THE ROYAL BANK OF SCOTLAND PLC

ISSUE MEMORANDUM LUNAR FUNDING V PLC US$5,000,000,000 SECURED ASSET-BACKED MEDIUM TERM NOTE PROGRAMME arranged by THE ROYAL BANK OF SCOTLAND PLC SERIES 2006-27 USD 30,000,000 Limited Recourse Secured Floating Rate Credit-Linked Notes due 2052 Issue Price: 100 per cent. THE ROYAL BANK OF SCOTLAND PLC ALLEN & OVERY LLP LONDON 11398-02622 ICM:3162021.26

The date of this Issue Memorandum is 22nd December, 2006. This Issue Memorandum, under which the Notes described herein (the Notes) are issued by Lunar Funding V PLC (the Issuer), incorporates by reference, and should be read in conjunction with, the Programme Memorandum dated 23rd October, 2006 (the Programme Memorandum) issued in relation to the US$5,000,000,000 Secured Asset-Backed Medium Term Note Programme (the Programme) of Lunar Funding I Limited, Lunar Funding III Limited, Lunar Funding IV Limited, Lunar Funding V PLC and other Additional Issuers adhering to the Programme from time to time. Terms defined in the Programme Memorandum have the same meaning in this Issue Memorandum. Application has been made to the Irish Financial Services Regulatory Authority (the Financial Regulator) as competent authority under Directive 2003/71/EC (the Prospectus Directive) for this Issue Memorandum to be approved. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its regulated market. This Issue Memorandum constitutes a prospectus for the purposes of the Prospectus Directive. Copies of this document have been filed with and approved by the Financial Regulator as required by the Prospectus (Directive 2003/71/EC) Regulations (the Prospectus Regulations). Upon approval of this Prospectus by the Financial Regulator, this Prospectus will be filed with the Companies Registration Office in accordance with Regulation 38(1)(b) of the Prospectus Regulations. The Issuer accepts responsibility for the information contained in this Issue Memorandum (save for the information in the section entitled "Description of the RBS Group") and the Programme Memorandum. To the best of the knowledge and belief of the Issuer (having taken all reasonable care to ensure that such is the case) such information is in accordance with the facts and does not omit anything likely to affect the import of such information. The Royal Bank of Scotland plc (RBS) accepts responsibility for the information contained in the section entitled "Description of the RBS Group" in this Issue Memorandum. To the best of the knowledge and belief of RBS (having taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not omit anything likely to affect the import of such information. This Issue Memorandum does not constitute, and may not be used for the purposes of, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation, and no action is being taken to permit an offering of the Notes or the distribution of this Issue Memorandum in any jurisdiction where such action is required. Any investment in Notes does not have the status of a bank deposit and is not within the scope of the deposit protection scheme operated by the Financial Regulator. The Issuer is not and will not be regulated by the Financial Regulator as a result of issuing the Notes. Neither the Arranger nor the Dealer (i) stands behind the Issuer, the Programme or the Notes or (ii) will make good any losses incurred by the Issuer in respect of the Charged Property or otherwise. The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act) and are subject to US tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to US persons. 11398-02622 ICM:3162021.26 2

CONTENTS Clause Page Risk Factors...4 Documents Incorporated by Reference...13 Terms of the Notes...14 Use of Proceeds...38 Description of the CDS Agreement...39 Description of the RBS Group...40 General Information...44 Form of CDS Confirmation...46 Form of Hedging Swap Confirmation...112 11398-02622 ICM:3162021.26 3

RISK FACTORS An investment in the Notes involves certain risks. Prior to investing in the Notes, prospective purchasers should carefully consider the following factors. There can be no assurance that the Issuer s investments will be successful, that its investment objective will be achieved, that the Noteholders will receive the full amounts payable by the Issuer under the Notes or that they will receive any return on their investment in the Notes. The Issuer believes that the following factors may be relevant to it and its industry. Most of these factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring. The Issuer believes that the factors described below represent the principal risks inherent in investing in Notes, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with any Notes may occur for other reasons and the Issuer does not represent that the statements below regarding the risks of holding any Notes are exhaustive. Prospective investors should also read the detailed information set out elsewhere in this Issue Memorandum and reach their own views prior to making any investment decision. Suitability Prospective purchasers of the Notes should ensure that they understand the nature of the Notes and the extent of their exposure to risk, that they have sufficient knowledge, experience and access to professional advisers to make their own legal, tax, accounting and financial evaluation of the merits and risks of investment in the Notes and that they consider the suitability of the Notes as an investment in light of their own circumstances and financial condition. Possible Insufficiency of the Underlying Assets and Payments under the Related Agreement to make Payments when due on the Notes There can be no assurance that the distributions or payments on the Underlying Assets and the payments under the Related Agreement will be sufficient (after taking into account other assets available for such purpose and which are part of the Charged Property) to make payments on the Notes after making payments that rank senior to such payments. If distributions or payments on the Underlying Assets and payments under the Related Agreement are insufficient (after taking into account other assets available for such purpose which are part of the Charged Property) to make payments on the Notes, the Issuer will have no other assets available for payment of the deficiency. Insufficiency of Enforcement Proceeds following an Event of Default Upon enforcement of security over the Charged Property following the occurrence of an Event of Default under the Conditions, it is likely that the net sums either derived from, or realised on, enforcement of such security will be insufficient to meet all amounts due to the Noteholders under the Notes. Certain Conflicts of Interest The Royal Bank of Scotland plc RBS is acting in a number of capacities (i.e. Counterparty, Hedge Counterparty, Arranger and Dealer) in connection with the transactions described in this Issue Memorandum. RBS acting in such capacities in connection with such transactions shall have only the duties and responsibilities expressly agreed to by it in its relevant capacity and shall not, by virtue of its acting in any other capacity, be deemed to have other 11398-02622 ICM:3162021.26 4

