10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2005
or
o	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: 1-8422

Countrywide Financial Corporation

(Exact name of registrant as specified in its charter)

Delaware	13-2641992
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
4500 Park Granada, Calabasas, California (Address of principal executive offices)	91302 (Zip Code)

(Registrant’s telephone number, including area code)

(818) 225-3000

      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 þ          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o

      Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes o          No þ

      Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class	Outstanding at November 2, 2005
Common Stock $.05 par value	597,943,899

COUNTRYWIDE FINANCIAL CORPORATION

FORM 10-Q

September 30, 2005

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION			1
Item 1.	Financial Statements:
	Consolidated Balance Sheets — September 30, 2005 and December 31, 2004		1
	Consolidated Statements of Earnings — Three and Nine Months Ended September 30, 2005 and 2004		2
	Consolidated Statement of Changes in Shareholders’ Equity — Nine Months Ended September 30, 2005 and 2004		3
	Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2005 and 2004		4
	Notes to Consolidated Financial Statements		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
	Overview		33
	Results of Operations Comparison — Quarters Ended September 30, 2005 and 2004		36
	Results of Operations Comparison — Nine Months Ended September 30, 2005 and 2004		56
	Quantitative and Qualitative Disclosure About Market Risk		71
	Credit Risk		74
	Loan Servicing		77
	Liquidity and Capital Resources		78
	Off-Balance Sheet Arrangements and Aggregate Contractual Obligations		79
	Prospective Trends		80
	Regulatory Trends		81
	Recently Issued Accounting Standards		81
	Factors That May Affect Our Future Results		81
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		82
Item 4.	Controls and Procedures		83
PART II. OTHER INFORMATION			84
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		84
Item 6.	Exhibits		84
EX-10.108
EX-12.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		September 30,		December 31,
		2005		2004
		(Unaudited)
		(In thousands, except share data)
ASSETS
Cash		$	1,488,581	$	751,237
Mortgage loans and mortgage-backed securities held for sale			35,217,353		37,350,149
Trading securities owned, at market value			11,883,408		10,558,387
Trading securities pledged as collateral, at market value			965,062		1,303,007
Securities purchased under agreements to resell, federal funds sold and securities borrowed			23,215,276		13,456,448
Loans held for investment, net			67,775,774		39,661,191
Investments in other financial instruments			10,706,071		10,091,057
Mortgage servicing rights, net			11,428,404		8,729,929
Premises and equipment, net			1,218,559		985,350
Other assets			7,394,547		5,608,950
	Total assets	$	171,293,035	$	128,495,705
LIABILITIES
Notes payable		$	75,139,971	$	66,613,671
Securities sold under agreements to repurchase and federal funds purchased			34,204,928		20,465,123
Deposit liabilities			37,798,722		20,013,208
Accounts payable and accrued liabilities			8,389,148		8,507,384
Income taxes payable			3,521,150		2,586,243
	Total liabilities		159,053,919		118,185,629
Commitments and contingencies			—		—
SHAREHOLDERS’ EQUITY
Preferred stock — authorized, 1,500,000 shares of $0.05 par value; none issued and outstanding			—		—
Common stock — authorized, 1,000,000,000 shares of $0.05 par value; issued, 597,311,402 shares and 581,706,836 shares at September 30, 2005 and December 31, 2004, respectively; outstanding, 597,181,258 shares and 581,648,881 shares at September 30, 2005 and December 31, 2004, respectively			29,865		29,085
Additional paid-in capital			2,887,658		2,570,402
Accumulated other comprehensive income			100,050		118,943
Retained earnings			9,221,543		7,591,646
	Total shareholders’ equity		12,239,116		10,310,076
	Total liabilities and shareholders’ equity	$	171,293,035	$	128,495,705

The accompanying notes are an integral part of these consolidated financial statements.

1

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2005			2004			2005			2004
			(Unaudited)
			(In thousands, except per share data)
Revenues
	Gain on sale of loans and securities		$	1,284,992		$	1,020,861		$	3,792,152		$	3,559,751
	Interest income			2,225,098			1,225,206			5,467,663			3,349,282
	Interest expense			(1,588,994	)		(671,969	)		(3,814,165	)		(1,765,302	)
		Net interest income		636,104			553,237			1,653,498			1,583,980
	Provision for loan losses			(54,834	)		(8,360	)		(91,557	)		(48,888	)
		Net interest income after provision for loan losses		581,270			544,877			1,561,941			1,535,092
	Loan servicing fees and other income from retained interests			1,103,533			812,940			3,095,040			2,372,353
	Amortization of mortgage servicing rights			(653,351	)		(394,069	)		(1,607,911	)		(1,377,728	)
	Recovery (impairment) of retained interests			853,667			(795,614	)		(209,938	)		(612,132	)
	Servicing hedge (losses) gains			(837,241	)		590,967			(242,375	)		114,312
		Net loan servicing fees and other income from retained interests		466,608			214,224			1,034,816			496,805
	Net insurance premiums earned			240,079			194,778			655,075			577,413
	Commissions and other revenue			138,669			134,763			380,462			380,406
		Total revenues		2,711,618			2,109,503			7,424,446			6,549,467
Expenses
	Compensation			988,614			850,384			2,625,236			2,301,138
	Occupancy and other office			228,263			155,608			642,056			454,481
	Insurance claims			183,758			106,721			348,479			275,148
	Advertising and promotion			56,412			47,586			165,206			121,381
	Other operating			202,893			162,027			507,913			442,983
		Total expenses		1,659,940			1,322,326			4,288,890			3,595,131
Earnings before income taxes				1,051,678			787,177			3,135,556			2,954,336
	Provision for income taxes			417,793			289,106			1,246,361			1,126,597
		NET EARNINGS	$	633,885		$	498,071		$	1,889,195		$	1,827,739
Earnings per share
	Basic		$	1.07		$	0.88		$	3.21		$	3.27
	Diluted		$	1.03		$	0.81		$	3.07		$	3.02

The accompanying notes are an integral part of these consolidated financial statements.

2

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

											Accumulated
								Additional			Other
				Number of		Common		Paid-in-			Comprehensive			Retained
				Shares		Stock		Capital			Income (Loss)			Earnings			Total
				(Unaudited)
				(In thousands, except share data)
Balance at December 31, 2003					184,479,342	$	9,225	$	2,307,531		$	164,526		$	5,603,434		$	8,084,716
Comprehensive income:
	Net earnings for the period				—		—		—			—			1,827,739			1,827,739
	Other comprehensive income (loss), net of tax:
		Net unrealized losses from available-for-sale securities			—		—		—			(121,905	)		—			(121,905	)
		Net unrealized gains from cash flow hedging instruments			—		—		—			17,110			—			17,110
		Net change in foreign currency translation adjustment			—		—		—			1,448			—			1,448
			Total comprehensive income															1,724,392
3-for-2 stock split, effected April 12, 2004					92,915,124		4,646		(4,646	)		—			—			—
2-for-1 stock split, effected August 30, 2004					282,010,434		14,101		(14,101	)		—			—			—
Stock options exercised					4,813,877		239		90,062			—			—			90,301
Tax benefit of stock options exercised					—		—		76,248			—			—			76,248
Issuance of common stock, net of treasury stock					378,201		20		13,417			—			—			13,437
Issuance of common stock for conversion of LYONs convertible debentures					334,626		17		6,410			—			—			6,427
Contribution of common stock to 401(k) Plan					304,954		15		20,920			—			—			20,935
Cash dividends paid — $0.25 per common share					—		—		—			—			(139,690	)		(139,690	)
Balance at September 30, 2004					565,236,558	$	28,263	$	2,495,841		$	61,179		$	7,291,483		$	9,876,766
Balance at December 31, 2004					581,648,881	$	29,085	$	2,570,402		$	118,943		$	7,591,646		$	10,310,076
Comprehensive income:
	Net earnings for the period				—		—		—			—			1,889,195			1,889,195
	Other comprehensive income (loss), net of tax:
		Net unrealized losses from available-for-sale securities			—		—		—			(589	)		—			(589	)
		Net unrealized losses from cash flow hedging instruments			—		—		—			(556	)		—			(556	)
		Net change in foreign currency translation adjustment			—		—		—			(17,748	)		—			(17,748	)
			Total comprehensive income															1,870,302
Stock options exercised					10,770,954		543		128,065			—			—			128,608
Tax benefit of stock options exercised					—		—		93,897			—			—			93,897
Issuance of common stock, net of treasury stock					1,954,198		97		56,584			—			—			56,681
Issuance of common stock for conversion of convertible debt					2,100,550		105		9,008			—			—			9,113
Tax benefit of interest on conversion of convertible debt					—		—		4,796			—			—			4,796
Contribution of common stock to 401(k) Plan					706,675		35		24,906			—			—			24,941
Cash dividends paid — $0.44 per common share					—		—		—			—			(259,298	)		(259,298	)
Balance at September 30, 2005					597,181,258	$	29,865	$	2,887,658		$	100,050		$	9,221,543		$	12,239,116

The accompanying notes are an integral part of these consolidated financial statements.

3

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

						Nine Months Ended
						September 30,
						2005			2004
						(Unaudited)
						(In thousands)
Cash flows from operating activities:
	Net earnings					$	1,889,195		$	1,827,739
		Adjustments to reconcile net earnings to net cash used by operating activities:
			Gain on sale of available-for-sale securities				(9,156	)		(276,922	)
			Accretion of discount on securities				(316,115	)		(287,641	)
			Accretion of discount on notes payable				657			2,283
			Provision for loan losses				91,557			48,888
			Amortization of mortgage servicing rights				1,607,911			1,377,728
			(Recovery) impairment of mortgage servicing rights				(332,113	)		340,455
			Change in fair value of mortgage servicing rights attributable to hedged risk				245,655			—
			Impairment of other retained interests				271,868			320,301
			Depreciation and other amortization				180,837			109,679
			Provision for deferred income taxes				957,669			382,108
			Tax benefit of stock options exercised				93,897			76,248
			Loans and mortgage-backed securities held for sale:
				Origination and purchase			(322,914,742	)		(247,028,170	)
				Sale and principal repayments			311,561,468			242,632,347
					Increase in mortgage loans and mortgage-backed securities held for sale		(11,353,274	)		(4,395,823	)
			Increase in trading securities				(951,277	)		(1,011,607	)
			Decrease in investments in other financial instruments				58,026			285,372
			Increase in other assets				(1,829,616	)		(1,792,880	)
			(Decrease) increase in accounts payable and accrued liabilities				(93,295	)		2,219,978
			(Decrease) increase in income taxes payable				(6,602	)		114,686
				Net cash used by operating activities			(9,494,176	)		(659,408	)
Cash flows from investing activities:
	Increase in securities purchased under agreements to resell, federal funds sold and securities borrowed						(9,758,828	)		(2,776,572	)
	Additions to loans held for investment, net						(25,283,369	)		(8,602,568	)
	Additions to investments in other financial instruments						(6,129,668	)		(7,185,126	)
	Proceeds from sale and repayment of investments in other financial instruments						4,964,343			13,161,655
	Additions to mortgage servicing rights						(4,219,928	)		(3,015,677	)
	Purchase of premises and equipment, net						(370,027	)		(242,829	)
		Net cash used by investing activities					(40,797,477	)		(8,661,117	)
Cash flows from financing activities:
	Net increase in short-term borrowings						8,639,563			3,731,215
	Issuance of long-term debt						17,747,957			12,234,310
	Repayment of long-term debt						(6,809,833	)		(5,065,117	)
	Net increase (decrease) in securities sold under agreements to repurchase and federal funds purchased						13,739,805			(10,889,083	)
	Net increase in deposit liabilities						17,785,514			9,405,027
	Issuance of common stock						185,289			103,738
	Payment of dividends						(259,298	)		(139,690	)
		Net cash provided by financing activities					51,028,997			9,380,400
Net increase in cash							737,344			59,875
Cash at beginning of period							751,237			626,183
		Cash at end of period				$	1,488,581		$	686,058

The accompanying notes are an integral part of these consolidated financial statements.

4

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Basis of Presentation

      Countrywide Financial Corporation (“Countrywide”) is a holding company which, through its principal subsidiary, Countrywide Home Loans, Inc. (“CHL”) and other subsidiaries (collectively, the “Company”), is engaged in diversified financial services including mortgage banking, banking and other mortgage finance-related businesses. The Company’s business activities fall into the following general categories: residential mortgage banking, retail banking and mortgage warehouse lending, dealing in securities, insurance underwriting and operating an insurance agency and international mortgage loan processing and subservicing.

      The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles for interim financial information and with the Securities and Exchange Commission’s instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements.

      In preparing financial statements in conformity with U.S. generally accepted accounting principles, management is required to make estimates and assumptions that materially affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.

      In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. For further information, including a description of the Company’s significant accounting policies, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2004 (the “2004 Annual Report”) for the Company.

      On April 12, 2004, the Company completed a 3-for-2 stock split effected as a stock dividend. On August 30, 2004, the Company completed a 2-for-1 stock split effected as a stock dividend. As more fully discussed in Note 2 to the 2004 Annual Report, in the fourth quarter of 2004, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 04-8, “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share,” (“EITF 04-8”). EITF 04-8 requires the Company to include the assumed conversion of its convertible debentures in diluted earnings per share (if dilutive), regardless of whether the market conditions have been met. Countrywide’s Liquid Yield Option Notes and Convertible Securities meet the criteria of EITF 04-8. All references in the accompanying consolidated balance sheets, consolidated statements of earnings and notes to consolidated financial statements to the number of common shares and earnings per share amounts have been restated to reflect these stock splits and the implementation of EITF 04-8.

      Certain amounts reflected in the prior year consolidated financial statements have been reclassified to conform to current year presentation.

Note 2 — Earnings Per Share

      Basic earnings per share is determined using net earnings divided by the weighted average common shares outstanding during the period. Diluted earnings per share is computed by dividing net earnings available to common shareholders by the weighted-average shares outstanding, assuming all potentially dilutive common shares were issued.

5

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      The following table summarizes the basic and diluted earnings per share calculations for the periods indicated:

		Three Months Ended September 30,
		2005						2004
		Net				Per-Share		Net				Per-Share
		Earnings		Shares		Amount		Earnings		Shares		Amount
		(In thousands, except per share data)
Net earnings and basic earnings per share		$	633,885		594,130	$	1.07	$	498,071		563,460	$	0.88
Effect of dilutive securities:
	Convertible debentures		56		1,470				796		20,772
	Dilutive stock options		—		21,392				—		28,484
Diluted earnings and earnings per share		$	633,941		616,992	$	1.03	$	498,867		612,716	$	0.81

		Nine Months Ended September 30,
		2005						2004
		Net				Per-Share		Net				Per-Share
		Earnings		Shares		Amount		Earnings		Shares		Amount
		(In thousands, except per share data)
Net earnings and basic earnings per share		$	1,889,195		588,663	$	3.21	$	1,827,739		559,749	$	3.27
Effect of dilutive securities:
	Convertible debentures		247		2,050				2,387		17,528
	Dilutive stock options		—		24,069				—		28,384
Diluted earnings and earnings per share		$	1,889,442		614,782	$	3.07	$	1,830,126		605,661	$	3.02

      During the three months ended September 30, 2005 and 2004, stock options to purchase 128,274 shares and 13,500 shares, respectively, were outstanding but not included in the computation of earnings per share because they were anti-dilutive. During the nine months ended September 30, 2005 and 2004, stock options to purchase 120,934 shares and 141,856 shares, respectively, were outstanding but not included in the computation of earnings per share because they were anti-dilutive.

Stock-Based Compensation

      The Company generally grants stock options for a fixed number of shares with an exercise price equal to the fair value of the shares at the date of grant to eligible employees. The Company recognizes compensation expense 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.

      The Company recognizes compensation expense relating to its restricted stock grants based on the fair value of the shares awarded as of the grant date. Compensation expense for restricted stock grants, including those awarded to retirement-eligible employees, is recognized over the shares’ nominal vesting period.

      In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (“SFAS 123R”), an amendment of FASB Statement No 123 (“SFAS 123”), “Accounting for Stock-Based Compensation.” The Company will adopt SFAS 123R beginning in 2006. As a result of adopting SFAS 123R, the Company will charge to expense the value of employee stock options as well as

6

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

restricted stock and any other stock-based compensation. The Company will also be required, for awards made beginning on the adoption of SFAS 123R, to immediately expense awards made to retirement-eligible employees and will be required to amortize grants to other employees over the lesser of the nominal vesting period or the period until the grantee becomes retirement-eligible. The Company will adopt SFAS 123R, using the modified prospective application approach effective January 1, 2006. The Company will utilize a variant of the Black-Scholes-Merton option-pricing model that takes into account employee tenure and exercise experience. We expect the charge to earnings for 2006 related to unamortized grants made before the effective date will be less than $40.0 million, net of tax. The effect of amortization of the value of any grants awarded after December 31, 2005 will increase this earnings charge.

      Had the estimated fair value of the options granted been included in compensation expense, the Company’s net earnings and earnings per share would have been as follows:

			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2005			2004			2005			2004
			(In thousands, except per share data)
Net Earnings:
	As reported		$	633,885		$	498,071		$	1,889,195		$	1,827,739
		Add: Stock-based compensation included in net earnings, net of taxes		492			988			2,528			1,953
		Deduct: Stock-based employee compensation, net of taxes		(11,744	)		(12,482	)		(91,957	)		(29,497	)
	Pro forma		$	622,633		$	486,577		$	1,799,766		$	1,800,195
Basic Earnings Per Share:
	As reported		$	1.07		$	0.88		$	3.21		$	3.27
	Pro forma		$	1.05		$	0.86		$	3.06		$	3.22
Diluted Earnings Per Share:
	As reported		$	1.03		$	0.81		$	3.07		$	3.02
	Pro forma		$	1.01		$	0.80		$	2.93		$	2.98

      Beginning in the second quarter of 2005, the Company utilized a variant of the Black-Scholes-Merton option-pricing model that takes into account enhanced estimates of employee tenure and exercise experience to estimate the fair value of the options. For purposes of this pro-forma disclosure, the fair value of each option grant is amortized to periodic compensation expense over the options’ vesting period.

      On April 1, 2005 the Company granted eligible employees options to purchase 13.3 million shares of its common stock at the average market price on the grant date. These options fully vest when granted and became exercisable on May 1, 2005. As a result of this vesting provision, the expense associated with the entire stock option grant amounting to $55.7 million, net of tax, is included in the above stock-based compensation pro-forma disclosure for the nine months ended September 30, 2005.

7

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      The weighted-average assumptions used to value the option grants and the resulting average estimated values were as follows:

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2005			2004			2005			2004
Weighted Average Assumptions:
	Dividend yield		1.65	%		0.75	%		1.70	%		0.85	%
	Expected volatility		32.50	%		35.43	%		32.50	%		36.02	%
	Risk-free interest rate		3.91	%		3.55	%		4.15	%		2.90	%
	Term(1)		5.00			—			3.15			—
	Expected life (in years)		—			5.00			—			5.59
Per-share fair value of options		$	6.28		$	12.03		$	6.95		$	11.09
Weighted-average exercise price		$	36.54		$	34.94		$	32.63		$	31.85

(1)  Beginning in the second quarter of 2005, expected employee tenure and exercise experience are determined by option pricing model.

Note 3  — Supplemental Cash Flow Information

      The following table presents supplemental cash flow information:

		Nine Months Ended
		September 30,
		2005			2004
		(In thousands)
Cash used to pay interest		$	3,628,334		$	1,729,970
Cash used to pay income taxes			213,646			563,410
Non-cash investing and finance activities:
	Unrealized loss on available-for-sale securities, foreign currency translation adjustments and cash flow hedges, net of tax		(18,893	)		(103,347	)
	Net (decrease) increase in fair value of medium-term notes due to application of fair value hedge accounting		(479,632	)		33,670
	Contribution of common stock to 401(k) plan		24,941			20,935
	(Decrease) increase in Mortgage Loans Held in SPEs and asset-backed secured financings		(10,563,299	)		6,865,764
	Transfer of mortgage loans from held for investment to held for sale		(2,922,771	)		—
	Issuance of common stock for conversion of convertible debt		9,113			6,427
	Tax effect of interest on conversion of convertible debt		4,796			—
	Exchange of LYONs convertible debentures for convertible securities		—			637,177
	Securitization of interest-only strips		—			56,038

Note 4 — Estimated Hurricane Losses

      During the periods presented, the Company incurred losses across several of its business units due to hurricanes that struck the gulf coast states. Hurricane Katrina was responsible for most of the losses during the nine months ended September 30, 2005. Hurricane Katrina differed from other hurricanes because it caused

8

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

flooding that resulted in losses against which many borrowers were not insured. Therefore, the Company has incurred losses related to Hurricane Katrina in its loans held for investment and Mortgage Banking activities in addition to the losses insured by its Insurance operations.

      The estimated hurricane losses are summarized in the following table:

		Nine Months Ended
		September 30,
Income Statement Line	Description	2005		2004
		(In thousands)
Gain on sale of loans and securities	Impairment of loans held for sale	$	22,055	$	—
Provision for loan losses	Estimated credit losses relating to loans held for investment		12,284		—
Recovery (impairment) of retained interests	Impairment of MSRs and other retained interests		24,724		—
Insurance claims expense	Estimated losses insured by Balboa Insurance Group		98,395		23,167
Other operating expenses	Provision for losses related to servicing advances for loans insured by the FHA and guaranteed by the VA		26,359		—
Total estimated hurricane losses		$	183,817	$	23,167

We continue to assess the impact of the hurricanes on our businesses, assets and operations. While our estimates are based on our best available information, they could ultimately be affected by many factors, including, but not limited to, the short-term and long-term impact on the economies of the affected communities; the conduct of borrowers in the affected areas; the actions of various third parties, including government agencies and government-sponsored entities that support housing, insurance companies, lenders and mortgage insurance companies; the apportionment of liability among insurers; the availability of catastrophic reinsurance proceeds; factors impacting property values in the affected areas, including any environmental factors such as the presence of toxic chemicals; and subsequent storm activity.

Note 5  — Mortgage Loans and Mortgage-Backed Securities Held for Sale

      The Company’s broker-dealer subsidiary, Countrywide Securities Corporation (“CSC”), may reacquire beneficial interests previously sold to outside third parties in the Company’s securitization transactions. In the event that such securities include protection by a derivative financial instrument held by a special purpose entity (“SPE”), that SPE no longer meets the conditions as a qualifying special purpose entity (“QSPE”) under Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,” (“SFAS 140”). As a result, the related mortgage loans held for sale and asset-backed secured financings are included on the Company’s consolidated balance sheets and are initially recorded at fair value. Such mortgage loans, net of related retained interests, (“Mortgage Loans Held in SPEs”) are included with mortgage loans and mortgage-backed securities held for sale on the Company’s consolidated balance sheet.

9

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      Mortgage loans and mortgage-backed securities held for sale include the following:

		September 30,		December 31,
		2005		2004
		(In thousands)
Prime		$	25,005,703	$	15,561,822
Nonprime			7,250,521		9,878,661
Prime home equity			1,851,137		1,046,075
Commercial real estate			1,109,992		300,292
	Mortgage loans originated or purchased for resale		35,217,353		26,786,850
Mortgage Loans Held in SPEs			—		10,563,299
		$	35,217,353	$	37,350,149

      At September 30, 2005, the Company had pledged $14.5 billion and $2.7 billion in mortgage loan inventory to secure asset-backed commercial paper and a secured revolving line of credit, respectively.

      At December 31, 2004, the Company had pledged $7.6 billion in mortgage loan inventory to secure asset-backed commercial paper.

      At December 31, 2004, the Company had pledged $6.7 billion of mortgage loans originated or purchased for resale and $10.6 billion of Mortgage Loans Held in SPEs as collateral for asset-backed secured financings.

Note 6 — Trading Securities

      Trading securities, which consist of trading securities owned and trading securities pledged as collateral, include the following:

		September 30,		December 31,
		2005		2004
		(In thousands)
Mortgage pass-through securities:
	Fixed-rate	$	7,178,640	$	6,768,864
	Adjustable-rate		761,807		717,194
			7,940,447		7,486,058
Collateralized mortgage obligations			2,554,064		2,067,066
U.S. Treasury securities			1,123,774		971,438
Obligations of U.S. Government-sponsored enterprises			439,939		560,163
Interest-only stripped securities			420,977		318,110
Mark-to-market on TBA securities			158,163		58,676
Asset-backed securities			126,492		340,684
Negotiable certificates of deposit			77,967		30,871
Corporate debt securities			—		21,659
Other			6,647		6,669
		$	12,848,470	$	11,861,394

      As of September 30, 2005, $10.8 billion of the Company’s trading securities had been pledged as collateral for financing purposes, of which the counterparty had the contractual right to sell or re-pledge $1.0 billion.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      As of December 31, 2004, $10.0 billion of the Company’s trading securities had been pledged as collateral for financing purposes, of which the counterparty had the contractual right to sell or re-pledge $1.3 billion.

Note 7 — Securities Purchased Under Agreements to Resell, Federal Funds Sold and Securities Borrowed

      The following table summarizes securities purchased under agreements to resell, federal funds sold and securities borrowed:

	September 30,		December 31,
	2005		2004
	(In thousands)
Securities purchased under agreements to resell	$	18,399,730	$	12,112,824
Securities borrowed		4,365,546		1,118,624
Federal funds sold		450,000		225,000
	$	23,215,276	$	13,456,448

      As of September 30, 2005, the Company had accepted collateral with a fair value of $31.2 billion that it had the contractual ability to sell or re-pledge, including $6.9 billion related to amounts offset against securities purchased under agreements to resell under master netting arrangements. As of September 30, 2005, the Company had re-pledged $27.5 billion of such collateral for financing purposes.

      As of December 31, 2004, the Company had accepted collateral with a fair value of $22.2 billion that it had the contractual ability to sell or re-pledge, including $8.2 billion related to amounts offset against securities purchased under agreements to resell under master netting arrangements. As of December 31, 2004, the Company had re-pledged $18.7 billion of such collateral for financing purposes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Note 8 — Mortgage Servicing Rights, Net

      The activity in Mortgage Servicing Rights (“MSRs”) is as follows:

		Nine Months Ended
		September 30,
		2005			2004
		(In thousands)
Mortgage Servicing Rights
	Balance at beginning of period	$	9,820,511		$	8,065,174
	Additions		4,219,928			3,015,677
	Securitization of MSRs		—			(56,038	)
	Amortization		(1,607,911	)		(1,377,728	)
	Change in fair value attributable to hedged risk		(245,655	)		—
	Application of valuation allowance to write down impaired MSRs		(69,045	)		(378,642	)
	Balance before valuation allowance at end of period		12,117,828			9,268,443
Valuation Allowance for Impairment of Mortgage Servicing Rights
	Balance at beginning of period		(1,090,582	)		(1,201,549	)
	Recoveries (additions)		332,113			(340,455	)
	Application of valuation allowance to write down impaired MSRs		69,045			378,642
	Balance at end of period		(689,424	)		(1,163,362	)
Mortgage Servicing Rights, Net		$	11,428,404		$	8,105,081

      The estimated fair values of mortgage servicing rights were $11.5 billion, $8.9 billion and $8.2 billion as of September 30, 2005, December 31, 2004 and September 30, 2004, respectively.

      The following table summarizes the Company’s estimate of amortization of its existing MSRs for the five-year period ending September 30, 2010. This projection was developed using the assumptions made by management in its September 30, 2005 valuation of MSRs. The assumptions underlying the following estimate will be affected as market conditions, portfolio composition and behavior change, causing both actual and projected amortization levels to vary over time. Therefore, the following estimates will change in a manner and amount not presently determinable by management.

		Estimated MSR
Year Ending September 30,		Amortization
		(In thousands)
2006		$	2,379,944
2007			1,832,295
2008			1,427,644
2009			1,125,491
2010			897,338
	Five-year total	$	7,662,712

12

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Note 9 — Investments in Other Financial Instruments

      Investments in other financial instruments include the following:

			September 30,		December 31,
			2005		2004
			(In thousands)
Available-for-sale securities:
	Mortgage-backed securities		$	6,667,730	$	6,009,819
	Obligations of U.S. Government-sponsored enterprises			409,423		279,991
	Municipal bonds			347,434		208,239
	U.S. Treasury securities			137,995		66,030
	Other			2,344		3,685
		Subtotal		7,564,926		6,567,764
Other interests retained in securitization classified as available-for-sale securities:
	Nonconforming interest-only and principal-only securities			303,072		191,502
	Prime home equity line of credit transferor’s interest			223,280		273,639
	Nonprime residual securities			214,249		237,695
	Prime home equity residual securities			158,252		275,598
	Prepayment penalty bonds			103,351		61,483
	Prime home equity interest-only securities			16,025		27,950
	Nonprime interest-only securities			9,657		84,834
	Nonconforming residual securities			3,380		11,462
	Subordinated mortgage-backed pass-through securities			2,213		2,306
		Total other interests retained in securitization classified as available-for-sale securities		1,033,479		1,166,469
Total available-for-sale securities				8,598,405		7,734,233
Other interests retained in securitization classified as trading securities:
	Prime home equity residual securities			708,532		533,554
	Nonprime residual securities			335,596		187,926
	Prime home equity line of credit transferor’s interest			232,709		—
	Nonconforming residual securities			11,800		20,555
		Total other interests retained in securitization classified as trading securities		1,288,637		742,035
Hedging instruments:
	Servicing			632,534		1,024,977
	Debt			186,495		589,812
		Total investments in other financial instruments	$	10,706,071	$	10,091,057

13

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      At September 30, 2005, the Company had pledged $1.3 billion and $1.1 billion of mortgage-backed securities to secure securities sold under agreements to repurchase, which the counterparty had the contractual right to re-pledge, and to secure an unused borrowing facility, respectively.

      At December 31, 2004, the Company had pledged $1.8 billion of mortgage-backed securities to secure securities sold under agreements to repurchase, which the counterparty had the contractual right to re-pledge.

      Amortized cost and fair value of available-for-sale securities are as follows:

	September 30, 2005
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Mortgage-backed securities	$	6,747,926	$	1,971	$	(82,167	)	$	6,667,730
Municipal bonds		348,276		1,399		(2,241	)		347,434
Obligations of U.S. Government-sponsored enterprises		415,689		8		(6,274	)		409,423
U.S. Treasury securities		137,545		1,461		(1,011	)		137,995
Other interests retained in securitization		846,262		193,678		(6,461	)		1,033,479
Other		2,344		—		—			2,344
	$	8,498,042	$	198,517	$	(98,154	)	$	8,598,405

	December 31, 2004
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
			(In thousands)
Mortgage-backed securities	$	6,034,293	$	6,347	$	(30,821	)	$	6,009,819
Municipal bonds		205,726		2,669		(156	)		208,239
Obligations of U.S. Government-sponsored enterprises		281,430		233		(1,672	)		279,991
U.S. Treasury securities		63,977		2,237		(184	)		66,030
Other interests retained in securitization		1,045,011		123,766		(2,308	)		1,166,469
Other		4,370		15		(700	)		3,685
	$	7,634,807	$	135,267	$	(35,841	)	$	7,734,233

14

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      The Company’s available-for-sale securities in an unrealized loss position are as follows:

	September 30, 2005
	Less Than 12 Months					12 Months or More					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
	(In thousands)
Mortgage-backed securities	$	5,161,265	$	(57,045	)	$	1,060,116	$	(25,122	)	$	6,221,381	$	(82,167	)
Municipal bonds		215,108		(1,846	)		23,529		(395	)		238,637		(2,241	)
Obligations of U.S. Government-sponsored enterprises		437,028		(2,449	)		145,523		(3,825	)		582,551		(6,274	)
U.S. Treasury securities		97,445		(883	)		—		(128	)		97,445		(1,011	)
Other interests retained in securitization		76,857		(6,049	)		4,586		(412	)		81,443		(6,461	)
Total impaired securities	$	5,987,703	$	(68,272	)	$	1,233,754	$	(29,882	)	$	7,221,457	$	(98,154	)

	December 31, 2004
	Less Than 12 Months					12 Months or More					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
	(In thousands)
Mortgage-backed securities	$	3,656,167	$	(18,725	)	$	823,916	$	(12,096	)	$	4,480,083	$	(30,821	)
Municipal bonds		65,587		(156	)		—		—			65,587		(156	)
Obligations of U.S. Government-sponsored enterprises		185,983		(1,283	)		28,648		(389	)		214,631		(1,672	)
U.S. Treasury securities		27,288		(184	)		—		—			27,288		(184	)
Other interests retained in securitization		27,970		(1,753	)		5,256		(555	)		33,226		(2,308	)
Other		3,620		(700	)		—		—			3,620		(700	)
Total impaired securities	$	3,966,615	$	(22,801	)	$	857,820	$	(13,040	)	$	4,824,435	$	(35,841	)

      The impairment reflected in these securities is a result of a change in market interest rates and management believes that such impairment is not indicative of the Company’s ability to recover the securities’ amortized cost in the reasonably foreseeable future. Accordingly, other-than-temporary impairment related to these securities has not been recognized as of September 30, 2005 or December 31, 2004.

15

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      Gross gains and losses realized on the sales of available-for-sale securities are as follows:

			Nine Months Ended
			September 30,
			2005			2004
			(In thousands)
Mortgage-backed securities:
	Gross realized gains		$	31		$	3,406
	Gross realized losses			(116	)		(523	)
		Net		(85	)		2,883
Home equity asset-backed senior securities:
	Gross realized gains			—			185,330
	Gross realized losses			—			—
		Net		—			185,330
U.S. Treasury securities:
	Gross realized gains			—			33,405
	Gross realized losses			—			(224	)
		Net		—			33,181
Municipal bonds:
	Gross realized gains			—			126
	Gross realized losses			(104	)		(15	)
		Net		(104	)		111
Obligations of U.S. Government-sponsored enterprises:
	Gross realized gains			14			324
	Gross realized losses			—			—
		Net		14			324
Other interests retained in securitization:
	Gross realized gains			12,462			85,469
	Gross realized losses			(4,383	)		(30,376	)
		Net		8,079			55,093
Other:
	Gross realized gains			1,252			—
	Gross realized losses			—			—
		Net		1,252			—
Total gains and losses on available-for-sale securities:
	Gross realized gains			13,759			308,060
	Gross realized losses			(4,603	)		(31,138	)
		Net	$	9,156		$	276,922

16

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Note 10 — Loans Held for Investment, Net

      Loans held for investment include the following:

			September 30,			December 31,
			2005			2004
			(In thousands)
Mortgage loans:
	Prime		$	45,664,924		$	22,588,351
	Prime home equity			15,314,508			11,435,792
	Nonprime			263,973			171,592
		Total mortgage loans		61,243,405			34,195,735
Warehouse lending advances secured by mortgage loans				4,546,137			3,681,830
Defaulted FHA-insured and VA-guaranteed mortgage loans repurchased from securities				1,262,551			1,518,642
				67,052,093			39,396,207
Purchase premium/discount and deferred loan origination costs				908,465			390,030
Allowance for loan losses				(184,784	)		(125,046	)
		Loans held for investment, net	$	67,775,774		$	39,661,191

      At September 30, 2005, mortgage loans held for investment totaling $47.1 billion were pledged to secure Federal Home Loan Bank advances.

      At September 30, 2005, the Company had accepted collateral of $4.7 billion securing warehouse-lending advances that it had the contractual ability to re-pledge. As of September 30, 2005, no such mortgage loan collateral had been re-pledged.

      At December 31, 2004, mortgage loans held for investment totaling $28.8 billion were pledged to secure Federal Home Loan Bank advances.

