-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Oel/fr103Jd0vUqUGboh9RQzAuJPzZ089DPLna8VvtpXzCuoVqOXYI24f5pzYN2J Bof0moCIiWShOoloAOdjPQ== /in/edgar/work/20000601/0000025191-00-000014/0000025191-00-000014.txt : 20000919 0000025191-00-000014.hdr.sgml : 20000919 ACCESSION NUMBER: 0000025191-00-000014 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000229 ITEM INFORMATION: FILED AS OF DATE: 20000601 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COUNTRYWIDE CREDIT INDUSTRIES INC CENTRAL INDEX KEY: 0000025191 STANDARD INDUSTRIAL CLASSIFICATION: [6162 ] IRS NUMBER: 132641992 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-12331-01 FILM NUMBER: 647543 BUSINESS ADDRESS: STREET 1: 4500 PARK GRANADA BLVD CITY: CALABASAS STATE: CA ZIP: 91302 BUSINESS PHONE: 8182253000 MAIL ADDRESS: STREET 1: 4500 PARK GRANADA BLVD CITY: CALABASAS STATE: CA ZIP: 91302 8-K 1 0001.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURENT REPORT Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 Date of Report: May 31, 2000 Date of Earliest Event Reported: Not Applicable COUNTRYWIDE CREDIT INDUSTRIES, INC. (Exact name of registrant as specified in its chapter) Delaware 1-8422 95-4083087 (State or other jurisdiction (Commission (IRS Employer of incorporation) Number) Identification No.) 4500 PARK GRANADA, CALABASAS CA 91302 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (818) 225-3000 ITEM 5. OTHER EVENTS Countrywide Credit Industries, Inc. ("CCI"), is hereby filing as Exhibit 99.15 hereto a copy of the Financial Statements and Report of Independent Certified Public Accountants for Countrywide Securities Corporation, a California corporation and a wholly-owned indirect subsidiary of CCI in order to make the financial information contained herein available to the general public. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Exhibit No. Description 99.15 Financial Statements and Report of Independent Certified Public Accountants for the period beginning March 1, 1999 and ending February 29, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned hereunto duly authorized. Dated: May 30, 2000 COUNTRYWIDE CREDIT INDUSTRIES, INC. By: /s/ Standford L. Kurland Standford L. Kurland Senior Managing Director and Chief Operating Officer EXHIBIT INDEX Exhibit No. Description 99.15 Financial Statements and Report of Independent Certified Public Accountants for the period beginning March 1, 1999 and ending February 29, 2000. EX-99.15 2 0002.txt SUBSIDIARY FINANCIAL STATEMENTS Financial Statements and Report of Independent Certified Public Accountants COUNTRYWIDE SECURITIES CORPORATION (A wholly-owned subsidiary of Countrywide Capital Markets, Inc.) February 29, 2000 C o n t e n t s Page Report of Independent Certified Public Accountants 3 Financial Statements Statement of Financial Condition 4 Statement of Earnings 5 Statement of Changes in Stockholder's Equity 6 Statement of Changes in Subordinated Borrowings 7 Statement of Cash Flows 8 Notes to Financial Statements 9 Supplementary Information Report of Independent Certified Public Accountants on Supplementary Information Required by Rule 17a-5 of the Securities and Exchange Commission 18 SCHEDULE I - Computation of Net Capital under Rule 15c3-1 of the Securities and Exchange Commission 19 SCHEDULE II - Computation for Determination of Reserve Requirements under Rule 15c3-3 of the Securities and Exchange Commission 20 SCHEDULE III - Information Relating to Possession or Control Requirements under Rule 15c3-3 of the Securities and Exchange Commission 21 Report of Independent Certified Public Accountants on Internal Control Structure Required by Rule 17a-5 of the Securities and Exchange Commission 23
Report of Independent Certified Public Accountants Board of Directors Countrywide Securities Corporation We have audited the accompanying statement of financial condition of Countrywide Securities Corporation (a wholly-owned subsidiary of Countrywide Capital Markets, Inc.) as of February 29, 2000, and the related statements of earnings, changes in stockholder's equity, changes in subordinated borrowings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Countrywide Securities Corporation as of February 29, 2000, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Los Angeles, California April 12, 2000 The accompanying notes are an integral part of this statement. Countrywide Securities Corporation (A wholly-owned subsidiary of Countrywide Capital Markets, Inc.) STATEMENT OF FINANCIAL CONDITION February 29, 2000 (Dollars in thousands) ASSETS Cash segregated under federal regulations $ 5,600 Receivables from brokers and dealers 18,461 Receivables from customers 4,628 Trading