurrence of an asset trigger event, all principal
receipts will be allocated and paid to Funding until the Funding share is zero.
Following the occurrence of a non-asset trigger event but prior to the
occurrence of an asset trigger event, the issuing entity notes will be subject
to prepayment risk (that is, they may be repaid earlier than expected).
Following the occurrence of an asset trigger event, the class A notes may not be
repaid in full by their respective final maturity dates. See "RISK FACTORS - THE
YIELD TO MATURITY OF THE ISSUING ENTITY NOTES MAY BE ADVERSELY AFFECTED BY
PREPAYMENTS OR REDEMPTIONS ON THE LOANS".
LOSSES
All losses arising on the loans are applied in reducing proportionately
the Funding share and the seller share. Funding's share and the seller's share
of the losses are determined by multiplying the amount of losses during a
distribution period by the Funding share percentage, which are allocated to
Funding (until the Funding share is zero) (the FUNDING LOSS AMOUNTS), and the
remainder, which are allocated to the seller (the SELLER LOSS AMOUNT), on each
distribution date.
In the event that any sums are recovered from a borrower in respect of
which a loss has been recorded on the losses ledger (other than in the event
that such recovery occurs subsequent to completion of enforcement procedures),
they belong to Funding and the seller on a separate trust but in the same
proportions as the seller share percentage and funding share percentage
applying as at the closing date or in respect of any later distribution
periods. In the same proportion as the seller share percentage and the funding
share percentage applying on the date immediately following the date on which
any previous recoveries of losses were paid to funding and the seller. Such
recoveries shall be paid to Funding and the seller as soon as reasonably
practicable.
If a recovery is made on a loan after Funding has discharged all its
obligations to all of its secured creditors (including to the issuing entity
under the intercompany loan agreement), then the sums recovered shall be held by
the mortgages trustee for the benefit of the seller only. No income shall arise
or accrue on such recoveries.
DISPOSAL OF TRUST PROPERTY
The trust property is held on trust for the benefit of Funding and the
seller. Subject to the terms of the mortgages trust deed, the mortgages trustee
is not entitled to dispose of the trust property or create any security interest
over the trust property.
If an event of default occurs under any intercompany loan agreement (an
INTERCOMPANY LOAN EVENT OF DEFAULT) and the security trustee enforces the
security granted by Funding over its assets, including its interest in the trust
property, then the security trustee is entitled, among other things, to sell
Funding's interest in the trust property. For further information on the
security granted by Funding over its assets, see "SECURITY FOR FUNDING'S
OBLIGATIONS".
ADDITIONS TO THE TRUST PROPERTY
The trust property may be increased from time to time by the assignment
of new loans and their related security to the mortgages trustee. The mortgages
trustee will hold the new loans and their related security on trust for Funding
and the seller according to the terms of the mortgages trust deed. For further
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information on the assignment of new loans and their related security to the
mortgages trustee, see "ASSIGNMENT OF THE LOANS AND THEIR RELATED SECURITY".
ACQUISITION BY FUNDING OF AN INCREASED INTEREST IN THE TRUST PROPERTY
On not more than 60 nor less than 30 days' written notice, Funding may
offer to make a payment to the seller in consideration for an increase in
Funding's share on a distribution date specified in that notice, with the effect
that Funding's share shall increase and the seller's share shall correspondingly
decrease. Funding is permitted to do this only if a number of conditions are
met, including:
o no note event of default and no intercompany loan event of default
has occurred under any intercompany loan agreement that has not
been remedied or waived;
o as at the most recent interest payment date, no deficiency is
recorded on Funding's principal deficiency ledger (which remains
outstanding);
o the security trustee is not aware that the increase in the Funding
share (or the corresponding decrease in the seller share) would
adversely affect the then current ratings by the rating agencies
of the outstanding notes;
o as at the relevant distribution date, the aggregate outstanding
principal balance of loans comprised in the trust property, in
respect of which the aggregate amount in arrears is more than
three times the monthly payment then due, is less than 4 per cent.
of the aggregate outstanding principal balance of all loans
comprised in the trust property;
o unless otherwise agreed by Moody's, Standard and Poor's or Fitch,
as the case may be, the short-term, unsecured, unguaranteed and
unsubordinated debt obligations of the seller are rated at least
P-1 by Moody's, A-1 by Standard & Poor's and F1 by Fitch at the
time of, and immediately following, the payment made by Funding on
the relevant distribution date;
o the product of the weighted average repossession frequency (WAFF)
and the weighted average loss severity (WALS) for the loans
constituting the trust property calculated on the relevant
distribution date in the same way as for the initial portfolio (or
as agreed by the servicer and the rating agencies from time to
time) does not exceed the product of the WAFF and WALS for the
loans comprised in the trust property calculated on the most
recent previous closing date, plus 0.25 per cent;
o the Moody's portfolio variation test of the loans in the
portfolio as calculated on the relevant distribution date, does
not exceed the most recently determined Moody's portfolio
variation test value as calculated in relation to the loans in
the portfolio as at the most recent date on which Moody's
performed a full pool analysis on the portfolio (not to be less
frequent than annually) plus 0.3 per cent.
o the first reserve fund has not been debited on or before the
relevant distribution date for the purposes of curing a principal
deficiency in respect of the term advances in circumstances where
the first reserve fund has not been replenished by a corresponding
amount by the relevant distribution date.
ACQUISITION BY THE SELLER OF A FURTHER INTEREST IN THE TRUST PROPERTY RELATING
TO CAPITALISED INTEREST
If a borrower takes a payment holiday or makes an underpayment in respect
of interest pursuant to the terms of a flexible loan, then the outstanding
principal balance of the flexible loan will increase by, in the case of a
payment holiday, the amount of interest that would have been paid on the
relevant loan if not for such payment holiday and, in the case of an
underpayment, the excess of the amount of interest that would have been paid on
the relevant loan if not for such underpayment over the reduced amount of
interest paid by the borrower (in each case, the CAPITALISED INTEREST).
The increase in the loan balance as a result of capitalised interest,
capitalised expenses and capitalised arrears will be allocated to the Funding
share and to the seller share, based on their respective percentage shares as
calculated on the previous distribution date.
Prior to an insolvency event occurring in respect of the seller, on each
distribution date, the seller will make a cash payment to Funding in an amount
equal to Funding's share of the capitalised interest in respect of those loans
that are subject to payment holidays or underpayments. Following such payment:
o the seller share will increase by an amount equal to the amount
paid to Funding for Funding's share of the capitalised interest,
and Funding's share will decrease by a corresponding amount; and
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o Funding will apply the proceeds of the amount paid by the seller
in accordance with the Funding pre-enforcement revenue priority of
payments and, after enforcement of the Funding security, in
accordance with the Funding post enforcement priority of payments.
If an insolvency event occurs in respect of the seller, then the seller
may acquire from Funding its share of the capitalised interest in the same
manner and for the same purpose described above, but it is not obliged to do so.
PAYMENT BY THE SELLER TO FUNDING OF THE AMOUNT OUTSTANDING UNDER AN INTERCOMPANY
LOAN
If the seller offers to make a payment to Funding of the amount
outstanding under a term advance that forms part of an intercompany loan, then
Funding may accept that offer but only if:
either:
(a) the aggregate outstanding principal balance of the relevant term
advance under an intercompany loan is less than 10 per cent. of
the principal balance of that term advance immediately after it
was drawn by Funding; or
(b) (i) the issuing entity or a previous issuing entity would be
required to deduct or withhold from any payment of principal or
interest or any other amount under any of the issuing entity notes
or the previous notes (as the case may be) any amount for or on
account of any present or future taxes, duties, assessments or
governmental charges of whatever nature or (ii) Funding would be
required to deduct or withhold from amounts due under an
intercompany loan any amount on account of any present or future
taxes, duties, assessments or governmental charges of whatever
nature and the issuing entity or that previous issuing entity (as
the case may be) is not able to arrange the substitution of a
company incorporated in another jurisdiction approved by the
relevant note trustee or previous note trustee (as the case may
be) as principal debtor under the relevant issuing entity notes or
previous notes (as the case may be) or as lender under the
relevant intercompany loan agreement, as the case may be; or
(c) the issuing entity, or a previous issuing entity, has delivered a
certificate to Funding, the issuing entity security trustee or the
relevant previous issuing entity security trustee and the rating
agencies to the effect that it would be unlawful for the issuing
entity or that previous issuing entity (as the case may be) to
make, fund or allow that term advance to remain outstanding and
stating that that the issuing entity or that previous issuing
entity (as the case may be) requires Funding to prepay that term
advance; or
(d) (in relation to the previous intercompany loans made by Holmes
Financing (No. 7) PLC and Holmes Financing (No. 8) PLC only) the
new Basel Capital Accord (as described in the consultative
document "The New Basel Capital Accord" published in April 2003 by
the Basel Committee on Banking Supervision and in their further
consultative documents) has been implemented in the United
Kingdom, whether by the rule of law, recommendation of best
practice or by any other regulation, no note enforcement notice
has been served and the seller has given not less than 30 and not
more than 60 days notice of the offer by the seller to be made on
or after the interest payment date falling in April 2007; or
(e) (in relation to each intercompany loan made by the issuing entity
under the master intercompany loan agreement) the new Basel
Capital Accord (as described in the consultative document "The New
Basel Capital Accord" published on 14 July 2004 by the European
Commission) has been implemented in the United Kingdom, whether by
the rule of law, recommendation of best practice or by any other
regulation, no note enforcement notice has been served and Funding
has given not less than 30 and not more than 60 days notice to the
note trustee and the issuing entity, but only if so specified with
respect to the corresponding issuing entity notes;
o the security trustee has received written confirmation from each
of the rating agencies that there would not be any adverse effect
on the then current ratings of the outstanding notes if Funding
accepted the offer;
o Funding would receive the payment on a distribution date; and
o the relevant issuing entity has confirmed to Funding that the
proceeds of the corresponding payment made by Funding to the
relevant issuing entity would be applied to repay the relevant
intercompany loan and the relevant issuing entity has exercised
its right to prepay the corresponding series of notes in these
circumstances.
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The Funding share would decrease by an amount equal to the payment made
by the seller and the seller share would increase by a corresponding amount.
TERMINATION OF MORTGAGES TRUST
The mortgages trust will terminate on the earlier of:
o the date on which all amounts due from Funding under all the
intercompany loan agreements have been repaid in full; and
o any other date agreed in writing by Funding and the seller.
RETIREMENT OF MORTGAGES TRUSTEE
The mortgages trustee is not entitled to retire or otherwise terminate
its appointment. The seller and Funding covenant not to replace the mortgages
trustee.
GOVERNING LAW
The mortgages trust deed is governed by English law.
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THE MASTER INTERCOMPANY LOAN AGREEMENT
The following section contains a summary of the material terms of the
master intercompany loan agreement. The summary does not purport to be complete
and is subject to the provisions of the master intercompany loan agreement.
THE FACILITY
Pursuant to the terms of the master intercompany loan agreement, the
issuing entity will lend to Funding from time to time on the relevant closing
date for each issue an aggregate amount in sterling equal to the proceeds of the
issue of such issuing entity notes.
For the purposes of this prospectus, each such advance of funds will be
divided into separate term advances which together shall constitute an
intercompany loan under the master intercompany loan agreement. Each
intercompany loan will be divided into one or more term advances. Each such term
advance under the master intercompany loan agreement will relate to a particular
series and class (or sub-class) of issuing entity notes. The intercompany loan
relating to the particular issue being issued on the relevant closing date of
the relevant prospectus supplement is referred to as the current intercompany
loan. The term advance supplement to the master intercompany loan agreement will
contain the terms of each term advance. Funding will use the proceeds of each
term advance under the master intercompany loan agreement to:
o pay the seller part of the consideration for loans (together with
their related security) sold by the seller to the mortgages
trustee in connection with the relevant issue by the issuing
entity and the making of the relevant term advances to Funding,
which will result in an increase in the amount of the trust
property and a corresponding adjustment to the value of the
Funding share of the trust property and the value of the seller
share of the trust property;
o acquire part of the seller's share of the trust property (such
payment to be made to the seller which will result in a
corresponding decrease of the seller's share of the trust property
and a corresponding increase in Funding's share of the trust
property);
o fund or replenish the first reserve fund; and/or
o make a payment to the issuing entity or to a previous issuing
entity or to a new issuing entity to refinance an existing term
advance.
RATINGS DESIGNATIONS OF THE TERM ADVANCES
The AAA term advances reflect the ratings expected to be assigned to the
corresponding class A notes by the rating agencies on the relevant closing date,
except that AAA term advances may correspond to money market notes rated at
least A-1+/P-1/F-1+. The AA term advances reflect the rating expected to be
assigned to the class B notes by the rating agencies on the relevant closing
date. The A term advances reflect the rating expected to be assigned to the
class M notes by the rating agencies on the relevant closing date. The BBB term
advances reflect the rating expected to be assigned to the class C notes by the
rating agencies on the relevant closing date. The BB term advances reflect the
rating expected to be assigned to the class D notes by the rating agencies on
the relevant closing date. If, after any closing date, the rating agencies
subsequently change the ratings assigned to a series and class (or sub-class) of
the issuing entity notes, then this will not affect the designated ratings of
the term advances under the master intercompany loan.
CONDITIONS TO DRAWDOWN
The issuing entity may make new term advances to Funding and issue
corresponding series and classes (or sub-classes) of issuing entity notes from
time to time without obtaining the consent of existing noteholders. The issuing
entity will not be obliged to make the new term advances available to Funding
unless the issuing entity security trustee is satisfied on the relevant closing
date that a number of conditions have been met, including:
o that the corresponding series and class (or sub-class) of issuing
entity notes have been issued and the proceeds received by or on
behalf of the issuing entity;
o that Funding has delivered a certificate certifying that it is
solvent; and
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o that each of the transaction documents has been duly executed by
the relevant parties to them.
REPRESENTATIONS AND AGREEMENTS
Funding will make several representations to the issuing entity in the
master intercompany loan agreement including representations that Funding has
been duly incorporated and that it has the requisite corporate power and
authority to enter into the transaction documents to which it is a party.
In addition, Funding will agree that:
o it will not create or permit to subsist any encumbrance, unless
arising by operation of law, or other security interest over any
of its assets other than pursuant to the transaction documents;
o it will not carry on any business or engage in any activity
whatsoever which is not incidental to or necessary in connection
with any of the activities in which the transaction documents
provide or envisage that Funding will engage;
o it will not have any subsidiaries, any subsidiary undertakings,
both as defined in the Companies Act 1985 as amended, or any
employees or premises;
o it will not transfer, sell, lend, part with or otherwise dispose
of all or any of its assets, properties or undertakings or any
interest, estate, right, title or benefit therein other than as
contemplated in the transaction documents;
o it will not pay any dividend or make any other distribution to its
shareholders, other than in accordance with the Funding deed of
charge, and it will not issue any new shares;
o it will not incur any indebtedness in respect of any borrowed
money or give any guarantee in respect of any indebtedness or of
any obligation of any person whatsoever other than indebtedness
contemplated by the transaction documents; and
o it will not enter into any amalgamation, demerger, merger or
reconstruction, nor acquire any assets or business nor make any
investments other than as contemplated in the transaction
documents.
PAYMENTS OF INTEREST
The interest rate applicable to the term advances made under the master
intercompany loan from time to time will be determined (other than, in each
case, in respect of the first period) by reference to LIBOR for three-month
sterling deposits or, for some term advances, such other sterling LIBOR rate as
may be specified in the applicable term advance supplement plus or minus, in
each case, a margin which may differ for each separate term advance. LIBOR for
an interest period will be determined on the relevant interest determination
date. The relevant prospectus supplement sets out details of the interest
payment dates and payment of interest on the term advances under the
intercompany loan relating to the series and class (or sub-class) of issuing
entity notes issued.
In addition, Funding will agree to pay an additional fee to the issuing
entity on each interest payment date or otherwise when required. The fee on each
interest payment date will be equal to the amount needed by the issuing entity
to pay or provide for other amounts falling due, if any, to be paid to its
creditors (other than amounts of interest and principal due on the issuing
entity notes and tax that can be met out of the issuing entity's profits) and a
sum (in amount up to 0.02 per cent. of the interest paid to the issuing entity
on the term advances on each interest payment date) to be retained by the
issuing entity as profit. The fee will be paid by Funding out of the Funding
available revenue receipts.
REPAYMENT OF PRINCIPAL ON THE TERM ADVANCES
The term advances under the master intercompany loan agreement will be
repaid on the dates and in the priorities described in "CASHFLOWS - DISTRIBUTION
OF FUNDING AVAILABLE PRINCIPAL RECEIPTS PRIOR TO ENFORCEMENT OF THE FUNDING
SECURITY OR THE OCCURRENCE OF A TRIGGER EVENT OR ENFORCEMENT OF THE ISSUING
ENTITY SECURITY".
DEFERRAL OF PAYMENTS ON BB TERM ADVANCES, BBB TERM ADVANCES, A TERM ADVANCES AND
AA TERM ADVANCES WHEN LOSSES ARE RECORDED ON RESPECTIVE PRINCIPAL DEFICIENCY
LEDGERS AND IN OTHER CIRCUMSTANCES
If:
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o a principal loss has been recorded on the principal deficiency
ledger in respect of any of the BB term advances, the BBB term
advances, the A term advances or the AA term advances (whether in
respect of a term advance under the current intercompany loan, any
previous intercompany loan or any new intercompany loan); or
o monies standing to the credit of the first reserve fund have been
used, on or prior to the relevant interest payment date, to cure a
principal deficiency in respect of the BB term advances and/or the
BBB term advances and/or the A term advances and/or the AA term
advances (whether in respect of a term advance under the current
intercompany loan, any previous intercompany loan or any new
intercompany loan), and the first reserve fund has not been
replenished by a corresponding amount on the relevant interest
payment date; or
o as at the relevant interest payment date, the total outstanding
principal balance of loans in the mortgages trust, in respect of
which the aggregate amount in arrears is more than three times the
monthly payment then due, is more than 5 per cent. of the total
outstanding principal balance of loans in the mortgages trust,
then the BB term advances, the BBB term advances, the A term advances,
and, as applicable, the AA term advances will not be entitled to principal
repayments (i) until the relevant circumstance as described in the preceding
bulleted list has been cured or otherwise ceases to exist; or (ii) unless no AAA
term advances are outstanding.
LIMITED RECOURSE
Funding will only be obliged to pay amounts to the issuing entity in
respect of any term advance under the master intercompany loan agreement to the
extent that it has funds to do so after making payments ranking in priority to
amounts due on the term advances.
If, on the final repayment date of a term advance under the master
intercompany loan, there is a shortfall between the amount of interest and/or
principal due on that term advance and the amount available to Funding to make
that payment, then that shortfall shall not be due and payable to the issuing
entity until the time (if ever) when Funding has enough money available to pay
the shortfall on that term advance (after making any other payments due that
rank higher in priority to that advance).
If, on the final repayment date of an intercompany loan, unless otherwise
specified in the relevant term advance supplement, there is a shortfall between
the amount required to pay all outstanding interest and/or principal on the AA
term advances, and/or the A term advances and/or the BBB term advances and/or
the BB term advances constituting that intercompany loan and the amount
available to Funding to make the relevant payments, then the shortfall shall be
deemed to be not due and payable under the relevant intercompany loan agreement
and any claim that the issuing entity may have against Funding in respect of
that shortfall will be extinguished.
MASTER INTERCOMPANY LOAN EVENTS OF DEFAULT
The master intercompany loan agreement will contain events of default
(each a MASTER INTERCOMPANY LOAN EVENT OF DEFAULT), which will include, among
others, the following events:
o a default by Funding for a period of three London business days in
the payment of any amount payable under any intercompany loan
agreement (whether any previous intercompany loan agreement, the
master intercompany loan agreement or any new intercompany loan
agreement) (but subject to the limited recourse provisions
described later in this section and in "- LIMITED RECOURSE");
o Funding does not comply in any material respect with its
obligations under the transaction documents (other than
non-payment as set out in the preceding paragraph) and that
non-compliance, if capable of remedy, is not remedied promptly and
in any event within twenty London business days of Funding
becoming aware of its non-compliance or of receipt of notice from
the security trustee requiring Funding's non-compliance to be
remedied; and
o insolvency related events occur in relation to Funding or it is,
or becomes, unlawful for Funding to perform its obligations under
any of the transaction documents.
Investors should note that, as described in "- LIMITED RECOURSE", it will
not be an event of default under an intercompany loan agreement (whether any
previous intercompany loan agreement, the master intercompany loan agreement or
any new intercompany loan agreement) if default is made by Funding in
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paying amounts due under the intercompany loan agreement where Funding does not
have the money available to make the relevant payment. The ability of the
issuing entity to repay each series and class (or sub-class) of issuing entity
notes will depend upon payments to the issuing entity from Funding under the
corresponding term advances pursuant to the master intercompany loan agreement.
See "RISK FACTORS - FAILURE BY FUNDING TO MEET ITS OBLIGATIONS UNDER THE MASTER
INTERCOMPANY LOAN AGREEMENT WOULD ADVERSELY AFFECT PAYMENTS ON THE ISSUING
ENTITY NOTES".
Investors should also note that an event of default by Funding in respect
of any previous intercompany loan or any new intercompany loan or any agreement
entered into by Funding in connection with that previous intercompany loan or
new intercompany loan, will constitute an event of default under the current
intercompany loan.
If a master intercompany loan event of default occurs, then the security
trustee will be entitled to deliver a notice to Funding stating that a master
intercompany loan event of default has occurred (a MASTER INTERCOMPANY LOAN
ENFORCEMENT NOTICE). Upon the service of a master intercompany loan enforcement
notice, the security trustee may direct that the term advances become
immediately due and payable and/or that the term advances become due and payable
on the demand of the security trustee.
NEW INTERCOMPANY LOAN AGREEMENTS WITH NEW ISSUING ENTITIES
New issuing entities may be established by Holdings for the purpose of
issuing new notes to investors and using the proceeds thereof to make new
intercompany loans to Funding. The issuance of new notes by a new issuing entity
and the making of the related new intercompany loan will only be permitted if
certain conditions are satisfied, including, among others, that the then current
ratings of the issuing entity notes outstanding at that time will not, as a
result of the new issuing entity issuing any new notes, be adversely affected.
See "RISK FACTORS - IF FUNDING ENTERS INTO NEW INTERCOMPANY LOAN
AGREEMENTS WITH NEW ISSUING ENTITIES, THEN THE NEW TERM ADVANCES MAY RANK AHEAD
OF THE CURRENT TERM ADVANCES AS TO PAYMENT, AND ACCORDINGLY NEW NOTES MAY RANK
AHEAD OF THE ISSUING ENTITY NOTES AS TO PAYMENT", "RISK FACTORS - NEW ISSUING
ENTITIES AND NEW START-UP LOAN PROVIDERS WILL SHARE IN THE SAME SECURITY GRANTED
BY FUNDING TO THE ISSUING ENTITY, AND THIS MAY ADVERSELY AFFECT PAYMENTS ON THE
ISSUING ENTITY NOTES", and "RISK FACTORS - THE PREVIOUS ISSUING ENTITIES, THE
FUNDING SWAP PROVIDER AND THE START-UP LOAN PROVIDER ALREADY SHARE IN THE
SECURITY BEING GRANTED BY FUNDING TO THE ISSUING ENTITY, WHICH MAY ADVERSELY
AFFECT PAYMENTS ON THE ISSUING ENTITY NOTES".
FUNDING'S BANK ACCOUNTS
Funding maintains two bank accounts in its name (managed by the cash
manager) with Abbey. These are:
(a) the Funding GIC account: the reserve funds (including the Funding
liquidity reserve fund and the Funding reserve fund) are credited
to this account and on each distribution date Funding's share of
the mortgages trust available revenue receipts and any
distribution of principal receipts to Funding under the mortgages
trust are initially deposited in this account. On each interest
payment date, amounts required to meet Funding's obligations to
its various creditors are, with the consent of the security
trustee, transferred to the Funding transaction account; and
(b) the Funding transaction account: on each interest payment date,
monies standing to the credit of the Funding GIC account are, with
the consent of the security trustee, transferred to the Funding
transaction account and applied by the cash manager in accordance
with the relevant order of priority of payments. Amounts
representing Funding's profits are retained in the Funding
transaction account.
If collateral is posted by the Funding swap provider under the Funding
swap agreement, Funding shall open a new account in its name, subject to the
terms of the Funding swap agreement, called the FUNDING COLLATERAL ACCOUNT into
which the collateral will be deposited. See "THE SWAP AGREEMENTS - RATINGS
DOWNGRADE OF SWAP PROVIDERS".
The accounts referred to above are currently maintained or to be
maintained with the account bank but may be required to be transferred to an
alternative bank in certain circumstances, including if the short-term,
unguaranteed and unsecured ratings ascribed to the account bank fall below A-1+
(or in the circumstances described below, A-1) by Standard & Poor's, F1 by Fitch
and P-1 by Moody's. So long as the relevant
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deposit amount is less than 30 per cent. of the amount of the Funding share in
the trust property, then the short-term, unguaranteed and unsecured rating
required to be ascribed to the account bank by Standard & Poor's shall be at
least A-1. Such a transfer is not required despite such a downgrade if the
account bank: (i) procures that an entity with the required rating becomes a
co-obligor in respect of the obligations of the account bank; (ii) procures that
an entity with the required rating provides a guarantee of the obligations of
the account bank; or (iii) takes such other actions to ensure that the rating
assigned to the outstanding notes is not adversely affected by the ratings
downgrade, in each case provided that the then current ratings of the
outstanding notes shall not be adversely affected by each or any of the above
actions.
GOVERNING LAW
The master intercompany loan agreement is governed by English law.
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SECURITY FOR FUNDING'S OBLIGATIONS
Funding has granted security for its obligations under the master
intercompany loan agreement (and the other transaction documents to which it is
a party) by entering into the Funding deed of charge with the security trustee,
the cash manager, the account bank, the seller, the corporate services provider,
the previous issuing entities, the Funding swap provider and the start-up loan
provider. The issuing entity has entered into a deed of accession to the Funding
deed of charge which means that it shares in the security granted by Funding
under the Funding deed of charge. In addition, if Funding enters into new
intercompany loan agreements with new issuing entities, then the new issuing
entities (together with any new start-up loan providers), will enter into deeds
of accession in relation to the Funding deed of charge. This means that they
will also share in the security granted by Funding under the Funding deed of
charge with the existing Funding secured creditors.
The Funding deed of charge has seven primary functions:
o it sets out the covenants of Funding;
o it creates security in favour of the security trustee which the
security trustee then administers on trust for each of the Funding
secured creditors (including secured creditors that accede to the
Funding deed of charge in connection with new term advances made
by the issuing entity or by a new issuing entity under a new
intercompany loan);
o it sets out the order in which the cash manager applies money
received by Funding prior to enforcement of the security;
o it sets out the enforcement procedures relating to a default by
Funding on its covenants under the transaction documents
(including provisions relating to the appointment of a receiver);
o it sets out the order in which the security trustee applies money
received by Funding following the enforcement of the security;
o it sets out the appointment of the security trustee, its powers
and responsibilities and the limitations on those
responsibilities; and
o it sets out how new creditors of Funding can accede to the terms
of the Funding deed of charge.
The following section contains a summary of the material terms of the
Funding deed of charge. The summary does not purport to be complete and is
subject to the provisions of the Funding deed of charge.
COVENANTS OF FUNDING
The Funding deed of charge contains covenants made by Funding in favour
of the security trustee on trust for the benefit of itself, any receiver of
Funding and the other Funding secured creditors. The main covenants are that
Funding will pay all amounts due to each of the Funding secured creditors as
they become due (subject to the limited recourse provisions) and that it will
comply with its other obligations under the transaction documents to which it is
or will be a party.
FUNDING SECURITY
Under the Funding deed of charge, Funding creates the following security
(also known as the FUNDING SECURITY) for and on behalf of the Funding secured
creditors in respect of its obligations under the intercompany loans outstanding
at any one time and the other transaction documents to which it is or will be a
party:
o a first ranking fixed charge (which may take effect as a floating
charge) over the Funding share of the trust property;
o an assignment by way of first ranking fixed security of all of its
rights and interest in the transaction documents to which Funding
is a party from time to time;
o a charge by way of first fixed charge (which may take effect as a
floating charge) of the rights and benefits of Funding in the
Funding GIC account, the Funding transaction account, all amounts
standing to the credit of those accounts and all authorised
investments purchased from those accounts;
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o with regard to all of Funding's assets located in England and
Wales or governed by English law, a first ranking floating charge
over all the assets and the undertaking of Funding not otherwise
secured by any fixed charge detailed here; and
o with regard to all of Funding's assets located in Scotland or
governed by Scots law, a first ranking floating charge.
NATURE OF SECURITY - FIXED CHARGE
Funding may not deal with those of its assets which are subject to a
fixed charge without the consent of the security trustee. Accordingly, Funding
is not permitted to deal with the assets which are expressed to be subject to a
fixed charge in its ordinary course of business. In this way, the security is
said to "FIX" over those assets which are expressed to be subject to a fixed
charge (being the charges described in the first three bullet points in this
section).
NATURE OF SECURITY - FLOATING CHARGE
Unlike the fixed charges, the floating charge does not attach to specific
assets but instead "FLOATS" over a class of assets which may change from time to
time, allowing Funding to deal with those assets and to give third parties title
to those assets free from any encumbrance in the event of sale, discharge or
modification, provided those dealings and transfers of title are in the ordinary
course of Funding's business. Any of Funding's assets, whether currently held or
acquired after the relevant closing date (including assets acquired as a result
of the disposition of any other asset of Funding), which are not subject to the
fixed charges mentioned in this section and all of its Scottish assets are
subject to the floating charge.
The Funding deed of charge was created prior to 15 September 2003.
Accordingly, the prohibition in section 72A of the Insolvency Act on the
appointment of an administrative receiver under floating charges created after
that date will not apply to any appointment made pursuant to the Funding deed of
charge.
The existence of the floating charge allows the security trustee to
appoint an administrative receiver of Funding and thereby prevent the
appointment of an administrator or receiver of Funding by one of Funding's other
creditors. Therefore, in the event that enforcement proceedings are commenced in
respect of amounts due and owing by Funding, the security trustee will always be
able to control those proceedings in the best interests of the Funding secured
creditors. However, see "RISK FACTORS - CHANGES OF LAW MAY ADVERSELY AFFECT YOUR
INTERESTS" relating to potential prohibition on appointment of administrative
receivers.
The interest of the Funding secured creditors in property and assets over
which there is a floating charge only will rank behind the expenses of any
liquidation or any administration and the claims of certain other preferential
creditors on enforcement of the Funding security. Section 250 of the Enterprise
Act abolishes crown preference in relation to all insolvencies and thus reduces
the categories of preferential debts that are to be paid in priority to debts
due to the holder of a floating charge but a new Section 176A of the Insolvency
Act (as inserted by Section 251 of the Enterprise Act) requires a "PRESCRIBED
PART" (up to a maximum amount of (pound)600,000) of the floating charge
realisations available for distribution to be set aside to satisfy the claims of
unsecured creditors. This means that the fees and expenses of any administration
and preferential creditors will be paid out of the proceeds of enforcement of
the floating charge ahead of amounts due to the issuing entity under the master
intercompany loan agreement. Again, see "RISK FACTORS - CHANGES OF LAW MAY
ADVERSELY AFFECT YOUR INTERESTS" relating to the introduction of enhanced rights
for unsecured creditors in respect of floating charge recoveries.
The floating charge created by the Funding deed of charge may CRYSTALLISE
and become a fixed charge over the relevant class of assets owned by Funding at
the time of crystallisation. Crystallisation will occur automatically following
the occurrence of specific events set out in the Funding deed of charge,
including, among other events, notice to Funding from the security trustee
following an intercompany loan event of default except in relation to Funding's
Scottish assets, where crystallisation will occur on the appointment of an
administrative receiver or upon the commencement of the winding up of Funding. A
crystallised floating charge will rank ahead of the claims of unsecured
creditors but will continue to rank behind the claims of preferential creditors
(as referred to in this section) on enforcement of the Funding security.
FUNDING PRE-ENFORCEMENT PRIORITY OF PAYMENTS
The Funding deed of charge sets out the order of priority of distribution
by the cash manager, as at the closing date and prior to the enforcement of the
Funding security, of amounts standing to the credit of the
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Funding transaction account on each interest payment date. This order of
priority is described in "CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE REVENUE
RECEIPTS" and "CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS
PRIOR TO ENFORCEMENT OF THE FUNDING SECURITY OR THE OCCURRENCE OF A TRIGGER
EVENT OR ENFORCEMENT OF THE ISSUING ENTITY SECURITY".
FOLLOWING THE CREATION OF NEW INTERCOMPANY LOAN AGREEMENTS WITH NEW ISSUING
ENTITIES
If any new issuing entities are established to issue new notes and
accordingly to make new term advances to Funding, such new issuing entities
(together with any new start-up loan providers) will enter into deeds of
accession or supplemental deeds in relation to the Funding deed of charge which
may, depending on the type of new notes to be issued, require amendments, among
other things, to the Funding pre-enforcement revenue priority of payments, the
Funding pre-enforcement principal priority of payments and the Funding post
enforcement priority of payments to reflect the amounts due to the new issuing
entity and any new start-up loan provider. The ranking of those new amounts due
will be as follows:
o subject to the rules regarding the application of principal
receipts by Funding (see "CASHFLOWS - DISTRIBUTION OF FUNDING
AVAILABLE PRINCIPAL RECEIPTS PRIOR TO ENFORCEMENT OF THE FUNDING
SECURITY OR THE OCCURRENCE OF A TRIGGER EVENT OR ENFORCEMENT OF
THE ISSUING ENTITY SECURITY - RULES FOR APPLICATION OF FUNDING
AVAILABLE PRINCIPAL RECEIPTS AND FUNDING PRINCIPAL RECEIPTS"), all
amounts due and payable to the previous issuing entities, the
issuing entity and any new issuing entity will be paid, subject to
their relevant repayment dates, in descending order of the
respective ratings of their term advances so the term advance with
the highest term advance rating will be paid first and the term
advance with the lowest term advance rating will be paid last; and
o all start-up loan providers will rank in no order of priority
between them but in proportion to the respective amounts due to
them.
ENFORCEMENT
The Funding deed of charge sets out the general procedures by which the
security trustee may take steps to enforce the security created by Funding so
that the security trustee can protect the interests of each of the Funding
secured creditors.
The Funding deed of charge requires the security trustee to consider the
interests of each of the Funding secured creditors as to the exercise of its
powers, trusts, authorities, duties and discretions, but requires the security
trustee in the event of a conflict between the interests of the previous issuing
entities, the issuing entity and any new issuing entities and the interests of
any other Funding secured creditors, to consider only, unless stated otherwise,
the interests of the previous issuing entities, the issuing entity and any new
issuing entities. As among the previous issuing entities, the issuing entity and
any new issuing entities, the security trustee will exercise its rights under
the Funding deed of charge only in accordance with the directions of the
previous issuing entities, the issuing entity and/or the new issuing entity(s)
with the highest-ranking term advance ratings. If the previous issuing entities,
the issuing entity and/or any new issuing entities with term advances of equal
ratings give conflicting directions, then the security trustee will act in
accordance with the directions of the previous issuing entities, the issuing
entity or new issuing entity (or two or more of them if in agreement) whose
aggregate principal amount outstanding of its/their highest-ranking term
advances is the greatest. In all cases, the security trustee will only act if it
is indemnified and/or secured to its satisfaction.
The Funding security will become enforceable upon the service of an
intercompany loan enforcement notice under any intercompany loan, provided that,
if the Funding security has become enforceable otherwise than by reason of a
default in payment of any amount due on any of the term advances, the security
trustee will not be entitled to dispose of all or part of the assets comprised
in the Funding security unless either:
o a sufficient amount would be realised to allow a full and
immediate discharge of all amounts owing in respect of the AAA
term advances - including the AAA term advances made under the
previous intercompany loans, the current intercompany loan and any
new intercompany loans (or, once these AAA term advances have been
repaid, the term advances with the next highest term advance
rating, and so on); or
o the security trustee is of the opinion that the cashflow expected
to be received by Funding 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 Funding,
to discharge in full over time all amounts
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owing in respect of the AAA term advances - including the AAA term
advances made under the previous intercompany loans, the current
intercompany loan and any new intercompany loans (or, once these
AAA term advances have been repaid, the term advances with the
next highest term advance rating, and so on).
Each of the Funding secured creditors will agree under the Funding deed
of charge that they will not take steps directly against Funding for any amounts
owing to them, unless the security trustee has become bound to enforce the
Funding security but has failed to do so within 30 days of becoming so bound.
FUNDING POST ENFORCEMENT PRIORITY OF PAYMENTS
The Funding deed of charge sets out the order of priority of distribution
as at the relevant closing date of each issue by the security trustee, following
service of an intercompany loan enforcement notice, of amounts received or
recovered by the security trustee or a receiver appointed on its behalf. This
order of priority is described in "CASHFLOWS - DISTRIBUTION OF FUNDING PRINCIPAL
RECEIPTS AND FUNDING REVENUE RECEIPTS FOLLOWING ENFORCEMENT OF THE FUNDING
SECURITY".
FOLLOWING THE CREATION OF NEW INTERCOMPANY LOAN AGREEMENTS WITH NEW ISSUING
ENTITIES
Any deeds of accession will amend the Funding post enforcement priority
of payments to reflect the amounts due to the new issuing entity and any new
start-up loan provider or any other relevant creditor that has acceded to the
terms of the Funding deed of charge.
APPOINTMENT, POWERS, RESPONSIBILITIES AND LIABILITIES OF THE SECURITY TRUSTEE
The security trustee is appointed to act as trustee on behalf of the
Funding secured creditors on the terms and conditions of the Funding deed of
charge. It holds the benefit of the security created by the Funding deed of
charge on trust for each of the Funding secured creditors in accordance with the
terms and conditions of the Funding deed of charge.
The Funding Deed of Charge provides that the security trustee may agree
amendments or modifications to any of the transaction documents:
o which in the opinion of the security trustee it may be expedient
to make, provided that the security trustee is of the opinion
acting reasonably, that such modifications will not be materially
prejudicial to the interests of the Funding secured creditors or,
if it is not of that opinion in relation to any Funding secured
creditors, such Funding secured creditor has given its written
consent to such modifications;
o which in the opinion of the security trustee are made to correct a
manifest error or are of a formal, minor or technical nature; or
o provided that the rating agencies confirm that as a result of such
modification there will not be any adverse effect on the then
current ratings by the rating agencies of any series or class (or
sub-class) of notes.
If any new funding entity is established, then the security trustee may
agree to changes to the transaction documents to enable the inclusion of such
new funding entity as a beneficiary of the mortgages trust, and the prior
consent of noteholders will not be obtained in relation to those modifications,
provided that the rating agencies confirm that the inclusion of the new funding
entity as a beneficiary of the mortgages trust would not adversely affect the
existing ratings of any series or class (or sub-class) of notes.
THE SECURITY TRUSTEE'S FEES AND EXPENSES
Funding shall reimburse the security trustee for all its costs and
expenses properly incurred in acting as security trustee. The security trustee
is entitled to a fee payable quarterly in the amount agreed from time to time by
the security trustee and Funding. Funding has agreed to indemnify the security
trustee and each of its officers, employees and advisers from and against all
claims, actions, proceedings, demands, liabilities, losses, damages, costs and
expenses arising out of or in connection with:
o the transaction documents; or
o the security trustee's engagement as security trustee,
which it or any of its officers, employees or advisers may suffer.
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Funding is not responsible under the Funding deed of charge for any
liabilities, losses, damages, costs or expenses resulting from fraud,
negligence, wilful misconduct or breach of the terms of the Funding deed of
charge by the security trustee or any of its officers or employees.
RETIREMENT AND REMOVAL
Subject to the appointment of a successor security trustee, the security
trustee may retire after giving three months' notice in writing to Funding.
Funding may remove the security trustee at any time provided that it has
the consent, which must not be unreasonably withheld or delayed, of each of the
other Funding secured creditors to the removal.
In addition, the security trustee may, subject to conditions specified in
the Funding deed of charge, appoint a co-trustee to act jointly with it.
ADDITIONAL PROVISIONS OF THE FUNDING DEED OF CHARGE
The Funding deed of charge contains a range of provisions regulating the
scope of the security trustee's duties and liabilities. These include the
following:
o the security trustee will, if reasonably practicable, give prior
notification to the seller of the security trustee's intention to
enforce the Funding security (although any failure to so notify
will not prejudice the ability of the security trustee to enforce
the Funding security);
o the security trustee is not responsible for the adequacy or
enforceability of the Funding deed of charge or any other
transaction document;
o the security trustee is not required to exercise its powers under
the Funding deed of charge without being directed to do so by the
issuing entity, the previous issuing entities, any new issuing
entities or the other Funding secured creditors;
o the security trustee may rely on documents provided by the
mortgages trustee, Funding and the cash manager and the advice of
consultants and advisors;
o the security trustee is not required to monitor whether an
intercompany loan event of default under any intercompany loan has
occurred or compliance by Funding with the transaction documents;
o the security trustee will be taken not to have knowledge of the
occurrence of an intercompany loan event of default under any
intercompany loan unless the security trustee has received notice
from a Funding secured creditor stating that an intercompany loan
event of default has occurred and describing that intercompany
loan event of default;
o the security trustee has no duties or responsibilities except
those expressly set out in the Funding deed of charge or the
transaction documents;
o any action taken by the security trustee under the Funding deed of
charge or any transaction document binds all of the Funding
secured creditors;
o each Funding secured creditor must make its own independent
investigations, without reliance on the security trustee, as to
the affairs of Funding and whether or not to request that the
security trustee take any particular course of action under any
transaction document;
o the security trustee and its affiliates may engage in any kind of
business with Funding or any of the Funding secured creditors as
if it were not security trustee and may receive consideration for
services in connection with any transaction document or otherwise
without having to account to the Funding secured creditors;
o the security trustee has no liability under or in connection with
the Funding deed of charge or any other transaction document,
whether to a Funding secured creditor or otherwise, other than to
the extent to which (a) the liability is able to be satisfied in
accordance with the Funding deed of charge out of the property
held by it on trust under the Funding deed of charge and (b) it is
actually indemnified for the liability. This limitation of
liability does not apply to a liability of the security trustee to
the extent that it is not satisfied because there is a reduction
in the extent of the security trustee's indemnification as a
result of its fraud, negligence or wilful misconduct or breach of
the terms of the Funding deed of charge; and
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o the security trustee is not responsible for any deficiency which
may arise because it is liable to tax in respect of the proceeds
of security.
The security trustee has had no involvement in the preparation of any
part of this prospectus, other than any particular reference to the security
trustee. The security trustee expressly disclaims and takes no responsibility
for any other part of this prospectus. The security trustee makes no statement
or representation in this prospectus, has not authorised or caused the issue of
any part of it and takes no responsibility for any part of it. The security
trustee does not guarantee the performance of the issuing entity notes or the
payment of principal or interest on the issuing entity notes.
GOVERNING LAW
The Funding deed of charge is governed by English law.
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SECURITY FOR THE ISSUING ENTITY'S OBLIGATIONS
The issuing entity has granted security for its obligations by entering
into the issuing entity deed of charge with the issuing entity secured
creditors.
The issuing entity deed of charge has six primary functions:
o it sets out covenants of the issuing entity;
o it creates security for the issuing entity security trustee which
the issuing entity security trustee then administers on trust for
each of the issuing entity secured creditors (including secured
creditors that accede to the issuing entity deed of charge in
connection with future series and classes (or sub-classes) of
issuing entity notes);
o it sets out the enforcement procedures relating to a default by
the issuing entity of its covenants under the transaction
documents (including the appointment of a receiver);
o it sets out the order in which the issuing entity security trustee
applies monies standing to the credit of the transaction accounts
following the enforcement of the issuing entity security;
o it sets out the appointment of the issuing entity security
trustee, its powers and responsibilities and the limitations on
those responsibilities; and
o it sets out how creditors of the issuing entity can accede to the
terms of the issuing entity deed of charge.
The following section contains a summary of the material terms of the
issuing entity deed of charge. The summary does not purport to be complete and
is subject to the provisions of the issuing entity deed of charge.
COVENANTS OF THE ISSUING ENTITY
The issuing entity deed of charge contains covenants made by the issuing
entity in favour of the issuing entity security trustee on trust for the benefit
of itself, any receiver of the issuing entity and the issuing entity secured
creditors. The main covenants are that the issuing entity will pay all amounts
due to each of the issuing entity secured creditors as they become due (subject
to applicable deferral provisions) and that it will comply with its other
obligations under the transaction documents.
ISSUING ENTITY SECURITY
Under the issuing entity deed of charge, the issuing entity creates the
following security in respect of its obligations under the issuing entity notes
and the other transaction documents to which it is or will be a party:
o an assignment and charge by way of first fixed security of the
issuing entity's rights under the transaction documents to which
it is a party, including the master intercompany loan agreement,
the Funding deed of charge, the issuing entity swap agreements,
the issuing entity paying agent and agent bank agreement, the
underwriting agreement, subscription agreement, the issuing entity
corporate services agreement, the issuing entity bank account
agreement, the issuing entity cash management agreement and the
trust deed;
o a charge by way of first fixed charge (which may take effect as a
floating charge) of the issuing entity's right, title and interest
and benefit in the transaction accounts and any amounts deposited
in them;
o a charge by way of first fixed charge (which may take effect as a
floating charge) of the issuing entity's right, title, interest
and benefit in all authorised investments made by or on behalf of
the issuing entity, including all monies and income payable under
them;
o with regard to all of the issuing entity's assets located in
England or Wales or governed by English law a first ranking
floating charge over the issuing entity's business and assets not
already charged under the fixed charges described here; and
o with regard to all of the issuing entity's assets located in
Scotland or governed by Scots law a first ranking floating charge
(all of the assets subject to fixed charges as listed above being
wholly governed by English law).
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NATURE OF SECURITY - FIXED CHARGE
The issuing entity may not deal with those of its assets which are
subject to a fixed charge without the consent of the issuing entity security
trustee. Accordingly, the issuing entity will not be permitted to deal in its
ordinary course of business with the assets which are expressed to be subject to
a fixed charge. In this way, the security is said to "FIX" over those assets
which are expressed to be subject to a fixed charge (being the charges described
in the first three bullet points in this section).
NATURE OF SECURITY - FLOATING CHARGE
Unlike the fixed charges, the floating charge does not attach to specific
assets but instead "FLOATS" over a class of assets which may change from time to
time, allowing the issuing entity to deal with those assets and to give third
parties title to those assets free from any encumbrance in the event of sale,
discharge or modification, provided those dealings and transfers of title are in
the ordinary course of the issuing entity's business. Any assets acquired by the
issuing entity after the relevant closing date (including assets acquired as a
result of the disposition of any other assets of the issuing entity) which are
not subject to fixed charges described in the preceding section and all of its
Scottish assets will also be subject to the floating charge.
The existence of the floating charge allows the issuing entity security
trustee to appoint an administrative receiver of the issuing entity and thereby
prevent the appointment of an administrator or receiver of the issuing entity by
one of the issuing entity's other creditors. Therefore, in the event that
enforcement proceedings are commenced in respect of amounts due and owing by the
issuing entity, the issuing entity security trustee should be able to control
those proceedings in the best interest of the issuing entity secured creditors.
However, see "RISK FACTORS - CHANGES OF LAW MAY ADVERSELY AFFECT YOUR INTERESTS"
relating to the appointment of administrative receivers.
The interests of the issuing entity secured creditors in property and
assets over which there is a floating charge will rank behind the expenses of
any liquidation or any administration and the claims of certain preferential
creditors on enforcement of the issuing entity security. This means that the
expenses of any liquidation or any administration and preferential creditors
will be paid out of the proceeds of enforcement of the floating charge ahead of
amounts due to the noteholders. Section 250 of the Enterprise Act abolishes
crown preference in relation to all insolvencies (and thus reduces the
categories of preferential debts that are to be paid in priority to debts due to
the holder of a floating charge) but a new Section 176A of the Insolvency Act
(as inserted by Section 251 of the Enterprise Act) requires a "PRESCRIBED PART"
(up to a maximum amount of (pound)600,000) of the floating charge realisations
available for distribution to be set aside to satisfy the claims of unsecured
creditors. This means that the fees and expenses of any administration, the
claims of preferential creditors and the beneficiaries of the prescribed part
will be paid out of the proceeds of enforcement of the floating charge ahead of
amounts due to noteholders. The prescribed part will not be relevant to property
subject to a valid fixed security interest or to a situation in which there are
no unsecured creditors.
The floating charge created by the issuing entity deed of charge may
CRYSTALLISE and become a fixed charge over the relevant class of assets owned by
the issuing entity at the time of crystallisation. Crystallisation will occur
automatically following the occurrence of specific events set out in the issuing
entity deed of charge, including, among other events, notice to the issuing
entity from the issuing entity security trustee following an event of default
under the issuing entity notes (except in relation to the issuing entity's
Scottish assets, where crystallisation will occur on the appointment of an
administrative receiver or upon commencement of a winding up of the issuing
entity). A crystallised floating charge will rank ahead of the claims of
unsecured creditors which are in excess of the prescribed part but will rank
behind the fees and expenses of any administration, the claims of preferential
creditors and the beneficiaries of the prescribed part on enforcement of the
issuing entity security.
ENFORCEMENT
The issuing entity deed of charge sets out the general procedures by
which the issuing entity security trustee may take steps to enforce the security
created by the issuing entity so that the issuing entity security trustee can
protect the interests of each of the issuing entity secured creditors.
The issuing entity deed of charge requires the issuing entity security
trustee to consider the interests of each of the issuing entity secured
creditors as to the exercise of its powers, trusts, authorities, duties and
discretions, but requires the issuing entity security trustee in the event of a
conflict between the interests of the noteholders and the interests of any other
issuing entity secured creditor, to consider only, unless stated
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otherwise, the interests of the noteholders. As among noteholders, the issuing
entity security trustee will exercise its rights under the issuing entity deed
of charge only in accordance with the directions of the class of noteholders
with the highest-ranking issuing entity notes. If there is a conflict between
the interests of the class A noteholders of one series and the class A
noteholders of another series, or conflict between the class B noteholders of
one series and the class B noteholders of another series, or conflict between
the class M noteholders of one series and the class M noteholders of another
series, or conflict between the class C noteholders of one series and the class
C noteholders of another series, or conflict between the class D noteholders of
one series and the class D noteholders of another series, then a resolution
directing the issuing entity security trustee to take any action must be passed
at separate meetings of the holders of each series of the class A notes or, as
applicable, each series of the class B notes or, as applicable, each series of
the class M notes or, as applicable, each series of the class C notes or, as
applicable, each series of the class D notes.
The issuing entity security will become enforceable upon either (a) the
enforcement of the Funding security or (b) the occurrence of a note event of
default which is not being waived by the issuing entity security trustee,
provided that, if the issuing entity security has become enforceable otherwise
than by reason of a default in payment of any amount due on the issuing entity
notes, the issuing entity security trustee will not be entitled to dispose of
all or part of the assets comprised in the issuing entity security unless
either:
o a sufficient amount would be realised to allow a full and
immediate discharge of all amounts owing in respect of the class A
notes or, if the class A notes have been fully repaid, the class B
notes or, if the class B notes have been fully repaid, the class M
notes or, if the class M notes have been fully repaid, the class C
notes or, if the class C notes have been fully repaid, the class D
notes; or
o the issuing entity security trustee is of the opinion that the
cashflow expected to be received by the issuing entity 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 issuing entity, to discharge in
full over time all amounts owing in respect of the class A notes
or, if the class A notes have been fully repaid, the class B notes
or, if the class B notes have been fully repaid, the class M notes
or, if the class M notes have been fully repaid, the class C notes
or, if the class C notes have been fully repaid, the class D
notes.
Each of the issuing entity secured creditors (other than the noteholders,
the note trustee acting on behalf of the noteholders and the issuing entity
security trustee) will agree under the issuing entity deed of charge that they
will not take steps directly against the issuing entity for any amounts owing to
them, unless the issuing entity security trustee has become bound to enforce the
issuing entity security but has failed to do so within 30 days of becoming so
bound and the failure is continuing.
POST ENFORCEMENT PRIORITY OF PAYMENTS
The issuing entity deed of charge sets out the order of priority of
distribution by the issuing entity security trustee, following service of a note
enforcement notice, of amounts received or recovered by the issuing entity
security trustee (or a receiver appointed on its behalf). There are two separate
payment orders of priority depending on whether the Funding security has also
been enforced. These orders of priority are described in "CASHFLOWS".
NEW ISSUING ENTITY SECURED CREDITORS
New issuing entity secured creditors will enter into deeds of accession
in relation to the issuing entity deed of charge upon or immediately prior to
the issue of the series or class (or sub-class) of offered notes described in
the relevant prospectus supplement and/or a new series or class (or sub-class)
of new notes by the issuing entity.
APPOINTMENT, POWERS, RESPONSIBILITIES AND LIABILITIES OF THE ISSUING ENTITY
SECURITY TRUSTEE
The issuing entity security trustee is appointed to act as trustee on
behalf of the issuing entity secured creditors on the terms and conditions of
the issuing entity deed of charge. It holds the benefit of the security created
by the issuing entity deed of charge on trust for each of the issuing entity
secured creditors in accordance with the terms and conditions of the issuing
entity deed of charge.
The issuing entity security trustee may concur with any person in making
any modifications to the transaction documents only (for so long as any issuing
entity notes remain outstanding) if so directed by the
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note trustee. The note trustee may give such direction, without the consent or
sanction of the noteholders, provided that:
o (i) the note trustee is of the opinion that such modifications
will not be materially prejudicial to the interests of the
noteholders of any series or class of issuing entity notes, and
(ii) the note trustee is of the opinion that such modifications
will not be materially prejudicial to the interests of the issuing
entity swap providers or, if it is not of that opinion in relation
to any of the issuing entity swap providers, such issuing entity
swap provider has consented to such modifications;
o in the opinion of the note trustee such modification is to correct
a manifest or proven error established as such to the satisfaction
of the note trustee or is an error of a formal, minor or technical
nature.
The issuing entity security trustee is entitled to assume in the exercise
of its discretions and powers, that the proposed exercise would not be
materially prejudicial to the interests of the noteholders, if the existing
ratings of the issuing entity notes are not adversely affected by that proposed
exercise. The prior consent of noteholders will not be obtained in relation to
the inclusion of a new funding entity as a beneficiary of the mortgages trust,
provided that the rating agencies confirm that the inclusion of such new funding
entity as a beneficiary of the mortgages trust would not adversely affect the
existing ratings of any notes.
ISSUING ENTITY SECURITY TRUSTEE'S FEES AND EXPENSES
The issuing entity will reimburse the issuing entity security trustee for
all its costs and expenses properly incurred in acting as issuing entity
security trustee. The issuing entity security trustee shall be entitled to a fee
payable quarterly in the amount agreed from time to time by the issuing entity
security trustee and the issuing entity. The issuing entity has agreed to
indemnify the issuing entity security trustee and each of its officers,
employees and advisers from and against all claims, actions, proceedings,
demands, liabilities, losses, damages, costs and expenses arising out of or in
connection with:
o the transaction documents; or
o the issuing entity security trustee's engagement as issuing entity
security trustee,
which it or any of its officers, employees or advisers may suffer.
The issuing entity will not be responsible under the issuing entity deed
of charge for any liabilities, losses, damages, costs or expenses resulting from
fraud, wilful default or negligence on the part of the issuing entity security
trustee or any of its officers, employees and advisers or breach by them of the
terms of the issuing entity deed of charge.
RETIREMENT AND REMOVAL
Subject to the appointment of a successor issuing entity security
trustee, the issuing entity security trustee may retire after giving three
months' notice in writing to the issuing entity.
The issuing entity may remove the issuing entity security trustee at any
time providing that it has the consent, which must not be unreasonably withheld
or delayed, of each of the other issuing entity secured creditors to the
removal.
In addition, the issuing entity security trustee may, subject to the
conditions specified in the issuing entity deed of charge, appoint a co-trustee
to act jointly with it.