      At December 31, 2004, the Company had accepted collateral of $3.8 billion securing warehouse-lending advances that it had the contractual ability to re-pledge. As of December 31, 2004, no such mortgage loan collateral had been re-pledged.

      Changes in the allowance for loan losses were as follows:

	Nine Months Ended
	September 30,
	2005			2004
	(In thousands)
Balance, beginning of the period	$	125,046		$	78,449
Provision for loan losses		91,557			48,888
Net charge-offs		(21,694	)		(19,572	)
Reduction of allowance due to sale of loans held for investment		(10,125	)		—
Balance, end of the period	$	184,784		$	107,765

17

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Note 11 — Other Assets

      Other assets include the following:

	September 30,		December 31,
	2005		2004
	(In thousands)
Securities broker-dealer receivables	$	1,895,306	$	818,299
Investments in Federal Reserve Bank and Federal Home Loan Bank stock		1,329,975		795,894
Reimbursable servicing advances		816,947		1,355,584
Interest receivable		724,464		426,962
Receivables from custodial accounts		567,305		391,898
Capitalized software, net		326,449		286,504
Cash surrender value of assets held in trust for deferred compensation plan		220,854		184,569
Prepaid expenses		203,877		212,310
Restricted cash		190,717		200,142
Receivables from sale of securities		107,338		143,874
Derivative margin accounts		83,303		99,795
Other assets		928,012		693,119
	$	7,394,547	$	5,608,950

      At September 30, 2005, the Company had pledged $1.4 billion of other assets to secure securities sold under agreements to repurchase.

      At December 31, 2004, the Company had pledged $0.3 billion of other assets to secure securities sold under agreements to repurchase.

18

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Note 12 — Notes Payable

      Notes payable consists of the following:

		September 30,		December 31,
		2005		2004
		(In thousands)
Federal Home Loan Bank advances		$	26,525,000	$	15,475,000
Medium-term notes:
	Fixed rate		12,270,182		13,519,494
	Floating rate		12,051,876		11,846,268
			24,322,058		25,365,762
Asset-backed commercial paper			13,086,975		7,372,138
Unsecured commercial paper			6,218,358		—
Secured revolving line of credit			2,531,768		—
Junior subordinated debentures			1,028,112		1,028,013
Unsecured bank loans			863,000		—
Subordinated debt			500,000		—
Convertible securities			17,700		65,026
LYONs convertible debentures			3,594		12,626
Asset-backed secured financings			—		17,258,543
Other			43,406		36,563
		$	75,139,971	$	66,613,671

Federal Home Loan Bank Advances

      During the nine months ended September 30, 2005, the Company obtained $11.7 billion of advances from the Federal Home Loan Bank (“FHLB”). Of these advances, $2.8 billion were fixed-rate and $8.9 billion were adjustable-rate. At September 30, 2005, the Company had pledged $47.1 billion of mortgage loans to secure its outstanding FHLB advances.

      At December 31, 2004, the Company had pledged $28.8 billion of mortgage loans to secure its outstanding FHLB advances.

Medium-Term Notes

      During the nine months ended September 30, 2005, the Company issued the following medium-term notes:

	Outstanding Balance						Interest Rate				Maturity Date
	Floating-Rate		Fixed-Rate		Total		From		To		From	To
	(In thousands)
CHL Series M	$	585,000	$	—	$	585,000		3.77%		3.77%	January, 2006	January, 2006
CFC Series A		3,920,000		562,732		4,482,732		3.71%		6.03%	March, 2006	August, 2020
CHL Euro		183,100		—		183,100		3.37%		3.99%	May, 2006	November, 2006
CFC Australian		272,125		—		272,125		3.89%		3.89%	July, 2008	July, 2008
Total	$	4,960,225	$	562,732	$	5,522,957

19

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      Of the $0.6 billion of fixed-rate medium-term notes issued by the Company during the period, $0.2 billion were effectively converted to floating rate debt using interest rate swaps.

      During the nine months ended September 30, 2005, the Company redeemed $6.1 billion of maturing medium-term notes.

      As of September 30, 2005, $3.8 billion of foreign currency-denominated medium-term notes were outstanding. Such notes are denominated in Japanese Yen, Pounds Sterling, Canadian Dollars, Australian Dollars and Euros. These notes have been effectively converted to U.S. dollars through currency swaps.

Asset-Backed Commercial Paper

      The Company has formed two special purpose entities to finance certain of its mortgage loan inventory using commercial paper.

      These entities issue commercial paper in the form of short-term secured liquidity notes (“SLNs”) with initial maturities of up to 180 days. The SLNs bear interest at prevailing money market rates approximating LIBOR. The SLN programs’ capacities, based on aggregate commitments from underlying credit enhancers, totaled $30.9 billion at September 30, 2005. For the nine months ended September 30, 2005, the average borrowings under these facilities totaled $17.9 billion and the weighted-average interest rate borne by the SLNs was 3.14%. At September 30, 2005, the weighted-average interest rate borne by the SLNs was 3.82% and the Company had pledged $14.5 billion in mortgage loan inventory to secure the SLNs.

Secured Revolving Line of Credit

      The Company has formed a special purpose entity for the purpose of financing inventory with funding provided by a group of bank-sponsored conduits that are financed through the issuance of asset-backed commercial paper. The entity incurs an interest charge based on prevailing money market rates approximating the cost of asset-backed commercial paper. At September 30, 2005, the entity had aggregate commitments from the bank-sponsored conduits totaling $8.4 billion and had $2.5 billion outstanding borrowings. For the nine months ended September 30, 2005, the average borrowings under this facility totaled $1.1 billion and the weighted-average interest rate borne was 3.57%. At September 30, 2005, the weighted-average interest rate borne was 3.93%.

Junior Subordinated Debentures

      As more fully discussed in Note 16 — “Notes Payable,” included in the consolidated financial statements of the 2004 Annual Report, the Company has issued junior subordinated debentures to non-consolidated subsidiary trusts. The trusts finance their holdings of the junior subordinated debentures by issuing Company-guaranteed capital securities.

20

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      The Company guarantees CHL’s indebtedness to two of the subsidiary trusts, Countrywide Capital I and Countrywide Capital III, which are excluded from the Company’s consolidated financial statements. Following is summarized information for those trusts:

			September 30, 2005
			Countrywide		Countrywide
			Capital I		Capital III
			(In thousands)
Balance Sheet:
	Junior subordinated debentures receivable		$	307,390	$	205,258
	Other assets			7,216		20,942
		Total assets	$	314,606	$	226,200
	Notes payable		$	9,222	$	6,172
	Other liabilities			7,216		20,941
	Company-guaranteed mandatorily redeemable capital trust pass-through securities			298,168		199,087
	Shareholder’s equity			—		—
		Total liabilities and shareholder’s equity	$	314,606	$	226,200

			Nine Months Ended
			September 30, 2005
			Countrywide			Countrywide
			Capital I			Capital III
			(In thousands)
Statement of Earnings:
	Revenues		$	18,624		$	12,482
	Expenses			(18,624	)		(12,482	)
	Provision for income taxes			—			—
		Net earnings	$	—		$	—

			December 31, 2004
			Countrywide		Countrywide
			Capital I		Capital III
			(In thousands)
Balance Sheet:
	Junior subordinated debentures receivable		$	307,323	$	205,226
	Other assets			1,031		691
		Total assets	$	308,354	$	205,917
	Notes payable		$	9,220	$	6,171
	Other liabilities			1,031		691
	Company-guaranteed mandatorily redeemable capital trust pass-through securities			298,103		199,055
	Shareholder’s equity			—		—
		Total liabilities and shareholder’s equity	$	308,354	$	205,917

21

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

			Nine Months Ended
			September 30, 2004
			Countrywide			Countrywide
			Capital I			Capital III
			(In thousands)
Statement of Earnings:
	Revenues		$	18,624		$	12,482
	Expenses			(18,624	)		(12,482	)
	Provision for income taxes			—			—
		Net earnings	$	—		$	—

Subordinated Debt

      During the quarter ended September 30, 2005, the Company issued $0.5 billion of unsecured subordinated notes maturing April 1, 2011. The notes pay interest quarterly at a floating rate equal to the three-month LIBOR rate plus 73 basis points, and are callable on or after April 1, 2006. The notes are unsecured obligations of the Company and rank subordinated and junior to all of Countrywide’s senior indebtedness. None of these notes were converted to fixed rate debt using interest rate swaps.

Asset-Backed Secured Financings

      During the periods presented, the Company has recorded certain securitization transactions as secured borrowings because they do not qualify for sales treatment under SFAS 140 as a result of the retention of securities that include protection by a derivative. At September 30, 2005, no such secured borrowings were outstanding.

      In addition, CSC may reacquire beneficial interests previously sold to outside third parties in the Company’s securitization transactions. In the event that such securities include protection by a derivative financial instrument held by a SPE, that SPE no longer meets the conditions as a QSPE under SFAS 140. As a result, the underlying mortgage loans held for sale and asset-backed secured financings are included on the Company’s consolidated balance sheets and are initially recorded at fair value. Once the securities that include protection by a derivative financial instrument are sold, typically in less than 90 days, the conditions necessary for QSPE status under SFAS 140 are again met and the related assets and liabilities are removed from the Company’s consolidated balance sheet. At September 30, 2005, no such asset-backed secured financings had been recorded.

Note 13 — Securities Sold Under Agreements to Repurchase and Federal Funds Purchased

      The following table summarizes securities sold under agreements to repurchase and federal funds purchased:

	September 30,		December 31,
	2005		2004
	(In thousands)
Securities sold under agreements to repurchase	$	33,754,928	$	20,440,123
Federal funds purchased		450,000		25,000
	$	34,204,928	$	20,465,123

      The Company routinely enters short-term financing arrangements to sell securities under agreements to repurchase (“repurchase agreements”). The repurchase agreements are collateralized by mortgage loans and

22

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

securities. All securities underlying repurchase agreements are held in safekeeping by broker-dealers or banks. All agreements are to repurchase the same or substantially identical securities.

      At September 30, 2005, repurchase agreements were secured by $10.8 billion of trading securities, $27.5 billion of securities purchased under agreements to resell and securities borrowed, $1.3 billion in investments in other financial instruments and $1.4 billion of other assets. As of September 30, 2005, $6.9 billion of the pledged securities purchased under agreements to resell and securities borrowed related to amounts offset against securities sold under agreements to repurchase pursuant to master netting agreements.

Note 14 — Deposit Liabilities

      The following table summarizes deposit balances:

	September 30,		December 31,
	2005		2004
	(In thousands)
Time deposits	$	19,142,370	$	10,369,763
Company-controlled custodial deposit accounts		14,150,667		7,900,900
Interest-bearing checking accounts		3,399,297		1,673,517
Non-interest-bearing checking accounts		1,105,577		66,983
Savings accounts		811		2,045
	$	37,798,722	$	20,013,208

Note 15 — Derivative Instruments and Risk Management Activities

      The primary market risk facing the Company is interest rate risk. From an enterprise perspective, the Company manages interest rate risk through the natural counterbalance of its loan production and servicing businesses. The Company also uses derivatives and other financial instruments to manage the interest rate risk related specifically to its interest rate lock commitments, mortgage loan inventory and MBS held for sale, MSRs and other retained interests, trading securities and its long-term debt. The primary objective of the Company’s interest rate risk management activities is to reduce the variability of earnings caused by changes in interest rates.

      The Company uses a variety of derivative financial instruments to manage interest rate risk. These instruments include MBS mandatory forward sale and purchase commitments, options to sell or buy MBS, Treasury and Eurodollar rate futures and options thereon, interest rate floors, interest rate caps, capped swaps, swaptions, interest rate swaps and mortgage forward rate agreements. These instruments involve, to varying degrees, elements of interest rate and credit risk.

      The Company manages foreign currency exchange rate risk, which arises from the issuance of foreign currency-denominated debt, with foreign currency swaps.

Risk Management Activities Related to Mortgage Loan Inventory and Interest Rate Lock Commitments

      The Company is exposed to interest rate risk from the time an interest rate lock commitment (“IRLC”) is made to a mortgage applicant (or financial intermediary) to the time the related mortgage loan is sold. During this period, the Company is exposed to losses if mortgage interest rates rise, because the value of the IRLC or mortgage loan declines. To manage this interest rate risk, the Company utilizes derivatives, primarily forward sales of MBS and options to buy and sell MBS, as well as options on Treasury futures contracts. Certain of these instruments qualify as fair value hedges of mortgage loans under Statement of Financial

23

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” (“SFAS 133”).

      During the nine months ended September 30, 2005, the risk management activities connected with 78% of the fixed-rate mortgage loan inventory and 34% of the adjustable-rate mortgage loan inventory were accounted for as fair value hedges. The Company recognized pre-tax losses of $37.6 million and $121.0 million, representing the ineffective portion of such fair value hedges of its mortgage inventory, for the nine months ended September 30, 2005 and 2004, respectively. These amounts, along with the change in the fair value of the derivative instruments that were not designated as hedge instruments, are included in gain on sale of loans and securities in the consolidated statements of earnings.

      IRLCs are derivative instruments and are recorded at fair value with changes in fair value recognized in current period earnings (as a component of gain on sale of loans and securities). Because IRLCs are derivatives under SFAS 133, the risk management activities related to the IRLCs do not qualify for hedge accounting under SFAS 133. The freestanding derivative instruments that are used to manage the interest rate risk associated with the IRLCs are carried at fair value with changes in fair value recorded as a component of gain on sale of loans in the consolidated statements of earnings.

Risk Management Activities Related to Mortgage Servicing Rights and Other Retained Interests

      MSRs and other retained interests, specifically interest-only securities and residual securities, are generally subject to a loss in value, or impairment, when mortgage interest rates decline. To moderate the effect of impairment on earnings, the Company maintains a portfolio of financial instruments, including derivatives, which generally increase in aggregate value when interest rates decline. This portfolio of financial instruments is collectively referred to as the “Servicing Hedge.”

      Effective April 1, 2005, a portion of the Servicing Hedge was qualified as a fair value hedge under SFAS 133. During the six months ended September 30, 2005, the portion of the Servicing Hedge that qualified as a fair value hedge covered approximately 26% of the risk associated with a change in fair value of the MSRs attributable to changes in interest rates of up to 50 basis points. At no other time during the nine months ended September 30, 2005 and 2004 has any portion of the Servicing Hedge qualified as a hedge under SFAS 133.

      Application of fair value hedge accounting under SFAS 133 results in the cost basis of the MSRs being adjusted for the change in fair value of the MSRs attributable to the hedged risk, with a corresponding amount included as a component of impairment or recovery of retained interests in the statement of earnings. The change in the fair value of the derivatives is included as a component of servicing hedge gains or losses in the statement of earnings. For the six months ended September 30, 2005, the Company recognized a gain of $24.5 million in earnings, which represents the amount of hedge ineffectiveness for the portion of the Servicing Hedge that qualified as a fair value hedge under SFAS 133. There was no portion of the related hedge instruments’ gain or loss that was excluded from the assessment of hedge effectiveness.

      The financial instruments that currently comprise the Servicing Hedge include options on interest rate futures, interest rate swaps, interest rate caps, interest rate swaptions, interest rate futures and mortgage forward rate agreements.

      Mortgage forward rate agreements represent mutual agreements to exchange a single cash flow at a forward settlement date, based on the basis point difference between the forward fixed-rate and a floating-rate set equal to the 30-day forward current coupon mortgage rate, known as the CMM index, on the settlement date. For use in the Servicing Hedge, the Company generally receives the fixed-rate and pays the floating-rate. Such agreements increase in value as the spread between the current coupon mortgage rate and the swap curves tightens, or when interest rates decline.

24

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      With respect to the options on interest rate swaps and futures and interest rate caps, the Company is not exposed to loss beyond its initial outlay to acquire the hedge instruments and any unrealized gains recognized to date.

      The following table summarizes the Company’s estimate of its maximum exposure to loss on Servicing Hedge instruments over the instruments’ contractual terms:

	September 30,
	2005
	(In millions)
Mortgage forward rate agreements	$	333
Interest rate futures contracts		28
Interest rate swaps		19

      Although these estimates could be exceeded, the Company derives its estimates of loss exposure based upon observed volatilities in the interest rate options market. Using the currently observed volatilities, management estimates, to a 95% confidence level, the maximum potential rate changes over a one-year time horizon. Management then estimates the Company’s exposure to loss based on the estimated maximum adverse rate change as of the measurement date.

      The following table summarizes the notional amounts of derivative contracts included in the Servicing Hedge:

	Balance,							Balance,
	December 31,				Dispositions/			September 30,
	2004		Additions		Expirations			2005
	(In millions)
Interest rate swaps	$	—	$	101,000	$	(54,750	)	$	46,250
Mortgage forward rate agreements		—		80,425		(40,675	)		39,750
Interest rate swaptions		41,250		56,800		(62,250	)		35,800
Long call options on interest rate futures		15,250		51,200		(46,700	)		19,750
Interest rate caps		300		2,434		(1,164	)		1,570
Long treasury futures		2,850		1,310		(3,000	)		1,160
Long put options on interest rate futures		2,000		—		(2,000	)		—
Interest rate floors		1,000		—		(1,000	)		—

Risk Management Activities Related to Issuance of Long-Term Debt

      The Company acquires interest rate swap contracts which enable it to convert a portion of its fixed-rate, long-term debt to U.S. dollar LIBOR-based floating-rate debt and to enable the Company to convert a portion of its foreign currency-denominated fixed and floating-rate, long-term debt to U.S. dollar LIBOR-based floating-rate debt. These transactions are designated as fair value hedges under SFAS 133. For the nine months ended September 30, 2005, the Company recognized a pre-tax gain of $0.4 million, representing the ineffective portion of such fair value hedges of debt. For the nine months ended September 30, 2004, the Company also recognized a pre-tax gain of $2.0 million, representing the ineffective portion of such fair value hedges of debt. These amounts are included in interest expense in the consolidated statements of earnings.

      The Company acquires interest rate swap contracts which enable it to convert a portion of its floating-rate, long-term debt to fixed-rate, long-term debt and to convert a portion of its foreign currency-denominated fixed-rate, long-term debt to U.S. dollar fixed-rate debt. These transactions are designated as cash flow hedges. For the nine months ended September 30, 2005, the Company recognized no pre-tax gain or loss on the ineffective portion of cash flow hedges. For the nine months ended September 30, 2004, the Company

25

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

recognized a pre-tax gain of $0.1 million, representing the ineffective portion of such cash flow hedges. As of September 30, 2005, deferred net gains or losses on derivative instruments included in other comprehensive income that are expected to be reclassified to earnings during the next 12 months are not material.

Risk Management Activities Related to Deposit Liabilities

      The Company acquires interest rate swap contracts that have the effect of converting a portion of its fixed-rate deposit liabilities to variable-rate deposit liabilities. Effective January 1, 2005, these transactions were designated as fair value hedges under SFAS 133. For the nine months ended September 30, 2005, the Company recognized a pre-tax loss of $0.6 million representing the ineffective portion of such fair value hedges. This amount is included in interest expense in the consolidated statement of earnings.

Risk Management Activities Related to the Broker-Dealer Securities Trading Portfolio

      In connection with its broker-dealer activities, the Company maintains a trading portfolio of fixed income securities, primarily MBS. The Company is exposed to the risk of price changes in this portfolio arising from changes in interest rates during the period it holds the securities. The Company utilizes derivative financial instruments to manage this risk. These instruments include MBS mandatory forward sale and purchase commitments as well as short sales of cash market U.S. Treasury securities, futures contracts, interest rate swap contracts and swaptions. All such derivatives are accounted for as freestanding and as such are carried at fair value with changes in fair value recorded in current period earnings as a component of gain on sale of loans and securities.

Note 16 — Regulatory and Agency Capital Requirements

      The Company is a bank holding company as a result of the acquisition of Countrywide Bank (the “Bank”) (formerly Treasury Bank). Both the Company and the Bank are subject to regulatory capital requirements imposed by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Company is also subject to U.S. Department of Housing and Urban Development, Fannie Mae, Freddie Mac and Government National Mortgage Association (“Ginnie Mae”) net worth requirements, which are lower than those of the Federal Reserve.

      Regulatory capital is assessed for adequacy by three measures: Tier 1 Leverage Capital, Tier 1 Risk-Based Capital and Total Risk-Based Capital. Tier 1 Leverage Capital includes common shareholders’ equity; preferred stock and capital securities that meet certain guidelines detailed in the capital regulations, less goodwill; the portion of MSRs not includable in regulatory capital (MSRs includable in regulatory capital are limited to the lesser of the carrying value of MSRs, 100% of Tier 1 capital, or 90% of the fair value of the MSRs, net of associated deferred taxes) and other adjustments. Tier 1 Leverage Capital is measured with respect to average assets during the quarter. The Company and the Bank are required to have a Tier 1 Leverage Capital ratio of 4.0% to be considered adequately capitalized and 5.0% to be considered well capitalized.

      The Tier 1 Risk-Based Capital ratio is calculated as a percent of risk-weighted assets at the end of the quarter. The Company and the Bank are required to have a Tier 1 Risk-Based Capital ratio of 4.0% to be considered adequately capitalized and 6.0% to be considered well capitalized.

      Total Risk-Based Capital includes preferred stock and capital securities excluded from Tier 1 Capital, mandatory convertible debt and subordinated debt that meets certain regulatory criteria. The Total Risk-Based Capital ratio is calculated as a percent of risk-weighted assets at the end of the quarter. The Company and the Bank are required to have a Total Risk-Based Capital ratio of 8.0% to be considered adequately capitalized and 10.0% to be considered well capitalized.

26

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      At September 30, 2005 and December 31, 2004, the Company and the Bank’s regulatory capital ratios and amounts and minimum required capital ratios for the Company and the Bank to maintain a “well capitalized” status were as follows:

		September 30, 2005
				Countrywide
				Financial Corporation				Countrywide Bank
		Minimum
		Required(1)		Ratio		Amount		Ratio		Amount
		(Dollar amounts in thousands)
Tier 1 Leverage Capital			5.0%		6.4%	$	11,982,092		7.2%	$	5,062,278
Risk-Based Capital:
	Tier 1		6.0%		10.0%	$	11,982,092		11.4%	$	5,062,278
	Total		10.0%		11.0%	$	13,153,213		11.6%	$	5,168,804

(1)  Minimum required to qualify as “well capitalized.”

		December 31, 2004
				Countrywide
				Financial Corporation				Countrywide Bank
		Minimum
		Required(1)		Ratio		Amount		Ratio		Amount
		(Dollar amounts in thousands)
Tier 1 Leverage Capital			5.0%		7.9%	$	10,332,383		7.8%	$	2,939,144
Risk-Based Capital:
	Tier 1		6.0%		11.1%	$	10,332,383		11.8%	$	2,939,144
	Total		10.0%		11.7%	$	10,928,223		12.0%	$	2,988,116

(1)  Minimum required to qualify as “well capitalized.”

Note 17 — Segments and Related Information

      The Company has five business segments: Mortgage Banking, Banking, Capital Markets, Insurance and Global Operations.

      The Mortgage Banking Segment is comprised of three distinct sectors: Loan Production, Loan Servicing and Loan Closing Services.

      The Loan Production Sector originates prime and nonprime loans through a variety of channels on a national scale. The Loan Production Sector is comprised of four lending divisions and includes the certain mortgage banking activities of Countrywide Bank such as loan sales. The four production divisions are: Consumer Markets Lending Division, the Full Spectrum Lending Division, the Wholesale Lending Division and the Correspondent Lending Division. The Consumer Markets and Full Spectrum Lending Divisions source mortgage loans directly from consumers through the Company’s retail branch network, as well as through real estate agents and homebuilders. The Wholesale Lending Division sources mortgage loans primarily from mortgage brokers. The Correspondent Lending Division acquires mortgage loans from other mortgage lenders, including financial institutions.

      The Loan Servicing Sector includes investments in MSRs and other retained interests, as well as the Company’s loan servicing operations and subservicing for other domestic financial institutions. The Loan Closing Services Sector is comprised of the LandSafe companies, which provide credit reports, appraisals, title reports and flood determinations to the Company’s Loan Production Sector, as well as to third parties.

27

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      The Banking Segment’s operations includes the investment and fee-based activities of Countrywide Bank together with the activities of Countrywide Warehouse Lending. Countrywide Bank invests primarily in mortgage loans sourced from the Loan Production Sector. Countrywide Warehouse Lending provides to third-party mortgage lenders temporary financing secured by mortgage loans.

      The Capital Markets Segment primarily includes the operations of Countrywide Securities Corporation, a registered broker-dealer specializing in the mortgage securities market. In addition, it includes the operations of Countrywide Asset Management Corporation, Countrywide Commercial Real Estate Finance Corporation, Countrywide Servicing Exchange and CCM International Ltd.

      The Insurance Segment includes Balboa Life and Casualty Group, a national provider of property, life and liability insurance; Balboa Reinsurance Company, a primary mortgage reinsurance company; and Countrywide Insurance Services, Inc., a national insurance agency offering a specialized menu of insurance products directly to consumers.

      The Global Operations Segment includes Global Home Loans Limited, a provider of loan origination processing and loan subservicing in the United Kingdom; UKValuation Limited, a provider of property valuation services in the UK; Countrywide International Technology Holdings Limited, a licensor of loan origination processing, servicing and residential real estate value assessment technology; and CFC India Private Limited, a provider of call center, data processing and information technology related services.

      In general, intercompany transactions are recorded on an arms-length basis. However, the fulfillment fees paid by Countrywide Bank to the Production Sector for origination costs incurred on mortgage loans funded by Countrywide Bank are determined on an incremental cost basis, which is less than the fees that Countrywide Bank would pay to a third party.

      Included in the tables below labeled “Other” are the holding company activities and certain reclassifications to conform management reporting to the consolidated financial statements:

		Quarter Ended September 30, 2005
		Mortgage Banking
		Loan			Loan		Closing		Total					Capital					Global					Total
		Production			Servicing		Services		Mortgage		Banking			Markets		Insurance			Operations		Other			Consolidated
		(In thousands)
Revenues:
	External	$	1,396,958		$	347,509	$	76,017	$	1,820,484	$	482,940		$	113,353	$	263,894		$	58,141	$	(27,194	)	$	2,711,618
	Intersegment		(12,700	)		122,849		—		110,149		(101,759	)		65,610		—			—		(74,000	)		—
Total Revenues		$	1,384,258		$	470,358	$	76,017	$	1,930,633	$	381,181		$	178,963	$	263,894		$	58,141	$	(101,194	)	$	2,711,618
Pre-tax Earnings (Loss)		$	413,731		$	257,666	$	31,139	$	702,536	$	278,264		$	92,042	$	(32,119	)	$	8,153	$	2,802		$	1,051,678
Total Assets		$	31,685,000		$	16,996,000	$	78,000	$	48,759,000	$	75,320,000		$	44,454,000	$	2,274,000		$	274,000	$	212,000		$	171,293,000

28

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

		Quarter Ended September 30, 2004
		Mortgage Banking
		Loan			Loan			Closing		Total						Capital				Global					Total
		Production			Servicing			Services		Mortgage			Banking			Markets		Insurance		Operations		Other			Consolidated
		(In thousands)
Revenues:
	External	$	1,365,512		$	98,191		$	58,347	$	1,522,050		$	233,746		$	104,089	$	220,882	$	57,038	$	(28,302	)	$	2,109,503
	Intersegment		(52,882	)		37,037			—		(15,845	)		(15,675	)		62,770		—		—		(31,250	)		—
Total Revenues		$	1,312,630		$	135,228		$	58,347	$	1,506,205		$	218,071		$	166,859	$	220,882	$	57,038	$	(59,552	)	$	2,109,503
Pre-tax Earnings (Loss)		$	496,551		$	(22,667	)	$	22,545	$	496,429		$	163,171		$	90,135	$	29,620	$	9,811	$	(1,989	)	$	787,177
Total Assets		$	31,149,000		$	14,507,000		$	73,000	$	45,729,000		$	37,007,000		$	33,789,000	$	1,653,000	$	246,000	$	288,000		$	118,712,000

		Nine Months Ended September 30, 2005
		Mortgage Banking
		Loan			Loan		Closing		Total					Capital				Global					Total
		Production			Servicing		Services		Mortgage		Banking			Markets		Insurance		Operations		Other			Consolidated
		(In thousands)
Revenues:
	External	$	4,092,271		$	668,294	$	205,842	$	4,966,407	$	1,225,559		$	423,145	$	736,335	$	169,458	$	(96,458	)	$	7,424,446
	Intersegment		(19,222	)		266,955		—		247,733		(203,054	)		137,841		—		—		(182,520	)		—
Total Revenues		$	4,073,049		$	935,249	$	205,842	$	5,214,140	$	1,022,505		$	560,986	$	736,335	$	169,458	$	(278,978	)	$	7,424,446
Pre-tax Earnings (Loss)		$	1,557,523		$	363,958	$	79,135	$	2,000,616	$	745,365		$	318,940	$	80,166	$	17,513	$	(27,044	)	$	3,135,556
Total Assets		$	31,685,000		$	16,996,000	$	78,000	$	48,759,000	$	75,320,000		$	44,454,000	$	2,274,000	$	274,000	$	212,000		$	171,293,000

		Nine Months Ended September 30, 2004
		Mortgage Banking
		Loan			Loan			Closing		Total						Capital				Global					Total
		Production			Servicing			Services		Mortgage			Banking			Markets		Insurance		Operations		Other			Consolidated
		(In thousands)
Revenues:
	External	$	4,462,808		$	199,460		$	162,813	$	4,825,081		$	552,695		$	404,356	$	656,922	$	168,453	$	(58,040	)	$	6,549,467
	Intersegment		(135,352	)		87,826			—		(47,526	)		(25,003	)		147,584		—		—		(75,055	)		—
Total Revenues		$	4,327,456		$	287,286		$	162,813	$	4,777,555		$	527,692		$	551,940	$	656,922	$	168,453	$	(133,095	)	$	6,549,467
Pre-tax Earnings (Loss)		$	2,166,986		$	(155,693	)	$	64,146	$	2,075,439		$	387,862		$	332,917	$	130,152	$	31,225	$	(3,259	)	$	2,954,336
Total Assets		$	31,149,000		$	14,507,000		$	73,000	$	45,729,000		$	37,007,000		$	33,789,000	$	1,653,000	$	246,000	$	288,000		$	118,712,000

29

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Note 18 — Summarized Financial Information

      Summarized financial information for Countrywide Financial Corporation (parent only) and subsidiaries is as follows:

			September 30, 2005
			Countrywide
			Financial		Countrywide
			Corporation		Home		Other
			(Parent Only)		Loans, Inc.		Subsidiaries		Eliminations			Consolidated
			(In thousands)
Balance Sheets:
	Mortgage loans and mortgage-backed securities held for sale		$	—	$	33,805,475	$	1,439,610	$	(27,732	)	$	35,217,353
	Trading securities			—		420,977		12,431,160		(3,667	)		12,848,470
	Securities purchased under agreements to resell and securities borrowed			—		—		24,128,085		(912,809	)		23,215,276
	Loans held for investment, net			—		6,125,137		61,653,102		(2,465	)		67,775,774
	Investments in other financial instruments			—		1,936,326		8,769,745		—			10,706,071
	Mortgage servicing rights, net			—		11,428,404		—		—			11,428,404
	Other assets			24,740,043		5,090,565		17,276,455		(37,005,376	)		10,101,687
		Total assets	$	24,740,043	$	58,806,884	$	125,698,157	$	(37,952,049	)	$	171,293,035
	Notes payable		$	12,238,424	$	40,186,972	$	38,453,807	$	(15,739,232	)	$	75,139,971
	Securities sold under agreements to repurchase and federal funds purchased			—		238,122		34,879,511		(912,705	)		34,204,928
	Deposit liabilities			—		—		37,921,990		(123,268	)		37,798,722
	Other liabilities			262,503		14,764,717		5,932,932		(9,049,854	)		11,910,298
	Equity			12,239,116		3,617,073		8,509,917		(12,126,990	)		12,239,116
		Total liabilities and equity	$	24,740,043	$	58,806,884	$	125,698,157	$	(37,952,049	)	$	171,293,035

			Nine Months Ended September 30, 2005
			Countrywide
			Financial			Countrywide
			Corporation			Home		Other
			(Parent Only)			Loans, Inc.		Subsidiaries		Eliminations			Consolidated
			(In thousands)
Statements of Earnings
	Revenues		$	2,450		$	4,870,145	$	2,899,834	$	(347,983	)	$	7,424,446
	Expenses			17,728			3,050,831		1,554,803		(334,472	)		4,288,890
	Provision for income taxes			(6,701	)		734,322		524,356		(5,616	)		1,246,361
	Equity in net earnings of subsidiaries			1,897,772			—		—		(1,897,772	)		—
		Net earnings	$	1,889,195		$	1,084,992	$	820,675	$	(1,905,667	)	$	1,889,195

30

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

			December 31, 2004
			Countrywide
			Financial		Countrywide
			Corporation		Home		Other
			(Parent Only)		Loans, Inc.		Subsidiaries		Eliminations			Consolidated
			(In thousands)
Balance Sheets:
	Mortgage loans and mortgage-backed securities held for sale		$	—	$	36,937,845	$	412,304	$	—		$	37,350,149
	Trading securities			—		318,110		11,543,284		—			11,861,394
	Securities purchased under agreements to resell and securities borrowed			—		2,550,127		13,579,254		(2,672,933	)		13,456,448
	Loans held for investment, net			—		5,431,321		34,230,360		(490	)		39,661,191
	Investments in other financial instruments			—		2,301,416		7,789,641		—			10,091,057
	Mortgage servicing rights, net			—		8,729,929		—		—			8,729,929
	Other assets			11,308,342		4,759,535		10,227,379		(18,949,719	)		7,345,537
		Total assets	$	11,308,342	$	61,028,283	$	77,782,222	$	(21,623,142	)	$	128,495,705
	Notes payable		$	829,030	$	51,532,883	$	22,856,613	$	(8,604,855	)	$	66,613,671
	Securities sold under agreements to repurchase and federal funds purchased			—		—		23,137,028		(2,671,905	)		20,465,123
	Deposit liabilities			—		—		20,013,208		—			20,013,208
	Other liabilities			169,236		5,451,663		5,736,987		(264,259	)		11,093,627
	Equity			10,310,076		4,043,737		6,038,386		(10,082,123	)		10,310,076
		Total liabilities and equity	$	11,308,342	$	61,028,283	$	77,782,222	$	(21,623,142	)	$	128,495,705

			Nine Months Ended September 30, 2004
			Countrywide
			Financial			Countrywide
			Corporation			Home		Other
			(Parent Only)			Loans, Inc.		Subsidiaries		Eliminations			Consolidated
			(In thousands)
Statements of Earnings:
	Revenues		$	7,684		$	3,681,918	$	3,099,160	$	(239,295	)	$	6,549,467
	Expenses			11,320			2,163,459		1,659,268		(238,916	)		3,595,131
	Provision for income taxes			(1,398	)		583,847		544,294		(146	)		1,126,597
	Equity in net earnings of subsidiaries			1,829,977			—		—		(1,829,977	)		—
		Net earnings	$	1,827,739		$	934,612	$	895,598	$	(1,830,210	)	$	1,827,739

Note 19 — Legal Proceedings

      Countrywide and certain subsidiaries are defendants in various legal proceedings involving matters generally incidental to their businesses. Although it is difficult to predict the ultimate outcome of these

31

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

proceedings, management believes, based on discussions with counsel, that any ultimate liability will not materially affect the consolidated financial position or results of operations or liquidity of the Company.