securities owned, at market value 1,984,031 Securities purchased under agreements to resell 457,524 Other assets 17,670 ------------------ Total assets $2,487,914 ================== LIABILITIES AND STOCKHOLDER'S EQUITY Payables to brokers and dealers $ 34,155 Payables to customers 3,753 Trading securities sold, not yet purchased, at market value 181,904 Securities sold under agreements to repurchase 2,075,257 Accounts payable and accrued liabilities 10,669 Due to affiliates 41,661 ------------------ Total liabilities 2,347,399 ------------------ Commitments and contingencies - Liabilities subordinated to claims of general creditors 52,093 ------------------ Stockholder's equity Capital stock - no par value; authorized, 100,000 shares; issued and outstanding, 30 shares 288 Additional paid-in capital 30,400 Retained earnings 57,734 ------------------ Total stockholder's equity 88,422 ------------------ Total liabilities and stockholder's equity $2,487,914 ==================
Countrywide Securities Corporation (A wholly-owned subsidiary of Countrywide Capital Markets, Inc.) STATEMENT OF EARNINGS Year ended February 29, 2000 (Dollars in thousands) Revenues Gain on securities trading accounts and fees $ 52,256 Interest earned 108,981 ------------------ 161,237 Expenses Employee compensation and benefits 37,126 Interest expense 84,084 Transfer and clearing fees 1,169 Rent 752 Data processing 3,735 Other operating expenses 7,107 ------------------ ------------------ 133,973 ------------------ Earnings before income taxes 27,264 Provision for income taxes 9,245 ------------------ NET EARNINGS $ 18,019 ==================
The accompanying notes are an integral part of this statement. Countrywide Securities Corporation (A wholly-owned subsidiary of Countrywide Capital Markets, Inc.) STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY Year ended February 29, 2000 (Dollars in thousands) Total Common Stock Paid-in Capital Retained Stockholder's Earnings Equity --------------- ----------------- ---------------- ----------------- Balances at March 1, 1999 $288 $30,400 $39,715 $70,403 Net earnings for the year - - 18,019 18,019 --------------- ----------------- ---------------- ----------------- Balances at February 29, 2000 $288 $30,400 $57,734 $88,422 =============== ================= ================ =================
Countrywide Securities Corporation (A wholly-owned subsidiary of Countrywide Capital Markets, Inc.) STATEMENT OF CHANGES IN SUBORDINATED BORROWINGS Year ended February 29, 2000 (Dollars in thousands) Subordinated borrowings at March 1, 1999 $52,190 Increases: Issuance of subordinated notes 52,793 Decreases: Payment of subordinated notes (52,890) ----------------- Subordinated borrowings at February 29, 2000 $52,093 =================
The accompanying notes are an integral part of this statement. Countrywide Securities Corporation (A wholly-owned subsidiary of Countrywide Capital Markets, Inc.) STATEMENT OF CASH FLOWS Year ended February 29, 2000 (Dollars in thousands) Cash flows from operating activities: Net earnings $ 18,019 Adjustments to reconcile net earnings to net cash used in operating activities: Decrease in cash segregated under federal regulations 2,034 Decrease in receivables from brokers and dealers 378,035 Decrease in receivables from customers 4,326 Increase in trading securities owned, at market value (523,585) Increase in securities purchased under agreements to resell (372,438) Increase in other assets (6,560) Increase in payables to brokers and dealers 28,615 Decrease in payables to customers (5,536) Increase in trading securities sold, not yet purchased, at market value 97,129 Increase in securities sold under agreements to repurchase 451,486 Increase in accounts payable and accrued liabilities 1,434 ------------------- Net cash provided by operating activities 72,959 Cash flows from financing activities: Decrease in due to affiliates (72,862) Net decrease in subordinated notes (97) ------------------- Net cash used in financing activities (72,959) Net change in cash - Cash at beginning of year - ------------------- Cash at end of year $ - =================== Supplemental disclosure of cash flow information: Interest paid $ 82,984 ===================