ADDITIONAL PROVISIONS OF THE ISSUING ENTITY DEED OF CHARGE
The issuing entity deed of charge contains a range of provisions
regulating the scope of the issuing entity security trustee's duties and
liability. These include the following:
o the issuing entity security trustee will, if reasonably
practicable, give prior notification to the seller of the issuing
entity security trustee's intention to enforce the issuing entity
security (although any failure to so notify will not prejudice the
ability of the issuing entity security trustee to enforce the
issuing entity security);
o the issuing entity security trustee is not responsible for the
adequacy or enforceability of the issuing entity deed of charge or
any other transaction document;
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o the issuing entity security trustee is not required to exercise
its powers under the issuing entity deed of charge without being
directed or requested to do so by an extraordinary resolution of
the noteholders or in writing by the holders of at least 25 per
cent. of the aggregate principal amount outstanding of the issuing
entity notes then outstanding or by any other issuing entity
secured creditor provided that:
(a) the issuing entity security trustee will not act at the
direction or request of the class B noteholders unless
either so to do would not, in its opinion, be materially
prejudicial to the interests of the class A noteholders or
the action is sanctioned by an extraordinary resolution of
the class A noteholders;
(b) the issuing entity security trustee will not act at the
direction or request of the class M noteholders unless
either so to do would not, in its opinion, be materially
prejudicial to the interests of the class A noteholders
and/or the class B noteholders or the action is sanctioned
by extraordinary resolutions of the class A noteholders
and/or the class B noteholders, as the case may be;
(c) the issuing entity security trustee will not act at the
direction or request of the class C noteholders unless
either so to do would not, in its opinion, be materially
prejudicial to the interests of the class A noteholders
and/or the class B noteholders and/or the class M
noteholders or the action is sanctioned by extraordinary
resolutions of the class A noteholders and/or the class B
noteholders and/or the class M noteholders, as the case may
be;
(d) the issuing entity security trustee will not act at the
direction or request of the class D noteholders unless
either so to do would not, in its opinion, be materially
prejudicial to the interest of the class A noteholders
and/or the class B noteholders and/or the class M
noteholders and/or the class C noteholders or the action is
sanctioned by extraordinary resolutions of the class A
noteholders and/or the class B noteholders and/or the class
M noteholders and the class C noteholders, as the case may
be; and
(e) the issuing entity security trustee will not act at the
direction or request of any other issuing entity secured
creditor unless so to do would not, in its opinion, be
materially prejudicial to the interests of the noteholders
or the action is sanctioned by extraordinary resolutions of
the noteholders and each of the other relevant secured
creditors that ranks ahead of that issuing entity secured
creditor (in the post enforcement priority of payments)
also consents to that action and in particular;
o the issuing entity security trustee is entitled to assume that, in
the exercise of its rights, powers, duties and discretions, the
exercise will not be materially prejudicial to the noteholders if
each of the rating agencies has confirmed that the then current
ratings of the issuing entity notes will not be adversely affected
by the exercise;
o the issuing entity security trustee may rely on documents provided
by the issuing entity, the issuing entity cash manager, the
issuing entity swap provider(s), the agent bank, the paying
agents, the registrar, the transfer agent, the issuing entity
account banks and the corporate services provider and the advice
of consultants and advisers;
o the issuing entity security trustee is not required to monitor
whether a note event of default has occurred or compliance by the
issuing entity with the transaction documents;
o the issuing entity security trustee will be taken not to have
knowledge of the occurrence of a note event of default unless the
issuing entity security trustee has received notice from a issuing
entity secured creditor stating that a note event of default has
occurred and describing that note event of default;
o the issuing entity security trustee may rely on any instructions
or directions given to it by the note trustee as being given on
behalf of the relevant class of noteholders without inquiry about
compliance with the trust deed;
o the issuing entity security trustee has no duties or
responsibilities except those expressly set out in the issuing
entity deed of charge or the transaction documents;
o any action taken by the issuing entity security trustee under the
issuing entity deed of charge or any of the transaction documents
binds all of the issuing entity secured creditors;
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o each issuing entity secured creditor must make its own independent
investigations, without reliance on the issuing entity security
trustee, as to the affairs of the issuing entity and whether or
not to request that the issuing entity security trustee take any
particular course of action under any transaction document;
o the issuing entity security trustee in a capacity other than as
issuing entity security trustee can exercise its rights and powers
as such as if it were not acting as the issuing entity security
trustee;
o the issuing entity security trustee and its affiliates may engage
in any kind of business with the issuing entity or any of the
issuing entity secured creditors as if it were not the issuing
entity security trustee and may receive consideration for services
in connection with any transaction document or otherwise without
having to account to the issuing entity secured creditors;
o the issuing entity security trustee has no liability under or in
connection with the issuing entity deed of charge or any other
transaction document, whether to a issuing entity secured creditor
or otherwise, other than to the extent to which (a) the liability
is able to be satisfied in accordance with the issuing entity deed
of charge out of the property held by it on trust under the
issuing entity deed of charge and (b) it is actually indemnified
for the liability. This limitation of liability does not apply to
a liability of the issuing entity security trustee to the extent
that it is not satisfied because there is a reduction in the
extent of the issuing entity security trustee's indemnification as
a result of its fraud, negligence, wilful misconduct or breach of
the terms of the issuing entity deed of charge; and
o the issuing entity security trustee is not responsible for any
deficiency which may arise because it is liable to tax in respect
of the proceeds of security.
The issuing entity security trustee has had no involvement in the
preparation of any part of this prospectus, other than any particular reference
to the issuing entity security trustee. The issuing entity security trustee
expressly disclaims and takes no responsibility for any other part of this
prospectus. The issuing entity security trustee makes no statement or
representation in this prospectus, has not authorised or caused the issue of any
part of it and takes no responsibility for any part of it. The issuing entity
security trustee does not guarantee the success of the issuing entity notes or
the payment of principal or interest on the issuing entity notes.
GOVERNING LAW
The issuing entity deed of charge will be governed by English law.
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CASHFLOWS
DISTRIBUTION OF FUNDING AVAILABLE REVENUE RECEIPTS
DEFINITION OF FUNDING AVAILABLE REVENUE RECEIPTS
FUNDING AVAILABLE REVENUE RECEIPTS will be calculated by the cash manager
on the day falling four business days prior to each interest payment date and
will be an amount equal to the sum of:
o all mortgages trust available revenue receipts distributed to
Funding during the interest period ending on the immediately
following interest payment date;
o other net income of Funding including all amounts of interest
received on the Funding GIC account, the Funding transaction
account and/or authorised investments (as defined in the
glossary), amounts received by Funding under the Funding swap
agreement (other than any early termination amount received by
Funding under the Funding swap agreement and any amount to be
credited to the Funding collateral account, including interest
thereon, subject to the circumstances described in "- COLLATERAL
IN THE FUNDING POST ENFORCEMENT PRIORITY OF PAYMENTS"), in each
case to be received on or prior to the immediately following
interest payment date; and
o the amounts standing to the credit of the first reserve ledger,
the second reserve ledger, the Funding reserve ledger and (if
established) the Funding liquidity reserve ledger.
Four business days prior to each interest payment date, the cash manager
will calculate whether there will be an excess or a deficit of Funding available
revenue receipts (including the first reserve fund and the second reserve fund)
to pay items (a) to (e), (g), (i), (k) and (m) of the Funding pre-enforcement
revenue priority of payments.
If there is a deficit on an interest payment date, then Funding shall pay
or provide for that deficit by applying amounts then standing to the credit of
the Funding principal ledger, if any, and the cash manager shall make a
corresponding entry in the relevant principal deficiency ledger, as described in
"CREDIT STRUCTURE".
Funding principal receipts may not be used to pay interest on any term
advance if and to the extent that would result in a deficiency being recorded or
an existing deficiency being increased, on a principal deficiency sub-ledger
relating to a higher ranking term advance.
Funding shall apply any excess revenue to extinguish any balance on the
principal deficiency ledger, as described in "CREDIT STRUCTURE".
DISTRIBUTION OF FUNDING AVAILABLE REVENUE RECEIPTS PRIOR TO ENFORCEMENT OF THE
FUNDING SECURITY
This section sets out the order of priority of payments of Funding
available revenue receipts as at the date of this prospectus. If Funding enters
into new intercompany loan agreements, then this order of priority will change
"- see SECURITY FOR FUNDING'S OBLIGATIONS".
Except for amounts due to third parties by the issuing entity, the
previous issuing entities and/or Funding under paragraph (a) or amounts due to
the account bank, the issuing entity account banks and/or the previous issuing
entity account banks, which shall be paid when due, on each interest payment
date prior to enforcement of the Funding security, the cash manager will apply
the Funding available revenue receipts in the following order of priority (the
FUNDING PRE-ENFORCEMENT REVENUE PRIORITY OF PAYMENTS):
(a) first, in no order of priority between them but in proportion to
the respective amounts due, to pay amounts due to:
o the security trustee (together with interest and any amount
in respect of VAT on those amounts) and to provide for any
amounts due or to become due in the immediately following
interest period to the security trustee under the Funding
deed of charge;
o in no order of priority between them but in proportion to
the respective amounts due, to pay amounts due to (i) the
issuing entity in respect of the issuing entity's
obligations specified in items (a) to (c) inclusive of the
issuing entity pre-enforcement revenue priority of payments
or, as the case may be, items (a) to (b) inclusive of the
post-enforcement
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priority of payments, as described in "- Distribution of
issuing entity revenue receipts" and "- Distribution of
issuing entity principal receipts and issuing entity
revenue receipts following enforcement of the issuing
entity security and enforcement of the Funding security"
and (ii) the previous issuing entities in respect of the
previous issuing entities' similar obligations under their
respective priorities of payments; and
o any third party creditors of Funding (other than those
referred to later in this order of priority of payments),
which amounts have been incurred without breach by Funding
of the transaction documents to which it is a party (and
for which payment has not been provided for elsewhere) and
to provide for any of these amounts expected to become due
and payable in the immediately following interest period by
Funding and to pay or discharge any liability of Funding
for corporation tax on any chargeable income or gain of
Funding;
(b) then, towards payment of amounts due and payable to the cash
manager under the cash management agreement (together with any
amount in respect of VAT on those amounts);
(c) then, in no order of priority between them but in proportion to
the respective amounts due, towards payment of amounts, if any,
due and payable to the account bank under the terms of the bank
account agreement and to the corporate services provider under the
corporate services agreement;
(d) then, towards payment of amounts (if any) due and payable to the
Funding swap provider under the Funding swap agreement (except for
any termination payments due and payable by Funding following a
Funding swap provider default (as defined later in this section));
(e) then, in no order of priority between them but in proportion to
the respective amounts due, towards payment of interest due and
payable on the AAA term advances in relation to the intercompany
loans;
(f) then, towards a credit to the AAA principal deficiency sub-ledger
in an amount sufficient to eliminate any debit on that ledger;
(g) then, in no order of priority between them but in proportion to
the respective amounts due, towards payment of interest due and
payable on the AA term advances in relation to the intercompany
loans;
(h) then, towards a credit to the AA principal deficiency sub-ledger
in an amount sufficient to eliminate any debit on that ledger;
(i) then, in no order of priority between them but in proportion to
the respective amounts due, towards payment of interest due and
payable on the A term advances in relation to the intercompany
loans;
(j) then, towards a credit to the A principal deficiency sub-ledger in
an amount sufficient to eliminate any debit on that ledger;
(k) then, in no order of priority between them but in proportion to
the respective amounts due, towards payment of interest due and
payable on the BBB term advances in relation to the intercompany
loans;
(l) then, towards a credit to the BBB principal deficiency sub-ledger
in an amount sufficient to eliminate a debit on that ledger;
(m) then, in no order of priority between them but in proportion to
the respective amounts due, towards payment of interest due and
payable on the BB term advances in relation to the intercompany
loans;
(n) then, towards a credit to the BB principal deficiency sub-ledger
in an amount sufficient to eliminate a debit on that ledger;
(o) then, in no order of priority between them but in proportion to
the respective amounts due, towards payment of any amounts due to
the issuing entity and the previous issuing entities in respect of
their respective obligations (if any) to make a termination
payment to an existing swap provider (but excluding any payment
due to an existing swap provider as a result of an existing swap
provider default or any existing swap provider downgrade
termination event);
(p) then, towards a credit to the first reserve ledger in an amount up
to the first reserve fund required amount (see "CREDIT STRUCTURE -
FIRST RESERVE FUND") (except that amounts standing to the credit
of the second reserve ledger shall not be available for this
purpose);
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(q) then, if an arrears trigger event has occurred, towards a credit
to the first reserve ledger to ensure that the balance thereof is
equal to the first reserve fund additional required amount (see
"CREDIT STRUCTURE - FIRST RESERVE FUND") (except that amounts
standing to the credit of the second reserve ledger shall not be
available for this purpose);
(r) then, towards a credit to the Funding liquidity reserve ledger in
an amount up to the Funding liquidity reserve required amount (see
"CREDIT STRUCTURE - FUNDING LIQUIDITY RESERVE FUND");
(s) then, in no order of priority between them but in proportion to
the respective amounts due, to pay amounts due to:
o the issuing entity and/or the previous issuing entities, as
the case may be, in respect of their respective obligations
to pay any termination payment to an existing swap provider
following an existing swap provider default or any existing
swap provider downgrade termination event;
o any other amounts due to the issuing entity under the
master intercompany loan agreement and/or to the previous
issuing entities under the previous intercompany loan
agreements, and not otherwise provided for in this order of
priorities; and
o after the occurrence of a Funding swap provider default,
towards payment of any termination payment due and payable
by Funding under the Funding swap agreement;
(t) then, towards a credit to the second reserve ledger in an amount
up to the second reserve fund required amount (see "CREDIT
STRUCTURE - SECOND RESERVE FUND");
(u) then, towards a credit to the Funding reserve ledger in an amount
up to the Funding reserve fund required amount (see "CREDIT
STRUCTURE - FUNDING RESERVE FUND");
(v) then, towards payment of amounts due to all start-up loan
providers under the start-up loan agreements;
(w) then, an amount equal to 0.01 per cent. of the Funding available
revenue receipts which shall be retained by Funding as profit or
distributed by it by way of dividends to its shareholders;
(x) then, towards payment of any additional consideration due to the
seller pursuant to the terms of the mortgage sale agreement (this
together with the postponed deferred consideration, known as
DEFERRED CONSIDERATION) other than postponed deferred
consideration; and
(y) then, towards payment of any additional consideration due to the
seller which has been postponed pursuant to the terms of the
mortgage sale agreement (known as POSTPONED DEFERRED
CONSIDERATION).
As used in this prospectus, FUNDING SWAP PROVIDER DEFAULT means the
occurrence of an event of default (as defined in the Funding swap agreement)
where the Funding swap provider is the defaulting party (as defined in the
Funding swap agreement).
As used in this prospectus, EXISTING SWAP PROVIDER DEFAULT means the
occurrence of an event of default (as defined in the relevant existing swap
agreement) where an existing swap provider is the defaulting party (as defined
in the relevant existing swap agreement) and EXISTING SWAP PROVIDER DOWNGRADE
TERMINATION EVENT means the occurrence of an additional termination event (as
defined in the relevant existing swap agreement) following the failure by the
relevant existing swap provider to comply with the ratings downgrade provisions
set out in the relevant existing swap agreement. EXISTING SWAP PROVIDERS means
the swap providers under the relevant existing swap agreements. EXISTING SWAP
AGREEMENTS means any outstanding swap agreements entered into between the
previous issuing entities, the issuing entity or any new issuing entity with the
relevant existing swap provider.
DISTRIBUTION OF ISSUING ENTITY REVENUE RECEIPTS
DEFINITION OF ISSUING ENTITY REVENUE RECEIPTS
REVENUE RECEIPTS will be calculated by the issuing entity cash manager
four business days prior to each interest payment date and will be an amount
equal to the sum of:
o interest to be paid by Funding on the relevant interest payment
date in respect of the term advances under the master intercompany
loan agreement;
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o fees to be paid to the issuing entity by Funding on the relevant
interest payment date under the terms of the master intercompany
loan agreement;
o interest payable on the issuing entity's bank accounts (but
excluding any interest in respect of collateral provided by a
issuing entity swap provider to the issuing entity as described
below) and any authorised investments (as defined in the glossary)
and which will be received on or before the relevant interest
payment date; and
o other net income of the issuing entity including amounts received
or to be received under the issuing entity swap agreements on or
before the relevant interest payment date (without double
counting) (other than any early termination amount received by the
issuing entity under the issuing entity swap agreements and any
amount to be credited to the relevant issuing entity collateral
account, including interest thereon, subject to the circumstances
described in "- COLLATERAL IN THE ISSUING ENTITY POST ENFORCEMENT
PRIORITY OF PAYMENTS").
DISTRIBUTION OF ISSUING ENTITY REVENUE RECEIPTS PRIOR TO ENFORCEMENT OF THE
ISSUING ENTITY SECURITY
The issuing entity cash management agreement sets out the order of
priority of distribution by the issuing entity cash manager, prior to the
enforcement of the issuing entity security, of amounts received by the issuing
entity on each interest payment date. The order of priority in effect at the
time of an issuance of US notes will be as described in this section as
supplemented by the relevant prospectus supplement and is subject to change at
the time of any new issue of notes.
As used in this prospectus, SWAP PROVIDER DEFAULT means the occurrence of
an event of default (as defined in the relevant issuing entity swap agreements)
where the relevant issuing entity swap provider is the defaulting party (as
defined in the relevant issuing entity swap agreement). ISSUING ENTITY SWAP
AGREEMENT means any swap agreement between a issuing entity swap provider and
the issuing entity. DOWNGRADE TERMINATION EVENT means the occurrence of an
additional termination event following the failure by the relevant issuing
entity swap provider to comply with the ratings downgrade provisions set out in
the relevant issuing entity swap agreement and DOWNGRADE TERMINATION PAYMENT
means a termination payment due and payable to the relevant issuing entity swap
provider following the occurrence of a downgrade termination event, save to the
extent that such termination payment may be satisfied by any swap replacement
payment made to the issuing entity following a downgrade termination event in
respect of the relevant issuing entity swap agreement. For the avoidance of
doubt, swap replacement payments made to the issuing entity following a
downgrade termination event will not constitute issuing entity revenue receipts.
Either on each interest payment date or when due in respect of amounts
due to third parties under paragraph (b) below or amounts due to the issuing
entity account banks under the issuing entity bank account agreement under
paragraph (c) below, the issuing entity security trustee will apply issuing
entity revenue receipts in the following order of priority (the ISSUING ENTITY
PRE-ENFORCEMENT REVENUE PRIORITY OF PAYMENTS):
(a) first, in no order of priority between them but in proportion to
the respective amounts due, to pay amounts due to:
(i) the issuing entity security trustee, together with interest
and any amount in respect of VAT on those amounts, and to
provide for any amounts due or to become due during the
following interest period to the issuing entity security
trustee under the issuing entity deed of charge;
(ii) the note trustee, together with interest and any amount in
respect of VAT on those amounts, and to provide for any
amounts due or to become due during the following interest
period to the note trustee under the trust deed; and
(iii) the agent bank, the paying agents, the registrar and the
transfer agent, together with interest and any amount in
respect of VAT on those amounts, and any costs, charges,
liabilities and expenses then due or to become due during
the following interest period to the agent bank, the paying
agents, the registrar and the transfer agent under the
issuing entity paying agent and agent bank agreement;
(b) then, to pay amounts due to any third party creditors of the
issuing entity (other than those referred to later in this order
of priority of payments), which amounts have been incurred without
breach by the issuing entity of the transaction documents to which
it is a party and for which payment has not been provided for
elsewhere and to provide for any of those amounts expected to
become due and payable during the following interest period by the
issuing entity
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and to pay or discharge any liability of the issuing entity for
corporation tax on any chargeable income or gain of the issuing
entity;
(c) then, in no order of priority between them but in proportion to
the respective amounts due, to pay amounts due to the issuing
entity cash manager, together with any amount in respect of VAT on
those amounts, and to provide for any amounts due, or to become
due to the issuing entity cash manager in the immediately
succeeding interest period, under the issuing entity cash
management agreement and to the corporate services provider under
the issuing entity corporate services agreement and to the issuing
entity account banks under the issuing entity bank account
agreement;
(d) then, from amounts (excluding principal) received by the issuing
entity from Funding in respect of each AAA term advance (and, in
respect of (ii) below, the amounts (if any), excluding principal,
received from the issuing entity swap provider(s) under the
issuing entity swap agreement(s) in respect of the related series
and class (or sub-class) of issuing entity notes):
(i) to pay the amounts due and payable to the relevant issuing
entity swap provider(s) (if any) in respect of the related
series and class (or sub-class) of class A notes (including
any termination payment, but excluding any issuing entity
swap excluded termination amount) in accordance with the
terms of the relevant issuing entity swap agreement;
(ii) pro rata and pari passu, to pay interest due and payable
(if any) on the related series and class (or sub-class) of
class A notes on such interest payment date;
(e) then, from amounts (excluding principal) received by the issuing
entity from Funding in respect of each AA term advance (and, in
respect of (ii) below, the amounts (if any), excluding principal,
received from the issuing entity swap provider(s) under the
issuing entity swap agreement(s) in respect of the related series
and class (or sub-class) of issuing entity notes):
(i) to pay the amounts due and payable to the relevant issuing
entity swap provider(s) (if any) in respect of the related
series and class (or sub-class) of class B notes (including
any termination payment, but excluding any issuing entity
swap excluded termination amount) in accordance with the
terms of the relevant issuing entity swap agreement;
(ii) pro rata and pari passu, to pay interest due and payable
(if any) on the related series and class (or sub-class) of
class B notes on such interest payment date;
(f) then, from amounts (excluding principal) received by the issuing
entity from Funding in respect of each A term advance (and, in
respect of (ii) below, the amounts (if any), excluding principal,
received from the issuing entity swap provider(s) under the
issuing entity swap agreement(s) in respect of the related series
and class (or sub-class) of issuing entity notes):
(i) to pay the amounts due and payable to the relevant issuing
entity swap provider(s) (if any) in respect of the related
series and class (or sub-class) of class M notes (including
any termination payment, but excluding any issuing entity
swap excluded termination amount) in accordance with the
terms of the relevant issuing entity swap agreement;
(ii) pro rata and pari passu, to pay interest due and payable
(if any) on the related series and class (or sub-class) of
class M notes on such interest payment date;
(g) then, from amounts (excluding principal) received by the issuing
entity from Funding in respect of each BBB term advance (and, in
respect of (ii) below, the amounts (if any), excluding principal,
received from the issuing entity swap provider(s) under the
issuing entity swap agreement(s) in respect of the related series
and class (or sub-class) of issuing entity notes):
(i) to pay the amounts due and payable to the relevant issuing
entity swap provider(s) (if any) in respect of the related
series and class (or sub-class) of class C notes (including
any termination payment, but excluding any issuing entity
swap excluded termination amount) in accordance with the
terms of the relevant issuing entity swap agreement;
(ii) pro rata and pari passu, to pay interest due and payable
(if any) on the related series and class (or sub-class) of
class C notes on such interest payment date;
(h) then, from amounts (excluding principal) received by the issuing
entity from Funding in respect of each BB term advance (and, in
respect of (ii) below, the amounts (if any), excluding principal,
received from the issuing entity swap provider(s) under the
issuing entity swap agreement(s) in respect of the related series
and class (or sub-class) of issuing entity notes):
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(i) to pay the amounts due and payable to the relevant issuing
entity swap provider(s) (if any) in respect of the related
series and class (or sub-class) of class D notes (including
any termination payment, but excluding any issuing entity
swap excluded termination amount) in accordance with the
terms of the relevant issuing entity swap agreement;
(ii) pro rata and pari passu, to pay interest due and payable
(if any) on the related series and class (or sub-class) of
class D notes on such interest payment date;
(i) then, in no order of priority between them but in proportion to
the respective amounts due, to pay to each issuing entity swap
excluded termination amount due to an issuing entity swap
provider;
(j) then, to the issuing entity, an amount equal to 0.01 per cent. of
the interest received on the term advances under the master
intercompany loan agreement, to be retained by the issuing entity
as profit; and
(k) then, any surplus to the issuing entity.
DISTRIBUTION OF ISSUING ENTITY REVENUE RECEIPTS AFTER ENFORCEMENT OF THE ISSUING
ENTITY SECURITY BUT PRIOR TO ENFORCEMENT OF THE FUNDING SECURITY
Following enforcement of the issuing entity security under the issuing
entity deed of charge, but prior to enforcement of the Funding security under
the Funding deed of charge, the issuing entity security trustee will apply
issuing entity revenue receipts in the same order of priority as set out in
"DISTRIBUTION OF ISSUING ENTITY REVENUE RECEIPTS" except that:
o in addition to the amounts due to the issuing entity security
trustee under paragraph (a) of "DISTRIBUTION OF ISSUING ENTITY
REVENUE RECEIPTS - DISTRIBUTION OF ISSUING ENTITY REVENUE RECEIPTS
PRIOR TO ENFORCEMENT OF THE ISSUING ENTITY SECURITY", issuing
entity revenue receipts will be applied to pay amounts due to any
receiver appointed by the issuing entity security trustee together
with interest and any amount in respect of VAT on those amounts,
and to provide for any amounts due or to become due to the
receiver during the following interest period; and
o the issuing entity security trustee will not be required to pay
amounts due to any entity which is not an issuing entity secured
creditor.
DISTRIBUTION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS PRIOR TO ENFORCEMENT OF THE
FUNDING SECURITY OR THE OCCURRENCE OF A TRIGGER EVENT OR ENFORCEMENT OF THE
ISSUING ENTITY SECURITY
DEFINITION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS
FUNDING AVAILABLE PRINCIPAL RECEIPTS will be calculated by the cash
manager on the day falling four business days prior to each interest payment
date and will be an amount equal to the sum of:
o all Funding principal receipts received by Funding during the
interest period ending on the relevant interest payment date and
any other amounts standing to the credit of the Funding principal
ledger;
o all Funding principal receipts standing to the credit of the cash
accumulation ledger which are to be applied on the next interest
payment date to repay a bullet term advance and/or, as applicable,
a scheduled amortisation term advance, and, for the avoidance of
doubt, all series 1 term AAA cash amounts standing to the credit
of the cash accumulation sub-ledger of the relevant issuing entity
which are to be applied on the next interest payment date to repay
the bullet term advance in respect of the AAA term advance and/or
any previous term AAA advance, as applicable;
o the amount, if any, to be credited to the principal deficiency
ledger pursuant to items (f), (h), (j), (l) and (n) in
"DISTRIBUTION OF FUNDING AVAILABLE REVENUE RECEIPTS - DISTRIBUTION
OF FUNDING AVAILABLE REVENUE RECEIPTS PRIOR TO ENFORCEMENT OF THE
FUNDING SECURITY" on the relevant interest payment date;
o prior to enforcement of the Funding security and to be applied
only in respect of the first reserve fund term advances, the
amount then standing to the credit of the first reserve ledger
(but less any amounts applied or to be applied on the relevant
date in payment of interest and other revenue expenses as set out
in items (a) to (o) (inclusive) of the Funding pre-enforcement
revenue priority of payments); and
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o prior to enforcement of the Funding security or the occurrence of
an asset trigger event, and to be applied only in respect of
Funding liquidity reserve fund term advances, the amount then
standing to the credit of the Funding liquidity reserve ledger
(but less any amounts applied or to be applied on the relevant
date in payment of interest and other revenue expenses as set out
in items (a) to (o) (inclusive) of the Funding pre-enforcement
revenue priority of payments),
less
o the amount of Funding principal receipts to be applied on the
relevant interest payment date to pay items (a) to (e)
(inclusive), (g), (i), (k) and (m) of the Funding pre-enforcement
revenue priority of payments.
For the avoidance of doubt, the amount standing to the credit of the
first reserve ledger and the Funding liquidity reserve ledger may be applied
after the payments described in items (i) (ii) and (iii) under rule (1) below
have been made.
RULES FOR APPLICATION OF FUNDING AVAILABLE PRINCIPAL RECEIPTS AND FUNDING
PRINCIPAL RECEIPTS
The Funding deed of charge sets out certain rules for the application by
Funding, or the cash manager on its behalf, of the Funding available principal
receipts on each interest payment date and, in the case of the principle
described in rule 4 below on each distribution date. For the purposes of the
principles described in rules 1 to 6 below:
(a) an amount will become due and payable in respect of a bullet term
advance in an amount equal to the relevant bullet amount on the
scheduled repayment date for that bullet term advance which falls
on that interest payment date (ignoring for the purposes of this
definition any provisions deferring payment if Funding has
insufficient funds to pay such amount on such interest payment
date);
(b) an amount will become due and payable in respect of a scheduled
amortisation term advance in an amount equal to the applicable
scheduled amortisation amount due on the scheduled repayment date
for that scheduled amortisation term advance which falls on that
interest payment date (ignoring for the purposes of this
definition any provisions deferring payment if Funding has
insufficient funds to pay such amount on such interest payment
date); and
(c) an amount will become due and payable on an interest payment date
in respect of any pass-through term advance in an amount equal to
the principal balance of such pass-through term advance if on or
immediately preceding an interest payment date any term advances
advanced by the same issuing entity under the same intercompany
loan and which are repayable prior to such pass-through term
advance have been repaid in full except as otherwise specified in
the relevant prospectus supplement.
The six rules are as follows:
1. GENERAL RULES
On each interest payment date, Funding or the cash manager on its behalf
will apply Funding available principal receipts:
(i) first, to replenish the first reserve fund to the extent only that
monies have been drawn from the first reserve fund to make
scheduled principal repayments on the first reserve fund term
advances;
(ii) then, if the Funding liquidity reserve fund has been established,
after the application of Funding available revenue receipts, to
replenish the Funding liquidity reserve fund up to the amount of
the Funding liquidity reserve required amount;
(iii) then, (subject to rule (2) below) to repay any AAA term advances
which are bullet term advances and/or scheduled amortisation term
advances that are then due and payable;
(iv) then, to pay into the cash accumulation ledger an amount equal to:
A - B
where:
A = the amount standing to the credit of the cash
accumulation ledger immediately prior to such interest
payment date, and
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B = the amounts applied to repay the bullet term advances and
scheduled amortisation term advances repaid under item
(iii) above; and
(v) then, to repay all other outstanding term advances which are then
due and payable in accordance with the terms and provisions of, as
applicable, the current intercompany loan agreement, the previous
intercompany loan agreements and any new intercompany loan
agreements and the relative term advance ratings of those term
advances. The repayment terms of the master intercompany loan are
described in the remaining sub-sections under this section.
Subject to the principles described in rules 2 to 6 below, term
advances will be repaid according to their respective term advance
ratings (first on the term advances with the highest term advance
rating, and thereafter on the term advances with the next highest
term advance rating, and so on, down to the term advances with the
lowest term advance rating) with any remainder remaining in the
Funding principal ledger.
2. PRIOR TO THE OCCURRENCE OF A TRIGGER EVENT AND THE ENFORCEMENT OF THE
FUNDING SECURITY, REPAYMENT OF THE AAA TERM ADVANCES IS DETERMINED BY
FINAL MATURITY DATE IF MORE THAN ONE AAA TERM ADVANCE IS DUE AND PAYABLE
ON THE SAME INTEREST PAYMENT DATE
If on any interest payment date amounts are due and payable under more
than one AAA term advance (whether in respect of the current intercompany
loan, the previous intercompany loans or any new intercompany loan), then
Funding will apply Funding available principal receipts to repay the AAA
term advance with the earliest final maturity date and then the next
earliest, and so on.
If, in this instance, any AAA term advances have the same final maturity
date, then Funding will apply Funding available principal receipts to
repay those AAA term advances in no order of priority between them but in
proportion to the respective amounts due.
3. IN CERTAIN CIRCUMSTANCES, PAYMENT ON ALL THE BB TERM ADVANCES, ALL THE
BBB TERM ADVANCES, ALL THE A TERM ADVANCES AND ALL THE AA TERM ADVANCES
IS DEFERRED
If:
o a principal loss has been recorded on the principal deficiency
ledger in respect of any of the BB term advances, the BBB term
advances, the A term advances or the AA term advances under any
intercompany loan; or
o monies standing to the credit of the first reserve fund have been
used, on or prior to the relevant interest payment date, to cure a
principal deficiency in respect of any of the BB term advances
and/or the BBB term advances and/or the A term advances and/or the
AA term advances under any intercompany loan, and the first
reserve fund has not been replenished by a corresponding amount on
the relevant interest payment date; or
o as at the relevant interest payment date, the aggregate
outstanding principal balance of loans in the mortgages trust, in
respect of which the aggregate amount in arrears is more than
three times the monthly payment then due, is more than 5 per cent.
of the aggregate outstanding principal balance of loans in the
mortgages trust,
then, any BB term advances, any BBB term advances, any A term advances or
AA term advances which are due and payable (whether in respect of the
current intercompany loan, the previous intercompany loans or any new
intercompany loan) will not be entitled to receive principal repayments:
(i) until the relevant circumstances described in the preceding bulleted
list have been cured or otherwise cease to exist; or (ii) unless no AAA
term advances are outstanding.
4. EFFECT OF CASH ACCUMULATION PERIOD ON TERM ADVANCES
From the time that a cash accumulation period has started in respect of a
bullet term advance or a series 1 term AAA cash amount, on each
distribution date and, if the principle described in rule 5 below is
applicable, on each interest payment date, Funding available principal
receipts will be deposited in the Funding GIC account and the amount of
those deposits will be recorded on the cash accumulation ledger until
Funding has saved enough to repay the relevant bullet term advance or the
relevant series 1 term AAA cash amount. Amounts accumulated by Funding
during a scheduled amortisation period will also be deposited on each
distribution date in the Funding GIC account and the amount so deposited
recorded in the cash accumulation ledger, until Funding has received
sufficient principal receipts to repay the relevant scheduled
amortisation term advance.
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During the cash accumulation period for a bullet term advance and/or for
a series 1 term AAA cash amount in relation to a AAA term advance or the
relevant previous term AAA advance, in each case made under an
intercompany loan (INTERCOMPANY LOAN X), no principal repayments will be
made on the pass-through term advances or any scheduled amortisation term
advances made under that intercompany loan X (unless that scheduled
amortisation term advance has a deemed "AAA" rating (in which case rule 2
above shall apply)). Subject to the terms set out in rules 1 and 5,
however, during a cash accumulation period under intercompany loan X
payments may continue to be made in relation to term advances due and
payable under other intercompany loan agreements. For the avoidance of
doubt, separate intercompany loans made under the master intercompany
loan agreement will be treated as different intercompany loans for the
purposes of these rules.
5. REPAYMENT OF PASS-THROUGH TERM ADVANCES
Subject to rule 3 above, Funding may make payments on pass-through term
advances whether or not a cash accumulation period has commenced under a
different intercompany loan.
Funding or the cash manager on its behalf will apply any amounts
available to pay any pass-through term advances to repay each outstanding
payable pass-through term advance in the proportion which the outstanding
principal balance of the intercompany loan under which such pass-through
term advance arises bears to the aggregate outstanding principal balance
of all intercompany loans. Any remaining amounts shall continue to be
reapplied in accordance with such proportion until the outstanding
payable pass through term advances have been repaid in full.
If any amounts remain after the application of the above rules, such
remainder shall be paid into the cash accumulation ledger of any bullet
term advances and/or any series 1 term AAA cash amount, as applicable, in
respect of which a cash accumulation period has commenced, or, if there
is none (or if the relevant bullet term advance and/or the series 1 term
AAA cash amount has been fully accumulated for), then such remainder
shall be credited to the Funding principal ledger.
6. REPAYMENT TESTS
If on an interest payment date in respect of which principal in respect
of any term advance is scheduled to be paid:
o for any AA term advance, the amount of principal due (or any part
thereof) in respect of the AA term advance may only be paid if,
after giving effect to such payment and the payment to be made on
such date in respect of the related series and class (or
sub-class) of issuing entity notes, the class A available
subordinated amount is at least equal to the class A required
subordinated amount;
o for any A term advance, the amount of principal due (or any part
thereof) in respect of the A term advance may only be paid if,
after giving effect to such payment and the payment to be made on
such date in respect of the related series and class (or
sub-class) of issuing entity notes, the class A available
subordinated amount is at least equal to the class A required
subordinated amount and the class B available subordinated amount
is at least equal to the class B required subordinated amount;
o for any BBB term advance, the amount of principal due (or any part
thereof) in respect of the BBB term advance may only be paid if,
after giving effect to such payment and the payment to be made on
such date in respect of the related series and class (or
sub-class) of issuing entity notes, the class A available
subordinated amount is at least equal to the class A required
subordinated amount, the class B available subordinated amount is
at least equal to the class B required subordinated amount and the
class M available subordinated amount is at least equal to the
class M required subordinated amount;
o for any BB term advance, the amount of principal due (or any part
thereof) in respect of the BB term advance may only be paid if,
after giving effect to such payment and the payment to be made on
such date in respect of the related series and class (or
sub-class) of issuing entity notes, the class A available
subordinated amount is at least equal to the class A required
subordinated amount, the class B available subordinated amount is
at least equal to the class B required subordinated amount, the
class M available subordinated amount is at least equal to the
class M required subordinated amount and the class C available
subordinated amount is at least equal to the class C required
subordinated amount,
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save that, on any date, in calculating the class A available subordinated
amount, the class B available subordinated amount, the class M available
subordinated amount and the class C available subordinated amount for
such date for the purposes of the above:
(a) stressed excess spread will be deemed to be zero; and
(b) references to the "AGGREGATE AMOUNT OF THE FIRST RESERVE FUND" in
the relevant definition of available subordinated amount in
respect of the relevant class of issuing entity notes (as set out
under "THE ISSUANCE OF ISSUING ENTITY notes") shall instead be
deemed to be an amount calculated as being the greater of either
(i) the amount standing to the credit of the first reserve fund on
the date that such calculation is made and (ii) if on any interest
payment date since the most recent interest payment date (the
REFERENCE DATE) on which the amount standing to the credit of the
first reserve fund was at least equal to the first reserve fund
required amount, the amount standing to the credit of the first
reserve fund has been less than the amount standing to the credit
of the first reserve fund on any preceding interest payment date
from and including the reference date, the first reserve fund
required amount on such date.
See "THE ISSUANCE OF ISSUING ENTITY NOTES" for a description of the
various required subordinated amounts and available subordinated amounts.
REPAYMENT OF TERM ADVANCES PRIOR TO A TRIGGER EVENT, ENFORCEMENT OF THE ISSUING
ENTITY SECURITY OR ENFORCEMENT OF THE FUNDING SECURITY
Prior to:
(a) the occurrence of a trigger event (as described further in "THE
MORTGAGES TRUST"); or
(b) enforcement of the issuing entity security by the issuing entity
security trustee under the issuing entity deed of charge or
enforcement of the previous issuing entity security by the
previous issuing entity security trustee under any previous
issuing entity deed of change; or
(c) enforcement of the Funding security by the security trustee under
the Funding deed of charge,
the term advances under any intercompany loan will be repaid in
accordance with the relevant intercompany loan agreement as follows,
replenishing the first reserve fund (to the extent only that money has been
drawn from the first reserve fund to make scheduled principal repayments) and
then replenishing the Funding liquidity reserve fund up to the Funding liquidity
reserve required amount:
o in order of their scheduled repayment dates, beginning with the
earliest such date (and, if two or more AAA term advances and/or
previous AAA term advances have the same final repayment date, in
proportion to their respective amounts due) to repay the principal
amounts due (if any) on such interest payment date in respect of
the AAA term advances to the issuing entity subject to rules 1 and
2 above. If there are insufficient funds available to pay the
scheduled repayment amount of a scheduled amortisation term
advance on the relevant scheduled repayment date, then the
shortfall will be repaid on the subsequent interest payment dates
(together with any other amounts scheduled to be repaid on the
scheduled amortisation term advances on those interest payment
dates) from Funding available principal receipts;
o in no order of priority among them, but in proportion to the
respective amounts due, to repay the principal amounts due (if
any) on such interest payment date on the AA term advances and/or
previous AA term advances, in each case subject to rules 1, 3 and
6 above;
o in no order of priority among them, but in proportion to the
respective amounts due, to repay the principal amounts due (if
any) on such interest payment date on the A term advances and/or
previous A term advances, in each case subject to rules 1, 3 and 6
above;
o in no order of priority among them, but in proportion to the
respective amounts due, to repay the principal amounts due (if
any) on such interest payment date on the BBB term advances and/or
previous BBB term advances, in each case subject to rules 1, 3 and
6 above; and
o in no order of priority among them, but in proportion to the
respective amounts due, to repay the principal amounts due (if
any) on such interest payment date on the BB term advances and/or
previous BB term advances, in each case subject to rules 1, 3 and
6 above.
REPAYMENT OF TERM ADVANCES OF EACH SERIES FOLLOWING THE OCCURRENCE OF A
NON-ASSET TRIGGER EVENT PRIOR TO ENFORCEMENT OF THE ISSUING ENTITY SECURITY OR
THE FUNDING SECURITY
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Following the occurrence of a non-asset trigger event under the mortgages
trust deed but prior to enforcement of the Funding security by the security
trustee under the Funding deed of charge or the issuing entity security under
the issuing entity deed of charge, the bullet term advances and the scheduled
amortisation term advances in respect of any intercompany loan will be deemed to
be pass-through term advances and on each interest payment date Funding will be
required to apply Funding available principal receipts in the following order of
priority, replenishing the first reserve fund (to the extent only that money has
been drawn from the first reserve fund to make scheduled principal repayments)
and then replenishing the Funding liquidity reserve fund up to the Funding
liquidity reserve required amount:
o first, to repay the term AAA advance with the earliest final
maturity date, then to repay the term AAA advance with the next
earliest final maturity, and so on until the AAA term advances in
respect of the current intercompany loan, the previous
intercompany loans and any new intercompany loans are fully
repaid;
o then, in no order of priority between them but in proportion to
the amounts due, to repay the AA term advances in respect of the
current intercompany loan, the previous intercompany loans and any
new intercompany loans, until those AA term advances are fully
repaid;
o then, in no order of priority between them but in proportion to
the amounts due, to repay the A term advances in respect of the
current intercompany loan, the previous intercompany loans and any
new intercompany loans, until those A term advances are fully
repaid;
o then, in no order of priority between them but in proportion to
the amounts due, to repay the BBB term advances in respect of the
current intercompany loan, the previous intercompany loans and any
new intercompany loans, until those BBB term advances are fully
repaid; and
o then, in no order of priority between them but in proportion to
the amounts due, to repay the BB term advances in respect of the
current intercompany loan, the previous intercompany loans and any
new intercompany loans, until those BB term advances are fully
repaid.
REPAYMENT OF TERM ADVANCES OF EACH SERIES FOLLOWING THE OCCURRENCE OF AN ASSET
TRIGGER EVENT PRIOR TO ENFORCEMENT OF THE ISSUING ENTITY SECURITY OR THE FUNDING
SECURITY
Following the occurrence of an asset trigger event but prior to
enforcement by the security trustee of the Funding security under the Funding
deed of charge or the issuing entity security under the issuing entity deed of
charge, the bullet term advances and the scheduled amortisation term advances in
respect of any intercompany loan will be deemed to be pass-through term advances
and on each interest payment date Funding will be required to apply Funding
available principal receipts in the following order of priority (replenishing
the first reserve fund (to the extent only that money has been drawn from the
first reserve fund to make scheduled principal repayments) and then replenishing
the Funding liquidity reserve fund up to the Funding liquidity reserve required
amount):
o first, in no order of priority between them, but in proportion to
the amounts due, to repay the AAA term advances in respect of the
current intercompany loan, the previous intercompany loans and any
new intercompany loans, until each of those AAA term advances is
fully repaid;
o then, in no order of priority between them, but in proportion to
the amounts due, to repay the AA term advances in respect of the
current intercompany loan, the previous intercompany loans and any
new intercompany loans, until each of those AA term advances is
fully repaid;
o then, in no order of priority between them but in proportion to
the amounts due, to repay the A term advances in respect of the
current intercompany loan, the previous intercompany loans and any
new intercompany loans, until those A term advances are fully
repaid;
o then, in no order of priority between them, but in proportion to
the amounts due, to repay the BBB term advances in respect of the
current intercompany loan, the previous intercompany loans and any
new intercompany loans, until each of those BBB term advances is
fully repaid; and
o then, in no order of priority between them, but in proportion to
the amounts due, to repay the BB term advances in respect of the
current intercompany loan, the previous intercompany loans and any
new intercompany loans, until each of those BB term advances is
fully repaid.
REPAYMENT OF TERM ADVANCES OF EACH SERIES FOLLOWING ENFORCEMENT OF THE ISSUING
ENTITY SECURITY
If the issuing entity security is enforced by the issuing entity security
trustee under the issuing entity deed of charge, then that will not result in
automatic enforcement of the Funding security under the Funding
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deed of charge. In those circumstances, however, the bullet term advances and
the scheduled amortisation advances under the master intercompany loan (only)
will be deemed to be pass-through term advances and Funding will be required to
apply Funding available principal receipts on each interest payment date in the
following order of priority, replenishing the first reserve fund (to the extent
only that money has been drawn from the first reserve fund to make scheduled
principal repayments) and then replenishing the Funding liquidity reserve fund
up to the Funding liquidity reserve required amount:
o first, in no order of priority between them, but in proportion to
the amounts due, to repay the AAA term advances until each of
those advances is fully repaid;
o then, in no order of priority between them, but in proportion to
the amounts due, to repay the AA advances until each of those
advances is fully repaid;
o then, in no order of priority between them, but in proportion to
the amounts due, to repay the A term advances until each of those
advances is fully repaid;
o then, in no order of priority between them, but in proportion to
the amounts due, to repay the BBB term advances until each of
those advances is fully repaid; and
o then, in no order of priority between them, but in proportion to
the amounts due, to repay the BB term advances until each of those
advances is fully repaid.
DISTRIBUTION OF ISSUING ENTITY PRINCIPAL RECEIPTS
DEFINITION OF ISSUING ENTITY PRINCIPAL RECEIPTS
Prior to enforcement of the issuing entity security, ISSUING ENTITY
PRINCIPAL RECEIPTS will be calculated by the issuing entity cash manager four
business days prior to each interest payment date and will be an amount equal to
the sum of all principal amounts to be repaid by Funding to the issuing entity
under the master intercompany loan during the relevant interest period.
Following enforcement of the issuing entity security, but prior to
enforcement of the Funding security, ISSUING ENTITY PRINCIPAL RECEIPTS means the
sum calculated by the issuing entity security trustee four business days prior
to each interest payment date as the amount to be repaid by Funding to the
issuing entity under the master intercompany loan during the relevant interest
period and/or the sum otherwise recovered by the issuing entity security trustee
(or the receiver appointed on its behalf) representing the principal balance of
the issuing entity notes.
DISTRIBUTION OF ISSUING ENTITY PRINCIPAL RECEIPTS PRIOR TO ENFORCEMENT OF THE
ISSUING ENTITY SECURITY
Prior to enforcement of the issuing entity security, the issuing entity,
or the issuing entity cash manager on its behalf, will apply any issuing entity
principal receipts, on each interest payment date, in the following manner:
CLASS A NOTES
o from principal amounts received by the issuing entity from Funding in
respect of each AAA term advance (and in respect of (ii) below, the
principal amounts received (if any) from the issuing entity swap
providers under the relevant issuing entity swap agreements in respect of
the related series and class (or sub-class) of issuing entity notes):
(i) to pay amounts due and payable (in respect of principal) on such
interest payment date to the relevant issuing entity swap
providers in respect of the related series and class (or
sub-class) of class A notes in accordance with the terms of the
relevant issuing entity swap agreements; and
(ii) to pay amounts due and payable in respect of principal (if any) on
such interest payment date on the related series and class (or
sub-class) of class A notes.
CLASS B NOTES
o from principal amounts received by the issuing entity from Funding in
respect of each AA term advance (and in respect of (ii) below, the
principal amounts received (if any) from the issuing entity swap
providers under the relevant issuing entity swap agreements in respect of
the related series and class (or sub-class) of issuing entity notes):
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(i) to pay amounts due and payable (in respect of principal) on such
interest payment date to the relevant issuing entity swap
providers in respect of the related series and class (or
sub-class) of class B notes in accordance with the terms of the
relevant issuing entity swap agreements; and
(ii) to pay amounts due and payable in respect of principal (if any) on
such interest payment date on the related series and class (or
sub-class) of class B notes.
CLASS M NOTES
o from principal amounts received by the issuing entity from Funding in
respect of each A term advance (and in respect of (ii) below, the
principal amounts received (if any) from the issuing entity swap
providers under the relevant issuing entity swap agreements in respect of
the related series and class (or sub-class) of issuing entity notes):
(i) to pay amounts due and payable (in respect of principal) on such
interest payment date to the relevant issuing entity swap
providers in respect of the related series and class (or
sub-class) of class M notes in accordance with the terms of the
relevant issuing entity swap agreements; and
(ii) to pay amounts due and payable in respect of principal (if any) on
such interest payment date on the related series and class (or
sub-class) of class M notes.
CLASS C NOTES
o from principal amounts received by the issuing entity from Funding in
respect of each BBB term advance (and in respect of (ii) below, the
principal amounts received (if any) from the issuing entity swap
providers under the relevant issuing entity swap agreements in respect of
the related series and class (or sub-class) of issuing entity notes):
(i) to pay amounts due and payable (in respect of principal) on such
interest payment date to the relevant issuing entity swap
providers in respect of the related series and class (or
sub-class) of class C notes in accordance with the terms of the
relevant issuing entity swap agreements; and
(ii) to pay amounts due and payable in respect of principal (if any) on
such interest payment date on the related series and class (or
sub-class) of class C notes.
CLASS D NOTES
o from principal amounts received by the issuing entity from Funding in
respect of each BB term advance (and in respect of (ii) below, the
principal amounts received (if any) from the issuing entity swap
providers under the relevant issuing entity swap agreements in respect of
the related series and class (or sub-class) of issuing entity notes):
(i) to pay amounts due and payable (in respect of principal) on such
interest payment date to the relevant issuing entity swap
providers in respect of the related series and class (or
sub-class) of class D notes in accordance with the terms of the
relevant issuing entity swap agreements; and
(ii) to pay amounts due and payable in respect of principal (if any) on
such interest payment date on the related series and class (or
sub-class) of class D notes.
DISTRIBUTION OF ISSUING ENTITY PRINCIPAL RECEIPTS FOLLOWING ENFORCEMENT OF THE
ISSUING ENTITY SECURITY BUT PRIOR TO ENFORCEMENT OF THE FUNDING SECURITY
The issuing entity deed of charge sets out the order of priority of
distribution of issuing entity principal receipts received or recovered by the
issuing entity security trustee (or a receiver appointed on its behalf)
following enforcement of the issuing entity security but prior to enforcement of
the Funding security. In these circumstances, the issuing entity security
trustee will apply issuing entity principal receipts on each interest payment
date to repay the issuing entity notes in the following manner:
o first, in no order of priority between them, but in proportion to
the amounts due, in respect of each AAA term advance (and in
respect of (ii) below, the principal receipts received (if any)
from the issuing entity swap providers under the relevant issuing
entity swap agreements in respect of the related series and class
(or sub-class) of issuing entity notes):
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(i) to pay amounts due and payable (in respect of principal) on
such interest payment date to the relevant issuing entity
swap providers in respect of the related series and class
(or sub-class) of class A notes in accordance with the
terms of the relevant issuing entity swap agreements; and
(ii) to pay amounts due and payable in respect of principal (if
any) on such interest payment date on the related series
and class (or sub-class) of class A notes;
o then, in no order of priority between them, but in proportion to
the amounts due, in respect of each AA term advance (and in
respect of (ii) below, the principal receipts received (if any)
from the issuing entity swap providers under the relevant issuing
entity swap agreements in respect of the related series and class
(or sub-class) of issuing entity notes):
(i) to pay amounts due and payable (in respect of principal) on
such interest payment date to the relevant issuing entity
swap providers in respect of the related series and class
(or sub-class) of class B notes in accordance with the
terms of the relevant issuing entity swap agreements; and
(ii) to pay amounts due and payable in respect of principal (if
any) on such interest payment date on the related series
and class (or sub-class) of class B notes;
o then, in no order of priority between them, but in proportion to
the amounts due, in respect of each A term advance (and in respect
of (ii) below, the principal receipts received (if any) from the
issuing entity swap providers under the relevant issuing entity
swap agreements in respect of the related series and class (or
sub-class) of issuing entity notes):
(i) to pay amounts due and payable (in respect of principal) on
such interest payment date to the relevant issuing entity
swap providers in respect of the related series and class
(or sub-class) of class M notes in accordance with the
terms of the relevant issuing entity swap agreements; and
(ii) to pay amounts due and payable in respect of principal (if
any) on such interest payment date on the related series
and class (or sub-class) of class M notes;
o then, in no order of priority between them, but in proportion to
the amounts due, in respect of each BBB term advance (and in
respect of (ii) below, the principal receipts received (if any)
from the issuing entity swap providers under the relevant issuing
entity swap agreements in respect of the related series and class
(or sub-class) of issuing entity notes):
(i) to pay amounts due and payable (in respect of principal) on
such interest payment date to the relevant issuing entity
swap providers in respect of the related series and class
(or sub-class) of class C notes in accordance with the
terms of the relevant issuing entity swap agreements; and
(ii) to pay amounts due and payable in respect of principal (if
any) on such interest payment date on the related series
and class (or sub-class) of class C notes;
o then, in no order of priority between them, but in proportion to
the amounts due, in respect of each BB term advance (and in
respect of (ii) below, the principal receipts received (if any)
from the issuing entity swap providers under the relevant issuing
entity swap agreements in respect of the related series and class
(or sub-class) of issuing entity notes):
(i) to pay amounts due and payable (in respect of principal) on
such interest payment date to the relevant issuing entity
swap providers in respect of the related series and class
(or sub-class) of class D notes in accordance with the
terms of the relevant issuing entity swap agreements; and
(ii) to pay amounts due and payable in respect of principal (if
any) on such interest payment date on the related series
and class (or sub-class) of class D notes.
DISTRIBUTION OF FUNDING PRINCIPAL RECEIPTS AND FUNDING REVENUE RECEIPTS
FOLLOWING ENFORCEMENT OF THE FUNDING SECURITY
The Funding deed of charge sets out the order of priority of distribution
as at the closing date by the security trustee, following service of an
intercompany loan acceleration notice, of amounts received or recovered by the
security trustee or a receiver appointed on its behalf. If Funding enters into
new intercompany loan agreements, then this order of priority may change - see
"SECURITY FOR FUNDING'S OBLIGATIONS".
161
The security trustee will apply amounts received or recovered following
enforcement of the Funding security on each interest payment date in accordance
with the following order of priority (except for amounts due to the account bank
under the bank account agreement, which will be paid when due):
(a) first, in no order of priority between them but in proportion to
the respective amounts due, to pay amounts due to:
o the security trustee and any receiver appointed by the
security trustee, together with interest and any amount in
respect of VAT on those amounts, and to provide for any
amounts due or to become due to the security trustee and
the receiver in the following interest period under the
Funding deed of charge; and
o the issuing entity in respect of the issuing entity's
obligations specified in items (A) to (B) of the post
enforcement priority of payments and the previous issuing
entities in respect of their own similar obligations;
(b) then, towards payment of amounts due and payable to the cash
manager and any costs, charges, liabilities and expenses then due
or to become due and payable to the cash manager under the cash
management agreement, together with any amount in respect of VAT
on those amounts;
(c) then, in no order of priority between them but in proportion to
the respective amounts due, towards payment of amounts (if any)
due to the account bank under the terms of the bank account
agreement and to the corporate services provider under the
corporate services agreement;
(d) then, towards payment of amounts (if any) due to the Funding swap
provider under the Funding swap agreement (except for any
termination payments due and payable by Funding under the Funding
swap agreement following a Funding swap provider default);
(e) then, in no order of priority between them but in proportion to
the respective amounts due, towards payments of interest and
principal due and payable on the AAA term advances outstanding
under the intercompany loans;
(f) then, in no order of priority between them but in proportion to
the respective amounts due, towards payments of interest and
principal due and payable on the AA term advances outstanding
under the intercompany loans;
(g) then, in no order of priority between them but in proportion to
the respective amounts due, towards payments of interest and
principal due and payable on the A term advances outstanding under
the intercompany loans;
(h) then, in no order of priority between them but in proportion to
the respective amounts due, towards payments of interest and
principal due and payable on the BBB term advances outstanding
under the intercompany loans;
(i) then, in no order of priority between them but in proportion to
the respective amounts due, towards payments of interest and
principal due and payable on the BB term advances outstanding
under the intercompany loans;
(j) then, towards payment of any amounts due to the issuing entity and
the previous issuing entities in respect of their respective
obligations (if any) to make a termination payment to an existing
swap provider (but excluding any payment due to a relevant
existing swap provider following an existing swap provider default
or any existing swap provider downgrade termination event);
(k) then, in no order of priority between them but in proportion to
the respective amounts due, to pay:
o amounts due to the issuing entity and the previous issuing
entities in respect of their respective obligations to pay
any termination payment to an existing swap provider
following an existing swap provider default or any existing
swap provider downgrade termination event;
o any other amounts due to the issuing entity and/or the
previous issuing entities under the master intercompany
loan agreement and/or the previous intercompany loan
agreements and not otherwise provided for earlier in this
order of priorities; and
162
o after the occurrence of a Funding swap provider default,
towards payment of any termination payment due and payable
by Funding under the Funding swap;
(l) then, towards payment of amounts due to all start-up loan
providers under the start-up loan agreements;
(m) then, towards payment of any postponed deferred consideration due
to the seller pursuant to the terms of the mortgage sale
agreement; and
(n) last, towards payment of any deferred consideration (other than
postponed deferred consideration) due to the seller pursuant to
the terms of the mortgage sale agreement.