duties or responsibilities or be deemed to hold a standard of care other than as expressly provided with respect to each such capacity. RBS in its various capacities in connection with the contemplated transactions may enter into business dealings, including the acquisition of investment securities as contemplated by the Transaction Documents, from which it may derive revenues and profits in addition to the fees, if any, stated in the various Transaction Documents, without any duty to account therefor. RBS acts as the Dealer in respect of the issuance of the Notes. From time to time, RBS and/or its affiliates may own significant amounts of Notes. The ability of the Issuer to meet its obligations under the Notes will be dependent, to a significant extent, on its receipt of payments due under the Related Agreement. Consequently, the Issuer is relying not only on the creditworthiness of the obligors of the Underlying Obligations (the Synthetic Reference Entities) but also on the creditworthiness of RBS. The insolvency of RBS and the occurrence of a default by it under the Related Agreement would adversely affect the ability of the Issuer to repay principal and pay interest when due under the Notes and could result in a withdrawal or downgrade of the ratings assigned to the Notes. There is no limitation or restriction on RBS, or any of its respective affiliates, with regard to acting as advisor (or in a similar role) to other parties or persons. This and other future activities of RBS and/or its affiliates may give rise to additional conflicts of interest. The CDS Agreement does not place restrictions upon RBS's ability to buy or sell or otherwise acquire or dispose of any interest in or exposure to obligations which might comprise Underlying Obligations. Accordingly, the Counterparty may invest for its own account in any such Underlying Obligation and if it so invests will administer any such acquired Underlying Obligations in accordance with its usual business practices and may act with respect to such Underlying Obligations in the same manner as it would if the CDS Agreement did not exist, regardless of whether any such action might have an adverse effect on the Issuer. Neither RBS nor any of its affiliates shall be under any duty in making any such investments to act in a way which is favourable to the interests of the Issuer or the holders of the Notes. The Issuer does not hold any of the Reference Obligations or the Underlying Obligations and none of the Issuer, the Trustee or any Noteholder has any rights or recourse in respect thereof. RBS and its affiliates may, in the conduct of their respective businesses, receive or become aware of price sensitive information or other information which is not generally available to the public or to either of Moody s or S&P. Neither RBS nor any of its affiliates is required to act or not act on such information in relation to any of the Synthetic Reference Entities, Underlying Obligations or Reference Obligations, and in particular neither RBS nor its affiliates is required to take into account the interests of the Issuer or holders of the Notes in relation to any such information. Conflict of Interest between Secured Parties The interests of the Counterparty, the Noteholders and the other Secured Parties may differ in certain circumstances. Condition 12, Condition 14 and the Trust Deed contain provisions setting out the basis on which the Trustee is required to exercise its discretion and the circumstances in which it can be directed to act by the Counterparty or the Noteholders. Limited recourse and non-petition The Notes are limited recourse obligations of the Issuer. Payments due in respect of the Notes prior to redemption or acceleration thereof will be made solely out of amounts received by or on behalf of the Issuer in respect of the Charged Property. In addition, payments on the Notes both prior to and following enforcement of the security over the Charged Property will be subordinated to or rank pari passu with the prior payment of certain other amounts in accordance with the Pre-enforcement Waterfalls or the Order of Priority. The net proceeds of liquidation of the Charged Property (in the case of redemption of the Notes) or the realisation of the security thereover (in the case of enforcement thereof following an Event of Default) 11398-02622 ICM:3162021.26 5

