FINANCE FOR RESIDENTIAL SOCIAL HOUSING PLC - Notice to Noteholders

THIS NOTICE IS IMPORTANT AND REQUIRES THE IMMEDIATE ATTENTION OF

SENIOR NOTEHOLDERS. IF SENIOR NOTEHOLDERS ARE IN ANY DOUBT AS TO THE ACTION

THEY SHOULD TAKE, THEY SHOULD SEEK THEIR OWN FINANCIAL AND LEGAL ADVICE,

INCLUDING AS TO ANY TAX CONSEQUENCES, IMMEDIATELY FROM THEIR STOCKBROKER,

SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL OR LEGAL ADVISER.

NOTICE OF RESULTS AND ADJOURNED MEETING OF THE HOLDERS OF THE OUTSTANDING

Series 1 Class A1 Asset Backed 8.369 Per Cent. Premium Yield Notes due 2058
(ISIN: USG34346AA77; Common Code: 7518471)

(the "Series 1 Class A1 Notes")

Series 1 Class A2 Asset Backed 8.569 Per Cent. Premium Yield Notes due 2058
(ISIN: USG34346AB50; Common Code: 7518498)

(the "Series 1 Class A2 Notes")

Series 2 Class A Asset Backed Variable Rate Notes due 2058
(ISIN USG34346AE99; Common Code 7518536)

(the "Series 2 Class A Notes")

issued by
FINANCE FOR RESIDENTIAL SOCIAL HOUSING PLC

(the "Issuer")

On 26 March 1997

The Series 1 Class A1 Notes, Series 1 Class A2 Notes and Series 2 Class A Notes are each a "Class" of Notes and together referred to as the "Senior Notes".

Capitalised terms used but not otherwise defined in this Notice shall have the meanings set out in the trust deed (the "Trust Deed") dated 26 March 1997 (as amended from time to time) and entered into between the Issuer and Royal Exchange Trust Company Limited as trustee (such role now being performed by Capita Trust Company Limited under power of attorney) (the "Trustee") and the bank agreement (the "Bank Agreement") dated 26 March 1997 (as amended from time to time) and entered into between the Issuer, The Royal Bank of Scotland plc ("RBS") (formerly National Westminster Bank plc) (the "Account Bank" and the "Administrator") and the Trustee.

The Trustee has not been involved in the formulation of the matters set out in this Notice, including, without limitation, the matters set out in section 1 (Background to the  Extraordinary Resolution)  (the "Proposal") and, in accordance with normal practice, the Trustee expresses no opinion on the merits of the Proposal (which it was not involved in negotiating) or the Extraordinary Resolution  and no opinion on whether Senior Noteholders would be acting in their best interests voting for or against the Proposal or the Extraordinary Resolution but on the basis of the information contained in this Notice has authorised it to be stated that it has no objection to the Extraordinary Resolution being submitted to Senior Noteholders for their consideration. The Trustee makes no representation that all relevant information has been disclosed to Senior Noteholders in connection with the Proposal, the Extraordinary Resolution and this Notice. The Trustee is not responsible for the accuracy, completeness, validity or correctness of the statements made in this Notice or omissions from this Notice. Nothing in this Notice should be construed as a recommendation to Senior Noteholders from the Trustee to vote in favour of, or against, the Proposal or the Extraordinary Resolution. The Trustee recommends that Senior Noteholders take their own independent professional advice on the merits and the consequences of voting in favour of, or against, the Extraordinary Resolution and the Proposal.

No person has been authorised to make any recommendation on behalf of the Issuer, the Trustee or the Principal Paying Agent as to whether or how the Senior Noteholders should vote pursuant to the Proposal. No person has been authorised to give any information, or to make any representation in connection therewith, other than those contained herein. If made or given, such recommendation or any such information or representation must not be relied upon as having been authorised by the Issuer, the Trustee or the Principal Paying Agent.

This Notice is issued and directed only to the Senior Noteholders and no other person shall, or is entitled to, rely or act on, or be able to rely or act on, its contents.

Each person receiving this Notice must make its own analysis and investigation regarding the Proposal and make its own voting decision, with particular reference to its own investment objectives and experience, and any other factors which may be relevant to it in connection with such voting decision. If such person is in any doubt about any aspect of the Proposal and/or the action it should take, it should consult its professional advisers.

Senior Noteholders should refer to section 3 (Voting and Quorum) of this Notice for details concerning methods of voting in respect of the Extraordinary Resolution and Proposal described in this Notice and quorum provisions in respect of the Adjourned Noteholders' Meeting.