COLLATERAL IN THE FUNDING POST ENFORCEMENT PRIORITY OF PAYMENTS
Any amount of collateral provided to Funding by the Funding swap provider
shall not be applied in accordance with the above priority of payments, except
to the extent that, following the early termination of the Funding swap due to
an event of default:
o the value of the collateral is applied against an amount equal to
the termination amount that would have been payable by the Funding
swap provider had the collateral not been provided; and
o such amounts (which, for the avoidance of doubt, shall not exceed
the amount equal to the termination amount that would have been
payable by the Funding swap provider had the collateral not been
provided) are not applied by Funding towards the costs of entering
into a replacement swap.
Any collateral not applied in accordance with the foregoing shall be
returned to the Funding swap provider.
DISTRIBUTION OF ISSUING ENTITY PRINCIPAL RECEIPTS AND ISSUING ENTITY REVENUE
RECEIPTS FOLLOWING ENFORCEMENT OF THE ISSUING ENTITY SECURITY AND ENFORCEMENT OF
THE FUNDING SECURITY
If the Funding security is enforced under the Funding deed of charge,
then there will be an automatic enforcement of the issuing entity security under
the issuing entity deed of charge. The issuing entity deed of charge sets out
the order of priority of distribution by the issuing entity security trustee,
following enforcement of the issuing entity security and enforcement of the
Funding security (known as the ISSUING ENTITY POST ENFORCEMENT PRIORITY OF
PAYMENTS), of amounts received or recovered by the issuing entity security
trustee (or a receiver appointed on its behalf) (a) on each interest payment
date or (b) when due in respect of amounts due to the issuing entity account
banks under the issuing entity bank account agreement under paragraph (b) below,
the issuing entity security trustee will apply amounts received or recovered
following enforcement of the issuing entity security as follows:
(a) first, in no order of priority between them but in proportion to
the respective amounts due, to pay amounts due to:
o the issuing entity security trustee and any receiver
appointed by the issuing entity security trustee together
with interest and any amount in respect of VAT on those
amounts and any amounts then due or to become due to the
issuing entity security trustee and the receiver under the
provisions of the issuing entity deed of charge;
o the note trustee together with interest and any amount in
respect of VAT on those amounts and any amounts then due or
to become due and payable to the note trustee under the
provisions of the trust deed; and
o the agent bank, the paying agents, the registrar and the
transfer agent together with interest and any amount in
respect of VAT on those amounts and any costs, charges,
liabilities and expenses then due or to become due and
payable to them under the provisions of the issuing entity
paying agent and agent bank agreement;
(b) then, in no order of priority between them but in proportion to
the respective amounts due, towards payment of amounts (together
with any amount in respect of VAT on those amounts) due and
payable to the issuing entity cash manager under the issuing
entity cash management agreement and to the corporate services
provider under the issuing entity corporate services agreement and
to the issuing entity account banks under the issuing entity bank
account agreement;
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(c) then, in no order of priority between them but in proportion to
the respective amounts due, to pay amounts due to the issuing
entity swap providers for each series of class A notes (except for
any termination payments due and payable to a issuing entity swap
provider as a result of an issuing entity swap provider default or
a downgrade termination event) and from amounts received from the
issuing entity swap provider to pay interest due or overdue on,
and to repay principal of, the applicable series of class A notes;
(d) then, in no order of priority between them but in proportion to
the respective amounts due, to pay amounts due to the issuing
entity swap providers for each series of class B notes (except for
any termination payments due and payable to an issuing entity swap
provider as a result of an issuing entity swap provider default or
a downgrade termination event) and from amounts received from the
issuing entity swap provider to pay interest due or overdue on,
and to repay principal of, the applicable series of class B notes;
(e) then, in no order of priority between them but in proportion to
the respective amounts due, to pay amounts due to the issuing
entity swap providers for each series of class M notes (except for
any termination payments due and payable to an issuing entity swap
provider as a result of an issuing entity swap provider default or
a downgrade termination event) and from amounts received from the
issuing entity swap provider to pay interest due or overdue on,
and to repay principal of, the applicable series of class M notes;
(f) then, in no order of priority between them but in proportion to
the respective amounts due, to pay amounts due to the issuing
entity swap providers for each series of class C notes (except for
any termination payments due and payable to an issuing entity swap
provider as a result of an issuing entity swap provider default or
a downgrade termination event) and from amounts received from the
issuing entity swap provider to pay interest due or overdue on,
and to repay principal of, the applicable series of class C notes;
(g) then, in no order of priority between them but in proportion to
the respective amounts due, to pay amounts due to the issuing
entity swap providers for each series of class D notes (except for
any termination payments due and payable to an issuing entity swap
provider as a result of an issuing entity swap provider default or
a downgrade termination event) and from amounts received from the
issuing entity swap provider to pay interest due or overdue on,
and to repay principal of, the applicable series of class D notes;
(h) then, in no order of priority between them but in proportion to
the respective amounts due, to pay any termination payment due to
the issuing entity swap providers for each series of class A notes
following a swap provider default or a downgrade termination
event;
(i) then, in no order of priority between them but in proportion to
the respective amounts due, to pay to pay any termination payment
due to the issuing entity swap providers for each series of class
B notes following a swap provider default or a downgrade
termination event;
(j) then, in no order of priority between them but in proportion to
the respective amounts due, to pay any termination payment due to
the issuing entity swap providers for each series of class M notes
following a swap provider default or a downgrade termination
event;
(k) then, in no order of priority between them but in proportion to
the respective amounts due, to pay any termination payment due to
the issuing entity swap providers for each series of class C notes
following a swap provider default or a downgrade termination
event; and
(l) last, in no order of priority between them but in proportion to
the respective amounts due, to pay any termination payment due to
the issuing entity swap providers for each series of class D notes
following a swap provider default or a downgrade termination
event.
COLLATERAL IN THE ISSUING ENTITY POST-ENFORCEMENT PRIORITY OF PAYMENTS
Any amount of collateral provided to the issuing entity by any issuing
entity swap provider shall not be applied in accordance with the above priority
of payments, except to the extent that, following the early termination of the
swap due to an event of default:
o the value of the collateral is applied against an amount equal to
the termination amount that would have been payable by the
relevant issuing entity swap provider had the collateral not been
provided; and
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o such amounts (which, for the avoidance of doubt, shall not exceed
the amount equal to the termination amount that would have been
payable by the relevant issuing entity swap provider had the
collateral not been provided) are not applied by the issuing
entity towards the costs of entering into a replacement swap.
Any collateral not applied in accordance with the foregoing shall be
returned directly to such issuing entity swap provider.
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CREDIT STRUCTURE
The issuing entity notes will be an obligation of the issuing entity only
and will not be obligations of, or the responsibility of, or guaranteed by, any
other party. However, there are a number of main features of the transaction
which enhance the likelihood of timely receipt of payments to noteholders, as
follows:
Funding available revenue receipts are expected to exceed interest and
fees payable to the issuing entity;
o a shortfall in Funding available revenue receipts may be met from
Funding's principal receipts;
o the first reserve fund, which was established on 26 July 2000, and
which was further funded on 29 November 2000, 23 May 2001, 5 July
2001, 1 April 2004, 8 August 2006, 28 March 2007 and 21 December
2007, is available to meet shortfalls in interest due on the term
advances and principal due on the first reserve fund term
advances;
o the second reserve fund, which was established on 29 November
2000, further funded on 5 July 2001 from the proceeds of the
previous term BB advance made by Holmes Financing (No. 4) PLC and
will be further funded by Funding's excess revenue to meet
shortfalls in interest due on the term advances if amounts
standing to the credit of the first reserve fund are insufficient
for that purpose;
o payments of the class D notes will be subordinated to payments on
the class A notes, class B notes, class M notes and class C notes;
o payments of the class C notes will be subordinated to payments on
the class A notes, class B notes and class M notes;
o payments of the class M notes will be subordinated to payments on
the class A notes and class B notes;
o payments on the class B notes will be subordinated to payments on
the class A notes;
o the mortgages trustee GIC account and the Funding GIC account each
earn interest at a specified rate (LIBOR for three-month sterling
deposits);
o Funding will be obliged to establish a Funding liquidity reserve
fund if the seller ceases to have a long-term unsecured,
unsubordinated and unguaranteed credit rating by Moody's of at
least A3 or at least A- by Fitch (unless the relevant rating
agency confirms that the current rating of the outstanding notes
will not be adversely affected by the rating downgrade of the
seller); and
o the Funding reserve fund, which was established on 1 April 2004
and will be funded from the excess Funding available revenue
receipts after Funding has paid all of its obligations in respect
of items ranking higher than item (u) of the Funding
pre-enforcement revenue priority of payments on each interest
payment date.
Each of these factors is considered more fully in the remainder of this
section.
CREDIT SUPPORT FOR THE ISSUING ENTITY NOTES PROVIDED BY FUNDING AVAILABLE
REVENUE RECEIPTS
It is anticipated that, during the life of the issuing entity notes
issued under the programme, the Funding share of the interest received from
borrowers on the loans will, assuming that all of the loans are fully
performing, be greater than the sum of the interest which the current issuing
entities have to pay on all of the current issuing entity notes and the other
costs and expenses of the structure. In other words, it is anticipated that the
Funding available revenue receipts would be sufficient to pay the amounts
payable under items (a) to (e), (g), (i), (k) and (m) of the Funding
pre-enforcement revenue priority of payments.
The actual amount of any excess will vary during the life of the issuing
entity notes. Two of the key factors determining the variation are as follows:
o the interest rate on the portfolio; and
o the level of arrears experienced.
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INTEREST RATE ON THE PORTFOLIO
Funding has entered or may enter into a swap in relation to the previous
intercompany loans, the current intercompany loan and any new intercompany loan
to enable it to swap amounts of interest received from borrowers which vary on a
variable, tracker or fixed rate basis for amounts it receives from the Funding
swap counterparty which vary in accordance with LIBOR based rates payable on the
intercompany loans, plus a margin expected to cover Funding's obligations to,
among others, the issuing entity. The swap hedges against the possible variance
between sterling LIBOR based rates payable on the intercompany loans and a
weighted average of the SVR payable on the variable rate loans (including those
capped rate loans that are not subject to the specified capped rate of
interest), the rates of interest payable on the tracker loans and the fixed
rates of interest payable on the fixed rate loans (including those capped rate
loans that are subject to the specified capped rate of interest).
The terms of the swaps are described in greater detail below in "THE SWAP
AGREEMENTS".
LEVEL OF ARREARS EXPERIENCED
If the level of arrears of interest payments made by the borrowers
results in Funding experiencing an income deficit, Funding will be able to use
the following amounts to cure that income deficit:
o first, amounts standing to the credit of the first reserve fund,
as described in "- FIRST RESERVE FUND";
o second, (if established) amounts standing to the credit of the
Funding liquidity reserve fund, as described in "- FUNDING
LIQUIDITY RESERVE FUND";
o third, amounts standing to the credit of the second reserve fund,
as described in "- SECOND RESERVE FUND"; and
o fourth, principal receipts, if any, as described in "- USE OF
FUNDING PRINCIPAL RECEIPTS TO PAY FUNDING INCOME DEFICIENCY".
Any excess of Funding revenue receipts will be applied on each interest
payment date to the extent described in the Funding pre-enforcement revenue
priority of payments, including to extinguish amounts standing to the credit of
any principal deficiency ledger and to replenish the reserve funds.
USE OF FUNDING PRINCIPAL RECEIPTS TO PAY FUNDING INCOME DEFICIENCY
Four business days prior to each interest payment date, the cash manager
will calculate whether there will be an excess or a deficit of Funding available
revenue receipts (including the reserve funds) to pay items (a) to (e), (g),
(i), (k) and (m) of the Funding pre-enforcement revenue priority of payments.
If there is a deficit, then Funding shall pay or provide for that deficit
by the application of Funding available principal receipts, if any, and the cash
manager shall make a corresponding entry in the relevant principal deficiency
sub-ledger, as described in "- PRINCIPAL DEFICIENCY LEDGER".
Funding principal receipts may not be used to pay interest on any term
advance if and to the extent that would result in a deficiency being recorded or
an existing deficiency being increased, on a principal deficiency sub-ledger
relating to a higher ranking term advance.
Funding shall apply any excess Funding available revenue receipts to
extinguish any balance on the principal deficiency ledger, as described in "-
PRINCIPAL DEFICIENCY LEDGER".
FIRST RESERVE FUND
A first reserve fund has been established:
o to help meet any deficit in Funding available revenue receipts;
o to help meet any deficit recorded on the principal deficiency
ledger; and
o prior to enforcement of the Funding security, to help repay
principal due on the first reserve fund term advances.
The first reserve fund was funded initially on 26 July 2000 by the first
start-up loan in the sum of (pound)6,000,000. It was further funded on
29 November 2000 by the second start-up loan in the sum of
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(pound)7,500,000, on 23 May 2001 by the third start-up loan in the sum of
(pound)12,000,000, on 1 April 2004 by the eighth start-up loan in the sum of
(pound)36,000,000, on 8 August 2006 from the Funding reserve fund in the sum of
(pound)8 million, on 28 March 2007 by the 2007-1 start-up loan in the sum of
(pound)77 million and on 21 December 2007 by the 2007-3 start-up loan in the sum
of (pound)78 million . In addition, part of the proceeds of the previous BB term
advance made by Holmes Financing (No. 4) PLC (in an amount equal to
(pound)31,000,000) was credited by Funding to the first reserve fund on 5 July
2001. The first reserve ledger is maintained by the cash manager to record the
balance from time to time of the first reserve fund.
On each interest payment date the amount of the first reserve fund is
added to certain other income of Funding in calculating Funding available
revenue receipts.
Prior to enforcement of the Funding security, after meeting any income
deficit and satisfying any deficit on the principal deficiency ledger, amounts
standing to the credit of the first reserve fund may be used to repay principal
due and payable in relation to the several outstanding AAA term advances from
and including their respective scheduled repayment dates.
The first reserve fund will be replenished from:
o firstly, Funding available principal receipts in an amount up to
the amount used to repay the first reserve fund term advances (but
only if the first reserve fund has been used for this purpose);
o secondly, any excess Funding available revenue receipts up to and
including an amount equal to the first reserve fund required
amount specified in connection with the most recent issuance of
notes; and
o thirdly, following the occurrence of an arrears trigger event, any
Funding available revenue receipts to be paid in accordance with
item (q) of the Funding pre-enforcement revenue priority of
payments receipts up to and including an amount equal to the first
reserve fund additional required amount specified in connection
with the most recent issuance of notes.
Funding available revenue receipts will only be applied to replenish the
first reserve fund after paying interest due on the term advances and reducing
any deficiency on the AAA principal deficiency sub-ledger, the AA principal
deficiency sub-ledger, the A principal deficiency sub-ledger, the BBB principal
deficiency sub-ledger and the BB principal deficiency sub-ledger (see "CASHFLOWS
- - DISTRIBUTION OF FUNDING AVAILABLE REVENUE RECEIPTS - DISTRIBUTION OF FUNDING
AVAILABLE REVENUE RECEIPTS PRIOR TO ENFORCEMENT OF THE FUNDING SECURITY").
The seller, Funding and the security trustee may agree to increase the
first reserve fund required amount and the first reserve fund additional
required amount from time to time. They may also agree to decrease the first
reserve fund required amount and the first reserve fund additional required
amount (subject to such reduction not having an adverse impact on the ratings of
the notes) if Funding has repaid any amounts owing to the previous issuing
entities, the issuing entity and any new issuing entities, from time to time.
The first reserve fund required amount and the first reserve fund additional
required amount in effect at the time of an issuance of US notes will be the
amounts specified as such in the relevant prospectus supplement under the
heading "SUMMARY - FIRST RESERVE FUND".
SECOND RESERVE FUND
A second reserve fund was established on 29 November 2000 to help meet
deficits in Funding available revenue receipts.
The second reserve fund is funded from:
(a) part of the proceeds of the previous term BB advance made by
Holmes Financing (No. 4) PLC (in an amount equal to
(pound)19,000,000) which was credited by Funding to the second
reserve fund on 5 July 2001; and
(b) excess Funding available revenue receipts, after Funding has
paid all of its obligations in respect of items ranking higher
than (t) (which item is a credit to the second reserve ledger up
to the second reserve fund required amount) pursuant to the
Funding pre-enforcement revenue priority of payments on each
interest payment date (see "CASHFLOWS - DISTRIBUTION OF FUNDING
AVAILABLE REVENUE RECEIPTS").
A second reserve ledger is maintained by the cash manager to record the
balance from time to time of the second reserve fund.
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On each interest payment date the amount of the second reserve fund is
added to certain other income of Funding in calculating Funding available
revenue receipts.
The second reserve fund is replenished from any excess Funding available
revenue receipts up to and including an amount equal to the second reserve fund
required amount. The SECOND RESERVE FUND REQUIRED AMOUNT is an amount equal to X
where X is calculated on each interest payment date as follows:
((LIBOR for three-month sterling deposits + 0.65 per cent.) - (the
weighted average yield on the loans in the mortgages trust) + (the net
margin on the Funding swap)) x (the aggregate outstanding principal
balance of all the term advances) x (the weighted average life of all the
term advances)
The weighted average life of the current term advances is calculated as
being the greater of 2.5 years or the weighted average life calculated on the
following assumptions:
(a) the lower of a 15 per cent. CPR and the 12 month rolling CPR; and
(b) the previous issuing entities, the issuing entity and any new
issuing entities, from time to time, not exercising their
respective options to redeem the previous notes, the issuing
entity notes or new notes, respectively, issued by it.
If the issuing entity exercises its option to redeem the issuing entity
notes, then the second reserve fund required amount will decrease in accordance
with the formula set forth in this section.
The seller, Funding and the security trustee may agree to increase,
decrease or amend the second reserve fund required amount from time to time.
FUNDING RESERVE FUND
A Funding reserve fund was established on 1 April 2004 to fund further
the reserve funds in connection with the issuance of new notes by any new
issuing entities after such date and, among other things, to fund certain costs
and expenses incurred by Funding in connection with subsequent assignments of
part of the seller's share of the trust property to it, fees to be paid under
new intercompany loans which relate to the costs of issue of new notes, all
necessary filing and other fees incurred in ensuring compliance with regulatory
requirements and all legal and audit fees and other professional advisory fees.
The Funding reserve fund will be funded from the excess Funding available
revenue receipts after Funding has paid all of its obligations in respect of
items ranking higher than item (u) of the Funding pre-enforcement revenue
priority of payments on each interest payment date. The Funding reserve ledger
will be maintained by the cash manager to record the balance of the Funding
reserve fund from time to time.
On each interest payment date, the amount of the Funding reserve fund is
added to certain other income of Funding in calculating Funding available
revenue receipts.
The Funding reserve fund is replenished from any excess Funding available
revenue receipts up to the Funding reserve fund required amount, or such other
amount as the seller may determine from time to time. The Funding reserve fund
required amount in effect at the time of an issuance of US notes will be the
amount specified as such in the relevant prospectus supplement under the heading
"SUMMARY - FUNDING RESERVE FUND REQUIRED AMOUNT" and may change at the time of
any new issue of notes or as the seller may determine.
The seller may increase, decrease or amend the Funding reserve fund
required amount from time to time, without the consent of the security trustee,
Funding or the noteholders.
PRINCIPAL DEFICIENCY LEDGER
A principal deficiency ledger has been established to record:
o any principal losses on the loans allocated to Funding; and/or
o the application of Funding available principal receipts to meet
any deficiency in Funding's available revenue receipts (as
described in "- USE OF FUNDING PRINCIPAL RECEIPTS TO PAY FUNDING
INCOME DEFICIENCY"); and/or
o the application of Funding available principal receipts which are
allocated to fund the Funding liquidity reserve fund up to the
Funding liquidity reserve required amount.
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The principal deficiency ledger is split into five sub-ledgers which will
each correspond to each of the AAA term advances, the AA term advances, the A
term advances, the BBB term advances and the BB term advances, respectively, as
follows:
o the AAA principal deficiency sub-ledger corresponding to all
outstanding AAA term advances;
o the AA principal deficiency sub-ledger corresponding to all
outstanding AA term advances;
o the A principal deficiency sub-ledger corresponding to all
outstanding A term advances;
o the BBB principal deficiency sub-ledger corresponding to all
outstanding BBB term advances; and
o the BB principal deficiency sub-ledger corresponding to all
outstanding term BB advances.
Losses on the loans and/or the application of Funding available principal
receipts to pay interest on term advances are recorded as follows:
o first, on the BB principal deficiency sub-ledger until the balance
of the BB principal deficiency sub-ledger is equal to the
aggregate principal amount outstanding of all term BB advances;
o second, on the BBB principal deficiency sub-ledger until the
balance of the BBB principal deficiency sub-ledger is equal to the
aggregate principal amount outstanding of all BBB term advances;
o third, on the A principal deficiency sub-ledger until the balance
of the A principal deficiency sub-ledger is equal to the aggregate
principal amount outstanding of all A term advances;
o fourth, on the AA principal deficiency sub-ledger until the
balance of the AA principal deficiency sub-ledger is equal to the
aggregate principal amount outstanding of all AA term advances;
and
o fifth, on the AAA principal deficiency sub-ledger, at which point
there will be an asset trigger event.
Any excess revenue of Funding as described in "- USE OF FUNDING PRINCIPAL
RECEIPTS TO PAY FUNDING INCOME DEFICIENCY" is, on each interest payment date,
applied to the extent described in the Funding pre-enforcement revenue priority
of payments as follows:
o first, provided that interest due on the AAA term advances has
been paid, in an amount necessary to reduce to zero the balance on
the AAA principal deficiency sub-ledger;
o second, provided that interest due on the AA term advances has
been paid, in an amount necessary to reduce to zero the balance on
the AA principal deficiency sub-ledger;
o third, provided that interest due on the A term advances has been
paid, in an amount necessary to reduce to zero the balance on the
A principal deficiency sub-ledger;
o fourth, provided that interest due on the BBB term advances has
been paid, in an amount necessary to reduce to zero the balance on
the BBB principal deficiency sub-ledger; and
o fifth, provided that interest due on the BB term advances has been
paid, in an amount necessary to reduce to zero the balance on the
BB principal deficiency sub-ledger.
FOLLOWING THE CREATION OF NEW INTERCOMPANY LOAN AGREEMENTS
In general, if Funding borrows a new term advance under a new
intercompany loan, and that new term advance does not have a term advance rating
of either AAA, AA, A, BBB or BB, then Funding will establish a new principal
deficiency sub-ledger. That new principal deficiency sub-ledger will correspond
to and be known by the term advance rating of the relevant new term advance.
Losses on the loans and/or the application of Funding available principal
receipts to pay interest on the outstanding term advances will first be recorded
on the lowest ranking principal deficiency sub-ledger, and then in ascending
order of rating priority up to the highest-ranking principal deficiency
sub-ledger. Any excess revenue of Funding will be applied to the highest-ranking
principal deficiency sub-ledger, in descending order of rating priority down to
the lowest ranking principal deficiency sub-ledger.
ISSUING ENTITY AVAILABLE FUNDS
On each interest payment date in respect of the master intercompany loan,
the issuing entity will receive from Funding an amount equal to or less than the
amount which it needs to pay out on the corresponding interest payment date in
respect of the issuing entity notes in accordance with the issuing
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entity pre-enforcement priority of payments. It is not intended that any surplus
cash will be accumulated in the issuing entity.
See also the description of the issuing entity swaps under "THE SWAP
AGREEMENTS".
PRIORITY OF PAYMENTS AMONG THE CLASS A NOTES, THE CLASS B NOTES, THE CLASS M
NOTES, THE CLASS C NOTES AND THE CLASS D NOTES
The order of payments of interest to be made on the classes of issuing
entity notes will be prioritised so that interest payments on the class D notes
will be subordinated to interest payments on the class C notes, interest
payments on the class C notes will be subordinated to interest payments on the
class M notes, interest payments on the class M notes will be subordinated to
interest payments on the class B notes and interest payments on the class B
notes will be subordinated to interest payments on the class A notes, in each
case in accordance with the issuing entity priority of payments.
Any shortfall in payments of interest on any series of the class B notes
and/or the class M notes and/or the class C notes and/or the class D notes on
any interest payment date in respect of such issuing entity notes will be
deferred until the next interest payment date and will accrue interest. On the
next interest payment date, the amount of interest due on the relevant class of
issuing entity notes will be increased to take account of any deferred interest.
If, on that interest payment date, there is still a shortfall, that shortfall
will be deferred again. This deferral process will continue until the final
repayment date of the issuing entity notes, at which point all such deferred
amounts of interest (including interest thereon) will be due and payable.
However, if there is insufficient money available to the issuing entity to pay
interest on the class B notes, or the class M notes or the class C notes, or the
class D notes then you may not receive all interest amounts payable on those
classes of issuing entity notes.
The issuing entity is not able to defer payments of interest due on any
interest payment date in respect of the class A notes or (if applicable) the
most senior class of issuing entity notes then outstanding. The failure to pay
interest on such issuing entity notes will be a note event of default.
The class A notes, the class B notes, the class M notes, the class C
notes and the class D notes will be constituted by the trust deed and will share
the same security. However, upon enforcement of the issuing entity security or
the occurrence of a trigger event, the class A notes of each series will rank in
priority to each series of class B notes, each series of class M notes, each
series of class C notes and each series of class D notes, the class B notes of
each series will rank in priority to each series of class M notes, each series
of class C notes and each series of class D notes, the class M notes of each
series will rank in priority to each series of class C notes and each series of
class D notes and the class C notes of each series will rank in priority to each
series of class D notes.
MORTGAGES TRUSTEE GIC ACCOUNT/FUNDING GIC ACCOUNT
All amounts held by the mortgages trustee are deposited in the mortgages
trustee GIC account with the mortgages trustee GIC provider. This account is
subject to a guaranteed investment contract such that the mortgages trustee GIC
provider agrees to pay a variable rate of interest on funds in the mortgages
trustee GIC account of LIBOR for three-month sterling deposits.
Amounts held in alternative accounts do not have the benefit of a
guaranteed investment contract but following their receipt are transferred into
the mortgages trustee GIC account on a regular basis and in any event no later
than the next business day after they are deposited in the relevant alternative
account.
All amounts held by Funding are deposited in the Funding GIC account in
the first instance. The Funding GIC account is maintained with the Funding GIC
provider. This account is subject to a guaranteed investment contract such that
the Funding GIC provider agrees to pay a variable rate of interest on funds in
the Funding GIC account of LIBOR for three-month sterling deposits.
FUNDING LIQUIDITY RESERVE FUND
Funding will be required to establish a liquidity reserve fund if the
long-term, unsecured, unsubordinated and unguaranteed debt obligations of the
seller cease to be rated at least A3 by Moody's or A- by Fitch (unless Moody's
or Fitch, as applicable, confirms that the then current ratings of the
outstanding notes will not be adversely affected by the ratings downgrade).
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Prior to enforcement of the Funding security, the Funding liquidity
reserve fund may be used to help meet any deficit in Funding available revenue
receipts which are allocated to the issuing entity or any previous issuing
entity to pay amounts due on the intercompany loan advanced by the issuing
entity or any previous issuing entity, but only to the extent that such amounts
are necessary to fund:
o the payment by any issuing entity of operating and administrative
expenses due and interest due on the relevant interest payment
date in respect of any series of class A notes, class B notes,
class M notes, class C notes and/or class D notes issued by such
issuing entity and to help meet any deficit recorded on the
principal deficiency ledger in respect of any series of class A
notes issued by such issuing entity; and
o prior to the occurrence of an asset trigger event, the payment of
principal in respect of the Funding liquidity reserve fund term
advances.
The Funding liquidity reserve fund, if any, will be funded initially from
Funding available revenue receipts in accordance with the Funding
pre-enforcement revenue priority of payments. The Funding liquidity reserve fund
will be funded up to the FUNDING LIQUIDITY RESERVE REQUIRED AMOUNT, being an
amount as of any interest payment date equal to the excess, if any, of 3 per
cent. of the aggregate outstanding balance of the issuing entity notes on that
payment date over amounts standing to the credit of the first reserve fund on
that payment date.
The Funding liquidity reserve fund will be deposited in Funding's name in
the Funding GIC account into which the first reserve fund and second reserve
fund are also deposited. All interest or income accrued on the amount of the
Funding liquidity reserve fund while on deposit in the Funding GIC account will
belong to Funding. The cash manager will maintain a separate Funding liquidity
reserve ledger to record the balance from time to time of the Funding liquidity
reserve fund.
On each interest payment date prior to enforcement of the Funding
security, funds standing to the credit of the Funding liquidity reserve fund
will be added to certain other income of Funding in calculating Funding
available revenue receipts to make payments due under the intercompany loan.
Once it has been initially funded, the Funding liquidity reserve fund
will be replenished from any Funding available revenue receipts or Funding
available principal receipts, as applicable. Funding available revenue receipts
will only be applied to replenish the Funding liquidity reserve fund after: (i)
the payment of interest due on each series of class A notes, the class B notes,
the class M notes, the class C notes and the class D notes and the reduction of
any deficiency on the principal deficiency sub ledger for each series of class A
notes, the class B notes, the class M notes, the class C notes and class D notes
as described in "CASHFLOWS - DISTRIBUTION OF FUNDING AVAILABLE REVENUE RECEIPTS
PRIOR TO ENFORCEMENT OF THE FUNDING SECURITY" and (ii) the payment of principal
in respect of the Funding liquidity reserve fund term advances.
Following enforcement of the Funding security, amounts standing to the
credit of the Funding liquidity reserve ledger may be applied in making payments
of principal due under the term advances.
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THE SWAP AGREEMENTS
The following section contains a summary of the material terms of the
Funding swap agreements and the issuing entity swap agreements. The summary does
not purport to be complete and is subject to the provisions of those swap
agreements, forms of which have been filed as an exhibit to the registration
statement of which this prospectus is a part.
GENERAL
Funding has entered into the Funding swap with Santander Global Banking
& Markets as the Funding swap provider. The issuing entity has entered into and
will enter into issuing entity swaps with the issuing entity swap providers. In
general, the swaps are designed to do the following:
o Funding swap: to hedge against the possible variance between the
mortgages trustee SVR payable on the variable rate loans, the
rates of interest payable on the tracker loans and the fixed rates
of interest payable on the fixed rate loans (which, for this
purpose, includes those capped rate loans then no longer subject
to their variable rates of interest but instead subject to
interest at their specified capped rates) and the sterling LIBOR
based rates payable in respect of the intercompany loans;
o Issuing entity swaps: to protect the issuing entity against
certain interest rate and/or currency risks in respect of amounts
received by the issuing entity from Funding under the master
intercompany loan agreement and amounts payable by the issuing
entity under each series and class (or sub-class) of issuing
entity notes.
THE FUNDING SWAP
Some of the loans in the portfolio pay a variable rate of interest for a
period of time which may either be linked to the mortgages trustee SVR or linked
to an interest rate other than the mortgages trustee SVR, such as sterling LIBOR
or a rate set by the Bank of England. Other loans pay a fixed rate of interest
for a period of time. However, the interest rate payable by Funding with respect
to the term advances is calculated as a margin over sterling LIBOR for
three-month sterling deposits or as a margin over the average of LIBOR for
one-month sterling deposits over a three month period, or as the case may be. To
provide a hedge against the possible variance between:
(a) the mortgages trustee SVR payable on the variable rate loans,
the rates of interest payable on the tracker loans and the fixed
rates of interest payable on the fixed rate loans; and
(b) a LIBOR based rate for three-month sterling deposits,
in relation to the previous issue by Holmes Financing (No. 1) PLC, Funding
entered into a separate variable rate swap, tracker rate swap and fixed rate
swap, all under the Funding swap agreement. At the time of the previous issue by
Holmes Financing (No. 2) PLC, Funding entered into the Funding swap which:
o replaced the variable rate swap, tracker rate swap and fixed rate
swap relating to the previous issue by Holmes Financing (No. 1)
PLC;
o had a notional amount that is sized to hedge against these
potential interest rate mismatches in relation to both the
previous issues by both Holmes Financing (No. 1) PLC and Holmes
Financing (No. 2) PLC; and
o provided for the notional amount to be increased to hedge against
similar potential interest rate mismatches in relation to new
issues, including the previous issue by Holmes Financing (No. 3)
PLC, the previous issue by Holmes Financing (No. 4) PLC, the
previous issue by Holmes Financing (No. 5) PLC, the previous issue
by Holmes Financing (No. 6) PLC, the previous issue by Holmes
Financing (No. 7) PLC, the previous issue by Holmes Financing (No.
8) PLC, the previous issue by Holmes Financing (No. 9) PLC and the
previous issue by Holmes Financing (No. 10) PLC and the previous
issues by the issuing entity.
When Funding entered into the Funding swap, all of the rights and
obligations of Funding and the Funding swap provider under the variable rate
swap, the tracker rate swap and the fixed rate swap ceased to exist and were
replaced by the rights and obligations arising under the Funding swap.
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Under the Funding swap, on each distribution date, as defined in the
glossary, the following amounts will be calculated in respect of the relevant
distribution period:
as determined in respect of the corresponding interest period under the
intercompany loans plus a spread for the relevant distribution period,
to the notional amount of the Funding swap as described later in this
section (known as the "DISTRIBUTION PERIOD SWAP PROVIDER AMOUNT"); and
the amount produced by applying a rate equal to the weighted average
of:
(a) the average of the standard variable mortgage rates or their
equivalent charged to existing borrowers on residential mortgage
loans as published from time to time, after excluding the
highest and the lowest rate, of Alliance & Leicester plc,
Halifax Plc, Lloyds TSB plc, HSBC Bank plc, National Westminster
Bank Plc and Barclays Bank PLC (and where those banks have more
than one standard variable rate, the highest of those rates);
(b) the rates of interest payable on the tracker loans; and
(c) the rates of interest payable on the fixed rate loans (including
those capped rate loans that are subject to the specified capped
rate of interest),
to the notional amount of the Funding swap (known as the
DISTRIBUTION PERIOD FUNDING AMOUNT).
On each interest payment date the following amounts will be calculated:
o the sum of each of the distribution period swap provider amounts
calculated during the preceding interest period; and
o the sum of each of the distribution period Funding amounts
calculated during the preceding interest period.
After these two amounts are calculated in relation to an interest payment
date, the following payments will be made on that interest payment date:
o if the first amount is greater than the second amount, then the
Funding swap provider will pay the difference to Funding;
o if the second amount is greater than the first amount, then
Funding will pay the difference to the Funding swap provider; and
o if the two amounts are equal, neither party will make a payment to
the other.
If a payment is to be made by the Funding swap provider, that payment
will be included in the Funding available revenue receipts and will be applied
on the relevant interest payment date according to the relevant order of
priority of payments of Funding. If a payment is to be made by Funding, it will
be made according to the relevant order of priority of payments of Funding.
The notional amount of the Funding swap in respect of a distribution
period will be an amount in sterling equal to:
o the aggregate principal amount outstanding of all intercompany
loans during the relevant distribution period, less
o the balance of the principal deficiency ledger attributable to all
intercompany loans during the relevant distribution period, less
o the amount of the principal receipts in the Funding GIC account
attributable to all intercompany loans during the relevant
distribution period.
In the event that the Funding swap is terminated prior to the earlier to
occur of the service of any intercompany loan acceleration notice and final
repayment of any intercompany loan, Funding shall enter into a new Funding swap
on terms acceptable to the rating agencies, Funding and the security trustee and
with a swap provider whom the rating agencies have previously confirmed in
writing to Funding, the issuing entity and the security trustee will not cause
the then current ratings of the outstanding notes to be downgraded, withdrawn or
qualified. If Funding is unable to enter into a new Funding swap on terms
acceptable to the rating agencies, Funding and the security trustee, this may
adversely affect amounts available to pay interest on the intercompany loans.
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THE ISSUING ENTITY SWAPS
The term advances under the master intercompany loan agreement are and
will be denominated in sterling and interest payable by Funding to the issuing
entity under the term advances is calculated by reference to LIBOR for
three-month sterling deposits. However, the issuing entity may (subject to
compliance with all applicable legal, regulatory and central bank requirements)
issue a series or class (or sub-class) of issuing entity notes in such currency
as may be agreed with the relevant dealers and/or underwriters. For example,
some of the issuing entity notes may be denominated in US dollars and accrue
interest at either a LIBOR-based rate for one-month US-dollar deposits, a
LIBOR-based rate for three-month US dollar deposits or such other rate specified
in the relevant prospectus supplement. Other issuing entity notes, as a further
example, may be denominated in euro and accrue interest at either a
EURIBOR-based rate for one-month euro deposits, a EURIBOR-based rate for
three-month euro deposits or such other rate specified in the relevant
prospectus supplement. To deal with the potential currency mismatch between (i)
its receipts and liabilities in respect of the term advances and (ii) its
receipts and liabilities under the issuing entity notes, the issuing entity
will, pursuant to the terms of the issuing entity swap agreements in respect of
each series, swap its receipts and liabilities in respect of the relevant term
advances on terms that match the issuing entity's obligations under the relevant
series of issuing entity notes.
The currency amount of each issuing entity swap will be the principal
amount outstanding under the series of issuing entity notes to which the
relevant issuing entity swap relates. Subject, in the case of the issuing
entity's obligations under certain classes (or sub-classes) of issuing entity
notes, to certain deferral of interest provisions that will apply when payment
of interest under the corresponding issuing entity notes is deferred in
accordance with the terms and conditions of such issuing entity notes and to the
extent that the issuing entity makes its corresponding payments to the issuing
entity swap providers, the issuing entity swap providers will pay to the issuing
entity amounts in the specified currency (for example, US dollars or euro) that
are equal to the amounts of interest to be paid on each of the classes (or
sub-classes) of the issuing entity notes of the relevant series and the issuing
entity will pay to the issuing entity swap providers the sterling interest
amounts received on the term advances corresponding to the classes (or
sub-classes) of issuing entity notes of the relevant series. In order to allow
for the effective currency amount of each issuing entity swap to amortise at the
same rate as the relevant series and class (or sub-class) of issuing entity
notes, each issuing entity swap agreement will provide that, as and when the
issuing entity notes amortise, a corresponding portion of the currency amount of
the relevant issuing entity swap will amortise. Pursuant to each issuing entity
swap agreement, any portion of issuing entity swap so amortised will be swapped
from sterling into the specified currency at the specified currency exchange
rate for such issuing entity notes.
On the final maturity date of each class of issuing entity notes or, if
earlier, the date on which such issuing entity notes are redeemed in full (other
than pursuant to NUMBER 5.5 (Optional redemption for tax and other reasons) or,
as applicable and if specified in the relevant prospectus supplement, NUMBER 5.6
(Optional redemption for implementation of EU Capital Requirements Directive)
under "TERMS AND CONDITIONS OF THE US NOTES"), the relevant issuing entity swap
provider will pay to the issuing entity an amount in the specified currency,
equal to the principal amount outstanding under the relevant issuing entity
notes, and the issuing entity will pay to the relevant issuing entity swap
provider an equivalent amount in sterling, converted by reference to the
specified currency exchange rate for such issuing entity notes. If the issuing
entity does not have sufficient principal available pursuant to the issuing
entity cash management agreement to pay such amount in full on such date and
accordingly pays only a part of such amount to the relevant issuing entity swap
provider, the relevant issuing entity swap provider will be obliged on such date
to pay only the equivalent of such partial amount in the specified currency, in
each case converted by reference to the specified currency exchange rate for
such issuing entity notes.
In the event that any issuing entity swap is terminated prior to the
earlier to occur of the service of a note enforcement notice and the final
redemption of the relevant series of issuing entity notes, the issuing entity
shall enter into a replacement issuing entity swap in respect of that series and
class (or sub-class) of issuing entity notes. Any replacement issuing entity
swap must be entered into on terms acceptable to the rating agencies, the
issuing entity and the issuing entity security trustee and with a replacement
swap provider whom the rating agencies have previously confirmed in writing to
the issuing entity and the issuing entity security trustee will not cause the
then current ratings of the issuing entity notes to be downgraded, withdrawn or
qualified. If the issuing entity is unable to enter into a replacement issuing
entity swap on terms acceptable to the rating agencies, the issuing entity and
the security trustee, this may adversely affect amounts available to pay amounts
due under the issuing entity notes.
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RATINGS DOWNGRADE OF SWAP PROVIDERS
Under each of the swap agreements, in the event that the relevant
rating(s) of a swap provider, or its respective guarantor or co-obligor, as
applicable, is or are, as applicable, downgraded by a rating agency below the
ratings specified in the relevant swap agreement (in accordance with the
requirements of the rating agencies) for such swap provider, and, where
applicable, as a result of the downgrade, the then current ratings of the
outstanding notes, in respect of the Funding swap, or the issuing entity notes
corresponding to the relevant issuing entity swap, in respect of an issuing
entity swap, would or may, as applicable, be adversely affected, the relevant
swap provider will, in accordance with the Funding swap or the relevant issuing
entity swap, as applicable, be required to take certain remedial measures which
may include providing collateral for its obligations under the relevant swap,
arranging for its obligations under the relevant swap to be transferred to an
entity with the rating(s) required by the relevant rating agency as specified in
the relevant swap agreement (in accordance with the requirements of the relevant
rating agency), procuring another entity with the rating(s) required by the
relevant rating agency as specified in the relevant swap agreement (in
accordance with the requirements of the relevant rating agency), to become
co-obligor or guarantor in respect of its obligations under the relevant swap,
or taking such other action as it may agree with the relevant rating agency.
A failure by the relevant swap provider to take such steps will, in
certain circumstances, allow Funding or the issuing entity, as applicable, to
terminate the relevant swap.
SWAP COLLATERAL
Any collateral posted by or on behalf of a swap provider (as set out
above) will be placed by Funding or the issuing entity, as appropriate, in a
collateral account in respect of such swap provider and such collateral, and any
interest thereon, shall be maintained and applied in accordance with the terms
of the relevant swap agreement.
TERMINATION OF THE SWAPS
The Funding swap will terminate on the date on which the aggregate
principal amount outstanding under all intercompany loans is reduced to zero.
Any swap may also be terminated in, inter alia, any of the following
circumstances, each referred to as a SWAP EARLY TERMINATION EVENT:
o at the option of one party to the swap, if there is a failure by
the other party to pay any amounts due under that swap;
o in respect of the issuing entity swaps, if an event of default
under the issuing entity notes occurs and the issuing entity
security trustee serves a note enforcement notice;
o in respect of the Funding swap, if an event of default under any
intercompany loan occurs and the security trustee serves an
intercompany loan enforcement notice;
o if applicable, at the option of the issuing entity (in the case of
an issuing entity swap relating to a series and class or sub-class
of notes that subjects it to Exchange Act reporting requirements)
or Funding (in the case of the Funding swap), if the relevant swap
provider fails to provide the cash manager with the required
financial information necessary to complete the issuing entity's
or Funding's, as applicable, Exchange Act filings with the SEC as
required pursuant to the relevant swap agreement;
o upon the occurrence of certain insolvency events in respect of the
relevant swap provider or its guarantor or the issuing entity or
Funding, as the case may be and as set out in the relevant swap
agreement, or the merger of the relevant swap provider without an
assumption of the obligations under the relevant swap agreement,
or if a change in law results in the obligations of one of the
parties under a swap agreement becoming illegal, a breach of a
provision of the swap agreement by the relevant swap provider is
not remedied within the relevant grace period, a failure by the
guarantor (if any) of the relevant swap provider under the swap
agreement to comply with its obligations under such guarantee
occurs, or a material misrepresentation is made by the relevant
swap provider under the swap agreement;
o if the issuing entity exercises its option to redeem all the
issuing entity notes for tax and/-or other reasons;
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o in respect of the issuing entity swaps, subject to certain
conditions, if withholding taxes are imposed on payments under an
issuing entity swap due to a change in law or a merger of a party
with another entity with the effect that the issuing entity swap
provider is required to pay an additional amount or will receive
an amount from which tax has been deducted;
o in respect of the issuing entity swaps, at the option of either
party, if a redemption of the relevant series and class (or
sub-class) of issuing entity notes occurs pursuant to NUMBER 5.5
(Optional redemption for tax and other reasons) or, as applicable
and if specified in the relevant prospectus supplement, NUMBER 5.6
(Optional redemption for implementation of EU Capital Requirements
Directive) under "TERMS AND CONDITIONS OF THE US NOTES"; and
o if the relevant swap provider or its guarantor, as applicable, is
downgraded and fails to comply with the requirements of the
ratings downgrade provision contained in the relevant swap
agreement as described above under "RATINGS DOWNGRADE OF SWAP
PROVIDERS".
Upon the occurrence of a swap early termination event, the issuing entity
or the relevant issuing entity swap provider may be liable to make a termination
payment to the other party and/or Funding or the Funding swap provider may be
liable to make a termination payment to the other party. This termination
payment will be calculated and payable in sterling. The amount of any
termination payment will be based on the market value of the terminated swap
based on market quotations of the cost of entering into a swap with the same
terms and conditions that would have the effect of preserving the respective
full payment obligations of the parties (or based upon loss (as defined in the
relevant issuing entity swap agreement or Funding swap agreement, as applicable)
in the event that no market quotation can be obtained). Any such termination
payment could be substantial.
If any issuing entity swap is terminated early and a termination
payment is due by the issuing entity to the relevant issuing entity swap
provider then, pursuant to its obligations under the master intercompany
loan, Funding shall pay the issuing entity an amount equal to the
termination payment due to the relevant issuing entity swap provider. Such
payment will be made by Funding only after paying interest amounts due on
the term advances and after providing for any debit balance on the
principal deficiency ledger and after paying or providing for items having
a higher ranking in the relevant order of priority of payments. The issuing
entity shall apply amounts received from Funding under the master
intercompany loan in accordance with the pre-enforcement revenue priority
of payments or, as the case may be, the post enforcement priority of
payments. The application by the issuing entity of termination payments due
to an issuing entity swap provider may affect the funds available to pay
amounts due to the noteholders (see further "RISK FACTORS - YOU MAY BE
SUBJECT TO RISKS RELATING TO EXCHANGE RATE OR INTEREST RATES ON THE ISSUING
ENTITY NOTES OR RISKS RELATING TO RELIANCE ON A 2A-7 SWAP PROVIDER").
If the issuing entity and/or Funding receive a termination payment
following the termination of the relevant swap, the issuing entity and/or
Funding will apply such payment towards meeting the costs of entering into a
replacement swap agreement on terms acceptable to the rating agencies, the
issuing entity or Funding as appropriate and the issuing entity security trustee
or the security trustee as appropriate, as described above.
If the issuing entity receives a termination payment from the issuing
entity swap provider, then the issuing entity shall apply those funds towards
meeting its costs in effecting exchanges at the spot rate of exchange until a
replacement issuing entity swap is entered into and/or to acquire a replacement
issuing entity swap, as the case may be. Noteholders will not receive extra
amounts (over and above interest and principal payable on the issuing entity
notes) as a result of the issuing entity receiving a termination payment.
TRANSFER OF THE SWAPS
An issuing entity swap provider may, at its option, transfer its
obligations under any relevant issuing entity swap to any other entity. Any such
transfer is subject to certain conditions, including among other things (i) that
the transferee has the ratings as required by the relevant rating agencies as
specified in the relevant swap agreement, or the transferee's performance under
the relevant issuing entity swap will be guaranteed by an entity with equivalent
ratings, (ii) that the transfer must not cause an event of default or a swap
early termination event to occur under the relevant issuing entity swap
agreement and (iii) if the transferee entity is located in a different country
from both the issuing entity and the relevant issuing entity swap provider, that
the rating agencies have confirmed that the transfer will not result in the then
current rating of the relevant series and class (or sub-class) of issuing entity
notes being downgraded.
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TAXATION
Neither Funding nor the issuing entity is obliged under any of the swap
agreements to gross up payments made by them if withholding taxes are imposed on
payments made under the swap agreements.
The Funding swap provider and the issuing entity swap providers are
always obliged to gross up payments made by them to Funding or the issuing
entity, as appropriate, if withholding taxes are imposed on payments made under
the relevant swap agreements. However, if an issuing entity swap provider is
obliged to gross up payments following a change in law or merger of a party, the
swap provider will, subject to certain conditions, have the right to terminate
the swap.
GOVERNING LAW
The Funding swap agreement is and the issuing entity swap agreements are
and will be governed by English law.
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CASH MANAGEMENT FOR THE MORTGAGES TRUSTEE AND FUNDING
The following section contains a summary of the material terms of the
cash management agreement. The summary does not purport to be complete and is
subject to the provisions of the cash management agreement.
Abbey was appointed on 26 July 2000 by the mortgages trustee, Funding and
the security trustee to provide cash management services in relation to:
o the mortgages trust; and
o Funding.
CASH MANAGEMENT SERVICES PROVIDED IN RELATION TO THE MORTGAGES TRUST
The cash manager's duties in relation to the mortgages trust include but
are not limited to:
(a) determining the current shares of Funding and the seller in the
trust property in accordance with the terms of the mortgages trust
deed;
(b) maintaining the following ledgers on behalf of the mortgages
trustee:
o the Funding share/seller share ledger, which records the
current shares of the seller and Funding in the trust
property;
o the losses ledger, which records losses on the loans;
o the principal ledger, which records principal receipts on
the loans received by the mortgages trustee and payments of
principal from the mortgages trustee GIC account to Funding
and the seller and any retained principal receipts; and
o the revenue ledger, which records revenue receipts on the
loans received by the mortgages trustee and payments of
revenue receipts from the mortgages trustee GIC account to
Funding and the seller;
(c) distributing the mortgages trust available revenue receipts and
the mortgages trustee principal receipts to Funding and the seller
in accordance with the terms of the mortgages trust deed;
(d) providing the mortgages trustee, Funding, the security trustee and
the rating agencies with a quarterly report in relation to the
trust property; and
(e) managing a bank account on behalf of the mortgages trustee.
CASH MANAGEMENT SERVICES TO BE PROVIDED TO FUNDING
The cash manager's duties in relation to Funding include but are not
limited to:
(a) four business days before each interest payment date, determining:
o the amount of Funding available revenue receipts to be
applied to pay interest and fees in relation to the term
advances on the following interest payment date; and
o the amount of Funding available principal receipts to be
applied to repay the term advances on the following
interest payment date;
(b) maintaining the following ledgers on behalf of Funding:
o the Funding principal ledger, which records the amount of
principal receipts received by Funding on each distribution
date;
o the Funding revenue ledger, which records all other amounts
received by Funding on each distribution date;
o the first reserve ledger, which records the amount credited
to the first reserve fund from parts of the proceeds of (i)
the first start-up loan on 26 July 2000, (ii) the second
start-up loan on 29 November 2000, (iii) the third start-up
loan on 23 May 2001, (iv) the previous term BB advance on 5
July 2001 under the intercompany loan made by Holmes
Financing (No. 4) PLC, (v) the eighth start-up loan on 1
April 2004, (vi) the Funding
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reserve fund on 8 August 2006, (vii) the 2007-1 start-up
loan on 28 March 2007, (viii) the 2007-3 start-up loan on
21 December 2007 and (ix) withdrawals and deposits in
respect of the first reserve fund;
o the second reserve ledger, which records the amount
credited to the second reserve fund from part of the
proceeds of (i) the previous term BB advance on 5 July 2001
under the intercompany loan made by Holmes Financing (No.
4) PLC and (ii) withdrawals and deposits in respect of the
second reserve fund;
o the Funding reserve ledger, which records the amount
credited to the Funding reserve fund from the excess
Funding available revenue receipts up to the Funding
reserve fund required amount after Funding has paid all of
its obligations in respect of items ranking higher than
item (u) of the Funding pre-enforcement revenue priority of
payments on each interest payment date, and any subsequent
withdrawals in respect of the Funding reserve fund;
o the principal deficiency ledger (and sub-ledgers), which
records principal deficiencies arising from losses on the
loans which have been allocated to Funding's share or the
use of Funding's principal receipts to cover certain senior
expenses (including interest on the term advances);
o the intercompany loan ledger, which records payments of
interest and repayments of principal made on each of the
term advances under the intercompany loans;
o the cash accumulation ledger, which records the amount
accumulated by Funding to be set aside in the cash
accumulation sub-ledger of the relevant issuing entity
and/or to pay the amounts due on the several bullet term
advances and/or, as applicable, the scheduled amortisation
term advances; and
o the Funding liquidity reserve ledger (if established) which
records the amounts credited to the Funding liquidity
reserve fund from Funding available revenue receipts and
from Funding available principal receipts up to the Funding
liquidity reserve required amount and drawings made under
the Funding liquidity reserve fund;
(c) investing sums standing to the credit of the Funding GIC account
and any collateral account maintained by Funding in respect of the
Funding swap provider in short-term authorised investments (as
defined in the glossary) as determined by Funding, the cash
manager and the security trustee;
(d) making withdrawals from the first reserve fund, the second reserve
fund, the Funding reserve fund and the Funding liquidity reserve
fund as and when required;
(e) applying the Funding available revenue receipts and Funding
available principal receipts in accordance with the relevant order
of priority of payments for Funding contained in the cash
management agreement or, as applicable, the Funding deed of
charge;
(f) providing Funding, the issuing entity, the security trustee and
the rating agencies with a quarterly report in relation to
Funding;
(g) making all returns and filings in relation to Funding and the
mortgages trustee and providing or procuring the provision of
company secretarial and administration services to them; and
(h) managing bank accounts on behalf of Funding.
For the definitions of Funding available revenue receipts, Funding
available principal receipts and the Funding priorities of payments, see
"CASHFLOWS".
COMPENSATION OF CASH MANAGER
The cash manager is paid a fee of (pound)117,500 per annum for its
services which is paid in four equal instalments quarterly in arrear on each
interest payment date. The fee is inclusive of VAT. The fee is subject to
adjustment if the applicable rate of VAT changes.
In addition, the cash manager is entitled to be indemnified for any
expenses or other amounts properly incurred by it in carrying out its duties.
The cash manager is paid by Funding, prior to amounts due to the issuing
entities on the term advances.
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RESIGNATION OF CASH MANAGER
The cash manager may resign only on giving 12 months' written notice to
the security trustee, Funding and the mortgages trustee and if:
o a substitute cash manager has been appointed and a new cash
management agreement is entered into on terms satisfactory to the
security trustee, the mortgages trustee and Funding; and
o the ratings of the outstanding notes at that time would not be
adversely affected as a result of that replacement (unless
otherwise agreed by an extraordinary resolution of the noteholders
of each class).
TERMINATION OF APPOINTMENT OF CASH MANAGER
The security trustee may, upon written notice to the cash manager,
terminate the cash manager's rights and obligations immediately if any of the
following events occurs:
o the cash manager defaults in the payment of any amount due and
fails to remedy the default for a period of three London business
days after becoming aware of the default;
o the cash manager fails to comply with any of its other obligations
under the cash management agreement which in the opinion of the
security trustee is materially prejudicial to the Funding secured
creditors and does not remedy that failure within 20 days after
the earlier of becoming aware of the failure and receiving a
notice from the security trustee; or
o Abbey, while acting as the cash manager, suffers an insolvency
event.
If the appointment of the cash manager is terminated or it resigns, the
cash manager must deliver its books of account relating to the loans to or at
the direction of the mortgages trustee, Funding or the security trustee, as the
case may be. The cash management agreement will terminate automatically when
Funding has no further interest in the trust property and all intercompany loans
(whether previous intercompany loans, current intercompany loans or new
intercompany loans) have been repaid or otherwise discharged.