will depend on various factors and may be insufficient to pay all amounts due to the Noteholders after making payments to other creditors of the Issuer ranking prior to, or pari passu with, the Noteholders. If the net proceeds of realisation of the security over the Charged Property constituted by the Trust Deed upon enforcement thereof are less than the aggregate amount payable in such circumstances by the Issuer in respect of the Notes and to the other Transaction Creditors (such negative amount being referred to herein as a shortfall), the obligations of the Issuer in respect of the Notes and its obligations to the other Transaction Creditors in such circumstances will be limited to such net proceeds which shall be applied in accordance with the Order of Priority. In such circumstances the other assets (if any) of the Issuer will not be available for payment of such shortfall which shall be borne by the Transaction Creditors in accordance with such order of priority (applied in reverse order), the rights of the Transaction Creditors to receive any further amounts in respect of such obligations shall be extinguished and none of the Noteholders or the other Transaction Creditors may take any further action to recover such amounts. In addition, none of the Noteholders, the Trustee or other Transaction Creditors (nor any other person acting on behalf of any of them) shall be entitled at any time to institute against the Issuer, or join in any institution against the Issuer of, any bankruptcy, reorganisation, arrangement, insolvency, winding up or liquidation proceedings or other proceedings under any applicable bankruptcy or similar law in connection with any obligations of the Issuer relating to the Notes, the Trust Deed or otherwise owed to the Transaction Creditors, save for lodging a claim in the liquidation of the Issuer which is initiated by another party or taking proceedings to obtain a declaration or judgment as to the obligations of the Issuer. Subordination of payments Payments on the Notes will be subordinated to payment of certain operating expenses of the Issuer, and associated liabilities and (except in certain circumstances) to payments due to the Counterparty under the Related Agreement. Control If an Event of Default occurs for the purposes of the Notes, the Trustee may declare the principal of, and the accrued interest on, the Notes to be immediately due and payable. The remedies exercisable on an Event of Default and actions taken pursuant thereto could be adverse to the interest of the holders of the Notes and the Trustee will have no obligation to consider the effect of such remedies or actions on individual holders of Notes. Mark-to-Market Close-Out of CDS Transaction An early termination of the CDS Transaction will result in a mark-to-market close-out under the Master Agreement. Changes in credit spreads applicable to Underlying Obligations could result in the Reference Portfolio having a positive mark-to-market value to the Counterparty which, upon such early termination of the CDS Transaction, would lead to a Negative Swap Close-out Payment becoming due from the Issuer. There can be no assurance that, upon any redemption of the Notes, the proceeds of realisation of the Charged Property would permit any payment on the Notes after required payments are made in respect of the Related Agreement and to the other creditors of the Issuer which rank in priority to the Noteholders pursuant to the Interest Pre-enforcement Waterfall, the Principal Pre-enforcement Waterfall or the Order of Priority, as the case may be. Interest Payment The Issuer s ability to make payments of interest in respect of the Notes will be constrained by (a) the effects of the Pre-enforcement Waterfalls and the Order of Priority and (b) the level of distributions and payments received in respect of the Related Agreement and the Underlying Assets. 11398-02622 ICM:3162021.26 6

Average Life and Prepayment Considerations The actual average lives and actual maturities of the Notes will be affected by, amongst other things, the financial condition of Synthetic Reference Entities, the amortisation of Underlying Obligations and the frequency and timing of Credit Events and satisfaction of the applicable Conditions to Settlement under the CDS Agreement. The Notes will be redeemed early upon the termination of the CDS Transaction, at the option of the Noteholders for taxation reasons or at the option of the Issuer. See Conditions 8(c), 8(d) and 8(h), respectively. Limited liquidity There is currently no active trading market for any of the Notes being offered hereby. Neither RBS nor any of its affiliates will be obligated to make a market in the Notes or otherwise to buy and sell the Notes following the issue thereof. The Notes may be owned by a relatively small number of investors and it is highly unlikely that an active secondary market for the Notes will develop. Purchasers of the Notes may find it difficult or uneconomic to liquidate their investment at any particular time, and it may be difficult for the holders of the Notes to determine the value of the Notes at any particular time. Consequently, a purchaser must be prepared to hold the Notes until maturity. Credit Ratings Credit ratings of debt securities represent the rating agencies opinions regarding their credit quality and are not a guarantee of quality. Rating agencies evaluate the safety of principal and interest payments and do not evaluate the risks of fluctuations in market value. Therefore, credit ratings may not fully reflect all the risks of an investment. Also, an issuer s current financial condition may be better or worse than a rating indicates. A 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 agencies. Security Although certain of the security constituted by the Trust Deed over the Charged Property will be expressed to take effect as a fixed charge under English law, it may take effect as a floating charge which will be subject to the items which are given priority over a floating charge by law, including prior charges, the claims of lien-holders relating to the assets the subject of the charge, the expenses of any winding up and the claims of certain preferred creditors. In addition, a floating charge will rank after a subsequently created fixed charge and may be subject to avoidance or to the imposition of a moratorium on enforcement in certain circumstances. The Trust Deed is governed by English law. Some of the Charged Property may be governed by laws of jurisdictions other than England which may require different and/or additional procedures and/or documentation to create or perfect any security interest, and no such action has been taken. Exposure to the Reference Obligations The amount of credit exposure represented by the Reference Portfolio exceeds the principal amount of the Notes. Therefore, the obligation of the Issuer to make payments to the Counterparty creates significant leveraged exposure to a portfolio of Reference Obligations. The Noteholders will not have the right to obtain from the Issuer, the Trustee, RBS or the Calculation Agent any information in relation to the Reference Obligations or Synthetic Reference Entities other than as specifically provided herein. RBS will have no obligation to keep the Issuer, the Trustee or the Noteholders informed as to matters arising in relation to any Synthetic Reference Entity or Reference Obligation including whether or not circumstances exist under which there is a possibility of the occurrence of a Credit Event. 11398-02622 ICM:3162021.26 7

