UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(Mark One)

|X|    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
       Act of 1934

For the fiscal year ended December 31, 2007

                                       or

|_|    Transition report pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934

For the transition period from __________ to ___________



Commission file number: 333-137495

                           PERMANENT MASTER ISSUER PLC

           (Exact name of issuing entity as specified in its charter)

                                 UNITED KINGDOM

                 (Jurisdiction of incorporation or organization)

   35 GREAT ST. HELEN'S, LONDON, EC3A 6AP, UNITED KINGDOM, +44 (0)20 7398-6300

                    (Address of principal executive offices)

                        PERMANENT FUNDING (NO. 2) LIMITED

              (Exact name of depositor as specified in its charter)

                                 UNITED KINGDOM

                 (Jurisdiction of incorporation or organization)

   35 GREAT ST. HELEN'S, LONDON, EC3A 6AP, UNITED KINGDOM, +44 (0)20 7398 6300

                    (Address of principal executive offices)

                              BANK OF SCOTLAND PLC

               (Exact name of sponsor as specified in its charter)

                                 UNITED KINGDOM

                 (Jurisdiction of incorporation or organization)

         THE MOUND, EDINBURGH, EH1 1YZ, UNITED KINGDOM +44 113 235 2176

                    (Address of principal executive offices)

<PAGE>

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: None.



       Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.

       Yes |_| No |X|

       Indicate by check mark if the registrant is not required to file reports
pursuant to section 13 or 15(d) of the Securities Act.

       Yes |_| No |X|

       Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

       Yes |X| No |_|

       Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K |_|

Not applicable.

       Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filed and large accelerated filer" in Rule 12b-2 of the Exchange
Act. (Check one):

     Large Accelerated Filer |_| Accelerated Filer |_| Non-accelerated filer |X|

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).

       Yes |_| No |X|

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter.

Not applicable.

                       DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).

Documents                                                    Where Incorporated
1.     The consolidated financial statements of              Part I
       Deutsche Bank Aktiengesellschaft ("Deutsche
       Bank Aktiengesellschaft") and its subsidiaries
       as of 31 December 2007 and 2006, and for
       each of the years in the three-year period
       ended 31 December 2007, and the audit
       report thereon, which are included in
       Deutsche Bank Aktiengesellschaft's Annual

<PAGE>

       Report on Form 20-F for the Year Ended 31
       December 2007, which was filed with the SEC
       on 26 March 2008 (SEC File No. 001-15242).

2.     The consolidated financial statements of              Part 1
       Credit Suisse Group and its subsidiaries as of
       31 December 2007 and 2006, and for each of
       the years in the three-year period ended 31
       December 2007, and the audit report thereon,
       which are included in Credit Suisse Group's
       Annual Report on Form 20-F for the Year
       Ended 31 December 2007, which was filed
       with the SEC on 20 March 2008 (SEC File
       No. 001-15244).

<PAGE>

                                     PART I

ITEM 1:         BUSINESS.

Not applicable.

ITEM 1A:        RISK FACTORS.

Not applicable.

ITEM 1B:        UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2:         PROPERTIES.

Not applicable.

ITEM 3:         LEGAL PROCEEDINGS.

Not applicable.

ITEM 4:         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

SUBSTITUTE INFORMATION PROVIDE IN ACCORDANCE WITH GENERAL INSTRUCTION J TO FORM
10-K:

ITEM 1112(B) SIGNIFICANT OBLIGORS OF POOL ASSETS (FINANCIAL INFORMATION).

The pool assets held by Permanent Mortgages Trustee Limited do not include any
significant obligors.

ITEM 1114(B)(2) CREDIT ENHANCEMENT AND OTHER SUPPORT, EXCEPT FOR CERTAIN
DERIVATIVES INSTRUMENTS (INFORMATION REGARDING SIGNIFICANT ENHANCEMENT
PROVIDERS; FINANCIAL INFORMATION) AND 1115(B) CERTAIN DERIVATIVES INSTRUMENTS
(FINANCIAL INFORMATION).