GOVERNING LAW
The cash management agreement is governed by English law.
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CASH MANAGEMENT FOR THE ISSUING ENTITY
The following section contains a summary of the material terms of the
issuing entity cash management agreement. The summary does not purport to be
complete and is subject to the provisions of the issuing entity cash management
agreement.
Abbey was appointed on the programme date by the issuing entity and the
issuing entity security trustee to provide cash management services to the
issuing entity.
CASH MANAGEMENT SERVICES TO BE PROVIDED TO THE ISSUING ENTITY
The issuing entity cash manager's duties include but are not limited to:
(a) four business days before each interest payment date, determining:
o the amount of issuing entity revenue receipts to be applied
to pay interest on the issuing entity notes on the
following interest payment date and to pay amounts due to
other creditors of the issuing entity; and
o the amount of issuing entity principal receipts to be
applied to repay the issuing entity notes on the following
interest payment date;
(b) applying issuing entity revenue receipts and issuing entity
principal receipts in accordance with the relevant order of
priority of payments for the issuing entity set out in the issuing
entity cash management agreement or, as applicable, the issuing
entity deed of charge;
(c) maintaining the following ledgers on behalf of the issuing entity:
o the issuing entity revenue ledger, which records issuing
entity revenue receipts (excluding any fees to be paid by
Funding on each interest payment date under the terms of
the master intercompany loan agreement (other than in
respect of any termination payment due by the issuing
entity in respect of any issuing entity swap), which will
be credited to the issuing entity expense ledger) received
and paid out of the issuing entity. The issuing entity
revenue ledger will be split into sub-ledgers corresponding
to each issue, series and class (or sub-class) of issuing
entity notes issued by the issuing entity, and any interest
received from Funding in respect of a term advance will be
credited to the relevant corresponding sub-ledger;
o the issuing entity principal ledger, which records all
Funding available principal receipts received by the
issuing entity from Funding constituting principal
repayments on a term advance. All such Funding available
principal receipts in relation each term advance will be
credited to a sub-ledger (in respect of the related issue,
series and class (or sub-class) of issuing entity notes);
o the issuing entity expense ledger, which records payments
of fees received from Funding under the master intercompany
loan and payments out in accordance with the issuing entity
pre-enforcement revenue priority of payments; and
o the series ledgers, which record payments of interest and
repayments of principal on each issue, series and class (or
sub-class) of issuing entity notes and any payment of fees
in respect of any termination payment due by the issuing
entity in respect of a corresponding issuing entity swap;
(d) providing the issuing entity, Funding, the issuing entity security
trustee and the rating agencies with quarterly reports in relation
to the issuing entity;
(e) making all returns and filings required to be made by the issuing
entity and providing or procuring the provision of company
secretarial and administration services to the issuing entity;
(f) arranging payment of all fees to the London Stock Exchange or, as
applicable, the United Kingdom Listing Authority or, as
applicable, the FSA;
(g) if necessary, performing all currency and interest rate
conversions (whether it be a conversion from sterling to dollars
or vice versa, sterling to euro or vice versa, or floating rates
of interest to fixed rates of interest or vice versa) free of
charge, cost or expense at the relevant exchange rate; and
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(h) investing sums standing to the credit of any collateral account
maintained by the issuing entity in respect of a issuing entity
swap provider in short-term authorised investments.
ISSUING ENTITY'S BANK ACCOUNTS
The issuing entity currently maintains a sterling bank account in its
name with Abbey at 21 Prescot Street, London E1 8AD and a euro account and a
dollar account in its name with Citibank, N.A., London Branch at Citigroup
Centre, Canada Square, London, E14 5LB (together the ISSUING ENTITY TRANSACTION
ACCOUNTS, such accounts being managed by the issuing entity cash manager). The
issuing entity may, with the prior written consent of the issuing entity
security trustee, open additional or replacement bank accounts.
The account referred to above (and any collateral account maintained by
the issuing entity as described in "CREDIT STRUCTURE - RATINGS DOWNGRADE OF SWAP
PROVIDERS") may be required to be transferred to an alternative bank in certain
circumstances including if the short-term, unguaranteed and unsecured ratings
ascribed to the issuing entity account bank fall below A-1+ (or in the
circumstances described below, A-1) by Standard & Poor's, F1 by Fitch and P-1 by
Moody's. So long as the relevant deposit amount is less than 30 per cent. of the
amount of the Funding share in the trust property, then the short-term,
unguaranteed and unsecured rating required to be ascribed to the issuing entity
account bank by Standard & Poor's shall be at least A-1. Such a transfer is not
required despite such a downgrade if the account bank (i) procures that an
entity with the required rating becomes a co-obligor in respect of the
obligations of the account bank; (ii) procures that an entity with the required
rating provides a guarantee of the obligations of the account bank; or (iii)
takes such other actions to ensure that the rating assigned to the issuing
entity notes is not adversely affected by the ratings downgrade, in each case
provided that the then current ratings of the issuing entity notes shall not be
adversely affected by each or any of the above actions.
COMPENSATION OF ISSUING ENTITY CASH MANAGER
The issuing entity cash manager is paid a fee of (pound)117,500 per annum
for its services, which is paid in four equal instalments quarterly in arrear on
each interest payment date. The fee is inclusive of VAT. The fees are subject to
adjustment if the applicable rate of VAT changes.
In addition, the issuing entity cash manager is entitled to be
indemnified for any expenses or other amounts properly incurred by it in
carrying out its duties. The issuing entity cash manager is paid by the issuing
entity prior to amounts due on the issuing entity notes.
RESIGNATION OF ISSUING ENTITY CASH MANAGER
The issuing entity cash manager may resign only on giving 12 months'
written notice to the issuing entity security trustee and the issuing entity and
if:
o a substitute issuing entity cash manager has been appointed and a
new issuing entity cash management agreement is entered into on
terms satisfactory to the issuing entity security trustee and the
issuing entity; and
o the ratings of the issuing entity notes at that time would not be
adversely affected as a result of that replacement.
TERMINATION OF APPOINTMENT OF ISSUING ENTITY CASH MANAGER
The issuing entity security trustee may, upon written notice to the
issuing entity cash manager, terminate the issuing entity cash manager's rights
and obligations immediately if any of the following events occurs:
o the issuing entity cash manager defaults in the payment of any
amount due and fails to remedy the default for a period of three
London business days after becoming aware of the default;
o the issuing entity cash manager fails to comply with any of its
other obligations under the issuing entity cash management
agreement which in the opinion of the issuing entity security
trustee is materially prejudicial to the noteholders and does not
remedy that failure within 20 days after the earlier of becoming
aware of the failure and receiving a notice from the issuing
entity security trustee; or
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o the issuing entity cash manager suffers an insolvency event.
If the appointment of the issuing entity cash manager is terminated or it
resigns, the issuing entity cash manager must deliver its books of account
relating to the issuing entity notes to or at the direction of the issuing
entity security trustee. The issuing entity cash management agreement will
terminate automatically when the issuing entity notes have been fully redeemed.
GOVERNING LAW
The issuing entity cash management agreement is governed by English law.
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DESCRIPTION OF THE TRUST DEED
The following section contains a summary of the material terms of the
trust deed. The summary does not purport to be complete and is subject to the
provisions of the trust deed.
GENERAL
The principal agreement governing the issuing entity notes is the trust
deed dated 28 November 2006 (as the same may be amended, restated, novated,
replaced or supplemented from time to time) and made between the issuing entity
and the note trustee (the trust deed). The trust deed has five primary
functions. It:
o constitutes the issuing entity notes;
o sets out the covenants of the issuing entity in relation to the
issuing entity notes;
o sets out the enforcement and post enforcement procedures relating
to the issuing entity notes;
o contains provisions necessary to comply with the US Trust
Indenture Act of 1939, as amended; and
o sets out the appointment, powers and responsibilities of the note
trustee.
The trust deed sets out the form of the global notes and the definitive
notes. It also sets out the terms and conditions, and the conditions for the
issue of definitive notes and/or the cancellation of any issuing entity notes.
It stipulates, among other things, that the paying agents, the registrar, the
transfer agent and the agent bank will be appointed. The detailed provisions
regulating these appointments are contained in the issuing entity paying agent
and agent bank agreement.
The trust deed also contains covenants made by the issuing entity in
favour of the note trustee and the noteholders. The main covenants are that the
issuing entity will pay interest and repay principal on each of the issuing
entity notes when due. Covenants are included to ensure that the issuing entity
remains insolvency-remote, and to give the note trustee access to all
information and reports that it may need in order to discharge its
responsibilities in relation to the noteholders. Some of the covenants also
appear in the terms and conditions of the US notes (see "TERMS AND CONDITIONS OF
THE US NOTES"). The issuing entity also covenants that it will (in respect of
those issuing entity notes that are listed) do all things necessary to maintain
the listing of the issuing entity notes on the official list of the United
Kingdom Listing Authority and to maintain the trading of such issuing entity
notes on the London Stock Exchange's Regulated Market and to keep in place a
common depositary, paying agents and an agent bank.
The trust deed provides that the class A noteholders' interests take
precedence for so long as the class A notes are outstanding and thereafter the
interests of the class B noteholders take precedence for so long as the class B
notes are outstanding and thereafter the interests of the class M noteholders
take precedence for so long as the class M notes are outstanding and thereafter
the interests of the class C noteholders take precedence for so long as the
class C notes are outstanding and thereafter the interests of the class D
noteholders take precedence for so long as the class D notes are outstanding.
Certain basic terms of each class of issuing entity notes may not be amended
without the consent of the majority of the holders of that class of issuing
entity note. This is described further in "TERMS AND CONDITIONS OF THE US
NOTES".
The trust deed also sets out the terms on which the note trustee is
appointed, the indemnification of the note trustee, the payment it receives and
the extent of the note trustee's authority to act beyond its statutory powers
under English law. The note trustee is also given the ability to appoint a
delegate or agent in the execution of any of its duties under the trust deed.
The trust deed also sets out the circumstances in which the note trustee may
resign or retire.
The trust deed includes certain provisions mandated by the US Trust
Indenture Act of 1939, as amended. Generally, these provisions outline the
duties, rights and responsibilities of the note trustee and the issuing entity
and the rights of the noteholders. Specifically these include, but are not
limited to:
(a) maintenance of a noteholder list by the note trustee;
(b) provision of financial statements and other information by the
issuing entity to the note trustee;
(c) ability of noteholders to waive certain past defaults of the
issuing entity;
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(d) duty of the note trustee to use the same degree of care in
exercising its responsibilities as would be exercised by a
prudent person conducting their own affairs;
(e) duty of the note trustee to notify all noteholders of any events
of default of which it has actual knowledge; and
(f) right of the note trustee to resign at any time by notifying the
issuing entity in writing and the ability of the issuing entity
to remove the note trustee under certain circumstances.
TRUST INDENTURE ACT PREVAILS
The trust deed contains a provision that, if any other provision of the
trust deed limits, qualifies or conflicts with another provision which is
required to be included in the trust deed by, and is not subject to contractual
waiver under the US Trust Indenture Act of 1939, as amended, then the required
provision of that Act will prevail.
GOVERNING LAW
The trust deed is governed by English law.
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THE ISSUING ENTITY NOTES AND THE GLOBAL NOTES
The issuance of each series of issuing entity notes will be authorised by
a resolution of the board of directors of the issuing entity passed prior to the
relevant closing date. The issuing entity notes will be constituted by a deed or
deeds supplemental to the trust deed between the issuing entity and the note
trustee, as trustee for, among others, the holders for the time being of the
issuing entity notes. While the material terms of the issuing entity notes and
the global notes are described in this prospectus, the statements set out in
this section with regard to the issuing entity notes and the global notes are
subject to the detailed provisions of the trust deed. The trust deed will
include the form of the global notes and the form of definitive notes. The trust
deed includes provisions which enable it to be modified or supplemented and any
reference to the trust deed is a reference also to the document as modified or
supplemented in accordance with its terms.
An issuing entity paying agent and agent bank agreement between the
issuing entity, the issuing entity security trustee, The Bank of New York,
acting through its London branch as principal paying agent, the US paying
agent, the registrar, the transfer agent and the agent bank regulates how
payments will be made on the issuing entity notes and how determinations and
notifications will be made. It was initially dated 28 November 2006 and the
parties include, on an ongoing basis, any successor party appointed in
accordance with its terms.
Each series and class (or sub-class) of each series of issuing entity
notes will be represented initially by one or more global notes in registered
form without interest coupons attached. The US notes will initially be offered
and sold pursuant to a registration statement, of which this prospectus forms a
part, filed with the SEC. The Reg S notes, which are not being offered under
this prospectus, will initially be offered and sold outside the United States to
non-US persons pursuant to Regulation S and will each be represented by a Reg S
global note (together with the US global notes, the global notes).
The global notes representing the US notes (the US GLOBAL NOTES) will be
deposited on behalf of the beneficial owners of the offered notes with The Bank
of New York, acting through its New York branch, as the custodian for, and
registered in the name of Cede & Co. as nominee of, The Depository Trust
Company (DTC). On confirmation from the custodian that it holds the US global
notes, DTC will record book-entry interests in the beneficial owner's account
or the participant account through which the beneficial owner holds its
interests in the US global notes. These book-entry interests will represent
the beneficial owner's beneficial interest in the relevant US global notes.
The Reg S global notes will be deposited on behalf of the beneficial
owners of those issuing entity notes with, and registered in the name of a
nominee of, The Bank of New York, acting through its London branch as common
depositary for Clearstream Banking, societe anonyme (Clearstream, Luxembourg)
and Euroclear Bank S.A./N.V. (Euroclear). On confirmation from the common
depositary that it holds the Reg S global notes, Clearstream, Luxembourg or
Euroclear, as the case may be, will record book-entry interests in the
beneficial owner's account or the participant account through which the
beneficial owner holds its interests in the Reg S global notes. These
book-entry interests will represent the beneficial owner's beneficial interest
in the relevant Reg S global notes.
The amount of issuing entity notes represented by each global note is
evidenced by the register maintained for that purpose by the registrar.
Together, the issuing entity notes represented by the global notes and any
outstanding definitive notes will equal the aggregate principal amount of the
issuing entity notes outstanding at any time. However, except as described under
"- GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES - DEFINITIVE NOTES", definitive
certificates representing individual issuing entity notes shall not be issued.
Beneficial owners may hold their interests in the global notes only
through DTC, Clearstream, Luxembourg or Euroclear, as applicable, or indirectly
through organisations that are participants in any of those systems. Ownership
of these beneficial interests in a global note will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
DTC, Clearstream, Luxembourg or Euroclear (with respect to interests of their
participants) and the records of their participants (with respect to interests
of persons other than their participants). By contrast, ownership of direct
interests in a global note will be shown on, and the transfer of that ownership
will be effected through, the register maintained by the registrar. Because of
this holding structure of issuing entity notes, beneficial owners of issuing
entity notes may look only to DTC, Clearstream, Luxembourg or Euroclear, as
applicable, or their respective participants for their beneficial entitlement to
those issuing entity notes. The issuing entity expects that DTC, Clearstream,
Luxembourg or Euroclear will take any action permitted to be taken by a
beneficial owner of
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issuing entity notes only at the direction of one or more participants to whose
account the interests in a global note is credited and only in respect of that
portion of the aggregate principal amount of issuing entity notes as to which
that participant or those participants has or have given that direction.
Beneficial owners will be entitled to the benefit of, will be bound by
and will be deemed to have notice of, all the provisions of the trust deed and
the issuing entity paying agent and agent bank agreement. Beneficial owners can
see copies of these agreements at the principal office for the time being of the
note trustee, which is, as of the date of this document, One Canada Square,
London E14 5AL and at the specified office for the time being of each of the
paying agents. Pursuant to its obligations under the listing rules made by the
UK Listing Authority, the issuing entity will maintain a paying agent in the
United Kingdom until the date on which the issuing entity notes are finally
redeemed.
PAYMENT
Principal and interest payments on the offered global notes will be made
via the paying agents to DTC, Euroclear or Clearstream, Luxembourg (as
applicable) or the respective nominee, as the registered holder of the offered
global notes. DTC's practice is to credit its participants' accounts on the
applicable interest payment date according to their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive payment
on that interest payment date.
Payments by DTC, Clearstream, Luxembourg and Euroclear participants to
the beneficial owners of issuing entity notes will be governed by standing
instructions, customary practice, and any statutory or regulatory requirements
as may be in effect from time to time, as is now the case with securities held
by the accounts of customers registered in street name. These payments will be
the responsibility of the DTC, Clearstream, Luxembourg or Euroclear participant
and not of DTC, Clearstream, Luxembourg, Euroclear, any paying agent, the note
trustee or the issuing entity. Neither the issuing entity, the note trustee nor
any paying agent will have any responsibility or liability for any aspect of the
records of DTC, Clearstream, Luxembourg or Euroclear relating to payments made
by DTC, Clearstream, Luxembourg or Euroclear on account of beneficial interests
in the global notes or for maintaining, supervising or reviewing any records of
DTC, Clearstream, Luxembourg or Euroclear relating to those beneficial
interests.
CLEARANCE AND SETTLEMENT
THE CLEARING SYSTEMS
DTC
DTC has advised the issuing entity and the underwriters that it intends
to follow the following procedures:
DTC will act as securities depository for the offered global notes. The
offered global notes will be issued as securities registered in the name of Cede
& Co. (DTC's nominee).
DTC has advised the issuing entity that it is a:
o LIMITED-PURPOSE trust company organised under the New York Banking
Law;
o BANKING ORGANISATION within the meaning of the New York Banking
Law;
o MEMBER of the Federal Reserve System;
o CLEARING CORPORATION within the meaning of the New York Uniform
Commercial Code; and
o CLEARING AGENCY registered under the provisions of Section 17A of
the Exchange Act.
DTC holds securities for its participants and facilitates the clearance
and settlement among its participants of securities transactions, including
transfers and pledges, in deposited securities through electronic book-entry
changes in its participants' accounts. This eliminates the need for physical
movement of securities certificates. DTC participants include securities brokers
and dealers, banks, trust companies, clearing corporations and other
organisations. Indirect access to the DTC system is also available to others
including securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a participant, either directly
or indirectly. The rules applicable to DTC and its participants are on file with
the SEC.
Transfers between participants on the DTC system will occur under DTC
rules.
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Purchases of issuing entity notes under the DTC system must be made by or
through DTC participants, which will receive a credit for the issuing entity
notes on DTC's records. The ownership interest of each actual beneficial owner
is in turn to be recorded on the DTC participants' and indirect participants'
records. Beneficial owners will not receive written confirmation from DTC of
their purchase. However, beneficial owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the DTC participant or indirect participant
through which the beneficial owner entered into the transaction. Transfer of
ownership interests in the offered global notes are to be accomplished by
entries made on the books of DTC participants acting on behalf of beneficial
owners. Beneficial owners will not receive certificates representing their
ownership interest in issuing entity notes unless use of the book-entry system
for the issuing entity notes described in this section is discontinued.
To facilitate subsequent transfers, all the offered global notes
deposited with DTC are registered in the name of DTC's nominee, Cede & Co. The
deposit of these offered global notes with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the ultimate beneficial owners of the issuing entity notes. DTC's
records reflect only the identity of the DTC participants to whose accounts the
beneficial interests are credited, which may or may not be the actual beneficial
owners of the issuing entity notes. The DTC participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC
participants, by DTC participants to indirect participants, and by DTC
participants and indirect participants to beneficial owners will be governed by
arrangements among them and by any statutory or regulatory requirements in
effect from time to time.
Redemption notices for the offered global notes will be sent to DTC. If
less than all of those offered global notes are being redeemed by investors,
DTC's practice is to determine by lot the amount of the interest of each
participant in those offered global notes to be redeemed.
Neither DTC nor Cede & Co. will consent or vote on behalf of the offered
global notes. Under its usual procedures, DTC will mail an omnibus proxy to the
issuing entity as soon as possible after the record date, which assigns the
consenting or voting rights of Cede & Co. to those DTC participants to whose
accounts the book-entry interests are credited on the record date, identified in
a list attached to the proxy.
The issuing entity understands that under existing industry practices,
when the issuing entity requests any action of noteholders or when a beneficial
owner desires to give or take any action which a noteholder is entitled to give
or take under the trust deed, DTC generally will give or take that action, or
authorise the relevant participants to give or take that action, and those
participants would authorise beneficial owners owning through those participants
to give or take that action or would otherwise act upon the instructions of
beneficial owners through them.
CLEARSTREAM, LUXEMBOURG AND EUROCLEAR
Clearstream, Luxembourg and Euroclear each hold securities for their
participating organisations and facilitate the clearance and settlement of
securities transactions between their respective participants through electronic
book-entry changes in accounts of those participants, thereby eliminating the
need for physical movement of securities. Clearstream, Luxembourg and Euroclear
provide various services including safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Clearstream, Luxembourg and Euroclear also deal with domestic
securities markets in several countries through established depository and
custodial relationships. Clearstream, Luxembourg and Euroclear have established
an electronic bridge between their two systems across which their respective
participants may settle trades with each other. Transactions may be settled in
Clearstream, Luxembourg and Euroclear in any of numerous currencies, including
United States dollars. Transfers between participants on the Clearstream,
Luxembourg system and participants of the Euroclear system will occur under
their respective rules and operating procedures.
Clearstream, Luxembourg is incorporated under the laws of Luxembourg as a
professional depository. Clearstream, Luxembourg participants are financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies and clearing corporations. Indirect access to
Clearstream, Luxembourg is also available to others, including banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream, Luxembourg participant, either directly or
indirectly.
The Euroclear system was created in 1968 to hold securities for its
participants and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against
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payment. The Euroclear system is operated by Euroclear, under licence from
Euroclear PLC, an English public limited company. All operations are conducted
by Euroclear. All Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with Euroclear. The board of Euroclear establishes policy
for the Euroclear system in accordance with the terms of its licence from
Euroclear PLC.
Euroclear participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries.
Indirect access to the Euroclear system is also available to other firms that
maintain a custodial relationship with a Euroclear participant, either directly
or indirectly.
Securities clearance accounts and cash accounts with Euroclear are
governed by the Terms and Conditions Governing use of Euroclear and the related
Operating Procedures of the Euroclear system, both as may be amended by
Euroclear, from time to time. These terms and conditions govern transfers of
securities and cash within the Euroclear system, withdrawal of securities and
cash from the Euroclear system, and receipts of payments for securities in the
Euroclear system. All securities in the Euroclear system are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. Euroclear acts under these terms and conditions only on
behalf of Euroclear participants and has no record of or relationship with
persons holding through Euroclear participants.
As the holders of book-entry interests, beneficial owners will not have
the right under the trust deed to act on solicitations by the issuing entity for
action by noteholders. Beneficial owners will only be able to act to the extent
they receive the appropriate proxies to do so from DTC, Clearstream, Luxembourg
or Euroclear or, if applicable, their respective participants. No assurances are
made about these procedures or their adequacy for ensuring timely exercise of
remedies under the trust deed.
No beneficial owner of an interest in a global note will be able to
transfer that interest except in accordance with applicable procedures, in
addition to those provided for under the trust deed, of DTC, Clearstream,
Luxembourg and Euroclear, as applicable. Transfers between participants in
Clearstream, Luxembourg and participants in the Euroclear system will occur
under their rules and operating procedures.
The laws of some jurisdictions require that some purchasers of securities
take physical delivery of those securities in definitive form. These laws and
limitations may impair the ability to transfer beneficial interests in the
global notes.
GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
INITIAL SETTLEMENT
The US global notes will be delivered at initial settlement to The Bank
of New York, acting through its New York branch, as custodian for DTC, and the
Reg S global notes will be delivered to The Bank of New York, acting through
its London branch, as common depositary for Clearstream, Luxembourg and
Euroclear. Customary settlement procedures will be followed for participants
of each system at initial settlement. Global notes will be credited to
investors' securities accounts on the settlement date against payment in
same-day funds.
SECONDARY TRADING
Secondary market sales of book-entry interests in issuing entity notes
between DTC participants will occur in the ordinary way in accordance with DTC
rules and will be settled using the procedures applicable to conventional United
States corporate debt obligations.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to these
procedures to facilitate transfers of interests in securities among participants
of DTC, Clearstream, Luxembourg and Euroclear, they are not obligated to perform
these procedures. Additionally, these procedures may be discontinued at any
time. None of the issuing entity, any agent, the underwriters or any affiliate
of any of the foregoing, or any person by whom any of the foregoing is
controlled for the purposes of the Securities Act, will have any responsibility
for the performance by DTC, Clearstream, Luxembourg, Euroclear or their
respective direct or indirect participants or accountholders of their respective
obligations under the rules and procedures governing their operations or for the
sufficiency for any purpose of the arrangements described herein.
DEFINITIVE NOTES
Beneficial owners of global notes will only be entitled to receive
definitive notes under the following limited circumstances:
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o as a result of a change in United Kingdom law, the issuing entity
or any paying agent is or will be required to make any deduction
or withholding on account of tax from any payment on the issuing
entity notes that would not be required if the issuing entity
notes were in definitive form;
o in the case of the US global notes, DTC notifies the issuing
entity that it is unwilling or unable to hold the US global notes
or is unwilling or unable to continue as, or has ceased to be, a
clearing agency under the Exchange Act, and, in each case, the
issuing entity cannot appoint a successor within 90 days; or
o in the case of the Reg S global notes, Clearstream, Luxembourg and
Euroclear are closed for business for a continuous period of 14
days or more (other than by reason of legal holidays) or announce
an intention to cease business permanently or do in fact do so and
no alternative clearing system satisfactory to the note trustee is
available.
In no event will definitive notes in bearer form be issued. Any
definitive notes will be issued in registered form in minimum denominations as
specified in the relevant prospectus supplement. Any definitive notes will be
registered in that name or those names as the registrar shall be instructed by
DTC, Clearstream, Luxembourg and Euroclear, as applicable. It is expected that
these instructions will be based upon directions received by DTC, Clearstream,
Luxembourg and Euroclear from their participants reflecting the ownership of
book-entry interests. To the extent permitted by law, the issuing entity, the
note trustee and any paying agent shall be entitled to treat the person in whose
names any definitive notes is registered as the absolute owner thereof. The
issuing entity paying agent and agent bank agreement contains provisions
relating to the maintenance by a registrar of a register reflecting ownership of
the issuing entity notes and other provisions customary for a registered debt
security.
Any person receiving definitive notes will not be obligated to pay or
otherwise bear the cost of any tax or governmental charge or any cost or expense
relating to insurance, postage, transportation or any similar charge, which will
be solely the responsibility of the issuing entity. No service charge will be
made for any registration of transfer or exchange of any definitive notes.
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TERMS AND CONDITIONS OF THE US NOTES
The following is a summary of the material terms and conditions of the US
notes offered pursuant to this prospectus and the relevant prospectus
supplement. This summary does not need to be read with the complete terms and
conditions of the US notes in order to learn all the material terms and
conditions of the US notes. The complete terms and conditions of the US notes
are set out in the trust deed, a form of which has been filed as an exhibit to
the registration statement, and in the event of a conflict, the terms and
conditions of the notes set out in the trust deed will prevail.
In this section:
o ISSUING ENTITY NOTES mean collectively the CLASS A NOTES, the
CLASS B NOTES, the CLASS M NOTES, the CLASS C NOTES and the CLASS
D NOTES of each series;
o CLASS A NOTEHOLDERS, CLASS B NOTEHOLDERS, CLASS M NOTEHOLDERS,
CLASS C NOTEHOLDERS and CLASS D NOTEHOLDERS, in each case and
unless specified otherwise, means the holders of the issuing
entity notes of all series of the applicable class; and
o CLASS A NOTES, CLASS B NOTES, CLASS M NOTES, CLASS C NOTES or
CLASS D NOTES, in each case and unless specified otherwise, means
the CLASS A NOTES, the CLASS B NOTES, the CLASS M NOTES, the CLASS
C NOTES or the CLASS D NOTES of all series of the applicable
class.
Furthermore, this section, as elsewhere in this prospectus, provides
information on the Reg S notes that are not being offered to the public in the
United States by this prospectus. This information is provided only to improve
your understanding of the offered notes. Each series and class (or sub-class) of
issuing entity notes will be issued with the benefit of (amongst others) the
following documents:
o the trust deed dated 28 November 2006 (as the same may be amended,
restated, novated, replaced or supplemented from time to time)
between the issuing entity and the note trustee and a deed or
deeds supplemental to the trust deed entered into between the
issuing entity and the note trustee from time to time;
o the issuing entity paying agent and agent bank agreement dated 28
November 2006 (as the same may be amended, restated, novated,
replaced or supplemented from time to time) between the issuing
entity, the principal paying agent and the agent bank, the US
paying agent, the registrar, the transfer agent and the note
trustee;
o the issuing entity deed of charge dated 28 November 2006 (as the
same may be amended, restated, novated, replaced or supplemented
from time to time) between the issuing entity, the note trustee,
the issuing entity security trustee, the issuing entity swap
providers and certain other parties; and
o if applicable to a series and class (or sub-class) of issuing
entity notes, an issuing entity swap agreement dated the relevant
closing date in respect of such series and class (or sub-class) of
issuing entity notes between the issuing entity, the issuing
entity swap provider and the issuing entity security trustee.
When the parties to these documents are referred to, the reference
includes any successor to that party validly appointed.
Initially the parties are as follows:
o Holmes Master Issuer PLC as issuing entity;
o The Bank of New York, acting through its London branch as
security trustee, issuing entity security trustee, note trustee,
principal paying agent and agent bank;
o The Bank of New York (Luxembourg) S.A. as registrar and transfer
agent;
o The Bank of New York, acting through its New York branch as US
paying agent; and
o Abbey National Treasury Services plc as Funding swap provider.
Noteholders can view copies of those documents at the specified office of
any of the paying agents.
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There is no English law which prohibits US residents from holding offered
issuing entity notes by reason solely of their residence outside the United
Kingdom.
There are no UK laws or regulations other than in relation to withholding
tax, as described in "UNITED KINGDOM TAXATION - PAYMENT OF INTEREST ON THE
ISSUING ENTITY NOTES", that restrict payments made to non-UK resident
noteholders.
1. FORM, DENOMINATION, REGISTER, TITLE AND TRANSFERS
1.1 The US notes are being offered and sold to the public in the
United States and to institutional investors outside the United States.
The US notes are initially in global registered form, without coupons
attached. Transfers and exchanges of beneficial interests in global notes
are made in accordance with the rules and procedures of DTC, Euroclear
and/or Clearstream, Luxembourg, as applicable.
Each Reg S global note will be deposited with, and registered in the name
of a nominee of, a common depositary for Euroclear and Clearstream,
Luxembourg. Each US global note will be deposited with a custodian for,
and registered in the name of Cede & Co., as nominee of DTC (or such
other name as may be requested by an authorised representative of DTC).
Each global note will be numbered serially with an identifying number
which will be recorded on the relevant global note and in the register.
Each series and class (or sub-class) of US notes may be fixed rate notes,
floating rate notes, zero coupon notes, money market notes or a
combination of any of the foregoing, depending upon the interest basis
shown in the applicable prospectus supplement.
Each series and class (or sub-class) of US notes may be bullet redemption
notes, scheduled redemption notes, pass-through notes or a combination of
any of the foregoing, depending upon the redemption/payment basis shown
in the applicable prospectus supplement.
Global note certificates will be exchanged for individual note
certificates in definitive registered form only under certain limited
circumstances. If individual note certificates are issued, they will be
serially numbered and issued in an aggregate principal amount equal to
the principal amount outstanding of the relevant global note certificates
and in registered form only.
The US notes (in either global or definitive form) will be issued in such
denominations as specified in the relevant prospectus supplement, save
that the minimum denomination of each issuing entity note will be such as
may be allowed or required from time to time by the relevant central bank
or regulatory authority (or equivalent body) or any laws or regulations
applicable to the relevant currency and save that the minimum
denomination of each US dollar denominated issuing entity note will be
issued in minimum denominations of $100,000 and in integral multiples of
$1,000 in excess thereof, each euro denominated issuing entity note will
be issued in minimum denominations of (euro)50,000 and in integral
multiples of (euro)1,000 in excess thereof and each sterling denominated
issuing entity note will be issued in minimum denominations of
(pound)50,000 and in integral multiples of (pound)1,000 in excess
thereof.
In the case of a series and class (or sub-class) of issuing entity notes
with more than one specified denomination, issuing entity notes of one
specified denomination may not be exchanged for issuing entity notes of
such series and class (or sub-class) of another specified denomination.
1.2 Register
The registrar will maintain a register in respect of the US notes in
accordance with the provisions of the issuing entity paying agent and
agent bank agreement. References in this section to a HOLDER of a US note
means the person in whose name such offered note is for the time being
registered in the register (or, in the case of a joint holding, the first
named thereof) and NOTEHOLDER shall be construed accordingly. An
individual NOTE CERTIFICATE will be issued to each noteholder in respect
of its registered holding. Each note certificate will be numbered
serially with an identifying number that will be recorded in the
register.
1.3 Title
The holder of each offered note shall (except as otherwise required by
law) be treated as the absolute owner of such offered note for all
purposes (whether or not it is overdue and regardless of any notice of
ownership, trust or any other interest therein, any writing on the note
certificate relating thereto (other than the endorsed form of transfer)
or any notice of any previous loss or theft of such note certificate) and
no person shall be liable for so treating such holder.
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1.4 Transfers
Title to the issuing entity notes shall pass by and upon registration in
the register. Subject to the provisions below, an offered note may be
transferred upon surrender of the relevant note certificate, with the
endorsed form of transfer duly completed, at the specified office of the
registrar or any transfer agent specified in the issuing entity paying
agent and agent bank agreement, together with such evidence as the
registrar or (as the case may be) such transfer agent may reasonably
require to prove the title of the transferor and the authority of the
individuals who have executed the form of transfer; provided, however,
that an offered note may only be transferred in the minimum denominations
specified in the relevant prospectus supplement. Where not all the
offered notes represented by the surrendered note certificate are the
subject of the transfer, a new note certificate in respect of the balance
of the offered notes will be issued to the transferor.
Within five commercial business days of such surrender of a note
certificate, the registrar will register the transfer in question and
deliver a new note certificate of a like principal amount to the offered
notes transferred to each relevant holder at its specified office or (as
the case may be) the specified office of any transfer agent or (at the
request and risk of any such relevant holder) by uninsured first class
mail (and by airmail if the holder is overseas) to the address specified
for the purpose by such relevant holder. In this paragraph, COMMERCIAL
BUSINESS DAY means a day on which commercial banks are open for business
(including dealings in foreign currencies) in the city where the
registrar or (as the case may be) the relevant transfer agent has its
specified office.
The transfer of an offered note will be effected without charge by or on
behalf of the issuing entity, the registrar or any transfer agent but
against such indemnity as the registrar or (as the case may be) such
transfer agent may require in respect of any tax or other duty of
whatsoever nature which may be levied or imposed in connection with such
transfer.
Noteholders may not require transfers to be registered during the period
of 15 days ending on the due date for any payment of principal or
interest in respect of the offered notes.
All transfers of offered notes and entries on the register are subject to
the detailed regulations concerning the transfer of offered notes
scheduled to the issuing entity paying agent and agent bank agreement.
The issuing entity may change the regulations with the prior written
approval of the note trustee and the registrar. A copy of the current
regulations will be mailed (free of charge) by the registrar to any
noteholder who requests in writing a copy of such regulations.
The offered notes are not issuable in bearer form.
2. STATUS, SECURITY AND PRIORITY
The issuing entity notes of each series and class (or sub-class) are
direct, secured and unconditional obligations of the issuing entity and are all
secured by the same issuing entity security (created by the issuing entity deed
of charge).
Subject to the provisions of numbers 4 and 5 and subject to the
conditions and priorities set out under "CASHFLOWS":
o the class A notes of each series will rank without preference or
priority among themselves and with the class A notes of each other
series, but in priority to the class B notes, the class M notes,
the class C notes and the class D notes of any series;
o the class B notes of each series will rank without preference or
priority among themselves and with the class B notes of each other
series, but in priority to the class M notes, the class C notes
and the class D notes of any series;
o the class M notes of each series will rank without any preference
or priority among themselves and with the class M notes of each
other series, but in priority to the class C notes and the class D
notes of any series; and
o the class C notes of each series will rank without any preference
or priority among themselves and with the class C notes of each
other series, but in priority to the class D notes of any series;
and
o the class D notes of each series will rank without preference or
priority among themselves and with the class D notes of each other
series.
The note trustee is required to have regard to the interests of all
classes of noteholders equally. However, except where the transaction documents
expressly provide otherwise, if there are any class A notes of any series
outstanding and if there is or may be a conflict between the interests of the
class A
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noteholders and the interests of the class B noteholders and/or the class M
noteholders and/or the class C noteholders and/or the class D noteholders, in
each case, of that series or any other series, then the note trustee will have
regard to the interests of the class A noteholders only. Except where the
transaction documents expressly provide otherwise, if there are no class A notes
outstanding and there are any class B notes of any series outstanding and if
there is or may be a conflict between the interests of the class B noteholders
and the interests of the class M noteholders and/or the class C noteholders
and/or the class D noteholders, in each case, of that series or any other
series, then the note trustee will have regard to the interests of the class B
noteholders only. Except where the transaction documents expressly provide
otherwise, if there are no class A notes outstanding and no class B notes
outstanding and there are any class M notes of any series outstanding and if
there is or may be a conflict between the interests of the class M noteholders
and the interests of the class C noteholders and/or the class D noteholders, in
each case, of that series or any other series, then the note trustee will have
regard to the interests of the class M noteholders only. Except where the
transaction documents expressly provide otherwise, if there are no class A notes
outstanding, no class B notes outstanding and no class M notes outstanding and
there are any class C notes of any series outstanding, and if there is or may be
a conflict between the interests of the class C noteholders and the interests of
the class D noteholders, in each case, of that series or any other series, then
the note trustee will have regard to the interests of the class C noteholders
only.
Except in limited circumstances described in number 11, there is no
limitation on the power of class A noteholders to pass an effective
extraordinary resolution which is binding on the class B noteholders, the class
M noteholders, the class C noteholders and the class D noteholders, in each
case, of any series. However, as described in number 11, there are provisions
limiting the power of the class B noteholders, the class M noteholders, the
class C noteholders and the class D noteholders to pass an effective
extraordinary resolution, depending on its effect on the class A noteholders.
Except in the limited circumstances described in number 11, there is no
limitation on the power of the class B noteholders to pass an effective
extraordinary resolution which is binding on the class M noteholders, the class
C noteholders and the class D noteholders in each case, of any series. Likewise,
as described in number 11, there are provisions limiting the power of the class
M noteholders, the class C noteholders and the class D noteholders to pass an
effective extraordinary resolution, depending on its effect on the class B
noteholders. Except in the limited circumstances described in number 11, there
is no limitation on the power of class M noteholders to pass an effective
extraordinary resolution which is binding on the class C noteholders and the
class D noteholders of any series. Likewise, as described in number 11 there are
provisions limiting the power of the class C noteholders and the class D
noteholders to pass an effective extraordinary resolution, depending on its
effect on the class M noteholders. Except in the limited circumstances described
in number 11, there is no limitation on the power of class C noteholders to pass
an effective extraordinary resolution which is binding on the class D
noteholders. Likewise, as described in number 11 there are provisions limiting
the power of the class D noteholders to pass an effective extraordinary
resolution, depending on its effect on the class C noteholders.
Notwithstanding that none of the note trustee, the issuing entity
security trustee and the noteholders may have any right of recourse against the
rating agencies in respect of any confirmation given by them and relied upon by
the note trustee or the issuing entity security trustee pursuant to this clause,
the issuing entity security trustee and the note trustee are entitled to assume
that any exercise by it or them of any power, discretion or duty under the
transaction documents will not be materially prejudicial to the interests of the
noteholders if the rating agencies have confirmed that the current ratings of
the issuing entity notes will not be adversely affected by that exercise.
Notwithstanding the foregoing, a credit rating is an assessment of credit and
does not address other matters that may be of relevance to the noteholders. In
being entitled to rely on the fact that the rating agencies have confirmed that
the then current rating of the relevant series and/or class or classes of notes
would not be adversely affected, it is expressly agreed and acknowledged by the
note trustee and the issuing entity security trustee and specifically notified
to the noteholders (and to which they are bound by the conditions) that the
above does not impose or extend any actual or contingent liability for the
rating agencies to the note trustee or the issuing entity security trustee, the
noteholders or any other person or create any legal relations between the rating
agencies and the note trustee, the issuing entity security trustee, the
noteholders or any other person whether by way of contract or otherwise.
The security for the payment of amounts due under the issuing entity
notes is created by the issuing entity deed of charge. The security is created
in favour of the issuing entity security trustee who will hold it on behalf of
the noteholders and on behalf of other parties expressed to be secured creditors
under the issuing entity deed of charge.
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3. COVENANTS
If any issuing entity note is outstanding, the issuing entity will not,
unless it is permitted by the terms and conditions of the issuing entity notes
or the terms of the transaction documents to which the issuing entity is party
or by the written consent of the issuing entity security trustee:
o create or permit to subsist any mortgage, standard security,
pledge, lien, charge or other security interest on the whole or
any part of its present or future assets or undertakings, except
where the same is given in connection with the issue of a series
of issuing entity notes;
o sell, dispose of or grant any option or right to acquire any of
its assets or undertakings or any interest or benefit in its
assets or undertakings;
o permit any other person, except for the issuing entity security
trustee, to have any equitable or beneficial interest in any of
its assets or undertakings;
o have an interest in any bank account other than the bank accounts
maintained pursuant to the transaction documents;
o carry on any business other than as described in this prospectus
(as supplemented and/-or amended from time to time) relating to
the issue of the issuing entity notes, the making of the master
intercompany loan and the related activities described therein or
as contemplated in the transaction documents;
o incur any indebtedness in respect of borrowed money whatsoever or
give any guarantee or indemnity in respect of any indebtedness or
obligation of any person, except where the same is incurred or
given or the issuing entity becomes so obligated in connection
with the issue of a series of issuing entity notes;
o consolidate with or merge with any person or transfer
substantially all of its properties or assets to any person;
o waive or consent to the modification or waiver of any of the
obligations relating to the issuing entity security;
o have any employees, premises or subsidiaries;
o pay any dividend or make any other distributions to its
shareholders or issue any further shares;
o purchase or otherwise acquire any issuing entity notes; or
o engage in any activities in the United States (directly or
through agents), or derive any income from US sources as
determined under US income tax principles, or hold any property
if doing so would cause it to be engaged or deemed to be engaged
in a trade or business in the United States as determined under
US income tax principles.
4. INTEREST
4.1 INTEREST ON FIXED RATE NOTES
Each fixed rate note bears interest on its principal amount outstanding
from (and including) the interest commencement date at the rate(s) per
annum equal to the rate(s) of interest payable, subject as provided in
the terms and conditions, in arrear on the interest payment date(s) in
each year specified for such note in the relevant prospectus supplement
up to (and including) the final maturity date.
If interest is required to be calculated in respect of any fixed rate
note for a period other than an interest period, such interest shall be
calculated by applying the rate of interest specified for such note in
the relevant prospectus supplement to the principal amount outstanding on
such note, multiplying such sum by the applicable day count fraction and
rounding the resultant figure to the nearest sub-unit of the relevant
specified currency, half of any such sub-unit being rounded upwards or
otherwise in accordance with applicable market convention.
DAY COUNT FRACTION means, in respect of the calculation of an amount of
interest in respect of a fixed rate note:
(a) if "ACTUAL/ACTUAL (ICMA)" is specified for such note in the
relevant prospectus supplement:
(i) in the case of issuing entity notes where the number of
days in the relevant period from (and including) the most
recent interest payment date for such issuing entity notes
(or, if none, the interest commencement date) to (but
excluding) the relevant interest payment
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date (the ACCRUAL PERIOD) is equal to or shorter than the
determination period during which the accrual period ends,
the number of days in such accrual period divided by; the
product of:
(A) the number of days in such determination period; and
(B) the number of determination dates (as specified in
the relevant prospectus supplement) that would occur
in one calendar year; or
(ii) in the case of issuing entity notes where the accrual
period is longer than the determination period during which
the accrual period ends, the sum of:
(A) the number of days in such accrual period falling in
the determination period in which the accrual period
begins divided by the product of (x) the number of
days in such determination period and (y) the number
of determination dates that would occur in one
calendar year; and
(B) the number of days in such accrual period falling in
the next determination period divided by the product
of (x) the number of days in such determination
period and (y) the number of determination dates
that would occur in one calendar year; and
(b) if "30/360" is specified for such note in the relevant prospectus
supplement, the number of days in the period from (and including)
the most recent interest payment date for such note (or, if none,
the interest commencement date) to (but excluding) the relevant
interest payment date (such number of days being calculated on the
basis of a year of 360 days with twelve 30-day months) divided by
360.
4.2 INTEREST ON FLOATING RATE NOTES
(a) Interest payment dates
Each floating rate note bears interest on its principal amount
outstanding from (and including) the interest commencement date
and such interest will be payable in arrear on the interest
payment date(s) in each year specified for such note in the
relevant prospectus supplement. Such interest will be payable in
respect of each interest period.
If a business day convention is specified for a floating rate note
in the relevant prospectus supplement and (x) if there is no
numerically corresponding day in the calendar month in which an
interest payment date should occur or (y) if any interest payment
date would otherwise fall on a day that is not a business day,
then, if the business day convention specified is:
(i) the "FOLLOWING BUSINESS DAY CONVENTION", the interest
payment date for such note shall be postponed to the next
day which is a business day; or
(ii) the "MODIFIED FOLLOWING BUSINESS DAY CONVENTION", the
interest payment date for such note shall be postponed to
the next day which is a business day unless it would
thereby fall into the next calendar month, in which event
such interest payment date shall be brought forward to the
immediately preceding business day; or
(iii) the "PRECEDING BUSINESS DAY CONVENTION", the interest
payment date for such note shall be brought forward to the
immediately preceding business day.
(b) Rate of interest
The rate of interest payable from time to time in respect of a
floating rate note will be determined in the manner specified in
the relevant prospectus supplement.
(i) ISDA Determination for floating rate notes
Where "ISDA DETERMINATION" is specified for such note in
the relevant prospectus supplement as the manner in which
the rate of interest is to be determined, the rate of
interest for each interest period will be the relevant ISDA
rate plus or minus (as indicated for such note in the
relevant prospectus supplement) the margin (if any). For
the purposes of this subparagraph (a), ISDA RATE for an
interest period means a rate equal to the floating rate
that would be determined by the agent bank or other person
specified in the relevant prospectus supplement under an
interest rate swap transaction if the agent bank or that
other person were acting as calculation agent for that swap
transaction under the terms of an agreement incorporating
the ISDA definitions and under which:
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(A) the floating rate option is as specified for such
note in the relevant prospectus supplement;
(B) the designated maturity is the period specified for
such note in the relevant prospectus supplement; and
(C) the relevant reset date is either (i) if the
applicable floating rate option is based on LIBOR or
EURIBOR for a currency, the first day of that
interest period or (ii) in any other case, as
specified for such note in the relevant prospectus
supplement.
For the purposes of this sub-paragraph (a), FLOATING RATE,
CALCULATION AGENT, FLOATING RATE OPTION, DESIGNATED
MATURITY and RESET DATE have the meanings given to those
terms in the ISDA definitions.
ISDA DEFINITIONS means the 2000 ISDA Definitions, as
published by the International Swaps and Derivatives
Associations, Inc. and as amended and updated as at the
relevant closing date for the relevant series of issuing
entity notes.
(ii) Screen rate determination for floating rate notes
Where SCREEN RATE DETERMINATION is specified for a floating
rate note in the relevant prospectus supplement as the
manner in which the rate of interest for such note is to be
determined, the rate of interest for each interest period
will, subject as provided below, be either:
(A) the offered quotation (if there is only one
quotation on the relevant screen page); or
(B) the arithmetic mean (rounded if necessary to the
fifth decimal place, with 0.000005 being rounded
upwards) of the offered quotations,
(expressed as a percentage rate per annum) for the reference rate
which appears or appear, as the case may be, on the relevant
screen page as at 11.00 a.m. (London time, in the case of LIBOR,
or Brussels time, in the case of EURIBOR) on the interest
determination date in question plus or minus the margin (if any),
all as determined by the agent bank. If five or more of such
offered quotations are available on the relevant screen page, the
highest (or, if there is more than one such highest quotation, one
only of such quotations) and the lowest (or, if there is more than
one such lowest quotation, one only of such quotations) shall be
disregarded by the agent bank for the purpose of determining the
arithmetic mean (rounded as provided above) of such offered
quotations.
If the reference rate from time to time in respect of a floating
rate note is specified for such note in the relevant prospectus
supplement as being other than LIBOR or EURIBOR, the rate of
interest in respect of such note will be determined as provided
for such note in the relevant prospectus supplement.
(c) Minimum rate of interest and/or maximum rate of interest
If the relevant prospectus supplement specifies a minimum rate of
interest for a floating rate note for any interest period, then,
in the event that the rate of interest for such note in respect of
such interest period determined in accordance with the provisions
of paragraph (ii) above is less than such minimum rate of
interest, the rate of interest for such note for such interest
period shall be such minimum rate of interest.
If the relevant prospectus supplement specifies a maximum rate of
interest for such note for any interest period, then, in the event
that the rate of interest for such note in respect of such
interest period determined in accordance with the provisions of
paragraph (ii) above is greater than such maximum rate of
interest, the rate of interest for such note for such interest
period shall be such maximum rate of interest.
(d) Determination of rate of interest and calculation of interest
amounts
The agent bank will at or as soon as practicable after each time
at which the rate of interest is to be determined, determine the
rate of interest for the relevant interest period.
The agent bank will calculate the amount of interest payable on the
floating rate notes in respect of each specified denomination (each an
INTEREST AMOUNT) for the relevant interest period. Each interest amount
shall be calculated by applying the rate of interest to the principal
amount outstanding of each issuing entity note, multiplying such sum by
the applicable day count fraction, and rounding the resultant figure to
the nearest sub-unit of the relevant specified currency, half of any such
sub-unit being rounded upwards or otherwise in accordance with applicable
market convention.
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DAY COUNT FRACTION means, in respect of the calculation of an amount of
interest for a floating rate note in accordance with this paragraph (d)
for any interest period:
(i) if "ACTUAL/365" or "ACTUAL/ACTUAL (ISDA)" is specified for
such note in the relevant prospectus supplement, the actual
number of days in the interest period divided by 365 (or,
if any portion of that interest period falls in a leap
year, the sum of (a) the actual number of days in that
portion of the interest period falling in a leap year
divided by 366 and (b) the actual number of days in that
portion of the interest period falling in a non-leap year
divided by 365);
(ii) if "ACTUAL/365 (FIXED)" is specified for such note in the
relevant prospectus supplement, the actual number of days
in the interest period divided by 365;
(iii) if "ACTUAL/365 (STERLING)" is specified for such note in
the relevant prospectus supplement, the actual number of
days in the interest period divided by 365 or, in the case
of an interest payment date falling in a leap year, 366;
(iv) if "ACTUAL/360" is specified for such note in the relevant
prospectus supplement, the actual number of days in the
interest period divided by 360;
(v) if "30/360", "360/360" or "Bond Basis" is specified for
such note in the relevant prospectus supplement, the number
of days in the interest period divided by 360 (the number
of days to be calculated on the basis of a year of 360 days
with twelve 30-day months (unless (a) the last day of the
interest period is the 31st day of a month but the first
day of the interest period is a day other than the 30th or
31st day of a month, in which case the month that includes
that last day shall not be considered to be shortened to a
30-day month or (b) the last day of the interest period is
the last day of the month of February, in which case the
month of February shall not be considered to be lengthened
to a 30-day month)); and
(vi) if "30E/360" or "EUROBOND BASIS" is specified for such note
in the relevant prospectus supplement, the number of days
in the interest period divided by 360 (the number of days
to be calculated on the basis of a year of 360 days with
twelve 30-day months, without regard to the date of the
first day or last day of the interest period unless, in the
case of the final interest period, the final maturity date
is the last day of the month of February, in which case the
month of February shall not be considered to be lengthened
to a 30-day month).
(e) Notification of rate of interest and interest amounts
The agent bank will cause the rate of interest and each interest
amount for each interest period and the relevant interest payment
date to be notified to the note trustee, the issuing entity
security trustee, the issuing entity cash manager, the paying
agents, the registrar and to any stock exchange or other relevant
competent authority or quotation system on which the relevant
floating rate notes are for the time being listed, quoted and/or
traded or by which they have been admitted to listing and to be
published in accordance with NUMBER 14 as soon as possible after
their determination but in no event later than the fourth business
day thereafter. Each interest amount and interest payment date so
notified may subsequently be amended (or appropriate alternative
arrangements made by way of adjustment) without notice in the
event of an extension or shortening of the interest period. Any
such amendment or alternative arrangements will be promptly
notified to the note trustee and each stock exchange or other
relevant authority on which the relevant floating rate notes are
for the time being listed or by which they have been admitted to
listing and to the noteholders in accordance with NUMBER 14.
(f) Determination or calculation by note trustee
If for any reason at any relevant time after the relevant closing
date, the agent bank or, as the case may be, the calculation agent
defaults in its obligation to determine the rate of interest for a
floating rate note or the agent bank defaults in its obligation to
calculate any interest amount for such note in accordance with
sub-paragraph (b)(i) or (ii) above or as otherwise specified in
the relevant prospectus supplement, as the case may be, and in
each case in accordance with paragraph (d) above, the note trustee
shall determine the rate of interest at such rate as, in its
absolute discretion (having such regard as it shall think fit to
the foregoing provisions of this NUMBER 4, but subject always to
any minimum rate of interest or maximum rate of interest specified
for such note in the relevant prospectus supplement), it shall
deem fair and reasonable in all the circumstances or, as the case
may be, the note trustee shall calculate the interest amount(s) in
such manner as it shall deem fair and reasonable in all the
circumstances and
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each such determination or calculation shall be deemed to have
been made by the agent bank or the calculation agent, as the case
may be.
(g) Certificates to be final
All certificates, communications, opinions, determinations,
calculations, quotations and decisions given, expressed, made or
obtained for the purposes of the provisions set out in this NUMBER
4.2, whether by the agent bank or the calculation agent or the
note trustee shall (in the absence of wilful default, bad faith or
manifest error) be binding on the issuing entity, the issuing
entity cash manager, the principal paying agent, the calculation
agent, the other paying agents, the note trustee and all
noteholders and (in the absence of wilful default or bad faith) no
liability to the issuing entity or the noteholders shall attach to
the agent bank or the calculation agent or the note trustee in
connection with the exercise or non-exercise by it of its powers,
duties and discretions pursuant to such provisions.
4.3 ACCRUAL OF INTEREST
Interest (if any) will cease to accrue on each issuing entity note (or,
in the case of the redemption of part only of an issuing entity note,
that part only of such note) on the due date for redemption thereof
unless, upon due presentation thereof, payment of principal is improperly
withheld or refused in which event, interest will continue to accrue as
provided in the trust deed.
4.4 DEFERRED INTEREST
To the extent that the funds available to the issuing entity, subject to
and in accordance with the relevant priority of payments, to pay interest
on any series and class (or sub-class) of issuing entity notes (other
than any series and class (or sub-class) of issuing entity notes if then
the most senior class of issuing entity notes then outstanding) on an
interest payment date (after discharging the issuing entity's liabilities
of a higher priority) are insufficient to pay the full amount of such
interest, payment of the shortfall attributable to such series and class
(or sub-class) of issuing entity notes (DEFERRED INTEREST) will not then
fall due but will instead be deferred until the first interest payment
date for such issuing entity notes thereafter on which sufficient funds
are available (after allowing for the issuing entity's liabilities of a
higher priority and subject to and in accordance with the relevant
issuing entity priority of payments) to fund the payment of such deferred
interest to the extent of such available funds.
Such deferred interest will accrue interest (ADDITIONAL INTEREST) at the
rate of interest applicable from time to time to the applicable series
and class (or sub-class) of issuing entity notes and payment of any
additional interest will also be deferred until the first interest
payment date for such issuing entity notes thereafter on which funds are
available (after allowing for the issuing entity's liabilities of a
higher priority subject to and in accordance with the relevant issuing
entity priority of payments) to the issuing entity to pay such additional
interest to the extent of such available funds.