Countrywide Securities Corporation (A wholly-owned subsidiary of Countrywide Capital Markets, Inc.) NOTES TO FINANCIAL STATEMENTS - Cont'd February 29, 2000 Countrywide Securities Corporation (A wholly-owned subsidiary of Countrywide Capital Markets, Inc.) NOTES TO FINANCIAL STATEMENTS February 29, 2000 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Countrywide Securities Corporation (the "Company") is a broker-dealer registered with the Securities and Exchange Commission ("SEC") and is a member of the National Association of Securities Dealers, Inc. ("NASD"). The Company trades mortgage-backed securities ("MBS") and other fixed income securities with broker-dealers and institutional investors. In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: Organization The Company is a California corporation that is a wholly-owned subsidiary of Countrywide Capital Markets, Inc. (the "Parent"), which in turn is a wholly-owned subsidiary of Countrywide Credit Industries, Inc. ("CCI"). Cash Financing of the Company's assets and operations is provided by collateralized financing arrangements, bank loans, or loans from affiliates, on an as needed basis. Accordingly, the unrestricted cash balance is zero. Securities Transactions Proprietary securities transactions are recorded on a trade date basis, while customers' securities transactions are recorded on settlement date basis. Trading securities owned and sold, not yet purchased, are carried at market value. Gains or losses resulting from changes in the market value of the securities are recorded in gain on securities trading accounts and fees. 14 Countrywide Securities Corporation (A wholly-owned subsidiary of Countrywide Capital Markets, Inc.) NOTES TO FINANCIAL STATEMENTS - Continue February 29, 2000 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Contiued Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase Securities purchased under agreements to resell and securities sold under agreements to repurchase are treated as collateralized financing transactions and are carried at the amounts at which the securities will subsequently be resold or reacquired as specified in the respective agreements, plus accrued interest. At February 29, 2000, the market value of the securities purchased under agreements to resell was $465,990,000 and the average effective interest rate was 4.48% for the year ended February 29, 2000. The market value of the securities sold under agreements to repurchase was $2,112,132,000 and the average effective interest rate was 5.23% for the year ended February 29, 2000. Resell and repurchase agreements are collateralized by U.S. Treasury securities or various MBS securities. Collateral is valued daily and the Company may require counter-parties to deposit additional collateral or return collateral pledged when appropriate. Collateral The Company continues to report assets it has pledged as collateral in secured borrowing and other arrangements when the secured party cannot sell or repledge the assets or the Company can substitute collateral or otherwise redeem it on short notice. The Company generally does not report assets received as collateral in secured lending and other arrangements since the debtor typically has the right to redeem the collateral on short notice. Income Taxes CCI and its subsidiaries, including the Company, have elected to file consolidated federal and combined state income and franchise tax returns. The policy of CCI is for each member of the consolidated group to recognize tax expense based on that member's financial statement income at the rate of 33.9%. The income tax liability generated by the Company, as well as payments thereof, are reflected in the amount due to affiliates. NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Stock-Based Compensation CCI grants stock options for a fixed number of shares to employees of the Company with an exercise price equal to the fair value of the shares at the date of grant. The Company recognizes compensation cost related to its stock option plans only to the extent that the fair value of the shares at the grant date exceeds the exercise price. NOTE B - CASH SEGREGATED UNDER FEDERAL REGULATIONS Cash of $5,600,000 at February 29, 2000 has been segregated in a special reserve bank account for the exclusive benefit of customers under Rule 15c3-3 of the Securities and Exchange Commission. NOTE C - RECEIVABLES FROM AND PAYABLES TO BROKERS AND DEALERS The components of receivables from and payables to brokers and dealers consisted of the following at February 29, 2000: (Dollars in thousands) Securities failed to deliver $17,136 Other receivables 1,325 ------------------ Total receivables from brokers and dealers $18,461 ==================
NOTE C - RECEIVABLES FROM AND PAYABLES TO BROKERS AND DEALERS - Continued (Dollars in thousands) Securities failed to receive $26,388 Unsettled proprietary trades, net 7,468 Other payables 299 ------------------ Total payables to $34,155 brokers and dealers ================== "Fails" represent the contract value of securities which have not been delivered or received by settlement date.