Note 20 — Borrower and Investor Custodial Accounts

      As of September 30, 2005 and December 31, 2004, the Company managed $25.8 billion and $20.6 billion, respectively, of off-balance sheet borrower and investor custodial cash accounts as well as related liabilities to those borrowers and investors. Of these amounts, $14.2 billion and $7.9 billion, respectively, were deposited at the Bank and were included in the Company’s deposit liabilities, with the remaining balances held by other depository institutions. These custodial accounts arise in connection with the Company’s mortgage servicing activities.

Note 21 — Loan Commitments

      As of September 30, 2005 and December 31, 2004, the Company had undisbursed home equity lines of credit commitments of $10.1 billion and $5.4 billion, respectively, as well as undisbursed construction loan commitments of $1.5 billion and $0.9 billion, respectively. As of September 30, 2005, outstanding commitments to fund mortgage loans totaled $49.6 billion.

Note 22 — Pension Plan

      The Company has a defined benefit pension plan (the “Plan”) covering substantially all of its employees. The Company’s policy is to contribute the amount actuarially determined to be necessary to pay the benefits under the Plan, and in no event to pay less than the amount necessary to meet the minimum funding standards of ERISA.

      On September 14, 2005, the Company made the maximum tax deductible pension plan contribution of $53.7 million for the plan year 2004.

Note 23 — Subsequent Events

      On October 27, 2005, the Board of Directors declared a dividend of $0.15 per common share payable November 30, 2005, to shareholders of record on November 10, 2005.

Note 24 — Recently Issued Accounting Standards

      In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”), which replaces APB No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Changes in Interim Financial Statements. The Statement changes the accounting for, and reporting of, a change in accounting principle. SFAS 154 requires retrospective application to prior period’s financial statements of voluntary changes in accounting principle and changes required by new accounting standards when the standard does not include specific transition provisions, unless it is impracticable to do so. SFAS 154 is effective for accounting changes and corrections of errors in fiscal years beginning after December 15, 2005 and will only affect the Company’s financial statements upon adoption of a voluntary change in accounting principle by the Company.

32

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

      Countrywide is a diversified financial services company engaged in mortgage-finance related businesses. We presently organize our businesses into five business segments — Mortgage Banking, Banking, Capital Markets, Insurance and Global Operations. Our goal is to continue as a leader in the mortgage banking business and to use this leadership position to take advantage of meaningful opportunities that leverage this business and provide sources of earnings that tend to be sustainable in various interest rate environments.

Significant Third Quarter Developments

      Hurricane Katrina and other hurricanes that occurred during the third quarter significantly affected the financial results of several of our business segments. The estimated losses from these hurricanes, primarily Hurricane Katrina, consist of a charge to our insurance operations as well as uninsured losses associated with flood damage on properties that collateralize mortgage loans and loans underlying mortgage servicing rights (“MSRs”) and residuals. The effect on pre-tax and after-tax earnings is summarized below:

Segment	Pre-Tax Effect			After-Tax Effect			Source
	(In thousands)			(In thousands)
Mortgage Banking	$	(70,174	)	$	(42,245	)	Estimated credit losses relating to loans held for sale and to credit-subordinated retained interests; impairment of MSRs and provision for servicing advances relating to government-insured loans
Banking		(12,036	)		(7,246	)	Estimated credit losses relating to loans held for investment
Capital Markets		(3,212	)		(1,882	)	Estimated losses relating to conduit activities
Insurance		(98,395	)		(63,957	)	Estimated insured losses
	$	(183,817	)	$	(115,330	)

      We continue to assess the impact of the hurricanes on our businesses, assets and operations. While our estimates are based on our best available information, they could ultimately be affected by many factors, including, but not limited to, the short-term and long-term impact on the economies of the affected communities; the conduct of borrowers in the affected areas; the actions of various third parties, including government agencies and government-sponsored entities that support housing, insurance companies, lenders and mortgage insurance companies; the apportionment of liability among insurers; the availability of catastrophic reinsurance proceeds; factors impacting property values in the affected areas, including any environmental factors such as the presence of toxic chemicals; and subsequent storm activity.

      Countrywide Bank (“Bank”) (formerly Treasury Bank) produces loans as part of our mortgage banking operations. We report the production and sale of these loans as part of our Mortgage Banking Segment. The Bank produced $4.9 billion of such loans during the quarter. In addition to these mortgage banking activities, we plan to continue increasing our investment in mortgage loans through Countrywide Bank. We continually evaluate the benefits of selling or retaining loans and consider, among other factors, capital availability, earnings growth and current market and economic conditions. Sales of loans generate current period gains on sale, while the retention of loans is designed to provide a stream of net interest income over the life of such loans and create a greater base of future earnings. Our decisions will result in changes, which may be significant, in loan retention levels and the size of our loan portfolio, as well as current period earnings and Production sector margins.

33

Third Quarter Results

      Our consolidated net earnings for the third quarter of 2005 were $633.9 million, an increase of 27% from 2004’s third quarter net earnings of $498.1 million. This increase was realized due to increased profitability in our Loan Servicing Sector arising from increases in values of our retained interests (MSRs and other retained interests), net of Servicing Hedge losses, along with increases in the profitability of our Banking Segment resulting from 135% growth in average interest-earning assets from the third quarter of 2004. Offsetting the increase in earnings were the hurricane-related losses previously discussed.

Mortgage Market

      The mortgage banking business continues to be the primary source of our revenues and earnings. As a result, the dominant external influence on our operating results is the aggregate demand for mortgage loans in the U.S., which is affected by such factors as prevailing mortgage interest rates and the strength of the U.S. housing market.

      For the quarter and nine months ended September 30, 2005, total U.S. residential mortgage production was estimated at $838 billion and $2,219 billion, respectively, compared to $616 billion and $1,980 billion for the quarter and nine months ended September 30, 2004, respectively. We increased our market share to 17.5% for the current quarter from 14.9% in the year-ago period. (Mortgage Market Source: Mortgage Bankers Association). Third party forecasters predict total U.S. mortgage production for 2005 to be between $2.6 trillion and $2.9 trillion, compared to $2.6 trillion in 2004. Due to differences in products represented and model estimation logic, mortgage market estimates vary. We estimate the mortgage market for 2005 to be $3.2 trillion compared to $2.9 trillion in 2004.

Loan Production

      Our total loan production volume increased during the third quarter because we increased our share of a larger mortgage market. The composition of our loan production has changed from last year as a result of increased homeowner preference for adjustable-rate mortgages. During the quarter ended September 30, 2005, our adjustable-rate loan production, including pay-option loans, has increased in prominence and was 51% of total loan production.

      Pay-option loans — which provide borrowers with the option to make fully-amortizing, interest-only, or “negative-amortizing” payments — have increased from approximately 7% of our loan production during the quarter ended September 30, 2004, to approximately 20% of our production during the quarter ended September 30, 2005. These loans provide our Production Sector with greater pricing margins; our Servicing Sector with increased servicing complexity during their option period; and, to the extent these loans are retained in the Bank’s portfolio, our Banking Segment with lower initial net interest income during the period of the loans’ reduced introductory interest rate. Approximately 80% of the pay-option loans produced in the current quarter was originated for sale without recourse. The remainder of these loans were retained in the Bank’s portfolio of loans held for investment.

      Our pay-option loan portfolio has very high initial loan quality, with original average credit rating (expressed in terms of FICO scores) of 720 and original loan-to-value and combined loan-to-values of 74% and 78%, respectively. We only originate pay-option loans to borrowers who can qualify at the loan’s fully-indexed interest rates. This high credit quality notwithstanding, lower initial payment requirements of pay-option loans may increase the credit risk inherent in our loans held for investment. This is because when the required monthly payments for pay-option loans eventually increase (in a period not to exceed 60 months), borrowers may be less able to pay the increased amounts and, therefore, more likely to default on the loan, than a borrower using an amortizing loan. Our exposure to this higher credit risk is increased by any negative amortization that has been added to the principal balance.

34

Interest Rate Risk and Credit Risk

      The principal market risk we face is interest rate risk — the risk that the value of our assets or liabilities or our net interest income will change due to changes in interest rates. Market risk is most directly reflected in the value of our interest rate lock commitments, inventory of loans held for sale, trading securities, investment in other financial instruments and mortgage servicing rights. We manage market risk primarily through the natural counterbalance of our loan production operations and our investment in MSRs, as well as with various financial instruments including derivatives. The primary objective of our interest rate risk management activities is to reduce the variability of earnings caused by changes in interest rates.

      We also face credit risk, primarily related to our residential mortgage production activities in both the Mortgage Banking and Banking Segments. Credit risk is the potential for financial loss resulting from the failure of a borrower or an institution to honor its contractual obligations to us. Credit risk most directly affects our other financial instruments that are credit subordinated to other securities and our mortgage loans held for investment. We manage mortgage credit risk principally by selling most of the mortgage loans that we produce, limiting credit recourse to Countrywide in those transactions, and by retaining high credit quality mortgages in our loan portfolio.

Liquidity

      Our liquidity and financing requirements are significant. We meet these requirements in a variety of ways, including use of the public corporate debt and equity markets, mortgage- and asset-backed securities markets, and, through the financing activities of our Bank. The objective of our liquidity management is to ensure that adequate, diverse and reliable sources of cash are available to meet our funding needs on a cost-effective basis. Our ability to raise financing at the level and cost required to compete effectively is dependent on maintaining our high credit standing.

Competition

      The mortgage industry has undergone rapid consolidation in recent years, and we expect this trend to continue in the future. Today the industry is dominated by large, sophisticated financial institutions. To compete effectively in the future, we will be required to maintain a high level of operational, technological and managerial expertise, as well as an ability to attract capital at a competitive cost. We believe that we will benefit from industry consolidation through increased market share.

      As used in this Report, references to “we,” “our,” “the Company” or “Countrywide” refer to Countrywide Financial Corporation and its consolidated subsidiaries unless otherwise indicated.

Critical Accounting Policies

      The accounting policies with the greatest impact on our financial condition and results of operations and which require the most judgment pertain to our mortgage securitization activities, our investments in MSRs and other retained interests and our use of derivatives to manage interest rate risk. Our critical accounting policies involve the following three areas: 1) accounting for gains on sales of loans and securities; 2) accounting for MSRs and other retained interests, including valuation of these retained interests; and 3) accounting for derivatives and our related interest rate risk management activities.

      On April 1, 2005, we implemented hedge accounting for a portion of our interest rate risk management activities related to our MSRs in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). See Note 15 — “Derivative Instruments and Risk Management Activities” for a description of our accounting for the portion of our interest rate risk management activities related to our retained interests that qualify as a hedge under SFAS 133.

Stock Split Effected as Stock Dividends and Earnings per Share Calculations

      In April 2004 and August 2004, respectively, we completed a 3-for-2 and a 2-for-1 stock split, both of which were effected as stock dividends. In the fourth quarter of 2004, the Emerging Issues Task Force reached a consensus on Issue No. 04-8, which required the Company to include the assumed conversion of its

35

convertible debentures in diluted earnings per share for all periods presented. All references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to the number of common shares and earnings per share amounts have been adjusted accordingly.

Results of Operations Comparison — Quarters Ended September 30, 2005 and 2004

Consolidated Earnings Performance

      Our diluted earnings per share for the quarter ended September 30, 2005 were $1.03, including an after-tax charge of $0.19 per diluted shares for losses related to hurricanes. Diluted earnings per share increased 27% from diluted earnings per share for the quarter ended September 30, 2004. Net earnings were $633.9 million for the quarter ended September 30, 2005, a 27% increase from the year-ago period.

      The increase in our earnings resulted primarily from an increase in the profitability of our Mortgage Banking Segment. The Mortgage Banking Segment produced pre-tax earnings of $702.5 million for the quarter ended September 30, 2005, an increase of 42% from the same period last year. The increase in the profitability of our Mortgage Banking Segment was primarily due to an increase in the value of our retained interests, net of Servicing Hedge losses. The Banking Segment produced pre-tax earnings of $278.3 million, an increase of 71% from the year-ago period. The increase in profitability of our Banking Segment was primarily due to a 135% increase in average interest-earning assets at Countrywide Bank from the year-ago period.

Operating Segment Results

      Pre-tax earnings (loss) by segment are summarized below:

			Quarter Ended
			September 30,
			2005			2004
			(In thousands)
Mortgage Banking:
	Loan Production		$	413,731		$	496,551
	Loan Servicing			257,666			(22,667	)
	Loan Closing Services			31,139			22,545
		Total Mortgage Banking		702,536			496,429
Banking				278,264			163,171
Capital Markets				92,042			90,135
Insurance				(32,119	)		29,620
Global Operations				8,153			9,811
Other				2,802			(1,989	)
	Total		$	1,051,678		$	787,177

      The pre-tax earnings (loss) of each segment include intercompany transactions, which are eliminated in the “other” category above.

36

      Mortgage loan production by segment and product, net of intercompany sales, is summarized below:

			Quarter Ended
			September 30,
			2005		2004
			(In millions)
Segment:
	Mortgage Banking		$	131,126	$	77,019
	Banking			9,801		8,694
	Capital Markets:
		Conduit acquisitions		5,083		6,111
		Commercial real estate		1,113		3
			$	147,123	$	91,827
Product:
	Prime Mortgage		$	122,228	$	70,812
	Nonprime Mortgage			12,201		11,954
	Prime Home Equity			11,581		9,058
	Commercial real estate			1,113		3
			$	147,123	$	91,827

      The following table summarizes loan production by purpose and by interest rate type:

		Quarter Ended
		September 30,
		2005		2004
		(In millions)
Purpose:
	Non-purchase	$	77,342	$	39,488
	Purchase		69,781		52,339
		$	147,123	$	91,827
Interest Rate Type:
	Adjustable Rate	$	74,647	$	56,325
	Fixed Rate		72,476		35,502
		$	147,123	$	91,827

Mortgage Banking Segment

      The Mortgage Banking Segment includes the Loan Production, Loan Servicing and Loan Closing Services Sectors. The Loan Production and Loan Closing Services Sectors generally perform at their best when mortgage interest rates are relatively low and loan origination volume is high. Conversely, the Loan Servicing Sector generally performs well when mortgage interest rates are relatively high and loan prepayments are low. We expect the natural counterbalance of these sectors to reduce the impact of changes in mortgage interest rates on our earnings.

      During the current quarter, the Mortgage Banking Segment incurred $70.2 million in pre-tax losses relating to the hurricanes that struck the Gulf Coast states. Specifically, Hurricane Katrina differed from other hurricanes because it caused losses as a result of flooding that many borrowers had not insured against. Therefore we have incurred credit losses related to loan inventory secured by real estate in areas affected by Hurricane Katrina.

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      Industry-standard underwriting requirements require borrowers to maintain property hazard insurance for damage to property securing a loan. Most homeowner insurance policies exclude flood loss coverage. Flood loss coverage is generally provided through the National Flood Insurance Program — an insurance program underwritten and administered by the U.S. Government. Banks are required by law and regulation to require flood insurance for loans secured by properties in zip codes identified as a “Special Flood Hazard Area” by the Federal Emergency Management Agency (“FEMA”). This requirement has become an industry standard for lenders to determine whether a borrower is required to maintain flood insurance.

      Hurricane Katrina caused extensive flood damage in areas outside of the FEMA-identified Special Flood Hazard Areas. As a result, many borrowers did not have flood insurance. This lack of insurance is a significant contributor to the $70.2 million of hurricane-related losses recorded in the Mortgage Banking segment during the current quarter. Specifically, the losses recorded in the Mortgage Banking segment were:

Sector	Description	Pre-Tax Amount		Recorded As
		(In thousands)
Production	Impairment of loans held for sale	$	18,843	Gain-on-Sale of loans and securities
Servicing	Provision for losses related to servicing advances for loans insured by the FHA and guaranteed by the VA		26,359	Other operating expenses
	Impairment of retained interests arising from estimated losses to be absorbed by credit-subordinated retained interests		17,024	Recovery (impairment) of retained interests
	Impairment of MSRs		7,700	Recovery (impairment) of retained interests
	Estimated credit losses related to loans held for investment		248	Provision for loan losses
	Total Servicing		51,331
	Total Mortgage Banking	$	70,174

Loan Production Sector

      The Loan Production Sector produces mortgage loans through the four production divisions of Countrywide Home Loans (“CHL”) — Consumer Markets, Wholesale Lending, Correspondent Lending and Full Spectrum Lending, and, beginning in the third quarter of 2005, through Countrywide Bank.

38

      The pre-tax earnings of the Loan Production Sector are summarized below:

			Quarter Ended September 30,
			2005					2004
					Percentage of					Percentage of
					Loan					Loan
					Production					Production
			Amount		Volume			Amount		Volume
			(Dollar amounts in thousands)
Revenues:
	Prime Mortgage		$	861,108				$	720,616
	Prime Home Equity			300,532					404,530
	Nonprime Mortgage			222,618					187,484
		Total revenues		1,384,258		1.06	%		1,312,630		1.70	%
Expenses:
	Compensation			598,427		0.45	%		531,667		0.69	%
	Other operating			260,629		0.20	%		185,169		0.24	%
	Allocated corporate			111,471		0.09	%		99,243		0.13	%
		Total expenses		970,527		0.74	%		816,079		1.06	%
Pre-tax earnings			$	413,731		0.32	%	$	496,551		0.64	%

      Revenues increased from the year-ago period due primarily to increased production and sales of Prime Mortgage Loans. The increased revenues were partially offset by a decline in gain on sale margin of Prime Mortgage and Prime Home Equity Loans combined with lower net interest income. The lower margins resulted in a reduction in revenues as a percentage of mortgage loan production. In the quarter ended September 30, 2005, $120.9 billion of mortgage loans, or 92% of Mortgage Banking loan production, was sold compared to $83.8 billion of mortgage loans, or 109% of Mortgage Banking loan production, in the quarter ended September 30, 2004.

      Expenses increased from the year-ago period, primarily due to increased compensation and occupancy costs incurred to accommodate growth in loan production partially offset by changes in our compensation structure. However, high levels of productivity helped reduce expenses expressed as a percentage of production from the prior year. We continued to expand our loan production operations in the quarter ended September 30, 2005 to continue support for our long-term objective of market share growth.

      Mortgage Banking loan production volume for the quarter ended September 30, 2005 increased 70% from a year-ago. Purchase and non-purchase loan production grew 38% and 114%, respectively, resulting from an increase in market share and an increase in the mortgage market. The increase in purchase loans is significant because this component of the mortgage market has historically offered relatively stable growth, averaging 11% per year over the last 10 years. The non-purchase, or refinance, component of the mortgage market is highly volatile because it is driven almost exclusively by prevailing mortgage interest rates.

39

      The following table summarizes Mortgage Banking loan production by purpose and by interest rate type:

		Quarter Ended
		September 30,
		2005		2004
		(In millions)
Purpose:
	Non-purchase	$	69,446	$	32,426
	Purchase		61,680		44,593
		$	131,126	$	77,019
Interest Rate Type:
	Fixed Rate	$	68,480	$	32,861
	Adjustable Rate		62,646		44,158
		$	131,126	$	77,019

      In the quarter ended September 30, 2005, 48% of our loan production was adjustable-rate in comparison to 57% in the year-ago period. The decrease in adjustable-rate production reflects the increase in short-term interest rates during the current period and the relatively flat yield curve, increasing the relative attractiveness of fixed-rate financing.

      The volume of Nonprime Mortgage and Prime Home Equity Loans produced (which is included in our total volume of loans produced) increased 36% during the quarter ended September 30, 2005 compared to the year-ago period. Details are shown in the following table:

	Quarter Ended
	September 30,
	2005			2004
	(Dollar amounts in
	millions)
Nonprime Mortgage Loans	$	11,399		$	9,591
Prime Home Equity Loans		10,344			6,421
	$	21,743		$	16,012
Percent of total Mortgage Banking loan production		16.6	%		20.8	%

      Nonprime Mortgage and Prime Home Equity Loans generally provide higher profit margins than Prime Mortgage Loans and the demand for such loans, particularly Nonprime Mortgage Loans, is believed to be less interest rate sensitive than the demand for Prime Mortgage Loans. Consequently, we believe these loans will be a significant component of the Loan Production Sector’s future profitability, especially if mortgage interest rates rise.

      During the quarter ended September 30, 2005, the Loan Production Sector operated at approximately 115% of planned operational capacity, compared to 111% during the year-ago period. The primary capacity constraint in our loan origination activities is the number of loan operations personnel we have on staff. Therefore, we measure planned capacity by multiplying the number of our loan operations personnel by the number of loans we expect each loan operations staff person to process under normal conditions. Management adjusts staffing levels to account for changes in the current and projected near-term mortgage market. We plan to continue building our sales staff as a primary means to increase our market share, particularly for purchase loans.

40

      The following table summarizes the number of people included in the Loan Production Sector workforce:

			Workforce at
			September 30,
			2005		2004
Sales				15,958		12,316
Operations:
	Regular employees			9,377		7,813
	Temporary staff			2,227		953
				11,604		8,766
Production technology				1,077		1,022
Administration and support				2,679		2,230
		Total Loan Production Sector workforce		31,318		24,334

      The following table shows total Mortgage Banking loan production volume by division:

	Quarter Ended
	September 30,
	2005		2004
	(In millions)
Correspondent Lending	$	62,731	$	32,367
Consumer Markets		32,967		22,864
Wholesale Lending		23,060		17,359
Full Spectrum Lending		7,422		4,429
Countrywide Bank(1)		4,946		—
	$	131,126	$	77,019

(1)  Countrywide Bank funds loans for both investment purposes and for sale. Bank production included in the Mortgage Banking Segment includes loans originated for sale at the Bank together with bulk sales of loans from the Bank to the Mortgage Banking Segment.

      The Correspondent Lending division increased its overall loan production volume due primarily to an increase in the mortgage market combined with increased market share resulting from a shift in the market towards products where we have traditionally been competitive.

      The Consumer Markets Division continues to expand its commissioned sales force, which emphasizes purchase loan production, to 5,764 at September 30, 2005, an increase of 933, or 19%, over the year-ago period. This Division’s branch network has grown to 631 branch offices at September 30, 2005, an increase of 75 offices from September 30, 2004.

      The Consumer Markets Division’s commissioned sales force contributed $13.8 billion in purchase originations during the quarter ended September 30, 2005, a 31% increase over the year-ago period. Such purchase production generated by the commissioned sales force represented 76% of the Consumer Markets Division’s total purchase production for the quarter ended September 30, 2005.

      The Wholesale Lending and Full Spectrum Lending Divisions also continue to increase their sales forces as a means to increase market share. At September 30, 2005, the sales force in the Wholesale Lending Division numbered 1,233, an increase of 21% compared to September 30, 2004.

      The Full Spectrum Lending Division expanded its sales force to 4,494, an increase of 39%, compared to September 30, 2004 and has expanded its branch network to 187 branch offices at September 30, 2005, an increase of 42 offices over the year-ago period.

41

Loan Servicing Sector

      The Loan Servicing Sector includes a significant processing operation, consisting of approximately 7,600 employees who service our 7.2 million mortgage loans. Also included in the Loan Servicing Sector’s results is the performance of our investments in MSRs and other retained interests and associated risk management activities, as well as profits from subservicing activities in the United States. The long-term performance of this sector is affected primarily by the level of interest rates, the corresponding effect on the level of projected and actual prepayments in our servicing portfolio, and our ability to effectively manage interest rate risk as well as the activities of our loan servicing personnel.

      The following table summarizes the results for the Loan Servicing Sector:

		Quarter Ended September 30,
		2005						2004
					Percentage of						Percentage of
					Average						Average
					Servicing						Servicing
		Amount			Portfolio(1)			Amount			Portfolio(1)
		(Dollar amounts in thousands)
Servicing fees, net of guarantee fees		$	826,189			0.333	%	$	597,800			0.319	%
Miscellaneous fees			135,391			0.054	%		115,910			0.062	%
Income from other retained interests			108,181			0.043	%		90,778			0.048	%
Escrow balance income (expense)			119,211			0.048	%		(15,120	)		(0.008	)%
Amortization of mortgage servicing rights			(653,351	)		(0.263	)%		(394,069	)		(0.210	)%
Recovery (impairment) of retained interests			853,667			0.344	%		(795,614	)		(0.424	)%
Servicing hedge (losses) gains			(837,241	)		(0.337	)%		590,967			0.315	%
	Total servicing revenues		552,047			0.222	%		190,652			0.102	%
Operating expenses			184,629			0.074	%		122,748			0.066	%
Allocated corporate expenses			17,471			0.007	%		19,324			0.010	%
	Total servicing expenses		202,100			0.081	%		142,072			0.076	%
Interest expense			92,281			0.037	%		71,247			0.038	%
Pre-tax earnings (loss)		$	257,666			0.104	%	$	(22,667	)		(0.012	)%
Average servicing portfolio		$	993,296,000					$	750,193,000

(1)  Annualized

      Our servicing portfolio grew to $1,047.6 billion at September 30, 2005, a 33% increase from September 30, 2004. At the same time, the overall weighted-average note rate of loans in our servicing portfolio increased to 6.0% from 5.9% at September 30, 2004.

      Pre-tax earnings in the Loan Servicing Sector were $257.7 million during the quarter ended September 30, 2005, an improvement of $280.3 million from the year-ago period. The average servicing portfolio grew 32% resulting in an increase in servicing fees. Amortization expense increased by $259 million due to the low interest rate environment at the beginning of the third quarter of 2005 combined with the larger servicing portfolio. During the quarter ended September 30, 2005, the recorded increase in the value of retained interests exceeded the decline in the value of the Servicing Hedge, including the cost of the hedge (option time value decay), by $16 million. In the year-ago quarter impairment net of Servicing Hedge gains was an expense of $205 million. The change in the performance of the Servicing Hedge largely offset the increase in amortization. In addition the escrow balance benefit improved by $134.3 million resulting primarily from an increase in short-term interest rates. The servicing sector was negatively impacted in the current quarter by hurricane losses of $51 million.

42

      Mortgage interest rates increased during the quarter ended September 30, 2005 which resulted in a lower projected prepayment rate at the end of the period than at the beginning. This in turn resulted in the reversal of previously recognized impairment in the current period. In contrast, interest rates declined during the quarter ended September 30, 2004, which resulted in a higher projected prepayment rate at the end of the period than at the beginning and impairment being recorded during the year-ago period. The reversal of previously recognized impairment, net of amortization was $200.3 million during the quarter ended September 30, 2005 compared to amortization and impairment of $1,189.7 million during the quarter ended September 30, 2004.

      The Servicing Hedge is designed so that the income or loss it generates offsets the impairment or recovery of MSRs and other retained interests. The values of the derivatives that constitute the primary components of the Servicing Hedge are tied to long-term Treasury, mortgage and swap rate indices. The increase in these rates during the quarter ended September 30, 2005 combined with option time value decay of $139 million on the options included in the Servicing Hedge resulted in a Servicing Hedge loss of $837.2 million. During the quarter ended September 30, 2004, the Servicing Hedge generated a gain of $591.0 million resulting from a decline in long-term Treasury and swap rates offset by time value decay on options of $125 million. In a stable interest rate environment, we expect to incur no significant impairment charges; however, we expect to incur expenses related to the Servicing Hedge driven primarily by time value decay on options used in the hedge. The level of Servicing Hedge losses in any period depends on various factors such as the size and composition of the hedge, the shape of the yield curve and the level of implied interest rate volatility.

Loan Closing Services Sector

      This sector is comprised of the LandSafe companies, which provide credit reports, flood determinations, appraisals, property valuation services and title reports primarily to the Loan Production Sector but to third parties as well.

      The LandSafe companies produced $31.1 million in pre-tax earnings in the quarter ended September 30, 2005, representing an increase of 38% from the year-ago period. The increase in LandSafe’s pre-tax earnings was primarily due to the increase in our loan origination activity.

Banking Segment

      The Banking Segment includes the investment and fee-based activities of Countrywide Bank, along with the activities of Countrywide Warehouse Lending, a provider of mortgage inventory financing to independent mortgage bankers. Part of our banking strategy is to hold loans in portfolio rather than immediately selling them into the secondary mortgage market. Management believes this strategy will provide a stream of earnings over the life of such loans and create a greater base of future earnings. In the short term, reported consolidated profits will be impacted by the reduction in gains that would have been recognizable had the loans been sold.

      Countrywide Bank (“Bank”) produces loans for sale through our Mortgage Banking Segment. As this activity is a Mortgage Banking activity, the mortgage loan production and the income relating to the sale of these loans is included in the Mortgage Banking Segment. The production of loans by Countrywide Bank for our Mortgage Banking operations assists in optimizing our funding operations while complying with regulatory requirements.

43

      The Banking Segment achieved pre-tax earnings of $278.3 million during the quarter ended September 30, 2005, as compared to $163.2 million for the year-ago period. Following is the composition of pre-tax earnings by component:

		Quarter Ended
		September 30,
		2005			2004
		(In thousands)
Countrywide Bank investment and fee-based activities (“Banking Operations”)		$	259,325		$	150,627
Countrywide Warehouse Lending (“CWL”)			27,303			18,449
Allocated corporate expenses			(8,364	)		(5,905	)
	Total Banking Segment pre-tax earnings	$	278,264		$	163,171

      The revenues and expenses of Banking Operations are summarized in the following table:

		Quarter Ended
		September 30,
		2005			2004
		(Dollar amounts in
		thousands)
Interest income		$	925,974		$	353,922
Interest expense			(573,670	)		(164,732	)
	Net interest income		352,304			189,190
Provision for loan losses			(44,792	)		(12,100	)
	Net interest income after provision for loan losses		307,512			177,090
Non-interest income			40,169			18,469
Non-interest expense			(88,356	)		(44,932	)
	Pre-tax earnings	$	259,325		$	150,627
Efficiency ratio(1)			21	%		20	%
After-tax return on average assets			0.88	%		1.25	%

(1)  Non-interest expense reduced by mortgage insurance divided by the sum of net interest income plus non-interest income.

      The increase in net interest income is primarily due to a $40.1 billion, or 135%, increase in average interest-earning assets, as summarized below:

				Quarter Ended September 30,
				2005							2004
							Interest		Annualized					Interest		Annualized
				Average			Income/		Yield/		Average			Income/		Yield/
				Balance			Expense		Rate		Balance			Expense		Rate
				(Dollar amounts in thousands)
Interest-earning assets:
	Mortgage loans(1)			$	61,573,048		$	835,380		5.41%	$	26,112,218		$	321,152		4.91%
	Securities available for sale(2)				6,389,697			74,976		4.69%		2,514,395			25,602		4.07%
	Short-term investments				489,367			4,345		3.47%		459,612			1,666		1.42%
	Other investments				1,289,353			11,273		3.47%		587,624			5,502		3.73%
		Total interest-earning assets			69,741,465			925,974		5.30%		29,673,849			353,922		4.76%
	Allowance for loan losses				(85,175	)						(32,994	)
	Other assets				613,141							155,171
		Total non interest-earning assets			527,966							122,177
			Total assets	$	70,269,431						$	29,796,026

44

			Quarter Ended September 30,
			2005						2004
					Interest		Annualized				Interest		Annualized
			Average		Income/		Yield/		Average		Income/		Yield/
			Balance		Expense		Rate		Balance		Expense		Rate
			(Dollar amounts in thousands)
Interest-bearing liabilities:
	Money market deposits		$	2,959,540		28,474		3.82%	$	1,038,431		5,847		2.24%
	Savings			879		3		1.33%		2,053		9		1.74%
	Escrow deposits			13,797,445		114,785		3.30%		8,401,590		27,942		1.32%
	Time deposits			17,875,852		165,013		3.66%		7,231,363		55,259		3.04%
		Total interest-bearing deposits		34,633,716		308,275		3.53%		16,673,437		89,057		2.12%
	FHLB advances			25,587,856		227,668		3.48%		10,572,307		75,388		2.79%
	Other borrowed funds			4,285,210		37,727		3.44%		70,067		287		1.60%
		Total borrowed funds		29,873,066		265,395		3.48%		10,642,374		75,675		2.78%
		Total interest-bearing liabilities		64,506,782		573,670		3.51%		27,315,811		164,732		2.38%
		Non interest-bearing liabilities and equity
	Non interest-bearing checking			672,792						60,788
	Other liabilities			819,097						292,733
	Shareholders’ equity			4,270,760						2,126,694
		Total non interest-bearing liabilities and equity		5,762,649						2,480,215
		Total liabilities and shareholders’ equity	$	70,269,431					$	29,796,026
Net interest income					$	352,304					$	189,190
Net interest spread(3)								1.79%						2.38%
Net interest margin(4)								2.00%						2.54%

(1)	Average balances include nonaccrual loans.
(2)	Average balances and yields for securities available for sale are based on average amortized cost computed on the settlement date basis.
(3)	Calculated as yield on total average interest-earning assets less rate on total average interest-bearing liabilities.
(4)	Calculated as net interest income divided by total average interest-earning assets.

      Net interest margin experienced compression during the quarter ended September 30, 2005 from the year-ago period mainly as a result of a lag in the re-pricing of the Bank’s loan portfolio compared to the increase in the cost of its interest-bearing liabilities and to the large volume of loans held by the Bank that are earning interest at their reduced introductory interest rates.

      Countrywide Bank increased its investment in pay-option loans during 2005. These loans have interest rates that adjust monthly and contain features that allow the borrower to defer making the full interest payment for at least the first year of the loan. Thereafter, minimum monthly payments increase by no more than 7¹/2% per year unless the unpaid balance increases to 115% of the original loan amount, at which time a new monthly payment amount adequate to repay the loan over its remaining contractual life is established. To ensure that contractual loan payments are adequate to repay a loan, the fully amortizing loan payment amount is recalculated every five years. Our underwriting standards for these loans include a requirement that the borrower meet secondary market debt service ratio tests based on the borrower making the fully amortizing loan payment assuming the note rate is fully indexed. (A fully indexed note rate equals the sum of the current index rate plus the margin applicable to the loan.) Our underwriting standards conform to those required to make the pay-option loans salable into the secondary market at the date of funding.

45

      Following is a summary of pay-option loans held for investment by Countrywide Bank:

				September 30,			December 31,
				2005			2004
				(In thousands)
Total pay-option loan portfolio				$	21,996,706		$	4,477,247
	Pay-option loans with accumulated negative amortization:
		Principal		$	7,893,817		$	32,818
			Accumulated negative amortization (from original loan balance)	$	25,487		$	29
Original loan-to-value ratio(1)					74	%		73	%
Original combined loan-to-value ratio(2)					78	%		75	%
FICO					720			730
Delinquencies(3)					0.08	%		0.09	%

(1)	The ratio of the lower of the appraised value or purchase price of the property to the amount of the loan that is secured by the property.
(2)	The ratio of the lower of the appraised value or purchase price of the property to the amount of all loans secured by the property.
(3)	Loans delinquent more than 60 days.

      The provision for loan losses increased by $32.7 million during the quarter ended September 30, 2005 compared to the quarter ended September 30, 2004. This increase includes the $12.0 million effect of the hurricane losses on Banking Operations. The remaining increase in the provision for loan losses reflects current portfolio growth, along with providing for seasoning of loans acquired during the past years of rapid portfolio growth. We expect our provision for loan losses and the related allowance for loan losses to increase as a percentage of our portfolio of loans held for investment as our portfolio continues to season. The impact of the increase in the allowance for loan losses as a percentage of loans receivable is moderated by the addition of new loans to our portfolio.