Amounts of deferred interest and additional interest shall not be
deferred beyond the final maturity date of the applicable series and
class (or sub-class) of issuing entity notes, when such amounts will
become due and payable.
Payments of interest due on an interest payment date in respect of the
most senior class of issuing entity notes of any series then outstanding
will not be deferred. In the event of the delivery of a note enforcement
notice (as described in NUMBER 9), the amount of interest in respect of
such issuing entity notes that was due but not paid on such interest
payment date will itself bear interest at the applicable rate until both
the unpaid interest and the interest on that interest are paid.
5. REDEMPTION, PURCHASE AND CANCELLATION
5.1 FINAL REDEMPTION
If the issuing entity notes have not previously been redeemed in full as
described in this NUMBER 5, the issuing entity will redeem each series
and class (or sub-class) of issuing entity notes at their then principal
amount outstanding together with all accrued interest on the final
maturity date in respect of such series and class (or sub-class) of
issuing entity notes.
5.2 MANDATORY REDEMPTION
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On each interest payment date, other than an interest payment date on
which a series and class (or sub-class) of issuing entity notes are to be
redeemed under NUMBERS 5.1, 5.4, 5.5 and 5.6, principal in respect of
such issuing entity notes will be repaid in an amount equal to the amount
(if any) repaid by Funding on such interest payment date in respect of,
and pursuant to, the relevant term advance, in each case converted, where
the specified currency for such issuing entity notes is not sterling,
into the specified currency at the specified currency exchange rate.
To the extent that there are insufficient funds available to the issuing
entity to repay the amount due to be paid on such interest payment date,
the issuing entity will be required to repay the shortfall, to the extent
the issuing entity receives funds therefor (and subject to the terms of
the issuing entity deed of charge and the issuing entity cash management
agreement) on subsequent interest payment dates in respect of such
issuing entity notes.
5.3 NOTE PRINCIPAL PAYMENTS, PRINCIPAL AMOUNT OUTSTANDING AND POOL FACTOR
Four business days prior to each interest payment date (the NOTE
DETERMINATION DATE), the issuing entity or the agent bank will determine
the following:
the amount of each principal payment payable on each offered note
of each series and class (or sub-class), called the NOTE PRINCIPAL
PAYMENT;
the principal amount outstanding of each offered note of that
series and class (or sub-class) on the note determination date,
which is the principal amount outstanding of that series and class
(or sub-class) of issuing entity note as at the closing date less
the aggregate of all note principal payments that have been paid
in respect of such note; and
the fraction, or pool factor, obtained by dividing the principal
amount outstanding of each offered note by the original principal
amount outstanding of each issuing entity note of that series and
class (or sub-class) as at the relevant closing date.
The issuing entity will notify the amounts and dates determined to the
agent bank, paying agents, note trustee, registrar and each stock
exchange on which the issuing entity notes are listed and shall publish
those amounts and dates in accordance with NUMBER 14 as soon as possible
after these parties have been notified.
If the issuing entity or agent bank fails to make a determination as
described, the note trustee will calculate the note principal payment,
principal amount outstanding and pool factor as described in this NUMBER
5.3, and each of these determinations or calculations will be deemed to
have been made by the issuing entity. If this happens, the issuing
entity, the agent bank and the noteholders will be bound by the
determinations made.
5.4 OPTIONAL REDEMPTION IN FULL OF A SERIES
Provided a note enforcement notice has not been served and subject to the
provisos below, upon giving not less than 30 and not more than 60 days'
prior notice to the note trustee, the noteholders and the relevant
issuing entity swap provider in accordance with NUMBER 14, the issuing
entity may redeem a series and class (or sub-class) of issuing entity
notes at the then redemption amount together with any accrued interest on
the following dates:
the date specified as the step-up date for such issuing entity
notes in the relevant prospectus supplement and on any interest
payment date for such issuing entity notes thereafter;
accordingly, the issuing entity has the option to redeem a series
and class (or sub-class) of issuing entity notes on or after the
step-up date for interest for that series and class (or sub-class)
of issuing entity notes; and
any interest payment date on which the aggregate principal amount
outstanding of such issuing entity notes and all other classes of
issuing entity notes of the same series issued on the same date is
less than 10 per cent. of the aggregate principal amount
outstanding of such series of issuing entity notes as at the
relevant closing date on which such series of issuing entity notes
was listed,
PROVIDED THAT (in either of the cases above), on or prior to giving any
such notice, the issuing entity shall have provided to the note trustee a
certificate of the issuing entity to the effect that (i) it will have the
funds available to it to make the required payment on the interest
payment date and any amounts required to be paid in priority to or in the
same priority with the issuing entity notes outstanding in accordance
with the terms and conditions of the issuing entity deed of charge and
the
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issuing entity cash management agreement and (ii) the repayment tests
will be satisfied following the making of such redemptions and the note
trustee shall be entitled to accept such certificate as sufficient
evidence thereof in which event it shall be conclusive and binding on the
noteholders and all other persons. REPAYMENT TESTS means the test set out
under "CASHFLOWS - 6. REPAYMENT TESTS".
5.5 OPTIONAL REDEMPTION FOR TAX AND OTHER REASONS
Provided a note enforcement notice has not been served, if the issuing
entity satisfies the note trustee that on the next interest payment date
for a series and class (or sub-class) of issuing entity notes either:
the issuing entity would by virtue of a change in the law or
regulations of the United Kingdom or any other jurisdiction (or
the application or interpretation thereof) be required to withhold
or deduct from amounts due on a series and class or (sub-class) of
the issuing entity notes any amount for, or on account of, any
present or future taxes, duties, assessments or governmental
charges of whatever nature; or
Funding would be required to withhold or deduct from amounts due
on the master intercompany loan any amount for, or on account of,
any present or future taxes, duties, assessments or governmental
charges, and
in relation to either of these events, such obligation of the
issuing entity or Funding (as the case may be) cannot be avoided
by the issuing entity or Funding (as the case may be) taking
reasonable measures available to the issuing entity or Funding (as
the case may be),
then the issuing entity shall use its reasonable endeavours to arrange
the substitution of a company incorporated in another jurisdiction
approved by the note trustee as principal debtor under such issuing
entity notes and/or as lender of such term advance as the case may be,
upon the note trustee being satisfied that (1) such substitution will not
be materially prejudicial to the interests of the noteholders of any
series and class, and (2) upon the issuing entity security trustee being
satisfied that (a) the position of the issuing entity secured creditors
will not thereby be adversely affected, and (b) such substitution would
not require registration of any new security under United States
securities laws or materially increase the disclosure requirements under
United States law or the costs of issuance. Only if the issuing entity is
unable to arrange a substitution will the issuing entity be entitled to
redeem the issuing entity notes as described in this NUMBER 5.5.
Subject to the proviso below, if the issuing entity is unable to arrange
a substitution as described above, and, as a result, one or more of the
events described in bullet point one or two above (as the case may be) is
continuing, then the issuing entity may, having given not more than 60
nor less than 30 days' notice to the note trustee, the noteholders and
the relevant issuing entity swap provider(s) in accordance with NUMBER
14, redeem all (but not some only) of such issuing entity notes on the
immediately succeeding interest payment date for such issuing entity
notes at their aggregate redemption amount together with any accrued and
unpaid interest in respect thereof provided that (in either case), prior
to giving any such notice, the issuing entity shall have provided to the
note trustee:
(i) a certificate signed by two directors of the issuing entity
stating the circumstances referred to in the three bullet points
above prevail and setting out details of such circumstances; and
(ii) an opinion in form and substance satisfactory to the note
trustee of independent legal advisors of recognised standing to
the effect that the issuing entity and/or Funding has or will
become obliged to deduct or withhold such amounts as a result of
such change or amendment.
The note trustee shall be entitled to accept such certificate and opinion
as sufficient evidence of the satisfaction of the circumstance set out in
bullet point one or two and three above, in which event they shall be
conclusive and binding on the noteholders. The issuing entity may only
redeem such issuing entity notes as aforesaid, if on or prior to giving
such notice, the issuing entity shall have provided to the note trustee a
certificate signed by two directors of the issuing entity to the effect
that it will have the funds, not subject to any interest of any other
person, required to redeem such issuing entity notes as described above
and any amounts required to be paid in priority to or in the same
priority with the issuing entity notes outstanding in accordance with the
terms and conditions of the issuing entity deed of charge and the issuing
entity cash management agreement and the note trustee shall be entitled
to accept such certificate as sufficient evidence thereof in which event
it shall be conclusive and binding on the noteholders and all other
persons.
In addition to the foregoing, if, at any time, the issuing entity
delivers a certificate to Funding, the note trustee and the issuing
entity security trustee to the effect that it would be unlawful for the
issuing
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entity to make, fund or allow to remain outstanding a term
advance made by it under the master intercompany loan agreement and
stating that the issuing entity may require Funding to prepay the
relevant term advance on an interest payment date subject to and in
accordance with the provisions of the master intercompany loan agreement
to the extent necessary to cure such illegality and the issuing entity
may redeem all (but not some only) of the relevant issuing entity notes
at their redemption amount together with any accrued interest upon giving
not more than 60 days' nor less than 30 days' (or such shorter period as
may be required under any relevant law) prior written notice to the
issuing entity security trustee, the note trustee, the relevant issuing
entity swap provider(s) and the noteholders in accordance with NUMBER 14
provided that, prior to giving any such notice, the issuing entity shall
have provided to the note trustee a certificate signed by two directors
of the issuing entity to the effect that it will have the funds, not
subject to the interest of any other person, required to redeem the
issuing entity notes as provided above and any amount to be paid in
priority to or in the same priority with the issuing entity notes and the
note trustee shall be entitled to accept such certificate as sufficient
evidence thereof in which event it shall be conclusive and binding on the
noteholders and all other persons. Such monies received by the issuing
entity shall be used to redeem the relevant issuing entity notes in full,
together with any accrued and unpaid interest on the equivalent interest
payment date.
5.6 OPTIONAL REDEMPTION FOR IMPLEMENTATION OF EU CAPITAL REQUIREMENTS
DIRECTIVE
If the Capital Requirements Directive, as described in the consultation
paper on the EU's implementation of the New Basel Capital Accord
published on 14 July 2004 by the European Commission, has been
implemented in the United Kingdom, whether by rule of law, recommendation
or best practice or by any other regulation, then, if so specified in the
relevant prospectus supplement, on the interest payment date specified in
the relevant prospectus supplement (if any) and on any interest payment
date for such issuing entity notes thereafter, the issuing entity may, by
giving not more than 60 nor less than 30 days' (or such shorter period as
may be required under any relevant law) prior notice to the note trustee,
the noteholders and the relevant issuing entity swap provider(s) in
accordance with NUMBER 14, redeem the issuing entity notes so specified
in the relevant prospectus supplement at their aggregate redemption
amount together with any accrued and unpaid interest in respect thereof
on the next following interest payment date for such issuing entity
notes, provided that a note enforcement notice has not been served. The
issuing entity may only redeem the issuing entity notes as aforesaid, if
on or prior to giving such notice, the issuing entity shall have provided
to the note trustee a certificate signed by two directors of the issuing
entity to the effect that (a) it will have the funds, not subject to any
interest of any other person, required to redeem such issuing entity
notes as aforesaid and any amounts required to be paid in priority to or
pari passu with such issuing entity notes outstanding in accordance with
the terms and conditions of the issuing entity deed of charge and the
Issuing Entity Cash Management Agreement, and (b) the repayment tests
will be satisfied following the making of such redemptions, and the note
trustee shall be entitled to accept such certificate as sufficient
evidence thereof in which event if shall be conclusive and binding on the
noteholders and all other parties.
5.7 REDEMPTION AMOUNTS
For the purposes of this NUMBER 5, REDEMPTION AMOUNT means, in respect of
any series and class (or sub-class) of issuing entity notes, the amount
specified in relation to such issuing entity notes in the applicable
prospectus supplement or, if not so specified:
(a) in respect of each issuing entity note (other than a zero coupon
note), the principal amount outstanding of such note; and
(b) in respect of each zero coupon note, an amount (the AMORTISED FACE
AMOUNT) calculated in accordance with the following formula:
redemption amount = RP x (1 + AY) x y
where:
RP = the Reference Price;
AY = the Accrual Yield expressed as a decimal; and
y = a fraction, the numerator of which is equal to the
number of days (calculated on the basis of a 360-day
year consisting of 12 months of 30 days each) from
(and including) the first closing date of the
applicable series and class (or sub-class) of
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issuing entity notes to (but excluding) the date fixed
for redemption or, as the case may be, the date upon
which such note becomes due and payable and the
denominator of which is 360.
If the amount payable in respect of any zero coupon note upon redemption
of such zero coupon note pursuant to NUMBERS 5.1, 5.2, 5.4, 5.5 or 5.6
above or upon its becoming due and repayable as provided in NUMBER 9 is
improperly withheld or refused, the amount due and repayable in respect
of such note shall be the amount calculated as provided in paragraph (c)
above as though the reference therein to the date fixed for the
redemption or, as the case may be, the date upon which such note becomes
due and payable were replaced by reference to the date which is the
earlier of:
(i) the date on which all amounts due in respect of such note have
been paid; and
(ii) the date on which the full amount of the moneys payable in respect
of such note has been received by the principal paying agent or
the note trustee or the registrar and notice to that effect has
been given to the noteholders in accordance with NUMBER 14.
5.8 MONEY MARKET NOTE MANDATORY TRANSFER
(a) If remarketing arrangements are specified as applicable in the
relevant prospectus supplement in relation to a series and class
(or sub-class) of money market notes, such money market notes
shall, subject to paragraph (c) below, be transferred in
accordance with paragraph (b) below on each transfer date prior
to the occurrence of a mandatory transfer termination event, as
confirmed by the remarketing bank providing a conditional
purchase confirmation to the issuing entity and the principal
paying agent, in exchange for payment of the transfer price and
the issuing entity and the principal paying agent will procure
payment of the transfer price to the money market noteholders on
the relevant transfer date.
(b) Subject to paragraphs (a) above and (c) below, all the money
market noteholders' interests in the money market notes shall be
transferred on the relevant transfer date to the account of the
remarketing bank on behalf of the relevant purchasers or as
otherwise notified by or on behalf of the remarketing bank prior
to such date or if definitive money market notes are then
issued, the money market notes will be registered in the name of
the remarketing bank or as otherwise notified by or on behalf of
the remarketing bank by the registrar and the register will be
amended accordingly with effect from the relevant transfer date.
(c) Any noteholder of a money market note may exercise his right to
retain such money market note through the facilities of DTC at
any time prior to the commencement of the remarketing period
that ends immediately before the relevant transfer date.
For the purposes of this NUMBER 5.8:
CONDITIONAL PURCHASE CONFIRMATION means a confirmation provided by the
remarketing bank to the issuing entity or the principal paying agent that
the conditional purchaser has purchased an interest in, or has had
transferred to it or on its behalf, an interest in all of the money
market notes;
CONDITIONAL PURCHASER means the entity specified as such in the relevant
prospectus supplement;
MANDATORY TRANSFER TERMINATION EVENT shall occur if the conditional
purchaser has purchased an interest in all the money market notes of the
relevant series and class (or sub-class);
REMARKETING BANK means the entity specified as such in the relevant
prospectus supplement;
REMARKETING PERIOD means, in respect of each transfer date (as specified
in the relevant prospectus supplement), the period from and including the
15th business day prior to such transfer date through and including the
10th business day prior to such transfer date, unless otherwise specified
in the relevant prospectus supplement;
TRANSFER DATE means, in respect of a series and class (or sub-class) of
money market notes, the date(s) specified as such in the relevant
prospectus supplement; and
TRANSFER PRICE means, in respect of each money market note as at a
transfer date, the principal amount outstanding of such money market note
on that transfer date, following the application of available issuing
entity principal receipts on such date.
5.9 OPTIONAL PURCHASE
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(a) If specified in the relevant prospectus supplement, Abbey has
the right (the PURCHASE OPTION), by delivering a notice to the
relevant noteholders, the registrar and the note trustee
pursuant to the Abbey optional purchase agreement, to require
the relevant noteholders, subject to and in accordance with any
applicable conditions specified in the relevant prospectus
supplement, to sell to Abbey or otherwise allow Abbey to be
substituted as the holder of all, but not some only, of the
class B notes and/or the class M notes and/or the class C notes
and/or the class D notes as so specified (collectively the
CALLED NOTES) on any interest payment date (prior to the date
specified in the prospectus supplement (the FINAL PURCHASE DATE)
or such later date as may be permitted by the FSA) falling on or
after the interest payment date (the INITIAL PURCHASE DATE)
specified in the applicable prospectus supplement (if any) for a
price equal to the aggregate redemption amount of any of the
called notes, together with any accrued and unpaid interest on
the called notes and, on the date therefor specified in the
notice (being an interest payment date falling on or after the
initial purchase date), the registrar shall effect the transfer
to Abbey of such called notes by entering such transfer in the
register.
(b) Immediately after such transfer or substitution of Abbey as the
registered holder of the called notes, each former holder of the
called notes shall cease to have any interest in the called
notes.
(c) The called notes transferred to Abbey pursuant to the purchase
option shall, subject as provided in the transaction documents,
remain outstanding until the date on which they would otherwise
be redeemed or cancelled in accordance with their terms and
conditions.
(d) By subscribing to or purchasing the called notes, each holder of
the called notes (i) is deemed to have notice of and be bound by
the provisions of the Abbey optional purchase agreement and (ii)
directs, authorises and requests the note trustee to enter into
the Abbey optional purchase agreement. Each holder of called
notes also irrevocably authorises and instructs the issuing
entity, the registrar, DTC, Euroclear or, as the case may be
Clearstream, Luxembourg to effect the transfer of its called
notes on the relevant interest payment date to Abbey, in
accordance with the relevant prospectus supplement and the rules
for the time being of DTC, Euroclear or, as the case may be,
Clearstream, Luxembourg.
6. PAYMENTS
Payments of principal and interest in respect of the issuing entity notes
will be made only against the presentation of those issuing entity notes to or
to the order of the registrar (or another agent that may be appointed in its
place). In the case of final redemption, and provided that payment is made in
full, payment will only be made against surrender of those issuing entity notes
to the registrar or replacement agent.
All payments on the offered notes are subject to any applicable fiscal or
other laws and regulations. Noteholders will not be charged commissions or
expenses on these payments.
If the due date for payment of any amount on the offered notes is not a
business day in the place it is presented, noteholders will not be entitled to
payment of the amount due in that place until the next business day in that
place and noteholders shall not be entitled to any further interest or other
payment as a result of that delay.
If a paying agent makes a partial payment on an offered note, the
registrar will annotate the register of noteholders, indicating the amount and
date of that payment.
If payment of principal on an offered note is improperly withheld or
refused, the interest which continues to accrue will still be payable in
accordance with the usual procedures.
The issuing entity can, at any time, vary or terminate the appointment of
any paying agent, registrar or transfer agent and can appoint a successor or
additional agent. If the issuing entity does this it must ensure that it
maintains a paying agent in London, a paying agent in New York and a registrar.
The issuing entity will ensure that at least 30 days' notice of any change in
the paying agents, registrar or transfer agent or their specified offices is
given to noteholders in accordance with number 14.
Subject as described earlier in relation to the deferral of interest in
number 4.4 above, if payment of interest on an issuing entity note is not made
for any other reason when due and payable, the unpaid interest will itself bear
interest at the applicable rate until both the unpaid interest and the interest
on that interest are paid.
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7. PRESCRIPTION
Claims against the issuing entity for payment of interest and principal
on redemption will become void if the relevant note certificates are not
surrendered for payment within the time limit for payment. That time limit is
ten years from the due date of such issuing entity notes. If there is a delay in
the paying agents or, as applicable, the note trustee, receiving the funds, then
the due date, for the purposes of this time limit, is the date on which it
notifies you, in accordance with number 14, that it has received the relevant
payment.
8. TAXATION
Payments of interest and principal will be made without making any
withholding or deduction for any tax unless a withholding or deduction is
required by any applicable law. If a withholding or deduction for tax is made,
the issuing entity or the relevant paying agent will account to the relevant
authority for the amount so withheld or deducted. Neither the issuing entity nor
any paying agent is required to make any additional payments to noteholders for
this withholding or deduction.
9. EVENTS OF DEFAULT
9.1 CLASS A NOTEHOLDERS
The note trustee may give notice of a class A note event of default (as
defined in the following paragraph) in respect of the class A notes of
any series (a CLASS A NOTE ENFORCEMENT NOTICE), and shall give such
notice if it is indemnified and/or secured to its satisfaction and it is:
required to by the holders of at least one quarter of the
aggregate principal amount outstanding of the class A notes then
outstanding (which, for this purpose and the purpose of any
extraordinary resolution (as defined in the trust deed) referred
to in this number 9.1, means the class A notes of all series
constituted by the trust deed); or
directed to by an extraordinary resolution of the class A
noteholders.
If any of the following events occurs and is continuing it is called a
CLASS A NOTE EVENT OF DEFAULT:
the issuing entity fails to pay for a period of three business
days any amount of interest or principal on the class A notes of
any series when that payment is due and payable in accordance with
the conditions; or
the issuing entity fails to perform or observe any of its other
obligations under the class A notes of any series, the trust deed,
the issuing entity deed of charge or any other transaction
document, and (except where that failure is incapable of remedy,
in which case no notice will be required) it remains unremedied
for 20 days after the note trustee has given notice of it to the
issuing entity requiring the same to be remedied; and the note
trustee has certified that the failure to perform or observe is
materially prejudicial to the interests of the class A noteholders
of such series; or
except for the purposes of an amalgamation or restructuring as
described in the point immediately following, the issuing entity
stops or threatens to stop carrying on all or a substantial part
of its business or is unable to pay its debts within the meaning
of Section 123(1)(a), (b), (c) or (d) of the United Kingdom
Insolvency Act 1986 or is unable to pay its debts as they fall due
or the value of its assets falls to less than the amount of its
liabilities (taking into account contingent and prospective
liabilities) or otherwise becomes insolvent; or
an order is made or an effective resolution is passed for the
winding-up of the issuing entity except for the purposes of or
pursuant to an amalgamation or restructuring previously approved
by the note trustee or by an extraordinary resolution of the class
A noteholders; or
proceedings are otherwise initiated against the issuing entity
under any applicable liquidation, insolvency, reorganisation or
other similar laws and those proceedings are not being disputed in
good faith with a reasonable prospect of success; or steps are
taken with a view to obtaining a moratorium in respect of third
party action; or, in relation to the whole or any substantial part
of the business or assets of the issuing entity, an administration
order is granted or an administrator is appointed out of court or
an administrative receiver or other receiver, liquidator or
similar official is appointed or any encumbrancer takes possession
of that business or those assets or a distress, execution,
diligence or other process is levied or enforced upon or sued out
against that business or those assets and is not discharged within
30 days; or the issuing entity initiates or consents to the
foregoing proceedings or makes a conveyance or assignment for the
benefit of its creditors generally; or
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a master intercompany loan enforcement notice is served in respect
of the master intercompany loan agreement while any of the class A
notes of any series are outstanding.
9.2 CLASS B NOTEHOLDERS
The terms described in this NUMBER 9.2 will have no effect so long as any
of the class A notes of any series are outstanding. Subject thereto, for
so long as any class B notes of any series are outstanding, the note
trustee may give notice of a class B note event of default (as defined in
the following paragraph) in respect of the class B notes (a CLASS B NOTE
ENFORCEMENT NOTICE), and shall give that notice if it is indemnified
and/or secured to its satisfaction and it is:
required to by the holders of at least one quarter of the
aggregate principal amount outstanding of the class B notes then
outstanding (which, for this purpose and the purpose of any
extraordinary resolution referred to in this NUMBER 9.2, means the
class B notes of all series constituted by the trust deed); or
directed to by an extraordinary resolution of the class B
noteholders.
If any of the following events occurs and is continuing it is called a
CLASS B NOTE EVENT OF DEFAULT:
the issuing entity fails to pay for a period of three business
days any amount of interest or principal on the class B notes of
any series when that payment is due and payable in accordance with
the conditions; or
the occurrence of any of the other events in NUMBER 9.1 described
above but so that any reference to the class A notes and the class
A noteholders shall be read as references to the class B notes and
the class B noteholders.
9.3 CLASS M NOTEHOLDERS
The terms described in this NUMBER 9.3 will have no effect so long as any
of the class A notes or the class B notes of any series are outstanding.
Subject thereto, for so long as any class M notes of any series are
outstanding, the note trustee may give notice of a class M note event of
default (as defined in the following paragraph) in respect of the class M
notes (a CLASS M NOTE ENFORCEMENT NOTICE), and shall give that notice if
it is indemnified and/or secured to its satisfaction and it is:
required to by the holders of at least one quarter of the
aggregate principal amount outstanding of the class M notes then
outstanding (which, for this purpose and the purpose of any
extraordinary resolution referred to in this NUMBER 9.3, means the
class M notes of all series constituted by the trust deed); or
directed to by an extraordinary resolution of the class M
noteholders.
If any of the following events occurs and is continuing it is called a
CLASS M NOTE EVENT OF DEFAULT:
the issuing entity fails to pay for a period of three business
days any amount of interest or principal on the class M notes of
any series when that payment is due and payable in accordance with
the conditions; or
the occurrence of any of the other events in NUMBER 9.1 described
above but so that any reference to the class A notes and the class
A noteholders shall be read as references to the class M notes and
the class M noteholders.
9.4 CLASS C NOTEHOLDERS
The terms described in this NUMBER 9.4 will have no effect so long as any
of the class A notes, the class B notes or the class M notes of any
series are outstanding. Subject thereto, for so long as any class C notes
of any series are outstanding, the note trustee may give notice of a
class C note event of default (as defined in the following paragraph) in
respect of the class C notes (a CLASS C NOTE ENFORCEMENT NOTICE), and
shall give that notice if it is indemnified and/or secured to its
satisfaction and it is:
required to by the holders of at least one quarter of the
aggregate principal amount outstanding of the class C notes then
outstanding (which, for this purpose and the purpose of any
extraordinary resolution referred to in this NUMBER 9.4, means the
class C notes of all series constituted by the trust deed); or
directed to by an extraordinary resolution of the class C
noteholders.
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If any of the following events occurs and is continuing it is called a
CLASS C NOTE EVENT OF DEFAULT:
the issuing entity fails to pay for a period of three business
days any amount of interest or principal on the class C notes of
any series when that payment is due and payable in accordance with
the conditions; or
the occurrence of any of the other events in NUMBER 9.1 described
above but so that any reference to the class A notes and the class
A noteholders shall be read as references to the class C notes and
the class C noteholders.
9.5 CLASS D NOTEHOLDERS
The terms described in this NUMBER 9.5 will have no effect so long as any
of the class A notes, the class B notes, the class M notes or the Class C
notes of any series are outstanding. Subject thereto, for so long as any
class D notes of any series are outstanding, the note trustee may give
notice of a class D note event of default (as defined in the following
paragraph) in respect of the class D notes (a CLASS D NOTE ENFORCEMENT
NOTICE), and shall give that notice if it is indemnified and/or secured
to its satisfaction and it is:
required to by the holders of at least one quarter of the
aggregate principal amount outstanding of the class D notes then
outstanding (which, for this purpose and the purpose of any
extraordinary resolution referred to in this NUMBER 9.5, means the
class D notes of all series constituted by the trust deed); or
directed to by an extraordinary resolution of the class D
noteholders.
If any of the following events occurs and is continuing it is called a
CLASS D NOTE EVENT OF DEFAULT:
the issuing entity fails to pay for a period of three business
days any amount of interest or principal on the class D notes of
any series when that payment is due and payable in accordance with
the conditions; or
the occurrence of any of the other events in NUMBER 9.1 described
above but so that any reference to the class A notes and the class
A noteholders shall be read as references to the class D notes and
the class D noteholders.
10. ENFORCEMENT OF ISSUING ENTITY NOTES
The note trustee may, at its discretion and without notice at any time
and from time to time, take such steps against the issuing entity or any
other person as it may think fit to enforce the provisions of the trust
deed and the issuing entity notes or the issuing entity deed of charge or
any of the other transaction documents to which it is a party and may, at
its discretion, at any time after the security under the issuing entity
deed of charge has become enforceable (including after the service of an
note enforcement notice in accordance with NUMBER 9), instruct the
issuing entity security trustee to take such steps as it may think fit to
enforce the security under the issuing entity deed of charge. The note
trustee shall not be bound to take steps or institute such proceedings or
give such instructions unless:
(subject in all cases to restrictions contained in the trust deed
to protect the interests of any higher ranking class of
noteholders) it shall have been so directed by an extraordinary
resolution (as described in NUMBER 11) of the class A noteholders,
the class B noteholders, the class M noteholders, the class C
noteholders and the class D noteholders (which for this purpose
means the holders of any series of the class A notes, the class B
notes, the Class M notes, the class C notes and the class D notes
(as applicable)) or so requested in writing by the holders of at
least one quarter in aggregate principal amount outstanding of the
class A notes, the class B notes, the class M notes, the class C
notes and the class D notes (as applicable) of all series then
outstanding; and
it shall have been indemnified and/or secured to its satisfaction.
The issuing entity security trustee shall not, and shall not be bound to,
take such steps or take any such other action unless it is so directed by
the note trustee and indemnified and/or secured to its satisfaction.
No noteholder may institute any proceedings against the issuing entity to
enforce its rights under or in respect of the issuing entity notes or the
trust deed unless (a) the note trustee or the issuing entity security
trustee, as applicable, has become bound to institute proceedings and has
failed to do so within a reasonable time and (b) the failure is
continuing provided that no class B noteholder, class M
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noteholder, class C noteholder or class D noteholder will be entitled to
commence proceedings for the winding-up or administration of the issuing
entity at any time unless:
there are no outstanding issuing entity notes of a class with
higher priority; or
if issuing entity notes of a class with higher priority are
outstanding, there is consent of noteholders of at least one
quarter of the aggregate principal amount outstanding of the
issuing entity notes outstanding of the class or classes of
issuing entity notes with higher priority or pursuant to an
extraordinary resolution of the holders of such class of issuing
entity notes.
In the event that:
the security under the issuing entity deed of charge is enforced
and the issuing entity security trustee determines that (a) the
proceeds of such enforcement, after distribution of such proceeds
to the persons entitled thereto ranking in priority to the issuing
entity notes under the issuing entity deed of charge and to the
noteholders (to the extent entitled thereto) are insufficient to
pay in full all principal and interest and other amounts
whatsoever due in respect of the issuing entity notes and any
claims ranking equally with such claims (b) such proceeds of
enforcement have been so distributed in accordance with the terms
of the issuing entity deed of charge and (c) there are no further
assets available to pay principal and interest and other amounts
whatsoever due in respect of the issuing entity notes; or
within 20 days following the final maturity date of the latest
maturing issuing entity note, the issuing entity security trustee
certifies that there is no further amount outstanding under the
master intercompany loan agreement,
then, the issuing entity security trustee is required to transfer or (as
the case may be) procure the transfer of all (but not some only) of the
class B notes and/or the class M notes and/or the class C notes and/or
the class D notes, for a nominal amount, to the post enforcement call
option holder, pursuant to the option granted to it by the issuing entity
security trustee. The option is granted to acquire all of the class B
notes, the class M notes, the class C notes and the class D notes, plus
accrued interest on them. This is called the post enforcement call
option. Immediately upon such transfer, no such former noteholder shall
have any further interest in the issuing entity notes. Each class B
noteholder, class M noteholder, class C noteholder and class D noteholder
acknowledges that the issuing entity security trustee has the authority
and the power to bind it in accordance with the terms and conditions set
out in the "POST ENFORCEMENT CALL OPTION" and, by subscribing for or
acquiring the issuing entity notes, it agrees to be bound in this way.
11. MEETINGS OF NOTEHOLDERS, MODIFICATIONS AND WAIVER
11.1 MEETINGS OF NOTEHOLDERS
The trust deed contains provisions for convening meetings of noteholders
of any series and class (or sub-class) to consider any matter affecting
their interests, including the sanctioning by extraordinary resolution of
a modification of any provision of the terms and conditions of the US
notes or the provisions of any of the transaction documents.
In respect of the class A notes, the trust deed provides that (subject to
NUMBER 11.2):
a resolution which, in the opinion of the note trustee, affects
the interests of the holders of the class A notes of one sub-class
or series (as the case may be) only shall be deemed to have been
duly passed if passed at a meeting of the holders of the class A
notes of that sub-class or series (as the case may be);
a resolution which, in the opinion of the note trustee, affects
the interests of the holders of the class A notes of any two or
more sub-classes or series (as the case may be) but does not give
rise to a conflict of interest between the holders of any such two
or more sub-classes or series (as the case may be) of class A
notes shall be deemed to have been duly passed if passed at a
single meeting of the holders of such two or more sub-classes or
series (as the case may be) of class A notes; and
a resolution which, in the opinion of the note trustee, affects
the interests of the holders of the class A notes of any two or
more sub-classes or series (as the case may be)and gives or may
give rise to a conflict of interest between the holders of such
two or more sub-classes or series (as the case may be) of class A
notes shall be deemed to have been duly passed only if, in lieu of
being
209
passed at a single meeting of the holders of such two or more
sub-classes or series (as the case may be) of class A notes, it
shall be duly passed at separate meetings of the holders of two or
more sub-classes or series (as the case may be) of class A notes.
In the case of a single meeting of the holders of two or more sub-classes
or series of the class A notes which are not all denominated in the same
currency, the principal amount outstanding of any class A note
denominated in a currency other than sterling shall be converted into
sterling at the relevant swap rate.
In respect of the class B notes, the trust deed provides that (subject to
NUMBER 11.2):
a resolution which, in the opinion of the note trustee, affects
the interests of the holders of the class B notes of one sub-class
or series (as the case may be) only shall be deemed to have been
duly passed if passed at a meeting of the holders of the class B
notes of that sub-class or series (as the case may be);
a resolution which, in the opinion of the note trustee, affects
the interests of the holders of the class B notes of any two or
more sub-classes or series (as the case may be) but does not give
rise to a conflict of interest between the holders of any such two
or more sub-classes or series (as the case may be) of the class B
notes shall be deemed to have been duly passed if passed at a
single meeting of the holders of such two or more sub-classes or
series (as the case may be) of class B notes; and
a resolution which, in the opinion of the note trustee, affects
the interests of the holders of the class B notes of any two or
more sub-classes or series (as the case may be) and gives or may
give rise to a conflict of interest between the holders of any
such two or more sub-classes or series (as the case may be) of
class B notes shall be deemed to have been duly passed only if, in
lieu of being passed at a single meeting of the holders of such
two or more sub-classes or series (as the case may be) of class B
notes, it shall be duly passed at separate meetings of the holders
of such two or more sub-classes or series (as the case may be) of
class B notes.
In the case of a single meeting of the holders of two or more sub-classes
or series of the class B notes which are not all denominated in the same
currency, the principal amount outstanding of any class B note
denominated in a currency other than sterling shall be converted into
sterling at the relevant swap rate.
In respect of the class M notes, the trust deed provides that (subject to
NUMBER 11.2):
a resolution which, in the opinion of the note trustee, affects
the interests of the holders of the class M notes of one sub-class
or series (as the case may be) only shall be deemed to have been
duly passed if passed at a meeting of the holders of the class M
notes of that sub-class or series (as the case may be);
a resolution which, in the opinion of the note trustee, affects
the interests of the holders of the class M notes of any two or
more sub-class or series (as the case may be) but does not give
rise to a conflict of interest between the holders of any such two
or more sub-classes or series (as the case may be) of class M
notes shall be deemed to have been duly passed if passed at a
single meeting of the holders of such two or more sub-classes or
series (as the case may be) of class M notes; and
a resolution which, in the opinion of the note trustee, affects
the interests of the holders of the class M notes of any two or
more sub-classes or series (as the case may be) and gives or may
give rise to a conflict of interest between the holders of any
such two or more sub-classes or series (as the case may be) of
class M notes shall be deemed to have been duly passed only if, in
lieu of being passed at a single meeting of the holders of such
two or more sub-classes or series (as the case may be) of class M
notes, it shall be duly passed at separate meetings of the holders
of such two or more sub-classes or series (as the case may be) of
class M notes.
In the case of a single meeting of the holders of two or more sub-classes
or series of the class M notes which are not all denominated in the same
currency, the principal amount outstanding of any class M note
denominated in a currency other than sterling shall be converted into
sterling at the relevant swap rate.
In respect of the class C notes, the trust deed provides that (subject to
NUMBER 11.2):
a resolution which, in the opinion of the note trustee, affects
the interests of the holders of the class C notes of one sub-class
or series (as the case may be) only shall be deemed to have been
210
duly passed if passed at a meeting of the holders of the class C
notes of that sub-class or series (as the case may be);
a resolution which, in the opinion of the note trustee, affects
the interests of the holders of the class C notes of any two or
more sub-classes or series (as the case may be) but does not give
rise to a conflict of interest between the holders of any such two
or more sub-classes or series (as the case may be) of class C
notes shall be deemed to have been duly passed if passed at a
single meeting of the holders of such two or more sub-classes or
series (as the case may be) of class C notes; and
a resolution which, in the opinion of the note trustee, affects
the interests of the holders of the class C notes or any two or
more sub-classes or series (as the case may be) and gives or may
give rise to a conflict of interest between the holders of any
such two or more sub-classes or series (as the case may be) of
class C notes shall be deemed to have been duly passed only if, in
lieu of being passed at a single meeting of the holders of such
two or more sub-classes or series (as the case may be) of class C
notes, it shall be duly passed at separate meetings of the holders
of such two or more sub-classes or series (as the case may be) of
class C notes.
In the case of a single meeting of the holders of two or more sub-classes
or series of the class C notes which are not all denominated in the same
currency, the principal amount outstanding of any class C note
denominated in a currency other than sterling shall be converted into
sterling at the relevant swap rate.
In respect of the class D notes, the trust deed provides that (subject to
NUMBER 11.2):
a resolution which, in the opinion of the note trustee, affects
the interests of the holders of the class D notes of one sub-class
or series (as the case may be) only shall be deemed to have been
duly passed if passed at a meeting of the holders of the class D
notes of that sub-class or series (as the case may be);
a resolution which, in the sole opinion of the note trustee,
affects the interests of the holders of the class D notes of any
two or more sub-classes or series (as the case may be) but does
not give rise to a conflict of interest between the holders of any
such two or more sub-classes or series (as the case may be) of
class D notes, shall be deemed to have been duly passed if passed
at a single meeting of the holders of such two or more sub-classes
or series (as the case may be) of class D notes;
a resolution which, in the sole opinion of the note trustee,
affects the interests of the holders of the class D notes of any
two or more sub-classes or series (as the case may be) and gives
or may give rise to a conflict of interest between the holders of
any such two or more sub-classes or series (as the case may be) of
class D notes, shall be deemed to have been duly passed only if,
in lieu of being passed at a single meeting of the holders of such
two or more sub-classes or series (as the case may be) of class D
notes, it shall be passed at a separate meeting of the holders of
each such two or more sub-classes or series (as the case may be)
of class D notes.
In the case of a single meeting of the holders of two or more sub-classes
or series of the class D notes which are not all denominated in the same
currency, the principal amount outstanding of any class D note
denominated in a currency other than sterling shall be converted into
sterling at the relevant swap rate.
The quorum for any meeting of the noteholders of any series and class (or
sub-class) of issuing entity notes or of any class of issuing entity
notes of more than one series convened to consider a resolution (except
for the purpose of passing an extraordinary resolution or a programme
resolution (as defined in NUMBER 11.2) will be one or more persons
holding or representing not less than 50 per cent. of the aggregate
principal amount outstanding then outstanding of such series and class
(or sub-class) of issuing entity notes or such class of issuing entity
notes of more than one series or, at any adjourned meeting, one or more
persons being or representing noteholders of such series and class (or
sub-class) of issuing entity notes or such class of issuing entity notes
of more than one series, whatever the aggregate principal amount
outstanding then outstanding of the aggregate issuing entity notes so
represented. A RESOLUTION means a resolution (excluding an extraordinary
resolution or a programme resolution) passed at a meeting of noteholders
duly convened and held in accordance with the provisions of the trust
deed by a simple majority of the persons voting thereat upon a show of
hands or if a poll is duly demanded by a simple majority of the votes
cast on such poll.
Subject to the following paragraph, the quorum at any meeting of the
holders of any series or class (or sub-class) of issuing entity notes or
of any class of issuing entity notes of more than one series of
211
issuing entity notes convened to consider the passing of an extraordinary
resolution (including, for the avoidance of doubt, a programme resolution
(as defined in NUMBER 11.2)) shall (subject as provided below) be one or
more persons holding or representing not less than 50 per cent. of the
aggregate principal amount outstanding of the issuing entity notes of the
relevant series and class (or sub-class) or of the class of issuing
entity notes of more than one series of issuing entity notes or, at any
adjourned and reconvened meeting, not less than one or more persons being
or representing noteholders whatever the principal amount outstanding of
the issuing entity notes of the relevant series and class (or sub-class)
or of the class of issuing entity notes of more than one series of
issuing entity notes.
The quorum at any meeting of the holders of any series and class (or
sub-class) of issuing entity notes or of any class of issuing entity
notes of more than one series of issuing entity notes convened to
consider an extraordinary resolution which includes the sanctioning of a
modification which would have the effect of altering the amount or timing
of payments of principal on the issuing entity notes of such series and
class (or sub-class) or of such class or the rate, the day or the timing
of payments of interest thereon or of the currency of payment of the
issuing entity notes of such series and class (or sub-class) or of such
class or altering the priority of payments or altering the quorum or
majority required in relation to any resolution (each, a BASIC TERMS
MODIFICATION, as more fully defined in the trust deed), shall be one or
more persons holding or representing not less than 75 per cent. of the
aggregate principal amount outstanding then outstanding of the issuing
entity notes of the relevant series and class (or sub-class) or of the
class of issuing entity notes of more than one series of issuing entity
notes or, at any adjourned and reconvened meeting, 25 per cent. of the
aggregate principal amount outstanding then outstanding of the issuing
entity notes of the relevant series and class (or sub-class).
An extraordinary resolution passed at any meeting of noteholders shall be
binding on all of the noteholders of the relevant series and class (or
sub-class) or of the class of issuing entity notes of more than one
series of issuing entity notes whether or not they are present or
represented at the meeting.
A resolution signed by or on behalf of all the noteholders of the
relevant series and class (or sub-class) or of the relevant class of more
than one series of issuing entity notes who for the time being are
entitled to receive notice of a meeting under the trust deed shall for
all purposes be as valid and effective as an extraordinary resolution
passed at a meeting of holders of such series and class (or sub-class) or
of the relevant class of more than one series of issuing entity notes.
Subject as provided in NUMBER 11.3:
an extraordinary resolution of the class A noteholders of any
series shall be binding on all class B noteholders, all class M
noteholders, all class C noteholders and all class D noteholders,
in each case, of that series or of any other series;
no extraordinary resolution of the class B noteholders of any
series shall take effect while the class A notes of that series or
of any other series remain outstanding unless sanctioned by an
extraordinary resolution of the class A noteholders of each
series, or the note trustee, is of the opinion that it would not
be materially prejudicial to the interests of the class A
noteholders of any series (as applicable) and subject to this
provision and to NUMBER 11.3, an extraordinary resolution of the
class B noteholders of any series will be binding on the class M
noteholders, the class C noteholders and the class D noteholders,
in each case, of that or any other series irrespective of the
effect upon them;
no extraordinary resolution of the class M noteholders of any
series shall take effect while the class A notes or class B notes
in each case, of that series or of any other series remain
outstanding unless sanctioned by an extraordinary resolution of
the class A noteholders and an extraordinary resolution of the
class B noteholders, in each case of each series, or the note
trustee, is of the opinion that it would not be materially
prejudicial to the respective interests of the class A noteholders
and/or the class B noteholders of any series (as applicable) and
subject to this provision and to NUMBER 11.3, an extraordinary
resolution of the class M noteholders of any series will be
binding on the class C noteholders and the class D noteholders, in
each case, of that or of any other series irrespective of the
effect upon them;
no extraordinary resolution of the class C noteholders of any
series shall take effect while the class A notes, class B notes or
class M notes in each case, of that series or of any other series
remain outstanding unless sanctioned by an extraordinary
resolution of the class A noteholders, an extraordinary resolution
of the class B noteholders and an extraordinary resolution of the
class M noteholders, in each case of each series, or the note
trustee, is of the opinion that it would not
212
be materially prejudicial to the respective interests of the
class A noteholders, the class B noteholders and/or the
class M noteholders of any series (as applicable) and subject to
this provision and to NUMBER 11.3, an extraordinary resolution of
the class C noteholders of any series will be binding on the class
D noteholders, in each case, of that or any other series
irrespective of the effect upon them; and
no extraordinary resolution of the class D noteholders of any
series shall take effect while the class A notes, class B notes,
class M notes or class C notes in each case, of that series or of
any other series remain outstanding unless sanctioned by an
extraordinary resolution of the class A noteholders, an
extraordinary resolution of the class B noteholders, an
extraordinary resolution of the class M noteholders and an
extraordinary resolution of the class C noteholders, in each case,
of each series, or the note trustee, is of the opinion that it
would not be materially prejudicial to the respective interests of
the class A noteholders, the class B noteholders, the class M
noteholders and/or the class C noteholders of any series (as
applicable).
11.2 PROGRAMME RESOLUTION
Notwithstanding the provisions set out in NUMBER 11.1, any extraordinary
resolution of the noteholders of any class of issuing entity notes of any
series to direct the note trustee to take any enforcement action pursuant
to NUMBERS 9 and 10 (a PROGRAMME RESOLUTION) shall only be capable of
being passed at a single meeting of the noteholders of all series of such
class of issuing entity notes. The quorum at any such meeting for passing
a programme resolution shall be one or more persons holding or
representing not less than half of the aggregate principal amount
outstanding then outstanding of the issuing entity notes of such class
or, at any adjourned and reconvened meeting, one or more persons being or
representing noteholders of such class of issuing entity notes, whatever
the aggregate principal amount outstanding of such class of issuing
entity notes so held or represented by them.
11.3 APPROVAL OF MODIFICATIONS AND WAIVERS BY NOTEHOLDERS
No extraordinary resolution of the noteholders of any one or more series
of class A notes to sanction a modification of, or any waiver or
authorisation of any breach or proposed breach of, any of the provisions
of the transaction documents or the terms and conditions of the issuing
entity notes shall take effect unless it has been sanctioned by an
extraordinary resolution of the class B noteholders, an extraordinary
resolution of the class M noteholders, an extraordinary resolution of the
class C noteholders and an extraordinary resolution of the class D
noteholders, in each case of each series, or the note trustee is of the
opinion that it would not be materially prejudicial to the respective
interests of the class B noteholders, the class M noteholders, the class
C noteholders and the class D noteholders of any series.
No extraordinary resolution of the noteholders of any one or more series
of class B notes to sanction a modification of, or any waiver or
authorisation of any breach or proposed breach of, any of the provisions
of the transaction documents or the terms and conditions of the issuing
entity notes shall take effect unless it has been sanctioned by an
extraordinary resolution of the class M noteholders, an extraordinary
resolution of the class C noteholders and an extraordinary resolution of
the class D noteholders, in each case of each series, or the note trustee
is of the opinion that it would not be materially prejudicial to the
respective interests of the class M noteholders, the class C noteholders
and the class D noteholders of any series.
No extraordinary resolution of the noteholders of any one or more series
of class M notes to sanction a modification of, or any waiver or
authorisation of any breach or proposed breach of, any of the provisions
of the transaction documents or the terms and conditions of the issuing
entity notes shall take effect unless it has been sanctioned by an
extraordinary resolution of the class C noteholders and an extraordinary
resolution of the class D noteholders, in each case of each series, or
the note trustee is of the opinion that it would not be materially
prejudicial to the respective interests of the class C noteholders and
the class D noteholders of any series.
No extraordinary resolution of the noteholders of any one or more series
of class C notes to sanction a modification of, or any waiver or
authorisation of any breach or proposed breach of, any of the provisions
of the transaction documents or the terms and conditions of such issuing
entity notes shall take effect unless it has been sanctioned by an
extraordinary resolution of the class D noteholders of each series, or
the note trustee is of the opinion that it would not be materially
prejudicial to the interests of the class D noteholders of any series.
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11.4 MODIFICATIONS AND WAIVER
The note trustee may, without the consent of the noteholders, (a) other
than in relation to a matter which is the subject of a basic terms
modification, agree to any modification of, or to the waiver or
authorisation of any breach or proposed breach of, the terms and
conditions of the issuing entity notes or any of any series and class (or
sub-class) of transaction documents which is not, in the opinion of the
note trustee, materially prejudicial to the interests of the noteholders
of any class of any series of issuing entity notes or materially
prejudicial to the interests of any of the issuing entity swap providers
or (b) determine that any note event of default shall not be treated as
such, provided that it is not in the opinion of the note trustee
materially prejudicial to the interest of the noteholders of the most
senior class of any series of issuing entity notes then outstanding or
(c) agree to any modification of any of the terms and conditions of any
series and class (or sub-class) of issuing entity notes or any of the
transaction documents which, in the opinion of the note trustee, is of a
formal, minor or technical nature or is to correct a manifest or proven
error established as such to the satisfaction of the note trustee or is
to comply with the mandatory provisions of law or (d) agree to any
modification of any of the terms and conditions of any series and class
(or sub-class) of issuing entity notes or any transaction documents as
expressly provided for in such transaction documents.
Any of these modifications, authorisations, determinations or waivers
will be binding on the noteholders and, unless the note trustee agrees
otherwise, shall be promptly notified to the noteholders and the rating
agencies in accordance with NUMBER 14 as soon as practicable thereafter.
Where the note trustee or the issuing entity security trustee is required
in connection with the exercise of its powers to have regard to the
interests of the noteholders of a class, a series or series and class (or
sub-class) thereof, it shall have regard to the interests of such
noteholders as a class. In particular, the note trustee shall not have
regard to, or be liable for, the consequences of such exercise for
individual noteholders resulting from their being domiciled or resident
in or connected with any particular territory. In connection with any
such exercise, neither the note trustee nor the issuing entity security
trustee shall be entitled to require, and no noteholder shall be entitled
to claim, from the issuing entity or any other person, any
indemnification or payment in respect of any tax consequence of any such
exercise upon individual noteholders.
12. INDEMNIFICATION OF THE NOTE TRUSTEE AND THE ISSUING ENTITY SECURITY TRUSTEE
The trust deed and the issuing entity deed of charge set out certain
provisions for the benefit of the note trustee and the issuing entity security
trustee. The following is a summary of such provisions and is subject to the
more detailed provisions of the trust deed and the issuing entity deed of
charge.
The issuing entity transaction documents contain provisions governing the
responsibility (and relief from responsibility) of the note trustee and the
issuing entity security trustee and providing for their indemnification in
certain circumstances, including, among others, provisions relieving the issuing
entity security trustee from taking enforcement proceedings or enforcing the
issuing entity security unless indemnified and/or secured to its satisfaction.
The note trustee, the issuing entity security trustee and their related
companies are entitled to enter into business transactions with the issuing
entity, Abbey or related companies of either of them and to act as note trustee
and issuing entity security trustee, respectively, for the holders of any new
notes and for any person who is a party to any transaction document or whose
obligations are comprised in the security or any of their subsidiary or
associated companies, without accounting for any profit resulting from those
transactions.
Neither the note trustee nor the issuing entity security trustee will be
responsible for any loss or liability suffered as a result of any assets in the
issuing entity security, or any deeds or documents of title relating thereto,
being uninsured or inadequately insured or being held by clearing organisations
or their operators or by intermediaries such as banks, brokers or other similar
persons on behalf of the note trustee and/or the issuing entity security
trustee, as applicable.
Furthermore, the note trustee and the issuing entity security trustee
will be relieved of liability for making searches or other inquiries in relation
to the assets comprising the issuing entity security. The note trustee and the
issuing entity security trustee do not have any responsibility in relation to
the legality and the enforceability of the trust arrangements and the related
issuing entity security. Neither the note trustee nor the issuing entity
security trustee will be obliged to take any action that might result in its
incurring personal liabilities. Neither the note trustee nor the issuing entity
security trustee is obliged to monitor or investigate the performance of any
other person under the issuing entity transaction documents and is entitled to
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assume, until it has actual knowledge to the contrary, that all such persons are
properly performing their duties, unless it receives express notice to the
contrary.
Neither the note trustee nor the issuing entity security trustee will be
responsible for any deficiency that may arise because it is liable to tax in
respect of the proceeds of any issuing entity security.
13. REPLACEMENT OF ISSUING ENTITY NOTES
If individual note certificates are lost, stolen, mutilated, defaced or
destroyed, the noteholder can replace them at the specified office of any paying
agent. The noteholder will be required both to pay the expenses of producing a
replacement and to comply with the issuing entity's reasonable requests for
evidence and indemnity. The noteholder must surrender any defaced or mutilated
issuing entity notes before replacements will be issued.
If a global note certificate is lost, stolen, mutilated, defaced or
destroyed, the issuing entity will deliver a replacement global note certificate
to the registered holder upon satisfactory evidence and surrender of any defaced
or mutilated global note certificate. Replacement will only be made upon payment
of the expenses for a replacement and compliance with the issuing entity's,
registrar's and paying agents' reasonable requests as to evidence and indemnity.
14. NOTICE TO NOTEHOLDERS
Notices to noteholders will be deemed to have been validly given if
published in the Financial Times and, so long as amounts are outstanding on the
US notes, The New York Times. However, a notice will also be treated as having
been duly given if the information contained in that notice appears on the
relevant page of the Reuters screen or other similar service approved by the
note trustee and notified to noteholders. The notice will be deemed given on the
date of first publication or when it first appears on the screen.
While the issuing entity notes are represented by global note
certificates, any notice to noteholders will be valid if published as described
in the previous paragraph or if delivered to DTC, Euroclear and/or Clearstream,
Luxembourg, as applicable.
The note trustee may approve some other method of giving notice to
noteholders or any series or class (or sub-class) or category of them having
regard to market practice then prevailing and to the requirements of the stock
exchanges on which the issuing entity notes are then listed and provided that
notice of such other method is given to noteholders in such manner as the note
trustee shall require.
15. GOVERNING LAW
The transaction documents and the issuing entity notes are and will be
governed by English law, unless specifically stated to the contrary. Certain
provisions of the transaction documents relating to the property situated in
Scotland are governed by Scots law. Unless specifically stated to the contrary
(i) the courts of England are to have non-exclusive jurisdiction to settle any
disputes which may arise out of or in connection with the transaction documents
and the issuing entity notes and (ii) the issuing entity and the other parties
to the transaction documents irrevocably submit to the non-exclusive
jurisdiction of the courts of England.
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MATERIAL LEGAL ASPECTS OF THE LOANS
The following discussion is a summary of the material legal aspects of
English and Scottish residential property loans and mortgages. It is not an
exhaustive analysis of the relevant law.
ENGLISH LOANS
GENERAL
There are two parties to a mortgage. The first party is the mortgagor,
who is the borrower and homeowner. The mortgagor grants the mortgage over his or
her property. The second party is the mortgagee, who is the lender. Each loan
will be secured by a mortgage which has a first ranking priority over all other
mortgages secured on the property and over all unsecured creditors of the
borrower, except in respect of certain statutory rights, which are granted
statutory priority. Some flexible loans are secured by both a first and a second
legal charge in favour of the seller. Each borrower is prohibited under the
English mortgage conditions from creating another mortgage or other secured
interest over the relevant property without the consent of the seller.
NATURE OF PROPERTY AS SECURITY
There are two forms of title to land in England and Wales: registered and
unregistered. Both systems of title can include both freehold and leasehold
land.
REGISTERED TITLE
Title to registered land is registered at the Land Registry. Each parcel
of land is given a unique title number. Title to the land is evidenced by a
title information document containing official copies of the entries on the
register relating to that land.
There are four classes of registered title. The most common is title
absolute. A person registered with title absolute owns the land free from all
interests other than those entered on the register, those classified as
overriding interests, certain equitable interests (as between the landowner and
the beneficiary of those interests only and of which the landowner has notice)
and (in the case of leasehold land) all implied and express covenants,
obligations and liabilities incident to the land.
The official copy of the registered title will reveal the present owner
of the land, together with any legal charges and other interests affecting the
land. However, the Land Registration Act 2002 provides that some interests in
the land will bind the land even though they are not capable of registration at
the Land Registry. The official copy of the registered title will also contain a
plan indicating the location of the land. However, this plan is not conclusive
as to matters such as the location of boundaries.