NOTE D - RECEIVABLES FROM AND PAYABLES TO CUSTOMERS Receivables from and payables to customers represent amounts due on securities transactions reflected on a settlement date basis. Securities owned by the customers are held as collateral to secure the receivable from customers. Such collateral is not reflected in the financial statements. NOTE E - TRADING SECURITIES OWNED AND SOLD, NOT YET PURCHASED Trading securities owned, at market value, consisted of the following at February 29, 2000: (Dollars in thousands) Mortgage pass-through certificates $1,744,406 Agency debt securities 129,389 Collateralized mortgage obligations 88,104 Negotiable certificates of deposit 19,024 Options 2,832 Other securities 276 ------------------- Total trading securities owned, at market value $1,984,031 ===================
NOTE E - TRADING SECURITIES OWNED AND SOLD, NOT YET PURCHASED Continued Trading securities sold, not yet purchased, at market value, consisted of the following at February 29, 2000: (Dollars in thousands) U. S. Treasury securities $107,709 Agency debt securities 72,356 Negotiable certificates of deposit 1,780 Other 59 ------------------- Total trading securities sold, not yet purchased, at market value $181,904 ===================
NOTE F - TRANSACTIONS WITH AFFILIATES The Company paid its affiliates $2,287,000 for data processing, marketing, management and accounting for the year ended February 29, 2000. In addition, the Company paid its affiliates $666,000 for rent charged or paid on its behalf for the year ended February 29, 2000. The Company reimbursed its affiliates for all other direct expenses paid on its behalf. Intercompany interest income and expense on the intercompany receivable or payable was based upon a weighted average interest rate of 5.29% for the year. Net interest on the intercompany balance amounted to an expense of $3,903,000 for the year ended February 29, 2000. All such payments and reimbursements are charged or credited through the intercompany account. Included in gain on securities trading accounts and fees are fees in the amount of $32,616,000 earned from an affiliate for the year ended February 29, 2000. Outstanding at February 29, 2000 were securities sold under agreements to repurchase with an affiliate in the amount of $620,101,000. During the year, the Company entered into agreements for options on interest rate swaps ("swaptions") with an affiliate having a notional amount of $60,000,000 and a fair market value at February 29, 2000 of $2,832,000. During the year ended February 29, 2000, the Company purchased and sold $45,062,515,000 of securities from affiliates at prevailing market prices. Refer to Note J for subordinated borrowings from an affiliate at February 29, 2000. NOTE G - NET CAPITAL REQUIREMENTS The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (SEC Rule 15c3-1), which requires the maintenance of minimum net capital. The Company has elected to use the alternative method, permitted by the rule, which requires that the Company maintain minimum net capital, as defined, equal to the greater of $250,000 or two percent of aggregate debit balances arising from customer transactions, as defined. At February 29, 2000, the Company's net capital was $80,462,000 and net capital in excess of the minimum required was $80,212,000. The rule also prohibits the Company from withdrawing equity capital or making distributions to its shareholder (the Parent) if resulting net capital would be less than five percent of aggregate debits. NOTE H - EMPLOYEE BENEFIT PLANS Eligible full-time employees of the Company are covered under CCI's defined benefit plans, including dental, medical, life insurance, dependent care and others. A portion of the employee benefit plan expense is allocated to the Company based on the Company's employees' participation in these plans. Eligible full-time employees of the Company are also covered under CCI's defined benefit pension and tax deferred savings and investment plans. A portion of the benefit plan expense is allocated to the Company based upon the percentage of the Company's salary expense to the total salary expense of CCI and its subsidiaries. The Company's expense related to these plans was $347,000 for the year ended February 29, 2000. Because the Company participates in these plans with other subsidiaries of CCI, an analysis setting forth the funding status at February 29, 2000, cannot be separately determined for the Company. NOTE