46

      The composition of the Bank’s balance sheets was as follows:

			September 30, 2005					December 31, 2004
			Amount			Rate		Amount			Rate
			(Dollar amounts in millions)
Assets
	Cash		$	456			0.00%	$	50			0.00%
	Short-term investments			799			3.89%		315			2.15%
	Mortgage loans			61,742			5.74%		34,230			5.25%
	Securities available for sale			6,025			4.68%		4,796			5.02%
	FHLB securities & FRB stock			1,329			3.48%		795			3.96%
		Total interest-earning assets		70,351			5.50%		40,186			5.07%
	Other assets			662					778
		Total assets	$	71,013				$	40,964
Liabilities and Equity
	Deposits:(1)
		Customer	$	23,711			3.58%	$	12,112			3.04%
		Company-controlled escrow deposit accounts		14,211			3.79%		7,901			2.19%
	FHLB advances			26,525			3.59%		15,475			2.97%
	Other borrowings			804			3.65%		1,811			2.37%
		Total interest-bearing liabilities		65,251			3.59%		37,299			2.74%
	Other liabilities			742					740
	Shareholders’ equity			5,020					2,925
		Total liabilities and equity	$	71,013				$	40,964
Primary spread(2)							1.91%					2.33%
Nonaccrual loans			$	68.8				$	21.8
Capital ratios:
	Tier 1 Leverage capital			7.2	%				7.8	%
	Tier 1 Risk-based capital			11.4	%				11.8	%
	Total Risk-based capital			11.6	%				12.0	%

(1)	Includes inter-company deposits.
(2)	Calculated as rate on total interest-earning assets less rate on total interest-bearing liabilities.

      The Banking Segment also includes the operation of CWL. CWL’s pre-tax earnings increased by $8.9 million during the quarter ended September 30, 2005 in comparison to the year-ago period, primarily due to an 85% increase in average mortgage warehouse advances, partially offset by a decrease in the net interest margin due to increasing competition in the warehouse lending market. The increase in warehouse mortgage advances was due primarily to increased activity with Mortgage Banking Segment customers.

Capital Markets Segment

      Our Capital Markets Segment achieved pre-tax earnings of $92.0 million for the quarter ended September 30, 2005, an increase of $1.9 million, or 2%, from the year-ago period. This increase is net of a $3.2 million provision for estimated hurricane-related losses associated with our conduit activities. Total revenues were $179.0 million, an increase of $12.1 million, or 7%, compared to the year-ago period. The Capital Markets Segment has expanded its staffing and infrastructure to invest in the development of new lines of business such as commercial real estate finance and broker-dealer operations in Japan.

47

      The following table shows revenues, expenses and pre-tax earnings of the Capital Markets Segment:

			Quarter Ended
			September 30,
			2005		2004
			(In thousands)
Revenues:
	Underwriting		$	82,363	$	95,330
	Conduit			53,093		48,986
	Securities trading			23,593		13,530
	Brokering			6,611		6,132
	Commercial real estate			5,994		330
	Other			7,309		2,551
		Total revenues		178,963		166,859
Expenses:
	Operating expenses			83,929		74,018
	Allocated corporate expenses			2,992		2,706
		Total expenses		86,921		76,724
Pre-tax earnings			$	92,042	$	90,135

      Underwriting revenues decreased $13.0 million over the year-ago period because of decreased underwriting of CHL securitizations by Capital Markets combined with a reduction in margins as a result of price competition.

      Conduit revenues for the quarter ended September 30, 2005 increased 8% in comparison to the year-ago period, primarily because of an increase in conduit loans sale volume, partially offset by a decrease in margins resulting from a change in mix toward lower-margin ARM loans.

      Securities trading revenues increased 74% due primarily to an increase in conforming mortgage securities trading margins and volume. Excluding U.S. Treasury securities, trading volumes increased 20% from the year-ago period. Including U.S. Treasury securities, the total securities volume traded increased 22% over the year-ago period.

      During the quarter ended September 30, 2005, the Capital Markets Segment generated revenues totaling $6.0 million from sales of commercial real estate loans. Our commercial real estate activities were in their startup period during the third quarter of 2004.

      The following table shows the composition of CSC securities trading volume, which includes intersegment trades with the mortgage banking operations, by instrument:

		Quarter Ended
		September 30,
		2005		2004
		(In millions)
Mortgage-backed securities		$	515,819	$	423,981
Asset-backed securities			43,144		57,161
Other			32,052		12,415
	Subtotal(1)		591,015		493,557
U.S. Treasury securities			380,358		301,239
	Total securities trading volume	$	971,373	$	794,796

(1)  Approximately 16% of the segment’s non-U.S. Treasury securities trading volume was with CHL during each of the quarters ended September 30, 2005 and 2004.

48

Insurance Segment

      The Insurance Segment’s pre-tax earnings decreased by $61.7 million over the year-ago period, to a loss of $32.1 million. Balboa Life and Casualty’s results for the quarter ended September 30, 2005 include a $98.4 million provision for insured losses and reinsurance reinstatement fees arising from the hurricanes in the third quarter of this year. The following table shows pre-tax results of operations by business line:

		Quarter Ended
		September 30,
		2005			2004
		(In thousands)
Balboa Reinsurance Company		$	40,387		$	33,045
Balboa Life and Casualty Operations(1)			(68,353	)		3,246
Allocated corporate expenses			(4,153	)		(6,671	)
	Total Insurance Segment pre-tax (loss) earnings	$	(32,119	)	$	29,620

(1)  Includes the Balboa Life and Casualty Group and the Countrywide Insurance Services Group.

      The following table shows net insurance premiums earned:

		Quarter Ended
		September 30,
		2005		2004
		(In thousands)
Balboa Reinsurance Company		$	44,682	$	39,694
Balboa Life and Casualty Operations			195,397		155,084
	Total net insurance premiums earned	$	240,079	$	194,778

      The following table shows insurance claim expenses:

		Quarter Ended September 30,
		2005				2004
				As Percentage				As Percentage
				of Net				of Net
				Earned				Earned
		Amount		Premiums		Amount		Premiums
		(Dollar amounts in thousands)
Balboa Reinsurance Company		$	11,348		25%	$	10,999		28%
Balboa Life and Casualty Operations			172,410		88%		95,722		62%
	Total insurance claim expenses	$	183,758			$	106,721

      Our mortgage reinsurance business produced $40.4 million in pre-tax earnings, an increase of 22% over the year-ago period, driven primarily by growth of 5% in the mortgage loans included in our loan servicing portfolio that are covered by reinsurance contracts along with a reduced provision, as a percentage of premiums earned, for insured losses resulting from faster than expected prepayments of older pools of reinsured loans.

      Our Life and Casualty insurance business produced pre-tax loss of $68.4 million, a decrease of $71.6 million from the year-ago period. The decrease in earnings was driven by $98.4 million in catastrophic hurricane losses in comparison to $23.2 million of such losses incurred in the year-ago period, partially offset by a $40.3 million, or 26% increase in net earned premiums during the quarter ended September 30, 2005 in comparison to the year-ago period. The increase in net earned premiums was primarily attributable to an increase in voluntary homeowners and auto insurance and includes a reduction of $9.2 million relating to a catastrophic reinsurance reinstatement fee paid to reinsurers as a result of the current period hurricane losses.

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      Our Life and Casualty insurance operations manage insurance risk by reinsuring portions of such risk. Balboa seeks to earn profits by capitalizing on Countrywide’s customer base and institutional relationships, as well as through operating efficiencies and sound underwriting.

Global Operations Segment

      Global Operations’ pre-tax earnings totaled $8.2 million, a decrease of $1.7 million from the year-ago period. The decrease in earnings was due to a 27% decline in the number of new mortgage loans processed.

Detailed Line Item Discussion of Consolidated Revenue and Expense Items

Gain on Sale of Loans and Securities

      Gain on sale of loans and securities is summarized below:

			Quarter Ended September 30,
			2005								2004
					Gain on Sale								Gain on Sale
								As Percentage								As Percentage
			Loans Sold		Amount			of Loans Sold			Loans Sold		Amount			of Loans Sold
			(Dollar amounts in thousands)
Mortgage Banking:
	Prime Mortgage Loans		$	103,117,925	$	777,810			0.75	%	$	66,367,092	$	543,919			0.82	%
	Prime Home Equity Loans			10,188,168		223,221			2.19	%		9,870,640		290,649			2.94	%
	Nonprime Mortgage Loans			7,556,295		172,656			2.28	%		7,601,946		92,063			1.21	%
		Production Sector		120,862,388		1,173,687			0.97	%		83,839,678		926,631			1.11	%
	Reperforming loans			318,327		6,572			2.06	%		338,163		15,495			4.58	%
			$	121,180,715		1,180,259					$	84,177,841		942,126
Capital Markets:
	Underwriting			N/A		71,777			N/A			N/A		79,353			N/A
	Conduit activities(1)		$	17,466,210		41,475			0.24	%	$	12,066,450		44,457			0.37	%
	Commercial real estate		$	436,740		5,200			1.19	%		N/A		77			N/A
	Securities trading and other			N/A		(21,279	)		N/A			N/A		(55,354	)		N/A
						97,173								68,533
Other				N/A		7,560			N/A			N/A		10,202			N/A
					$	1,284,992							$	1,020,861

(1)  Includes intercompany sales

      Gain on sale of Prime Mortgage Loans increased in the quarter ended September 30, 2005 as compared to the quarter ended September 30, 2004 due primarily to increased sales of such loans combined with a shift in mix of Prime Mortgage Loans sold towards higher margin adjustable-rate products. These positive results were partially offset by lower margins resulting from increased pricing competition.

      Gain on sale of Prime Home Equity Loans decreased in the quarter ended September 30, 2005 as compared to the year-ago period due primarily to reduced margins on such loans.

      Gain on sale of Nonprime Mortgage Loans increased in the quarter ended September 30, 2005 as compared to the quarter ended September 30, 2004 due to interest rate risk management activities that resulted in losses recognized in the third quarter of 2004 related to loans that were sold in the fourth quarter of 2004.

      Reperforming loans are reinstated loans that had previously defaulted and were repurchased from mortgage securities we issued. The note rate on these loans is typically higher than the currently offered mortgage interest rates and therefore, the margin on these loans is typically higher than margins on Prime

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Mortgage Loans. A change in Ginnie Mae rules in 2003 related to the purchase of defaulted loans from Ginnie Mae securities has resulted in fewer loans available for repurchase, which has contributed to a lower margin on sale related to these loans.

      The increase in Capital Markets’ gain on sale related to its commercial real estate activities was due to increased sales of such loans. Capital Markets’ revenues from its securities trading activities consist of gain on sale of loans and securities and interest income. In a steep yield curve environment, net interest income will comprise a larger percentage of total securities trading revenues. As the yield curve flattens, the mix of revenues will generally shift toward gain on sale of securities. During the quarter ended September 30, 2005 the yield curve was flatter than in the year-ago period, which resulted in a shift in trading revenues from interest income to gain on sale.

      In general, gain on sale of loans and securities is affected by numerous factors, including the volume, mix and timing of loans sold, production channel mix, the level of price competition, the level of investor demand for mortgage securities, the slope of the yield curve and the effectiveness of our associated interest rate risk management activities.

Net Interest Income

      Net interest income is summarized below:

			Quarter Ended
			September 30,
			2005			2004
			(In thousands)
Net interest income (expense):
	Banking Segment loans and securities		$	370,725		$	202,514
	Mortgage Banking Segment loans and securities			140,697			337,054
	Loan Servicing Sector interest expense			(95,750	)		(88,145	)
	Interest income (expense) on custodial balances			119,211			(15,120	)
	Reperforming loans			14,537			21,753
	Capital Markets Segment securities portfolio			68,311			83,364
	Other			18,373			11,817
		Net interest income		636,104			553,237
	Provision for loan losses related to loans held for investment			(54,834	)		(8,360	)
		Net interest income after provision for loan losses	$	581,270		$	544,877

      The increase in net interest income from the Banking Segment was primarily attributable to growth in the average investment in mortgage loans in the Bank and CWL. Average assets in the Banking Segment increased to $77.3 billion during the quarter ended September 30, 2005, an increase of $43.5 billion, or 129% over the year-ago period. Partially offsetting this increase, the net interest margin decreased to 1.99% during the quarter ended September 30, 2005 from 2.45% during the year-ago period. Net interest margin experienced compression during the quarter ended September 30, 2005 from the year-ago period mainly as a result of a lag in the re-pricing of the Bank’s loan portfolio compared to the increase in the cost of its interest-bearing liabilities, and to the large volume of loans held by the Bank that are earning interest at their reduced introductory interest rates.

      The decrease in net interest income from Mortgage Banking Segment loans and securities reflects a decrease in net interest margin from the year-ago period. The Mortgage Banking Segment loan and securities inventory is primarily financed with borrowings tied to short-term indices. Short-term interest rates rose while long-term mortgage interest rates remained flat between the year-ago period and the quarter ended September 30, 2005, reducing the net interest margin.

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      Interest expense allocated to the Loan Servicing Sector increased primarily due to a higher cost of funds driven by an increase in interest rates combined with an increase in total Servicing Sector assets.

      Net interest income from custodial balances increased in the current period due to an increase in the earnings rate from 1.29% during the quarter ended September 30, 2004 to 3.48% during the quarter ended September 30, 2005, and due to an increase of $9.2 billion in average custodial balances over the year-ago period. The increased earnings on custodial balances were partially offset by an increase in the interest that we pass through to security holders. We are required to pass through monthly interest to security holders on paid-off loans at the underlying security rates, which were substantially higher than the short-term rates earned by us on the payoff float. The amount of such interest passed through to the security holders was $98.9 million and $66.2 million in the quarters ended September 30, 2005 and 2004, respectively.

      The decrease in interest income related to reperforming loans is a result of a decrease in the average balance of such loans held.

      The decrease in net interest income from the Capital Markets securities portfolio is attributable to a decrease in the net interest margin from 0.86% in the quarter ended September 30, 2004 to 0.52% in the quarter ended September 30, 2005, partially offset by an increase of 36% in the average inventory of securities held. The decrease in the net interest margin earned on the securities portfolio is primarily due to a larger increase in short-term financing rates versus the increase in rates in the longer-term securities held by the Capital Markets Segment. The decline in net interest income was partially offset by an increase in gain on sale.

Loan Servicing Fees and Other Income from Retained Interests

      Loan servicing fees and other income from retained interests are summarized below:

		Quarter Ended
		September 30,
		2005		2004
		(In thousands)
Servicing fees, net of guarantee fees		$	826,189	$	597,800
Income from other retained interests			108,181		90,778
Prepayment penalties			62,519		39,304
Late charges			61,583		45,677
Global Operations Segment subservicing fees			26,655		26,232
Ancillary fees			18,406		13,149
	Total loan servicing fees and other income from retained interests	$	1,103,533	$	812,940

      The increase in servicing fees, net of guarantee fees, was principally due to a 32% increase in the average servicing portfolio, plus an increase in the overall annualized net service fee earned from 0.319% of the average portfolio balance during the quarter ended September 30, 2004 to 0.333% during the quarter ended September 30, 2005.

      The increase in income from other retained interests was due primarily to a 21% increase in the average investment in these assets from the quarter ended September 30, 2004 to quarter ended September 30, 2005. The yield excludes any impairment charges, which are included in recovery (impairment) of retained interests in the consolidated statement of earnings. These investments include interest-only and principal-only securities as well as residual interests that arise from the securitization of mortgage loans, particularly Nonprime Mortgage and Prime Home Equity Loans.

Amortization of Mortgage Servicing Rights

      We recorded amortization of MSRs of $653.4 million, or an annual rate of 23.6%, during the quarter ended September 30, 2005 as compared to $394.1 million, or an annual rate of 17.5%, during the quarter ended September 30, 2004. The amortization rate of MSRs is dependent on the forecasted prepayment speeds

52

at the beginning of the period. Mortgage interest rates at the beginning of the current quarter were lower than the year-ago period and as a result, the forecasted prepayment speeds were higher in the current quarter. This resulted in a higher amortization rate in the quarter ended September 30, 2005 than in the year-ago period. The increase in amortization in the current quarter is the result of the higher amortization rate combined with a larger MSR asset.

Recovery (Impairment) of Retained Interests and Servicing Hedge (Losses) Gains

      Recovery (impairment) of retained interests and Servicing Hedge (losses) gains are detailed below:

				Quarter Ended
				September 30,
				2005			2004
				(In thousands)
Recovery (impairment) of retained interests:
	MSRs:
		Recovery (impairment)		$	667,589		$	(795,776	)
		Increase in MSR cost basis through application of hedge accounting:
			Change in fair value attributable to hedged risk		247,775			—
		Total recovery (impairment) of MSRs			915,364			(795,776	)
	Other retained interests				(61,697	)		162
				$	853,667		$	(795,614	)
Servicing Hedge (losses) gains recorded in earnings				$	(837,241	)	$	590,967

      Recovery of previously recorded MSR impairment and the increase in the MSR cost basis through the application of hedge accounting during the quarter ended September 30, 2005 resulted from an increase in the estimated fair value of MSRs, primarily driven by the increase in mortgage interest rates during the period. MSR impairment in the quarter ended September 30, 2004 resulted generally from a decrease in the MSR’s estimated fair value, driven by a decrease in mortgage interest rates during that period. In the quarter ended September 30, 2005, we recognized impairment of other retained interests, primarily as a result of a decline in the value of such securities. The collateral underlying certain of these residuals is fixed-rate while the pass-through rate is floating. An increase in projected short-term interest rates during both periods caused compression of the spread on such residuals, which resulted in a decline in their value.

      Long-term Treasury and swap rates increased during the quarter ended September 30, 2005. The increase resulted in a Servicing Hedge loss. In addition time value decay on the options included in the Servicing Hedge amounted to $139 million during the period. The net result is a loss of $837.2 million in the quarter ended September 30, 2005. During the quarter ended September 30, 2004, the Servicing Hedge generated a gain of $591.0 million. This gain resulted from a decrease in long-term Treasury and swap rates during the quarter ended September 30, 2004, offset by time value decay of $125 million.

Net Insurance Premiums Earned

      The increase in net insurance premiums earned of $45.3 million is due to an increase in premiums earned on the voluntary homeowners and auto lines of business and an increase in reinsurance premiums earned and includes a reduction of $9.2 million relating to an adjustment to a catastrophic reinsurance reinstatement fee paid to reinsurers as a result of the current period hurricane losses.

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Commissions and Other Revenue

      Commissions and other revenue consisted of the following:

		Quarter Ended
		September 30,
		2005		2004
		(In thousands)
Appraisal fees, net		$	31,100	$	20,538
Credit report fees, net			20,425		18,652
Global Operations Segment processing fees			18,236		20,208
Title services			12,024		11,449
Insurance agency commissions			8,338		14,959
Increase in cash surrender value of life insurance			4,708		13,184
Other			43,838		35,773
	Total commissions and other revenue	$	138,669	$	134,763

Compensation Expenses

      Our average workforce by segment is summarized below:

		Quarter Ended
		September 30,
		2005		2004
Mortgage Banking			39,408		30,713
Banking			1,911		1,087
Capital Markets			644		551
Insurance			2,065		1,860
Global Operations			2,708		2,163
Corporate Administration			4,500		3,901
	Average workforce, including temporary staff		51,236		40,275

      Compensation expenses are summarized below:

		Quarter Ended
		September 30,
		2005			2004
		(In thousands)
Base salaries		$	524,533		$	430,835
Incentive bonus and commissions			564,296			450,760
Payroll taxes and benefits			173,167			106,473
Deferral of loan origination costs			(273,382	)		(137,684	)
	Total compensation expenses	$	988,614		$	850,384

      Compensation expenses increased $138.2 million, or 16%, during the quarter ended September 30, 2005 as compared to the year-ago period. In the Loan Production Sector, compensation expenses, prior to the deferral of loan origination costs, increased $178.6 million, or 27%, because of a 30% increase in average staff. In the Loan Servicing Sector, compensation expense rose $19.0 million, or 27%, to accommodate a 22% increase in the number of loans serviced. Compensation expenses increased in most other business segments and corporate areas, reflecting growth in the Company.

      Incremental direct costs associated with the origination of loans are deferred when incurred. Subsequent treatment of these costs is based on whether the loans are held for sale or held for investment. If the related

54

loan is sold, the costs deferred are included as a component of gain on sale; if the loan is held for investment, the costs are amortized to interest income over the life of the loan.

Occupancy and Other Office Expenses

      Occupancy and other office expenses are summarized below:

		Quarter Ended
		September 30,
		2005		2004
		(In thousands)
Office and equipment rentals		$	47,289	$	37,730
Utilities			40,040		33,087
Depreciation expense			38,875		28,393
Postage and courier service			26,595		21,624
Office supplies			20,546		15,072
Dues and subscriptions			15,247		12,818
Repairs and maintenance			13,471		10,717
Other			26,200		(3,833	)
	Total occupancy and other office expenses	$	228,263	$	155,608

      Occupancy and other office expenses for the quarter ended September 30, 2005 increased by $72.7 million primarily to accommodate a 27% increase in the average workforce.

Insurance Claim Expenses

      Insurance claim expenses were $183.8 million for the quarter ended September 30, 2005 as compared to $106.7 million for the year-ago period. The increase in insurance claim expenses was due mainly to growth in our insured risk and recognition of $98.4 million of hurricane losses during the current quarter, compared to $23.2 million in the year-ago period.

Advertising and Promotion Expenses

      Advertising and promotion expenses increased 19% from the quarter ended September 30, 2004, because of a shift in the mortgage loan production market towards purchase activity. These expenses are customarily lower when low interest rates drive increased consumer demand for mortgages.

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Other Operating Expenses

      Other operating expenses are summarized below:

		Quarter Ended
		September 30,
		2005			2004
		(In thousands)
Insurance commission expense		$	46,673		$	29,288
Legal, consulting, accounting and auditing fees			37,936			32,416
Losses on servicing-related advances			33,637			23,161
Travel and entertainment			30,329			22,286
Software amortization and impairment			19,421			10,649
Insurance			17,005			9,285
Taxes and licenses			11,776			10,107
Other			48,131			42,719
Deferral of loan origination costs			(42,015	)		(17,884	)
	Total other operating expenses	$	202,893		$	162,027

      Losses on servicing-related advances include a $26.4 million provision for losses relating to FHA-insured and VA-guaranteed loans secured by properties damaged by Hurricane Katrina.

Results of Operations Comparison — Nine Months Ended September 30, 2005 and 2004

Consolidated Earnings Performance

      Our diluted earnings per share for the nine months ended September 30, 2005 were $3.07, a 2% increase from diluted earnings per share for the nine months ended September 30, 2004. Net earnings were $1,889.2 million for the nine months ended September 30, 2005, a 3% increase from the year-ago period.

      The increase in our earnings was primarily the result of an increase in the profitability of our Banking Segment which produced pre-tax earnings of $745.4 million, up 92% from the year-ago period. This increase was primarily due to a 127% increase in average interest-earning assets at Countrywide Bank from the year-ago period. The increase in profitability of our Banking Segment was partially offset by a 4 percent decline in Mortgage Banking earnings, which produced pre-tax earnings of $2,000.6 million for the nine months ended September 30, 2005. The decrease in the profitability of our Mortgage Banking Segment was due to reduced production margins, partially offset by improved profitability in loan servicing. Loan servicing earnings increased primarily from higher revenues resulting from a 32% increase in the size of the Company’s average loan servicing portfolio.

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Operating Segment Results

      Pre-tax earnings (loss) by segment are summarized below:

			Nine Months Ended
			September 30,
			2005			2004
			(In thousands)
Mortgage Banking:
	Loan Production		$	1,557,523		$	2,166,986
	Loan Servicing			363,958			(155,693	)
	Loan Closing Services			79,135			64,146
		Total Mortgage Banking		2,000,616			2,075,439
	Banking			745,365			387,862
	Capital Markets			318,940			332,917
	Insurance			80,166			130,152
	Global Operations			17,513			31,225
	Other			(27,044	)		(3,259	)
		Total	$	3,135,556		$	2,954,336

      The pre-tax earnings (loss) of each segment include intercompany transactions, which are eliminated in the “other” category above.

      Mortgage loan production by segment and product, net of intercompany sales, is summarized below:

			Nine Months Ended
			September 30,
			2005		2004
			(In millions)
Segment:
	Mortgage Banking		$	311,029	$	232,993
	Banking			34,389		20,664
	Capital Markets:
		Conduit acquisitions		12,399		14,034
		Commercial real estate		2,409		3
			$	360,226	$	267,694
Product:
	Prime Mortgage		$	293,957	$	217,643
	Nonprime Mortgage			32,457		28,400
	Prime Home Equity			31,403		21,648
	Commercial real estate			2,409		3
			$	360,226	$	267,694

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      The following table summarizes loan production by purpose and by interest rate type:

		Nine Months Ended
		September 30,
		2005		2004
		(In millions)
Purpose:
	Non-purchase	$	187,793	$	137,779
	Purchase		172,433		129,915
		$	360,226	$	267,694
Interest Rate Type:
	Adjustable Rate	$	190,644	$	138,711
	Fixed Rate		169,582		128,983
		$	360,226	$	267,694

Mortgage Banking Segment

      The Mortgage Banking Segment includes the Loan Production, Loan Servicing and Loan Closing Services Sectors.

Loan Production Sector

      The pre-tax earnings of the Loan Production Sector are summarized below:

			Nine Months Ended September 30,
			2005					2004
					Percentage of					Percentage of
					Loan					Loan
					Production					Production
			Amount		Volume			Amount		Volume
			(Dollar amounts in thousands)
Revenues:
	Prime Mortgage		$	2,535,384				$	2,457,822
	Nonprime Mortgage			887,646					993,738
	Prime Home Equity			650,019					875,896
		Total revenues		4,073,049		1.31	%		4,327,456		1.86	%
Expenses:
	Compensation			1,527,442		0.49	%		1,368,623		0.59	%
	Other operating			702,102		0.23	%		495,633		0.21	%
	Allocated corporate			285,982		0.09	%		296,214		0.13	%
		Total expenses		2,515,526		0.81	%		2,160,470		0.93	%
Pre-tax earnings			$	1,557,523		0.50	%	$	2,166,986		0.93	%

      Despite an increase in loan production and sales, revenues decreased over the year-ago period due primarily to decreased gain on sale margins combined with lower net interest income. In the nine months ended September 30, 2005, $295.7 billion of mortgage loans, or 95% of loan production, was sold compared to $241.0 billion of mortgage loans, or 103% of loan production, in the nine months ended September 30, 2004. This decline in sales as a percentage of production contributed to the decline in revenues as a percentage of mortgage loan production in the current nine months.

      Expenses increased from the year-ago period, primarily due to an increase in loan production. High levels of productivity helped reduce expenses expressed as a percentage of production compared to the prior year.

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We continued to expand our loan production operations in the nine months ended September 30, 2005 to continue support of our long-term objective of market share growth.

      Mortgage Banking loan production volume for the nine months ended September 30, 2005 increased 33% from the year-ago period. The increase was due to a rise in purchase and non-purchase loan production of 31% and 36%, respectively, reflecting an increase in market share.

      The following table summarizes Mortgage Banking loan production by purpose and by interest rate type:

		Nine Months Ended
		September 30,
		2005		2004
		(In millions)
Purpose:
	Non-purchase	$	162,878	$	119,610
	Purchase		148,151		113,383
		$	311,029	$	232,993
Interest Rate Type:
	Fixed rate	$	159,130	$	121,665
	Adjustable rate		151,899		111,328
		$	311,029	$	232,993

      While virtually unchanged as a percentage of total loans funded, the volume of Mortgage Banking Nonprime Mortgage and Prime Home Equity Loans produced (which is included in our total volume of loans produced) increased 36% during the nine months ended September 30, 2005 compared to the year-ago period. Details are shown in the following table:

	Nine Months Ended
	September 30,
	2005			2004
	(Dollar amounts in
	millions)
Nonprime Mortgage Loans	$	29,256		$	23,771
Prime Home Equity Loans		23,838			15,389
	$	53,094		$	39,160
Percent of total Mortgage Banking loan production		17.1	%		16.8	%

      During the nine months ended September 30, 2005, the Loan Production Sector operated at approximately 112% of planned operational capacity, compared to 111% during the year-ago period.

      The following table shows total Mortgage Banking loan production volume by division:

	Nine Months Ended
	September 30,
	2005		2004
	(In millions)
Correspondent Lending	$	141,157	$	99,062
Consumer Markets		87,173		70,198
Wholesale Lending		60,030		52,845
Full Spectrum Lending		17,723		10,888
Countrywide Bank		4,946		—
	$	311,029	$	232,993

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Loan Servicing Sector

      The following table summarizes the results for the Loan Servicing Sector:

		Nine Months Ended September 30,
		2005						2004
					Percentage of						Percentage of
					Average						Average
					Servicing						Servicing
		Amount			Portfolio(1)			Amount			Portfolio(1)
					(Dollar amounts in thousands)
Servicing fees, net of guarantee fees		$	2,307,775			0.333	%	$	1,722,152			0.327	%
Miscellaneous fees			367,250			0.053	%		409,834			0.078	%
Income from other retained interests			333,296			0.048	%		279,972			0.053	%
Escrow balance income (expense)			226,999			0.033	%		(95,084	)		(0.018	)%
Amortization of mortgage servicing rights			(1,607,911	)		(0.232	)%		(1,377,728	)		(0.262	)%
Impairment of retained interests			(211,333	)		(0.031	)%		(612,132	)		(0.116	)%
Servicing hedge (losses) gains			(242,375	)		(0.034	)%		114,312			0.022	%
	Total servicing revenues		1,173,701			0.170	%		441,326			0.084	%
Operating expenses			494,056			0.071	%		334,454			0.064	%
Allocated corporate expenses			46,686			0.007	%		56,678			0.011	%
	Total servicing expenses		540,742			0.078	%		391,132			0.075	%
Interest expense			269,001			0.039	%		205,887			0.039	%
Pre-tax earnings (loss)		$	363,958			0.053	%	$	(155,693	)		(0.030	)%
Average servicing portfolio		$	922,747,000					$	701,309,000

(1)  Annualized

      Our servicing portfolio grew to $1,047.6 billion at September 30, 2005, a 33% increase from September 30, 2004. At the same time, the overall weighted-average note rate of loans in our servicing portfolio increased to 6.0% from 5.9% at September 30, 2004.

      Pre-tax earnings in the Loan Servicing Sector were $364.0 million during the nine months ended September 30, 2005, an improvement of $519.7 million from the year-ago period. Pre-tax earnings in the Loan Servicing Sector increased primarily due to a $585.6 million increase in the net servicing fees, which was caused by a 32% increase in the average servicing portfolio. In addition, escrow balance benefit increased by $322.1 million due to an increase in short-term interest rates. Partially offsetting these increases was an increase in amortization and impairment, net of Servicing Hedge, of $186.1 million to $2,061.6 million during the current period.

Loan Closing Services Sector

      The LandSafe companies produced $79.1 million in pre-tax earnings, an increase of 23% from the year-ago period. The increase in LandSafe’s pre-tax earnings was primarily due to the increase in our loan origination activity.

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Banking Segment

      The Banking Segment achieved pre-tax earnings of $745.4 million during the nine months ended September 30, 2005, as compared to $387.9 million for the year-ago period. Following is the composition of pre-tax earnings by component:

		Nine Months Ended
		September 30,
		2005			2004
		(In thousands)
Banking Operations		$	703,393		$	352,922
Countrywide Warehouse Lending (“CWL”)			65,560			51,489
Allocated corporate expenses			(23,588	)		(16,549	)
	Total Banking Segment pre-tax earnings	$	745,365		$	387,862

      The revenues and expenses of Banking Operations are summarized in the following table:

		Nine Months Ended
		September 30,
		2005			2004
		(Dollar amounts in
		thousands)
Interest income		$	2,211,265		$	850,223
Interest expense			(1,307,624	)		(405,230	)
	Net interest income		903,641			444,993
Provision for loan losses			(71,463	)		(29,438	)
	Net interest income after provision for loan losses		832,178			415,555
Non-interest income			107,806			50,509
Non-interest expense			(236,591	)		(113,142	)
	Pre-tax earnings	$	703,393		$	352,922
Efficiency ratio(1)			22	%		21	%
After-tax return on average assets			0.98			1.14	%

(1)  Non-interest expense reduced by mortgage insurance divided by the sum of net interest income plus non-interest income.

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      The increase in net interest income is primarily due to a $32.0 billion or 127% increase in average interest-earning assets, as summarized below:

				Nine Months Ended September 30,
				2005							2004
							Interest		Annualized					Interest		Annualized
				Average			Income/		Yield/		Average			Income/		Yield/
				Balance			Expense		Rate		Balance			Expense		Rate
				(Dollar amounts in thousands)
Interest-earning assets:
	Mortgage loans(1)			$	49,539,769		$	1,957,245		5.27%	$	21,183,950		$	743,501		4.68%
	Securities available for sale(2)				6,123,269			210,533		4.58%		2,910,392			87,197		3.99%
	Short-term investments				495,642			10,996		2.93%		638,066			5,357		1.10%
	Other investments				1,061,780			32,491		4.09%		505,866			14,168		3.74%
		Total interest-earning assets			57,220,460			2,211,265		5.16%		25,238,274			850,223		4.49%
	Allowance for loan losses				(65,383	)						(24,139	)
	Other assets				679,545							345,701
		Total non interest-earning assets			614,162							321,562
			Total assets	$	57,834,622						$	25,559,836
Interest-bearing liabilities:
	Money market deposits			$	2,323,968			59,808		3.44%	$	566,521			8,847		2.09%
	Savings				1,207			13		1.47%		1,761			23		1.74%
	Escrow deposits				10,835,877			237,543		2.93%		7,588,982			61,939		1.09%
	Time deposits				14,943,793			387,925		3.47%		5,454,897			125,337		3.07%
		Total interest-bearing deposits			28,104,845			685,289		3.26%		13,612,161			196,146		1.92%
	FHLB advances				20,976,798			529,183		3.33%		9,099,735			204,220		2.95%
	Other borrowed funds				3,951,381			93,152		3.11%		571,845			4,864		1.12%
		Total borrowed funds			24,928,179			622,335		3.29%		9,671,580			209,084		2.84%
		Total interest-bearing liabilities			53,033,024			1,307,624		3.28%		23,283,741			405,230		2.31%
		Non interest-bearing liabilities and equity
	Non interest-bearing checking				340,283							106,994
	Other liabilities				834,149							241,859
	Shareholders’ equity				3,627,166							1,927,242
		Total non interest-bearing liabilities and equity			4,801,598							2,276,095
		Total liabilities and shareholders’ equity		$	57,834,622						$	25,559,836
Net interest income							$	903,641						$	444,993
Net interest spread(3)										1.88%							2.18%
Net interest margin(4)										2.11%							2.36%

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(1)	Average balances include nonaccrual loans.
(2)	Average balances and yields for securities available for sale are based on average amortized cost computed on the settlement date basis.
(3)	Calculated as yield on total average interest-earning assets less rate on total average interest-bearing liabilities.
(4)	Calculated as net interest income divided by total average interest-earning assets.

      The provision for loan losses increased during the nine months ended September 30, 2005 compared to the nine months ended September 30, 2004 due to the increase in mortgage loans held for investment along with the continued seasoning of the loans we have added during the past years. We expect our provision for loan losses and the related allowance for loan losses to increase as a percentage of our portfolio of loans held for investment as our portfolio continues to season. The impact of the increase in the allowance for loan losses will be partially mitigated by the addition of new loans to our portfolio.