Following the occurrence of any Credit Event pursuant to the CDS Agreement (and subject to the satisfaction of all the Conditions to Settlement), the Issuer will be required to pay to the Counterparty the relevant Cash Settlement Amounts (if any) on the relevant Credit Event Cash Settlement Dates or to deliver Underlying Assets to the Counterparty in lieu of such payment. In addition, on each Interest Shortfall Payment Date (if any) the Issuer will be required to pay to the Counterparty the relevant Interest Shortfall Ledger Payments. The payment of such Cash Settlement Amounts and Interest Shortfall Ledger Payments will be funded by amounts received by the Issuer from the Hedge Counterparty pursuant to the Hedging Swap Agreement and subject to certain priority amounts in accordance with the Interest Pre-enforcement Waterfall, by making drawings out of amounts standing to the credit of the Transaction Account. As a result, the Issuer may have insufficient funds available to make payments of interest and/or principal, as the case may be, on the Notes when due and payable. For the avoidance of doubt the Issuer may be required to make more than one payment in respect of Reference Obligations though not in any case in respect of any particular Interest Shortfall occurring with respect to a Reference Obligation. Additional Fixed Payments will be payable by the Counterparty to the Issuer in accordance with the terms of the CDS Agreement. The notional amount of the Reference Portfolio is U.S.$1,714,285,715 while the aggregate principal balance of the Notes on the Issue Date is U.S.$30,000,000. In the case of losses in respect of the Reference Portfolio, the Issuer will be exposed to losses up to the value of the Charged Property. The Notes therefore represent a leveraged investment in the Reference Portfolio. Due to the fact that the Notes represent a leveraged investment in the Reference Portfolio it is possible that changes in the market value of the Reference Portfolio will result in greater corresponding changes in the market value of the Notes than if this were not a leveraged investment. The offering of the Notes has been structured so that the Notes can withstand certain assumed losses relating to payments of Cash Settlement Amounts and/or Interest Shortfall Ledger Payments by the Issuer. There is no assurance that actual payments of Cash Settlement Amounts and/or Interest Shortfall Ledger Payments by the Issuer will not exceed such assumed losses. If payments of Cash Settlement Amounts and/or Interest Shortfall Ledger Payments exceed such assumed losses, payments on the Notes could be adversely affected thereby. Credit Events Credit Events may occur under the CDS Agreement notwithstanding the fact that the occurrence of such Credit Event arises directly or indirectly from, inter alia, a lack of authority or capacity of the Synthetic Reference Entity, an illegality or unenforceability of an Underlying Obligation, any applicable law or change in interpretation thereof or the imposition of restrictions by any monetary or other authority. Counterparty and Hedge Counterparty Risk Under the Related Agreement and the Hedging Swap Agreement the Counterparty and the Hedge Counterparty respectively agree to make payments to the Issuer as described therein. The Issuer will be exposed to the credit risk of the Counterparty and the Hedge Counterparty with respect to such payments. If the CDS Transaction terminates early, a Negative Swap Close-out Payment may be payable by the Issuer to the Counterparty. Any such Negative Swap Close-out Payment may in certain circumstances reduce the amount available to the Issuer to make payments to the Noteholders. The Issuer s ability to meet its obligations under the Notes and the Related Agreement will be dependent on payments received by it in connection with the Related Agreement and the Hedging Swap Agreement. The Issuer is therefore relying in part on the creditworthiness of the Counterparty and the Hedge Counterparty with respect to the Counterparty s and the Hedge Counterparty s performance of its obligations to make payments to the Issuer. 11398-02622 ICM:3162021.26 8

In order to mitigate the risk of the Issuer s exposure to the credit risk of the Counterparty, in the event that the Counterparty is downgraded so that it has a short-term issuer credit rating of below "A-1+" as assigned by S&P or below "P-1" as assigned by Moody s or a long-term debt rating of below "A1" as assigned by Moody s, the Counterparty will be required to take certain actions. In order to mitigate the risk of the Issuer s exposure to the credit risk of the Hedge Counterparty, in the event that the Hedge Counterparty is downgraded so that it has a short-term issuer credit rating of below "A-1+" as assigned by S&P or below "P-1" as assigned by Moody s or a long-term debt rating of below "Aa3" as assigned by Moody s, the Hedging Swap Agreement will terminate and the Issuer will be required to enter into replacement arrangements in accordance with the terms and conditions of the Notes. No Legal or Beneficial Interest in the Reference Obligations or Underlying Obligations Entering into the CDS Agreement presents risks in addition to those that would result from direct purchases of the Underlying Obligations. The Issuer will have a contractual relationship only with the Counterparty and not with any Synthetic Reference Entity. Under the CDS Agreement, none of the Issuer, the Trustee, the Noteholders or any other entity will have any rights to acquire from the Counterparty (or to require the Counterparty to transfer, assign or otherwise dispose of) any interest in any specific Reference Obligation or Underlying Obligation. Consequently, the CDS Agreement does not constitute a purchase or other acquisition or assignment of any interest in any Reference Obligation or Underlying Obligation. The Issuer will therefore have rights solely against the Counterparty in accordance with the CDS Agreement and will have no recourse to any Synthetic Reference Entities. None of the Issuer, the Trustee or the Noteholders will have any rights directly to enforce compliance by the Synthetic Reference Entity in respect of the relevant Underlying Obligation, will not have any rights of set-off against such Synthetic Reference Entity, will not have any voting rights with respect to the relevant Reference Obligation, will not directly benefit from any collateral supporting the relevant Underlying Obligation and will not have the benefit of the remedies that would normally be available to a holder of such Underlying Obligation. The Counterparty will not, at any time, grant to the Issuer any security interests over any Underlying Obligation. In addition, in the event of the insolvency of the Counterparty, the Issuer will be treated as a general creditor of the Counterparty and will not have any claim with respect to any Underlying Obligation. Nature of Reference Obligations and Underlying Obligations The Reference Obligations will be notional credit-default swaps referencing commercial mortgage backed securities and residential mortgage backed securities. A mortgage backed security is a security or any obligation that is evidenced by a certificate that entitles the holder thereof to receive payments that depend primarily on, and are secured upon or derived from, the cash flow from, or the market value of, a specified pool of mortgages, that by its terms is expected to generate or convert into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the securities or certificates. Mortgage backed securities are often subject to extension and prepayment risks which may have a substantial impact on the timing and level of their cashflows. Structural features and general economic and financial conditions all have an impact on the weighted average life of mortgage backed securities. There can be no certainty as to the exact weighted average life of any mortgage backed security at a specific point in time, nor the level of impact of the above-mentioned structural features and changes to the general economic conditions. As a result, no assurance can be made as to the exact timing and/or level of cashflows from the Reference Portfolio. This uncertainty may substantially affect the returns on the Notes. Commercial mortgage backed securities 11398-02622 ICM:3162021.26 9