NOTICE IS HEREBY GIVEN to the holders of the Senior Notes (the "Senior Noteholders") that at separate meetings of the Senior Noteholders (each a " Noteholders' Meeting") convened by the Notice of Meetings and held on 6 May 2016 at the offices of Fieldfisher LLP, Riverbank House, 2 Swan Lane, London EC4R 3TT:

1. the required quorum was achieved for the Noteholders' Meetings for the Series 1 Class A1 Notes and the Series 1 Class A2 Notes and was not achieved for the Series 2 Class A Notes; and

2. the Extraordinary Resolution was duly passed by the holders of the Series 1 Class A1 Notes and the Series 1 Class A2 Notes.

NOTICE IS HEREBY GIVEN to the Senior Noteholders that pursuant to Condition 13 of the Terms and Conditions of the Series 2 Notes and the provisions of the Ninth Schedule of the Trust Deed a meeting of the Senior Noteholders of the Series 2 Class A Notes (the "Original Noteholders' Meeting") convened by the Issuer at the offices of Fieldfisher LLP,  Riverbank House, 2 Swan Lane, London, EC4R 3TT on 6 May 2016 at 11.00am was adjourned through a lack of quorum and that a separate adjourned Noteholders' Meeting (the "Adjourned Noteholders' Meeting") convened by the Issuer will be held at the offices of Fieldfisher  LLP on Wednesday 11 May 2016 at 10.00am (London time) in respect of the Series 2 Class A Notes for the purpose of considering and, if thought fit, passing the resolution which will be proposed as an Extraordinary Resolution at the Adjourned Noteholders' Meeting in accordance with the provisions of the Ninth Schedule of the Trust Deed.

1. Background to the Extraordinary Resolution

   Pursuant to the terms of the Bank Agreement, the Account Bank shall be an entity which has its short term unsecured, unsubordinated and unguaranteed debt rated at least A-1 by S&P and its long term unsecured, unsubordinated and unguaranteed debt rated at least A3 by Moody's or such other rating which is consistent with the relevant published criteria of the relevant rating agency from time to time (the "Account Bank Required Rating").

   Following the downgrade by S&P of the short-term credit rating from A-1 to A-2 (the "RBS Downgrade") of The Royal Bank of Scotland plc ("RBS"), RBS ceased to meet the rating requirements required to fulfil certain of its roles under the Trust Deed, the Administration Agreement and the Bank Agreement.

   Pursuant to the Bank Agreement, in the event that the Account Bank no longer has the Account Bank Required Rating, the Account Bank shall either:

   1. deposit the Balance of the Collection Account in an account in the name of the Issuer with an institution that has the Account Bank Required Rating within 30 days of such downgrade, provided that such entity shall agree to enter an agreement and mandate on terms substantially similar to the terms of the Bank Agreement; or

   2. the Bank will be required to ensure that its obligations are guaranteed by an institution that has the Account Bank Required Rating within 30 days.

      RBS has provided the Issuer and the Trustee with draft documentation (the "Documents") prepared by RBS's legal counsel for the purpose of implementing a proposal (the "RBS Proposal") to mitigate potential credit rating linkage determined by the Rating Agencies between RBS's current credit rating and its role as the Account Bank through its provision of collateral to support its obligations under the Bank Agreement.

      The Documents are as follows:

2. an amendment deed to the Bank Agreement and Cash Management Agreement (the "Amendment Deed") between the Issuer, the Trustee and RBS (as Account Bank, Administrator and Cash Manager) which amends certain provisions of the Cash Management Agreement and the Bank Agreement to enable RBS to provide additional support for the rating of the Notes in its role as the Account Bank in accordance with the RBS Proposal;

3. a collateral agreement (the "Collateral Agreement") between the Issuer, the Trustee and RBS (as Account Bank and Cash Manager) pursuant to which RBS as Account Bank may, in certain circumstances, post cash and/or securities to support its obligations to the Issuer; and

4. a custody agreement (the "Custody Agreement") between the Issuer, the Trustee, RBS and Bank of New York Mellon appointing Bank of New York Mellon as the custodian (the "Custodian") of any securities deposited by RBS for safekeeping and to hold any cash received for deposit for the account of the Issuer.

RBS shall pay to the Custodian such fees and charges as agreed between RBS and the Custodian in respect of the services of the Custodian pursuant to the Custody Agreement and reimburse the Custodian for out-of-pocket expenses that are a normal incident of the services provided under the Custody Agreement.  RBS shall also indemnify and hold harmless the Custodian and BNY Mellon affiliates from all losses incurred by such parties other than as a result of their own negligence, wilful misconduct or fraud pursuant to the Custody Agreement.