      The Banking Segment also includes the operation of CWL. CWL’s pre-tax earnings increased by $14.1 million during the nine months ended September 30, 2005 in comparison to the year-ago period, primarily due to a 61% increase in average mortgage warehouse advances, which resulted primarily from an overall increase in activity with Mortgage Banking Segment customers.

Capital Markets Segment

      Our Capital Markets Segment achieved pre-tax earnings of $318.9 million for the nine months ended September 30, 2005, a decrease of $14.0 million, or 4%, from the year-ago period. Total revenues were $561.0 million, an increase of $9.0 million, or 2%, compared to the year-ago period. During the nine months ended September 30, 2005, market conditions caused by rising short-term interest rates and a flattening of the yield curve have resulted in lower revenue from conduit and securities trading operations. Partially offsetting this decline, Capital Markets began to realize revenue from its commercial real estate finance activities. The Capital Markets Segment has expanded its capacity to invest in the development of new lines of business such as commercial real estate finance and broker-dealer operations in Japan, which largely contributed to an increase in expenses of $23.0 million, or 11%, compared to the year-ago period.

      The following table shows revenues, expenses and pre-tax earnings of the Capital Markets Segment:

			Nine Months Ended
			September 30,
			2005		2004
			(In thousands)
Revenues:
	Conduit		$	221,442	$	225,896
	Underwriting			190,633		224,272
	Securities trading			67,360		89,554
	Commercial real estate			44,585		345
	Brokering			21,857		13,346
	Other			15,109		(1,473	)
		Total revenues		560,986		551,940
Expenses:
	Operating expenses			231,282		211,522
	Allocated corporate expenses			10,764		7,501
		Total expenses		242,046		219,023
Pre-tax earnings			$	318,940	$	332,917

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      During the nine months ended September 30, 2005, the Capital Markets Segment generated revenues totaling $221.4 million from its conduit activities, which includes managing the acquisition and sale or securitization of whole loans on behalf of CHL. Conduit revenues for the nine months ended September 30, 2005 decreased 2% in comparison to the year-ago period, primarily because of a decrease in margins, driven by flattening of yield curve and increased competition.

      Underwriting revenues decreased $33.6 million over the year-ago period because of decreased underwriting of CHL securitizations by Capital Markets and a decrease in margins.

      Securities trading revenues declined 25% due to a decline in conforming mortgage securities trading margins and volume. Trading volumes declined 4% from the year-ago period excluding U.S. Treasury securities. Including U.S. Treasury securities, the total securities volume traded increased 14% over the year-ago period.

      During the nine months ended September 30, 2005, the commercial real estate finance activities of the Capital Markets Segment generated revenues totaling $44.6 million primarily from sales of commercial real estate loans. Our commercial real estate finance activities were in their startup period during the first nine months of 2004.

      The following table shows the composition of CSC securities trading volume, which includes intersegment trades with the mortgage banking operations, by instrument:

		Nine Months Ended
		September 30,
		2005		2004
		(In millions)
Mortgage-backed securities		$	1,403,555	$	1,449,809
Asset-backed securities			113,044		138,092
Other			66,598		62,191
	Subtotal(1)		1,583,197		1,650,092
U.S. Treasury securities			1,104,291		716,720
	Total securities trading volume	$	2,687,488	$	2,366,812

(1)  Approximately 16% and 15% of the segment’s non-U.S. Treasury securities trading volume was with CHL during the nine months ended September 30, 2005 and 2004, respectively.

Insurance Segment

      The Insurance Segment’s pre-tax earnings decreased 38% over the year-ago period, to $80.2 million. The following table shows pre-tax earnings by business line:

		Nine Months Ended
		September 30,
		2005			2004
		(In thousands)
Balboa Reinsurance Company		$	120,447		$	97,180
Balboa Life and Casualty Operations(1)			(25,546	)		51,739
Allocated corporate expenses			(14,735	)		(18,767	)
	Total Insurance Segment pre-tax earnings	$	80,166		$	130,152

(1)  Includes the Balboa Life and Casualty Group and the Countrywide Insurance Services Group.

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      The following table shows net insurance premiums earned:

		Nine Months Ended
		September 30,
		2005		2004
		(In thousands)
Balboa Reinsurance Company		$	131,526	$	115,508
Balboa Life and Casualty Operations			523,549		461,905
	Total net insurance premiums earned	$	655,075	$	577,413

      The following table shows insurance claim expenses:

		Nine Months Ended September 30,
		2005				2004
				As Percentage				As Percentage
				of Net				of Net
				Earned				Earned
		Amount		Premiums		Amount		Premiums
		(Dollar amounts in thousands)
Balboa Reinsurance Company		$	31,144		24%	$	29,584		26%
Balboa Life and Casualty Operations			317,335		61%		245,564		53%
	Total insurance claim expenses	$	348,479			$	275,148

      Our mortgage reinsurance business produced $120.4 million in pre-tax earnings, an increase of 24% over the year-ago period, driven primarily by growth of 5% in the mortgage loans included in our loan servicing portfolio that are covered by reinsurance contracts, along with a reduced provision, as a percentage of premiums earned, for insured losses due to faster-than expected prepayments of older pools of reinsured loans.

      Our Life and Casualty insurance business produced pre-tax loss of $25.5 million, a decrease of $77.3 million from the year-ago period. The decline in earnings was driven by $104.3 million in catastrophe losses, including $98.4 million relating to the hurricanes that struck the Gulf Coast states in the third quarter, in comparison to $23.2 million incurred in the year-ago period. The impact of these losses was partially offset by a $61.6 million, or 13%, increase in net earned premiums during the nine months ended September 30, 2005 in comparison to the year-ago period. The increase in net earned premiums was primarily attributable to an increase in voluntary homeowners and auto insurance and includes a reduction of $9.2 million relating to a catastrophic reinsurance reinstatement fee paid to reinsurers relating to the hurricane losses in the current period.

Global Operations Segment

      Global Operations pre-tax earnings totaled $17.5 million, a decrease of $13.7 million from the year-ago period. The decrease in earnings was due to a 40% decline in the number of new mortgage loans processed.

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Detailed Line Item Discussion of Consolidated Revenue and Expense Items

Gain on Sale of Loans and Securities

      Gain on sale of loans and securities is summarized below:

			Nine Months Ended September 30,
			2005								2004
					Gain on Sale								Gain on Sale
								As Percentage								As Percentage
			Loans Sold		Amount			of Loans Sold			Loans Sold		Amount			of Loans Sold
			(Dollar amounts in thousands)
Mortgage Banking:
	Prime Mortgage Loans		$	246,974,065	$	2,181,008			0.88	%	$	200,483,749	$	1,883,934			0.94	%
	Nonprime Mortgage Loans			31,523,425		742,391			2.36	%		21,771,622		793,117			3.64	%
	Prime Home Equity Loans			17,233,196		501,137			2.91	%		18,737,801		556,451			2.97	%
		Production Sector		295,730,686		3,424,536			1.16	%		240,993,172		3,233,502			1.34	%
	Reperforming loans			1,001,989		29,475			2.94	%		2,395,139		116,019			4.84	%
			$	296,732,675		3,454,011					$	243,388,311		3,349,521
Capital Markets:
	Conduit activities(1)		$	42,134,334		184,750			0.44	%	$	32,911,505		197,614			0.60	%
	Underwriting			N/A		157,490			N/A			N/A		174,782			N/A
	Commercial real estate		$	1,568,656		42,800			2.73	%		N/A		77			N/A
	Securities trading and other			N/A		(64,472	)		N/A			N/A		(187,139	)		N/A
						320,568								185,334
Other				N/A		17,573			N/A			N/A		24,896			N/A
					$	3,792,152							$	3,559,751

(1)  Includes intercompany sales

      Gain on sale of Prime Mortgage Loans increased in the nine months ended September 30, 2005 as compared to the nine months ended September 30, 2004 due primarily to an increase in the volume of loans sold partially offset by lower margins resulting from increased pricing competition.

      Gain on sale of Nonprime Mortgage Loans decreased in the nine months ended September 30, 2005 as compared to the nine months ended September 30, 2004 due primarily to lower margins resulting from increased pricing competition, partially offset by increased sales of Nonprime Mortgage Loans.

      Gain on sale of Prime Home Equity Loans decreased in the nine months ended September 30, 2005 as compared to the nine months ended September 30, 2004 due primarily to a decrease in the volume of loans sold.

      Gain on sale of Reperforming Loans decreased in the nine months ended September 30, 2005 as compared to the nine months ended September 30, 2004 due primarily to a decrease in the volume of loans sold combined with lower margins.

      A change in Ginnie Mae rules related to the repurchase of defaulted loans from Ginnie Mae securities has reduced the amount of loans available for repurchase, which has contributed to a lower gain on sale related to these items.

      The decrease in Capital Markets’ gain on sale related to its conduit activities was due to a decline in margins partially offset by increased sales of mortgage loans. Capital Markets’ revenues from its securities

66

trading activities consist of gain on sale and interest income. In a steep yield curve environment, net interest income will comprise a larger percentage of total securities trading revenue. As the yield curve flattens, the mix of revenues will naturally shift toward gain on sale of securities. During the nine months ended September 30, 2005 the yield curve was flatter than in the year-ago period, which resulted in a shift in trading revenues from interest income to gain on sale. The decrease in loss on sale of the trading securities was more than offset by a decline in net interest income due to the overall decline in trading margins.

Net Interest Income

      Net interest income is summarized below:

			Nine Months Ended
			September 30,
			2005			2004
			(In thousands)
Net interest income (expense):
	Banking Segment loans and securities		$	941,312		$	481,468
	Mortgage Banking Segment loans and securities			472,716			1,026,760
	Loan Servicing Sector interest expense			(292,309	)		(254,561	)
	Interest income (expense) on custodial balances			226,999			(95,084	)
	Reperforming loans			62,700			78,997
	Capital Markets Segment securities portfolio			190,116			312,206
	Other			51,964			34,194
		Net interest income		1,653,498			1,583,980
	Provision for loan losses related to loans held for investment			(91,557	)		(48,888	)
		Net interest income after provision for loan losses	$	1,561,941		$	1,535,092

      The increase in net interest income from the Banking Segment was primarily attributable to growth in the average investment in mortgage loans in the Bank and CWL. Average assets in the Banking Segment increased to $63.0 billion during the nine months ended September 30, 2005, an increase of $34.2 billion over the year-ago period. The net interest margin decreased to 2.05% during the nine months ended September 30, 2005 from 2.29% during the year-ago period.

      The decrease in net interest income from Mortgage Banking loans and securities reflects primarily a flattening of the yield curve during the nine months ended September 30, 2005 as compared to the year-ago period. The Mortgage Banking Segment loan and securities inventory is primarily financed with borrowings tied to short-term indices. Short-term interest rates rose while long-term mortgage interest rates declined slightly between the year-ago period and the nine months ended September 30, 2005, reducing the net interest income relating to outstanding balances. The decline in net interest margin was not offset by an increase in gain on sale due to price competition.

      Interest expense allocated to the Loan Servicing Sector increased primarily due to an increase in total Servicing Sector assets combined with an increase in cost of funds.

      Net interest income from custodial balances increased in the current period due to an increase in the earnings rate on the custodial balances from 0.98% during the nine months ended September 30, 2004 to 2.97% during the nine months ended September 30, 2005, resulting from an increase in short-term interest rates and to an increase in average custodial balances of $4.3 billion or 25% over the year-ago period. We are required to pass through monthly interest to security holders on paid-off loans at the underlying security rates, which were substantially higher than the short-term rates earned by us on the payoff float. The amount of such interest passed through to the security holders was $248.3 million and $220.2 million in the nine months ended September 30, 2005 and 2004, respectively.

67

      The decrease in interest income related to reperforming loans is a result of a decrease in the average balance of such loans held.

      The decrease in net interest income from the Capital Markets securities portfolio is attributable to a decrease in the net interest margin from 1.00% in the nine months ended September 30, 2004 to 0.50% in the nine months ended September 30, 2005, partially offset by an increase of 23% in the average inventory of securities held. The decrease in net interest margin on the securities portfolio is primarily due to a larger increase in short-term financing rates versus the increase in rates in the longer-term securities held by the Capital Markets Segment. The decline in net interest income was partially offset by an increase in gain on sale of securities.

Loan Servicing Fees and Other Income from Retained Interests

      Loan servicing fees and other income from retained interests are summarized below:

		Nine Months Ended
		September 30,
		2005		2004
		(In thousands)
Servicing fees, net of guarantee fees		$	2,307,775	$	1,722,152
Income from other retained interests			333,296		279,972
Late charges			174,302		130,948
Prepayment penalties			142,032		119,281
Global Operations Segment subservicing fees			82,385		79,209
Ancillary fees			55,250		40,791
	Total loan servicing fees and other income from retained interests	$	3,095,040	$	2,372,353

      The increase in servicing fees, net of guarantee fees, was principally due to a 32% increase in the average servicing portfolio, plus an increase in the overall annualized net service fee earned from 0.327% of the average portfolio balance during the nine months ended September 30, 2004 to 0.333% during the nine months ended September 30, 2005.

      The increase in income from other retained interests was due primarily to a 19% increase in the average investment in these assets.

Amortization of Mortgage Servicing Rights

      We recorded amortization of MSRs of $1,607.9 million, or an annual rate of 20.5%, during the nine months ended September 30, 2005 as compared to $1,377.7 million, or an annual rate of 21.4%, during the nine months ended September 30, 2004. The amortization rate of MSRs is dependent on the forecasted prepayment speeds at the beginning of each quarter during the period. On average mortgage rates at the beginning of the quarterly periods during the current period were lower than the year-ago period, however the average of the portfolio note rates was lower over the same period and as a result, the average forecasted prepayment speeds were lower in the current period. This resulted in a lower amortization rate for the nine months ended September 30, 2005 than in the year-ago period. Dollar amortization was higher primarily due to the higher MSR asset balance during the period.

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(Impairment) Recovery of Retained Interests and Servicing Hedge (Losses) Gains

      (Impairment) recovery of retained interests and Servicing Hedge (losses) gains are detailed below:

				Nine Months Ended
				September 30,
				2005			2004
				(In thousands)
(Impairment) recovery of retained interests:
	MSRs:
		Recovery (impairment)		$	332,113		$	(340,455	)
		Reduction of MSR cost basis through application of hedge accounting:
			Change in fair value attributable to hedged risk		(245,655	)		—
		Total recovery (impairment) of MSRs			86,458			(340,455	)
	Other retained interests				(296,396	)		(271,677	)
				$	(209,938	)	$	(612,132	)
Servicing Hedge (losses) gains recorded in earnings				$	(242,375	)	$	114,312

      Total recovery of MSRs during the nine months ended September 30, 2005 resulted from an increase in the estimated fair value of MSRs resulting primarily from the increase in mortgage interest rates during the period. MSR impairment in the nine months ended September 30, 2004 resulted generally from a decrease in their estimated fair value driven by a slight decrease in mortgage rates during the period. In the nine months ended September 30, 2005 and 2004, we recognized impairment of other retained interests, primarily as a result of a decline in the value of such securities. The collateral underlying certain of these residuals is fixed-rate while the pass-through rate is floating. An increase in projected short-term interest rates during both periods caused compression of the spread on such residuals, which resulted in a decline in their value.

      Long-term Treasury and swap interest rates increased during the nine months ended September 30, 2005. The increase resulted in a Servicing Hedge loss of $242.4 million. During the nine months ended September 30, 2004, the Servicing Hedge generated a gain of $114.3 million. This gain resulted from a decrease in long-term Treasury and swap rates during the nine months ended September 30, 2004.

Net Insurance Premiums Earned

      The increase in net insurance premiums earned of $77.7 million is due to an increase in premiums earned on the voluntary homeowners and auto lines of business and in reinsurance premiums earned.

Commissions and Other Revenue

      Commissions and other revenue consisted of the following:

		Nine Months Ended
		September 30,
		2005		2004
		(In thousands)
Appraisal fees, net		$	78,857	$	53,975
Credit report fees, net			59,441		53,904
Global Operations Segment processing fees			46,915		59,717
Title services			34,676		34,203
Insurance agency commissions			19,995		46,932
Increase in cash surrender value of life insurance			5,897		13,970
Other			134,681		117,705
	Total commissions and other revenue	$	380,462	$	380,406

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Compensation Expenses

      Average workforce by segment is summarized below:

		Nine Months Ended
		September 30,
		2005		2004
Mortgage Banking			35,839		28,803
Banking			1,708		952
Capital Markets			608		520
Insurance			1,994		1,816
Global Operations			2,511		2,066
Corporate Administration			4,264		3,605
	Average workforce, including temporary staff		46,924		37,762

      Compensation expenses are summarized below:

		Nine Months Ended
		September 30,
		2005			2004
		(In thousands)
Base salaries		$	1,442,419		$	1,172,582
Incentive bonus and commissions			1,427,527			1,193,222
Payroll taxes and benefits			461,222			347,317
Deferral of loan origination costs			(705,932	)		(411,983	)
	Total compensation expenses	$	2,625,236		$	2,301,138

      Compensation expenses increased $324.1 million, or 14%, during the nine months ended September 30, 2005 as compared to the year-ago period. In the Loan Production Sector, compensation expenses, increased $405.4 million, or 23%, prior to the deferral of loan origination costs, because of a 27% increase in average staff.

      In the Loan Servicing Sector, compensation expense rose $44.1 million, or 22%, to accommodate a 22% increase in the number of loans serviced. Compensation expenses increased in most other business segments and corporate areas, reflecting growth in the Company.

Occupancy and Other Office Expenses

      Occupancy and other office expenses are summarized below:

		Nine Months Ended
		September 30,
		2005		2004
		(In thousands)
Depreciation expense		$	136,818	$	80,925
Office and equipment rentals			133,956		108,213
Utilities			109,150		90,403
Postage and courier service			74,125		65,844
Office supplies			54,682		42,674
Dues and subscriptions			38,823		32,053
Repairs and maintenance			35,630		32,650
Other			58,872		1,719
	Total occupancy and other office expenses	$	642,056	$	454,481

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      Occupancy and other office expenses for the nine months ended September 30, 2005 increased by $187.6 million primarily to accommodate a 24% increase in the average workforce.

Insurance Claim Expenses

      Insurance claim expenses were $348.5 million for the nine months ended September 30, 2005 as compared to $275.1 million for the year-ago period. The increase in insurance claim expenses was due mainly to growth in our insured risk and an $81.1 million increase in hurricane losses over the year-ago period, partially offset by a decrease in the non-catastrophe related loss ratio experienced on lender-placed property and voluntary homeowners lines of business.

Advertising and Promotion Expenses

      Advertising and promotion expenses increased 36% from the nine months ended September 30, 2004, as a result of a shift in the mortgage loan production market towards purchase activity.

Other Operating Expenses

      Other operating expenses are summarized below:

		Nine Months Ended
		September 30,
		2005			2004
		(In thousands)
Insurance commission expense		$	114,942		$	92,652
Legal, consulting, accounting and auditing fees			91,374			75,969
Losses on servicing-related advances			78,620			39,524
Travel and entertainment			78,453			58,817
Software amortization and impairment			48,087			29,948
Insurance			39,755			38,362
Taxes and licenses			33,685			27,168
Other			132,849			131,672
Deferral of loan origination costs			(109,852	)		(51,129	)
	Total other operating expenses	$	507,913		$	442,983

      Losses on servicing-related advances consist primarily of losses arising from unreimbursed servicing advances on defaulted loans and credit losses arising from defaulted VA-guaranteed loans. (See the “Credit Risk Management” section of this Report for a further discussion of credit risk.) The increase in losses on servicing-related advances is primarily due to recognition of a provision for losses on guaranteed loans of $26.4 million as a result of Hurricane Katrina.

Quantitative and Qualitative Disclosures About Market Risk

      The primary market risk we face is interest rate risk. Interest rate risk includes the risk that the value of our assets and liabilities will change due to changes in interest rates. Interest rate risk also includes the risk that the net interest income from our mortgage loan and investment portfolios will change in response to changes in interest rates. From an enterprise perspective, we manage interest rate risk through the natural counterbalance of our loan production and servicing businesses. We also use various financial instruments, including derivatives, to manage the interest rate risk related specifically to the values of our interest rate lock commitments, Mortgage Loan Inventory and MBS held for sale, MSRs and other retained interests and trading securities, as well as a portion of our debt. The overall objective of our interest rate risk management activities is to reduce the variability of earnings caused by changes in interest rates.

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Impact of Changes in Interest Rates on the Net Value of the Company’s Interest Rate-Sensitive Financial Instruments

      We perform various sensitivity analyses that quantify the net financial impact of changes in interest rates on our interest rate-sensitive assets, liabilities and commitments. These analyses incorporate assumed changes in the interest rate environment, including selected hypothetical, instantaneous parallel shifts in the yield curve.

      We employ various commonly used modeling techniques to value our financial instruments in connection with these sensitivity analyses. For mortgage loans, MBS, MBS forward contracts, collateralized mortgage obligations and MSRs, option-adjusted spread (“OAS”) models are used. The primary assumptions used in these models for purpose of these sensitivity analyses are the implied market volatility of interest rates and prepayment speeds. For options and interest rate floors, an option-pricing model is used. The primary assumption used in this model is implied market volatility of interest rates. Other retained interests are valued using zero volatility discounted cash flow models. The primary assumptions used in these models are prepayment rates, discount rates and credit losses. All relevant cash flows associated with the financial instruments are incorporated in the various models.

      The following table summarizes the estimated change in fair value of our interest rate-sensitive assets, liabilities and commitments as of September 30, 2005, given several hypothetical, instantaneous, parallel shifts in the yield curve:

				Change in Fair Value
Change in Interest Rate (Basis Points)				-100			-50			+50			+100
				(In millions)
MSRs and other financial instruments:
	MSR and other retained interests			$	(2,721	)	$	(1,282	)	$	1,017		$	1,726
	Impact of Servicing Hedge:
		Mortgage-based			337			168			(168	)		(335	)
		Swap-based			1,940			784			(388	)		(532	)
		Treasury-based			84			19			—			—
			MSRs and other retained interests, net		(360	)		(311	)		461			859
	Committed Pipeline				368			256			(388	)		(853	)
	Mortgage Loan Inventory				1,212			740			(935	)		(1,986	)
	Impact of associated derivative instruments:
		Mortgage-based			(1,608	)		(982	)		1,291			2,773
		Treasury-based			209			41			45			118
		Eurodollar-based			(130	)		(78	)		102			214
			Committed Pipeline and Mortgage Loan Inventory, net		51			(23	)		115			266
	Countrywide Bank:
		Securities portfolio			89			58			(86	)		(190	)
		Mortgage loans			570			311			(380	)		(757	)
		Deposit liabilities			(261	)		(134	)		137			275
		Federal Home Loan Bank Advances			(288	)		(142	)		168			301
			Countrywide Bank, net		110			93			(161	)		(371	)

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				Change in Fair Value
Change in Interest Rate (Basis Points)				-100			-50			+50			+100
				(In millions)
	Notes payable and capital securities				(800	)		(398	)		392			761
	Impact of associated derivative instruments:
		Swap-based			93			46			(45	)		(88	)
			Notes payable and capital securities, net		(707	)		(352	)		347			673
	Insurance company investment portfolios				51			27			(28	)		(55	)
Net change in fair value related to MSRs and other financial instruments				$	(855	)	$	(566	)	$	734		$	1,372
Net change in fair value related to broker-dealer trading securities				$	(19	)	$	(7	)	$	(1	)	$	(10	)

      The following table summarizes the estimated change in fair value of the Company’s interest rate-sensitive assets, liabilities and commitments as of December 31, 2004, given several hypothetical (instantaneous) parallel shifts in the yield curve:

	Change in Fair Value
Change in Interest Rate (Basis Points)	-100			-50			+50			+100
	(In millions)
Net change in fair value related to MSRs and other financial Instruments	$	(285	)	$	(492	)	$	787		$	1,765
Net change in fair value related to broker-dealer trading securities	$	(11	)	$	(3	)	$	(8	)	$	(24	)

      These sensitivity analyses are limited in that they were performed at a particular point in time; only contemplate certain movements in interest rates; do not incorporate changes in interest rate volatility or changes in the relationship of one interest rate index to another; are subject to the accuracy of various assumptions used, including prepayment forecasts and discount rates; and do not incorporate other factors that would impact the Company’s overall financial performance in such scenarios, most significantly the impact of changes in loan production earnings that result from changes in interest rates. In addition, not all of the changes in fair value would affect current period earnings. For example, MSRs are carried by impairment stratum at the lower of amortized cost or market value. Consequently, absent hedge accounting, any increase in the value of a particular MSR stratum above its amortized cost basis would not be reflected in current-period earnings. The total impairment valuation allowance was $689.4 million as of September 30, 2005. On April 1, 2005, we implemented hedge accounting in accordance with SFAS 133 for a portion of our interest rate risk management activities related to our MSRs. In addition, our debt is carried at its unpaid principal balance net of issuance discount or premium; therefore, absent hedge accounting, changes in the market value of our debt are not recorded in current-period earnings. For these reasons, the preceding estimates should not be viewed as an earnings forecast.

Foreign Currency Risk

      In order to diversify our funding sources globally, we occasionally issue medium-term notes denominated in a foreign currency. We manage the foreign currency risk associated with these medium-term notes through cross-currency swap transactions. The terms of the cross-currency swaps effectively convert all foreign currency-denominated medium-term notes into U.S. dollar obligations, thereby eliminating the associated foreign currency risk. As a result, potential changes in the exchange rates of foreign currencies denominating such medium-term notes would not have a net financial impact on future earnings, fair values or cash flows.

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Credit Risk

Securitization

      We have historically sold most of our mortgage loans shortly after production, generally through securitizations. When we securitize our mortgage loans, we retain limited credit risk. As described in our 2004 Annual Report, the degree to which credit risk on the underlying loans is transferred through the securitization process depends on the structure of the securitization. Our Prime Mortgage Loans generally are securitized on a non-recourse basis, while Prime Home Equity Loans and Nonprime Mortgage Loans generally are securitized with limited recourse for credit losses.

      Our exposure to credit losses related to our limited recourse securitization activities is limited to the carrying value of our subordinated interests and to the contractual limit of reimbursable losses under our corporate guarantees less the recorded liability for such guarantees. These amounts at September 30, 2005 are as follows:

		September 30,
		2005
		(In thousands)
Subordinated Interests:
	Prime home equity residual securities	$	866,784
	Nonprime residual securities		549,845
	Prime home equity transferor’s interests		455,989
	Nonconforming residual securities		15,180
	Subordinated mortgage-backed pass-through securities		2,213
		$	1,890,011
Corporate guarantees in excess of recorded liability		$	339,711

      The carrying value of the residual securities is net of expected future credit losses. The total credit losses incurred for the periods indicated related to all of our mortgage securitization activities are summarized as follows:

	Nine Months Ended
	September 30,
	2005		2004
	(In thousands)
Nonprime securitizations with retained residual interest	$	46,992	$	43,990
Repurchased or indemnified loans		25,505		31,430
Prime home equity securitizations with retained residual interest		22,082		20,035
Prime home equity securitizations with corporate guarantee		9,219		6,088
Nonprime securitizations with corporate guarantee		8,611		15,777
VA losses in excess of VA guarantee		1,541		1,195
	$	113,950	$	118,515

Portfolio Lending Activities

      We have a portfolio of mortgage loans held for investment, consisting primarily of Prime Mortgage and Prime Home Equity Loans, which totaled $62.2 billion at September 30, 2005. This portfolio is held primarily in our Bank. Many Prime Home Equity Loans held in the Bank with combined loan-to-value ratios equal to or above 90% are covered by a pool insurance policy that provides partial protection against credit losses. Otherwise, we generally retain full credit exposure on these loans.

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      We also provide short-term secured mortgage-loan warehouse advances to various lending institutions, which totaled $4.5 billion at September 30, 2005. We incurred no credit losses related to this activity in the nine months ended September 30, 2005.

      Nonaccrual loans and foreclosed assets at period end are summarized as follows:

				September 30,
				2005
				(In thousands)
Nonaccrual loans(1):
	Mortgage loans:
		Nonprime		$	347,724
		Prime			274,564
		Prime home equity			52,901
			Subtotal		675,189
	Warehouse lending advances				—
	Defaulted FHA-insured and VA-guaranteed mortgage loans repurchased from securities				577,912
		Total nonaccrual loans			1,253,101
	Foreclosed assets				69,834
		Total nonaccrual loans and foreclosed assets		$	1,322,935
Nonaccrual loans as a percentage of loans held for investment:
	Total				1.8	%
	Excluding loans FHA-insured and VA-guaranteed loans				1.0	%
Allowance for loan losses				$	184,784
Allowance for loan losses as a percentage of nonaccrual loans:
	Total				14.7	%
	Excluding loans FHA-insured and VA-guaranteed loans				27.4	%
Allowance for loan losses as a percentage of loans held for investment					0.3	%

(1)  This amount excludes $282.7 million of government-insured loans eligible for repurchase from Ginnie Mae securities issued by us due to the loans’ severe delinquency. Our servicing agreement with Ginnie Mae allows us to repurchase loans that are delinquent more than 90 days instead of continuing to advance the delinquent interest to the security holders. This amount is included in loans held for investment as Countrywide has the option of repurchasing the loans from the securities and is required to include such loans on its balance sheets. However, we do not include these loans in our nonaccrual balances because we have not exercised the option to repurchase the loans.

      The allowance for loan losses increased by 48% from $125.0 million at December 31, 2004, to $184.8 million at September 30, 2005, primarily due to growth in loans held for investment at Countrywide Bank. We expect our allowance for loan losses and the related provision for loan losses to increase as a percentage of our portfolio of loans held for investment as our portfolio of loans held for investment continues to season. As our portfolio continues to grow, the impact of seasoning on the allowance as a percentage of loans held for investment will be partially offset by new loans.

Mortgage Reinsurance

      We provide mortgage reinsurance on mortgage loans included in our servicing portfolio through contracts with several primary mortgage insurance companies. Under these contracts, we absorb mortgage insurance losses in excess of a specified percentage of the principal balance of a given pool of loans, subject to a cap, in

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exchange for a portion of the pools’ mortgage insurance premium. As of September 30, 2005, approximately $74.2 billion of mortgage loans in our servicing portfolio are covered by such mortgage reinsurance contracts. The reinsurance contracts place limits on our maximum exposure to losses. At September 30, 2005, the maximum aggregate losses under the reinsurance contracts were $526.3 million. We are required to pledge securities to cover this potential liability. For the nine months ended September 30, 2005, we did not experience any losses under our reinsurance contracts.

Mortgage Loans Held for Sale

      At September 30, 2005, mortgage loans held for sale amounted to $35.2 billion. While the loans are in inventory, we bear credit risk after taking into consideration primary mortgage insurance (which is generally required for conventional loans with a loan-to-value ratio greater than 80%), FHA insurance or VA guarantees. Historically, credit losses related to loans held for sale have not been significant due to the short period of time that loans are held prior to sale.

Counterparty Credit Risk

      We have exposure to credit loss in the event of contractual non-performance by our trading counterparties and counterparties to our various over-the-counter derivative financial instruments. We manage this credit risk by selecting only well-established, financially strong counterparties, spreading the credit risk among many such counterparties and by placing contractual limits on the amount of unsecured credit extended to any single counterparty.

      The aggregate amount of counterparty credit exposure after consideration of relevant netting agreements at September 30, 2005, before and after collateral held by us, was as follows:

		September 30,
		2005
		(In millions)
Aggregate credit exposure before collateral held		$	967
Less: collateral held			(611	)
	Net aggregate unsecured credit exposure	$	356

      For the nine months ended September 30, 2005, we incurred no credit losses due to non-performance of any of our counterparties.

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Loan Servicing

      The following table sets forth certain information regarding our servicing portfolio of single-family mortgage loans, including loans and securities held for sale, loans held for investment and loans serviced under subservicing agreements, for the periods indicated.

			Nine Months Ended
			September 30,
			2005			2004
			(In millions)
Beginning owned servicing portfolio			$	821,475		$	630,451
Add: Loan production				357,817			267,691
		Purchased MSRs		43,232			25,709
Less: Runoff(1)				(202,457	)		(155,720	)
Ending owned servicing portfolio				1,020,067			768,131
Subservicing portfolio				27,556			17,861
	Total servicing portfolio		$	1,047,623		$	785,992
MSR portfolio			$	922,344		$	708,124
Mortgage loans owned				97,723			60,007
Subservicing portfolio				27,556			17,861
	Total servicing portfolio		$	1,047,623		$	785,992

			September 30,
			2005			2004
			(Dollar amounts in
			millions)
Composition of owned servicing portfolio at period end:
	Conventional mortgage		$	798,344		$	605,849
	Nonprime Mortgage			117,666			68,774
	Prime Home Equity			53,728			39,412
	FHA-insured mortgage			37,409			40,815
	VA-guaranteed mortgage			12,920			13,281
		Total owned servicing portfolio	$	1,020,067		$	768,131
Delinquent mortgage loans(2):
	30 days			2.51	%		2.29	%
	60 days			0.71	%		0.67	%
	90 days or more			0.81	%		0.77	%
		Total delinquent mortgage loans		4.03	%		3.73	%
Loans pending foreclosure(2)				0.42	%		0.35	%
Delinquent mortgage loans(2):
	Conventional			2.28	%		2.22	%
	Government			13.13	%		12.84	%
	Nonprime Mortgage			12.37	%		11.06	%
	Prime Home Equity			1.19	%		0.71	%
		Total delinquent mortgage loans		4.03	%		3.73	%
Loans pending foreclosure(2):
	Conventional			0.21	%		0.16	%
	Government			1.07	%		1.12	%
	Nonprime Mortgage			1.70	%		1.59	%
	Prime Home Equity			0.06	%		0.03	%
		Total loans pending foreclosure		0.42	%		0.35	%

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(1)	Runoff refers to scheduled principal repayments on loans and unscheduled prepayments (partial prepayments or total prepayments due to refinancing, modification, sale, condemnation or foreclosure).
(2)	Expressed as a percentage of the total number of loans serviced, excluding subserviced loans and loans purchased at a discount due to their non-performing status.

      We attribute the overall increase in delinquencies in our servicing portfolio primarily to the relative overall increase in the number of loans in the nonprime portfolios, as well as an increase in average age of these portfolios, which carry higher delinquency rates than the conventional and Prime Home Equity portfolios. In addition, delinquencies were negatively impacted by the effects of Hurricane Katrina. We believe the delinquency rates in our servicing portfolio are consistent with industry experience for similar mortgage loan portfolios.

Liquidity and Capital Resources

      We regularly forecast our potential funding needs over three-month and longer horizons, taking into account debt maturities and potential peak balance sheet levels. We establish available reliable sources of liquidity sized to meet potential future funding requirements. We currently have $87.0 billion in available sources of short-term liquidity, which represents an increase of $13.8 billion from December 31, 2004. We believe we have adequate financing to meet our current needs.

      As part of our strategic capital management and as a cost effective means for financing growth, the Company issued $500 million in callable floating-rate subordinated notes during the third quarter. These subordinated notes are eligible for Tier 2 regulatory capital treatment and represent an efficient and non-dilutive means for supporting the Company’s capital management efforts. Other capital raising alternatives under consideration to address future needs include various high equity content securities that would not be dilutive.

      At September 30, 2005 and at December 31, 2004, CFC’s regulatory capital ratios were as follows:

				September 30, 2005				December 31, 2004
		Minimum
		Required(1)		Ratio		Amount		Ratio		Amount
		(Dollar amounts in thousands)
Tier 1 Leverage Capital			5.0%		6.4%	$	11,982,092		7.9%	$	10,332,383
Risk-Based Capital:
	Tier 1		6.0%		10.0%	$	11,982,092		11.1%	$	10,332,383
	Total		10.0%		11.0%	$	13,153,213		11.7%	$	10,928,223

(1)  Minimum required to qualify as “well capitalized.”