The assets underlying commercial mortgage backed securities (CMBS) generally consist of mortgage loans secured by income-producing property (such as multi-family housing or commercial property). In general, incremental risks of delinquency, foreclosure and loss with respect to an underlying pool of mortgage loans secured by income-producing property may be greater than those associated with residential mortgage loan pools. In part, this is caused by lack of diversity. The pool tends to consist of relatively fewer mortgage loans and as a result each such mortgage loan represents a larger percentage of the principal amount of the CMBS. A failure in the performance of any one mortgage loan in the underlying mortgage pool will have a greater impact on the performance of the related CMBS. The credit risk associated with CMBS is, as a result, property specific. In this respect, commercial transactions backed by mortgage loans secured by income-producing property tend to resemble more traditional non-recourse secured loans. The underlying collateral must be analysed and the transaction structured to address issues specific to an individual commercial property and its business. Mortgage loans secured by income-producing properties may entail risks of delinquency and foreclosure, and risks of loss in the event thereof, which are greater than similar risks associated with loans made on the security of single-family residential property. In addition, commercial mortgage loans are generally nonrecourse loans and in the event of a default there will generally only be recourse against the specific properties and other assets that have been pledged to secure such mortgage loans. Also, even if a commercial mortgage loan provides for recourse to a mortgagor or its affiliates, the lender is unlikely to ultimately recover any amounts not covered by the mortgaged property. In addition, structural and legal risks of CMBS include the possibility that, in a bankruptcy or similar proceeding involving the originator or the servicer (often the same entity or an affiliate thereof), the assets of the issuer could be treated as never having been truly sold by the originator to the issuer and could be substantively consolidated with those of the originator, or the transfer of such assets to the issuer could be voided as a fraudulent transfer. Challenges based on such doctrines could result also in cashflow delays and losses on the related issue of CMBS. In general, the ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced (for example, if rental or occupancy rates decline and/or operating expenses increase), the borrower's ability to repay the loan may be impaired. Net operating income of an income-producing property can be affected by, among other things, tenant mix, success of tenant businesses, property location and condition, management decisions, competition from comparable type properties, changes in laws, as well as other business, industry and regulatory considerations and general economic conditions. Residential mortgage backed securities Residential mortgage backed securities (RMBS) represent interests in pools of residential mortgage loans secured by one- to multi-family residential mortgage loans. RMBS may be prepaid by their respective issuers at any time. Residential mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. Residential mortgage loans in an issue of RMBS may be subject to various statutory legal requirements, public policies and various common law and equitable principles that protect consumers, which among other things may regulate interest rates and other charges, require certain disclosures, require licensing of originators, prohibit discriminatory lending practices, regulate the use of consumer credit information and regulate debt collection practices. Violation of certain provisions of these laws, public policies and principles may limit the servicer's ability to collect all or part of the principal of or interest on a residential mortgage loan, entitle the borrower to a refund of amounts previously paid by it, or subject the servicer to damages and sanctions. Any such violation could result also in cashflow delays and losses on the related issue of RMBS. 11398-02622 ICM:3162021.26 10