I - COMMITMENTS AND CONTINGENCIES The Company is contingently liable under an irrevocable letter of credit agreement used in lieu of margin and clearing deposits with the MBS Clearing Corporation in the amount of $10,000,000. The total margin requirement was $10,435,000 at February 29, 2000, which was satisfied with the letter of credit and a cash deposit of $435,000. The Company is a defendant in various legal proceedings involving matters generally incidental to its business. Although it is difficult to predict the ultimate outcome of these proceedings, management believes, based on discussions with counsel, that any ultimate liability will not materially affect the financial position or results of operations of the Company. NOTE J - LIABILITIES SUBORDINATED TO CLAIMS OF GENERAL CREDITORS All borrowings under revolving subordination agreements are with an affiliate. At February 29, 2000, the balances are: (Dollars in thousands) Revolving subordinated note, 5.47%, due May 24, 2000 $35,457 Revolving subordinated note, 5.88%, due June 26, 2000 11,423 Revolving subordinated note, 5.00%, due April 28, 2000 5,213 ------------------ Total liabilities subordinated to claims of general creditors $52,093
================== The liabilities subordinated to claims of general creditors are subordinated to all existing and future claims of all non-subordinated creditors of the Company and constitute part of the Company's Net Capital (SEC Rule 15c3-1) and may be repaid only if, after giving effects to such repayment, the Company meets specified requirements of the SEC. Interest expense on the subordinated borrowings amounted to $2,795,000 for the year ended February 29, 2000. NOTE K - FINANCIAL INSTRUMENTS The Company utilizes a variety of derivative and other financial instruments for trading purposes and to manage interest rate risk. These instruments include MBS mandatory forward delivery and purchase commitments, short sales of cash market U.S. Treasury securities and swaptions. Risks arise from the potential fluctuations of interest rates during the term of these contracts. The following summarizes the notional amounts of MBS mandatory forward delivery and purchase commitments and swaptions, and fair values (carrying amounts) of the related assets and liabilities at February 29, 2000, as well as the average fair values of the related assets and liabilities for the year ended February 29, 2000. - ---------------------------------- --- ---------------- --- --------------------------- ------------------------------- Fair Value Average Notional At 2/29/00 Fair Values (Dollars in Thousands) Amount Assets Liabilities Assets Liabilities - ---------------------------------- ----------------- ------------ -------------- --------------- ------------- - ---------------------------------- ----------------- ------------ -------------- --------------- ------------- Forward contracts for sale of MBS $3,095,708 - $15,474 - ($4,314) Forward contracts for purchase of MBS $1,331,271 $4,394 - ($2,772) - Swaptions $ 60,000 $2,832 - $2,970 - - -----------------------------------------------------------------------------------------------------------------------
While the Company does not anticipate nonperformance by any counter-party, the Company is exposed to credit loss in the event of nonperformance by the counter-parties to the various instruments. These entities include other broker/dealers and institutional investors. The Company has established credit policies applicable to making commitments involving financial instruments with off-balance-sheet risk. Such policies include credit reviews, approvals, limits and monitoring procedures. The fair values of financial instruments approximate the carrying value. Countrywide Securities Corporation (A wholly-owned subsidiary of Countrywide Capital Markets, Inc.) NOTES TO FINANCIAL STATEMENTS - CONTINUED February 28, 1995 and 1994 SUPPLEMENTARY INFORMATION REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SUPPLEMENTARY INFORMATION REQUIRED BY RULE 17a-5 OF THE SECURITIES AND EXCHANGE COMMISSION 17 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SUPPLEMENTARY INFORMATION REQUIRED BY RULE 17a-5 OF THE SECURITIES AND EXCHANGE COMMISSION Board of Directors Countrywide Securities Corporation We have audited the financial statements of Countrywide Securities Corporation as of and for the year ended February 29, 2000, and have issued our report thereon dated April 12, 2000. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole of Countrywide Securities Corporation, which are presented in the preceding section of this report. The supplementary information contained in Schedules I, II, and III on the following pages is presented for purposes of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by Rule 17a-5 of the Securities and Exchange Act of 1934. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Los Angeles, California April 12, 2000 Countrywide Securities Corporation (A wholly-owned subsidiary of Countrywide Capital Markets, Inc.) February 29, 2000 SCHEDULE I COMPUTATION OF NET CAPITAL UNDER RULE 15c3-1 OF THE SECURITIES AND EXCHANGE COMMISSION (Dollars in thousands) AGGREGATE DEBITS Total aggregate debits from the reserve formula $ 6,196 =============== NET CAPITAL Stockholder's equity $ 88,422 Add: Allowable liabilities subordinated to claims of general creditors 52,093 --------------- Total capital and allowable subordinated liabilities 140,515 Deductions and/or charges A (1) Nonallowable assets Receivables from brokers and dealers $ 889 Receivables from customers 797 Furniture, equipment and leasehold 3,465 improvements, net Other nonallowable assets 1,176 ------------- 6,327 (2) Additional charges on customer's securities accounts 66 B. Aged fails to deliver 809 Number of items - 45 C. Other deductions and/or charges 517 (7,719) ------------- --------------- Net capital before haircuts on security positions 132,796 Haircuts on securities (computed pursuant to rule 15c3-1(c)(2)(vi)) Trading and investment securities 1. Bankers acceptances, CDs and commercial paper 862 2. U.S. and Canadian government obligations 42,220 3. Corporate obligations 5,623 4. Options 2,832 5. Other securities 44 6. Undue concentration 753 (52,334) ------------- --------------- NET CAPITAL $ 80,462 ===============
NET CAPITAL REQUIREMENTS/PERCENTAGE Minimum net capital requirement (2% aggregate debit items) $124 Net capital requirement (minimum requirement) $250 Excess net capital $80,212 Excess net capital greater than 5% of aggregate debits $80,152 Percentage: Net capital to aggregate debit items 1299% There are no material differences between the above computation and the computation included with the Company's FOCUS II Form X-17A-5 for the period ending February 29, 2000.
Countrywide Securities Corporation (A wholly-owned subsidiary of Countrywide Capital Markets, Inc.) February 29, 2000 SCHEDULE II COMPUTATION FOR DETERMINATION OF RESERVE REQUIREMENTS UNDER RULE 15c3-3 OF THE SECURITIES AND EXCHANGE COMMISSION (Dollars in thousands) CREDIT BALANCES Free credit balances and other credit balances in customers' security accounts $2,749 Monies borrowed collateralized by securities carried for the accounts of customers - Monies payable against customers' securities loaned - Customers' securities failed to receive 415 Credit balances in firm accounts which are attributable to principal sales to customers 2,288 Market value of stock dividends, stock splits, and similar distributions receivable outstanding over 7 business days - Market value of short security count differences over 7 business days - Market value of short securities and credits in all suspense accounts over 7 business days 8 Market value of securities which are in transfer in excess of 40 calendar days and have not been confirmed to be in transfer - ------------------ Total Credits 5,460 ================== DEBIT BALANCES Debit balances in customers' cash and margin accounts excluding unsecured accounts and accounts doubtful of collection 3,827 Securities borrowed to effectuate short sales by customers and securities borrowed to make delivery on customers' securities failed to deliver - Failed to deliver of customers' securities not older than 30 calendar days 2,369 Margin required and on deposit with the Options Clearing Corporation - ------------------ Aggregate Debit Items 6,196 less 3% (for alternative method only) (186) ------------------ Total 15c3-3 Debits 6,010 ================== Excess of total debits over total credits 550 ================== ================== Required deposit None ================== Amount held on deposit in "reserve" bank account including value of qualified securities at end of reporting period $5,600 ================== There are no material differences between the above computation and the computation included with the Company's FOCUS II Form X-17A-5 for the period ending February 29, 2000.