Cash Flow

      Cash flow used by operating activities was $9.5 billion for the nine months ended September 30, 2005, compared to $0.7 billion for the nine months ended September 30, 2004. The increase in net cash flow used by operations for the nine months ended September 30, 2005 compared to the nine months ended September 30, 2004 was primarily due to a $7.0 billion net increase in cash used to fund Mortgage Loan Inventory and a $2.3 billion net increase in cash used to settle accounts payable and accrued liabilities.

      Net cash used by investing activities was $40.8 billion for the nine months ended September 30, 2005, compared to $8.7 billion for the nine months ended September 30, 2004. The increase in net cash used in investing activities was attributable to a $16.7 billion increase in cash used to fund loans held for investment, combined with a $7.1 billion increase in cash used to fund investments in other financial instruments and a $7.0 billion increase in securities purchased under agreements to resell and securities borrowed.

      Net cash provided by financing activities for the nine months ended September 30, 2005 totaled $51.0 billion, compared to $9.4 billion for the nine months ended September 30, 2004. The increase in cash provided by financing activities was comprised of a $29.5 billion net increase in short-term borrowings, including securities sold under agreements to repurchase, an $8.4 billion net increase in bank deposit liabilities and a $3.8 billion increase in long-term debt.

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Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Off-Balance Sheet Arrangements and Guarantees

      In the ordinary course of our business, we engage in financial transactions that are not reflected on our balance sheet. (See Note 2 — “Summary of Significant Accounting Policies” in the 2004 Annual Report for a description of our consolidation policy.) Such transactions are structured to manage our interest rate, credit or liquidity risks, to diversify funding sources or to optimize our capital.

      Substantially all of our off-balance sheet arrangements relate to the securitization of mortgage loans. Our mortgage loan securitizations are normally structured as sales in accordance with SFAS 140 and as such involve the transfer of mortgage loans to qualifying special-purpose entities that are not subject to consolidation. In a securitization, an entity transferring the assets is able to convert those assets into cash. Special-purpose entities used in such securitizations obtain cash to acquire the assets by issuing securities to investors. In a securitization, we customarily provide representations and warranties with respect to the mortgage loans transferred. In addition, we generally retain the right to service the transferred mortgage loans.

      We also generally have the right to repurchase mortgage loans from the special-purpose entity if the remaining outstanding balance of the mortgage loans falls to a level where the cost of servicing the loans becomes burdensome in relation to the benefits of servicing.

      Our Prime Mortgage Loans generally are securitized on a non-recourse basis, while Prime Home Equity and Nonprime Loans generally are securitized with limited recourse for credit losses. During the nine months ended September 30, 2005, we securitized $43.3 billion in Nonprime Mortgage and Prime Home Equity Loans with limited recourse for credit losses. Our exposure to credit losses related to our limited recourse securitization activities is limited to the carrying value of our subordinated interests and to the contractual limit of reimbursable losses under our corporate guarantees less the recorded liability for such guarantees. For a further discussion of our exposure to credit risk, see the section in this Report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Credit Risk.”

      We do not believe that any of our off-balance sheet arrangements have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations

      The following table summarizes our significant contractual obligations at September 30, 2005, with the exception of short-term borrowing arrangements and pension and post-retirement benefit plans:

	Less Than						More Than
	1 Year		1-3 Years		3-5 Years		5 Years		Total
	(In thousands)
Obligations:
Notes payable	$	15,697,798	$	25,397,535	$	10,600,067	$	3,276,238	$	54,971,638
Time deposits	$	11,462,222	$	4,430,535	$	2,132,505	$	1,117,108	$	19,142,370
Operating leases	$	152,701	$	225,579	$	103,356	$	31,577	$	513,213
Purchase obligations	$	108,097	$	16,337	$	3,301	$	760	$	128,495

      As of September 30, 2005, the Company had undisbursed home equity lines of credit and construction loan commitments of $10.1 billion and $1.5 billion, respectively. As of September 30, 2005, outstanding commitments to fund mortgage loans in process totaled $49.6 billion.

      In connection with the Company’s underwriting activities, the Company had commitments to purchase and sell new issues of securities aggregating $37.0 million at September 30, 2005.

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Prospective Trends

United States Mortgage Market

      Over the last decade, total mortgage indebtedness in the United States has grown at an average annual rate of 9%. We believe that continued population growth, ongoing developments in the mortgage market and the prospect of relatively low interest rates support similar growth in the market for the foreseeable future. Some of the ongoing developments in the mortgage market that should fuel its growth include government-sponsored programs targeted to increase homeownership in low-income and minority communities, the growth of prime home equity lending as a major form of consumer finance and the increasing efficiency of the secondary mortgage market that lowers the overall cost of homeownership.

      In recent years, the level of complexity in the mortgage lending business has increased significantly due to several factors:

•  The continuing evolution of the secondary mortgage market and demand by borrowers has resulted in a proliferation of mortgage products;

•  Greater regulation imposed on the industry has resulted in increased costs and the need for higher levels of specialization; and

•  Interest rate volatility has risen over the last decade. At the same time, homeowners’ propensity to refinance their mortgages has increased as the refinance process has become more efficient and cost effective. The combined result has been large swings in the volume of mortgage loans originated from year to year. These volume swings have placed significant operational and financial pressures on mortgage lenders.

      To compete effectively in this environment, mortgage lenders must have a very high level of operational, technological and managerial expertise. In addition, the residential mortgage business has become more capital-intensive and therefore access to capital at a competitive cost is critical. Primarily because of these factors, the industry has undergone consolidation.

      According to the trade publication Inside Mortgage Finance, the top five originators produced 46% of all loans originated during the first nine months of the calendar year 2005, as compared to 45% for the nine months ended December 31, 2004. Following is a comparison of loan volume for the top five originators, according to Inside Mortgage Finance:

		Nine Months Ended		Nine Months Ended
Institution		September 30, 2005		December 31, 2004
		(In billions)
Countrywide		$	358	$	287
Wells Fargo Home Mortgage			253		234
Washington Mutual			182		195
Chase Home Finance			139		155
Bank of America Mortgage			118		114
	Total for Top Five	$	1,050	$	985

      We believe the consolidation trend will continue, as the aforementioned market forces will continue to drive out weak competitors. We believe Countrywide will benefit from this trend through increased market share.

      Compared to Countrywide, the other industry leaders are less reliant on the secondary mortgage market as an outlet for adjustable-rate mortgages, due to their greater portfolio lending capacity. This could place us at a competitive disadvantage in the future if the demand for adjustable-rate mortgages continues, the secondary mortgage market does not continue to provide a competitive outlet for these loans, or we are unable to sustain an adequate portfolio lending capacity.

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Regulatory Trends

      The regulatory environments in which we operate have an impact on the activities in which we may engage, how the activities may be carried out and the profitability of those activities. Therefore, changes to laws, regulations or regulatory policies can affect whether and to what extent we are able to operate profitably. For example, proposed state and federal legislation targeted at predatory lending could have the unintended consequence of raising the cost or otherwise reducing the availability of mortgage credit for those potential borrowers with less than prime-quality credit histories. This could result in a reduction of otherwise legitimate nonprime lending opportunities.

Recently Issued Accounting Standards

      In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (“SFAS 123R”), an amendment of FASB Statement No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation.” This Statement requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. SFAS 123R requires measurement of fair value of employee stock options using an option pricing model that takes into account the awarded options’ unique characteristics. SFAS 123R requires charging the recognized cost to expense over the period the employee provides services to earn the award, generally the vesting period for the award. The Company will adopt SFAS 123R, using the modified prospective application approach, effective January 1, 2006. We expect the charge to earnings for 2006 related to unamortized grants made before the effective date will be less than $40.0 million, net of tax. The effect of amortization of the value of any grants awarded after December 31, 2005 will increase this earnings charge.

      In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”), which replaces APB No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Changes in Interim Financial Statements. The Statement changes the accounting for, and reporting of, a change in accounting principle. SFAS 154 requires retrospective application to prior period’s financial statements of voluntary changes in accounting principle and changes required by new accounting standards when the standard does not include specific transition provisions, unless it is impracticable to do so. SFAS 154 is effective for accounting changes and corrections of errors in fiscal years beginning after December 15, 2005 and will only affect the Company’s financial statements upon adoption of a voluntary change in accounting principles by the Company.

Factors That May Affect Our Future Results

      We make forward-looking statements in this Report and in other reports we file with the SEC. In addition, we make forward-looking statements in press releases and our management may make forward-looking statements orally to analysts, investors, the media and others. Generally, forward-looking statements include:

•  Projections of our revenues, income, earnings per share, capital structure or other financial items

•  Descriptions of our plans or objectives for future operations, products or services

•  Forecasts of future economic performance, interest rates, profit margins and our share of future markets

•  Descriptions of assumptions underlying or relating to any of the foregoing

      Forward-looking statements give management’s expectation about the future and are not guarantees. Words like “believe,” “expect,” “anticipate,” “promise,” “plan” and other expressions or words of similar meanings, as well as future or conditional verbs such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. There are a number of factors, many of which are beyond our control that could cause actual results to differ significantly from management’s expectations. Some of these factors are discussed below.

81

      Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made. We do not undertake to update them to reflect changes that occur after the date they are made.

      Factors that could cause actual results to differ materially from historical results or those anticipated include, but are not limited to the following:

•  Changes in general business, economic, market and political conditions from those expected

•  Our inability to effectively implement our business strategies or manage the volatility inherent in the mortgage banking business

•  Our accounting policies and methods are fundamental to how we report our financial condition and results of operations and they may require management to make estimates about matters that are inherently uncertain

•  Competition within the financial services industry

•  Significant changes in regulations governing our business or in generally accepted accounting principles

•  Incomplete or inaccurate information provided by customers and counterparties

•  A general decline in U.S. housing prices or in activity in the U.S. housing market

•  A loss of investment-grade credit ratings, which may result in increased cost of debt or loss of access to corporate debt markets

•  A reduction in the availability of secondary markets for our mortgage loan products

•  A reduction in government support of homeownership

•  A change in our relationship with the housing-related government agencies and government sponsored enterprises

•  Changes in regulations or the occurrence of other events that impact the business, operation or prospects of government sponsored enterprises

•  Ineffectiveness of our hedging activities

•  The level and volatility of interest rates

•  Changes in interest rate paths

•  The ability of management to effectively implement the Company’s strategies

•  The level of competition in each of our business segments

•  The occurrence of natural disasters or other events or circumstances that could impact our operations or could impact the level of claims in the Insurance Segment.

      Other risk factors are described elsewhere herein as well as in other reports and documents that we file with or furnish to the SEC including the Company’s Annual Report on Form 10-K. Other factors that could also cause results to differ from our expectations may not be described in any such report or document. Each of these factors could by itself, or together with one or more other factors, adversely affect our business, results of operations and/or financial condition.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      In response to this Item, the information set forth on pages 71 to 73 of this Form 10-Q is incorporated herein by reference.

82

Item 4. Controls and Procedures

Disclosure Controls and Procedures

      We have conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report as required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act. Based on their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective in ensuring that material information relating to the Company, including our consolidated subsidiaries, is made known to the Chief Executive Officer and Chief Financial Officer by others within those entities during the period in which this quarterly report on Form 10-Q was being prepared.

Internal Control over Financial Reporting

Changes to Internal Control over Financial Reporting

      There has been no change in our internal control over financial reporting during the quarter ended September 30, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, except for the implementation of 1) a new payroll software application and 2) a new core banking system at Countrywide Bank. Management believes that these changes enhance the Company’s internal control over financial reporting.

83

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

      The following table shows Company repurchases of its common stock for each calendar month during the nine months ended September 30, 2005.

						Total Number of		Maximum Number
						Shares Purchased		of Shares That May
		Total Number of		Average		as Part of Publicly		yet be Purchased
		Shares		Price Paid		Announced Plan		Under the Plan or
Calendar Month		Purchased(1)		per Share		or Program(1)		Program(1)
January			8,960	$	36.82		n/a		n/a
February			2,395	$	32.02		n/a		n/a
March			17,098	$	32.57		n/a		n/a
April			39,363	$	33.02		n/a		n/a
May			—	$	—		n/a		n/a
June			449	$	37.17		n/a		n/a
July			1,186	$	38.14		n/a		n/a
August			1,130	$	35.13		n/a		n/a
September			—	$	—		n/a		n/a
	Total		70,581	$	33.51		n/a		n/a

(1)  The Company has no publicly announced plans or programs to repurchase its stock. The shares indicated in this table represent only the withholding of a portion of restricted shares to cover taxes on vested restricted shares.

Item 6. Exhibits

      (a) Exhibits

See Index of Exhibits on page 86

84

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.

Countrywide Financial Corporation

(Registrant)

Dated: November 8, 2005

By:  /s/ Stanford L. Kurland

Stanford L. Kurland

President and Chief Operating Officer

Dated: November 8, 2005

By:  /s/ Eric P. Sieracki

Eric P. Sieracki

Executive Managing Director and

Chief Financial Officer

85

COUNTRYWIDE FINANCIAL CORPORATION

FORM 10-Q

SEPTEMBER 30, 2005

INDEX OF EXHIBITS

Exhibit
No.			Description
	+10	.107*	Personalized Relocation Terms Document by and between Countrywide Financial Corporation (the “Company”) and Andrew Gissinger, III, dated as of January 29, 2004 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on October 3, 2005).
	10	.108	Trust Deed, between the Company, as Issuer, Countrywide Home Loans, Inc. (“CHL”), as Guarantor and Deutsche Trustee Company Limited, as Trustee, dated August 15, 2005.
	+10	.109*	Purchase Contract by and between CHL and Andrew Gissinger, III, dated as of September 27, 2005 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on October 3, 2005).
	+10	.110*	The Company 2003 Non-Employee Directors’ Fee Plan, as amended and restated on September 27, 2005 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on October 3, 2005).
	+10	.111*	Third Amendment to 2000 Equity Incentive Plan of the Company, dated September 28, 2005 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on October 3, 2005).
	+10	.112*	Amendment Number Five to the Company Global Stock Plan, dated September 28, 2005 (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on October 3, 2005).
	10	.113*	Indenture, dated September 30, 2005, between the Company and The Bank of New York, as Trustee, relating to the Floating Rate Subordinated Notes due April 11, 2011 (incorporated by reference to Exhibit 4.27 to the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2005).
	10	.114*	Form of Floating Rate Subordinated Note due April 1, 2011 of the Company (incorporated by reference to Exhibit 4.28 to the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2005)
	12	.1	Computation of the Ratio of Earnings to Fixed Charges.
	31	.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
	32	.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

*  Incorporated by reference.

+ Constitutes a management contract or compensatory plan or arrangement.

86 EX-10.108 2 v13939exv10w108.htm EX-10.108

Exhibit 10.108

Allen & Overy LLP

TRUST DEED

COUNTRYWIDE FINANCIAL CORPORATION

and

COUNTRYWIDE HOME LOANS, INC.

and

DEUTSCHE TRUSTEE COMPANY LIMITED

relating to a
U.S.$5,000,000,000
Euro Medium Term Note Programme

15 August 2005

CONTENTS

Clause		Page
1.	Definitions		1
2.	Amount and Issue of the Notes		9
3.	Forms of the Notes		11
4.	Fees, Duties and Taxes		13
5.	Covenant of Compliance		13
6.	Cancellation of Notes and Records		13
7.	Guarantee		15
8.	Non-Payment		16
9.	Proceedings, Action and Indemnification		16
10.	Application of Moneys		17
11.	Notice of Payments		17
12.	Investment by Trustee		17
13.	Partial Payments		18
14.	Covenants by the Issuer and the Guarantor		18
15.	Remuneration and Indemnification of Trustee		23
16.	Supplement to Trustee Acts		24
17.	Trustee’s Liability		29
18.	Trustee Contracting with the Issuer and the Guarantor		29
19.	Waiver, Authorisation and Determination		30
	Modification		30
	Breach		30
	Consolidation, Merger, Conveyance or Transfer		30
20.	Holder of Definitive Note assumed to be Receiptholder and Couponholder		32
21.	Currency Indemnity		32
22.	New Trustee		32
23.	Trustee’s Retirement and Removal		33
24.	Trustee’s Powers to be Additional		33
25.	Notices		34
26.	Governing Law		34
27.	Submission to Jurisdiction		34
28.	Counterparts		35
29.	Contracts (Rights of Third Parties) Act 1999		35
Schedule
1.	Terms and Conditions of the Notes		36
2.	Forms of Global and Definitive Notes, Receipt, Coupon, Talon and Certificate		62
	Part 1     Form of Temporary Global Note		62
	Part 2     Form of Permanent Global Note		70
	Part 3     Form of Definitive Note		78
	Part 4     Form of Receipt		82
	Part 5     Form of Coupon		83
	Part 6     Form of Talon		84
	Part 7     Form of Certificate to be Presented by Euroclear or Clearstream, Luxembourg		86
3.	Provisions for Meetings of Noteholders		90
Signatories			98

THIS TRUST DEED is made on 15 August 2005 BETWEEN:

(1)	COUNTRYWIDE FINANCIAL CORPORATION, a company incorporated with limited liability in the State of Delaware, whose principal office is at 4500 Park Granada, Calabasas, California 91302, United States of America the Issuer);
(2)	COUNTRYWIDE HOME LOANS, INC., a company incorporated with limited liability in the State of New York, whose principal office is at 4500 Park Granada aforesaid the Guarantor); and
(3)	DEUTSCHE TRUSTEE COMPANY LIMITED, a company incorporated with limited liability in England and Wales, whose registered office is at Winchester House, 1 Great Winchester Street, London EC2N 2DB, England (the Trustee, which expression shall, wherever the context so admits, include such company and all other persons or companies for the time being the trustee or trustees of these presents) as trustee for the Noteholders, the Receiptholders and the Couponholders (each as defined below).

WHEREAS:

(1)	By resolutions of the Board of Directors of the Issuer passed on 19-20 August 2005, the Issuer has resolved to establish a Euro Medium Term Note Programme unconditionally and irrevocably guaranteed by the Guarantor (the Programme) pursuant to which the Issuer may from time to time issue Notes as set out herein. Notes up to a maximum nominal amount (calculated in accordance with Clause 3(5) of the Programme Agreement (as defined below)) from time to time outstanding of U.S.$5,000,000,000 (subject to increase as provided in the Programme Agreement) (the Programme Limit) may be issued by the Issuer pursuant to the said Programme.
(2)	By resolutions of the Board of Directors of the Guarantor passed on 14 April 2005, the Guarantor has resolved to guarantee all Notes issued under the said Programme and to enter into certain covenants as set out in this Trust Deed.
(3)	The Trustee has agreed to act as trustee of these presents for the benefit of the Noteholders, the Receiptholders and the Couponholders upon and subject to the terms and conditions of these presents.

NOW THIS TRUST DEED WITNESSES AND IT IS AGREED AND DECLARED as follows:

1. DEFINITIONS

(A)	In these presents, unless there is anything in the subject or context inconsistent therewith, the following expressions shall have the following meanings:
	Agency Agreement means the agreement dated 15 August 2005, as amended and/or supplemented and/or restated from time to time, pursuant to which the Issuer and the Guarantor have appointed the Agent and the other Paying Agents in relation to all or any Series of the Notes and any other agreement for the time being in force appointing another Agent or further or other Paying Agents in relation to all or any Series of the Notes, or in connection with their duties, the terms of which have previously been approved in writing by the Trustee, together with any agreement for the time being in force amending or modifying with the prior written approval of the Trustee any of the aforesaid agreements;
	Agent means, in relation to all or any Series of the Notes, Deutsche Bank AG, London Branch a corporation domiciled in Frankfurt am Main, Germany, operating in the United Kingdom under branch number HR000005, acting through its London branch at Winchester House, 1 Great

1

Winchester Street, London EC2N 2DB and hereinafter referred to as Deutsche Bank AG, London Branch, or, if applicable, any Successor agent in relation thereto which shall become such pursuant to the provisions of the Agency Agreement;

Appointee means any attorney, manager, agent, delegate or other person appointed by the Trustee under these presents;

Auditors means the auditors for the time being of the Issuer or, as the case may be, the Guarantor or, in the event of their being unable or unwilling promptly to carry out any action requested of them pursuant to the provisions of these presents, such other firm of accountants as may be nominated or approved by the Trustee for the purposes of these presents;

Calculation Agent means, in relation to all or any Series of the Notes, the person appointed as such from time to time pursuant to the provisions of the Agency Agreement or, if applicable, any Successor calculation agent in relation thereto which shall become such pursuant to the provisions of the Agency Agreement;

Clearstream, Luxembourg means Clearstream Banking, société anonyme;

Conditions means, in relation to the Notes of any Series, the terms and conditions endorsed on or incorporated by reference into the Note or Notes constituting such Series, such terms and conditions being in or substantially in the form set out in Schedule 1 or in such other form, having regard to the terms of issue of the Notes of the relevant Series, as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s) as modified and supplemented by the Final Terms applicable to the Notes of the relevant Series, in each case as from time to time modified in accordance with the provisions of these presents;

Couponholders means the several persons who are for the time being holders of the Coupons and includes, where applicable, the Talonholders;

Coupon means an interest coupon appertaining to a Definitive Note (other than a Zero Coupon Note), such coupon being:

(i)	if appertaining to a Fixed Rate Note, in the form or substantially in the form set out in Part 5 A of Schedule 2 or in such other form, having regard to the terms of issue of the Notes of the relevant Series, as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s); or
(ii)	if appertaining to a Floating Rate Note or an Indexed Interest Note, in the form or substantially in the form set out in Part 5 B of Schedule 2 or in such other form, having regard to the terms of issue of the Notes of the relevant Series, as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s); or
(iii)	if appertaining to a Definitive Note which is neither a Fixed Rate Note nor a Floating Rate Note nor an Indexed Interest Note, in such form as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s),

and includes, where applicable, the Talon(s) appertaining thereto and any replacements for Coupons and Talons issued pursuant to Condition 10;

Dealers means ABN AMRO Bank N.V., BNP Paribas, Barclays Bank PLC, Calyon, Citigroup Global Markets Limited, Countrywide Securities Corporation, Deutsche Bank AG, London Branch, Goldman Sachs International, HSBC Bank plc, J.P. Morgan Securities Ltd., Lehman Brothers International (Europe), Mizuho International plc, Morgan Stanley & Co. International Limited,

2

Société Générale, UBS Limited and WestLB AG, London Branch and any other entity which the Issuer may appoint as a Dealer and notice of whose appointment has been given to the Agent and the Trustee by the Issuer in accordance with the provisions of the Programme Agreement but excluding any entity whose appointment has been terminated in accordance with the provisions of the Programme Agreement and notice of which termination has been given to the Agent and the Trustee by the Issuer in accordance with the provisions of the Programme Agreement and references to a relevant Dealer or relevant Dealer(s) mean, in relation to any Tranche or Series of Notes, the Dealer or Dealers with whom the Issuer has agreed the issue of the Notes of such Tranche or Series and Dealer means any one of them;

Definitive Note means a Note in definitive form issued or, as the case may require, to be issued by the Issuer in accordance with the provisions of the Programme Agreement or any other agreement between the Issuer and the relevant Dealer(s), the Agency Agreement and these presents in exchange for either a Temporary Global Note or part thereof or a Permanent Global Note (all as indicated in the applicable Final Terms), such Note in definitive form being in the form or substantially in the form set out in Part 3 of Schedule 2 with such modifications (if any) as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s) and having the Conditions endorsed thereon or, if permitted by the relevant Stock Exchange, incorporating the Conditions by reference (where applicable to this Trust Deed) as indicated in the applicable Final Terms and having the relevant information supplementing, replacing or modifying the Conditions appearing in the applicable Final Terms endorsed thereon or attached thereto and (except in the case of a Zero Coupon Note in bearer form) having Coupons and, where appropriate, Receipts and/or Talons attached thereto on issue;

Dual Currency Note means a Note in respect of which payments of principal and/or interest are made or to be made in such different currencies, and at rates of exchange calculated upon such basis or bases, as the Issuer and the relevant Dealer(s) may agree (as indicated in the applicable Final Terms);

Early Redemption Amount has the meaning ascribed thereto in Condition 6(e);

Euroclear means Euroclear Bank S.A./N.V. as operator of the Euroclear System;

Event of Default means any of the conditions, events or acts provided in Condition 9 to be Events of Default (being events upon the happening of which the Notes of any Series would, subject only to notice by the Trustee as therein provided, become immediately due and repayable);

Extraordinary Resolution has the meaning ascribed thereto in paragraph 20 of Schedule 3;

Final Terms has the meaning set out in the Programme Agreement;

Fixed Rate Note means a Note on which interest is calculated at a fixed rate payable in arrear on a fixed date or fixed dates in each year and on redemption or on such other dates as may be agreed between the Issuer and the relevant Dealer(s) (as indicated in the applicable Final Terms);

Floating Rate Note means a Note on which interest is calculated at a floating rate payable one-, two-, three-, six- or twelve-monthly or in respect of such other period or on such date(s) as may be agreed between the Issuer and the relevant Dealer(s) (as indicated in the applicable Final Terms);

Global Note means a Temporary Global Note and/or a Permanent Global Note, as the context may require;

Index Linked Interest Note means a Note in respect of which the amount payable in respect of interest is calculated by reference to an index and/or a formula as the Issuer and the relevant Dealer(s) may agree (as indicated in the applicable Final Terms);

3

Index Linked Note means an Indexed Interest Note and/or an Indexed Redemption Amount Note, as applicable;

Index Linked Redemption Note means a Note in respect of which the amount payable in respect of principal is calculated by reference to an index and/or a formula as the Issuer and the relevant Dealer(s) may agree (as indicated in the applicable Final Terms);

Interest Commencement Date means, in the case of interest-bearing Notes, the date specified in the applicable Final Terms from (and including) which such Notes bear interest, which may or may not be the Issue Date;

Interest Payment Date means, in relation to any Floating Rate Note or Indexed Interest Note, either:

(i)	the date which falls the number of months or other period specified as the Specified Period in the applicable Final Terms after the preceding Interest Payment Date or the Interest Commencement Date (in the case of the first Interest Payment Date); or
(ii)	such date or dates as are indicated in the applicable Final Terms;

Issue Date means, in respect of any Note, the date of issue and purchase of such Note pursuant to and in accordance with the Programme Agreement or any other agreement between the Issuer and the relevant Dealer(s), being in the case of any Definitive Note represented initially by a Temporary Global Note the same date as the date of issue of the Temporary Global Note which initially represented such Note;

Issue Price means the price, generally expressed as a percentage of the nominal amount of the Notes, at which the Notes will be issued;

Liability means any loss, damage, cost, charge, claim, demand, expense, judgment, action, proceeding or other liability whatsoever (including, without limitation, in respect of taxes, duties, levies, imposts and other charges) and including any value added tax or similar tax charged or chargeable in respect thereof and legal fees and expenses provided that such legal fees and expenses shall have been properly incurred;

London Business Day has the meaning set out in Condition 4(b)(v);

Maturity Date means the date on which a Note is expressed to be redeemable;

month means calendar month;

Note means a note issued pursuant to the Programme and denominated in such currency or currencies as may be agreed between the Issuer and the relevant Dealer(s) which:

(i)	has such maturity as may be agreed between the Issuer and the relevant Dealer(s), subject to such minimum or maximum maturity as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the Issuer or the relevant currency; and
(ii)	has such denomination as may be agreed between the Issuer and the relevant Dealer(s), subject to such minimum denomination as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant currency,

4

issued or to be issued by the Issuer pursuant to the Programme Agreement or any other agreement between the Issuer and the relevant Dealer(s), the Agency Agreement and these presents and which shall initially be represented by, and comprised in, either a Temporary Global Note which may (in accordance with the terms of such Temporary Global Note) be exchanged for Definitive Notes or a Permanent Global Note, which Permanent Global Note may (in accordance with the terms of such Permanent Global Note) in turn be exchanged for Definitive Notes and includes any replacements for a Note issued pursuant to Condition 10;

Noteholders means the several persons who are for the time being bearers of outstanding Notes save that, in respect of the Notes of any Series, for so long as such Notes or any part thereof are represented by a Global Note deposited with a common depositary for Euroclear and Clearstream, Luxembourg, each person who is, for the time being, shown in the records of Euroclear or Clearstream, Luxembourg (other than Clearstream, Luxembourg, if Clearstream, Luxembourg shall be an accountholder of Euroclear and Euroclear, if Euroclear shall be an accountholder of Clearstream, Luxembourg) as the holder of a particular nominal amount of the Notes of such Series shall be deemed to be the holder of such nominal amount of such Notes (and the holder of the relevant Global Note shall be deemed not to be the holder) for all purposes of these presents, other than with respect to the payment of principal or interest on such nominal amount of such Notes, the rights to which shall be vested, as against the Issuer and the Trustee, solely in such common depositary and for which purpose such common depositary shall be deemed to be the holder of such nominal amount of such Notes in accordance with and subject to its terms and the provisions of these presents and the expressions Noteholder, holder and holder of Notes and related expressions shall be construed accordingly;

notice means, in respect of a notice to be given to Noteholders, a notice validly given pursuant to Condition 13;

outstanding means, in relation to the Notes of all or any Series, all the Notes of such Series issued other than:

(a)	those Notes which have been redeemed pursuant to these presents;
(b)	those Notes in respect of which the date for redemption in accordance with the Conditions has occurred and the redemption moneys (including all interest payable thereon) have been duly paid to the Trustee or to the Agent in the manner provided in the Agency Agreement (and where appropriate notice to that effect has been given to the relative Noteholders in accordance with Condition 13) and remain available for payment against presentation of the relevant Notes and/or Receipts and/or Coupons;
(c)	those Notes which have been purchased and cancelled in accordance with Conditions 6(h) and 6(i);
(d)	those Notes which have become void under Condition 8;
(e)	those mutilated or defaced Notes which have been surrendered and cancelled and in respect of which replacements have been issued pursuant to Condition 10;
(f)	(for the purpose only of ascertaining the nominal amount of the Notes outstanding and without prejudice to the status for any other purpose of the relevant Notes) those Notes which are alleged to have been lost, stolen or destroyed and in respect of which replacements have been issued pursuant to Condition 10; and
(g)	any Temporary Global Note to the extent that it shall have been exchanged for Definitive Notes or a Permanent Global Note and any Permanent Global Note to the extent that it shall

5

have been exchanged for Definitive Notes in each case pursuant to its provisions, the provisions of these presents and the Agency Agreement;

PROVIDED THAT for each of the following purposes, namely:

(i)	the right to attend and vote at any meeting of the holders of the Notes of any Series;
(ii)	the determination of how many and which Notes of any Series are for the time being outstanding for the purposes of Clause 9(A), Conditions 9 and 14 and paragraphs 2, 5, 6 and 9 of Schedule 3;
(iii)	any discretion, power or authority (whether contained in these presents or vested by operation of law) which the Trustee is required, expressly or impliedly, to exercise in or by reference to the interests of the holders of the Notes of any Series; and
(iv)	the determination by the Trustee whether any event, circumstance, matter or thing is, in its opinion, materially prejudicial to the interests of the holders of the Notes of any Series,

those Notes of the relevant Series (if any) which are for the time being held by or on behalf of the Issuer, the Guarantor or any of the Issuer’s other Subsidiaries, in each case as beneficial owner, shall (unless and until ceasing to be so held) be deemed not to remain outstanding;

Paying Agents means, in relation to all or any Series of the Notes, the several institutions (including, where the context permits, the Agent) at their respective specified offices initially appointed as paying agents in relation to such Notes by the Issuer and the Guarantor pursuant to the Agency Agreement and/or, if applicable, any Successor paying agents at their respective specified offices for all or any Series of the Notes;

Permanent Global Note means a global note in the form or substantially in the form set out in Part 2 of Schedule 2 with such modifications (if any) as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s), together with the copy of the applicable Final Terms annexed thereto, comprising some or all of the Notes of the same Series, issued by the Issuer pursuant to the Programme Agreement or any other agreement between the Issuer and the relevant Dealer(s), the Agency Agreement and these presents;

Potential Event of Default means any condition, event or act which, with the lapse of time and/or the issue, making or giving of any notice, certification, declaration, demand, determination and/or request and/or the taking of any similar action and/or the fulfilment of any similar condition, would constitute an Event of Default;

Programme means the Euro Medium Term Note Programme established by, or otherwise contemplated in, the Programme Agreement;

Programme Agreement means the agreement of even date herewith between the Issuer, the Guarantor and the Dealers named therein concerning the purchase of Notes to be issued pursuant to the Programme together with any agreement for the time being in force amending, replacing, novating or modifying such agreement;

Receipt means a receipt attached on issue to a Definitive Note redeemable in instalments for the payment of an instalment of principal, such receipt being in the form or substantially in the form set out in Part 4 of Schedule 2 or in such other form as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s) and includes any replacements for Receipts issued pursuant to Condition 10;

6

Receiptholders means the several persons who are for the time being holders of the Receipts;

Reference Banks means the several banks initially appointed as reference banks in relation to the Notes of any relevant Series and/or, if applicable, any Successor reference banks in relation to such Notes;

Relevant Date has the meaning set out in Condition 7;

repay, redeem and pay shall each include both the others and cognate expressions shall be construed accordingly;

Series means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (i) expressed to be consolidated and form a single series and (ii) identical in all respects (including as to listing) except for their respective Issue Dates, Interest Commencement Dates and/or Issue Prices and the expressions Notes of the relevant Series, holders of Notes of the relevant Series and related expressions shall be construed accordingly;

Stock Exchange means the London Stock Exchange, or any other or further stock exchange(s) on which any Notes may from time to time be listed, and references in these presents to the relevant Stock Exchange shall, in relation to any Notes, be references to the Stock Exchange on which such Notes are, from time to time, or are intended to be, listed;

Subsidiary means any company which is for the time being a subsidiary (within the meaning of Section 736 of the Companies Act 1985 of Great Britain) or a subsidiary undertaking (within the meaning of Section 258 and Schedule 10A of the Companies Act 1985 of Great Britain);

Successor means, in relation to the Agent, the other Paying Agents, the Reference Banks and the Calculation Agent, any successor to any one or more of them in relation to the Notes which shall become such pursuant to the provisions of these presents and/or the Agency Agreement (as the case may be) and/or such other or further agent, paying agents, reference banks or calculation agent (as the case may be) in relation to the Notes as may (with the prior approval of, and on terms previously approved by, the Trustee in writing) from time to time be appointed as such, and/or, if applicable, such other or further specified offices (in the former case being within the same city as those for which they are substituted) as may from time to time be nominated, in each case by the Issuer and the Guarantor and (except in the case of the initial appointments and specified offices made under and specified in the Conditions and/or the Agency Agreement, as the case may be) notice of whose appointment or, as the case may be, nomination has been given to the Noteholders;

Talonholders means the several persons who are for the time being holders of the Talons;

Talons means the talons (if any) appertaining to, and exchangeable in accordance with the provisions therein contained for further Coupons appertaining to, the Definitive Notes (other than the Zero Coupon Notes), such talons being in the form or substantially in the form set out in Part 6 of Schedule 2 or in such other form as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s) and includes any replacements for Talons issued pursuant to Condition 10;

Temporary Global Note means a temporary global note in the form or substantially in the form set out in Part 1 of Schedule 2 with such modifications (if any) as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s), together with the copy of the applicable Final Terms annexed thereto, comprising some or all of the Notes of the same Series, issued by the Issuer pursuant to the Programme Agreement or any other agreement between the Issuer and the relevant Dealer(s), the Agency Agreement and these presents;

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these presents means this Trust Deed and the Schedules and any trust deed supplemental hereto and the Schedules (if any) thereto and the Notes, the Receipts, the Coupons, the Talons, the Conditions and, unless the context otherwise requires, the Final Terms, all as from time to time modified in accordance with the provisions herein or therein contained;

Tranche means all Notes which are identical in all respects (including as to listing);

Trustee Acts means the Trustee Act 1925 and the Trustee Act 2000;

Trust Corporation means a corporation entitled by rules made under the Public Trustee Act 1906 of Great Britain or entitled pursuant to any other comparable legislation applicable to a trustee in any other jurisdiction to carry out the functions of a custodian trustee;

Zero Coupon Note means a Note on which no interest is payable;

words denoting the singular shall include the plural and vice versa;

words denoting one gender only shall include the other genders; and

words denoting persons only shall include firms and corporations and vice versa.