In addition, structural and legal risks of RMBS include the possibility that, in a bankruptcy or similar proceeding involving the originator or the servicer (often the same entity or an affiliate thereof), the assets of the issuer could be treated as never having been truly sold by the originator to the issuer and could be substantively consolidated with those of the originator, or the transfer of such assets to the issuer could be voided as a fraudulent transfer. Challenges based on such doctrines could result also in cashflow delays and losses on the related issue of RMBS. The rate of defaults and losses on residential mortgage loans will be affected by a number of factors, including general economic conditions and economic conditions specific to the area where the related mortgaged property is located, as well as the extent of the borrower's equity in the mortgaged property and the financial circumstances of the borrower. If a residential mortgage loan is in default, foreclosure of such residential mortgage loan may be a lengthy and difficult process, and may involve significant expenses. Furthermore, the market for defaulted residential mortgage loans or foreclosed properties may be very limited. Reliable sources of statistical information may not exist with respect to the defaults, prepayments or recovery rates for all types of obligations comprising the Reference Portfolio. Actual default rates may exceed historical default rates or the default and other assumptions referenced herein. Actual recovery rates may be lower than historical recovery rates or the Rating Agencies assumed recovery rates and may be zero. In any event, past performance is not indicative of future performance. Retention of Reference Obligations and Underlying Obligations RBS is not required to retain any legal, equitable or economic interest in any Reference Obligation or any Underlying Obligation at any time and there is no restriction whatsoever on RBS s ability to retain, hedge, sell or otherwise dispose of any legal, equitable or economic interest in any Reference Obligation or Underlying Obligation. As a result, any obligation of the Issuer to pay a Cash Settlement Amount and/or an Interest Shortfall Ledger Payment exists regardless of whether RBS suffers a loss or is exposed to the risk of loss on a Reference Obligation upon the occurrence of a Credit Event or at any other time. Risks Relating to the Underlying Assets and Transaction Account The obligation of the Issuer to make payments on the Notes is in part dependent on payments received by the Issuer in respect of the Underlying Assets and the Transaction Account. The Issuer will be exposed to the credit risk of the obligor in respect of the Underlying Assets held by the Issuer and the Account Bank. Security The obligations of the Issuer under the Notes are secured under English law by an assignment by way of a first fixed charge granted in favour of the Trustee for itself and on behalf of the other Secured Parties over the Issuer's rights in respect of the Underlying Assets pursuant to the Trust Deed on the Closing Date. In any event, the charge created pursuant to the Trust Deed may be insufficient or ineffective to secure the Charged Assets that are securities for the benefit of Noteholders. Any risk of loss arising from any insufficiency or ineffectiveness of the security for the Notes will be borne by the Secured Parties, including the Noteholders in accordance with the Pre-enforcement Waterfalls or the Order of Priority (in each case, in reverse order) without recourse to the Issuer, the Trustee, RBS or any other party. Any risk of loss arising from any insufficiency or ineffectiveness of the security for the Notes or the custody risks which may be associated with assets comprising the Underlying Assets will be borne by the Secured Parties, including the Noteholders, without recourse to the Issuer, the Trustee, RBS or any other party. Although the security constituted by the Trust Deed over the Charged Property held from time to time is expressed to take effect as a fixed charge, it may (as a result of the payments to be made from the 11398-02622 ICM:3162021.26 11

Transaction Account in accordance with the Conditions and the Trust Deed) take effect as a floating charge which, in particular, would rank after a subsequently created fixed charge. However, the Issuer has covenanted not to create any such subsequent charges without the consent of the Trustee. Examiners, Preferred Creditors under Irish law and Floating charges The Issuer has its registered office in Ireland. As a result there is a rebuttable presumption that its centre of main interest is in Ireland and consequently it is likely that any insolvency proceedings applicable to it would be governed by Irish law. An examiner may be appointed to an Irish company in circumstances where it is unable, or likely to be unable, to pay its debts. One of the effects of such an appointment is that during the period of appointment, there is a prohibition on the taking of enforcement action by any creditors of the company. Given that the Issuer is a special purpose entity, the limited recourse nature of the Issuer's liabilities and the structure of the transaction, it is unlikely that an examiner would be appointed to the Issuer. In an insolvency of the Issuer, the claims of certain preferential creditors (including the Irish Revenue Commissioners for certain unpaid taxes) will rank in priority to claims of unsecured creditors and claims of creditors holding floating charges. In addition, the claims of creditors holding fixed charges may rank behind other "super" preferential creditors (including expenses of any examiner appointed and certain capital gains tax liabilities) and, in the case of fixed charges over book debts, may rank behind claims of the Irish Revenue Commissioners. In certain circumstances, a charge which purports to be taken as a fixed charge may take effect as a floating charge. Under Irish law, for a charge to be characterised as a fixed charge, the charge holder is required to exercise the requisite level of control over the assets purported to be charged and the proceeds of such assets including any bank account into which such proceeds are paid. If the Issuer becomes subject to an insolvency proceeding and the Issuer has obligations to creditors that are treated under Irish law as creditors that are senior relative to the Noteholders, the Noteholders may suffer losses as a result of their subordinated status during such insolvency proceeding. 11398-02622 ICM:3162021.26 12

DOCUMENTS INCORPORATED BY REFERENCE This Issue Memorandum should be read and construed in conjunction with the Programme Memorandum and full information on the Issuer and the Notes is only available on the basis of the combination of the provisions set out within this Issue Memorandum and the Programme Memorandum. The Programme Memorandum has been previously published and approved by the Financial Regulator and shall be deemed to be incorporated in, and form part of, this Issue Memorandum, save that any statement contained in the Programme Memorandum shall be deemed to be modified or superseded for the purpose of this Issue Memorandum to the extent that a statement contained herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute part of this Issue Memorandum. Terms used herein but not otherwise defined shall have the meanings given to them in the Programme Memorandum. 11398-02622 ICM:3162021.26 13