The information required herein is incorporated by reference from the following
documents:

       o      The consolidated financial statements of Deutsche Bank
              Aktiengesellschaft and its subsidiaries as of 31 December 2007 and
              2006, and for each of the years in the three-year period ended 31
              December 2007, and the audit report thereon, which are included in
              Deutsche Bank Aktiengesellschaft's Annual Report on Form 20-F for
              the Year Ended 31 December 2007, which was filed with the SEC on
              26 March 2008 (SEC File No. 001-15242).

       o      The consolidated financial statements of Credit Suisse Group and
              its subsidiaries as of 31 December 2007 and 2006, and for each of
              the years in the three-year period ended 31 December 2007, and the
              audit report thereon, which are included in Credit Suisse Group's
              Annual Report on Form 20-F for the Year Ended 31 December 2007,
              which was filed with the SEC on 20 March 2008 (SEC File No.
              001-15244).

ITEM 1117 LEGAL PROCEEDINGS

None.

<PAGE>

                                     PART II

ITEM 5:         MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
                MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Not applicable.

ITEM 6:         SELECTED FINANCIAL DATA.

Not applicable.

ITEM 7:         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                RESULTS OF OPERATIONS.

Not applicable.

ITEM 7A:        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8:         FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Not applicable.

ITEM 9:         CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                FINANCIAL DISCLOSURE.

Not applicable

ITEM 9A:        CONTROLS AND PROCEDURES.

Not applicable.

ITEM 9B:        OTHER INFORMATION.

None.

<PAGE>

                                    PART III

ITEM 10:        DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following table sets out the directors of the issuing entity and their
respective business addresses and occupations. Each director has served in
office since the incorporation of the issuing entity. The term of office for
each director is indefinite, subject to resignation or disqualification under
the Companies Act of 1985. Each director has served as a director of the issuing
entity since its formation in 2006.

<TABLE>
<CAPTION>
NAME                            BUSINESS ADDRESS                PRINCIPAL ACTIVITIES/    AGE
                                                                BUSINESS OCCUPATION
<S>                             <C>                             <C>                      <C>
SFM Directors Limited           35 Great St Helen's             Provision of directors   -
                                London EC3A 6AP                 to special purpose
                                United Kingdom                  companies
SFM Directors (No.2) Limited    35 Great St Helen's             Provision of directors   -
                                London EC3A 6AP                 to special purpose
                                United Kingdom                  companies
David Balai                     Bank of Scotland plc            Senior Director          52
                                33 Old Broad Street
                                London EC2N 1HZ
                                United Kingdom
</TABLE>

The sponsor has caused David Balai, Senior Director of Bank of Scotland plc
Treasury Division, the arranger and an affiliate of the seller, to be a director
of the issuing entity. David Balai does not receive any compensation for acting
as director.

The sponsor has caused SFM Directors Limited and SFM Directors (No. 2) Limited,
companies specialising in acting as directors of special purpose companies, to
be directors of the issuing entity.

SFM Directors Limited and SFM Directors (No.2) Limited are limited liability
companies incorporated in England & Wales, in 2000. The companies were
established for the purposes of acting as corporate directors to special purpose
companies and have been carrying out this function for the past eight years. SFM
Directors Limited and SFM Directors (No.2) Limited are part of the SFM Group and
have been acting as corporate directors for the issuing entity since its
incorporation in September 2006.

David Balai, Senior Director Securitisation, is a qualified banker employed by
Bank of Scotland plc for the last six years. During this time, David has
primarily been involved at a senior level in establishing and managing the HBOS
securitisation programmes, which includes the Permanent Master Issuer programme.

The directors of each of SFM Directors Limited and SFM Directors (No. 2) Limited
are Jonathan Eden Keighley, James Macdonald and Robert Berry. Their principal
activities include the provision of directors and corporate management services
to structured finance transactions as directors on the boards of SFM Directors
Limited and SFM Directors (No. 2) Limited. The business address of each of the
directors of SFM Directors Limited and SFM Directors (No. 2) Limited is 35 Great
St. Helen's, London EC3A 6AP, United Kingdom.