(B) (i) All references in these presents to principal and/or principal amount and/or interest in respect of the Notes or to any moneys payable by the Issuer and/or the Guarantor under these presents shall, unless the context otherwise requires, be construed in accordance with Condition 5(d).

(ii)	All references in these presents to any statute or any provision of any statute shall be deemed also to refer to any statutory modification or re-enactment thereof or any statutory instrument, order or regulation made thereunder or under any such modification or re-enactment.
(iii)	All references in these presents to guarantees or to an obligation being guaranteed shall be deemed to include respectively references to indemnities or to an indemnity being given in respect thereof.
(vi)	All references in these presents to any action, remedy or method of proceeding for the enforcement of the rights of creditors shall be deemed to include, in respect of any jurisdiction other than England, references to such action, remedy or method of proceeding for the enforcement of the rights of creditors available or appropriate in such jurisdiction as shall most nearly approximate to such action, remedy or method of proceeding described or referred to in these presents.
(v)	All references in these presents to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include references to any additional or alternative clearing system as is approved by the Issuer, the Agent and the Trustee.
(vi)	Unless the context otherwise requires words or expressions used in these presents shall bear the same meanings as in the Companies Act 1985 of Great Britain.
(vii)	In this Trust Deed references to Schedules, Clauses, subclauses, paragraphs and subparagraphs shall be construed as references to the Schedules to this Trust Deed and to the Clauses, subclauses, paragraphs and subparagraphs of this Trust Deed respectively.
(viii)	In these presents tables of contents and Clause headings are included for ease of reference and shall not affect the construction of these presents.

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(C)	Words and expressions defined in these presents or the Agency Agreement or used in the applicable Final Terms shall have the same meanings where used herein unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Agency Agreement and these presents, these presents shall prevail and, in the event of inconsistency between the Agency Agreement or these presents and the applicable Final Terms, the applicable Final Terms shall prevail.
(D)	All references in these presents to the relevant currency shall be construed as references to the currency in which payments in respect of the Notes and/or Receipts and/or Coupons of the relevant Series are to be made as indicated in the applicable Final Terms.
(E)	All references in these presents to listing and listed shall include references to quotation and quoted respectively.

2. AMOUNT AND ISSUE OF THE NOTES

(A)	Amount of the Notes, Final Terms and Legal Opinions:
	The Notes will be issued in Series in an aggregate nominal amount from time to time outstanding not exceeding the Programme Limit from time to time and for the purpose of determining such aggregate nominal amount Clause 3(5) of the Programme Agreement shall apply.
	By not later than 3.00 p.m. (London time) on the London Business Day preceding each proposed Issue Date, the Issuer shall deliver or cause to be delivered to the Trustee a copy of the applicable Final Terms and shall notify the Trustee in writing without delay of the relevant Issue Date and the nominal amount of the Notes to be issued. Upon the issue of the relevant Notes, such Notes shall become constituted by these presents without further formality.
	Before the first issue of Notes occurring after each anniversary of this Trust Deed and on such other occasions as the Trustee so requests (on the basis that the Trustee considers it necessary in view of a change (or proposed change) in applicable law affecting the Issuer or, as the case may be, the Guarantor, these presents, the Programme Agreement or the Agency Agreement, or the Trustee has other grounds), the Issuer or, as the case may be, the Guarantor will procure that (a) further legal opinion(s) (relating, if applicable, to any such change or proposed change) in such form and with such content as the Trustee may require from the legal advisers specified in the Programme Agreement or such other legal advisers as the Trustee may require is/are delivered to the Trustee. Whenever such a request is made with respect to any Notes to be issued, the receipt of such opinion in a form satisfactory to the Trustee shall be a further condition precedent to the issue of those Notes.

(B)

Covenant to repay principal and to pay interest:

The Issuer covenants with the Trustee that it will, as and when the Notes of any Series or any of them or any instalment of principal in respect thereof becomes due to be redeemed in accordance with the Conditions, unconditionally pay or procure to be paid to or to the order of the Trustee in the relevant currency in immediately available funds the principal amount in respect of the Notes of such Series or the amount of such instalment becoming due for redemption on that date and (except in the case of Zero Coupon Notes) shall (subject to the provisions of the Conditions) in the meantime and until redemption in full of the Notes of such Series (both before and after any judgment or other order of a court of competent jurisdiction) unconditionally pay or procure to be paid to or to the order of the Trustee as aforesaid interest (which shall accrue from day to day) on the nominal amount of the Notes outstanding of such Series at rates and/or in amounts calculated from time to time in accordance with, or specified in, and on the dates provided for in, the Conditions (subject to Clause 2(D)) PROVIDED THAT:

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(i)	every payment of principal or interest or other sum due in respect of the Notes made to or to the order of the Agent in the manner provided in the Agency Agreement shall be in satisfaction pro tanto of the relative covenant by the Issuer in this Clause contained in relation to the Notes of such Series, except to the extent that there is a default in the subsequent payment thereof in accordance with the Conditions to the relevant Noteholders, Receiptholders or Couponholders (as the case may be);
(ii)	in the case of any payment of principal made to the Trustee or the Agent after the due date or on or after accelerated maturity following an Event of Default, interest shall (subject, where applicable, as provided in the Conditions) continue to accrue on the nominal amount of the relevant Notes (except in the case of Zero Coupon Notes to which the provisions of Condition 6(j) shall apply) (both before and after any judgment or other order of a court of competent jurisdiction) at the rates aforesaid (or, if higher, the rate of interest on judgment debts for the time being provided by English law) up to and including the date which the Trustee determines to be the date on and after which payment is to be made in respect thereof, as stated in a notice given to the holders of such Notes (such date to be not later than seven days after the day on which the whole of such principal amount, together with an amount equal to the interest which has accrued and is to accrue pursuant to this proviso up to and including that date, has been received by the Trustee or the Agent); and
(iii)	in any case where payment of the whole or any part of the principal amount of any Note is improperly withheld or refused upon due presentation thereof (other than in circumstances contemplated by (ii) above) interest shall accrue on the nominal amount of such Note (except in the case of Zero Coupon Notes to which the provisions of Condition 6(j) shall apply) payment of which has been so withheld or refused (both before and after any judgment or other order of a court of competent jurisdiction) at the rates aforesaid (or, if higher, the rate of interest on judgment debts for the time being provided by English law) from the date of such withholding or refusal until the date on which, upon further presentation of the relevant Note, payment of the full amount (including interest as aforesaid) in the relevant currency payable in respect of such Note is made or (if earlier) the seventh day after notice is given to the relevant Noteholder(s) (whether individually or in accordance with Condition 13) that the full amount (including interest as aforesaid) in the relevant currency in respect of such Note is available for payment, provided that, upon further presentation thereof being duly made, such payment is made.

The Trustee will hold the benefit of this covenant on trust for the Noteholders, the Receiptholders and the Couponholders and itself in accordance with these presents.

(C)	Trustee’s requirements regarding Paying Agents:
	At any time after an Event of Default or a Potential Event of Default shall have occurred or the Notes of all or any Series shall otherwise have become due and repayable or the Trustee shall have received any money which it proposes to pay under Clause 10 to the relevant Noteholders, Receiptholders and/or Couponholders, the Trustee may:

(i) by notice in writing to the Issuer, the Guarantor, the Agent and the other Paying Agents require the Agent and the other Paying Agents pursuant to the Agency Agreement:

(a) to act thereafter as Agent and other Paying Agents respectively of the Trustee in relation to payments to be made by or on behalf of the Trustee under the terms of these presents mutatis mutandis on the terms provided in the Agency Agreement (save that the Trustee’s liability under any provisions thereof for the indemnification, remuneration and payment of out-of-pocket expenses of the Agent and the other Paying Agents shall be limited to the amounts for the time being held by the Trustee

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on the trusts of these presents relating to the Notes of the relevant Series and available for such purpose) and thereafter to hold all Notes, Receipts and Coupons and all sums, documents and records held by them in respect of Notes, Receipts and Coupons on behalf of the Trustee; or

(b) to deliver up all Notes, Receipts and Coupons and all sums, documents and records held by them in respect of Notes, Receipts and Coupons to the Trustee or as the Trustee shall direct in such notice provided that such notice shall be deemed not to apply to any documents or records which the Agent or the relevant other Paying Agent is obliged not to release by any law or regulation; and

(ii) by notice in writing to the Issuer and the Guarantor require them to make all subsequent payments in respect of the Notes, Receipts and Coupons to or to the order of the Trustee and not to the Agent and with effect from the issue of any such notice to the Issuer and the Guarantor and until such notice is withdrawn proviso (i) to subclause (B) of this Clause relating to the Notes shall cease to have effect.

(D) If the Floating Rate Notes or Indexed Interest Notes of any Series become immediately due and repayable under Condition 9, the rate and/or amount of interest payable in respect of them will be calculated at the same intervals as if such Notes had not become due and repayable, the first of which will commence on the expiry of the Interest Period during which the Notes of the relevant Series become so due and repayable mutatis mutandis in accordance with the provisions of Condition 4(b) except that the rates of interest need not be published.

(E)	Currency of payments:
	All payments in respect of, under and in connection with these presents and the Notes of any Series to the relevant Noteholders, Receiptholders and Couponholders shall be made in the relevant currency.

(F)

Further Notes:

The Issuer shall be at liberty from time to time (but subject always to the provisions of these presents) without the consent of the Noteholders, Receiptholders or Couponholders to create and issue further Notes ranking pari passu in all respects (or in all respects save for the date from which interest thereon accrues and the amount of the first payment of interest on such further Notes) and so that the same shall be consolidated and form a single series with the outstanding Notes of a particular Series.

(G)

Separate Series:

The Notes of each Series shall form a separate Series of Notes and accordingly, unless for any purpose the Trustee in its absolute discretion shall otherwise determine, the provisions of this Clause and of Clauses 3 to 21 (both inclusive), 22(B) and Schedule 3 shall apply mutatis mutandis separately and independently to the Notes of each Series and in such Clauses and Schedule the expressions Notes, Noteholders, Receipts, Receiptholders, Coupons, Couponholders, Talons and Talonholders shall be construed accordingly.

3. FORMS OF THE NOTES

(A) Global Notes:

(i) The Notes of each Tranche will initially be represented by a Temporary Global Note which shall be exchangeable for either Definitive Notes together with, where applicable, Receipts

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and (except in the case of Zero Coupon Notes) Coupons and, where applicable, Talons attached or a Permanent Global Note, in each case in accordance with the provisions of such Temporary Global Note. Each Permanent Global Note shall be exchangeable for Definitive Notes together with, where applicable, Receipts and (except in the case of Zero Coupon Notes) Coupons and, where applicable, Talons attached, in accordance with the provisions of such Permanent Global Note.

All Global Notes shall be prepared, completed and delivered to a common depositary for Euroclear and Clearstream, Luxembourg in accordance with the provisions of the Programme Agreement or to another appropriate depositary in accordance with any other agreement between the Issuer and the relevant Dealer(s) and, in each case, the Agency Agreement and these presents.

(ii)

Each Temporary Global Note shall be printed or typed in the form or substantially in the form set out in Part 1 of Schedule 2 and may be a facsimile. Each Temporary Global Note shall have annexed thereto a copy of the applicable Final Terms and shall be signed manually or in facsimile by two persons duly authorised by the Issuer on behalf of the Issuer and shall be authenticated by or on behalf of the Agent. Each Temporary Global Note so executed and authenticated shall be a binding and valid obligation of the Issuer and title thereto shall pass by delivery.

(iii)

Each Permanent Global Note shall be printed or typed in the form or substantially in the form set out in Part 2 of Schedule 2 and may be a facsimile. Each Permanent Global Note shall have annexed thereto a copy of the applicable Final Terms and shall be signed manually or in facsimile by two persons duly authorised by the Issuer on behalf of the Issuer and shall be authenticated by or on behalf of the Agent. Each Permanent Global Note so executed and authenticated shall be a binding and valid obligation of the Issuer and title thereto shall pass by delivery.

(B) Definitive Notes:

(i) The Definitive Notes, the Receipts, the Coupons and the Talons shall be to bearer in the respective forms or substantially in the respective forms set out in Parts 3, 4, 5 and 6, respectively, of Schedule 2. The Definitive Notes, the Receipts, the Coupons and the Talons shall be serially numbered and, if listed or quoted, shall be security printed in accordance with the requirements (if any) from time to time of the relevant Stock Exchange and the relevant Conditions shall be incorporated by reference (where applicable to these presents) into such Definitive Notes if permitted by the relevant Stock Exchange (if any), or, if not so permitted, the Definitive Notes shall be endorsed with or have attached thereto the relevant Conditions, and, in either such case, the Definitive Notes shall have endorsed thereon or attached thereto a copy of the applicable Final Terms (or the relevant provisions thereof). Title to the Definitive Notes, the Receipts, the Coupons and the Talons shall pass by delivery.

(ii) The Definitive Notes shall be signed manually or in facsimile by two persons duly authorised by the Issuer on behalf of the Issuer and shall be authenticated by or on behalf of the Agent. The Definitive Notes so executed and authenticated, and the Receipts, the Coupons and Talons, upon execution and authentication of the relevant Definitive Notes, shall be binding and valid obligations of the Issuer. The Receipts, the Coupons and the Talons shall not be signed. No Definitive Note and none of the Receipts, Coupons or Talons appertaining to such Definitive Note shall be binding or valid until such Definitive Note shall have been executed and authenticated as aforesaid.

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(C)	Facsimile Signatures:
	The Issuer may use the facsimile signature of any person who at the date such signature is affixed to a Note is duly authorised by the Issuer notwithstanding that at the time of issue of any of the Notes, he may have ceased for any reason to be so authorised.

(D)

Persons to be treated as Noteholders:

Except as ordered by a court of competent jurisdiction or as required by law, the Issuer, the Guarantor, the Trustee, the Agent and the other Paying Agents (notwithstanding any notice to the contrary and whether or not it is overdue and notwithstanding any notation of ownership or writing thereon or notice of any previous loss or theft thereof) may (i) for the purpose of making payment thereon or on account thereof, deem and treat the bearer of any Global Note, Definitive Note, Receipt, Coupon or Talon and of all rights thereunder as the absolute owner thereof free from all encumbrances, and shall not be required to obtain proof of such ownership or as to the identity of the bearer and (ii) for all other purposes deem and treat:

(a)	the bearer of any Definitive Note, Receipt, Coupon or Talon; and
(b)	each person for the time being shown in the records of Euroclear or Clearstream, Luxembourg or such other additional or alternative clearing system approved by the Issuer, the Agent and the Trustee, as having a particular nominal amount of Notes credited to his securities account,

as the absolute owner thereof free from all encumbrances and shall not be required to obtain proof of such ownership or as to the identity of the bearer of any Global Note, Definitive Note, Receipt, Coupon or Talon.

4.

FEES, DUTIES AND TAXES

The Issuer will pay any stamp, issue, registration, documentary and other fees, duties and taxes, including interest and penalties, payable on or in connection with (i) the execution and delivery of these presents (ii) the constitution and original issue of the Notes, the Receipts and the Coupons and (iii) any action taken by or on behalf of the Trustee or (where permitted under these presents so to do) any Noteholder, Receiptholder or Couponholder to enforce, or to resolve any doubt concerning, or for any other purpose in relation to, these presents.

5.

COVENANT OF COMPLIANCE

Each of the Issuer and the Guarantor covenants with the Trustee that it will comply with and perform and observe all the provisions of these presents which are expressed to be binding on it. The Conditions shall be binding on the Issuer, the Guarantor, the Noteholders, the Receiptholders and the Couponholders. The Trustee shall be entitled to enforce the obligations of the Issuer and the Guarantor under the Notes, the Receipts and the Coupons as if the same were set out and contained in this Trust Deed, which shall be read and construed as one document with the Notes, the Receipts and the Coupons. The Trustee shall hold the benefit of this covenant upon trust for itself and the Noteholders, the Receiptholders and the Couponholders according to its and their respective interests.

6. CANCELLATION OF NOTES AND RECORDS

(A) The Issuer shall use all reasonable endeavours to procure that all Notes (i) redeemed or (ii) purchased for cancellation by or on behalf of the Issuer, the Guarantor or any other Subsidiary of the Issuer or (iii) which, being mutilated or defaced, have been surrendered and replaced pursuant to

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Condition 10 (together in each case, in the case of Definitive Notes, with all unmatured Receipts and Coupons attached thereto or delivered therewith) and, in the case of Definitive Notes all relative Receipts and Coupons paid in accordance with the relevant Conditions or which, being mutilated or defaced, have been surrendered and replaced pursuant to Condition 10 shall forthwith be cancelled by or on behalf of the Issuer and a certificate stating:

(a)	the aggregate nominal amount of Notes which have been redeemed and the amounts paid in respect thereof and the aggregate amounts in respect of Receipts and Coupons which have been paid;
(b)	the serial numbers of such Notes in definitive form and Receipts;
(c)	the total numbers (where applicable, of each denomination) by maturity date of such Receipts and Coupons;
(d)	the aggregate amount of interest paid (and the due dates of such payments) on Global Notes;
(e)	the aggregate nominal amount of Notes (if any) which have been purchased by or on behalf of the Issuer, the Guarantor or any other Subsidiary of the Issuer and cancelled and the serial numbers of such Notes in definitive form and, in the case of Definitive Notes, the total number (where applicable, of each denomination) by maturity date of the Receipts, Coupons and Talons attached thereto or surrendered therewith;
(f)	the aggregate nominal amounts of Notes and Receipts and the aggregate amounts in respect of Coupons which have been so exchanged or surrendered and replaced and the serial numbers of such Notes in definitive form and the total number (where applicable, of each denomination) by maturity date of such Coupons and Talons;
(g)	the total number (where applicable, of each denomination) by maturity date of the unmatured Coupons missing from Definitive Notes bearing interest at a fixed rate which have been redeemed or exchanged or surrendered and replaced and the serial numbers of the Definitive Notes to which such missing unmatured Coupons appertained; and
(h)	the total number (where applicable, of each denomination) by maturity date of Talons which have been exchanged for further Coupons

shall be given to the Trustee by or on behalf of the Issuer as soon as possible and in any event within four months after the date of such redemption, purchase, payment, exchange or replacement (as the case may be). The Trustee may accept such certificate as conclusive evidence of redemption, purchase, exchange or replacement pro tanto of the Notes or payment of interest thereon or exchange of the relative Talons respectively and of cancellation of the relative Notes and Coupons.

(B) The Issuer shall use all reasonable endeavours to procure (i) that the Agent shall keep a full and complete record of all Notes, Receipts, Coupons and Talons issued by it (other than serial numbers of Receipts and Coupons) and of their redemption, purchase by or on behalf of the Issuer, the Guarantor or any other Subsidiary of the Issuer and of all replacement notes, receipts, coupons or talons issued in substitution for lost, stolen, mutilated, defaced or destroyed Notes, Receipts, Coupons or Talons and (ii) that such records shall be made available to the Trustee at all reasonable times.

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7. GUARANTEE

(A)	The Guarantor hereby irrevocably and unconditionally guarantees to the Trustee the due and punctual payment in accordance with these presents of the principal of and interest on the Notes and of all other amounts payable by the Issuer under these presents.
(B)	If the Issuer fails, for any reason whatsoever, punctually to pay any such principal, interest or other amount, the Guarantor shall cause each and every such payment to be made as if the Guarantor instead of the Issuer were expressed to be the primary obligor of the relevant Note, Receipt or Coupon and not merely as surety (but without affecting the Issuer’s obligations) to the intent that the holder thereof shall receive the same amounts in respect of principal, interest or such other amount as would have been receivable had such payments been made by the Issuer.
(C)	If any payment received by the Trustee or any Noteholder, Receiptholder or Couponholder pursuant to the provisions of these presents in relation to the Notes, the Receipts or the Coupons shall (whether on the subsequent bankruptcy, insolvency or corporate reorganisation of the Issuer or, without limitation, on any other event) be avoided or set aside for any reason, such payment shall not be considered as discharging or diminishing the liability of the Guarantor and this guarantee shall continue to apply as if such payment had at all times remained owing by the Issuer and the Guarantor shall indemnify the Trustee and the Noteholders and/or Receiptholders and/or Couponholders (as the case may be) in respect thereof PROVIDED THAT the obligations of the Issuer and/or the Guarantor under this subclause shall, as regards each payment made to the Trustee or any Noteholder, Receiptholder or Couponholder which is avoided or set aside, be contingent upon such payment being reimbursed to the Issuer or other persons entitled through the Issuer.
(D)	The Guarantor hereby agrees that its obligations hereunder shall be unconditional and that the Guarantor shall be fully liable irrespective of the validity, regularity, legality or enforceability against the Issuer of, or of any defence or counter-claim whatsoever available to the Issuer in relation to, its obligations under these presents, whether or not any action has been taken to enforce the same or any judgment obtained against the Issuer, whether or not any of the other provisions of these presents have been modified, whether or not any time, indulgence, waiver, authorisation or consent has been granted to the Issuer by or on behalf of the Noteholders or the Receiptholders or Couponholders or the Trustee, whether or not any determination has been made by the Trustee pursuant to Clause 19(A), whether or not there have been any dealings or transactions between the Issuer, any of the Noteholders, Receiptholders or Couponholders or the Trustee, whether or not the Issuer has been dissolved, liquidated, merged, consolidated, bankrupted or has changed its status, functions, control or ownership, whether or not the Issuer has been prevented from making payment by foreign exchange provisions applicable at its place of registration or incorporation and whether or not any other circumstances have occurred which might otherwise constitute a legal or equitable discharge of or defence to a guarantor. Accordingly, the validity of this guarantee shall not be affected by reason of any invalidity, irregularity, illegality or unenforceability of all or any of the obligations of the Issuer under these presents and this guarantee shall not be discharged nor shall the liability of the Guarantor under these presents be affected by any act, thing or omission or means whatever whereby its liability would not have been discharged if it had been the principal debtor.
(E)	Without prejudice to the provisions of Clause 9(A), the Trustee may determine from time to time whether or not it will enforce this guarantee which it may do without making any demand of or taking any proceedings against the Issuer (as appropriate) and may from time to time make any arrangement or compromise with the Guarantor in relation to this guarantee which the Trustee may consider expedient in the interests of the Noteholders, Receiptholders or Couponholders.
(F)	The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of dissolution, liquidation, merger or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest or notice with respect to the Notes, Receipts or Coupons

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or the indebtedness evidenced thereby and all demands whatsoever and hereby covenants that this guarantee shall be a continuing guarantee, shall extend to the ultimate balance of all sums payable by the Issuer under these presents in relation to the Notes, Receipts and Coupons, shall not be discharged except by complete performance of the obligations contained in these presents in relation to the Notes, Receipts and Coupons and is additional to, and not instead of, any security or other guarantee or indemnity at any time existing in favour of any person, whether from the Guarantor or otherwise.

(G) If any moneys shall become payable by the Guarantor under this guarantee the Guarantor shall not, so long as the same remain unpaid, without the prior written consent of the Trustee:

(i)	in respect of any amounts paid by it under this guarantee, exercise any rights of subrogation or contribution or, without limitation, any other right or remedy which may accrue to it in respect of or as a result of any such payment; or
(ii)	in respect of any other moneys for the time being due to the Guarantor by the Issuer, claim payment thereof or exercise any other right or remedy;

(including in either case claiming the benefit of any security or right of set-off or, on the liquidation of the Issuer, proving in competition with the Trustee). If, notwithstanding the foregoing, upon the bankruptcy, insolvency or liquidation of the Issuer any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, shall be received by the Guarantor before payment in full of all principal of, and interest on, the Notes, Receipts and Coupons shall have been made to the Noteholders, Receiptholders and Couponholders, such payment or distribution shall be received by the Guarantor on trust to pay the same over immediately to the Trustee for application in or towards the payment of all sums due and unpaid under these presents in accordance with Clause 10 on the basis that Clause 10 does not apply separately and independently to each Series of the Notes.

(H) The obligations of the Guarantor under these presents constitute direct, unconditional, unsubordinated and unsecured obligations of the Guarantor and (save for certain obligations required to be preferred by law) rank and will rank pari passu with all other unsecured obligations (other than subordinated obligations, if any) of the Guarantor, from time to time outstanding.

8. NON-PAYMENT

(A)

Proof that as regards any specified Note, Receipt or Coupon the Issuer or, as the case may be, the Guarantor has made default in paying any amount due in respect of such Note, Receipt or Coupon shall (unless the contrary be proved) be sufficient evidence that the same default has been made as regards all other Notes, Receipts or Coupons (as the case may be) in respect of which the relevant amount is due and payable.

(B)

References in provisos (ii) and (iii) to Clause 2(B) and the provisions of any trust deed supplemental to this Trust Deed corresponding to provisos (ii) and (iii) to Clause 2(B) to “the rates aforesaid” shall, in the event of the Notes having become due and repayable, with effect from the expiry of the interest period during which such Notes become due and repayable, be construed as references to rates of interest calculated mutatis mutandis in accordance with the Conditions except that no notices need be published in respect thereof.

9. PROCEEDINGS, ACTION AND INDEMNIFICATION

(A) The Trustee shall not be bound to take any proceedings mentioned in Condition 9 or any other action in relation to these presents unless respectively directed or requested to do so (i) by an Extraordinary Resolution or (ii) in writing by the holders of at least one-quarter in nominal amount of the Notes

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then outstanding and in either case then only if it shall be indemnified and/or secured to its satisfaction against all Liabilities to which it may thereby render itself liable or which it may incur by so doing.

(B) Only the Trustee may enforce the provisions of these presents. No Noteholder, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer or the Guarantor to enforce the performance of any of the provisions of these presents unless the Trustee having become bound as aforesaid to take proceedings fails to do so within a reasonable period and such failure is continuing.

10.	APPLICATION OF MONEYS
	All moneys received by the Trustee under these presents from the Issuer or, as the case may be, the Guarantor (including any moneys which represent principal or interest in respect of Notes, Receipts or Coupons which have become void under Condition 8) shall, unless and to the extent attributable, in the opinion of the Trustee, to a particular Series of the Notes, be apportioned pari passu and rateably between each Series of the Notes, and all moneys received by the Trustee under these presents from the Issuer or, as the case may be, the Guarantor to the extent attributable in the opinion of the Trustee to a particular Series of the Notes or which are apportioned to such Series as aforesaid, be held by the Trustee upon trust to apply them (subject to Clause 12):
	FIRST in payment or satisfaction of all amounts then due and unpaid under Clauses 15 and/or 16(J) to the Trustee and/or any Appointee;
	SECONDLY in or towards payment pari passu and rateably of all principal and interest then due and unpaid in respect of the Notes of that Series;
	THIRDLY in or towards payment pari passu and rateably of all principal and interest then due and unpaid in respect of the Notes of each other Series; and
	FOURTHLY in payment of the balance (if any) to the Issuer (without prejudice to, or liability in respect of, any question as to how such payment to the Issuer shall be dealt with as between the Issuer and any other person).
	Without prejudice to this Clause 10, if the Trustee holds any moneys which represent principal or interest in respect of Notes which have become void or in respect of which claims have been prescribed under Condition 8, the Trustee will hold such moneys on the above trusts.

11.	NOTICE OF PAYMENTS
	The Trustee shall give notice to the relevant Noteholders in accordance with Condition 13 of the day fixed for any payment to them under Clause 10. Such payment may be made in accordance with Condition 5 and any payment so made shall be a good discharge to the Trustee.

12. INVESTMENT BY TRUSTEE

(A) The Trustee may at its discretion and pending payment invest moneys at any time available for the payment of principal and interest on the Notes in some or one of the investments hereinafter authorised for such periods as it may consider expedient with power from time to time at the like discretion to vary such investments and to accumulate such investments and the resulting interest and other income derived therefrom. The accumulated investments shall be applied under Clause 10. All interest and other income deriving from such investments shall be applied first in payment or satisfaction of all amounts then due and unpaid under Clause 15 to the Trustee and/or any Appointee and otherwise held for the benefit of and paid to the Noteholders or the holders of the related Coupons, as the case may be.

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(B) Any moneys which under the trusts of these presents ought to or may be invested by the Trustee may be invested in the name or under the control of the Trustee in any investments or other assets in any part of the world, whether or not they produce income or by placing the same on deposit in the name or under the control of the Trustee at such bank or other financial institution and in such currency as the Trustee may think fit. If that bank or institution is the Trustee or a Subsidiary, holding or associated company of the Trustee, it need only account for an amount of interest equal to the amount of interest which would, at then current rates, be payable by it on such a deposit to an independent customer. The Trustee may at any time vary any such investments for or into other investments or convert any moneys so deposited into any other currency and shall not be responsible for any loss resulting from any such investments or deposits, whether due to depreciation in value, fluctuations in exchange rates or otherwise.

13.

PARTIAL PAYMENTS

Upon any payment under Clause 10 (other than payment in full against surrender of a Note, Receipt or Coupon) the Note, Receipt or Coupon in respect of which such payment is made shall be produced to the Trustee or the Paying Agent by or through whom such payment is made and the Trustee shall or shall cause such Paying Agent to enface thereon a memorandum of the amount and the date of payment but the Trustee may, in any particular case, dispense with such production and enfacement upon such indemnity being given as it shall think sufficient.

14. COVENANTS BY THE ISSUER AND THE GUARANTOR

(A) The Issuer covenants with the Trustee that, so long as any of the Notes remains outstanding (or, in the case of paragraphs (viii), (ix), (xiii), (xiv), (xvi) and (xviii), so long as any of such Notes or the relative Receipts or Coupons remains liable to prescription or, in the case of subparagraph (xv), until the expiry of a period of 30 days after the Relevant Date) it shall:

(i)	at all times carry on and conduct its affairs and procure its Subsidiaries to carry on and conduct their respective affairs in a proper and efficient manner;
(ii)	give or procure to be given to the Trustee such opinions, certificates and information as it shall require and in such form as it shall require (including without limitation the procurement of all such certificates called for by the Trustee pursuant to Clause 16(C)) for the purpose of the discharge or exercise of the duties, trusts, powers, authorities and discretions vested in it under these presents or by operation of law;
(iii)	cause to be prepared and certified by its Auditors in respect of each annual financial accounting period accounts in such form as will comply with all relevant legal and accounting requirements and all requirements for the time being of the relevant Stock Exchange;
(iv)	at all times keep proper books of account and allow the Trustee and any person appointed by the Trustee to whom the Issuer shall have no reasonable objection free access to such books of account at all reasonable times during normal business hours;
(v)	send to the Trustee (in addition to any copies to which it may be entitled as a holder of any securities of the Issuer) two copies in English of every balance sheet, profit and loss account, report, circular and notice of general meeting and every other document issued or sent to its shareholders together with any of the foregoing, and every document issued or sent to holders of securities other than its shareholders (including the Noteholders) as soon as practicable after the issue or publication thereof;

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(vi)	forthwith give notice in writing to the Trustee of the occurrence of any Event of Default or Potential Event of Default;
(vii)	give to the Trustee (a) within seven days after demand by the Trustee therefor and (b) (without the necessity for any such demand) promptly after the publication of its audited accounts in respect of each financial year commencing with the financial year ending 28 February 2006 and in any event not later than 180 days after the end of each such financial year, a certificate signed by two of its Directors, to the effect that as at a date not more than seven days before delivering such certificate (the relevant certification date) there did not exist and had not existed since the relevant certification date of the previous certificate (or in the case of the first such certificate the date hereof) any Event of Default or any Potential Event of Default (or if such exists or existed, specifying the same) and that during the period from and including the relevant certification date of the last such certificate (or in the case of the first such certificate the date hereof) to and including the relevant certification date of such certificate the Issuer has complied with all its obligations contained in these presents or (if such is not the case) specifying the respects in which it has not complied;
(viii)	at all times execute and do all such further documents, acts and things as may be necessary at any time or times in the opinion of the Trustee for the purpose of discharging its functions under, or giving effect to, these presents;
(ix)	at all times maintain an Agent, other Paying Agents, a Calculation Agent and Reference Banks in accordance with the Conditions;
(x)	procure the Agent to notify the Trustee forthwith in the event that it does not, on or before the due date for any payment in respect of the Notes or any of them or any of the relative Receipts or Coupons, receive unconditionally pursuant to the Agency Agreement payment of the full amount in the relevant currency of the moneys payable on such due date on all such Notes, Receipts or Coupons as the case may be;
(xi)	in the event of the unconditional payment to the Agent or the Trustee of any sum due in respect of the Notes or any of them or any of the relative Receipts or Coupons being made after the due date for payment thereof forthwith give or procure to be given notice to the relevant Noteholders in accordance with Condition 13 that such payment has been made;
(xii)	use all reasonable endeavours to maintain the quotation or listing on the relevant Stock Exchange of those of the Notes which are quoted or listed on the relevant Stock Exchange or, if it is unable to do so having used such all reasonable endeavours, use all reasonable endeavours to obtain and maintain a quotation or listing of such Notes issued by it on such other stock exchange or exchanges or securities market or markets as the Issuer may (with the prior written approval of the Trustee) decide and shall also upon obtaining a quotation or listing of such Notes issued by it on such other stock exchange or exchanges or securities market or markets enter into a trust deed supplemental to this Trust Deed to effect such consequential amendments to these presents as the Trustee may require or as shall be requisite to comply with the requirements of any such stock exchange or securities market provided that the Issuer shall not be obliged to maintain any listing of the Notes on a regulated market in the European Economic Area in circumstances where:

(a) a listing or admission to trading of such Notes on such regulated market in the European Economic Area would require the Issuer (1) to prepare financial statements in accordance with auditing standards other than U.S. GAAP or (2) to provide additional information and/or a report from its auditors as a result of differences between U.S. GAAP and International Financial Reporting Standards; or

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(b) the EU Financial Services Action Plan is implemented in a manner that, in the reasonable opinion of the Issuer, is unduly burdensome (as certified by the Issuer to the Trustee in a certificate signed by two Directors of the Issuer),

in which event the Issuer may, but shall not be obliged to, seek an alternative listing for any such Notes on or by such Stock Exchange as may be agreed between the Issuer and the Trustee;

(xiii)	give notice to the Noteholders in accordance with Condition 13 of any appointment, resignation or removal of any Agent, Calculation Agent, Reference Bank or other Paying Agent (other than the appointment of the initial Agent, Calculation Agent, Reference Banks and other Paying Agents) after having obtained the prior written approval of the Trustee thereto or any change of any Paying Agent’s or Reference Bank’s specified office and (except as provided by the Agency Agreement or the Conditions) at least 30 days prior to such event taking effect; PROVIDED ALWAYS THAT so long as any of the Notes, Receipts or Coupons remains liable to prescription in the case of the termination of the appointment of the Agent or the Calculation Agent no such termination shall take effect until a new Agent or Calculation Agent (as the case may be) has been appointed on terms previously approved in writing by the Trustee;
(xiv)	obtain the prior written approval of the Trustee to, and promptly give to the Trustee two copies of, the form of every notice given to the holders of any Notes issued by it in accordance with Condition 13 (such approval, unless so expressed, not to constitute approval for the purposes of Section 21 of the Financial Services and Markets Act 2000 (the FSMA) of a communication within the meaning of Section 21 of the FSMA);
(xv)	if payments of principal or interest in respect of the Notes or relative Receipts or Coupons by the Issuer shall become subject generally to the taxing jurisdiction of any territory or any political sub-division or any authority therein or thereof having power to tax other than or in addition to the United States of America or any political sub-division or any authority therein or thereof having power to tax, immediately upon becoming aware thereof, notify the Trustee in writing of such event and (unless the Trustee otherwise agrees) enter forthwith into a trust deed supplemental to this Trust Deed, giving to the Trustee an undertaking or covenant in form and manner satisfactory to the Trustee in terms corresponding to the terms of Condition 7 with the substitution for (or, as the case may be, the addition to) the references therein to the United States of America or any political sub-division thereof or any authority therein or thereof having power to tax of references to that other or additional territory or any political sub-division thereof or any authority therein or thereof having power to tax to whose taxing jurisdiction such payments shall have become subject as aforesaid such trust deed also (where applicable) to modify Condition 6(b) so that such Condition shall make reference to the other or additional territory, any political sub-division thereof and any authority therein or thereof having power to tax;
(xvi)	comply with and perform all its obligations under the Agency Agreement and use all reasonable endeavours to procure that the Agent and the other Paying Agents comply with and perform all their respective obligations thereunder and any notice given by the Trustee pursuant to Clause 2(C)(i) and that the Calculation Agent complies with and performs all its obligations under the relative calculation agency agreement and not make any amendment or modification to such Agreement without the prior written approval of the Trustee;
(xvii)	in order to enable the Trustee to ascertain the nominal amount of the Notes of each Series for the time being outstanding for any of the purposes referred to in the proviso to the definition of outstanding in Clause 1, deliver to the Trustee as soon as practicable upon being so requested in writing by the Trustee, a certificate in writing signed by two of its Directors,

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setting out the total number and aggregate nominal amount of the Notes of each Series issued which:

(a)	up to and including the date of such certificate have been purchased by the Issuer or any Subsidiary of the Issuer and cancelled; and
(b)	are at the date of such certificate held by, for the benefit of, or on behalf of, the Issuer or any Subsidiary of the Issuer;

(xviii)	procure its Subsidiaries to comply with all applicable provisions of Condition 6(h);
(xix)	use all reasonable endeavours to procure that each of the Paying Agents makes available for inspection by Noteholders, Receiptholders and Couponholders at its specified office copies of these presents, the Agency Agreement and the then latest audited balance sheet and profit and loss account (consolidated if applicable) of the Issuer and the Guarantor;
(xx)	if, in accordance with the provisions of the Conditions, interest in respect of the Notes becomes payable at the specified office of any Paying Agent in the United States of America promptly give notice thereof to the relative Noteholders in accordance with Condition 13;
(xxi)	use all reasonable endeavours to procure that Euroclear and/or Clearstream, Luxembourg (as the case may be) issue(s) any document requested by the Trustee under Clause 16(U) as soon as practicable after such request;
(xxii)	give prior written notice to the Trustee of any proposed redemption pursuant to Condition 6(b) or 6(c) and, if it shall have given notice to the Noteholders of its intention to redeem any Notes pursuant to Condition 6(c), duly proceed to draw (if appropriate) and redeem the relevant Notes accordingly; and
(xxiii)	promptly provide the Trustee with copies of all supplements and/or amendments and/or restatements of the Programme Agreement.