TERMS OF THE NOTES Series 2006-27 USD 30,000,000 Limited Recourse Secured Floating Rate Credit-Linked Notes due 2052 The Terms of the Notes are as set out below (including Schedules 1 and 2 to this Issue Memorandum). Any provisions of the Conditions, details of which are required to be set out in the applicable Issue Memorandum which are not so specified herein, shall not apply to the Notes. Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Programme Memorandum dated 23rd October, 2006. This Issue Memorandum must be read in conjunction with such Programme Memorandum. No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999. The Notes will be governed by, and construed in accordance with, English law. A PRINCIPAL CHARACTERISTICS OF THE ISSUE 1 Issuer Lunar Funding V PLC 2 Relevant Dealer/Lead Manager The Royal Bank of Scotland plc 3 Placement Agent Not Applicable 4 Series No 2006-27 5 Tranche 1 6 Relevant Currency (or Currencies in the case of Dual Currency Notes) U.S. Dollars (USD or Dollars) 7 Type of Notes Floating Rate Notes 8 Principal Amount USD 30,000,000 9 Issue Date 19th December, 2006 10 Issue Price 100 per cent. 11 Interest Commencement Date (if different from Issue Date) 20th December, 2006 12 Maturity Date The earliest to occur of: (a) 7 Business Days following 12th October, 2052 subject to adjustment in accordance with the Following Business Day Convention (the Scheduled Maturity Date); and 11398-02622 ICM:3162021.26 14

(b) the Final Asset Liquidation Date. 13 Calculation Agent The Royal Bank of Scotland plc 14 Custodian Not Applicable Clause 2.6(a) of the Agency Agreement shall apply. The determination by the Calculation Agent of any amount or of any state of affairs, circumstances, event or other matter, or the formation of any opinion or the exercise of any discretion required or permitted to be determined, formed or exercised by the Calculation Agent shall (in the absence of manifest error) be final and binding on the Issuer, the Trustee, the Counterparty, the Agent and the Noteholders. In performing its duties pursuant to this Issue Memorandum and the Conditions, the Calculation Agent shall act in good faith and a commercially reasonable manner. The Calculation Agent is not acting as a fiduciary for, or as an adviser to, the Noteholders in respect of its duties as Calculation Agent. 15 Sub-Custodian (if any) None (Clause 3.4 of Custody Agreement) 16 Asset Manager None 17 Related Agreement A credit default swap entered into in respect of the Reference Portfolio between the Issuer and the Counterparty evidenced by a confirmation dated 19th December, 2006 (the CDS Confirmation) pursuant to an ISDA Master Agreement (1992 Multicurrency Cross- Border) (together with the schedule thereto) dated as of 16th December, 2004 between the Issuer and the Counterparty (the Master Agreement). Counterparty Related Agreement Guarantor The Royal Bank of Scotland plc Not Applicable 18 Repurchase Agreement Not Applicable Repurchase Counterparty Not Applicable 19 Credit Support Document A Credit Support Annex dated 16th December, 2004 that supplements and forms part of the Master Agreement (the Credit Support Annex and, together with the Master Agreement and the CDS Confirmation, the CDS Agreement). Credit Support Provider Counterparty 11398-02622 ICM:3162021.26 15

20 Rating Yes. The Notes are expected to be rated "AAA" by S&P and "Aaa" by Moody's on the Issue Date. 21 Listing Yes. Application has been made prior to the Issue Date to list the Notes on the Official List of the Irish Stock Exchange and admit the Notes to trading on its regulated market. No assurance is given that such application will be successful. B DEFINITIONS 22 Additional jurisdictions for the purposes of the definition of Business Day (as used in the definition of Interest Determination Date, Condition 3(c), 7(g), 8(f) and 8(o)(i) and in this Issue Memorandum) 23 Business Day Jurisdictions for the purposes of the definition of Presentation Business Day 24 Principal Financial Centre (euro-denominated Notes) New York City, Dublin and TARGET Settlement Day Not Applicable Not Applicable 25 Additional defined terms See Schedule 2 C FORM, DENOMINATION AND TITLE 26 Form of the Notes Bearer Notes 27 Authorised Denomination(s) U.S.$100,000 D STATUS OF THE NOTES 28 Provisions relating to Prioritised Tranches of Notes 29 Pre-enforcement Waterfalls (Clause 6.19 of the Principal Trust Deed) Not Applicable Prior to the security in respect of the Charged Property being enforced, the Issuer shall apply amounts standing to the credit of the Transaction Account on such Interest Payment Date or, as the case may be, Redemption Date (less amounts scheduled for payment out of the Transaction Account in accordance with the use of funds provisions applicable to the Transaction Account as set out in paragraph 45) (the Interest Proceeds) in the order set out below (the Interest Preenforcement Waterfall): 11398-02622 ICM:3162021.26 16