The company secretary of the issuing entity is SFM Corporate Services Limited,
35 Great St Helen's, London, EC3A 6AP, United Kingdom.

In accordance with the issuing entity corporate services agreement, the issuing
entity corporate services provider SFM Corporate Services Limited will provide
to the issuing entity directors, a registered and administrative office, the
service of a company secretary and the arrangement of meetings of directors and
shareholders and procure book-keeping services and preparation of accounts by
Bank of Scotland plc. No other remuneration is paid by the issuing entity to or
in respect of any director or officer of the issuing entity for acting as such.

The issuing entity has no employees.

The following table sets out the directors of the depositor and their respective
business addresses and occupations. Each director has served in office since the
incorporation of the depositor. The term of office for each director is

<PAGE>

indefinite, subject to resignation or disqualification under the Companies Act
of 1985. Each director has served as a director of the depositor since its
formation in 2006.
<TABLE>
<CAPTION>
NAME                            BUSINESS ADDRESS                BUSINESS OCCUPATION      AGE
<S>                             <C>                             <C>                      <C>
SFM Directors Limited...........35 Great St Helen's             Director of special   -
                                London                          purpose companies
                                EC3A 6AP
                                United Kingdom
SFM Directors (No.2) Limited....35 Great St Helen's             Director of special   -
                                London                          purpose companies
                                EC3A 6AP
                                United Kingdom
David Balai.....................Bank of Scotland plc            Senior Director          52
                                33 Old Broad Street
                                London EC2N 1HZ
                                United Kingdom
</TABLE>

The directors of each of SFM Directors Limited and SFM Directors (No. 2) Limited
are Jonathan Eden Keighley, James Macdonald and Robert Berry. Their principal
activities include the provision of directors and corporate management services
to structured finance transactions as directors on the boards of SFM Directors
Limited and SFM Directors (No. 2) Limited. The business address of each of the
directors of SFM Directors Limited and SFM Directors (No. 2) Limited is 35 Great
St. Helen's, London EC3A 6AP, United Kingdom.

The company secretary of the depositor is SFM Corporate Services Limited, 35 St.
Helen's, London EC3A 6AP, United Kingdom.

The directors and secretary of the depositor have no conflicts of interest
between any duties to the depositor and their private interests and/or other
duties.

In accordance with the corporate services agreement, the corporate services
provider will provide to the depositor directors, a registered and
administrative office, the service of a company secretary and the arrangement of
meetings of directors and shareholders and procure book-keeping services and
preparation of accounts by Bank of Scotland plc. No other remuneration is paid
by the depositor to or in respect of any director or officer of the depositor
for acting as such.

ITEM 11:        EXECUTIVE COMPENSATION.

In accordance with the master issuer corporate services agreement dated October
17, 2006 and filed with the Commission on Form 8-K on November 1, 2006 (File No.
333-137495) as Exhibit 10.9, the issuing entity corporate services provider will
provide to the issuing entity directors, a registered and administrative office,
the service of a company secretary and the arrangement of meetings of directors
and shareholders and procure book-keeping services and preparation of accounts
by Bank of Scotland plc. Fees of (pound)7,170.52 were paid in 2007 for these
services.

<PAGE>

ITEM 12:        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                AND RELATED STOCKHOLDER MATTERS.

<TABLE>
<CAPTION>
(1) Title of class      (2) Name and address of       (3) Amount and nature of               (4) Percent of class
------------------      ------------------------      ------------------------               --------------------
                        beneficial owner              beneficial ownership
                        ----------------              --------------------
<S>                     <C>                           <C>                                    <C>
ORDINARY SHARES         Permanent Holdings            The authorized share capital of        100%
                        Limited,                      Permanent Master Issuer plc
                        35 Great St. Helen's          consists of 50,000 ordinary shares
                        London                        of (pound)1 each.
                        EC3A 6AP

                                                      Permanent Holdings Limited holds:

                                                      - 49,998 ordinary shares partly
                                                      paid to (pound)0.25

                                                      - One (pound)1 ordinary share fully paid

                                                      - One (pound)1 ordinary
                                                      share fully paid held in
                                                      trust by SFM Corporate
                                                      Services Limited for
                                                      Permanent Holdings Limited

</TABLE>

ITEM 13:        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                INDEPENDENCE.