UNREGISTERED TITLE
All land in England and Wales is now subject to compulsory registration
on the happening of any of a number of trigger events, which includes the
granting of a first legal mortgage. However, a small proportion of land in
England and Wales (typically where the land has been in the same ownership for a
number of years) is still unregistered. Title to unregistered land is proved by
establishing a chain of documentary evidence to title going back at least 15
years. Where the land is affected by third party rights, some of those rights
can be proved by documentary evidence or by proof of continuous exercise of the
rights for a prescribed period and do not require registration. However, other
rights would have to be registered at the Central Land Charges Registry in order
to be effective against a subsequent purchaser of the land.
TAKING SECURITY OVER LAND
Where land is registered, a mortgagee must register its mortgage at the
Land Registry in order to secure priority over any subsequent mortgagee.
Priority of mortgages over registered land is governed by the date of
registration of the mortgage rather than date of creation. However, a
prospective mortgagee is able to obtain a priority period within which to
register his mortgage. If the mortgagee submits a proper
216
application for registration during this period, its interest will take priority
over any application for registration of any interest which is received by the
Land Registry during this priority period.
In the system of unregistered land, the mortgagee protects its interest
by retaining possession of the title deeds to the property. Without the title
deeds to the property, the borrower is unable to establish the necessary chain
of ownership, and is therefore effectively prevented from dealing with its land
without the consent of the mortgagee. Priority of mortgages over unregistered
land is governed first by the possession of title deeds, and in relation to
subsequent mortgages by the registration of a land charge.
THE SELLER AS MORTGAGEE
The sale of the English mortgages by the seller to the mortgages trustee
will take effect in equity only. The mortgages trustee will not apply to the
Land Registry or the Central Land Charges Registry to register or record its
equitable interest in the mortgages. The consequences of this are explained in
the section "RISK FACTORS - THERE MAY BE RISKS ASSOCIATED WITH THE FACT THAT THE
MORTGAGES TRUSTEE HAS NO LEGAL TITLE TO THE MORTGAGES, WHICH MAY ADVERSELY
AFFECT THE PAYMENTS ON THE ISSUING ENTITY NOTES".
ENFORCEMENT OF MORTGAGES
If a borrower defaults under a loan, the English mortgage conditions
provide that all monies under the loan will become immediately due and payable.
The seller or its successors or assigns would then be entitled to recover all
outstanding principal, interest and fees under the covenant of the borrower
contained in the English mortgage conditions to pay or repay those amounts. In
addition, the seller or its successors or assigns may enforce its mortgage in
relation to the defaulted loan. Enforcement may occur in a number of ways,
including the following:
The mortgagee may enter into possession of the property. If it
does so, it does so in its own right and not as agent of the
mortgagor, and so may be personally liable for mismanagement of
the property and to third parties as occupier of the property.
The mortgagee may lease the property to third parties.
The mortgagee may foreclose on the property. Under foreclosure
procedures, the mortgagor's title to the property is extinguished
so that the mortgagee becomes the owner of the property. The
remedy is, because of procedural constraints, rarely used.
The mortgagee may appoint a receiver to deal with income from the
property or exercise other rights delegated to the receiver by the
mortgagee. A receiver is the agent of the mortgagor and so, unlike
when the mortgagee enters possession of the property, in theory
the mortgagee is not liable for the receiver's acts or as occupier
of the property. In practice, the receiver will require
indemnities from the mortgagee that appoints it.
The mortgagee may sell the property, subject to various duties to
ensure that the mortgagee exercises proper care in relation to the
sale. This power of sale arises under the Law of Property Act
1925. The purchaser of a property sold pursuant to a mortgagee's
power of sale becomes the owner of the property.
There is a requirement for a court order to enforce a land mortgage
securing a loan to the extent that the credit agreement is regulated by the CCA
or treated as such or, on and from N(M), is a regulated mortgage contract that
would otherwise be regulated by the CCA or treated as such. See further "RISK
FACTORS - IF THE ISSUING ENTITY'S INTERPRETATION OF CERTAIN TECHNICAL RULES
UNDER THE CCA WERE HELD TO BE INCORRECT BY A COURT OR THE OMBUDSMAN OR WAS
CHALLENGED BY A SIGNIFICANT NUMBER OF BORROWERS, OR BORROWERS WERE TO EXERCISE
RIGHTS OF SET-OFF TO THE EXTENT AVAILABLE UNDER THE CCA, THERE COULD BE MATERIAL
DISRUPTION TO THE INCOME FLOW FROM THE MORTGAGES TRUST".
SCOTTISH LOANS
GENERAL
A standard security is the only means of creating a fixed charge over
heritable or long leasehold property in Scotland. Its form must comply with the
requirements of the Conveyancing and Feudal Reform (Scotland) Act 1970 (the 1970
Act). There are two parties to a standard security. The first party is the
grantor, who is the borrower and homeowner. The grantor grants the standard
security over its property (and is generally the only party to execute the
standard security). The second party is the grantee of the standard
217
security, who is the lender, and is termed the heritable creditor. Each Scottish
loan will be secured by a standard security which has a first ranking priority
over all other standard securities secured on the property and over all
unsecured creditors of the borrower. Some flexible loans are secured by both a
first and a second ranking standard security in favour of the seller. If a
borrower creates a subsequent standard security over the relevant property in
favour of a third party, upon intimation of that subsequent standard security to
the seller (in its capacity as trustee for the mortgages trustee pursuant to the
relevant Scottish declaration of trust granted by the seller in favour of the
mortgages trustee), the prior ranking of the seller's standard security shall be
restricted to security for advances made prior to such intimation, plus advances
made subsequent to such intimation which the seller is obliged to advance, plus
interest and expenses in respect thereof.
The 1970 Act automatically imports a statutory set of "STANDARD
CONDITIONS" into all standard securities, although the majority of these may be
varied by agreement between the parties. The seller, along with most major
lenders in the residential mortgage market in Scotland, has elected to vary the
Standard Conditions by means of its own set of Scottish mortgage conditions, the
terms of which are in turn imported into each standard security. The main
provisions of the Standard Conditions which cannot be varied by agreement relate
to enforcement, and in particular the notice and other procedures that require
to be carried out as a preliminary to the exercise of the heritable creditor's
rights on a default by the borrower.
NATURE OF PROPERTY AS SECURITY
While title to all land in Scotland is registered there are currently two
possible forms of registration, namely the Land Register and Sasine Register.
Both systems of registration can include both heritable (the Scottish equivalent
to freehold) and long leasehold land.
LAND REGISTER
This system of registration was established by the Land Registration
(Scotland) Act 1979 and now applies to the whole of Scotland. Any sale of land
(including a long leasehold interest in land) the title to which has not been
registered in the Land Register or the occurrence of certain other events in
relation thereto (but not the granting of a standard security alone) triggers
its registration in the Land Register, when it is given a unique title number.
Title to the land and the existence of any standard security over it are
established by the entries on the Land Register relating to that land. Prior to
22 January 2007 the holder of the title received a land certificate containing
official copies of the relevant entries on the Land Register. Similarly, the
holder of any standard security over the land in question received a charge
certificate containing official copies of the entries relating to that security.
However, in terms of the Automated Registration of Title to Land (Electronic
Communications) (Scotland) Order 2006 and the Land Registration (Scotland) Rules
2006, with effect from 22 January 2007 such land and charge certificates are
only issued to the relevant title or security holder if so requested at the time
of the relevant registration and otherwise are available in electronic form
only. A person registered in the Land Register owns the land free from all
interests other than those entered on the Register, those classified as
overriding interests and any other interests implied by law.
The relevant Land Register entries and land certificate (whether in paper
or electronic form) will reveal the present owners of the land, together with
any standard securities and other interests (other than certain overriding
interests and any other interests implied by law) affecting the land. They will
also contain a plan indicating the location of the land. While this plan is not
in all circumstances conclusive as to the location of the boundaries of the
land, it cannot be amended if this would be to the prejudice of a proprietor in
possession of the land, unless this indemnity has been expressly excluded in the
relevant Land Register entries and Land Certificate.
SASINE REGISTER
Title to all land in Scotland where no event has yet occurred to trigger
registration in the Land Register is recorded in the General Register of
Sasines. Title to such land is proved by establishing a chain of documentary
evidence of title going back at least ten years. Where the land is affected by
third party rights, some of those rights can be proved by documentary evidence
or by proof of continuous exercise of the rights for a prescribed period and do
not require registration. However, other rights (including standard securities)
would have to be recorded in the Sasine Register in order to be effective
against a subsequent purchaser of the land.
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TAKING SECURITY OVER LAND
A heritable creditor must register its standard security in the Land
Register or the Sasine Register (as applicable) in order to perfect its security
and secure priority over any subsequent standard security. Until such
registration occurs, a standard security will not be effective against a
subsequent purchaser or the heritable creditor under another standard security
over the property. Priority of standard securities is (subject to express
agreement to the contrary between the security holders) governed by the date of
registration rather than the date of execution. There is no equivalent in
Scotland to the priority period system which operates in relation to registered
land in England and Wales.
THE SELLER AS HERITABLE CREDITOR
The sale of the Scottish mortgages by the seller to the mortgages trustee
has been given effect by a number of declarations of trust by the seller (and
any sale of Scottish mortgages in the future will be given effect by further
declarations of trust), by which the beneficial interest in the Scottish
mortgages is transferred to the mortgages trustee. Such beneficial interest (as
opposed to the legal title) cannot be registered in the Land or Sasine
Registers. The consequences of this are explained in the section "RISK FACTORS -
THERE MAY BE RISKS ASSOCIATED WITH THE FACT THAT THE MORTGAGES TRUSTEE HAS NO
LEGAL TITLE TO THE MORTGAGES, WHICH MAY ADVERSELY AFFECT THE PAYMENTS ON THE
ISSUING ENTITY NOTES".
ENFORCEMENT OF MORTGAGES
If a borrower defaults under a loan, the Scottish mortgage conditions
provide that all monies under the loan will become immediately due and payable.
The seller or its successors or assignees would then be entitled to recover all
outstanding principal, interest and fees under the obligation of the borrower
contained in the Scottish mortgage conditions to pay or repay those amounts. In
addition, the seller or its successors or assignees may enforce its standard
security in relation to the defaulted loan. Enforcement may occur in a number of
ways, including the following (all of which arise under the 1970 Act):
The heritable creditor may enter into possession of the property.
If it does so, it does so in its own right and not as agent of the
borrower, and so may be personally liable for mismanagement of the
property and to third parties as occupier of the property.
The heritable creditor may grant a lease over the property of up
to seven years (or longer with the courts' permission) to third
parties.
The heritable creditor may sell the property, subject to various
duties to ensure that the sale price is the best that can
reasonably be obtained. The purchaser of a property sold pursuant
to a heritable creditor's power of sale becomes the owner of the
property.
The heritable creditor may, in the event that a sale cannot be
achieved, foreclose on the property. Under foreclosure procedures
the borrower's title to the property is extinguished so that the
heritable creditor becomes the owner of the property. The remedy
is however rarely used.
In contrast to the position in England and Wales, the heritable creditor
has no power to appoint a receiver under the standard security.
There is a requirement for a court order to enforce a standard security
securing a loan to the extent that the credit agreement is regulated by the CCA
or treated as such or, on and from N(M), is a regulated mortgage contract that
would otherwise be regulated by the CCA or treated as such. See further "RISK
FACTORS - IF THE ISSUING ENTITY'S INTERPRETATION OF CERTAIN TECHNICAL RULES
UNDER THE CCA WERE HELD TO BE INCORRECT BY A COURT OR THE OMBUDSMAN OR WAS
CHALLENGED BY A SIGNIFICANT NUMBER OF BORROWERS, OR BORROWERS WERE TO EXERCISE
RIGHTS OF SET-OFF TO THE EXTENT AVAILABLE UNDER THE CCA, THERE COULD BE MATERIAL
DISRUPTION TO THE INCOME FLOW FROM THE MORTGAGES TRUST".
BORROWER'S RIGHT OF REDEMPTION
Under Section 11 of the Land Tenure Reform (Scotland) Act 1974 the
grantor of any standard security over residential property has an absolute
right, on giving appropriate notice, to redeem that standard security once
it has subsisted for a period of 20 years, subject only to the payment of
certain sums specified in Section 11 of that Act. These specified sums
consist essentially of the principal monies advanced by the lender,
interest thereon and expenses incurred by the lender in relation to that
standard security.
219
UNITED KINGDOM TAXATION
The comments below, which are of a general nature and based on current
United Kingdom tax law and H.M. Revenue & Customs published practice, describe
only the United Kingdom withholding tax treatment of payments of principal and
interest in respect of the issuing entity notes. They do not deal with any other
United Kingdom tax implications of acquiring, holding or disposing of issuing
entity notes. Slaughter and May, United Kingdom tax advisers to the issuing
entity (UK TAX COUNSEL), has prepared and reviewed this summary and the opinions
of UK tax counsel are contained in this summary. Prospective noteholders who are
unsure as to their tax position should seek their own professional advice.
PAYMENT OF INTEREST ON THE ISSUING ENTITY NOTES
Payments of interest on the issuing entity notes may be made without
deduction or withholding on account of United Kingdom income tax provided that
the issuing entity 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
ACT). The London Stock Exchange is a recognised stock exchange. Securities will
be treated as listed on the London Stock Exchange if they are included in the
Official List (within the meaning of and in accordance with the provisions of
Part 6 of the Financial Services and Markets Act 2000) and admitted to trading
on the London Stock Exchange. Provided, therefore, that the issuing entity notes
are and remain so listed, interest on the issuing entity notes will be payable
without withholding or deduction on account of United Kingdom tax.
Interest on the issuing entity notes may also be paid without withholding
or deduction on account of United Kingdom tax where interest on the issuing
entity notes is paid by a company and, at the time the payment is made, the
issuing entity reasonably believes (and any person by or through whom interest
on the issuing entity notes is paid reasonably believes) that the beneficial
owner is within the charge to United Kingdom corporation tax as regards the
payment of interest; provided that H.M. Revenue & Customs has not given a
direction (in circumstances where it has reasonable grounds to believe that the
above exemption is not available in respect of such payment of interest at the
time the payment is made) that the interest should be paid under deduction of
tax.
Interest on the issuing entity notes may also be paid without withholding
or deduction on account of United Kingdom tax where the maturity of the issuing
entity notes is less than 365 days from the date of issue and where issuing
entity notes are not issued under arrangements the effect of which is to render
such issuing entity notes part of a borrowing with a total term of a year or
more.
In other cases, an amount must generally be withheld from payments of
interest on the issuing entity notes on account of United Kingdom income tax at
the savings rate (currently 20 per cent.). However, where an applicable double
tax treaty provides for a lower rate of withholding tax (or for no tax to be
withheld) in relation to interest paid to a noteholder, H.M. Revenue & Customs
can issue a notice to the issuing entity to pay interest to the noteholder
without deduction of tax (or for interest to be paid with tax deducted at the
rate provided for in the relevant double tax treaty).
Noteholders may wish to note that in certain circumstances, H.M. Revenue
& Customs has power to obtain information (including the name and address of the
beneficial owner of the interest) from any person in the United Kingdom who
either pays or credits interest to, or receives interest for the benefit of, a
noteholder. H.M. Revenue & Customs also has power, in certain circumstances, to
obtain information from any person in the United Kingdom who pays amounts
payable on the redemption of issuing entity notes which are deeply discounted
securities for the purposes of the Income Tax (Trading and Other Income) Act
2005 to, or receives such amounts for the benefit of, another person. H.M.
Revenue & Customs published practice indicates that it will not exercise its
power to require this information where such amounts are paid on or before 5
April 2008. Such information may include the name and address of the beneficial
owner of the amount payable on redemption. Any information obtained may, in
certain circumstances, be exchanged by H.M. Revenue & Customs with the tax
authorities of the jurisdiction in which the noteholder is resident for tax
purposes.
EU SAVINGS DIRECTIVE
Under EC Council Directive 2003/48/EC on the taxation of savings income
(the EU Savings Directive), a Member State is required to provide to the tax
authorities of another Member State details of payments of interest (or similar
income) paid by a person within its jurisdiction to an individual resident in
that other
220
Member State. However, for a transitional period, Belgium, Luxembourg and
Austria are instead required (unless during that period they elect otherwise) to
operate a withholding system in relation to such payments (the ending of such
transitional period being dependent upon the conclusion of certain other
agreements relating to information exchange with certain other countries). A
number of non-EU countries and territories including Switzerland have adopted
similar measures (a withholding system in the case of Switzerland).
221
UNITED STATES TAXATION
The following section discusses the material federal income tax
consequences of the purchase, ownership and disposition of the offered notes
(the OFFERED NOTES) that may be relevant to a noteholder that is a UNITED STATES
PERSON (as defined later in this section) or that otherwise is subject to US
federal income taxation on a net income basis in respect of an offered note (any
such United States person or holder, a US HOLDER). In general, this discussion
assumes that a holder acquires an offered note at par at original issuance and
holds such note as a capital asset. It does not purport to be a comprehensive
description of all the tax considerations that may be relevant to a decision to
purchase the offered notes. In particular, it does not discuss special tax
considerations that may apply to certain types of taxpayers, including dealers
in stocks, securities or notional principal contracts; traders in securities
electing to mark to market; banks, savings and loan associations and similar
financial institutions; taxpayers whose functional currency is other than the US
dollar; taxpayers that hold an offered note as part of a hedge or straddle or a
conversion transaction, within the meaning of section 1258 of the US Internal
Revenue Code of 1986, as amended (the CODE); and subsequent purchasers of
offered notes. In addition, this discussion does not describe any tax
consequences arising under the laws of any taxing jurisdiction other than the US
federal government.
GENERAL
This discussion is based on the United States tax laws, regulations,
rulings and decisions in effect or available on the date of this prospectus,
subject to any qualifications set out in the relevant prospectus supplement. All
of the foregoing are subject to change, and any change may apply retroactively
and could affect the continued validity of this discussion.
Cleary Gottlieb Steen & Hamilton LLP, US tax advisers to the issuing
entity (US TAX COUNSEL), has prepared and reviewed this discussion of material
US federal income tax consequences. As described under "- TAX STATUS OF THE
ISSUING ENTITY, FUNDING, MORTGAGES TRUSTEE AND THE MORTGAGES TRUST", US tax
counsel is of the opinion that the mortgages trustee acting as trustee of the
mortgages trust, Funding and the issuing entity will not be subject to US
federal income tax as a result of their contemplated activities. As described
further under "-CHARACTERISATION OF THE OFFERED NOTES AND - OFFERED NOTES AS
DEBT OF FUNDING", it is anticipated that US tax counsel will deliver their
opinion, which will be contained in the relevant prospectus supplement, that
although there is no authority on the treatment of instruments substantially
similar to the offered notes, the offered notes to which the relevant prospectus
supplement relate will be treated as debt for US federal income tax purposes
(either of the issuing entity or of Funding, as described below). Except as
described in the two preceding sentences (and set forth in the corresponding
opinions), US tax counsel will render no opinions relating to the offered notes
or the parties to the transaction.
An opinion of US tax counsel is not binding on the US Internal Revenue
Service (the IRS) or the courts, and no rulings will be sought from the IRS on
any of the issues discussed in this section. Accordingly, persons considering
the purchase of offered notes are encouraged to consult their own tax advisors
as to the personal US federal income tax consequences of the purchase, ownership
and disposition of the offered notes, including the possible application of
state, local, non-US or other tax laws, and other US tax issues affecting the
transaction.
As used in this section, the term UNITED STATES PERSON means a person who
is a citizen or resident of the United States, a US domestic corporation or
partnership, any estate the income of which is subject to US federal income tax
regardless of the source of its income, or any trust if a court within the
United States is able to exercise primary supervision over the administration of
the trust and one or more US persons have the authority to control all
substantial decisions of the trust.
TAX STATUS OF THE ISSUING ENTITY, FUNDING, MORTGAGES TRUSTEE AND THE
MORTGAGES TRUST
Under the transaction documents, each of the issuing entity, Funding and
the mortgages trustee acting in its capacity as trustee of the mortgages trust
covenants not to engage in any activities in the United States (directly or
through agents), not to derive any income from sources within the United States
as determined under US federal income tax principles, and not to hold any
property if doing so would cause it to be engaged or deemed to be engaged in a
trade or business within the United States as determined under US federal income
tax principles. US tax counsel is of the opinion that, assuming compliance with
the foregoing restrictions, none of the issuing entity, Funding or the mortgages
trustee acting in its capacity as trustee of the mortgages trust will be subject
to US federal income tax. No elections will be made to treat the
222
issuing entity, Funding or the mortgages trust or any of their assets as a REMIC
(a type of securitisation vehicle having a special tax status under the Code).
CHARACTERISATION OF THE OFFERED NOTES
Subject to the discussion of US taxation in the relevant prospectus
supplement, it is anticipated that US tax counsel will deliver its opinion,
which will be contained in the relevant prospectus supplement, that although
there is no authority regarding the treatment of instruments that are
substantially similar to the offered notes to which the relevant prospectus
supplement relates, the offered notes will be treated as debt for US federal
income tax purposes (either of the issuing entity or of Funding, as described
under "- OFFERED NOTES AS DEBT OF FUNDING"). The issuing entity intends to treat
the offered notes as indebtedness of the issuing entity for all purposes,
including US tax purposes.
The discussion below assumes that the offered notes will be treated as
debt for US tax purposes. The offered notes will not be qualifying assets in the
hands of domestic savings and loan associations, real estate investment trusts,
or REMICs under sections 7701(a)(19)(C), 856(c)(5)(B) or 860G(a)(3) of the Code,
respectively.
TAXATION OF US HOLDERS OF THE OFFERED NOTES
QUALIFIED STATED INTEREST AND ORIGINAL ISSUE DISCOUNT. Subject to the discussion
of US taxation in the relevant prospectus supplement, it is anticipated that a
US holder of an offered note will treat stated interest on the offered notes as
ordinary interest income when paid or accrued, in accordance with its tax method
of accounting, and that the offered notes will not be considered to have
original issue discount.
SALES AND RETIREMENT. In general, a US holder of an offered note will have a
basis in such note equal to the cost of the offered note to such holder, and
reduced by any payments thereon other than payments of stated interest. Upon a
sale, exchange or retirement of the offered note, a US-holder generally will
recognise gain or loss equal to the difference between the amount realised on
the sale, exchange or retirement (less any accrued interest, which will be
taxable as such) and the holder's tax basis in the offered note. Such gain or
loss will be long-term capital gain or loss if the US holder has held the
offered note for more than one year at the time of disposition. Long-term
capital gains recognised by an individual holder generally are subject to tax at
a lower rate than short-term capital gains or ordinary income. The deductibility
of capital losses is subject to limitations.
OFFERED NOTES AS DEBT OF FUNDING
The IRS could possibly seek to characterise the offered notes as
ownership interests in the related term advance between the issuing entity and
Funding (the RELATED ADVANCE), rather than as debt of the issuing entity. If the
IRS were successful in such a characterisation, a US holder of an offered note
would be treated as owning (a) a pro rata share of the related advance, which
will be treated as debt for US federal income tax purposes and (b) an interest
in the related issuing entity dollar currency swap. Treasury regulations permit
taxpayers meeting certain requirements to integrate a debt instrument and a
related currency hedge and to treat them for most tax purposes as if they were a
synthetic debt instrument having the terms of the debt instrument and hedge
combined. Integrating the related advance and issuing entity dollar currency
swap would create a synthetic debt instrument having the characteristics of the
offered notes and hence would produce largely the same result as if the offered
notes were not recharacterised as debt of Funding.
The integration regulations apply only if a taxpayer creates a record
identifying the debt instrument and hedge on or before the close of the date the
hedge is entered into. The issuing entity will create a record that is intended
to provide such identification effective for each US holder as of the date of
acquisition of an offered note. By its acquisition of an offered note, each US
holder agrees to appoint the issuing entity as its agent for this purpose. The
IRS could challenge the effectiveness of such an identification made on behalf
of a group of taxpayers. The integration rules would not apply to a US holder
that is related to any issuing entity dollar currency swap provider.
If a issuing entity dollar currency swap terminated before the offered
notes were retired, and the integration regulations applied, then a US holder
may be considered to recognise gain or loss as if the holder had sold for fair
market value his interest in the related advance. Moreover, for periods
following such termination, the integration rules would no longer apply to the
related advance except in the discretion of the IRS.
223
If any issuing entity dollar currency swap was not integrated with the
related advance, then a US holder would calculate separately income and
deductions from that issuing entity dollar currency swap and income from the
related advance. For most holders, the tax consequences of treating a issuing
entity dollar currency swap and the related advance separately would be similar
to the treatment if they were combined, but there could be differences. For
example, income from a issuing entity dollar currency swap may be sourced
differently from income from the related advance and would always be computed
under an accrual method. Individual taxpayers may be allowed deductions for
payments made under issuing entity dollar currency swaps only as a miscellaneous
itemised deduction (which is allowed for regular tax purposes only subject to
limitations and is not allowed for alternative minimum tax purposes). US holders
may wish to consult their own tax advisors regarding the possible treatment of
offered notes as debt of Funding, application of the integration rules, and the
consequences of an inability to integrate a issuing entity dollar currency swap
and the related advance.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The paying agent will be required to file information returns with the
IRS with respect to payments on the offered notes made to certain US holders. In
addition, certain US holders may be subject to US backup withholding tax in
respect of such payments if they do not provide their taxpayer identification
numbers to the paying agent, and may also be subject to information reporting
and backup withholding requirements with respect to proceeds from a sale of the
offered notes.
224
ERISA CONSIDERATIONS
The offered notes should be eligible for purchase by employee benefit
plans and other plans subject to the US Employee Retirement Income Security Act
of 1974, as amended (ERISA), and/or the provisions of section 4975 of the Code
and by governmental, church or non-US plans that are subject to US or non-US
state, local or other federal law that is substantially similar to ERISA or
section 4975 of the Code (SIMILAR LAW), subject to consideration of the issues
described in this section. ERISA imposes certain requirements on employee
benefit plans (as defined in section 3(3) of ERISA) subject to ERISA, including
entities such as collective investment funds and separate accounts whose
underlying assets include the assets of such plans (each, an ERISA PLAN)
and on those persons who are fiduciaries with respect to ERISA Plans.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirements of investment prudence and
diversification and the requirement that an ERISA Plan's investments be made in
accordance with the documents governing the Plan. The prudence of a particular
investment must be determined by the responsible fiduciary of an ERISA Plan by
taking into account the ERISA Plan's particular circumstances and all of the
facts and circumstances of the investment including, but not limited to, the
matters discussed under "RISK FACTORS" and the fact that in the future there may
be no market in which such fiduciary will be able to sell or otherwise dispose
of the offered notes.
Section 406 of ERISA and section 4975 of the Code prohibit certain
transactions involving the assets of an ERISA Plan (as well as those plans that
are not subject to ERISA but which are subject to section 4975 of the Code, such
as individual retirement accounts (together with ERISA Plans, the PLANS)) and
certain persons (referred to as parties in interest or disqualified persons)
having certain relationships to such Plans, unless a statutory or administrative
exemption is applicable to the transaction. A party in interest or disqualified
person who engages in a prohibited transaction may be subject to excise taxes
and other penalties and liabilities under, including a plan fiduciary, ERISA and
the Code.
The seller, the issuing entity, the servicer, the mortgages trustee,
Funding or any other party to the transactions contemplated by the transaction
documents may be parties in interest or disqualified persons with respect to
many Plans. Prohibited transactions within the meaning of section 406 of ERISA
or section 4975 of the Code may arise if any of the offered notes is acquired or
held by a Plan with respect to which the issuing entity, the servicer, the
mortgages trustee, Funding or any other party to such transactions is a party in
interest or a disqualified person. Certain exemptions from the prohibited
transaction provisions of section 406 of ERISA and section 4975 of the Code may
be applicable, however, depending in part on the type of Plan fiduciary making
the decision to acquire any such issuing entity notes and the circumstances
under which such decision is made. Included among these exemptions are section
408(b)(17) of ERISA and section 4975(d)(20) of the Code (relating to
transactions between a person that is a party in interest (other than a
fiduciary or an affiliate that has or exercises discretionary authority or
control or renders investment advice investment advice with respect to assets
involved in the transaction) solely by reason of providing services to the plan,
provided that there is adequate consideration for the transaction), Prohibited
Transaction Class Exemption (PTCE) 91-38 (relating to investments by bank
collective investment funds), PTCE 84-14 (relating to transactions effected by a
"QUALIFIED PROFESSIONAL ASSET MANAGER"), PTCE 95-60 (relating to transactions
involving insurance company general accounts), PTCE 90-1 (relating to
investments by insurance company pooled separate accounts) and PTCE 96-23
(relating to transactions determined by in-house asset managers). Prospective
investors should consult with their advisors regarding the prohibited
transaction rules and these exceptions. There can be no assurance that any of
these exemptions or any other exemption will be available with respect to any
particular transaction involving any such issuing entity notes.
Each purchaser and subsequent transferee of any offered note will be
deemed by such purchase or acquisition of any such note to have represented and
warranted, on each day from the date on which the purchaser or transferee
acquires such note through and including the date on which the purchaser or
transferee disposes of such note, either that (a) it is not a Plan or an entity
whose underlying assets include the assets of any Plan or a governmental, church
or non-US plan which is subject to Similar Law or (b) its purchase, holding and
disposition of such note will not result in a prohibited transaction under
section 406 of ERISA or section 4975 of the Code (or, in the case of a
governmental, church or non-US plan, a violation of Similar Law any
substantially similar federal, state or local law of the United States) for
which an exemption is not available.
In addition, the US Department of Labor has promulgated a regulation, 29
C.F.R. section 2510.3-101 (the PLAN ASSET REGULATION), as modified by section
3(42) of ERISA, describing what constitutes the assets of a Plan with respect to
the Plan's investment in an entity for purposes of certain provisions of ERISA,
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including the fiduciary responsibility provisions of Title I of ERISA, and
section 4975 of the Code. Under the Plan Asset Regulation, if a Plan invests in
an "EQUITY INTEREST" of an entity that is neither a "PUBLICLY-OFFERED SECURITY"
nor a security issued by an investment company registered under the Investment
Company Act, the Plan's assets include both the equity interest and an undivided
interest in each of the entity's underlying assets, unless one of the exceptions
to such treatment described in the Plan Asset Regulation applies. Under the Plan
Asset Regulation, a security which is in form debt may be considered an "EQUITY
INTEREST" if it has "SUBSTANTIAL EQUITY FEATURES". If the issuing entity were
deemed under the Plan Asset Regulation to hold plan assets by reason of a Plan's
investment in any of the offered notes, such plan assets would include an
undivided interest in the assets held by the issuing entity and transactions by
the issuing entity would be subject to the fiduciary responsibility provisions
of Title I of ERISA and the prohibited transaction provisions of ERISA and
section 4975 of the Code. While there is little pertinent authority in this area
and no assurance can be given, the issuing entity believes that the offered
notes should not be treated as "EQUITY INTERESTS" for the purposes of the Plan
Asset Regulation.
Any insurance company proposing to purchase any of the offered notes
using the assets of its general account should consider the extent to which such
investment would be subject to the requirements of ERISA in light of the US
Supreme Court's decision in John Hancock Mutual Life Insurance Co. v. Harris
Trust and Savings Bank and under any subsequent guidance that may become
available relating to that decision. In particular, such an insurance company
should consider the retroactive and prospective exemptive relief granted by the
US Department of Labor for transactions involving insurance company general
accounts in PTCE 95-60, 60 Fed. Reg. 35925 (12 July, 1995), the enactment of
section 401(c) of ERISA by the Small Business Job Protection Act of 1996
(including, without limitation, the expiration of any relief granted thereunder)
and the Insurance Company General Account Regulations, 65 Fed. Reg. No. 3 (5
January 2000) (to be codified at 29 C.F.R. pt. 2550) that became generally
applicable on 5 July 2001.
Each Plan fiduciary who is responsible for making the investment
decisions whether to purchase or commit to purchase and to hold any of the
offered notes should determine whether, under the documents and instruments
governing the Plan, an investment in such issuing entity notes is appropriate
for the Plan, taking into account the overall investment policy of the Plan and
the composition of the Plan's investment portfolio. Any Plan proposing to invest
in such issuing entity notes (including any governmental plan) should consult
with its counsel to confirm that such investment will not result in a non-exempt
prohibited transaction and will satisfy the other requirements of ERISA and the
Code (or, in the case of a governmental, church or non-US plan, any Similar
Law).
The sale of any offered notes to a Plan is in no respect a representation
by the seller, the issuing entity, the servicer, the mortgages trustee, Funding
or any other party to the transactions that such an investment meets all
relevant legal requirements with respect to investments by Plans generally or
any particular Plan, or that such an investment is appropriate for Plans
generally or any particular Plan.
The issuing entity notes (other than any offered notes) may not be
purchased or held by a Plan or an entity whose underlying assets include the
assets of any Plan. Each purchaser and subsequent transferee of any such note
will be deemed by such purchase or acquisition of any such note to have
represented and warranted, on each day from the date on which the purchaser or
transferee acquires such note through and including the date on which the
purchaser or transferee disposes of such note, that it is not a Plan or an
entity whose underlying assets include the assets of any Plan.
Any further ERISA considerations with respect to specific issuing entity
notes may be found in the relevant prospectus supplement.
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ENFORCEMENT OF FOREIGN JUDGMENTS IN ENGLAND AND WALES
The issuing entity is a United Kingdom public limited company
incorporated with limited liability in England and Wales. Any final and
conclusive judgment of any United States federal or state court having
jurisdiction recognised by England or Wales in respect of an obligation of the
issuing entity in respect of the issuing entity notes which is for a fixed sum
of money and which has not been stayed or satisfied in full, would be
enforceable by action against the issuing entity in the courts of England and
Wales without a re-examination of the merits of the issues determined by the
proceedings in that United States federal or state court, as applicable, unless:
the proceedings in that United States federal or state court, as
applicable, involved a denial of the principles of natural or
substantial justice;
the judgment is contrary to the public policy of England or Wales;
the judgment was obtained by fraud or duress or was based on a
clear mistake of fact;
the judgment is of a public nature (for example, a penal or
revenue judgment);
there has been a prior judgment in another court between the same
parties concerning the same issues as are dealt with in the
judgment of the United States federal or state court, as
applicable;
enforcement would breach section 5 of the Protection of Trading
Interests Act 1980; or
enforcement proceedings are not instituted within six years after
the date of the judgment.
A judgment by a court may be given in some cases only in sterling. The
issuing entity expressly submits to the non-exclusive jurisdiction of the courts
of England for the purpose of any suit, action or proceedings arising out of
this offering.
All of the directors and executive officers of the issuing entity reside
outside the United States. Substantially all or a substantial portion of the
assets of all or many of those persons are located outside the United States. As
a result, it may not be possible for holders of the issuing entity notes to
effect service of process within the United States upon those persons or to
enforce against them judgments obtained in United States courts predicated upon
the civil liability provisions of federal securities laws of the United States.
Based on the restrictions referred to in this section, there is doubt as to the
enforceability in England and Wales, in original actions or in actions for
enforcement of judgments of United States courts, of civil liabilities
predicated upon the federal securities laws of the United States.
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UNITED STATES LEGAL INVESTMENT CONSIDERATIONS
None of the issuing entity notes will constitute mortgage related
securities under the United States Secondary Mortgage Market Enhancement Act of
1984, as amended.
Except as stated above, no representation is made as to the proper
characterisation of the issuing entity notes for legal investment purposes,
financial institutional regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase the issuing entity notes under
applicable legal investment restrictions. These uncertainties may adversely
affect the liquidity of the issuing entity notes. Accordingly, all institutions
whose investment activities are subject to legal investment laws and
regulations, regulatory capital requirements or review by regulatory authorities
should consult with their legal advisors in determining whether and to what
extent the issuing entity notes constitute legal investments or are subject to
investment, capital or other restrictions.
Any money market notes of the issuing entity (as designated in the
relevant prospectus supplement) will be "ELIGIBLE SECURITIES" within the meaning
of Rule 2a-7 under the Investment Company Act.
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LEGAL MATTERS
Certain matters of English law regarding the issuing entity notes,
including matters relating to the validity of the issuance of the issuing
entity notes will be passed upon for the issuing entity by Slaughter and
May, London, England. Certain matters of United States law regarding the
issuing entity notes, including matters of United States federal income tax
law with respect to the offered notes, will be passed upon for the issuing
entity by Cleary Gottlieb Steen & Hamilton LLP, New York. Certain matters
of English law and United States law will be passed upon for the
underwriters by Allen & Overy LLP, London, England.
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UNDERWRITING
UNITED STATES
A prospectus supplement will be prepared for each series of US notes
which will describe the method of offering being used for that series and will
set forth the identity of any of its underwriters and either the price at which
each class of such series is being offered, the nature and amount of any
underwriting discounts or additional compensation to the underwriters and the
proceeds of the offering to the issuing entity or the method by which the price
at which the underwriters will sell those US notes will be determined. Each
prospectus supplement for an underwritten offering will also contain information
regarding the nature of the underwriters' obligations, any material relationship
between any underwriter and the issuing entity and, where appropriate,
information regarding any discounts or concessions to be allowed or reallowed to
dealers or others and any arrangements to stabilise the market for the US notes
so offered. US notes may be acquired by the underwriters for their own accounts
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The terms of these purchases will be governed by
an underwriting agreement among the underwriters and the issuing entity.
The seller and the issuing entity will agree to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act.
The selling commissions and management and underwriting fees that the
issuing entity has agreed to pay to the underwriters will be paid to the
underwriters on behalf of the issuing entity by Funding from part of the
proceeds of the relevant start-up loan and/or from the Funding Reserve Fund.
In the event that an underwriter fails to purchase the offered notes
allocated to it in accordance with the terms of the underwriting agreement, the
underwriting agreement provides that in certain circumstances the underwriting
agreement may be terminated.
The underwriting agreement is subject to a number of restrictions and may
be terminated by the underwriters in certain circumstances prior to payment to
the issuing entity.
After the initial offering, the underwriters may change the public
offering price and any other selling terms.
The underwriters or their affiliates may engage in over-allotment
transactions (also known as short sales), stabilising transactions, syndicate
covering transactions and penalty bids for the US notes under Regulation M under
the Exchange Act.
Over-allotment transactions involve sales by an underwriter in
excess of the total offering size, which creates what is known as
a naked short position. A naked short position is more likely to
be created if the underwriters are concerned that there may be
downward pressure on the price of the issuing entity notes in the
open market after pricing that could adversely affect investors
who purchase in the offering.
Stabilising transactions permit bids to purchase the US notes so
long as the stabilising bids do not exceed a specified maximum.
Short covering transactions involve purchases of the US notes in
the open market after the distribution has been completed in order
to cover naked short positions.
Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when the issuing entity notes
originally sold by that syndicate member are purchased in a
syndicate covering transaction.
Similar to other purchase transactions, these transactions may have the
effect of raising or maintaining the market price of the US notes or preventing
or retarding a decline in the market price of the US notes. As a result, these
transactions may cause the prices of the US notes to be higher than they would
otherwise be in the absence of those transactions. Neither the issuing entity
nor any of the underwriters represent that any underwriter will engage in any of
these transactions or that these transactions, once begun, will not be
discontinued without notice at any time.
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The US notes will be registered under the Securities Act. Any
underwriters of the US notes that are not US registered broker dealers will
agree that they will offer and sell the US notes within the United States
through US registered broker-dealers. The US notes will not be offered or sold
via the internet, e-mail or through similar electronic channels except that
certain underwriters may deliver copies of this prospectus and relevant
prospectus supplement via e-mail to persons who have given, and not withdrawn,
their prior consent to receive copies of this prospectus and relevant prospectus
supplement in that format.
The place and time of delivery for the issuing entity notes in respect of
which this prospectus is delivered will be set forth in the relevant prospectus
supplement.
UNITED KINGDOM
Each underwriter will represent and agree that:
(a) (i) it is a person whose ordinary activities involve it in
acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of its business and (ii) it
has not offered or sold and will not offer or sell the offered
notes other than to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as
principal or as agent) for the purposes of their businesses or who
it is reasonable to expect will acquire, hold, manage or dispose
of investments (as principal or agent) for the purposes of their
businesses where the issue of the offered notes would otherwise
constitute a contravention of section 19 of FSMA by the issuing
entity;
(b) it has only communicated or caused to be communicated and it will
only communicate or cause to be communicated any invitation or
inducement to engage in investment activities (within the meaning
of section 21 of FSMA) received by it in connection with the issue
of any offered notes in circumstances in which section 21(1) of
FSMA does not apply to the issuing entity; and
(c) it has complied and will comply with all applicable provisions of
FSMA with respect to anything done by it in relation to the
offered notes in, from or otherwise involving the United Kingdom.
FRANCE
Each underwriter will represent and agree that it has not offered or sold
and will not offer or sell, directly or indirectly, issuing entity notes to the
public in France, and has not distributed or caused to be distributed and will
not distribute or cause to be distributed to the public in France, the
prospectus or any other offering material relating to the issuing entity notes,
and that such offers, sales and distributions have been and shall only be made
in France to (i) providers of investment services relating to portfolio
management for the account of third parties, and/or (ii) qualified investors
(investisseurs qualifies) other than individuals, all as defined in, and in
accordance with, articles L.411-1, L.411-2, D.411-1 of the French Code monetaire
et financier.
This Base Prospectus prepared in connection with the issue of offered
notes has not been submitted to the clearance procedures of the Autorite des
marches financiers.
ITALY
Each underwriter will represent and agree that the offering of the
offered notes has not been registered pursuant to Italian securities legislation
and, accordingly, the offered notes may not be offered, sold or delivered, nor
may copies of this prospectus or of any other document relating to the offered
notes be distributed in the Republic of Italy, except:
(a) to professional investors (operatori qualificati), as defined in
Article 31, second paragraph, of CONSOB (the ITALIAN SECURITIES
EXCHANGE COMMISSION) Regulation No. 11522 of 1 July 1998, as
amended; or
(b) in circumstances which are exempted from the rules on solicitation
of investments pursuant to Article 100 of Legislative Decree No.
58 of 24 February 1998 (the FINANCIAL SERVICES ACT) and Article
33, first paragraph, of CONSOB Regulation No. 11971 of 14 May
1999, as amended.
In addition, each underwriter will represent and agree that any offer,
sale or delivery of the offered notes or distribution of copies of this
prospectus or any other document relating to the offered notes in the Republic
of Italy under (a) or (b) above must be:
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(i) made by an investment firm, bank or financial intermediary
permitted to conduct such activities in the Republic of Italy in
accordance with the Financial Services Act and Legislative Decree
No. 385 of 1 September 1993, as amended (the BANKING ACT);
(ii) in compliance with Article 129 of the Banking Act and the
implementing guidelines of the Bank of Italy, as amended from time
to time, pursuant to which the Bank of Italy may request
information on the issue or the offer of securities in the
Republic of Italy; and
(iii) in compliance with any other applicable laws and regulations
imposed by CONSOB.
SPAIN
Each underwriter will represent and agree that the issuing entity notes
may not be offered or sold in Spain by means of a public offer as defined and
construed in Chapter I of Title III of Law 24/1998, of 28 July, on the Spanish
Securities Act (as amended by Royal Decree Law 5/2005, of 11 March) and related
legislation. This prospectus has not been registered with the Comision Nacional
del Mercado de Valores (CNMV) and therefore it is not intended for any public
offer of issuing entity notes in Spain.
CANADA
The offered notes will not be qualified for sale under the securities
laws of any province or territory of Canada. Each underwriter will be required
to represent and agree, that it has not offered, sold or distributed and will
not offer, sell or distribute any offered notes, directly or indirectly, in
Canada or to or for the benefit of any resident of Canada, other than in
compliance with applicable securities laws. Each underwriter has and will also
represent and agree that it has not and will not distribute or deliver the
prospectus, or any other offering material in connection with any offering of
offered notes in Canada, other than in compliance with applicable securities
laws.
GENERAL
Each underwriter will represent and agree that it has complied and will
comply with all applicable laws and regulations in force in any jurisdiction in
which it purchases, offers, sells or delivers offered notes or possesses them or
distributes this prospectus or any other offering material and will obtain any
consent, approval or permission required by it for the purchase, offer, sale or
delivery by it of offered notes under the laws and regulations in force in any
jurisdiction to which it is subject or in which it makes such purchases, offers,
sales or deliveries and the issuing entity shall have no responsibility for it.
Furthermore, each underwriter has and will represent and agree that it has not
and will not directly or indirectly offer, sell or deliver any offered notes or
distribute or publish any prospectus, form of application, prospectus,
advertisement or other offering material except under circumstances that will,
to the best of its knowledge and belief, result in compliance with any
applicable laws and regulations, and all offers, sales and deliveries of offered
notes by it will be made on the same terms.
Neither the issuing entity nor the underwriters represent that offered
notes may at any time lawfully be sold in compliance with any application
registration or other requirements in any jurisdiction, or pursuant to any
exemption available thereunder, or assume any responsibility for facilitating
such sale.
Each underwriter will, unless prohibited by applicable law, furnish to
each person to whom it offers or sells offered notes a copy of this prospectus
and the relevant prospectus supplement or, unless delivery of this prospectus is
required by applicable law, inform each such person that a copy will be made
available upon request. The underwriters are not authorised to give any
information or to make any representation not contained in this prospectus and
the relevant prospectus supplement in connection with the offer and sale of
offered notes to which this prospectus and the relevant prospectus supplement
relate.
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REPORTS TO NOTEHOLDERS
Pursuant to the cash management agreement, the cash manager on behalf of
Funding will prepare and file with the SEC periodic reports on Form 8-K, annual
reports on Form 10-K and monthly reports on Form 10-D that will contain the
information required by Item 1121 of Regulation AB under the Securities Act. You
should note that the reports of the issuing entity required to be filed under
the Exchange Act will be located on the SEC's EDGAR system under a separate
Central Index Key (CIK) number. The monthly reports will be substantially in the
form of Annex A and contain information on the portfolio, the issuing entity
notes, the intercompany loans, cash accumulation ledgers, reserve funds, the
principal deficiency ledger and the occurrence of any material events. The
financial information contained in these reports will not be prepared in
accordance with generally accepted accounting principles of any jurisdiction.
Unless and until definitive notes are issued, the reports will be sent to the
holders of the global notes. No reports will be sent to investors by the cash
manager.
The annual reports on assessment of compliance, attestation reports and
statements of compliance referred to under the heading "THE SERVICING AGREEMENT
- - SERVICER COMPLIANCE" will be filed as exhibits to Funding's annual report on
Form 10-K.
Beneficial owners of the issuing entity notes will be entitled to receive
from the servicer on a monthly basis a report containing information about the
loans in the mortgages trust and certain other data if they have furnished the
servicer with the beneficial ownership certification described in the servicing
agreement.
CERTAIN RELATIONSHIPS
Subject as provided to the following paragraph, there are no business
relationships, agreements, arrangements, transactions or understandings that are
entered into outside the ordinary course of business or are on terms other than
would be obtained in an arm's length transaction with an unrelated third party
between the sponsor, Funding or the issuing entity on the one hand and the
servicer, the note trustee, the issuing entity security trustee, the mortgages
trustee, the seller, the Funding swap provider, any issuing entity swap provider
or any affiliates of such parties, that currently exist or that existed during
the past two years and that would be material to the issuing entity notes.
Pursuant to the transaction documents, there are numerous relationships
involving or relating to the issuing entity notes or the expected portfolio
between the sponsor (who is also the seller, the servicer, the cash manager and
the issuing cash manager), Funding or the issuing entity on the one hand and the
servicer (see "THE SERVICER"), the note trustee and the issuing entity security
trustee (see "THE NOTE TRUSTEE AND THE ISSUING ENTITY SECURITY TRUSTEE"), the
mortgages trustee (see "THE MORTGAGES TRUSTEE"), the seller (in its capacity as
originator) and the Funding swap provider (see "THE ABBEY GROUP OF COMPANIES"),
each issuing entity swap provider (see "THE ISSUING ENTITY SWAP PROVIDERS" in
the relevant prospectus supplement) or any affiliates of such parties, that
currently exists or that existed during the past two years and that would be
material to the issuing entity notes. The material terms of these relationships
are disclosed in the sections referred to above in this prospectus. See "SUMMARY
OF PROSPECTUS - FEES" for the fee amounts relating to the foregoing
relationships.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows Funding to "INCORPORATE BY REFERENCE" the information
filed with the SEC by Funding under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act, that relates to the issuing entity and the offered notes. This
means that Funding can disclose important information to any investor by
referring the investor to these documents. The information incorporated by
reference is an important part of this prospectus, and information filed by
Funding with the SEC that relates to the issuing entity for any series of
offered notes will automatically update and supersede this information.
Documents that may be incorporated by reference for a particular series of
offered notes include collateral term sheets, the related transaction documents
and amendments thereto, other documents on Form 8-K, Form 10-D and Section
13(a), 13(c), 14 or 15(d) of the Exchange Act as may be required in connection
with the issuing entity. Any reports and documents that are incorporated in this
prospectus will not be physically included in this prospectus or delivered with
this prospectus.
Funding will provide or cause to be provided without charge to each
person to whom this prospectus and relevant prospectus supplement is delivered
in connection with the offering of one or more classes of the related series of
offered notes, on written or oral request of that person, a copy of any or all
reports incorporated in this prospectus by reference, in each case to the extent
the reports relate to one or more of
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the classes of the related series of notes, other than the exhibits to those
documents, unless the exhibits are specifically incorporated by reference in the
documents. Requests should be directed either by telephone to + 44 20 7398 6300
or in writing to Holmes Funding Limited, Abbey National House, 2 Triton Square,
Regent's Place, London NW1 3AN, Attention: The Directors.
WHERE INVESTORS CAN FIND MORE INFORMATION
Funding has filed a registration statement for the US notes with the SEC
under the Securities Act. This prospectus is part of the registration statement,
but the registration statement includes additional information.
Funding will file, or cause to be filed, with the SEC all required
periodic and special SEC reports and other information about the US notes, the
issuing entity and the mortgages trust, including annual reports on Form 10-K,
periodic reports on Form 10-D and periodic reports on Form 8-K. Such reports
will be filed with the SEC under central index key (CIK) number for Holmes
Master Issuer plc and will be signed by Funding.
Currently, Funding's annual reports on Form 10-K, current reports on Form
10-D, periodic reports on Form 8-K, amendments to those reports filed or
furnished pursuant to section 13(a) or 15(d) of the Exchange Act and the
periodic reports of the issuing entity cash manager and the servicer are not
made available on the website of any transaction party, although the seller
intends to make such reports available in this manner in the future. These
reports may be obtained from the note trustee in electronic or paper format free
of charge upon request or from the Bloomberg financial information service.
Investors may read and copy any materials filed by the issuing entity
with the SEC at the SEC's Public Reference Room at 100 F Street, NW.,
Washington, DC 20549. Investors should call the SEC at 1 800 732 0330 for
further information on the operation of the public reference room. SEC filings,
including by Funding, are also available to the public on the SEC's internet
site at http://www.sec.gov.
Investors may also access information related to previous notes issued by
the issuing entity and each of the previous issuing entities at
http://www.holmesreporting.com.
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LISTING AND GENERAL INFORMATION
AUTHORISATION
The issue of each series of issuing entity notes from time to time has
been authorised by resolution of the board of directors of the issuing entity
passed on 16 November 2006.
LISTING OF ISSUING ENTITY NOTES
Application has been made to the FSA in its capacity as competent
authority under FSMA, as amended (the UK LISTING AUTHORITY), for the issuing
entity notes issued during the period of 12 months from the date of this
prospectus (other than any issuing entity notes which are unlisted or listed on
any other exchange) to be admitted to the official list (the OFFICIAL LIST)
maintained by the UK Listing Authority. Application will also be made to the
London Stock Exchange plc (the LONDON STOCK EXCHANGE) for each such class of the
issuing entity notes to be admitted to trading on the London Stock Exchange's
Regulated Market. Admission to the Official List together with admission to the
London Stock Exchange's Regulated Market (being a regulated market for the
purposes of Directive 2004/39/EC (the Markets in Financial Instruments
Directive)) constitute official listing on the London Stock Exchange.
It is expected that each issue, series and class (or sub-class) of
issuing entity notes which is to be admitted to the Official List and to trading
on the London Stock Exchange's Regulated Market will be admitted separately,
as and when issued, subject only to the issue of a global note or notes
initially representing the issuing entity notes of each issue, series and class
(or sub-class) and to making the final terms relating to the issuing entity
notes available to the public in accordance with the EU Directive 2003/71/EC
(the PROSPECTUS DIRECTIVE) and associated UK and EU implementing legislation.
This prospectus has been prepared in compliance with the prospectus rules
made under Part VI of FSMA.
To the best of the knowledge and belief of the issuing entity (which 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 this information. The issuing entity
accepts responsibility accordingly.
CLEARING AND SETTLEMENT
Transactions in respect of the offered notes will normally be effected
for settlement in US dollars and for delivery on the third working day after the
date of the transaction. Prior to listing, however, dealings will be permitted
by the London Stock Exchange in accordance with its rules.
It is expected that the offered notes will be accepted for clearance
through DTC, Clearstream, Luxembourg and Euroclear. The appropriate CUSIP
numbers, common codes and ISINs for each series and class (or sub-class) of
issuing entity notes will be specified in the relevant prospectus supplement.
LITIGATION
None of the issuing entity, Funding, Holdings, the post-enforcement call
option holder or the mortgages trustee is or has been involved in the previous
12 months (or, in the case of the issuing entity, since 3 October 2006 (being
the date of its incorporation) in any governmental, legal or arbitration
proceedings (including any such proceedings which are pending or threatened of
which the issuing entity, Funding, Holdings, the post-enforcement call option
holder or the mortgages trustee are aware) which may have, or have had in the
recent past, a significant effect upon the financial position or profitability
of the issuing entity, Funding, Holdings, the post-enforcement call option
holder or the mortgages trustee (as the case may be).
ACCOUNTS
So long as the issuing entity notes are listed on the official list of the
UK Listing Authority and are trading on the London Stock Exchange,
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the most recently published audited annual accounts of the issuing entity
from time to time shall be available at the specified office of the
principal paying agent in London. The issuing entity does not normally
publish interim accounts.
The latest statutory accounts of Funding have been prepared and were
drawn up to 31 December 2007. So long as the issuing entity notes are listed on
the Official List of the UK Listing Authority and are trading on the London
Stock Exchange, the most recently published audited annual accounts of Funding
from time to time shall be available at the specified office of the principal
paying agent in London. Funding does not normally publish interim accounts.
Since the date of its incorporation, the issuing entity has not entered
into any contracts or arrangements not being in the ordinary course of business.
SIGNIFICANT OR MATERIAL CHANGE
Since 31 December 2007, (being the date of the most recent financial
reports of the issuing entity) and 31 December 2007 (being the date of the most
recent financial reports of Funding), 29 December 1998 (being the date of
incorporation of Holdings), 28 April 2000 (being the date of incorporation of
the mortgages trustee) and 28 April 2000 (being the date of incorporation of the
post enforcement call option holder), there has been (a) no material adverse
change in the financial position or prospects of the issuing entity, Funding,
Holdings, the post enforcement call option holder or the mortgages trustee and
(b) no significant change in the financial or trading position of the issuing
entity, Funding, Holdings, the post enforcement call option holder or the
mortgages trustee.
TRUSTEE RELIANCE
The transaction documents provide that the security trustee, the note
trustee and/or the issuing entity security trustee may rely on reports or other
information from professional advisers or other experts in accordance with the
provisions of the transaction documents, whether or not any such report or other
information entered into by the security trustee, the note trustee and/or the
issuing entity security trustee and the relevant person in connection therewith
contains any monetary or other limit on the liability of the relevant person.