1. to the payment of all amounts then due but unpaid to the Trustee (insofar as they relate to the Notes); 2. to the payment of all taxes due and owing by the Issuer to any tax authority (insofar as they relate to the Notes); 3. to the payment of any due but unpaid Administrative Expenses (insofar as they relate to the Notes) on a pro rata and pari passu basis; 4. to the payment to the Counterparty of any due but unpaid Cash Settlement Amounts to the extent not paid out of the Transaction Account; 5. to the payment to the Counterparty of any due but unpaid Interest Shortfall Ledger Payment to the extent not paid out of the Transaction Account; 6. to the payment, on a pro rata and pari passu basis, of the interest due and payable in respect of the Notes in respect of the Interest Period ending immediately prior to such Interest Payment Date or, as the case may be, Redemption Date; and 7. any remaining Interest Proceeds to the payment to the Issuer. Prior to the security in respect of the Charged Property being enforced, on the Maturity Date (or such other date(s) as the Notes may become subject to early redemption in whole or in part) and any subsequent date on which the Issuer shall receive any Additional Fixed Payments from the Counterparty, the Issuer shall (subject as otherwise provided herein) apply amounts standing to the credit of the Transaction Account on such Interest Payment Date, after all other payments are made from the Transaction Account in accordance with the use of funds provisions applicable to the Transaction Account as set out in paragraph 45 (including, for the avoidance of doubt, any Cash Settlement Amounts) (the Principal Proceeds) in the order set out below (the Principal Pre-enforcement Waterfall) and, in the case of items 1 to 4, to the extent not paid out of the Interest Proceeds in accordance with the Interest Pre-enforcement Waterfall: 1. to the payment of all amounts due but unpaid to the Trustee (insofar as they relate to the Notes); 11398-02622 ICM:3162021.26 17

E SECURITY 2. to the payment of any due but unpaid Administrative Expenses (insofar as they relate to the Notes) on a pro rata and pari passu basis; 3. in the case where the CDS Transaction has been terminated, to the payment of an amount equal to the lower of (A) the Negative Swap Close-out Payment (if any) and (B) the Credit Support Balance (as defined in the Credit Support Annex), in either case minus any net Relevant Unpaid Amounts owing from the Counterparty to the Issuer; 4. except where the Counterparty is the Defaulted Counterparty, to the payment of all amounts (if any) (including any Negative Swap Close-out Payment following an Early Termination Date) due but unpaid to the Counterparty to the extent not paid under item 3 above; 5. to the payment, on a pro rata and pari passu basis, of (a) the Redemption Amount and any due but unpaid interest on the Notes and/or, as applicable, (b) any Partial Redemption Amount; 6. where the Counterparty is the Defaulted Counterparty, to the payment of all amounts (if any) (including any Negative Swap Close-out Payment following an Early Termination Date) due but unpaid to the Counterparty to the extent not paid under item 3 above; and 7. any remaining Principal Proceeds to the payment to the Issuer. 30 Underlying Assets Subject to paragraph 40 below, a hedging swap between the Issuer and the Hedge Counterparty (the Hedging Swap Agreement) evidenced by a confirmation dated 19th December, 2006 (the Hedging Swap Confirmation) pursuant to an ISDA Master Agreement (1992 Multicurrency Cross-Border) (together with the schedule thereto) dated as of 19th December, 2006 between the Issuer and the Hedge Counterparty. The form of Hedging Swap Confirmation is set out in the Issue Memorandum. This shall not be endorsed on the Notes but shall be available for inspection as part of the Issue Memorandum by Noteholders during normal business hours at the specified office of any Paying Agent. 11398-02622 ICM:3162021.26 18

31 Additional Security Not Applicable 32 Security Documents Not Applicable 33 Additional Secured Parties 34 Underlying Assets not held by the Custodian 35 Circumstances in which Issuer is required to appoint replacement Custodian None Not Applicable Not Applicable 36 Order of Priority The order of priority in which the net proceeds of enforcement of the security over the Charged Property, or of a realisation of the Charged Property upon redemption of the Notes (the Enforcement Proceeds), is to be applied as follows: 1. to the payment of the fees, costs, charges, expenses and liabilities incurred by the Trustee or any receiver (insofar as they relate to the Notes); and 2. thereafter in accordance with the Principal Preenforcement Waterfall. 37 Principal Terms of Related Agreement 38 Additional Transaction Creditors and Transaction Documents 39 Details of Asset Manager and Asset Management Agreement (if any) 40 Substitution of Underlying Assets The form of CDS Confirmation is set out in the Issue Memorandum. This shall not be endorsed on the Notes but shall be available for inspection as part of the Issue Memorandum by Noteholders during normal business hours at the specified office of any Paying Agent. Not Applicable Not Applicable Applicable In the event that the Hedging Swap Agreement terminates prior to the redemption of the Notes, the Trustee, acting on behalf of the Issuer, will, immediately following such termination, enter into a replacement Hedging Swap Agreement (in a form and with a Hedge Counterparty approved by the Trustee, acting on behalf of the Issuer, and subject to receipt of Rating Agency Confirmation) pursuant to which the Hedge Counterparty is obliged to pay to the Issuer (a) an amount (together with any amounts received by the 11398-02622 ICM:3162021.26 19