The Custodian shall be subject to non-petition provisions in the Custody Agreement.

RBS shall, upon demand, pay to the Issuer the amount of any and all (a) reasonable costs (including reasonable legal costs and expenses) which the Issuer may incur in connection with the administration of the Collateral Agreement and (b) costs (including legal costs and expenses) which the Issuer may incur in connection with the exercise or enforcement of any of its rights under the Collateral Agreement.

Pursuant to the terms of the Custody Agreement, in certain circumstances, the Custodian may credit the Issuer's cash account with cash equal to the amount of any payment which the Custodian anticipates will be received by the Custodian or depository prior to actual receipt by the Custodian of final payment of such amount.  Such advance credit shall be regarded by the Custodian as an extension of credit to the Issuer.  As the Issuer is prohibited from incurring indebtedness under the terms of the Trust Deed without the prior written consent of the Trustee, the Issuer requests that the Senior Noteholders direct the Trustee to consent to the Issuer incurring such potential indebtedness if it enters into the Custody Agreement. It is not the intention of the Issuer to become voluntarily indebted pursuant to the terms of the Custody Agreement.

RBS has discussed the RBS Proposal with Moody’s Investors Service ("Moody’s") and Standard and Poor’s Rating Services ("S&P" and, together with Moody's, the "Rating Agencies"). The Rating Agencies have confirmed that they have no further comments on the RBS Proposal. It is RBS’s expectation, based on RBS’s understanding of the relevant criteria published by the Rating Agencies, that:

1. the RBS Proposal is in accordance with S&P’s counterparty criteria and as a result the ratings of the Notes will no longer be constrained at the long-term issuer credit rating of RBS (BBB+), and

2. the RBS Proposal will have no impact on the Moody’s ratings of the Notes.

The Issuer wishes to seek a direction from the Senior Noteholders pursuant to an Extraordinary Resolution the form of which is set out in paragraph 2 below (the "Extraordinary Resolution") passed at a meeting directing it and the Trustee to implement the RBS Proposal and enter into the Documents.

The Documents are available to Senior Noteholders upon request from the Issuer or the Principal Paying Agent subject to receipt by the Issuer or the Principal Paying Agent of satisfactory proof of holding of Senior Notes.  The relevant contact details of the Issuer and the Principal Paying Agent are set out below.

RBS has issued a letter of intent to the Issuer confirming that, should the Extraordinary Resolution be passed by the Senior Noteholders, then it is RBS’s intention to duly execute the Documents in the form made available to Senior Noteholders and thereafter to deliver collateral to satisfy the collateral posting remedy under 3(c) of Schedule 1 of the Amendment Deed within 7 business days from the date that the documents are executed.    

1. Form of Extraordinary Resolution

"THAT this Adjourned Noteholders' Meeting of the holders of the Series 2 Class A Notes presently outstanding of Finance for Residential Social Housing plc (the "Senior Notes" and the "Issuer", respectively) constituted by a trust deed dated 26 March 1997 (as amended from time to time) (the "Trust Deed") each made between the Issuer and Royal Exchange Trust Company Limited as trustee (such role now being performed by Capita Trust Company Limited under power of attorney) (the "Trustee") as trustee for the holders of the Senior Notes (the "Senior Noteholders") hereby by Extraordinary Resolution resolves:

1. to approve the terms of each of the Documents;

2. that the Trustee is hereby authorised, directed, requested, ratified, sanctioned, instructed and empowered to consent to the Issuer incurring indebtedness with the Custodian in certain circumstances in accordance with the terms of the Custody Agreement;

3. that the Trustee is hereby authorised, directed, requested, ratified, sanctioned, instructed and empowered to concur to the Documents and, in order to give effect thereto and to implement the same, forthwith to execute the Documents and to concur in, execute and do all such other deeds, instruments, acts and things as may be necessary or appropriate to carry out and give effect to this Extraordinary Resolution;

4. to waive, and hereby authorises, directs, requests, ratifies, sanctions, instructs and empowers the Trustee to waive any breach or potential breach of any provision of any Transaction Document that has occurred or may occur as a result of the RBS Downgrade;

5. to hold harmless, discharge and exonerate the Trustee from all liability for which it may have become or may become liable under the Trust Deed, the Notes, the Bank Agreement or any other Transaction Document or otherwise in respect of any act or omission for which the Trustee may become responsible in connection with the Documents, or by reason of the implementation of, or the Trustee acting in accordance with, this Extraordinary Resolutionor making any determination or exercising (or, as the case may be, not exercising) any other power or right conferred pursuant to, or arising out of this Extraordinary Resolution;

6. that the Trustee is hereby authorised, directed, empowered, requested, ratified, sanctioned and instructed without the need for any further consent or approval to take (or refrain from taking, as the case may be) all such actions and things as may be required, necessary or desirable to implement and to give effect to this Extraordinary Resolution, including without limitation the execution of any documents, declarations, certificates, agreements, deeds or instruments (howsoever described) to give effect to this Extraordinary Resolution; and

7. to sanction every abrogation, modification, compromise or arrangement in respect of the rights of the Noteholders against the Trustee involved in or resulting from this Extraordinary Resolution.

