**Exhibit 99.2**

 
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| **Private & confidential**  The Directors  Permanent Funding (No.1) Limited |   |        |   |              |
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| Blackwell House                                                                      |   | **Our ref** |   | rkg/jb/214        |
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| London                                                                               |   | **Contact** |   | Richard Gabbertas |
| EC2V 5AE                                                                             |   |        |   | 0113 231 3123     |

 

26June 2006

 

Dear Sirs

**Report ofthe Independent Accountants to Permanent Funding (No.1) Limited on itsassertion about Halifax plc’s compliance with its minimum servicing standardsfor the year ended 31 December 2005**

We have examined PermanentFunding (No.1) Limited’sassertion, attached as Appendix 2, that Halifax plc (“the Servicer”) compliedwith the minimum servicing standards set forth in Appendix 1 for the year ended31 December 2005.

The directors of Permanent Funding (No.1) Limited (“theCompany”) are responsible for identifying the minimum servicing standards setforth in Appendix 1 and for the Company’s assertion regarding the Servicer’scompliance with those requirements attached as Appendix 2. Our responsibilityis to express an opinion on theCompany’s assertion about theServicer’s compliance based on our examination.

Our examination was conductedin accordance with attestation standards established by the American Instituteof Certified Public Accountants and, accordingly, included examining, on a testbasis, evidence about theServicer’s compliance with those requirements and performing such otherprocedures as we considered necessary in the circumstances. Webelieve that our examination provides a reasonable basis for our opinion.

Our examination does not provide a legal determinationon the Servicer’s compliance withspecified requirements, nor does it include an assessment of the adequacy ofthe servicing standards themselves.

In our opinion theCompany’s assertion that theServicer complied with the minimumservicing standards contained in Appendix 1 for the year ended 31 December 2005is fairly stated in all material respects.

 

 
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| ABCD   |                                                                                                                                                                                                                 |
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|   | ***KPMG Audit Plc***                                                                                                                                                                                                 |
|   | ***Report of the Independent Accountants to Permanent Funding (No.1)  Limited on its assertion about Halifax plc’s compliance with its minimum  servicing standards for the year ended 31 December 2005*** |
|   | *26 June 2006*                                                                                                                                                                                                  |

 

This report is intended solely for the information anduse of the Company, and is not intended to be and should not be used by anyoneother than the Company.

/s/ KPMG Audit Plc

*KPMG Audit Plc*

Chartered Accountants26 June 2006

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**Appendix 1:Specified standards**

Permanent Funding(No. 1) Limited has identified the following standards, defined as theminimum servicing standards to which Halifax plc as Servicer is required to comply.

**(1) *General servicing considerations*.**

(a) Policiesand procedures are instituted to monitor any performance or other triggers andevents of default in accordance with the transaction agreements.

**(2) *Cash collection and administration*.**

(a) Payments on poolassets are deposited into the appropriate custodial bank account - thePermanent Mortgages Trustee GIC control account - no more than two businessdays of receipt.

(b) Advancesof funds or guarantees regarding collections, cash flows or distributions, andany interest or other fees charged for such advances, are made, reviewed andapproved as specified in the transaction agreements.

(c) Therelated accounts for the transaction, such as cash reserve accounts or accountsestablished as a form of overcollateralization, are separately maintained(e.g., with respect to commingling of cash) as set forth in the transactionagreements.

(d) Reconciliationsare prepared on a monthly basis for all asset-backed securities related bankaccounts, including custodial accounts and related bank clearing accountsnamely the Permanent Mortgages Trustee GIC control account, Permanent Funding(No. 1) plc GIC account, Permanent Financing (No. 3) plc capitalaccount and Permanent Financing (No. 3) plc transaction account, PermanentFinancing (No. 4) plc capital account and Permanent Financing (No. 4)plc transaction account, Permanent Financing (No. 5) plc capital accountand Permanent Financing (No. 5) plc transaction account, PermanentFinancing (No. 6) plc capital account and Permanent Financing (No. 6)plc transaction account, (No. 7) plc capital account and PermanentFinancing (No. 7) plc transaction account,. (No. 8) plc capitalaccount and Permanent Financing (No. 8) plc transaction account Thesereconciliations:

(i) Aremathematically accurate;

(ii) Areprepared within 30 calendar days after the bank statement cut-off date;

(iii) Arereviewed and approved by someone other than the person who prepared thereconciliation; and

(iv) Containexplanations for reconciling items. These reconciling items are resolved within90 calendar days of their original identification.