DOCUMENTS AVAILABLE
From the date of this prospectus and for so long as any series and class
(or sub-class) of issuing entity notes issued by the issuing entity is listed on
the London Stock Exchange's Regulated Market, copies of the following documents
may, when published, be inspected at the registered office of the issuing
entity and from the specified office of the principal paying agent during usual
business hours, on any weekday (Saturdays and public holidays excepted):
(a) the Memorandum and Articles of Association of each of the issuing
entity, Funding, Holdings, the post-enforcement call option holder
and the mortgages trustee;
(b) a copy of this prospectus and the relevant prospectus supplements;
(c) any future offering circulars, prospectuses, final terms,
information memoranda and supplements, including prospectus
supplements (as applicable), (save that a prospectus supplement
relating to an unlisted series and class (or sub-class) of issuing
entity notes will be available for inspection only by the
underwriters or dealers, as applicable, as specified in the
prospectus supplement or, upon proof satisfactory to the principal
paying agent or the registrar, as the case may be, as to the
identity of the holder of any issuing entity note to which the
prospectus supplement relates) to the prospectus and any other
documents incorporated therein or therein by reference; and
(d) each of the following documents:
the programme agreement;
each subscription agreement;
each underwriting agreement;
the master intercompany loan agreement;
the mortgages trust deed (as amended and restated);
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the mortgage sale agreement (as amended and restated)
(including each Scottish declaration of trust entered into
pursuant thereto);
the issuing entity deed of charge;
each deed of accession to the issuing entity deed of
charge;
the Funding deed of charge (as amended and restated);
each deed of accession to the Funding deed of charge;
each issuing entity swap agreement;
the Funding swap agreement (as amended and restated);
the trust deed;
the issuing entity paying agent and agent bank agreement;
the servicing agreement (as amended and restated);
the cash management agreement (as amended);
the issuing entity cash management agreement;
the Funding guaranteed investment contract;
the mortgages trustee guaranteed investment contract;
the issuing entity post enforcement call option agreement;
the issuing entity bank account agreement;
the master definitions and construction schedule;
the corporate services agreement;
the issuing entity corporate services agreement; and
any other deeds of accession or supplemental deeds relating
to any such documents.
The issuing entity confirms that the assets backing the issue of issuing
entity notes, taken together with the other arrangements entered into by the
issuing entity on 28 November 2006 (as the same may be amended, restated,
novated, replaced or supplemented from time to time) and on each relevant
closing date (including those described in "CREDIT STRUCTURE"), have
characteristics that demonstrate capacity to produce funds to service any
payments due and payable on the issuing entity notes. However, investors are
advised that this confirmation is based on the information available to the
issuing entity on the date of this prospectus and may be affected by the future
performance of such assets backing the issue of the issuing entity notes.
Consequently, investors are advised to review carefully any disclosure in this
prospectus and the relevant prospectus supplement together with any amendments
and supplements thereto.
237
GLOSSARY
Principal terms used in this prospectus are defined as follows:
USD, $, US$, US DOLLARS and DOLLARS means the lawful currency for the
time being of the United States of America.
(EURO), EURO and EURO means the single currency introduced at the third
stage of European Economic and Monetary Union pursuant to the Treaty
establishing the European Communities, as amended from time to time.
(POUND), POUNDS and STERLING means the lawful currency for the time being
of the United Kingdom of Great Britain and Northern Ireland.
1999 REGULATIONS means the Unfair Terms in Consumer Contracts Regulations
1999.
2007-1 START-UP LOAN means the loan made by the start-up loan provider to
Funding under the 2007-1 start-up loan agreement which was used in part to fund
the first reserve fund.
2007-1 START-UP LOAN AGREEMENT means the agreement entered into on 28
March 2007 between the start-up loan provider and Funding under which the 2007-1
start-up loan was made by the start-up loan provider to Funding.
2007-3 START-UP LOAN means the loan made by the start-up loan provider to
Funding under the 2007-3 start-up loan agreement which was used in part to fund
the first reserve fund.
2007-3 START-UP LOAN AGREEMENT means the agreement entered into on 21
December 2007 between the start-up loan provider and Funding under which the
2007-3 start-up loan was made by the start-up loan provider to Funding.
A PRINCIPAL DEFICIENCY SUB-LEDGER means one of five sub-ledgers on the
principal deficiency ledger which specifically records any principal deficiency
in respect of any term A advances.
AA PRINCIPAL DEFICIENCY SUB-LEDGER means one of five sub-ledgers on the
principal deficiency ledger which specifically records any principal deficiency
in respect of any term AA advances.
AAA PRINCIPAL DEFICIENCY SUB-LEDGER means one of five sub-ledgers on the
principal deficiency ledger which specifically records any principal deficiency
in respect of any term AAA advances.
A TERM ADVANCES means the term advances made by the issuing entity to
Funding under the master intercompany loan agreement from the proceeds of issue
of any series of class M notes.
AA TERM ADVANCES means the term advances made by the issuing entity to
Funding under the master intercompany loan agreement from the proceeds of issue
of any series of class B notes.
AAA TERM ADVANCES means the term advances made by the issuing entity to
Funding under the master intercompany loan agreement from the proceeds of issue
of any series of class A notes.
ABBEY means Abbey National plc (see "THE ABBEY GROUP OF COMPANIES" in
this prospectus).
ABBEY GROUP means the seller and its subsidiaries.
ABBEY OPTIONAL PURCHASE AGREEMENT means the agreement (if any) to be
entered into between Abbey and the note trustee pursuant to which Abbey will be
entitled to procure the sale to itself of all, but not some only, of the class B
notes and/or class M notes and/or class C notes and/or class D notes in
accordance with number 5.9 of the issuing entity notes and the relevant
prospectus supplement.
ABBEY SVR means the standard variable rate set by the seller which
applies to all variable rate loans (other than tracker loans) beneficially owned
by the seller on the seller's residential mortgage book.
ACCOUNT BANK means Abbey acting through its branch at 21 Prescot Street,
London E1 8AD.
ACCRUAL PERIOD has the meaning given to that term on page 200.
238
ACCRUED INTEREST means in respect of a given date, the interest which has
accrued from the last interest payment date up to that date, but which is not
currently payable.
AGENT BANK means The Bank of New York, acting through its London branch.
ALTERNATIVE ACCOUNTS means any transaction accounts of the mortgages
trustee other than the mortgages trustee GIC account.
ALTERNATIVE INSURANCE REQUIREMENTS means requirements which vary the
insurance provisions of the mortgage conditions.
ANTICIPATED CASH ACCUMULATION PERIOD means the anticipated number of
months required to accumulate sufficient principal receipts to set aside the
relevant series 1 term AAA cash amount on the relevant interest payment date
and/or to pay the relevant bullet amount, as described further in "THE MORTGAGES
TRUST - CASH MANAGEMENT AND ALLOCATION OF TRUST PROPERTY - PRINCIPAL RECEIPTS".
ARRANGERS means Barclays Bank PLC, Citigroup Global Markets Limited and
Deutsche Bank AG, London Branch.
ARREARS OF INTEREST means in respect of a given date, interest, principal
(if applicable) and expenses which are due and payable on that date.
ARREARS TRIGGER EVENT has the meaning given to it in the relevant
prospectus supplement.
ASSET TRIGGER EVENT will occur when an amount is debited to the AAA
principal deficiency sub-ledger of Funding.
AUTHORISED INVESTMENTS means:
(a) sterling gilt-edged securities;
(b) sterling demand or time deposits, certificates of deposit and
short-term debt obligations (including commercial paper) provided
that in all cases such investments have a maturity date falling no
later than the next following interest payment date, the
short-term unsecured, unguaranteed and unsubordinated debt
obligations of the issuing or guaranteeing entity or the entity
with which the demand or time deposits are made (being an
authorised person under FSMA) are rated at least equal to either
A-1+ by Standard & Poor's, P-1 by Moody's and F1 (in the case of
such investments having a maturity of less than 30 days) or F1+
(in the case of such investments having a maturity of 30 or more
days) by Fitch or their equivalents by three other
internationally recognised rating agencies and the long term
unsecured, unguaranteed and unsubordinated debt obligations of
such entity are rated at least A (in the case of such investments
having a maturity of less than 30 days) or AA- (in the case of
such investments having a maturity of more than 30 days) by Fitch
or which are otherwise acceptable to the rating agencies (if they
are notified in advance) to maintain the then current ratings of
the issuing entity notes; and
(c) in the case of collateral provided by the relevant issuing entity
swap provider and/or the Funding swap provider, such demand or
time deposit in such currency as is approved by the rating
agencies in respect of the relevant issuing entity swap agreement
and/or the Funding swap agreement.
BANK ACCOUNT AGREEMENT means the agreement entered into on 26 July 2000
between the account bank, the mortgages trustee and Funding which governs the
operation of the mortgages trustee GIC account, the Funding GIC account and the
Funding transaction account.
BASEL II FRAMEWORK has the meaning given to that term on page 72.
BASIC TERMS MODIFICATION means the modification of terms, including
altering the amount, rate or timing of payments on the issuing entity notes, the
currency of payment, the priority of payments or the quorum or majority required
in relation to these terms.
BB PRINCIPAL DEFICIENCY SUB-LEDGER means one of five sub-ledgers on the
principal deficiency ledger which specifically records any principal deficiency
in respect of any term BB advances.
BBB PRINCIPAL DEFICIENCY SUB-LEDGER means one of five sub-ledgers on the
principal deficiency ledger which specifically records any principal deficiency
in respect of any term BBB advances.
BB TERM ADVANCES means the term advances made by the issuing entity to
Funding under the master intercompany loan agreement from the proceeds of issue
of any series of class D notes.
239
BBB TERM ADVANCES means the term advances made by the issuing entity to
Funding under the master intercompany loan agreement from the proceeds of issue
of any series of class C notes.
BENEFICIARIES means both Funding and the seller together as beneficiaries
of the mortgages trust.
BOOKING FEE means a fee payable by the borrower in respect of
applications for certain types of loans.
BORROWER means in relation to a loan, the individual or individuals
specified as such in the relevant mortgage together with the individual or
individuals (if any) from time to time assuming an obligation to repay such loan
or any part of it.
BULLET AMOUNT means, in respect of a bullet term advance, the relevant
bullet amount specified in the relevant prospectus in relation to the related
series and class (or sub-class) of previous notes and (in the case of issuing
entity notes) the amount specified as the relevant bullet amount in the relevant
prospectus supplement.
BULLET REDEMPTION DATE means, for any series and class (or sub-class) of
bullet redemption notes, the interest payment date specified as such for such
series and class (or sub-class) of notes (in the case of US notes, in the
prospectus supplement), subject to the terms and conditions of the notes.
BULLET REDEMPTION NOTES means any series and class (or sub-class) of
notes which is scheduled to be repaid in full on one interest payment date.
Bullet redemption notes will be deemed to be pass-through notes in certain
circumstances.
BULLET REPAYMENT DATE means the interest payment date specified as such
for a bullet term advance in the relevant loan confirmation or (in the case of
issuing entity notes) the relevant term advance supplement.
BULLET TERM ADVANCE means any term advance which is scheduled to be
repaid in full on one interest payment date, including those term advances
designated as a "BULLET TERM ADVANCE" in the relevant prospectus or (in the case
of term advances made by the issuing entity) the relevant prospectus supplement.
Bullet term advances will be deemed to be pass-through term advances if:
(a) a bullet term advance is not repaid in full on its scheduled
repayment date;
(b) a trigger event occurs;
(c) the issuing entity security is enforced (or, in the case of term
advances made by previous issuing entities, the security created
by that previous issuing entity is enforced); or
(d) the Funding security is enforced.
BUNGALOW means a one storeyed house.
BUSINESS DAY means a day that is a London business day, a New York
business day and a TARGET business day.
CALENDAR YEAR means a year from the beginning of 1st January to the end
of 31st December.
CALLED NOTES has the meaning set forth in number 5.9 of the issuing
entity notes.
CAPITALISED means, in respect of a fee or other amount, added to the
principal balance of a loan.
CAPPED RATE LOANS means loans that are subject to a maximum rate of
interest and charge interest at the lesser of the SVR (or, as the case may be,
the tracker rate) or the specified capped rate.
CASH ACCUMULATION LEDGER means a ledger maintained by the cash manager
for Funding, which records the amounts accumulated by Funding to be set aside as
a series 1 term AAA cash amount on the relevant interest payment date in the
cash accumulation sub-ledger for the relevant issuing entity and/or to pay the
amounts due on the bullet term advances and/or, as applicable, the scheduled
amortisation term advances.
CASH ACCUMULATION PERIOD means the period of time estimated to be the
number of months prior to the relevant interest payment date of a bullet amount
or a series 1 term AAA cash amount, in each case necessary for Funding to
accumulate sufficient principal receipts so that ultimately the relevant class
of issuing entity notes will be redeemed in full in the amount of the relevant
bullet amount or the series 1 term
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AAA cash amounts set aside, as the case may be, as described further in
"THE MORTGAGES TRUST - CASH MANAGEMENT AND ALLOCATION OF TRUST PROPERTY -
PRINCIPAL RECEIPTS".
CASH ACCUMULATION SUB-LEDGER means a sub-ledger of such name on the cash
accumulation ledger in the name of the relevant issuing entity which will record
any series 1 term AAA cash amounts in relation to such issuing entity on the
relevant interest payment dates.
CASH MANAGEMENT AGREEMENT means the cash management agreement entered
into on 26 July 2000 (as amended on 29 November 2000 and to be further amended
on the closing date) between the cash manager, the mortgages trustee, Funding
and the security trustee, as described further in "THE MORTGAGES TRUST - CASH
MANAGEMENT FOR THE MORTGAGES TRUSTEE AND FUNDING".
CASH MANAGER means Abbey acting, pursuant to the cash management
agreement, as agent for the mortgages trustee, Funding and the security trustee,
inter alia, to manage all cash transactions and maintain certain ledgers on
behalf of the mortgages trustee, Funding and the security trustee.
CCA means the Consumer Credit Act 1974.
CHALET means a house with overhanging eaves.
CLASS means a class of notes (in other words, any of the class A notes,
the class B notes, the class M notes, the class C notes and the class D notes).
CLASS A AVAILABLE SUBORDINATED AMOUNT has the meaning given to that term
on page 75.
CLASS A NOTES means the issuing entity notes of any series designated as.
CLASS A NOTE ENFORCEMENT NOTICE means an enforcement notice served by the
note trustee in relation to the enforcement of the class A notes following a
class A note event of default.
CLASS A NOTE EVENT OF DEFAULT means an event of default under the
provisions of number 9.1 of the issuing entity notes where the issuing entity is
the defaulting party.
CLASS A NOTEHOLDERS means the holders of the class A notes.
CLASS A PREVIOUS NOTES means the series 1 class A previous notes, the
series 2 class A previous notes, the series 3 class A previous notes, the series
4 class A previous notes and the series 5 class A previous notes.
CLASS A REQUIRED SUBORDINATED AMOUNT has the meaning given to that term
on page 75.
CLASS A REQUIRED SUBORDINATED PERCENTAGE means, with respect to any
issuance of class A notes, the percentage specified as such with respect to
those class A notes.
CLASS B AVAILABLE SUBORDINATED AMOUNT has the meaning given to that term
on page 75.
CLASS B NOTES means the issuing entity notes of any series designated as
such.
CLASS B NOTE ENFORCEMENT NOTICE means an enforcement notice served by the
note trustee in relation to the enforcement of the class B notes following a
class B note event of default.
CLASS B NOTE EVENT OF DEFAULT means an event of default under the
provisions of number 9.2 of the issuing entity notes where the issuing entity is
the defaulting party.
CLASS B NOTEHOLDERS means the holders of the class B notes.
CLASS B PREVIOUS NOTES means the series 1 class B previous notes, the
series 2 class B previous notes, the series 3 class B previous notes, the series
4 class B previous notes and the series 5 class B previous notes.
CLASS B REQUIRED SUBORDINATED AMOUNT has the meaning given to that term
on page 81.
CLASS B REQUIRED SUBORDINATED PERCENTAGE means, with respect to any
issuance of class B notes, the percentage specified as such with respect to
those class B notes.
CLASS C AVAILABLE SUBORDINATED AMOUNT has the meaning given to that term
on page 75.
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CLASS C NOTES means the issuing entity notes of any series designated as
such.
CLASS C NOTE ENFORCEMENT NOTICE means an enforcement notice served by the
note trustee in relation to the enforcement of the class C notes following a
class C note event of default.
CLASS C NOTE EVENT OF DEFAULT means an event of default under the
provisions of number 9.4 of the issuing entity notes where the issuing entity is
the defaulting party.
CLASS C NOTEHOLDERS means the holders of the class C notes.
CLASS C PREVIOUS NOTES means the series 1 class C previous notes, the
series 2 class C previous notes, the series 3 class C previous notes, the series
4 class C previous notes and the series 5 class C previous notes.
CLASS C REQUIRED SUBORDINATED AMOUNT has the meaning given to that term
on page 76.
CLASS C REQUIRED SUBORDINATED PERCENTAGE means, with respect to any
issuance of class C notes, the percentage specified as such with respect to
those class C notes.
CLASS D NOTES means the issuing entity notes of any series designated as
such.
CLASS D NOTE ENFORCEMENT NOTICE means an enforcement notice served by the
note trustee in relation to the enforcement of the class D notes following a
class D note event of default.
CLASS D NOTE EVENT OF DEFAULT means an event of default under the
provisions of number 9.5 of the issuing entity notes where the issuing entity is
the defaulting party.
CLASS D NOTEHOLDERS means the holders of the class D notes.
CLASS D PREVIOUS NOTES means the series 3 class D previous notes.
CLASS M AVAILABLE SUBORDINATED AMOUNT has the meaning given to that term
on page 76.
CLASS M NOTES means the issuing entity notes of any series designated as
such.
CLASS M NOTE ENFORCEMENT NOTICE means an enforcement notice served by the
note trustee in relation to the enforcement of the class M notes following a
class M note event of default.
CLASS M NOTE EVENT OF DEFAULT means an event of default under the
provisions of number 9.3 of the issuing entity notes where the issuing entity is
the defaulting party.
CLASS M NOTEHOLDERS means the holders of the class M notes.
CLASS M PREVIOUS NOTES means the series 1 class M previous notes, the
series 2 class M previous notes, the series 3 class M previous notes and the
series 4 class M previous notes.
CLASS M REQUIRED SUBORDINATED AMOUNT has the meaning given to that term
on page 76.
CLASS M REQUIRED SUBORDINATED PERCENTAGE means, with respect to any
issuance of class M notes, the percentage specified as such with respect to
those class M notes.
CLEARING SYSTEMS means together, Euroclear, Clearstream, Luxembourg or
DTC.
CLEARSTREAM, LUXEMBOURG means Clearstream Banking, societe anonyme.
CLOSING DATE has the meaning given to it in the relevant prospectus
supplement.
CML means Council of Mortgage Lenders.
CODE means United States Internal Revenue Code of 1986, as amended.
COMMON DEPOSITARY means The Bank of New York, acting through its
London Branch.
COMPLETION CASHBACK means an agreement by the seller to pay an amount to
the relevant borrower on the completion of the relevant loan.
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CONVERTED means a property converted into one or more residential
dwellings that was either previously used for non-residential purposes or
comprised a different number of residential dwellings.
CORE TERMS means the main subject matter of the contract.
CORPORATE SERVICES AGREEMENT means the agreement entered into on 26 July
2000 between the corporate services provider, Holdings, Holmes Financing (No. 1)
PLC, Funding, the mortgages trustee, the post enforcement call option holder,
Abbey, the previous security trustee and the security trustee which governs the
provision of corporate services by the corporate services provider to Holmes
Financing (No. 1) PLC, Funding, the mortgages trustee, Holdings and the post
enforcement call option holder.
CORPORATE SERVICES PROVIDER means Wilmington Trust SP Services (London)
Limited.
CPR means on any calculation date means the annualised principal
repayment rate of all the loans comprised in the trust property during the
previous calculation period calculated as follows:
1 - ((1 - R) ^ (12))
where R equals the result (expressed as a percentage) of the total
principal receipts received during the period of one month (or, if shorter, from
and including the closing date) ending on that calculation date divided by the
aggregate outstanding principal balance of the loans comprised in the trust
property as at the first day of that period.
CRYSTALLISE means when a floating charge becomes a fixed charge.
CURRENT FUNDING SHARE means the share of Funding in the trust property
from time to time, calculated in accordance with the formula described in "THE
MORTGAGES TRUST - FUNDING SHARE OF THE TRUST PROPERTY".
CURRENT FUNDING SHARE PERCENTAGE means the percentage share of Funding in
the trust property from time to time, calculated in accordance with the formula
described in "THE MORTGAGES TRUST - FUNDING SHARE OF THE TRUST PROPERTY".
CURRENT INTERCOMPANY LOANS AND CURRENT INTERCOMPANY LOAN AGREEMENTS means
any loan made available by the issuing entity to Funding under the master
intercompany loan agreement in respect of the particular issue being issued on
the relevant closing date of the relevant prospectus supplement.
CURRENT NOTES means the previous notes and any issuing entity notes, in
each case outstanding as of the date of determination.
CURRENT SELLER SHARE means the share of the seller in the trust property
from time to time, calculated in accordance with the formula described in "THE
MORTGAGES TRUST - SELLER SHARE OF THE TRUST PROPERTY".
CURRENT SELLER SHARE PERCENTAGE means the percentage share of the seller
in the trust property from time to time, calculated in accordance with the
formula described in "THE MORTGAGES TRUST - SELLER SHARE OF THE TRUST PROPERTY".
CURRENT START-UP LOAN AGREEMENTS means the first start-up loan agreement,
the second start-up loan agreement, the third start-up loan agreement, the
fourth start-up loan agreement, the fifth start-up loan agreement, the sixth
start-up loan agreement, the seventh start-up loan agreement, the eighth
start-up loan agreement and any other start-up loan agreement between Abbey and
Funding under which Abbey has made a start-up loan to Funding.
CURRENT TERM ADVANCE means any term advance made by the issuing entity to
Funding under the current intercompany loan.
DAY COUNT FRACTION has the meaning given to that term on page 199.
DEALERS means the entities (if any) named as such in the relevant
prospectus supplement.
DEFERRED CONSIDERATION means the consideration payable to the seller in
respect of the loans assigned to the mortgages trustee from time to time, which
is payable out of Funding available revenue receipts after making payments of a
higher order of priority as set out in the Funding pre-enforcement revenue
priority of payments and the Funding post enforcement priority of payments.
243
DELAYED CASHBACK means an agreement by the seller to pay an amount to the
relevant borrower at a specified date following completion of the relevant loan.
DETERMINATION DATE means in respect of a series and class (or sub-class)
of issuing entity notes, the date(s) specified as such in the relevant
prospectus supplement.
DILIGENCE means the process (under Scots law) by which a creditor
attaches the property of a debtor to implement or secure a court decree or
judgment.
DISTRIBUTION DATE means the eighth day of each month or, if not a London
business day, the next succeeding London business day) of each month and any
other day on which Funding acquires a further interest in the trust property
and/or mortgages trustee acquires new loans from the seller.
DISTRIBUTION PERIOD means the period from (and including) one
distribution date, to (but excluding) the next distribution date and in respect
of the first distribution date, the period from (and including) the closing date
to (but excluding) the first distribution date.
DISTRIBUTION PERIOD FUNDING AMOUNT means the amount produced by applying
a rate equal to the weighted average of:
(a) the average of the standard variable mortgage rates or their
equivalent charged to existing borrowers on residential mortgage
loans as published from time to time, after excluding the highest
and the lowest rate, of Alliance & Leicester plc, Halifax Plc,
Lloyds TSB plc, HSBC Bank plc, National Westminster Bank Plc and
Woolwich plc (and where those banks have more than one standard
variable rate, the highest of those rates);
(b) the rates of interest payable on the tracker loans; and
(c) the rates of interest payable on the fixed rate loans (including
those capped rate loans that are subject to the specified capped
rate of interest),
to the notional amount of the Funding swap.
DISTRIBUTION PERIOD SWAP PROVIDER AMOUNT means the amount produced by
applying LIBOR for three-month sterling deposits (as determined in respect of
the corresponding interest period under the intercompany loans) plus a spread
for the relevant distribution period to the notional amount of the Funding swap.
DOWNGRADE TERMINATION EVENT means the occurrence of an Additional
Termination Event (as defined in the Funding swap agreement or issuing entity
swap agreement) following the failure by Funding swap provider or the relevant
issuing entity swap provider, as applicable, to comply with the ratings
downgrade provisions set out in the Funding swap agreement or the relevant
issuing entity swap agreement.
DOWNGRADE TERMINATION PAYMENT means a termination payment due and payable
to the Funding swap provider or the relevant issuing entity swap provider, as
applicable, following the occurrence of a downgrade termination event, save to
the extent that such termination payment may be satisfied by any swap
replacement payment made to Funding or the issuing entity following a downgrade
termination event in respect of the relevant swap and applied in accordance with
the relevant order of priority of payments.
DTC means The Depository Trust Company.
DTI means the Department of Trade and Industry.
EARLY REPAYMENT FEE means any fee which a borrower is required to pay in
the event that he or she is in default or his or her loan becomes repayable for
any other mandatory reason or he or she repays all or any part of the relevant
loan before a specified date.
EIGHTH START-UP LOAN means the loan made by the start-up loan provider to
Funding under the eighth start-up loan agreement.
EIGHTH START-UP LOAN AGREEMENT means the agreement entered into on 1
April 2004 between the start-up loan provider and Funding under which the eighth
start-up loan was made by the start-up loan provider to Funding.
ENGLISH LOAN means a loan secured by an English mortgage.
244
ENGLISH MORTGAGE means a mortgage over a property in England or Wales.
ENGLISH MORTGAGE CONDITIONS means the mortgage conditions applicable to
English loans.
ERISA means the US Employee Retirement Income Security Act of 1974, as
amended. See further "ERISA CONSIDERATIONS".
EURIBOR means the Euro-Zone Interbank offered rate, and in the case of
the offered notes the Euro-Zone Interbank offered rate as determined by the
agent bank in accordance with the issuing entity paying agent and agent bank
agreement.
EUROCLEAR means Euroclear Bank S.A./N.V.
EXCHANGE ACT means the United States Securities Exchange Act of 1934, as
amended.
EXISTING SWAP AGREEMENTS means any outstanding swap agreements entered
into between the previous issuing entities, the issuing entity or any new
issuing entity with the relevant existing swap provider.
EXISTING SWAP PROVIDER DEFAULT means the occurrence of an event of
default (as defined in the relevant existing swap agreement) where an existing
swap provider is the defaulting party (as defined in the relevant existing swap
agreement).
EXISTING SWAP PROVIDER DOWNGRADE TERMINATION EVENT means the occurrence
of an Additional Termination Event (as defined in the relevant existing swap
agreement) following the failure by the relevant existing swap provider to
comply with the ratings downgrade provisions set out in the relevant existing
swap agreement.
EXISTING SWAP PROVIDERS means the swap providers under the relevant
existing swap agreements.
EXPECTED PORTFOLIO means the ensemble of (a) the portfolio of loans
making up the trust property as at the reference date and (b) the portfolio of
new loans, again as at the reference date, from which the new loans to be
assigned by the seller to the mortgages trustee by the closing date shall be
drawn, in each case together with their related security, accrued interest and
other amounts derived from such loans.
FIFTH START-UP LOAN means the loan made by the start-up loan provider to
Funding under the fifth start-up loan agreement.
FIFTH START-UP LOAN AGREEMENT means the agreement entered into on 8
November 2001 between the start-up loan provider and Funding under which the
fifth start-up loan was made by the start-up loan provider to Funding.
FINAL MATURITY DATE means, in respect of a series and class (or
sub-class) of notes, the interest payment date falling in the month indicated
for such class in the relevant prospectus or (in the case of issuing entity
notes) the relevant prospectus supplement.
FINAL REPAYMENT DATE means, in relation to a term advance, the date
specified as such in the relevant loan confirmation or (in the case of issuing
entity notes) the related term advance supplement and prospectus supplement.
FINAL PURCHASE DATE has the meaning set forth in number 5.9 of the
issuing entity notes.
FINAL SCHEDULED REPAYMENT DATE means, in relation to a scheduled
amortisation term advance, the last scheduled repayment date in respect of such
scheduled amortisation term advance.
FIRST CLOSING DATE means the date of the first issue under the programme.
FIRST RESERVE FUND means an amount provided from part of the proceeds of
the first start-up loan, the second start-up loan, the third start-up loan, the
previous BB term advance by Holmes Financing (No. 4) PLC, the eighth start-up
loan, the 2007-1 start-up loan, the 2007-3 start-up loan, any other current
start-up loan or any new start-up loan and the Funding reserve fund, as
withdrawn and credited from time to time, which may be used by Funding to meet
any deficit in revenue or to repay amounts of principal, as described further in
"CREDIT STRUCTURE - FIRST RESERVE FUND".
FIRST RESERVE FUND ADDITIONAL REQUIRED AMOUNT means, at any time, the
amount specified as such in connection with the most recent issuance of notes.
245
FIRST RESERVE FUND REQUIRED AMOUNT means, at any time, the amount
specified as such in connection with the most recent issuance of notes.
FIRST RESERVE FUND TERM ADVANCES means (a) on the applicable scheduled
repayment date of each bullet term advance, that bullet term advance, (b) on the
final maturity date of each issuing entity note, previous note or new note in
respect of which a corresponding scheduled amortisation term advance (which is a
term AAA advance) has been made, that scheduled amortisation term advance, and
(c) on the final repayment date of each pass-through term advance which is a AAA
term advance, that pass-through term advance.
FIRST RESERVE LEDGER means a ledger maintained by the cash manager for
Funding to record the amount credited to the first reserve fund from the current
start-up loans, and subsequent withdrawals and deposits in respect of the first
reserve fund.
FIRST START-UP LOAN means the loan made by the start-up loan provider to
Funding under the first start-up loan agreement which was used in part to fund
the first reserve fund.
FIRST START-UP LOAN AGREEMENT means the agreement entered into on 26 July
2000 between the start-up loan provider and Funding under which the first
start-up loan was made by the start-up loan provider to Funding.
FITCH means Fitch Ratings Ltd.
FIXED RATE NOTE means an issuing entity note, the interest basis of which
is specified in the relevant prospectus supplement as being fixed rate.
FIXED SECURITY means a form of security which means that the chargor is
not allowed to deal with the assets subject to the charge without the consent of
the chargee.
FLAT means a set of rooms, usually on one floor, forming a complete
residence which is equivalent to an apartment.
FLEXIBLE LOAN means a type of loan product that typically incorporates
features that give the borrower options to, among other things, make further
drawings on the loan account and/or to overpay or underpay interest and
principal in a given month and, for the avoidance of doubt, includes flexible
plus loans.
FLEXIBLE PLUS LOAN means a flexible loan documented under the flexible
plus mortgage conditions 2003, the flexible plus mortgage conditions 2006 or the
flexible plus mortgage conditions 2007 and described in "THE LOANS -
CHARACTERISTICS OF THE LOANS - FLEXIBLE LOANS".
FLOATING CHARGE means a form of charge which is not attached to specific
assets but which "FLOATS" over a class of them and which allows the chargor to
deal with those assets in the everyday course of its business, up until the
point that the floating security is enforced, at which point it crystallises
into a fixed security.
FLOATING RATE NOTE means an issuing entity note, the interest basis of
which is specified in the relevant prospectus supplement as being floating rate.
FOURTH START-UP LOAN means the loan made by the start-up loan provider to
Funding under the fourth start-up loan agreement.
FOURTH START-UP LOAN agreement means the agreement entered into on 5 July
2001 between the start-up loan provider and Funding under which the fourth
start-up loan was made by the start-up loan provider to Funding.
FSA means the Financial Services Authority.
FSMA means the Financial Services and Markets Act 2000.
FUNDING means Holmes Funding Limited.
FUNDING AVAILABLE PRINCIPAL RECEIPTS means an amount equal to the sum of:
(a) all Funding principal receipts received by Funding during the
interest period ending on the relevant interest payment date and
any other amounts standing to the credit of the Funding principal
ledger;
246
(b) all Funding principal receipts standing to the credit of the cash
accumulation ledger which are to be applied on the next interest
payment date to repay a bullet term advance and/or, as applicable,
a scheduled amortisation term advance and for the avoidance of
doubt, all series 1 term AAA cash amounts standing to the credit
of the cash accumulation sub-ledger of the relevant issuing entity
which are to be applied on the next interest payment date to repay
the bullet term advance in respect of the AAA term advance and/or
any previous term AAA advance, as applicable;
(c) the amount (if any) credited to the principal deficiency ledger
pursuant to items (f), (h), (j), (l) and (n) in the Funding
pre-enforcement revenue priority of payments;
(d) prior to the enforcement of the Funding security, and to be
applied only in respect of the first reserve fund term advances,
the amount standing to the credit of the first reserve ledger (but
less any amounts applied or to be applied on the relevant date in
payment of interest and other revenue expenses as set out in items
(a) to (o) (inclusive) of the Funding pre-enforcement revenue
priority of payments); and
(e) prior to enforcement of the Funding security or the occurrence of
an asset trigger event, and to be applied only in respect of
Funding liquidity reserve fund term advances, the amount then
standing to the credit of the Funding liquidity reserve ledger but
less any amounts applied or to be applied on the relevant date in
payment of interest and other revenue expenses as set out in items
(A) to (O) (inclusive) of the Funding pre-enforcement revenue
priority of payments),
less
(f) the amount of Funding principal receipts to be applied on the next
interest payment date to pay items (a) to (e) (inclusive), (g),
(i), (k) and (m) of the Funding pre-enforcement revenue priority
of payments.
FUNDING AVAILABLE REVENUE RECEIPTS means an amount equal to the sum of:
(a) all mortgages trust available revenue receipts distributed to
Funding during the interest period ending on the immediately
following interest payment date;
(b) other net income of Funding including all amounts of interest
received on amounts standing to the credit of the Funding GIC
account and/or the Funding transaction account and/or authorised
investments and/or amounts received by Funding under the Funding
swap agreement (other than any early termination amount received
by Funding under the Funding swap agreement and any amount
standing to the credit of the Funding collateral account including
interest thereon, subject to the circumstances described in
"COLLATERAL IN THE FUNDING POST ENFORCEMENT PRIORITY OF PAYMENT"),
in each case to be received on or prior to the immediately
following interest payment date; and
(c) the amount standing to the credit of the reserve ledgers.
FUNDING COLLATERAL ACCOUNT means the designated bank account of Funding
into which collateral posted by the Funding swap provider will be deposited if
required pursuant to the Funding swap agreement.
FUNDING DEED OF CHARGE means the deed of charge entered into on 26 July
2000 between Funding, Holmes Financing (No. 1) PLC, the corporate services
provider, the account bank, the Funding GIC provider, the security trustee, the
seller, the start-up loan providers, the cash manager and the Funding swap
provider and acceded to on 29 November 2000 by Holmes Financing (No. 2) PLC, on
23 May 2001 by Holmes Financing (No. 3) PLC, on 5 July 2001 by Holmes Financing
(No. 4) PLC, on 8 November 2001 by Holmes Financing (No. 5) PLC, amended and
restated and acceded to by Holmes Financing (No. 6) PLC on 7 November 2002,
acceded to on 26 March 2003 by Holmes Financing (No. 7) PLC, on 1 April 2004 by
Holmes Financing (No. 8) PLC, on 8 December 2005 by Holmes Financing (No. 9)
PLC, on 8 August 2006 by Holmes Financing (No. 10) PLC and amended and restated
and acceded to by the issuing entity on 28 November 2006, and further amended
and restated and acceded by the issuing entity on 28 March 2007.
FUNDING GIC ACCOUNT means the account of Funding held with Abbey at its
branch at 21 Prescot Street, London E1 8AD. Amounts deposited to the credit of
the Funding GIC account will receive a rate of interest determined in accordance
with the Funding guaranteed investment contract.
FUNDING GIC PROVIDER means Abbey.
FUNDING GUARANTEED INVESTMENT CONTRACT means the guaranteed investment
contract entered into on 26 July 2000 between Funding and the Funding GIC
provider under which the Funding GIC provider
247
agrees to pay Funding a guaranteed rate of interest on the balance of the
Funding GIC account, as described further in "CREDIT STRUCTURE - MORTGAGES
TRUSTEE GIC ACCOUNT/FUNDING GIC ACCOUNT".
FUNDING LIQUIDITY RESERVE FUND means the reserve fund established on
downgrade of the long-term rating of the seller assigned by Fitch or Moody's to
meet interest and principal (in limited circumstances) on all the outstanding
notes.
FUNDING LIQUIDITY RESERVE FUND TERM ADVANCES means (a) on the applicable
scheduled repayment date of each bullet term advance, that bullet term advance,
(b) on the final scheduled repayment date of each scheduled amortisation term
advance which is a term AAA advance, that scheduled amortisation term advance,
and (c) on the final repayment date of each pass-through term advance which is a
term AAA advance, that pass-through term advance.
FUNDING LIQUIDITY RESERVE LEDGER means a ledger maintained by the cash
manager for Funding to record the amounts credited to the Funding liquidity
reserve fund from Funding available revenue receipts and from Funding available
principal receipts up to the Funding liquidity reserve required amount and
drawings made under the Funding liquidity reserve fund.
FUNDING LIQUIDITY RESERVE REQUIRED AMOUNT means an amount calculated in
accordance with the formula set out in "CREDIT STRUCTURE - FUNDING LIQUIDITY
RESERVE FUND".
FUNDING LOSS AMOUNT has the meaning given to it under "THE MORTGAGES
TRUST - LOSSES".
FUNDING POST ENFORCEMENT PRIORITY OF PAYMENTS means the order in which,
following the enforcement of the Funding security, the security trustee will
apply the amounts received following enforcement of the Funding security, as set
out in "SECURITY FOR FUNDING'S OBLIGATIONS".
FUNDING PRE-ENFORCEMENT PRINCIPAL PRIORITY OF PAYMENTS means the order in
which, prior to enforcement of the Funding security, the cash manager will apply
the Funding available principal receipts on each interest payment date, as set
out in "SECURITY FOR FUNDING'S OBLIGATIONS".
FUNDING PRE-ENFORCEMENT REVENUE PRIORITY OF PAYMENTS means the order in
which, prior to enforcement of the Funding security, the cash manager will apply
the Funding available revenue receipts on each interest payment date, as set out
in "SECURITY FOR FUNDING'S OBLIGATIONS".
FUNDING PRINCIPAL LEDGER means a ledger maintained by the cash manager
for Funding to record the amount of principal receipts received by Funding from
the mortgages trustee on each distribution date.
FUNDING PRINCIPAL RECEIPTS means the principal receipts paid by the
mortgages trustee to Funding on each distribution date.
FUNDING RESERVE FUND means the amount credited to the Funding reserve
fund from the excess Funding available revenue receipts after Funding has paid
all of its obligations in respect of items ranking higher than item (u) of the
Funding pre-enforcement revenue priority of payments on each interest payment
date as described further in "CREDIT STRUCTURE - FUNDING RESERVE FUND".
FUNDING RESERVE LEDGER means a ledger maintained by the cash manager to
record the amount credited to the Funding reserve fund from the excess Funding
available revenue receipts after Funding has paid all of its obligations in
respect of items ranking higher than item (u) of the Funding pre-enforcement
revenue priority of payments on each interest payment date, and any subsequent
withdrawals in respect of the Funding reserve fund.
FUNDING RESERVE FUND REQUIRED AMOUNT means, at any time, the amount
specified as such in connection with the most recent issuance of notes.
FUNDING REVENUE LEDGER means a ledger maintained by the cash manager to
record all amounts received by Funding from the mortgages trustee on each
distribution date other than principal receipts, together with interest received
by Funding on its authorised investments or pursuant to the bank account
agreement.
FUNDING SECURED CREDITORS means the security trustee, the previous
security trustee, the Funding swap provider, the cash manager, the account bank,
the previous issuing entities, the seller, the corporate services provider, the
start-up loan provider, the issuing entity and any other entity that accedes to
the terms of the Funding deed of charge from time to time.
FUNDING SECURITY means security created by Funding pursuant to the
Funding deed of charge in favour of the Funding secured creditors.
248
FUNDING SHARE or FUNDING'S SHARE means the Funding share of the trust
property from time to time, as calculated on each distribution date.
FUNDING SHARE PERCENTAGE means the Funding share percentage of the trust
property from time to time as calculated on each distribution date.
FUNDING SHARE/SELLER SHARE LEDGER means the ledger of such name
maintained by the cash manager pursuant to the cash management agreement to
record the Funding share, the Funding share percentage, the seller share and
seller share percentage of the trust property.
FUNDING SWAP means the swap documented under the Funding swap agreement
which enables Funding to hedge against the possible variance between the
mortgages trustee SVR payable on the variable rate loans, the fixed rates of
interest payable on the fixed rate loans and the rates of interest payable on
the tracker loans and a sterling LIBOR based rate for three-month sterling
deposits, as described further in "THE SWAP AGREEMENTS - THE FUNDING SWAP".
FUNDING SWAP AGREEMENT means the 1992 ISDA Master Agreement
(Multicurrency-Cross Border) and schedule thereto entered into on 26 July 2000
(as amended and restated on 29 November 2000, as further amended by a side
letter dated 6 December 2000 and as further amended by deed on 23 May 2001)
between Funding, the Funding swap provider and the security trustee and any
confirmation documented thereunder from time to time between Funding, the
Funding swap provider and the security trustee (as each of the same may be
amended, restated, varied or supplemented from time to time).
FUNDING SWAP PROVIDER means Santander Global Banking & Markets.
FUNDING SWAP PROVIDER DEFAULT means the occurrence of an event of default
(as defined in the Funding swap agreement) where the Funding swap provider is
the defaulting party (as defined in the Funding swap agreement).
FUNDING TRANSACTION ACCOUNT means the account in the name of Funding
maintained with the account bank pursuant to the bank account agreement or such
additional or replacement account as may for the time being be in place.
FURTHER ADVANCE means an advance made following a request from an
existing borrower for a further amount to be lent to him or her under his or her
mortgage, where Abbey has discretion as to whether to accept that request.
FURTHER ISSUING ENTITY NOTES means, at any time, issuing entity notes
issued after that time.
GLOBAL NOTES means the US global notes and the Reg S global notes.
HIGH LOAN-TO-VALUE FEE means a fee incurred by a borrower as a result of
taking out a loan with an LTV ratio in excess of a certain percentage specified
in the offer.
HIGHER VARIABLE RATE LOANS means variable rate loans subject to an
interest rate at a margin above the Abbey SVR or the mortgages trustee SVR, as
applicable.
HOLDINGS means Holmes Holdings Limited.
HOUSE means a building for human habitation.
ICTA means Income and Corporation Taxes Act 1988.
IN ARREARS means in respect of a mortgage account, occurs when one or
more monthly payments in respect of a mortgage account have become due and
unpaid by a borrower.
INITIAL PURCHASE DATE has the meaning set forth in number 5.9 of the
issuing entity notes.
INSOLVENCY EVENT means in respect of the seller, the servicer or the cash
manager or the issuing cash manager (each, for the purposes of this definition,
a relevant entity) means:
(a) an order is made or an effective resolution passed or documents
filed contemplating the winding up of or administration of the
relevant entity;
(b) the relevant entity ceases or threatens to cease to carry on its
business or stops payment or threatens to stop payment of its
debts or is deemed unable to pay its debts within the meaning of
section 123(a), (b), (c) or (d) of the Insolvency Act 1986 (as
amended) or becomes unable
249
to pay its debts as they fall due or the value of its assets falls
to less than the amounts of its liabilities (taking into account,
for both these purposes, contingent and prospective liabilities)
or otherwise becomes insolvent; and
(c) proceedings (including, but not limited to, presentation of an
application for an administration order, the filing of documents
with the court for the appointment of an administrator or the
service of a notice of intention to appoint an administrator) are
initiated against the relevant entity under any applicable
liquidation, administration, reorganisation (other than a
reorganisation where the relevant entity is solvent) or other
similar laws, save where such proceedings are being contested in
good faith; or an administrative or other receiver, administrator
or other similar official is appointed in relation to the whole or
any substantial part of the undertaking or assets of the relevant
entity or the appointment of an administrator takes effect; or a
distress, execution, diligence or other process is enforced upon
the whole or any substantial part of the undertaking or assets of
the relevant entity and in any of the foregoing cases it is not
discharged within 15 London business days; or if the relevant
entity initiates or consents to judicial proceedings relating to
itself under any applicable liquidation, administration,
insolvency, reorganisation or other similar laws or makes a
conveyance or assignment for the benefit of its creditors
generally or takes steps with a view to obtaining a moratorium in
respect of any indebtedness.
INTERCOMPANY LOAN means all the term advances made available to Funding
by (i) a previous issuing entity or the issuing entity (as the case may be)
under a previous intercompany loan, (ii) the issuing entity under the current
intercompany loan, or (iii) the issuing entity or any new issuing entity (as the
case may be) under any new intercompany loan.
INTERCOMPANY LOAN ACCELERATION NOTICE means an acceleration notice served
by the security trustee on Funding following an intercompany loan event of
default.
INTERCOMPANY LOAN AGREEMENTS means the previous intercompany loan
agreements, the current intercompany loan agreements and all new intercompany
loan agreements.
INTERCOMPANY LOAN EVENT OF DEFAULT has the meaning given to it on page
130.
INTERCOMPANY LOAN LEDGER means a ledger maintained by the cash manager to
record payments of interest and repayments of principal made on each of the
outstanding term advances and any new term advances under any intercompany
loans.
INTEREST DETERMINATION DATE means:
(a) in relation to a series and class (or sub-class) of notes, the
relevant closing date of such issuing entity notes or such other
date as may be specified as such in the relevant prospectus or (in
the case of issuing entity notes) the relevant prospectus
supplement; and
(b) in relation to a term advance, the relevant closing date of the
related series and class of notes or such other date as may be
specified as such in the relevant loan confirmation or (in the
case of the issuing entity notes) the relevant term advance
supplement.
INTEREST PAYMENT DATE means (i) in respect of a series and class (or
sub-class) of notes, the interest payment dates specified in the relevant
prospectus or (in the case of the issuing entity notes) the relevant prospectus
supplement, subject to the terms and conditions of the US notes and (ii) in
respect of a term advance, the interest payment date specified in the relevant
loan confirmation or (in the case of the issuing entity notes) in the relevant
prospectus supplement as applicable to such term advance.
INTEREST PERIOD means:
(a) in relation to a series and class (or sub-class) of issuing entity
notes (i) the period from (and including) the relevant interest
payment date (or in respect of the first interest period, the
applicable interest determination date) to (but excluding) the
next following (or first) relevant interest payment date; and
(b) in relation to the term advances the period from (and including)
the applicable interest payment date (or in respect of the first
interest period, the applicable interest determination date) to
(but excluding) the next following applicable interest payment
date.
INVESTMENT COMPANY ACT means the United States Investment Company Act of
1940, as amended.
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INVESTMENT PLAN means in respect of an interest only loan, a repayment
mechanism selected by the borrower and intended to provide sufficient funds to
redeem the full principal of a mortgage loan at maturity.
ISSUE means each issue of issuing entity notes under the programme,
comprising one or more series and classes (or sub-classes) of issuing entity
notes.
ISSUING ENTITIES means the previous issuing entities, the issuing entity
and any new issuing entity.
ISSUING ENTITY ACCOUNT BANKS means the sterling account bank and the
non-sterling account bank.
ISSUING ENTITY BANK ACCOUNT AGREEMENT means the agreement entered into on
28 November 2006 between the issuing cash managers and the issuing entity (as
the same may be amended, restated, novated, replaced or supplemented from time
to time) which governs the operation of the issuing entity transaction accounts.
ISSUING ENTITY CASH MANAGEMENT AGREEMENT means the issuing entity cash
management agreement entered into on 28 November 2006 between the issuing cash
manager, the issuing entity and the issuing entity security trustee (as the same
may be amended, restated, novated, replaced or supplemented from time to time),
as described further in "CASH MANAGEMENT FOR THE ISSUING ENTITY".
ISSUING ENTITY CASH MANAGER means Abbey acting, pursuant to the issuing
entity cash management agreement, as agent for the issuing entity and the
issuing entity security trustee to manage all cash transactions and maintain
certain ledgers on behalf of the issuing entity.
ISSUING ENTITY COLLATERAL ACCOUNT means the designated bank account of
the issuing entity into which collateral posted by the relevant issuing entity
swap provider will be deposited if required pursuant to the relevant issuing
entity swap agreement.
ISSUING ENTITY CORPORATE SERVICES AGREEMENT means an agreement entered
into on 28 November 2006 between the issuing entity, the corporate services
provider and the issuing entity security trustee (as the same may be amended,
restated, novated, replaced or supplemented from time to time), which governs
the provision of corporate services by the corporate services provider to the
issuing entity.
ISSUING ENTITY DEED OF CHARGE means the deed of charge entered into on 28
November 2006 between, among others, the issuing entity and the issuing entity
security trustee (as the same may be amended, restated, novated, replaced or
supplemented from time to time), under which the issuing entity charges the
issuing entity security in favour of the issuing entity security trustee for the
benefit of the issuing entity secured creditors, as described further in
"SECURITY FOR THE ISSUING ENTITY'S OBLIGATIONS".
ISSUING ENTITY NOTES includes all of the class A notes, the class B
notes, the class M Notes, the class C notes and the class D notes of any series
issued by the issuing entity.
ISSUING ENTITY PAYING AGENT AND AGENT BANK AGREEMENT means the agreement
entered into on 28 November 2006 (as amended, restated, supplemented, replaced
and/or novated from time to time) which sets out the appointment of the paying
agents, the registrar, the transfer agent and the agent bank for the issuing
entity notes.
ISSUING ENTITY POST ENFORCEMENT CALL OPTION AGREEMENT means the agreement
entered into on 28 November 2006 under which the note trustee agrees on behalf
of the holders of the class B notes, the class M notes, the class C notes and
the class D notes that following enforcement of the issuing entity security, the
post-enforcement call option holder may call for the class B notes, the class M
notes, the class C notes and the class D notes (as amended, restated,
supplemented, replaced and/or novated from time to time).
ISSUING ENTITY POST ENFORCEMENT PRIORITY OF PAYMENTS means the order in
which, following enforcement of the issuing entity security, the issuing entity
security trustee will apply the amounts received following enforcement of the
issuing entity security, as set out in "CASHFLOWS - DISTRIBUTION OF ISSUING
ENTITY PRINCIPAL RECEIPTS AND ISSUING ENTITY REVENUE RECEIPTS FOLLOWING
ENFORCEMENT OF THE ISSUING ENTITY SECURITY AND ENFORCEMENT OF THE FUNDING
SECURITY".
ISSUING ENTITY PRE-ENFORCEMENT REVENUE PRIORITY OF PAYMENTS means the
order in which, prior to enforcement of the issuing entity security, the issuing
cash manager will apply the issuing entity revenue receipts on each interest
payment date, as set out in "CASHFLOWS - DISTRIBUTION OF ISSUING ENTITY REVENUE
RECEIPTS".
251
ISSUING ENTITY PRINCIPAL RECEIPTS means an amount equal to the sum of all
principal amounts repaid by Funding to the issuing entity under the master
intercompany loan.
ISSUING ENTITY REVENUE RECEIPTS means, in relation to an interest payment
date, an amount equal to the sum of:
(a) interest to be paid by Funding on the relevant interest payment
date in respect of the term advances under the master intercompany
loan agreement;
(b) fees to be paid to the issuing entity by Funding on the relevant
interest payment date under the terms of the master intercompany
loan agreement;
(c) interest payable on the issuing entity's bank accounts (but
excluding any interest in respect of collateral provided by a
issuing entity swap provider to the issuing entity) and any
authorised investments which will be received on or before the
relevant interest payment date; and
(d) other net income of the issuing entity including amounts received
or to be received under the issuing entity swap agreements on or
before the relevant interest payment date (without double
counting) (other than any early termination amount received by the
issuing entity under the issuing entity swap agreements and any
amount to be credited to the relevant issuing entity collateral
account, including interest thereon, subject to the circumstances
described in "CASHFLOWS - COLLATERAL IN THE ISSUING ENTITY POST
ENFORCEMENT PRIORITY OF PAYMENTS").
ISSUING ENTITY SECURED CREDITORS means the issuing entity security
trustee, the issuing entity swap providers, the note trustee, the noteholders,
the issuing entity account banks, the paying agents, the registrar, the transfer
agent, the agent bank, the corporate services provider, the issuing entity cash
manager and any new issuing entity secured creditor who accedes to the issuing
entity deed of charge from time to time under a deed of accession or a
supplemental deed.
ISSUING ENTITY SECURITY means security created by the issuing entity
pursuant to the issuing entity deed of charge in favour of the issuing entity
secured creditors.
ISSUING ENTITY SECURITY TRUSTEE means The Bank of New York, acting
through its London branch at One Canada Square, London, E14 5AL.
ISSUING ENTITY SWAP AGREEMENTS means each 1992 ISDA Master Agreement
(Multicurrency-Cross Border), schedules thereto and confirmations thereunder
relating to issuing entity swaps to be entered into on or before the closing
date of a series in relation to a series and/or class (or sub-class) of issuing
entity notes, between the issuing entity, the issuing entity swap provider and
the issuing entity security trustee (as amended, restated, novated, replaced or
supplemented from time to time).
ISSUING ENTITY SWAP EXCLUDED TERMINATION AMOUNT means, in relation to an
issuing entity swap agreement, an amount equal to:
(a) the amount of any termination payment due and payable to the
relevant issuing entity swap provider as a result of an issuing
entity swap provider default or following an issuing entity swap
provider downgrade termination event;
less
(b) the amount, if any, received by the issuing entity from a
replacement swap provider upon entry by the issuing entity into an
agreement with such replacement swap provider to replace such
issuing entity swap agreement which has terminated as a result of
such issuing entity swap provider default or following the
occurrence of such issuing entity swap provider downgrade
termination event.
ISSUING ENTITY SWAP PROVIDER means each person who enters into an issuing
entity swap with the issuing entity (other than the issuing entity security
trustee) and, in relation to a series and class (or sub-class) of issuing entity
notes, shall be identified as such in the relevant prospectus supplement.
ISSUING ENTITY SWAP PROVIDER DEFAULT means the occurrence of an Event of
Default under an issuing entity swap agreement (as defined in the relevant
issuing entity swap agreement) where the issuing entity swap provider is the
Defaulting Party (as defined in the relevant issuing entity swap agreement).
ISSUING ENTITY SWAP PROVIDER DOWNGRADE EVENT means the occurrence of an
additional termination event under an issuing entity swap agreement following
the failure by the issuing entity swap provider to
252
comply with the requirements of the ratings downgrade provisions set out
in the relevant issuing entity swap agreement.
ISSUING ENTITY SWAP RATE means the rate at which a foreign currency is
converted to sterling or, as the case may be, sterling is converted a foreign
currency under the relevant issuing entity swap or, if there is no such issuing
entity swap rate in effect at such time, the "SPOT" rate at which such foreign
currency is converted into sterling or as the case may be, sterling is converted
into such foreign currency on the foreign exchange markets.
ISSUING ENTITY SWAPS means the currency swaps entered into by the issuing
entity from time to time which enable the issuing entity to hedge the amounts it
receives and pays under the master intercompany loan agreement and the amounts
it receives and must pay under each series and class of issuing entity notes
(other than sterling-denominated issuing entity notes) in the specified
currency, as identified in the relevant prospectus supplement.
ISSUING ENTITY TRANSACTION ACCOUNTS means the following bank accounts
that the issuing entity currently maintains in its name: a sterling bank account
with Abbey at 21 Prescot Street, London E1 8AD; and a euro account and a dollar
account with Citibank, N.A., London Branch at Citigroup Centre, Canada Square,
London, E14 5LB.
ISSUING ENTITY TRANSACTION DOCUMENTS means the documents listed in
"LISTING AND GENERAL INFORMATION".
LEAP YEAR means from 1st January to 31st December in the relevant year.
LENDING CRITERIA means the criteria applicable to the granting of an
offer of a mortgage to a borrower, as may be amended from time to time and as
further described in "THE LOANS - LENDING CRITERIA".
LIBOR or STERLING LIBOR means the London Interbank Offer Rate for
sterling deposits, as determined by the agent bank in accordance with the
issuing entity paying agent and agent bank agreement.
LINK-DETACHED means a house joined to another house or houses typically
by way of an attached garage.
LOAN means each loan referenced by its loan identifier number and
comprising the aggregate of all principal sums, interest, costs, charges,
expenses and other monies (including all further advances) due or owing with
respect to that loan under the relevant mortgage conditions by a borrower on the
security of a mortgage from time to time outstanding or, as the context may
require, the borrower's obligations in respect of the same.
LONDON BUSINESS DAY means a day (other than a Saturday or Sunday) on
which banks are generally open for business in London.
LONDON STOCK EXCHANGE means London Stock Exchange plc.
LOSSES means the realised losses experienced on the loans in the
portfolio.
LOSSES LEDGER means the ledger of such name created and maintained by the
cash manager pursuant to the cash management agreement to record the losses on
the portfolio.