   Capitalised terms in this Extraordinary Resolution shall, except where the context otherwise requires or save where otherwise defined herein, bear the meanings given in or incorporated in the notice convening this Adjourned Noteholders' Meeting dated 6 May 2016."

   3.         Voting and Quorum

The provisions governing the convening and holding of the Adjourned Noteholders’ Meeting are set out in the ninth Schedule to the Trust Deed.

For the purposes of the Adjourned Noteholders' Meeting, a "Senior Noteholder" shall mean, in the case of the Senior Notes held though Clearstream Banking, societe anonyme ("Clearstream, Luxembourg") and/or Euroclear Bank S.A./N.V. ("Euroclear"), each person who is for the time being shown in the records of Clearstream, Luxembourg and/or Euroclear as the holder of a particular principal amount of the Senior Notes and, in the case of the Senior Notes held though the Depository Trust Company ("DTC"), each person who is shown in the records of DTC as the holder of a particular principal amount of the Senior Notes on 14 April 2016 (the "Record Date"). Transferees of the Senior Notes after the Record Date will not be entitled to vote on the Extraordinary Resolution.

Quorum

Each person who is the owner of a particular nominal amount of the Senior Notes, as shown in the records of Clearstream, Luxembourg and/or Euroclear as the holder of a particular principal amount of the Senior Notes and in the case of the Senior Notes held though the DTC, each person who is on the Record Date shown in the records of DTC as the holder of a particular principal amount of the Senior Notes or their respective accountholders ("Accountholders"), (a "Beneficial Owner") should note that they are not the registered holders of the Senior Notes for the purposes of the Adjourned Noteholders' Meeting and will only be entitled to attend and vote at the Adjourned Noteholders' Meeting in accordance with the procedures set out below in "Procedures for Voting". On this basis, the only Senior Noteholder currently able to vote at the Adjourned Noteholders' Meeting with respect to the Senior Notes represented by the Global Note Certificate will be the registered holder of the Global Note Certificate, which is Citibank, Brussels, as nominee for the common depositary of Euroclear and Clearstream. However Citibank, Brussels may grant proxies to the Beneficial Owners to attend and vote at the Adjourned Noteholders' Meeting. Alternatively, Beneficial Owners who hold their interests through a clearing system and who do not wish to attend and vote in person may convey their voting instructions by contacting the relevant clearing system (or through the relevant Accountholder, if applicable) and arrange for votes to be cast on their behalf. See "Procedures for Voting" below.

The quorum required at the Adjourned Noteholders’ Meeting is at least two or more Voters whatever the proportion of the Notes which they represent provided however that for so long as the Relevant Fraction of the Principal Amount Outstanding of the relevant Class of Notes is represented by a Global Note, a single Proxy representing the holder thereof shall be deemed to be two Voters for the purposes of forming a quorum.   If a quorum is not present within 15 minutes from the time fixed for a meeting so adjourned, the meeting shall be dissolved.

Procedure for Voting

The holder of a Bearer Note may obtain a Voting Certificate from the Principal Paying Agent or require the Principal Paying Agent to issue a Block Voting Instruction by depositing such Note with the Principal Paying Agent not later than 48 hours before the time fixed for the Adjourned Noteholders' Meeting. A Voting Certificate, Block Voting Instruction or a Proxy authorised in such Block Voting Instruction shall be valid until (in the case of a Voting Certificate) the earliest of (i) the conclusion of the Adjourned Noteholders' Meeting; and (ii) the surrender of such Voting Certificate to the Principal Paying Agent and (in the case of a Block Voting Instruction and a Proxy authorised thereunder) the earlier of (i) the conclusion of the Adjourned Noteholders'  Meeting and (ii) the surrender to such Paying Agent, not less than 48 hours before the time fixed for the Adjourned Noteholders'  Meeting (or if the Adjourned Noteholders' Meeting has been adjourned, the time fixed for its resumption), of the receipt for the deposited Senior Notes and notification thereof by the Principal Paying Agent to the Issuer and the Trustee of the deposited Senior Notes to which it relates. So long as a Voting Certificate or Block Voting Instruction is valid, the bearer thereof (in the case of a Voting Certificate) or any Proxy named therein (in the case of a Block Voting Instruction) shall be deemed to be the holder of the Senior Notes to which it relates for all purposes in connection with the Adjourned Noteholders' Meeting. A Voting Certificate and a Block Voting Instruction cannot be outstanding simultaneously in respect of the same Note.