**(3) *Investor remittances and reporting*.**

Amountsdue to investors are allocated and remitted in accordance with timeframes,distribution priority and other terms set forth in the transaction agreements.

**(4) *Pool asset administration*.**

(a) The Servicer hasmade reasonable endeavours to maintain collateral or security on pool assets.

 (b) Any additions, removals orsubstitutions to the asset pool are made, reviewed and approved in accordancewith any conditions or requirements in the transaction agreements.

(c) The Servicer’srecords regarding the pool assets agree with the lender’s records with respectto the unpaid principal balance.

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(d) Changes withrespect to the terms or status of a pool asset (for example loan modificationsor re-ageings) are made, reviewed and approved by authorized personnel inaccordance with the transaction agreements and related pool asset documents.

(e) Loss mitigation orrecovery actions (*e.g.*,foreclosures or repossessions) are initiated, conducted and concluded inaccordance with the timeframes or other requirements established by thetransaction agreements. Such programs include a hierarchy of workout procedures(*e.g.*, forbearance plans,modifications and deeds in lieu of foreclosure, as applicable).

(f) Records documentingcollection efforts are maintained during the period a pool asset is delinquentin accordance with the transaction agreements. Such records are maintained onat least a monthly basis and describe the entity’s activities in monitoringdelinquent pool assets including, for example, phone calls, letters and paymentrescheduling plans in cases where delinquency is deemed temporary (*e.g.*, illness or unemployment).

(g) Adjustments tointerest rates or rates of return for pool assets with variable rates arecomputed based on the related pool asset documents.

(h) Delinquencies,charge-offs and uncollectible accounts are recognized and recorded inaccordance with the transaction agreements.

(i) Any external enhancement or other support ismaintained as set forth in the transaction agreements.

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** **

**Appendix 2: Permanent Funding (No. 1)Limited’s assertion about Halifax plc’s compliance with its minimum servicingstandards for the year ended 31 December 2005 (the Assertion)**

Theundersigned, a duly authorised representative of Permanent Funding (No. 1)Limited pursuant to the Amended and Restated ServicingAgreements between Halifax plc acting as Servicer (the Servicer), Halifax plcas Seller, Permanent Funding (No. 1) Limited as Funding 1 and The Bank ofNew York as the Security Trustee dated 25th November 2003, 12 March 2004,22 July 2004, 18 November 2004, 23 March 2005, 22 June 2005and 22 March 2006 as amended (the Agreements), certifies that:

1. Permanent Funding (No. 1)Limited is responsible for assessing the Servicer’s compliance with the minimumservicing standards, as set out in Appendix 1.

2. Permanent Funding (No. 1)Limited has used the minimum servicing standards, set out in Appendix 1, as abasis for assessing the Servicer’s compliance with the Agreements.

3. A review of the activitiesof the Servicer during the year ended 31 December 2005 and its performanceunder the aforementioned Agreements has been made under my supervision.

4. Based on such review, tothe best of my knowledge, the Servicer has complied with the minimum servicingstandards attached as Appendix 1 throughout the year ended 31 December 2005in all material respects, except as may be set forth in paragraph 5 below.

5. The following isa description of any exceptions to paragraph 4 above:

None.

Capitalisedterms used but not defined in this Assertion have their respective meanings setforth in the Agreements, unless the context requires otherwise or unlessotherwise defined in this Assertion.

IN WITNESSWHEREOF, the undersigned has duly executed this Annual Compliance Certificatethis 22th day of June 2006.
| /s/ David Balai                  |   |   |   |   |
|----------------------------------|--------|--------|--------|--------|
| Authorised signatory             |
| Permanent Funding (No.1) Limited |

 

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