**Exhibit 15.3**

 

Dated: June 30, 2004

 

Halifaxplc: Annual Compliance Certificate

 

Theundersigned, a duly authorised representative of Halifax plc, acting asServicer (the Servicer), pursuant to the Amended and Restated ServicingAgreement between the Servicer, Halifax plc as Seller, Permanent MortgagesTrustee Limited as Mortgages Trustee, Permanent Funding (No. 1) Limited asFunding 1 and The Bank of New York as the Security Trustee dated 25th November2003, as amended (the Agreement), certifies that:

 

1.     A review ofthe activities of the Servicer during the period from 25th November 2003 to31st December 2003 and its performance under the aforementioned Agreement hasbeen made under my supervision.

 

2.     Based onsuch review, to the best of my knowledge, the Servicer has fulfilled itsobligations under the Agreement and the minimum servicing standards attached asAppendix 1 throughout the period from 25th November 2003 to 31stDecember 2003 in all material respects, except as may be set forth in paragraph3 below.

 

3.     Thefollowing is a description of any exceptions to paragraph 2 above:

 

None.

 

Capitalised terms used but not defined inthis Annual Compliance Certificate have their respective meanings set forth inthe Agreement, unless the context requires otherwise or unless otherwisedefined in this Certificate.

 

IN WITNESS WHEREOF, the undersigned has dulyexecuted this Annual Compliance Certificate this 30th day of June, 2004.

 
| /s/ Philip Hanson    |   |
|----------------------|--------|
| Authorised signatory |
| Halifax plc          |

 

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**Appendix 1: Minimum servicingstandards**

 

Permanent Mortgages Trustee Limited have identified the followingstandards, defined as the minimum servicing standards to which Halifax plc asServicer is required to comply.

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

 

(i) Policies and procedures are instituted to monitor any performanceor other triggers and events of default in accordance with the transactionagreements.

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

 

(i) Payments on pool assets are deposited into the appropriatecustodial bank accounts - the Permanent Mortgage Trustee GIC control account -no more than two business days of receipt.

 

(ii) Advances of funds or guarantees regarding collections, cash flowsor distributions, and any interest or other fees charged for such advances, aremade, reviewed and approved as specified in the transaction agreements

 

(iii) The related accounts for the transaction, such as cash reserveaccounts or accounts established as a form of overcollateralization, areseparately maintained (e.g. with respect to commingling of cash) as set forthin the transaction agreements.

 

(iv) Reconciliations are prepared on a monthly basis for allasset-backed securities related bank accounts, including custodial accounts andrelated bank clearing accounts – namely, the Permanent Mortgages Trustee GICaccount, Permanent Funding (No.1) GIC account, Permanent Financing (No.3)capital account and Permanent Financing (No.3) transaction account. Thesereconciliations:

 

(A) Are mathematically accurate;

 

(B) Are prepared within 30 calendar days after the bank statementcut-off date;

 

(C) Are reviewed and approved by someone other than the person whoprepared the reconciliation; and

 

(D) Contain explanations for reconciling items. These reconciling itemsare resolved within 90 calendar days of their original identification.

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**(3)*Investor remittances.***

 

(i) Amounts due to investors are allocated and remitted in accordancewith timeframes, distribution priority and other terms set forth in thetransaction agreements.

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

 

(i) The servicer has made reasonable endeavours to maintain collateralor security on pool assets.

 

(ii) Pool assets and related documents are safeguarded as required bythe transaction agreements.

 

(iii) Any additions, removals or substitutions to the asset pool aremade, reviewed and approved in accordance with any conditions or requirementsin the transaction agreements.

 

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(iv) The servicer’s records regarding the pool assets agree with thelender’s records with respect to the unpaid principal balance.

 

(v) Changes with respect to the terms or status of a pool asset (forexample loan modifications or re-ageings) are made, reviewed and approved byauthorized personnel in accordance with the transaction agreements and relatedpool asset documents.

 

(vi) Loss mitigation or recovery actions (*e.g.*, foreclosures or repossessions) are initiated,conducted and concluded in accordance with the timeframes or other requirementsestablished by the transaction agreements. Such programs include a hierarchy ofworkout procedures (*e.g.*,forbearance plans, modifications and deeds in lieu of foreclosure, asapplicable).

 

(vii) Records documenting collection efforts are maintained during theperiod a pool asset is delinquent in accordance with the transactionagreements. Such records are maintained on at least a monthly basis anddescribe the entity’s activities in monitoring delinquent pool assetsincluding, for example, phone calls, letters and payment rescheduling plans incases where delinquency is deemed temporary (*e.g.*,illness or unemployment).

 

(viii) Adjustments to interest rates or rates of return for pool assetswith variable rates are computed based on the related pool asset documents.

 

(ix) Delinquencies, charge-offs and uncollectible accounts arerecognized and recorded in accordance with the transaction agreements.

 

(x) Any external enhancement or other support is maintained as setforth in the transaction agreements.

 

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