A holder of a Registered Definitive Note may by an instrument in writing in the form for the time being available from the specified office of the Registrar in the English language signed by the holder (or, in the case of joint holders, the first named) or its duly appointed attorney or, in the case of a corporation, executed under its seal or signed on its behalf by its duly appointed attorney or a duly authorised officer of the corporation and delivered to the Registrar not later than 48 hours prior to the time for which such meeting or adjourned meeting is convened, appoint any person to attend and act on his or its behalf in connection with any meeting or proposed Adjourned Noteholders' meeting.

Any holder of a Registered Definitive Note which is a corporation may by resolution of its directors or other governing body and the delivery of an executed or certified copy of such resolution (or, if such resolution is not in English, a certified English translation thereof) to the Registrar not later than 48 hours prior to the time for which such meeting or adjourned meeting is convened, authorise any person to act as its representative in connection with the Adjourned Noteholders' Meeting.

Only Voters, representatives of the Issuer and the Trustee, the financial advisers of the Issuer and the Trustee and the legal counsel to the Issuer, the Trustee and such advisers may attend and speak at the Adjourned Noteholders' Meeting.

Every question submitted to the Adjourned Noteholders' Meeting shall be decided in the first instance by a show of hands. Unless a poll is validly demanded before or at the time that the result is declared, the Chairman's declaration that on a show of hands a resolution has been passed, passed (or not passed) by a particular majority or rejected shall be conclusive, without proof of the number of votes cast for, or against, the Extraordinary Resolution.

A demand for a poll shall be valid if it is made by the Chairman, the Issuer, the Trustee or one or more Voters representing or holding not less than one fiftieth of the aggregate Principal Amount Outstanding of the Senior Notes of the relevant class. The poll may be taken immediately or after such adjournment as the Chairman directs. A valid demand for a poll shall not prevent the continuation of the Adjourned Noteholders' Meeting for any other business.

On a show of hands every Voter has one vote. On a poll every person who is present has one vote for each £100,000 of Registered Definitive Notes of the relevant Class of which he is a holder or in respect of which he is a proxy or representative or in respect of each Unit of Bearer Notes of the relevant Class so produced or represented by the voting certificate so produced or in respect of which he is a proxy. The holder of a Global Note shall be treated as having one vote for each £100,000 principal amount of Senior Notes represented by such Global Note. Without prejudice to the obligations of proxies, a person entitled to more than one vote need not use them all or cast them all in the same way.

In case of equality of votes the chairman shall both on a show of hands and on a poll have a casting vote in addition to any other votes which he may have.

To be passed at the Adjourned Noteholders’ Meeting, the Extraordinary Resolution requires a majority of at least 75 per cent of the votes cast.

If passed at the Adjourned Noteholders' Meeting, the Extraordinary Resolution will be binding on all the Senior Noteholders of the relevant Class, whether or not present at the Adjourned Noteholders' Meeting and whether or not voting, and upon all Couponholders.

Any Extraordinary Resolution passed by the Senior Noteholders shall also be binding on the Mezzanine Noteholders and the Series 3 Noteholders. 

Principal Paying Agent

Citibank, N.A., London Branch
Citigroup Centre
Canada Square
Canary Wharf
London E14 5LB

Tel: [phone]
Email: [e-mail]

Trustee

Capita Trust Company Limited
4th Floor
40 Dukes Place
London
EC3A 7NH

Fax: [phone]
Email: [e-mail]

Account Bank and Administrator

The Royal Bank of Scotland
280 Bishopsgate
London
EC2M 4AA

Tel: [phone]
Email:  [e-mail]
Attention:  Liability Management

Subject to the Extraordinary Resolution being passed by the Senior Noteholders and all relevant documents being executed, the Amendments set out above shall be become effective and the Noteholders will be notified thereof in accordance with the Conditions.

This notice is given by:

Issuer

Finance for Residential Social Housing plc
4th Floor
40 Dukes Place
London
EC3A 7NH

Fax: [phone]
Email: [e-mail]

Dated 6 May 2016

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