Countrywide Securities Corporation (A wholly-owned subsidiary of Countrywide Capital Markets, Inc.) February 29, 2000 SCHEDULE III INFORMATION RELATING TO POSSESSION OR CONTROL REQUIREMENTS UNDER RULE 15c3-3 OF THE SECURITIES AND EXCHANGE COMMISSION Market valuation and number of items for: Value Number ------------ ------------ 1. Customer's fully paid securities and excess margin securities not in respondent's possession or control as of the report date (for which instructions to reduce to possession or control had been issued as of the report date) but for which the required action was not taken by respondent within the time frames specified under rule 15c3-3. $ - - 2. Customer's fully paid securities and excess margin securities for which instructions to reduce to possession or control had not been issued as of the report date,excluding items arising from "temporary lags which result from normal business operations" as permitted under rule 15c3-3. $- - REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON THE INTERNAL CONTROL STRUCTURE REQUIRED BY RULE 17a-5 OF THE SECURITIES AND EXCHANGE COMMISSION REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON INTERNAL CONTROL STRUCTURE REQUIRED BY RULE 17a-5 OF THE SECURITIES AND EXCHANGE COMMISSION Board of Directors Countrywide Securities Corporation In planning and performing our audit of the financial statements of Countrywide Securities Corporation (the Company), for the year ended February 29, 2000, we considered its internal control, including control activities for safeguarding securities, in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on internal control. Also, as required by rule 17a-5(g)(1) of the Securities and Exchange Commission (SEC), we have made a study of the practices and procedures followed by the Company, including tests of compliance with such practices and procedures that we considered relevant to the objectives stated in rule 17a-5(g), in the following: 1. Making the periodic computations of aggregate indebtedness (or aggregate debits) and net capital under rule 17a-3(a)(11) and the reserve required by rule 15c3-3(e). 2. Making the quarterly securities examinations, counts, verifications, and comparisons, and the recordation of differences required by rule 17a-13. 3. Complying with the requirements for prompt payment for securities under Section 8 of Federal Reserve Regulation T of the Board of Governors of the Federal Reserve System. 4. Obtaining and maintaining physical possession or control of all fully paid and excess margin securities of customers as required by rule 15c3-3. The management of the Company is responsible for establishing and maintaining internal control and the practices and procedures referred to in the preceding paragraph. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of controls, and of the practices and procedures referred to in the preceding paragraph, and to assess whether those practices and procedures can be expected to achieve the SEC's above-mentioned objectives. Two of the objectives of internal control and the practices and procedures are to provide management with reasonable but not absolute assurance that assets for which the Company has responsibility are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Rule 17a-5(g) lists additional objectives of the practices and procedures listed in the preceding paragraph. Because of inherent limitations in internal control or the practices and procedures referred to above, errors or fraud may occur and not be detected. Also, projection of any evaluation of them to future periods is subject to the risk that they may become inadequate because of changes in conditions or that the effectiveness of their design and operation may deteriorate. Our consideration of internal control would not necessarily disclose all matters in internal control that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of the specific internal control components does not reduce to a relatively low level the risk that errors or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. However, we noted no matters involving internal control, including control activities for safeguarding securities, that we consider to be material weaknesses as defined above. We understand that practices and procedures that accomplish the objectives referred to in the second paragraph of this report are considered by the SEC to be adequate for its purposes in accordance with the Securities Exchange Act of 1934 and related regulations, and that practices and procedures that do not accomplish such objectives in all material respects indicate a material inadequacy for such purposes. Based on this understanding and on our study, we believe that the Company's practices and procedures were adequate at February 29, 2000, to meet the Commission's objectives. This report is intended solely for the information and use of the Board of Directors, management, the SEC, the National Association of Securities Dealers, Inc., and other regulatory agencies that rely on rule 17a-5(g) under the Securities Exchange Act of 1934 in their regulation of registered brokers and dealers, and should not be used for any other purpose. Los Angeles, California April 12, 2000 -----END PRIVACY-ENHANCED MESSAGE-----