LTV RATIO or LOAN-TO-VALUE RATIO means the ratio of the outstanding
balance of a loan to the value of the mortgaged property securing that loan.
MAISONETTE means a flat on more than one floor used as a residence.
MASTER DEFINITIONS AND CONSTRUCTION SCHEDULE means together, the amended
and restated master definitions and construction schedule and the issuing entity
master definitions and construction schedule signed on 28 November 2006, as
amended from time to time, which are schedules of definitions used in the
issuing entity transaction documents.
MASTER INTERCOMPANY LOAN means all the term advances made available by
the issuing entity to Funding under the relevant intercompany loan pursuant to
the master intercompany loan agreement.
MASTER INTERCOMPANY LOAN AGREEMENT means the master intercompany
loan agreement entered into on 28 November 2006 between Funding, the
issuing entity and the security trustee, as amended, restated, novated,
replaced or supplemented from time to time.
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MASTER INTERCOMPANY LOAN ENFORCEMENT NOTICE means an enforcement notice
served by the security trustee in relation to the enforcement of the Funding
security following a master intercompany loan event of default under the master
intercompany loan.
MASTER INTERCOMPANY LOAN EVENT OF DEFAULT means an event of default under
the master intercompany loan agreement.
MIG POLICIES means mortgage indemnity guarantee policies.
MINIMUM RATE LOANS means loans subject to a minimum rate of interest.
MINIMUM SELLER SHARE means an amount included in the current seller share
which is calculated in accordance with the mortgages trust deed as further
described under "THE MORTGAGES TRUST".
MONEY MARKET NOTES means the bullet redemption notes or scheduled
redemption notes, the final maturity date of which will be less than 397 days
from the closing date on which such issuing entity notes are issued.
MOODY'S means Moody's Investors Service Limited.
MOODY'S PORTFOLIO VARIATION TEST means the calculation methodology
provided by Moody's to the servicer from time to time for the purpose of
calculating the Moody's portfolio variation test value.
MOODY'S PORTFOLIO VARIATION TEST VALUE means a certain percentage
resulting from the application of the Moody's portfolio variation test.
MORTGAGE means the legal charge or standard security securing a loan.
MORTGAGE ACCOUNT means all loans secured on the same property will be
incorporated in the same mortgage account.
MORTGAGE CONDITIONS means the terms and conditions applicable to the
loans as contained in the seller's "MORTGAGE CONDITIONS" booklet for England and
Wales or Scotland applicable from time to time.
MORTGAGEE means the party in whose favour a mortgage is granted.
MORTGAGE RELATED SECURITIES means as defined in the US Secondary Mortgage
Markets Enhancement Act 1984, as amended.
MORTGAGE SALE AGREEMENT means the mortgage sale agreement entered
into on 26 July 2000 as amended on 29 November 2000 and as amended and
restated on 23 May 2001, 5 July 2001, 8 November 2001, 7 November 2002, 26
March 2003, 1 April 2004, 8 December 2005, 8 August 2006, 28 November 2006
and 20 March 2008 and made between the seller, the mortgages trustee, Funding
and the security trustee in relation to the assignment of the portfolio to
the mortgages trustee, as further described in "ASSIGNMENT OF THE LOANS AND
THEIR RELATED SECURITY".
MORTGAGE TERMS means all the terms and conditions applicable to a loan,
including without limitation the applicable mortgage conditions and offer
conditions.
MORTGAGES TRUST means the bare trust of the trust property held by the
mortgages trustee as to both capital and income on trust absolutely for Funding
(as to the Funding share) and the seller (as to the seller share), so that each
has an undivided beneficial interest in the trust property.
MORTGAGES TRUST AVAILABLE REVENUE RECEIPTS means an amount equal to the
sum of:
(a) revenue receipts on the loans (but excluding principal receipts);
and
(b) interest payable to the mortgages trustee on the mortgages trustee
GIC account and the alternative accounts,
less
(c) third party amounts.
MORTGAGES TRUST DEED means the mortgages trust deed dated 29 November
2000, as amended from time to time, between (among others) the mortgages
trustee, Funding and the seller, as further described in "THE MORTGAGES TRUST".
254
MORTGAGES TRUSTEE means Holmes Trustees Limited.
MORTGAGES TRUSTEE ACCOUNTS means the mortgages trustee GIC account and
the alternative accounts.
MORTGAGES TRUSTEE GIC ACCOUNT means the account in the name of the
mortgages trustee maintained with the account bank pursuant to the terms of the
bank account agreement and the mortgages trustee guaranteed investment contract
or such additional or replacement account as may for the time being be in place.
MORTGAGES TRUSTEE GIC PROVIDER means Abbey.
MORTGAGES TRUSTEE GUARANTEED INVESTMENT CONTRACT means the guaranteed
investment contract entered into between the mortgages trustee and the mortgages
trustee GIC provider under which the mortgages trustee GIC provider agrees to
pay the mortgages trustee a guaranteed rate of interest on the balance of the
mortgages trustee GIC account, as described further in "CREDIT STRUCTURE -
MORTGAGES TRUSTEE GIC ACCOUNT/FUNDING GIC ACCOUNT".
MORTGAGES TRUSTEE PRINCIPAL PRIORITY OF PAYMENTS means the order in which
the cash manager applies principal receipts on the loans on each distribution
date to each of Funding and the seller, depending on whether a trigger event has
occurred, as set out in "THE MORTGAGES TRUST".
MORTGAGES TRUSTEE REVENUE PRIORITY OF PAYMENTS means the order in which
the cash manager applies the mortgages trust available revenue receipts on each
distribution date, as set out in "THE MORTGAGES TRUST".
MORTGAGES TRUSTEE SVR means the standard variable rate which applies to
certain variable rate loans in the portfolio as set by the servicer, as
described further in "THE SERVICING AGREEMENT".
N(M) means the date on which FSMA rules relating to the regulation of
mortgages came into effect, namely 31 October 2004.
NATIONAL MORTGAGE LENDING POLICY means the lending policy of the seller
as varied from time to time.
NEW FUNDING ENTITY means a new entity, being a wholly owned subsidiary of
Holdings, which may be established by Holdings, from time to time to issue new
notes and (with the agreement of the seller and Funding) to acquire an interest
in the trust property.
NEW INTERCOMPANY LOAN AGREEMENTS means the intercompany loan agreements
made between any new issuing entity and Funding.
NEW INTERCOMPANY LOANS means (i) any new loans made available by the
issuing entity to Funding under the master intercompany loan agreement in
respect of a particular issue issued on a date later than the closing date of
the relevant prospectus supplement or (ii) any new loans made available by a new
issuing entity to Funding under a new intercompany loan agreement entered into
by Funding with a new issuing entity.
NEW ISSUE means the issue of new notes to investors by a new issuing
entity to fund a new intercompany loan or the issue of further issuing entity
notes by the issuing entity.
NEW ISSUING ENTITY means a new wholly owned subsidiary of Holdings that
is not established as at the closing date and which, if established, will issue
new notes and make a new intercompany loan or loans to Funding.
NEW LOANS means loans, other than the current loans, which the seller may
assign, from time to time, to the mortgages trustee pursuant to the terms of the
mortgage sale agreement.
NEW NOTES means an issue of notes by a new issuing entity.
NEW RELATED SECURITY means the security for the new loans which the
seller may assign to the mortgages trustee pursuant to the mortgage sale
agreement.
NEW START-UP LOAN AND NEW START-UP LOAN PROVIDER means a new start-up
loan to be made available to Funding by a new start-up loan provider when
Funding enters into a new intercompany loan agreement.
255
NEW START-UP LOAN AGREEMENT means a new start-up loan agreement to be
entered into by a new start-up loan provider, Funding and the security trustee.
NEW SWAP AGREEMENT AND NEW SWAP PROVIDER means a swap agreement to be
entered into by a new issuing entity, a new swap provider and a new security
trustee.
NEW TERM ADVANCES means (i) any new term advance made by the issuing
entity to Funding under the master intercompany loan agreement or (ii) any new
term advance made by a new issuing entity to Funding under a new intercompany
loan agreement entered into by Funding with that new issuing entity.
NEW YORK BUSINESS DAY means a day (other than a Saturday or a Sunday) on
which banks are generally open in the city of New York.
A NON-ASSET TRIGGER EVENT will occur if:
(a) an insolvency event occurs in relation to the seller;
(b) the seller is terminated as servicer and a new servicer is not
appointed within 60 days;
(c) on the distribution date immediately succeeding a seller share
event distribution date, the seller share is equal to or less than
the minimum seller share (determined using the amounts of the
current seller share and minimum seller share that would exist
after making the distributions of the principal receipts due on
that distribution date on the basis that the cash manager assumes
that those principal receipts are distributed in the manner
described under "- MORTGAGES TRUST ALLOCATION AND DISTRIBUTION OF
PRINCIPAL RECEIPTS PRIOR TO THE OCCURRENCE OF A TRIGGER EVENT");
or
(d) on the distribution date immediately succeeding a seller share
event distribution date, the outstanding principal balance of
loans comprising the trust property on such distribution date is
less than the required loan balance amount in effect at that time.
NON-STERLING ACCOUNT BANK means Citibank, N.A., London Branch situated at
Citigroup Centre, Canada Square, London E14 5LB.
NOTEHOLDERS means the holders of issuing entity notes, previous notes or
new notes, as applicable, or any of them as the context requires.
NOTE ENFORCEMENT NOTICE means an enforcement notice served by the note
trustee or the issuing entity security trustee in relation to the enforcement of
the issuing entity security following a note event of default under the issuing
entity notes.
NOTE EVENT OF DEFAULT means an event of default under number 9 of the
issuing entity notes where the issuing entity is the defaulting party.
NOTE PRINCIPAL PAYMENT means the amount of each principal payment payable
on each issuing entity note.
NOTES includes all of the issuing entity notes, the previous notes and
any new notes.
NOTE TRUSTEE means The Bank of New York, acting through its London
branch at One Canada Square, London, E14 5AL.
OFFER CONDITIONS means the terms and conditions applicable to a specific
loan as set out in the relevant offer letter to the borrower.
OFFERED NOTES means each series and class (or sub-class) of US notes.
OFT means the Office of Fair Trading.
OUTSTANDING AMOUNT means following enforcement of a loan, the amount
outstanding on the payment of that loan after deducting money received under the
applicable mortgage indemnity guarantee policy.
PASS-THROUGH TERM ADVANCE means a term advance which has no scheduled
repayment date other than the final repayment date and which is designated as a
"PASS-THROUGH" term advance in the relevant prospectus supplement.
PAYING AGENTS means the principal paying agent and the US paying agent.
256
PAYMENT HOLIDAY means a period during which a borrower may suspend
payments under a mortgage loan where the borrower is permitted under the
mortgage terms to do so and will therefore not be in breach of the mortgage
terms.
PAYMENT RATE DATE means the eighth day (or, if not a London business day,
the next succeeding London business day) of each month.
PAYMENT RATE PERIOD means the period from and including a payment rate
date to but excluding the next payment rate date.
PENSION PLAN means a financial plan arranged by a borrower to provide for
such borrower's expenses during retirement.
PORTFOLIO means at any time the loans and their related security assigned
to the mortgages trustee and held by the mortgages trustee on trust for the
beneficiaries.
POST-ENFORCEMENT CALL OPTION means the call option granted to PECOH in
respect of the class B notes, the class M notes, the class C notes and the class
D notes under the issuing entity post enforcement call option agreement.
POST-ENFORCEMENT CALL OPTION HOLDER or PECOH means PECOH Limited.
PREVIOUS A TERM ADVANCES means the advances made under the previous
intercompany loan agreements or the master intercompany loan agreement, as the
case may be, from the proceeds of the issue of the series 1 class M previous
notes, the series 2 class M previous notes, the series 3 class M previous notes
and the series 4 class M previous notes.
PREVIOUS AA TERM ADVANCES means the advances made under the previous
intercompany loan agreements or the master intercompany loan agreement, as the
case may be, from the proceeds of issue of the series 1 class B previous notes,
the series 2 class B previous notes, the series 3 class B previous notes, the
series 4 class B previous notes and the series 5 class B previous notes.
PREVIOUS AAA TERM ADVANCES means the advances made under the previous
intercompany loan agreements or the master intercompany loan agreement, as the
case may be, from the proceeds of issue of the series 1 class A previous notes,
the series 2 class A previous notes, the series 3 class A previous notes, the
series 4 class A previous notes and the series 5 class A previous notes.
PREVIOUS BB TERM ADVANCE means the advance made under the previous
intercompany loan agreement or the master intercompany loan agreement, as the
case may be, from the proceeds of issue of its series 3 class D previous notes.
PREVIOUS BBB TERM ADVANCES means the advances made under the previous
intercompany loan agreements or the master intercompany loan agreement, as the
case may be, from the proceeds of issue of the series 1 class C previous notes,
the series 2 class C previous notes, the series 3 class C previous notes, the
series 4 class C previous notes and the series 5 class C previous notes.
PREVIOUS CLOSING DATES means in respect of Holmes Financing (No. 1) PLC,
26 July 2000, in respect of Holmes Financing (No. 2) PLC, 29 November 2000, in
respect of Holmes Financing (No. 3) PLC, 23 May 2001, in respect of Holmes
Financing (No. 4) PLC, 5 July 2001, in respect of Holmes Financing (No. 5) PLC,
8 November 2001, in respect of Holmes Financing (No. 6) PLC, 7 November 2002, in
respect of Holmes Financing (No. 7) PLC, 26 March 2003, in respect of Holmes
Financing (No. 8) PLC, 1 April 2004, in respect of Holmes Financing (No. 9) PLC,
8 December 2005 and, in respect of Holmes Financing (No. 10) PLC, 8 August 2006
and in respect of the previous notes issued by the issuing entity, the date such
previous notes were issued.
PREVIOUS INTERCOMPANY LOAN AGREEMENT means the intercompany loan
agreements made between the previous issuing entities and Funding.
PREVIOUS INTERCOMPANY LOANS means (i) any previous loans made available
by the previous issuing entities to Funding under the previous intercompany loan
agreements or (ii) any previous loans made available by the issuing entity to
Funding under the master intercompany loan agreement in respect of a particular
issue issued on a date prior to the closing date of the relevant prospectus
supplement.
PREVIOUS ISSUES means the issue of the previous notes.
257
PREVIOUS ISSUING ENTITIES means Holmes Financing (No. 1) PLC, Holmes
Financing (No. 2) PLC, Holmes Financing (No. 3) PLC, Holmes Financing (No. 4)
PLC, Holmes Financing (No. 5) PLC, Holmes Financing (No. 6) PLC, Holmes
Financing (No. 7) PLC, Holmes Financing (No. 8) PLC, Holmes Financing (No. 9)
PLC and Holmes Financing (No. 10) PLC.
PREVIOUS ISSUING ENTITY ACCOUNT BANKS means the sterling account bank and
the non-sterling account bank in respect of previous issuing entities.
PREVIOUS ISSUING ENTITY SECURITY means security created by the previous
issuing entities pursuant to the previous issuing entity deeds of charge in
favour of the previous issuing entity secured creditors.
PREVIOUS ISSUING ENTITY SECURITY TRUSTEE means The Bank of New York,
acting through its London branch at One Canada Square, London, E14 5AL and
JPMorgan Chase Bank, N.A., London Branch at Trinity Tower, 9 Thomas More
Street, London E1W 1YT.
PREVIOUS NOTES means includes all of the class A previous notes, the
class B previous notes, the class C previous notes, the class D previous notes
and the class M previous notes.
PREVIOUS NOTE TRUSTEE means The Bank of New York, acting through its
London branch at One Canada Square, London, E14 5AL.
PREVIOUS SECURITY TRUSTEE means The Bank of New York, London Branch at
One Canada Square, London E14 5AL.
PREVIOUS SWAP AGREEMENTS means the swap agreements entered into between
the previous issuing entities and the previous swap providers in relation to the
previous swaps.
PREVIOUS SWAP PROVIDERS means Barclays Bank PLC, UBS AG (acting through
its business group UBS Warburg), General Re Financial Securities Limited,
Westdeutsche Landesbank Girozentrale, Credit Suisse First Boston International,
Citibank, N.A., London Branch, Banque AIG, London branch, Swiss Re Financial
Products Corporation or any of them as the context requires.
PREVIOUS SWAPS means the dollar currency swaps, the euro currency swaps
and the fixed-floating interest swap entered into by Holmes Financing (No. 1)
PLC, the dollar currency swaps and the euro currency swaps entered into by
Holmes Financing (No. 2) PLC, the dollar currency swaps and the euro currency
swaps entered into by Holmes Financing (No. 3) PLC, the dollar currency swaps,
the euro currency swaps and the Swiss franc currency swap entered into by Holmes
Financing (No. 4) PLC, the dollar currency swaps, the euro currency swaps and
the Swiss franc currency swap entered into by Holmes Financing (No. 5) PLC, the
dollar currency swaps, the euro currency swaps and the Swiss franc currency swap
entered into by Holmes Financing (No. 6) PLC, the dollar currency swaps and euro
currency swaps entered into by Holmes Financing (No. 7) PLC, the dollar currency
swaps and the euro currency swaps entered into by Holmes Financing (No. 8) PLC,
the dollar currency swaps and the euro currency swap entered into by Holmes
Financing (No. 9) PLC, and the dollar currency swaps and the euro currency swap
entered into by Holmes Financing (No. 10) PLC, each under the previous swap
agreements.
PREVIOUS TERM ADVANCES means (i) any previous term advance made by the
previous issuing entities to Funding under the relevant previous intercompany
loan agreement or (ii) any previous term advance made by the issuing entity to
Funding under the master intercompany loan agreement.
PRINCIPAL DEFICIENCY LEDGER means the ledger of such name maintained by
the cash manager, comprising on the date of this prospectus five sub-ledgers,
the AAA principal deficiency sub-ledger, the AA principal deficiency sub-ledger,
the A principal deficiency sub-ledger, the BBB principal deficiency sub-ledger
and the BB principal deficiency sub-ledger and which records any deficiency of
principal (following a loss on a loan or the application of principal receipts
to meet any deficiency in Funding available revenue receipts) in respect of
payments due under the outstanding intercompany loans.
PRINCIPAL LEDGER means the ledger of such name maintained by the cash
manager on behalf of the mortgages trustee pursuant to the cash management
agreement to record any retained principal receipts plus principal receipts on
the loans and payments of principal from the mortgages trustee GIC account to
Funding and the seller on each distribution date. Together the principal ledger
and the revenue ledger reflect the aggregate of all amounts of cash standing to
the credit of the mortgages trustee GIC account.
PRINCIPAL PAYING AGENT means The Bank of New York, acting through its
London branch at One Canada Square, London E14 5AL.
258
PRINCIPAL PAYMENT RATE means the average monthly rolling principal
payment rate on the loans for the 12 months immediately preceding the relevant
distribution date, calculated on each payment rate date.
PRINCIPAL RECEIPTS means all principal amounts received from borrowers in
respect of the loans or otherwise paid or recovered in respect of the loans and
their related security representing monthly repayments of principal, prepayments
of principal, redemption proceeds and amounts recovered on enforcement
representing principal (but excluding principal received or treated as received
in respect of a loan subsequent to the completion of enforcement procedures and
certain early repayment fees).
PRODUCT SWITCH means a variation to the financial terms and conditions of
a loan other than:
(a) any variation agreed with a borrower to control or manage arrears
on the loan;
(b) any variation in the maturity date of the loan unless it is
extended beyond July 2038;
(c) any variation imposed by statute;
(d) subject to the mortgage sale agreement, any variation of the
principal available and/or the rate of interest payable in
respect of the loan where that rate is offered to the
borrowers of more than 10 per cent. by outstanding principal
amount of loans comprised in the trust property in any
interest period; or
(e) any variation in the frequency with which the interest payable in
respect of the loan is charged.
PROGRAMME AGREEMENT means the agreement entered into on 17 November 2006,
as amended from time to time, between amongst others, the issuing entity,
Funding and the dealers named therein (or deemed named therein).
PROGRAMME DATE means 28 November 2006.
PROGRAMME RESOLUTION has the meaning given to that term on page 216.
PROSPECTUS means the prospectus or other offering document pursuant to
which issuing entity notes were issued.
PROSPECTUS RULES means the prospectus rules made pursuant to FSMA.
PURCHASE OPTION has the meaning set forth in number 5.9 under "TERMS AND
CONDITIONS OF THE US NOTES".
PURPOSE-BUILT means in respect of a residential dwelling, built or made
for such a residential purpose (as opposed to converted).
RATING means rating assigned by the rating agencies to the current notes
or new notes.
RATING AGENCIES means each of Moody's, Standard & Poor's and Fitch.
REASONABLE, PRUDENT MORTGAGE LENDER means includes a lender acting within
the policy applied by the seller from time to time to the originating,
underwriting and servicing of loans beneficially owned by the seller outside the
mortgages trust.
RECEIVER means a receiver appointed by the issuing entity security
trustee and/or the security trustee, respectively pursuant to the issuing entity
deed of charge and/or the Funding deed of charge.
REFERENCE BANKS means at the closing date, the London office of each of
the following banks: ABN AMRO Bank N.V., Barclays Bank PLC, Citibank, N.A. and
The Royal Bank of Scotland PLC.
REFERENCE DATE has the meaning given to that term on page 160.
REGISTERS OF SCOTLAND means the Land Register of Scotland and/or the
General Register of Sasines.
REGISTRAR means The Bank of New York (Luxembourg) S.A. at Aerogolf
Center, 1A Hoehenhof, L-1736 Senningerberg, Luxembourg.
REG S or REGULATION S means Regulation S under the Securities Act.
REG S GLOBAL NOTES means each Reg S note represented on issue by a global
note in registered form for each such class.
REG S NOTES means each class of issuing entity notes sold in reliance on
Regulation S.
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REGULATED MORTGAGE CONTRACT means as currently defined under FSMA (with
effect from N(M), a credit agreement is a regulated mortgage contract if, at the
time it is entered into: (a) the contract is one under which the lender provides
credit to an individual or to a trustee; (b) the contract provides that the
obligation of the individual/trustee to repay is to be secured by a first legal
mortgage on land (other than timeshare accommodation) in the UK; and (c) at
least 40 per cent. of that land is used, or is intended to be used, as or in
connection with a dwelling by the individual or (in the case of credit provided
to the trustee) by an individual who is a beneficiary of the trust, or by a
related person (and, for the avoidance of doubt, where a contract provides for
such repayment obligation to be secured by, in Scotland, a first standard
security, that contract can amount to a "REGULATED MORTGAGE CONTRACT" if the
other elements of the definition are satisfied).
REGULATIONS means the Unfair Terms in Consumer Contract Regulations 1994
and 1999.
REINSTATEMENT means in relation to a property that has been damaged,
repairing or rebuilding that property to the condition that it was in prior to
the occurrence of the damage.
RELATED SECURITY in relation to a loan, the security for the repayment of
that loan including the relevant mortgage or standard security and all other
matters applicable thereto acquired as part of the portfolio assigned to the
mortgages trustee.
RELEVANT BULLET AMOUNT has the meaning given to it under "THE MORTGAGES
TRUST - CASH MANAGEMENT AND ALLOCATION OF TRUST PROPERTY - PRINCIPAL RECEIPTS".
RELEVANT CLOSING DATE means, in respect of a series and class (or
sub-class) of issuing entity notes, the closing date specified in the relevant
prospectus supplement.
RELEVANT DEPOSIT AMOUNT means the sum of the following:
(a) either:
(i) prior to any optional redemption date in respect of the
issuing entity notes, any new notes or any previous notes
(pursuant to the terms and conditions thereof) or if an
optional redemption date has occurred in respect of the
issuing entity notes, any new notes or any previous notes
(pursuant to the terms and conditions thereof) and the
option has been exercised by the issuing entity, any new
issuing entity or, as the case may be, any previous issuing
entity, an amount equal to:
the Funding share of the trust property (as most recently
calculated)/the Funding share of the trust property on the closing
date x the first reserve fund required amount; or
(ii) if the issuing entity, any new issuing entity or any
previous issuing entity does not exercise its option to
redeem the issuing entity notes, any new notes or any
previous notes issued by it on any optional redemption date
pursuant to the terms and conditions thereof, an amount
equal to:
the Funding share of the trust property (as most recently
calculated)/the Funding share of the trust property on the closing
date x the first reserve fund required amount x 2;
(b) any amounts standing to the credit of the Funding GIC account
which will be applied on the next following interest payment date
to pay term advances which in turn will result in any issuing
entity notes, any new notes or any previous notes having ratings
of AAA, AA, A-1+ or A-1 from Standard & Poor's to be redeemed in
whole or in part;
(c) any amounts standing to the credit of the mortgages trustee GIC
account which will be distributed to Funding on the next following
distribution date and which will be applied by Funding on the next
following interest payment date to pay term advances which in turn
will result in any issuing entity notes, any new notes or any
previous notes having ratings of AAA, AA, A-1+ or A-1 from
Standard & Poor's to be redeemed in whole or in part; and
(d) any other amounts standing to the credit of accounts maintained by
the mortgages trustee, Funding or the issuing entity, new issuing
entity or previous issuing entity with any issuing cash manager
and which would otherwise be required by Standard & Poor's to be
rated A-1+,
less any amounts invested in authorised investments or maintained
in accounts at a bank rated at least A-1+ by Standard & Poor's.
RELEVANT ISSUING ENTITIES means the previous issuing entities, the
issuing entity and any new issuing entities, as applicable.
260
REQUIRED SUBORDINATED AMOUNT means the class A required subordinated
amount, the class B required subordinated amount, the class C required
subordinated amount and/or the class M required subordinated amount, as
applicable.
REQUIRED SUBORDINATED PERCENTAGE means the class A required subordinated
percentage, the class B required subordinated percentage, the class C required
subordinated percentage and/or the class M required subordinated percentage, as
applicable.
RESERVE FUNDS means the first reserve fund, the second reserve fund, the
Funding reserve fund and the Funding liquidity reserve fund.
RESERVE LEDGERS means the first reserve ledger, the second reserve
ledger, the Funding reserve ledger and Funding liquidity reserve ledger.
RETAINED PRINCIPAL RECEIPTS has the meaning given to it under "THE
MORTGAGES TRUST - CASH MANAGEMENT AND ALLOCATION OF TRUST PROPERTY - PRINCIPAL
RECEIPTS".
REVENUE LEDGER means the ledger(s) of such name created and maintained by
the cash manager on behalf of the mortgages trustee pursuant to the cash
management agreement to record revenue receipts on the loans and interest from
alternative accounts and the mortgages trustee GIC account and payments of
revenue receipts from the mortgages trustee GIC account to Funding and the
seller on each distribution date. The revenue ledger and the principal ledger
together reflect the aggregate of all amounts of cash standing to the credit of
the mortgages trustee GIC account and the alternative accounts.
REVENUE RECEIPTS means amounts received by the mortgages trustee in
respect of the loans other than principal receipts and third party amounts and
whether received in the mortgages trustee GIC account or any alternative
account.
REWARD CASHBACK means an amount that the seller has agreed to pay to a
borrower under a reward loan at periodic intervals whilst such reward loan is
outstanding.
REWARD LOAN means a loan which includes a reward cashback.
SANTANDER GLOBAL BANKING & MARKETS means Abbey National Treasury Services
PLC trading as Santander Global Banking & Markets.
SCHEDULED AMORTISATION amount has the meaning given to it under "THE
MORTGAGES TRUST - CASH MANAGEMENT AND ALLOCATION OF TRUST PROPERTY - PRINCIPAL
RECEIPTS".
SCHEDULED AMORTISATION PERIOD means the period commencing on the
distribution date falling three months prior to the scheduled repayment date of
a scheduled amortisation amount and which ends on the date that an amount equal
to the relevant scheduled amortisation amount has been accumulated by Funding.
SCHEDULED AMORTISATION TERM ADVANCES means any term advance that is
scheduled to be repaid in instalments of more than one scheduled repayment date,
namely those term advances designated as a "SCHEDULED AMORTISATION" term
advance.
SCHEDULED REDEMPTION DATES means, in respect of a series and class (or
sub-class) of notes, the interest payment date, if any, specified in the
relevant prospectus or (in the case of the issuing entity notes) the relevant
prospectus supplement, for the payment of principal, subject to the terms and
conditions of the US notes.
SCHEDULED REPAYMENT means the principal amount due to be paid on the
scheduled repayment date of the relevant term advances.
SCHEDULED REPAYMENT DATES means, in respect of a term advance, the
interest payment date(s) specified in the relevant prospectus or (in the case of
the issuing entity notes) the relevant prospectus supplement and term advance
supplement for the scheduled repayment of principal.
SCOTTISH DECLARATION OF TRUST means each declaration of trust granted by
the seller in favour of the mortgages trustee pursuant to the mortgage sale
agreement transferring the beneficial interest in Scottish loans and their
related security to the mortgages trustee.
SCOTTISH LOAN means a loan secured by a Scottish mortgage.
SCOTTISH MORTGAGE means a mortgage over a property in Scotland.
SCOTTISH MORTGAGE CONDITIONS means the mortgage conditions applicable to
Scottish loans.
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SEC means the United States Securities and Exchange Commission.
SECOND RESERVE FUND means reserve fund established on 29 November 2000
and funded from excess Funding available revenue receipts, as described further
in "CREDIT STRUCTURE - SECOND RESERVE FUND", and further funded on 5 July 2001
from part of the proceeds of the previous term BB advance.
SECOND RESERVE FUND REQUIRED AMOUNT means an amount calculated in
accordance with the formula set out in "CREDIT STRUCTURE - SECOND RESERVE FUND".
SECOND RESERVE LEDGER means a ledger maintained by the cash manager to
record the amount credited to the second reserve fund, and subsequent
withdrawals and deposits in respect of the second reserve fund.
SECOND START-UP LOAN means the loan made by the start-up loan provider to
Funding under the second start-up loan agreement which was used in part to fund
the first reserve fund.
SECOND START-UP LOAN AGREEMENT means the agreement entered into on 29
November 2000 between the start-up loan provider and Funding under which the
second start-up loan was made by the start-up loan provider to Funding.
SECURITIES ACT means the United States Securities Act of 1933, as
amended.
SECURITY TRUSTEE means The Bank of New York, acting through its London
branch at One Canada Square, London E14 5AL.
SELLER means Abbey.
SELLLER LOSS AMOUNT has the meaning given to it under "THE MORTGAGES
TRUST - LOSSES".
SELLER'S POLICY means the originating, underwriting, administration,
arrears and enforcement policy applied by the seller from time to time to loans
and their related security owned solely by the seller.
SELLER SHARE or SELLER'S SHARE means the seller share of the trust
property from time to time as calculated on each distribution date.
SELLER SHARE EVENT has the meaning given to it under "THE MORTGAGES TRUST
- - CASH MANAGEMENT AND ALLOCATION OF TRUST PROPERTY - PRINCIPAL RECEIPTS".
SELLER SHARE EVENT DISTRIBUTION DATE means a distribution date on which a
seller share event occurs.
SELLER SHARE PERCENTAGE means the seller share percentage of the trust
property from time to time as calculated on each distribution date.
SENIOR EXPENSES means amounts ranking in priority to interest due on the
term advances.
SERIES 1 CLASS A PREVIOUS NOTES means the series 1 class A previous notes
issued by the previous issuing entities or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 1 CLASS B PREVIOUS NOTES means the series 1 class B previous notes
issued by the previous issuing entities or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 1 CLASS C PREVIOUS NOTES means the series 1 class C previous notes
issued by the previous issuing entities or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 1 CLASS M PREVIOUS NOTES means the series 1 class M previous notes
issued by Holmes Financing (No. 7) PLC or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 1 TERM AAA CASH AMOUNT has the meaning given to it under "THE
MORTGAGES TRUST - CASH MANAGEMENT AND ALLOCATION OF TRUST PROPERTY - PRINCIPAL
RECEIPTS".
SERIES 2 CLASS A PREVIOUS NOTES means the series 2 class A previous notes
issued by the previous issuing entities or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
262
SERIES 2 CLASS B PREVIOUS NOTES means the series 2 class B previous notes
issued by the previous issuing entities or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 2 CLASS C PREVIOUS NOTES means the series 2 class C previous notes
issued by the previous issuing entities or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 2 CLASS M PREVIOUS NOTES means the series 2 class M previous notes
issued by Holmes Financing (No. 7) PLC or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 3 CLASS A PREVIOUS NOTES means the series 3 class A previous notes
issued by the previous issuing entities or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 3 CLASS A1 PREVIOUS NOTES means the series 3 class A1 previous
notes issued by the previous issuing entities or the issuing entity, as
described further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS
NOTES AND THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus
supplement.
SERIES 3 CLASS A2 PREVIOUS NOTES means the series 3 class A2 previous
notes issued by the previous issuing entities or the issuing entity, as
described further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS
NOTES AND THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus
supplement.
SERIES 3 CLASS B PREVIOUS NOTES means the series 3 class B previous notes
issued by the previous issuing entities or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 3 CLASS C PREVIOUS NOTES means the series 3 class C previous notes
issued by the previous issuing entities or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 3 CLASS D PREVIOUS NOTES means the series 3 class D1 previous
notes, the series 3 class D2 previous notes and the series 3 class D3 previous
notes issued by the previous issuing entities or the issuing entity, as
described further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS
NOTES AND THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus
supplement.
SERIES 3 CLASS D1 PREVIOUS NOTES means the series 3 class D1 previous
notes issued by Holmes Financing (No. 4) PLC or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 3 CLASS D2 PREVIOUS NOTES means the series 3 class D2 previous
notes issued by Holmes Financing (No. 4) PLC or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 3 CLASS D3 PREVIOUS NOTES means the series 3 class D3 previous
notes issued by Holmes Financing (No. 4) PLC or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 3 CLASS M PREVIOUS NOTES means the series 3 class M previous notes
issued by Holmes Financing (No. 7) PLC or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 4 CLASS A PREVIOUS NOTES means the series 4 class A previous notes
issued by the previous issuing entities or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 4 CLASS B PREVIOUS NOTES means the series 4 class B previous notes
issued by the previous issuing entities or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
263
SERIES 4 CLASS A1 PREVIOUS NOTES means the series 4 class A1 previous
notes issued by the previous issuing entities or the issuing entity, as
described further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS
NOTES AND THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus
supplement.
SERIES 4 CLASS A2 PREVIOUS NOTES means the series 4. class A2 previous
notes issued by the previous issuing entities or the issuing entity, as
described further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS
NOTES AND THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus
supplement.
SERIES 4 CLASS C PREVIOUS NOTES means the series 4 class C previous notes
issued by the previous issuing entities or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 4 CLASS M PREVIOUS NOTES means the series 4 class M previous notes
issued by the previous issuing entities or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 5 CLASS A PREVIOUS NOTES means the series 5 class A previous notes
issued by Holmes Financing (No. 6) PLC or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 5 CLASS B PREVIOUS NOTES means the series 5 class B previous notes
issued by Holmes Financing (No. 6) PLC or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERIES 5 CLASS C PREVIOUS NOTES means the series 5 class C previous notes
issued by Holmes Financing (No. 6) PLC or the issuing entity, as described
further in "DESCRIPTION OF THE PREVIOUS ISSUING ENTITIES, THE PREVIOUS NOTES AND
THE PREVIOUS INTERCOMPANY LOANS" in the relevant prospectus supplement.
SERVICER means Abbey or such other person as may from time to time be
appointed as servicer of the portfolio pursuant to the servicing agreement.
SERVICING AGREEMENT means the agreement between the mortgages trustee,
the security trustee and Funding under which the servicer agrees to administer
the loans and their related security comprised in the portfolio, as described
further in "THE SERVICING AGREEMENT".
SEVENTH START-UP LOAN means the loan made by the start-up loan provider
to Funding under the seventh start-up loan agreement.
SEVENTH START-UP LOAN AGREEMENT means the agreement entered into on 26
March 2003 between the start-up loan provider and Funding under which the
seventh start-up loan was made by the start-up loan provider to Funding.
SHORTFALL means the deficiency of Funding available income receipts on an
interest payment date over the amounts due by Funding under the Funding
pre-enforcement revenue priority of payments.
SIXTH START-UP LOAN means the loan made by the start-up loan provider to
Funding under the sixth start-up loan agreement.
SIXTH START-UP LOAN AGREEMENT means the agreement entered into on 7
November 2002 between the start-up loan provider and Funding under which the
sixth start-up loan was made by the start-up loan provider to Funding.
SPECIFIED MINIMUM RATE means the rate specified in the offer conditions.
STABILISED RATE means the rate to which any loan reverts after the
expiration of any period during which any alternative method(s) of calculating
the interest rate specified in the offer conditions are used.
STANDARD & POOR'S means Standard & Poor's Rating Services, a division of
The McGraw-Hill Companies, Inc.
264
START-UP LOAN AGREEMENTS means the current start-up loan agreements and
all new start-up loan agreements.
START-UP LOAN PROVIDER means Abbey, in its capacity as provider of the
first start-up loan, the second start-up loan, the third start-up loan, the
fourth start-up loan, the fifth start-up loan, the sixth start-up loan, the
seventh start-up loan and the eighth start-up loan.
STERLING ACCOUNT BANK means Abbey acting through its branch at 21 Prescot
Street, London E1 8AD.
STRESSED EXCESS SPREAD has the meaning given to it on page 77.
SUBSCRIPTION AGREEMENT means an agreement supplemental to the programme
agreement in or substantially in the form set out in the programme agreement or
such other form as may be agreed between the issuing entity and the dealers.
SVR means the Abbey SVR or the mortgages trustee SVR, as applicable.
SVR LOAN means a loan which is subject to the mortgages trustee SVR or,
as applicable, the Abbey SVR.
SWAP AGREEMENTS means the Funding swap agreement and the issuing entity
swap agreements.
SWAP EARLY TERMINATION EVENT means a circumstance in which a swap
agreement can be terminated prior to its scheduled termination date.
SWAP PROVIDERS means the Funding swap provider and/or any of the issuing
entity swap providers.
SWAP REPLACEMENT PAYMENT means any payment received by the issuing entity
from a replacement swap counterparty as consideration for the entry into by the
issuing entity of a replacement swap.
TARGET BUSINESS DAY means a day on which the Trans-European Automated
Real-time Gross settlement Express Transfer (TARGET) System is open.
TERM ADVANCES means the outstanding previous term advances, the current
term advances or the new term advances.
TERM ADVANCE RATING means the designated rating assigned to a term
advance which corresponds to the rating of the class of notes when first issued
to provide funds for that term advance so that, for example, any term AAA
advance has a term advance rating of AAA to reflect the ratings of AAA/Aaa/AAA
then assigned to the corresponding notes.
TERM ADVANCE SUPPLEMENT means in relation to any term advance made
available by the issuing entity, the document between, amongst others, Funding
and the issuing entity recording the principal terms of such term advance.
TERRACED means a house in a row of houses built in one block in a uniform
style.
THIRD PARTY AMOUNTS includes:
(a) payments of high loan-to-value fees due to the seller;
(b) amounts under a direct debit which are repaid to the bank making
the payment if such bank is unable to recoup that amount itself
from its customer's account; or
(c) payments by borrowers of early repayment fees and product charges
which are due to the seller.
THIRD START-UP LOAN means the loan made by the start-up loan provider to
Funding under the third start-up loan agreement which was used in part to fund
the first reserve fund.
THIRD START-UP LOAN AGREEMENT means the agreement entered into on 23 May
2001 between the start-up loan provider and Funding under which the third start-
up loan was made by the start-up loan provider to Funding.
TRACKER LOAN means a loan where interest is linked to a variable interest
rate other than the SVR. For example, the rate on a tracker loan may be set at a
fixed or variable margin above or below sterling LIBOR or above or below rates
set from time to time by the Bank of England.
265
TRACKER RATE means the rate of interest applicable to a tracker loan
(before applying any cap or minimum rate).
TRANSACTION ACCOUNT means the account in the name of the issuing entity
maintained with the sterling account bank pursuant to the issuing entity bank
account agreement or such other additional or replacement account as may for the
time being be in place.
TRANSACTION DOCUMENTS means the issuing entity transaction documents, the
previous intercompany loan agreements, the current start-up loan agreements, the
previous swap agreements, other documents relating to the issue of previous
notes by the previous issuing entities and any new intercompany loan agreements,
new start-up loan agreements, new swap agreements, other documents relating to
issues of new notes by new issuing entities, the mortgages trustee guaranteed
investment contract and all other agreements referred to therein.
TRANSFER AGENT means The Bank of New York (Luxembourg S.A.) at Aerogolf
Center, 1A, Hoehenhof, L-1736 Senningerberg, Luxembourg.
TRANSFER DATE means, in respect of an issue, the date (as specified in
the relevant prospectus supplement) on which the remarketing bank agrees to seek
purchasers of the relevant issuing entity notes.
TRANSFER PRICE means, in respect of an issue, the price obtained by the
remarketing bank from third party purchasers, prior to the relevant transfer
date, for the relevant issuing entity notes tendered by it.
TRIGGER EVENT means an asset trigger event and/or a non-asset trigger
event.
TRUST DEED means the principal agreement entered into on 28 November 2006
governing the issuing entity notes, as further described in "DESCRIPTION OF THE
TRUST DEED".
TRUST PROPERTY includes:
(a) the sum of (pound)100 settled by the corporate services provider
on trust on the date of the mortgages trust deed;
(b) the portfolio of loans and their related security assigned to the
mortgages trustee by the seller at their relevant sale dates;
(c) any new loans and their related security assigned to the mortgages
trustee by the seller;
(d) any drawings under flexible loans;
(e) any interest and principal paid by borrowers on their loans;
(f) any other amounts received under the loans and related security
(excluding third party amounts); and
(g) amounts on deposit and interest earned on such amounts in the
mortgages trustee GIC account and in the alternative accounts.
UK LISTING AUTHORITY means the FSA in its capacity as competent authority
under FSMA.
UNDERPAYMENT means a reduced payment by the borrower under a flexible
loan and where such reduced payment is in place of the monthly payment set out
in the mortgage offer (or any changed monthly payment subsequently notified by
the lender to the borrower), where there are sufficient available funds to fund
the difference between the monthly payment and this reduced payment and where
the borrower is not in breach of the mortgage terms for making such payment.
UNDERWRITING AGREEMENT means each agreement entered into among the
issuing entity and the underwriters that sets forth the terms whereby the
underwriters may acquire US notes for their own accounts and/or may sell US
notes from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale.
UNITED STATES PERSON means:
(a) a citizen or resident of the United States;
(b) a domestic partnership;
(c) a domestic corporation;
(d) any estate (other than a foreign estate); and
266
(e) any trust if:
(i) a court within the United States is able to exercise
primary supervision over the administration of the trust;
and
(ii) one or more United States fiduciaries have the authority to
control all substantial decisions of the trust.
US GLOBAL NOTES means each US note represented on issue by a global note
in registered form for each such class.
US NOTES means each series and class of notes which are registered with
the SEC under the Securities Act.
US PAYING AGENT means The Bank of New York, acting through its New York
branch at 101 Barclay Street, New York, NY10286.
US TAX COUNSEL means Cleary Gottlieb Steen & Hamilton LLP.
VALUATION means a methodology for determining the value of a property
which would meet the standards of a reasonable, prudent mortgage lender (as
referred to under "THE SERVICER AND THE SERVICING AGREEMENT - THE SERVICING
AGREEMENT - UNDERTAKINGS BY THE SERVICER") and which has been approved by the
Director of Group Property and Survey of the seller.
VALUATION FEE means a fee incurred by borrowers as a result of the seller
or servicer obtaining a valuation of the property.
VARIABLE MORTGAGE RATE means the rate of interest which determines the
amount of interest payable each month on a variable rate loan.
VARIABLE RATE LOAN means a loan where the interest rate payable by the
borrower varies in accordance with a specified variable rate.
VAT means value added tax.
WAFF means weighted average repossession frequency.
WALS means weighted average loss severity.
WITHHOLDING TAX means a tax levied under United Kingdom law, as further
described in "UNITED KINGDOM TAXATION - PAYMENT OF INTEREST ON THE ISSUING
ENTITY NOTES".
267
ISSUING ENTITY
HOLMES MASTER ISSUER PLC
Abbey National House
2 Triton Square
Regent's Place
London NW1 3AN
SERVICER
ABBEY NATIONAL PLC
Abbey National House
2 Triton Square
Regent's Place
London NW1 3AN
REGISTRAR AND TRANSFER AGENT US PAYING AGENT
THE BANK OF NEW YORK (LUXEMBOURG) S.A. THE BANK OF NEW YORK, NEW YORK BRANCH
Aerogolf Center New York Branch
1A, Hoehenhof 101 Barclay Street
L-1736 Senningerberg New York
Grand Duchy of Luxembourg NY 10286
NOTE TRUSTEE, SECURITY TRUSTEE, ISSUING ENTITY SECURITY TRUSTEE,
AGENT BANK AND PRINCIPAL PAYING AGENT
THE BANK OF NEW YORK, ACTING THROUGH ITS LONDON BRANCH
One Canada Square
London E14 5AL
LEGAL ADVISERS TO THE UNDERWRITERS, THE MANAGERS, THE NOTE TRUSTEE,
THE ISSUING ENTITY SECURITY TRUSTEE AND THE SECURITY TRUSTEE
as to English law and US law as to Scots law
ALLEN & OVERY LLP TODS MURRAY LLP
One Bishops Square Edinburgh Quay
London E1 6AO 133 Fountainbridge
Edinburgh EH3 9AG
LEGAL ADVISERS TO THE ISSUING ENTITY AND THE SERVICER
as to English law as to US law
SLAUGHTER AND MAY CLEARY GOTTLIEB STEEN & HAMILTON LLP
One Bunhill Row One Liberty Plaza
London EC1Y 8YY New York
New York 10006
as to Scots law
TODS MURRAY LLP
Edinburgh Quay
133 Fountainbridge
Edinburgh EH3 9AG
268
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14.OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Following are the estimated expenses* (expressed in US dollars based on
an exchange rate of US$1.00=[pounds-sterling]0.4952**), other than underwriting
discounts and commissions, to be incurred in connection with the offering and
distribution of the securities being registered under this registration
statement:
Securities and Exchange Commission registration fee.........................$0**
Printing and engraving expenses..........................................$60,600
Legal fees and expenses...............................................$1,050,000
Accounting fees and expenses............................................$305,000
Trustee's fees and expenses..............................................$80,000
Rating agency fees....................................................$1,215,000
Miscellaneous...........................................................$105,000
Total.................................................................$2,815,600
- ----------
* All amounts except the SEC registration fee are estimates.
** All registration fees have been previously paid by Holmes Funding Limited
under Registration Statement No. 333 -- 139944 on Form S-3 and the filing
fee of $119,758.89 is offset against the registration fees previously paid
thereunder
ITEM 15.INDEMNIFICATION OF DIRECTORS AND OFFICERS
HOLMES FUNDING LIMITED ("FUNDING")
Subject to the provisions of the United Kingdom Companies Act 1985, the
laws which govern the organization of Funding provide for every director or
other officer or auditor of Funding to be indemnified out of the assets of
Funding against any liability incurred by him in defending any proceedings,
whether civil or criminal, in which judgment is given in his favor or in which
he is acquitted or in connection with any application in which relief is
granted to him by the court from liability for negligence, default, breach of
duty or breach of trust in relation to the affairs of Funding.
ITEM 16.EXHIBITS
A list of exhibits filed herewith or incorporated by reference is contained
in the Exhibit Index, which is incorporated herein by reference.
ITEM 17.UNDERTAKINGS
A. As to Rule 415: The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to
this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities
Act");
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or
the most recent post-effective amendment hereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this registration
statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in this
registration statement or any material change to such
information in this registration statement;
Provided, however, that:
(A) Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) above do
not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in reports
filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), that are incorporated
by reference in the registration statement, or is contained in a
form of prospectus filed pursuant to Rule 424(b) that is part of
this registration statement;
(B) Provided further, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) above do not apply if the information required to be
included in a post-effective amendment is provided pursuant to Item
1100(c) of Regulation AB.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That for the purpose of determining liability under the Securities
Act to any purchaser:
(A) Each prospectus filed by the registrant pursuant to Rule
424(b)(3) shall be deemed to be part of the registration statement
as of the date the filed prospectus was deemed part of and included
in the registration statement; and
(B) Each prospectus required to be filed pursuant to Rule
424(b)(2), (b)(5), or (b)(7) as part of a registration statement in
reliance on Rule 430B relating to an offering made pursuant to Rule
415(a)(1)(i), (vii) or (x) for the purpose of providing the
information required by Section 10(a) of the Securities Act shall
be deemed to be part of and included in the registration statement
as of the earlier of the date such form of prospectus is first used
after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As provided
in Rule 430B, for liability purposes of the issuer and any person
that is at that date an underwriter, such date shall be deemed to
be a new effective date of the registration statement relating to
the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is
part of the registration statement will, as to a purchaser with a
time of contract of sale prior to such effective date, supersede or
modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in
any such document immediately prior to such effective date.
(5) That, for the purpose of determining liability of the registrant
under the Securities Act to any purchaser in the initial
distribution of the securities:
The undersigned registrant undertakes that in a primary offering of
securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used
to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities
to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed
pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or
used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to
the offering containing material information about the
undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering
made by the undersigned registrant to the purchaser.
B. As to filings incorporating subsequent Exchange Act documents by
reference: The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each
filing, if any, of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
C. As to indemnification: Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors,
officers and controlling persons of the registrant pursuant to the
provisions described under Item 15 above, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
D. As to Rule 430A: The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
E. As to qualification of Trust Indentures under Trust Indenture Act of
1939 (the "Trust Indenture Act") for delayed offerings: The
undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance
with the rules and regulations prescribed by the Securities and
Exchange Commission under Section 305(b)(2) of the Trust Indenture
Act.
F. As to Regulation AB:
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act, each filing of the annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act of a third
party that is incorporated by reference in the registration
statement in accordance with Item 1100(c)(1) of Regulation AB
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(2) That, except as otherwise provided by Item 1105 of Regulation AB,
information provided in response to that Item pursuant to Rule
312 of Regulation S-T through the
specified Internet address in the prospectus is deemed to be a
part of the prospectus included in the registration statement.
(3) To provide to any person without charge, upon request, a copy of
the information provided in response to Item 1105 of Regulation
AB pursuant to Rule 312 of Regulation S-T through the specified
Internet address as of the date of the prospectus included in the
registration statement if a subsequent update or change is made
to the information.
SIGNATURES OF HOLMES FUNDING LIMITED
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement or amendment thereto to be signed on its behalf by the
undersigned, thereunto duly authorised, in the city of London, on March 20
2008.
HOLMES FUNDING LIMITED
By: /s/ Martin McDermott
-------------------------------------
Name: Wilmington Trust SP Services
(London) Limited by its authorised
person Martin McDermott for and on
its behalf
Title: Director
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement or amendment thereto has been signed by the
following persons in the capacities and on the dates indicated below.
HOLMES FUNDING LIMITED
SIGNATURE TITLE DATE
- -------------------------------------------- ---------------------------------- -----------------------------
By: /s/ Mark Filer
----------------------------------------
Name: Mark Filer Director March 20, 2008
By: /s/ Martin McDermott
-----------------------------------------
Name: Wilmington Trust SP Services (London)
Limited by its authorised person Director March 20, 2008
Martin McDermott for and on its behalf
By: /s/ Martin McDermott
----------------------------------------
Name: Martin McDermott Director March 20, 2008
(Principal financial officer,
Principal executive officer and
Principal accounting officer)
SIGNATURE OF AUTHORIZED REPRESENTATIVE OF
HOLMES FUNDING LIMITED
Pursuant to the Securities Act of 1933, as amended, the undersigned, the
duly authorized representative in the United States of Holmes Funding Limited,
has signed this registration statement or amendment thereto in Newark, Delaware
on March 20, 2008.
By: /s/ Donald J. Puglisi
----------------------------------------------
Name: Donald J. Puglisi
---------------------------------------------
Office: Authorized Representative in the United
States
EXHIBIT INDEX
EXHIBIT NO.DESCRIPTION OF EXHIBIT
1.1 Form of Underwriting Agreement (9)
3.1.1 Memorandum and Articles of Association of Holmes Master Issuer plc (9)
3.1.2 Memorandum and Articles of Association of Holmes Funding Limited (1)
4.1.1 Master Intercompany Loan Agreement
4.1.2 Form of Term Advance Supplement (9)
4.2.1 Amended and Restated Mortgages Trust Deed
4.3.1 Amended and Restated Mortgage Sale Agreement
4.3.2 Form of Scottish Declaration of Trust (9)
4.4.1 Form of Amended and Restated Master Issuer Deed of Charge
4.4.2 Form of Deed of Accession to Master Issuer Deed of Charge (9)
4.5.1 Form of Third Amended and Restated Funding Deed of Charge (9)
4.5.2 Form of Deed of Accession to Third Amended and Restated Funding Deed of Charge (9)
4.6.1 Form of Amended and Restated Master Issuer Trust Deed (9)
4.6.2 Form of Terms and Conditions of the Notes (9)
4.7 Form of Amended and Restated Master Issuer Paying Agent and Agent Bank Agreement (9)
4.8 Amended and Restated Cash Management Agreement (9)
4.9 Master Issuer Cash Management Agreement (9)
4.10 Form of Fourth Amended and Restated Servicing Agreement (9)
4.12 Bank Account Agreement and form of Second Amendment Agreement to the Bank Account Agreement (9)
4.13 Master Issuer Bank Account Agreement (9)
5.1 Form of Opinion of Slaughter and May as to validity (9)
8.1 Form of Opinion of Cleary Gottlieb Steen & Hamilton LLP as to U.S. tax matters (9)
8.2 Form of Opinion of Slaughter and May as to U.K. tax matters (9)
10.1 Funding Guaranteed Investment Contract (9)
10.2 Form of Amended and Restated Funding Swap Agreement (2), Form of Deed of Amendment to Amended and Restated Funding
Swap Agreement (3) and Form of Deed of Amendment to Amended and Restated Funding Swap Agreement (7)
10.3 Form of Master Issuer Dollar Currency Swap Agreement (9)
10.5 Form of First Start-up Loan Agreement (1), Form of Second Start-up Loan Agreement (2), Form of Third Start-up Loan
Agreement (3), Form of Fourth Start-up Loan Agreement (4), Form of Fifth Start-up Loan Agreement (5), Form of Sixth
Start-up Loan Agreement (6), Form of Seventh Start-up Loan Agreement (7), and Form of Eighth Start-up Loan Agreement
(8)
10.6 Form of Further Amended and Restated Master Definitions and Construction Schedule
10.7 Form of Amended and Restated Master Issuer Definitions and Construction Schedule
10.8 Corporate Services Agreement (2)
10.9 Master Issuer Corporate Services Agreement (9)
10.10 Amended and Restated Mortgages Trustee GIC (9)
23.1 Consent of Slaughter and May (9)
23.2 Consent of Cleary Gottlieb Steen & Hamilton (9)
24.1 Power of Attorney (9)
25.1 Statement of Eligibility of Trustee (Form T-1) (9)
(1) Incorporated by reference from the Form S-11 filed by Holmes Financing
(No. 1) PLC (File No. 333-12250) which became effective on July 24, 2000.
(2) Incorporated by reference from the Form S-11 filed by Holmes Financing
(No. 2) PLC (File No. 333-12834) which became effective on November 17,
2000.
(3) Incorporated by reference from the Form S-11 filed by Holmes Financing
(No. 3) PLC (File No. 333-13444) which became effective on May 14, 2000.
(4) Incorporated by reference from the Form S-11 filed by Holmes Financing
(No. 4) PLC (File No. 333-13576) which became effective on June 27, 2001.
(5) Incorporated by reference from the Form S-11 filed by Holmes Financing
(No. 5) PLC (File No. 333-14002) which became effective on October 30,
2001.
(6) Incorporated by reference from the Form S-11 filed by Holmes Financing
(No. 6) PLC (File No. 333-99349) which became effective on October 30,
2002.
(7) Incorporated by reference from the Form S-11 filed by Holmes Financing
(No. 7) PLC (File No. 333-103179) which became effective on March 19,
2003.
(8) Incorporated by reference from the Form S-11 filed by Holmes Financing
(No. 8) PLC (File No. 333-112028) which became effective on March 23,
2004.
(9) Incorporated by reference to the corresponding exhibit to the Registration
Statement on Form S-3 (File No. 333 - 139944) filed on March 6, 2007.