None.

ITEM 14:        PRINCIPAL ACCOUNTING FEES AND SERVICES.

Not applicable.

SUBSTITUTE INFORMATION PROVIDE IN ACCORDANCE WITH GENERAL INSTRUCTION J TO FORM
10-K:

ITEM 1119 OF REGULATION AB:     AFFILIATIONS AND CERTAIN RELATIONSHIPS AND
                                RELATED TRANSACTIONS

Pursuant to the HBOS Group Reorganisation Act 2006 and with effect from
September 17, 2007, The Governor and Company of the Bank of Scotland was
registered as a public company under the Companies Act 1985 and changed its name
to Bank of Scotland plc and the business and all property and liabilities of
Halifax plc ("Halifax") were transferred to the Bank of Scotland plc.

Prior to the reorganisation, Halifax was and, as a result of the reorganisation,
Bank of Scotland plc is the sponsor of the programme, the originator of the
loans, the seller of loans to the mortgages trustee and the servicer of the
loans.

In addition, prior to the reorganisation, Halifax provided, and as a result of
the reorganisation, Bank of Scotland plc provides the services of (a) cash
manager to the mortgages trustee, Permanent Funding (No. 1) Limited ("Funding
1"), and the depositor, (b) cash manager to the issuing entity and cash manager
to the Funding 1 issuing entities, (c) swap provider to the depositor, and swap
provider to Funding 1. Bank of Scotland plc also acts as start-up loan provider
to Funding 2.

Except as described in the preceding paragraphs, there are no other affiliations
or relationships or related transactions involving the transaction parties.

ITEM 1122 OF REGULATION AB: COMPLIANCE WITH APPLICABLE SERVICING CRITERIA.

The report on assessment of compliance with servicing criteria for asset-backed
securities required by Item 1122(a) of Regulation AB and the attestation report
on assessment of compliance with servicing criteria for asset-backed securities
required by Item 1122(b) of Regulation AB are attached as Exhibit 33.1 and 34.1,
respectively, to this Form 10-K.

<PAGE>

ITEM 1123 OF REGULATION AB: SERVICER COMPLIANCE STATEMENT.

The servicer compliance statement required by Item 1123 of Regulation AB is
attached as Exhibit 35.1 to this Form 10-K.

                                     PART IV

ITEM 15: EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES.

         EXHIBIT 31.1: Rule 13a-14(d)/15d-14(d) certification.

         EXHIBIT 33.1: Report on assessment of compliance with servicing
         criteria for asset-backed securities.

         EXHIBIT 34.1: Attestation report on assessment of compliance with
         servicing criteria for asset-backed securities.

         EXHIBIT 35.1: Servicer compliance statement.

         EXHIBIT 99.1: The consolidated financial statements of Deutsche Bank
         Aktiengesellschaft and its subsidiaries as of 31 December 2007 and
         2006, and for each of the years in the three-year period ended 31
         December 2007, and the audit report thereon, which are included in
         Deutsche Bank Aktiengesellschaft's Annual Report on Form 20-F for the
         Year Ended 31 December 2007, which was filed with the SEC on 26 March
         2008 (SEC File No. 001-15242).

         EXHIBIT 99.2: The consolidated financial statements of Credit Suisse
         Group and its subsidiaries as of 31 December 2007 and 2006, and for
         each of the years in the three-year period ended 31 December 2007, and
         the audit report thereon, which are included in Credit Suisse Group's
         Annual Report on Form 20-F for the Year Ended 31 December 2007, which
         was filed with the SEC on 20 March 2008 (SEC File No. 001-15244).

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                             PERMANENT FUNDING (NO. 2) LIMITED, as Depositor

                             By:      /s/ David Balai_____
                             Name:    David Balai
                             Title:   Senior officer in charge of securitization

Date: 28 March 2008