(B) The Guarantor covenants with the Trustee that, so long as any of the Notes remains outstanding (or, in the case of paragraphs (viii) and (xvi), so long as any of such Notes or the relative Receipts or Coupons remains liable to prescription or, in the case of subparagraph (xv), until the expiry of a period of 30 days after the Relevant Date) it shall:

(i)	at all times carry on and conduct its affairs and procure its Subsidiaries to carry on and conduct their respective affairs in a proper and efficient manner;
(ii)	give or procure to be given to the Trustee such opinions, certificates and information as it shall require and in such form as it shall require (including without limitation the procurement of all such certificates called for by the Trustee pursuant to Clause 16(C)) for the purpose of the discharge or exercise of the duties, trusts, powers, authorities and discretions vested in it under these presents or by operation of law;
(iii)	cause to be prepared and certified by its Auditors in respect of each annual financial accounting period accounts in such form as will comply with all relevant legal and accounting requirements and all requirements for the time being of the relevant Stock Exchange;
(iv)	at all times keep proper books of account and allow the Trustee and any person appointed by the Trustee to whom the Guarantor shall have no reasonable objection free access to such books of account at all reasonable times during normal business hours;

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(v)	send to the Trustee (in addition to any copies to which it may be entitled as a holder of any securities of the Guarantor) two copies in English of every balance sheet, profit and loss account, report, circular and notice of general meeting and every other document issued or sent to its shareholders together with any of the foregoing, and every document issued or sent to holders of securities other than its shareholders (including the Noteholders) as soon as practicable after the issue or publication thereof;
(vi)	forthwith give notice in writing to the Trustee of the occurrence of any Event of Default or Potential Event of Default;
(vii)	give to the Trustee (a) within seven days after demand by the Trustee therefor and (b) (without the necessity for any such demand) promptly after the publication of its audited accounts in respect of each financial year commencing with the financial year ending 28 February 2006 and in any event not later than 180 days after the end of each such financial year, a certificate signed by two of its Directors, to the effect that as at a date not more than seven days before delivering such certificate (the relevant certification date) there did not exist and had not existed since the relevant certification date of the previous certificate (or in the case of the first such certificate the date hereof) any Event of Default or any Potential Event of Default (or if such exists or existed, specifying the same) and that during the period from and including the relevant certification date of the last such certificate (or in the case of the first such certificate the date hereof) to and including the relevant certification date of such certificate the Guarantor has complied with all its obligations contained in these presents or (if such is not the case) specifying the respects in which it has not complied;
(viii)	at all times execute and do all such further documents, acts and things as may be necessary at any time or times in the opinion of the Trustee for the purpose of discharging its functions under, or giving effect to, these presents;

(ix)	if payments of principal or interest in respect of the Notes or relative Receipts or Coupons by the Guarantor shall become subject generally to the taxing jurisdiction of any territory or any political sub-division or any authority therein or thereof having power to tax, other than or in addition to the United States of America or any political sub-division or any authority therein or thereof having power to tax, immediately upon becoming aware thereof, notify the Trustee in writing of such event and (unless the Trustee otherwise agrees) enter forthwith into a trust deed supplemental to this Trust Deed, giving to the Trustee an undertaking or covenant in form and manner satisfactory to the Trustee in terms corresponding to the terms of Condition 7 with the substitution for (or, as the case may be, the addition to) the references therein to the United States of America or any political sub-division thereof or any authority therein or thereof having power to tax of references to that other or additional territory or any political sub-division thereof or any authority therein or thereof having power to tax to whose taxing jurisdiction such payments shall have become subject as aforesaid such trust deed also (where applicable) to modify Condition 6(b) so that such Condition shall make reference to the other or additional territory, any political sub-division thereof and any authority therein or thereof having power to tax;
(x)	comply with and perform all its obligations under the Agency Agreement;
(xi)	in order to enable the Trustee to ascertain the nominal amount of the Notes of each Series for the time being outstanding for any of the purposes referred to in the proviso to the definition of outstanding in Clause 1, deliver to the Trustee as soon as practicable upon being so requested in writing by the Trustee, a certificate in writing signed by two of its Directors, setting out the total number and aggregate nominal amount of the Notes of each Series issued which:

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(a)	up to and including the date of such certificate have been purchased by the Guarantor or any Subsidiary of the Guarantor and cancelled; and
(b)	are at the date of such certificate held by, for the benefit of, or on behalf of, the Guarantor or any Subsidiary of the Guarantor; and

(xii) procure its Subsidiaries to comply with all applicable provisions of Condition 6(h).

15. REMUNERATION AND INDEMNIFICATION OF TRUSTEE

(A)	The Issuer shall pay to the Trustee remuneration for its services as trustee of these presents such amount as shall be agreed from time to time by exchange of letters between the Issuer and the Trustee. Such remuneration shall accrue from day to day and be payable (in priority to payments to Noteholders, Receiptholders and Couponholders) up to and including the date when, all the Notes having become due for redemption, the redemption moneys and interest thereon to the date of redemption have been paid to the Agent or the Trustee PROVIDED THAT if upon due presentation of any Note, Receipt or Coupon or any cheque payment of the moneys due in respect thereof is improperly withheld or refused, remuneration will commence again to accrue until payment to such Noteholder, Receiptholder or Couponholder is duly made.
(B)	In the event of the occurrence of an Event of Default or a Potential Event of Default or the Trustee considering it expedient or necessary or being requested by the Issuer to undertake duties which the Trustee and the Issuer agree to be of an exceptional nature or otherwise outside the scope of the normal duties of the Trustee under these presents the Issuer shall pay to the Trustee such additional remuneration as shall be agreed between them.
(C)	The Issuer shall in addition pay to the Trustee an amount equal to the amount of any value added tax or similar tax chargeable in respect of its remuneration under these presents.
(D)	In the event of the Trustee and the Issuer failing to agree:

(1) (in a case to which subclause (A) above applies) upon the amount of the remuneration; or

(2) (in a case to which subclause (B) above applies) upon whether such duties shall be of an exceptional nature or otherwise outside the scope of the normal duties of the Trustee under these presents, or upon such additional remuneration,

such matters shall be determined by a merchant or investment bank (acting as an expert and not as an arbitrator) selected by the Trustee and approved by the Issuer or, failing such approval, nominated (on the application of the Trustee) by the President for the time being of The Law Society of England and Wales (the expenses involved in such nomination and the fees of such merchant or investment bank being payable by the Issuer) and the determination of any such merchant or investment bank shall be final and binding upon the Trustee and the Issuer.

(E)

The Issuer shall also pay or discharge all Liabilities incurred by the Trustee in relation to the preparation and execution of, the exercise of its powers and the performance of its duties under, and in any other manner in relation to, these presents, including but not limited to, travelling expenses and any stamp, issue, registration, documentary and other taxes or duties paid or payable by the Trustee in connection with any action taken by or on behalf of the Trustee for enforcing, or resolving any doubt concerning, or for any other purpose in relation to, these presents.

(F)

The Issuer hereby further undertakes to the Trustee that all monies payable by the Issuer to the Trustee under this clause shall be made without set-off, counterclaim, deduction or withholding unless required by law in which event the Issuer will pay such additional amounts as will result in

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the receipt by the Trustee of the amounts which would otherwise have been payable by the Issuer to the Trustee under this clause in the absence of any such set-off, counterclaim, deduction or withholding.

(G)	All amounts payable pursuant to subclause (E) above and/or Clause 16(J) shall be payable by the Issuer on the date specified in a demand by the Trustee and in the case of payments actually made by the Trustee prior to such demand shall (if not paid within seven days after such demand and the Trustee so requires) carry interest at the rate of two per cent. per annum above the Base Rate from time to time of National Westminster Bank Plc from the date specified in such demand, and in all other cases shall (if not paid on the date specified in such demand or, if later, within seven days after such demand and, in either case, the Trustee so requires) carry interest at such rate from the date specified in such demand. All remuneration payable to the Trustee shall carry interest at such rate from the due date therefor.
(H)	Unless otherwise specifically stated in any discharge of these presents the provisions of this Clause and Clause 16(J) shall continue in full force and effect notwithstanding such discharge.
(I)	The Trustee shall be entitled in its absolute discretion to determine in respect of which Series of Notes any Liabilities incurred under these presents have been incurred or to allocate any such Liabilities between the Notes of any Series.

16.

SUPPLEMENT TO TRUSTEE ACTS

Section 1 of the Trustee Act 2000 shall not apply to the duties of the Trustee in relation to the trusts constituted by these presents. Where there are any inconsistencies between the Trustee Acts and the provisions of these presents, the provisions of these presents shall, to the extent allowed by law, prevail and, in the case of any such inconsistency with the Trustee Act 2000, the provisions of these presents shall constitute a restriction or exclusion for the purposes of that Act. The Trustee shall have all the powers conferred upon trustees by the Trustee Acts and by way of supplement thereto it is expressly declared as follows:

(A)	The Trustee may in relation to these presents act on the advice or opinion of or any information obtained from any lawyer, valuer, accountant, surveyor, banker, broker, auctioneer or other expert whether obtained by the Issuer, the Guarantor, the Trustee or otherwise and shall not be responsible for any Liability occasioned by so acting.
(B)	Any such advice, opinion or information may be sent or obtained by letter, telex, telegram, facsimile transmission, cable or electronic mail and the Trustee shall not be liable for acting on any advice, opinion or information purporting to be conveyed by any such letter, telex, telegram, facsimile transmission or cable although the same shall contain some error or shall not be authentic.
(C)	The Trustee may call for and shall be at liberty to accept as sufficient evidence of any fact or matter or the expediency of any transaction or thing, a certificate signed by any two Directors of the Issuer or by any two Directors of the Guarantor, and the Trustee shall not be bound in any such case to call for further evidence or be responsible for any Liability that may be occasioned by it or any other person acting on such certificate.
(D)	The Trustee shall be at liberty to hold these presents and any other documents relating thereto or to deposit them in any part of the world with any banker or banking company or company whose business includes undertaking the safe custody of documents or lawyer or firm of lawyers considered by the Trustee to be of good repute and the Trustee shall not be responsible for or required to insure against any Liability incurred in connection with any

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such holding or deposit and may pay all sums required to be paid on account of or in respect of any such deposit.

(E)	The Trustee shall not be responsible for the receipt or application of the proceeds of the issue of any of the Notes by the Issuer, the exchange of any Global Note for another Global Note or Definitive Notes or the delivery of any Global Note or Definitive Notes to the person(s) entitled to it or them.
(F)	The Trustee shall not be bound to give notice to any person of the execution of any documents comprised or referred to in these presents or to take any steps to ascertain whether any Event of Default or any Potential Event of Default has occurred and, until it shall have actual knowledge or express notice pursuant to these presents to the contrary, the Trustee shall be entitled to assume that no Event of Default or Potential Event of Default has occurred and that each of the Issuer and the Guarantor is observing and performing all its obligations under these presents.
(G)	Save as expressly otherwise provided in these presents, the Trustee shall have absolute and uncontrolled discretion as to the exercise or non-exercise of its trusts, powers, authorities and discretions under these presents (the exercise or non-exercise of which as between the Trustee and the Noteholders, the Receiptholders and Couponholders shall be conclusive and binding on the Noteholders, the Receiptholders and Couponholders) and shall not be responsible for any Liability which may result from their exercise or non-exercise and in particular the Trustee shall not be bound to act at the request or direction of the Noteholders or otherwise under any provision of these presents or to take at such request or direction or otherwise any other action under any provision of these presents, without prejudice to the generality of subclause 9(A), unless it shall first be indemnified or secured to its satisfaction against all Liabilities to which it may render itself liable or which it may incur by so doing.
(H)	The Trustee shall not be liable to any person by reason of having acted upon any Extraordinary Resolution in writing or any Extraordinary Resolution or other resolution purporting to have been passed at any meeting of the holders of Notes of all or any Series in respect whereof minutes have been made and signed or any direction or request of Noteholders even though subsequent to its acting it may be found that there was some defect in the constitution of the meeting or the passing of the resolution or (in the case of an Extraordinary Resolution in writing) that not all such holders had signed the Extraordinary Resolution or (in the case of direction or request) it was not signed by the requisite number of Noteholders or that for any reason the resolution was not valid or binding upon such holders and the relative Receiptholders and Couponholders.

(I)	The Trustee shall not be liable to any person by reason of having accepted as valid or not having rejected any Note, Receipt or Coupon purporting to be such and subsequently found to be forged or not authentic.
(J)	Without prejudice to the right of indemnity by law given to trustees, each of the Issuer and the Guarantor shall indemnify the Trustee and every Appointee and keep it or him indemnified against all Liabilities to which it or he may be or become subject or which may be incurred by it or him in the execution or purported execution of any of its or his trusts, powers, authorities and discretions under these presents or its or his functions under any such appointment or in respect of any other matter or thing done or omitted in any way relating to these presents or any such appointment.
(K)	Any consent or approval given by the Trustee for the purposes of these presents may be given on such terms and subject to such conditions (if any), as the Trustee thinks fit and notwithstanding anything to the contrary in these presents, may be given retrospectively.

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The Trustee may give any consent or approval, exercise any power, authority or discretion or take any similar action (whether or not such consent, approval, power, authority, discretion or action is specifically referred to in these presents) if it is satisfied that the interests of the Noteholders will not be materially prejudiced thereby. For the avoidance of doubt, the Trustee shall not have any duty to the Noteholders in relation to such matters other than that which is contained in the preceding sentence.

(L)	The Trustee shall not (unless and to the extent ordered so to do by a court of competent jurisdiction) be required to disclose to any Noteholder, Receiptholder or Couponholder any information (including, without limitation, information of a confidential, financial or price sensitive nature) made available to the Trustee by the Issuer, the Guarantor or any other person in connection with these presents and no Holder, Receiptholder or Couponholder shall be entitled to take any action to obtain from the Trustee any such information.
(M)	Where it is necessary or desirable for any purpose in connection with these presents to convert any sum from one currency to another it shall (unless otherwise provided by these presents or required by law) be converted at such rate or rates, in accordance with such method and as at such date for the determination of such rate of exchange, as may be agreed by the Trustee in consultation with the Issuer and any rate, method and date so agreed shall be binding on the Issuer, the Guarantor, the Noteholders, the Receiptholders and the Couponholders.
(N)	The Trustee as between itself and the Noteholders, the Receiptholders and the Couponholders may determine all questions and doubts arising in relation to any of the provisions of these presents. Every such determination, whether or not relating in whole or in part to the acts or proceedings of the Trustee, shall be conclusive and shall bind the Trustee and the Noteholders, the Receiptholders and the Couponholders.
(O)	In connection with the exercise by it of any of its trusts, powers, authorities or discretions under these presents (including, without limitation, any modification, waiver, authorisation or determination), the Trustee shall have regard to the general interests of the Noteholders as a class but shall not have regard to any interests arising from circumstances particular to individual Noteholders, Receiptholders or Couponholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of such exercise for individual Noteholders, Receiptholders or Couponholders (whatever their number) resulting from their being, for any purpose, domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Noteholder, Receiptholder or Couponholder be entitled to claim, from the Issuer, the Guarantor, the Trustee or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders, the Receiptholders or Couponholders except to the extent already provided for in Condition 7 and/or any undertaking given in addition thereto or in substitution therefor under these presents.
(P)	Any trustee of these presents being a lawyer, accountant, broker or other person engaged in any profession or business shall be entitled to charge and be paid all usual professional and other charges properly incurred for business transacted and acts done by him or his firm in connection with the trusts of these presents and also his reasonable charges in addition to disbursements for all other work and business done and all time spent by him or his firm in connection with matters arising in connection with these presents.

(Q) The Trustee may whenever it thinks fit, subject to the consent of the Issuer (such consent not to be unreasonably withheld) except following the occurrence of an Event of Default or a Potential Event of Default or if the Trustee has reasonable grounds to believe that an Event

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of Default or a Potential Event of Default has occurred or is about to occur or if the Trustee has been advised by its legal advisers that such delegation is necessary in order to avoid a conflict of interest or a possible conflict of interest, in each of which cases no such consent of the Issuer as aforesaid shall be required, delegate by power of attorney or otherwise to any person or persons or fluctuating body of persons (whether being a joint trustee of these presents or not) all or any of its trusts, powers, authorities and discretions under these presents. Such delegation may be made upon such terms (including power to sub-delegate) and subject to such conditions and regulations as the Trustee may in the interests of the Noteholders think fit. Provided that the Trustee shall have exercised reasonable care in the selection of such delegate the Trustee shall not be under any obligation to supervise the proceedings or acts of any such delegate or sub-delegate or be in any way responsible for any Liability incurred by reason of any misconduct or default on the part of any such delegate or sub-delegate. The Trustee shall within a reasonable time after any such delegation or any renewal, extension or termination thereof give notice thereof to the Issuer.

(R)	The Trustee may, after consultation with the Issuer and the Guarantor, unless, in the opinion of the Trustee, such consultation would be materially prejudicial to the interests of the Noteholders in the conduct of the trusts of these presents instead of acting personally employ and pay an agent (whether being a lawyer or other professional person) to transact or conduct, or concur in transacting or conducting, any business and to do, or concur in doing, all acts required to be done in connection with these presents (including the receipt and payment of money). Provided that the Trustee shall have exercised reasonable care in the selection of such agent the Trustee shall not be in any way responsible for any Liability incurred by reason of any misconduct or default on the part of any such agent or be bound to supervise the proceedings or acts of any such agent. The Trustee shall within a reasonable time after appointing such an agent or after any renewal, extension or termination of such an appointment give notice thereof to the Issuer and the Guarantor.
(S)	The Trustee may, after consultation with the Issuer and the Guarantor, unless, in the opinion of the Trustee, such consultation would be materially prejudicial to the interests of the Noteholders, appoint and pay any person to act as a custodian or nominee on any terms in relation to such assets of the trusts constituted by these presents as the Trustee may determine, including for the purpose of depositing with a custodian these presents or any document relating to the trusts constituted by these presents and provided that the Trustee shall have exercised reasonable care in the selection of such custodian or nominee the Trustee shall not be responsible for any Liability incurred by reason of the misconduct, omission or default on the part of any person appointed by it hereunder or be bound to supervise the proceedings or acts of such person; the Trustee is not obliged to appoint a custodian if the Trustee invests in securities payable to bearer. The Trustee shall within a reasonable time after appointing such a custodian or nominee or after any renewal, extension or termination of such an appointment give notice thereof to the Issuer and the Guarantor.
(T)	The Trustee shall not be responsible for the execution, delivery, legality, effectiveness, adequacy, genuineness, validity, performance (other than its own), enforceability or admissibility in evidence of these presents or any other document relating or expressed to be supplemental thereto and shall not be liable for any failure to obtain any licence, consent or other authority for the execution, delivery, legality, effectiveness, adequacy, genuineness, validity, performance (other than its own), enforceability or admissibility in evidence of these presents or any other document relating or expressed to be supplemental thereto.
(U)	The Trustee may call for any certificate or other document and/or evidence and/or information and/or certification to be issued or given by Euroclear or Clearstream, Luxembourg as to the nominal amount of Notes represented by a Global Note standing to the account of any person. Any such certificate or other document shall be conclusive and

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binding for all purposes. Any such certificate or other document may comprise any form of statement or print out of electronic records provided by the relevant clearing system (including Euroclear’s EUCLID or Clearstream, Luxembourg’s Cedcom system) in accordance with its usual procedures and in which the holder of a particular principal amount of Notes is clearly identified together with the amount of such holding. The Trustee shall not be liable to any person by reason of having accepted as valid or not having rejected any certificate or other document and/or evidence and/or information and/or certification to such effect purporting to be issued or given by Euroclear or Clearstream, Luxembourg and subsequently found to be forged or not authentic.

(V)	Any certificate or report of the Auditors of the Issuer or any other person called for by or provided to the Trustee (whether or not addressed to the Trustee) in accordance with or for the purposes of these presents may be relied upon by the Trustee as sufficient evidence of the facts stated therein notwithstanding that such certificate or report and/or any engagement letter or other document entered into by the Trustee in connection therewith contains a monetary or other limit on the liability of the Auditors of the Issuer or such other person in respect thereof and notwithstanding that the scope and/or basis of such certificate or report may be limited by any engagement or similar letter or by the terms of the certificate or report itself.
(W)	The Trustee shall not be responsible to any person for failing to request, require or receive any legal opinion relating to the Notes or for checking or commenting upon the content of any such legal opinion and shall not be responsible for any Liability incurred thereby.
(X)	Subject to the requirements, if any, of the Stock Exchange, any corporation into which the Trustee shall be merged or with which it shall be consolidated or any company resulting from any such merger or consolidation shall be a party hereto and shall be the Trustee under these presents without executing or filing any paper or document or any further act on the part of the parties hereto.

(Y)	The Trustee shall not be bound to take any action in connection with these presents or any obligations arising pursuant thereto, including, without prejudice to the generality of the foregoing, forming any opinion or employing any financial adviser, where it is not reasonably satisfied that it will be indemnified (by or on behalf of the Noteholders or, as the case may be, each person or persons requesting it to take such action or form such opinion) against all Liabilities which may be incurred in connection with such action and may demand prior to taking any such action that there be paid to it in advance such sums as it reasonably considers (without prejudice to any further demand) shall be sufficient so to indemnify it.
(Z)	No provision of these presents shall require the Trustee to do anything which may (i) be illegal or contrary to applicable law or regulation; or (ii) cause it to expend or risk its own funds or otherwise incur any Liability in the performance of any of its duties or in the exercise of any of its rights, powers or discretions, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or Liability (whether by the Noteholders or by or on behalf of any other person or persons) is not assured to it.
(AA)	Unless notified to the contrary, the Trustee shall be entitled to assume without enquiry (other than requesting a certificate pursuant to subclause 14(xvii)) that no Notes are held by, for the benefit of, or on behalf of, the Issuer, the Guarantor or any other Subsidiary of the Issuer.

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(BB) The Trustee shall have no responsibility whatsoever to the Issuer, the Guarantor, any Noteholder or Couponholder or any other person for the maintenance of or failure to maintain any rating of any of the Notes by any rating agency.

(CC) The Trustee shall not be responsible for, or for investigating any matter which is the subject of, any recital, statement, representation, warranty or covenant of any person contained in these presents, or any other agreement or document relating to the transactions contemplated in these presents or under such other agreement or document.

17.

TRUSTEE’S LIABILITY

Nothing in these presents shall in any case in which the Trustee has failed to show the degree of care and diligence required of it as trustee having regard to the provisions of these presents conferring on it any trusts, powers, authorities or discretions exempt the Trustee from or indemnify it against any Liability for gross negligence, wilful default, fraud or breach of trust of which it may be guilty in relation to its duties under these presents.

18.	TRUSTEE CONTRACTING WITH THE ISSUER AND THE GUARANTOR
	Neither the Trustee nor any director or officer or holding company, Subsidiary or associated company of a corporation acting as a trustee under these presents shall, by reason of its or his fiduciary position, be in any way precluded from:

(i) entering into or being interested in any contract or financial or other transaction or arrangement with the Issuer or the Guarantor or any person or body corporate associated with the Issuer or the Guarantor (including without limitation any contract, transaction or arrangement of a banking or insurance nature or any contract, transaction or arrangement in relation to the making of loans or the provision of financial facilities or financial advice to, or the purchase, placing or underwriting of or the subscribing or procuring subscriptions for or otherwise acquiring, holding or dealing with, or acting as paying agent in respect of, the Notes or any other notes, bonds, stocks, shares, debenture stock, debentures or other securities of, any Issuer or any person or body corporate associated as aforesaid); or

(ii) accepting or holding the trusteeship of any other trust deed constituting or securing any other securities issued by or relating to the Issuer or the Guarantor or any such person or body corporate so associated or any other office of profit under the Issuer or the Guarantor or any such person or body corporate so associated,

and shall be entitled to exercise and enforce its rights, comply with its obligations and perform its duties under or in relation to any such contract, transaction or arrangement as is referred to in (i) above or, as the case may be, any such trusteeship or office of profit as is referred to in (ii) above, without regard to the interests of the Noteholders and notwithstanding that the same may be contrary or prejudicial to the interests of the Noteholders and shall not be responsible for any Liability occasioned to the Noteholders thereby and shall be entitled to retain and shall not be in any way liable to account for any profit made or share of brokerage or commission or remuneration or other amount or benefit received thereby or in connection therewith.

Where any holding company, Subsidiary or associated company of the Trustee or any director or officer of the Trustee acting other than in his capacity as such a director or officer has any information, the Trustee shall not thereby be deemed also to have knowledge of such information and, unless it shall have actual knowledge of such information, shall not be responsible for any loss suffered by Noteholders resulting from the Trustee’s failing to take such information into account in acting or refraining from acting under or in relation to these presents.

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19.

WAIVER, AUTHORISATION AND DETERMINATION

(A)

The Trustee may, without the consent or sanction of the Noteholders, the Receiptholders or the Couponholders and without prejudice to its rights in respect of any subsequent breach, Event of Default or Potential Event of Default from time to time and at any time but only if and in so far as in its opinion the interests of the Noteholders shall not be materially prejudiced thereby, waive or authorise any breach or proposed breach by the Issuer or the Guarantor of any of the covenants or provisions contained in these presents or determine that any Event of Default or Potential Event of Default shall not be treated as such for the purposes of these presents PROVIDED ALWAYS THAT the Trustee shall not exercise any powers conferred on it by this Clause in contravention of any express direction given by Extraordinary Resolution or by a request under Condition 9 but so that no such direction or request shall affect any waiver, authorisation or determination previously given or made. Any such waiver, authorisation or determination may be given or made on such terms and subject to such conditions (if any) as the Trustee may determine, shall be binding on the Noteholders, the Receiptholders and the Couponholders and, if, but only if, the Trustee shall so require, shall be notified by the Issuer to the Noteholders in accordance with Condition 13 as soon as practicable thereafter.

MODIFICATION

(B) The Trustee may, without the consent or sanction of the Noteholders, the Receiptholders or the Couponholders, at any time and from time to time, concur with the Issuer in making any modification (i) to these presents which in the opinion of the Trustee it may be proper to make, PROVIDED THAT the Trustee is of the opinion that such modification will not be materially prejudicial to the interests of the Noteholders or (ii) to these presents, if in the opinion of the Trustee, such modification is of a formal, minor or technical nature or to correct a manifest error or an error which is, in the opinion of the Trustee, proven. Any such modification may be made on such terms and subject to such conditions (if any) as the Trustee may determine, shall be binding upon the Noteholders, the Receiptholders and the Couponholders and, unless the Trustee agrees otherwise, shall be notified by the Issuer to the Noteholders in accordance with Condition 13 as soon as practicable thereafter.

BREACH

(C) Any breach of or failure to comply with any such terms and conditions as are referred to in subclauses (A) and (B) of this Clause shall constitute a default by the Issuer or the Guarantor in the performance or observance of a covenant or provision binding on it under or pursuant to these presents.

CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER

(D) (1 ) The Issuer shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any person, unless:

(a) the corporation formed by such consolidation or into which the Issuer is merged or the person which acquires by conveyance or transfer, the properties and assets of the Issuer substantially as an entirety shall be a corporation organised and existing under the laws of the United States of America, any political subdivision thereof or any State thereof and shall expressly assume, by a trust deed supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and interest on all the Notes and the performance of every covenant of these presents on the part of the Issuer to be performed or observed;

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(b)	immediately after giving effect to such transaction, no Event of Default or Potential Event of Default shall have occurred;
(c)	the Issuer has delivered to the Trustee a certificate signed by two of its Directors and an opinion of counsel acceptable to the Trustee, each stating that such consolidation, merger, conveyance or transfer and such supplemental trust deed comply with this paragraph (1) and that all conditions precedent herein provided for relating to such transaction have been complied with; and
(d)	the Guarantor has delivered to the Trustee a certificate signed by two of its Directors and an opinion of counsel acceptable to the Trustee, each stating that the Guarantor’s obligations under these presents shall remain in full force and effect thereafter.

(2)

Upon any consolidation with or merger into any other corporation, or any conveyance or transfer of the properties and assets of the Issuer substantially as an entirety, in each case in accordance with paragraph (1) above, the successor corporation formed by such consolidation or into which the Issuer is merged or the successor person to which such conveyance or transfer is made, shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under these presents with the same effect as if such successor had been named as the Issuer herein, and thereafter the predecessor corporation shall be relieved of all obligations and covenants under these presents.

(3)

The Guarantor shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any person, unless:

(a)	the corporation formed by such consolidation or into which the Guarantor is merged or the person which acquires by conveyance or transfer, the properties and assets of the Guarantor substantially as an entirety shall be a corporation organised and existing under the laws of the United States of America, any political subdivision thereof or any State thereof and shall expressly assume, by a trust deed supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the obligations of the Guarantor contained in Clause 7 and the performance of every covenant contained in these presents on the part of the Guarantor to be performed or observed;
(b)	immediately after giving effect to such transaction, no Event of Default or Potential Event of Default shall have occurred; and
(c)	the Guarantor has delivered to the Trustee a certificate signed by two of its Directors and an opinion of counsel acceptable to the Trustee, each stating that such consolidation, merger, conveyance or transfer and such supplemental trust deed comply with this paragraph (3) and that all conditions precedent herein provided for relating to such transaction have been complied with.

(4) Upon any consolidation with or merger into any other corporation, or any conveyance or transfer of the properties and assets of the Guarantor substantially as an entirety, in each case in accordance with paragraph (3) above, the successor corporation formed by such consolidation or into which the Guarantor is merged or the successor person to which such conveyance or transfer is made, shall succeed to, and be substituted for, and may exercise every right and power of, the Guarantor under these presents with the same effect as if such successor had been named as the Guarantor herein, and thereafter the predecessor corporation shall be relieved of all obligations and covenants under these presents.

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20.

HOLDER OF DEFINITIVE NOTE ASSUMED TO BE RECEIPTHOLDER AND COUPONHOLDER

(A)

Wherever in these presents the Trustee is required or entitled to exercise a power, trust, authority or discretion under these presents, except as ordered by a court of competent jurisdiction or as required by applicable law, the Trustee shall, notwithstanding that it may have express notice to the contrary, assume that each Noteholder is the holder of all Receipts and Coupons appertaining to each Definitive Note of which he is the holder.

NO NOTICE TO RECEIPTHOLDERS OR COUPONHOLDERS

(B)	Neither the Trustee nor the Issuer shall be required to give any notice to the Receiptholders or Couponholders for any purpose under these presents and the Receiptholders or Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the holders of Bearer Notes in accordance with Condition 13.
21.	CURRENCY INDEMNITY
	Each of the Issuer and the Guarantor shall severally indemnify the Trustee, every Appointee, the Noteholders, the Receiptholders and the Couponholders and keep them indemnified against:

(a)

any Liability incurred by any of them arising from the non-payment by the Issuer or the Guarantor of any amount due to the Trustee or the holders of the Notes issued by the Issuer or the Guarantor and the relative Receiptholders or Couponholders under these presents, by reason of any variation in the rates of exchange between those used for the purposes of calculating the amount due under a judgment or order in respect thereof and those prevailing at the date of actual payment by the Issuer or the Guarantor; and

(b)

any deficiency arising or resulting from any variation in rates of exchange between (i) the date as of which the local currency equivalent of the amounts due or contingently due under these presents (other than this Clause) is calculated for the purposes of any bankruptcy, insolvency or liquidation of the Issuer or the Guarantor and (ii) the final date for ascertaining the amount of claims in such bankruptcy, insolvency or liquidation. The amount of such deficiency shall be deemed not to be reduced by any variation in rates of exchange occurring between the said final date and the date of any distribution of assets in connection with any such bankruptcy, insolvency or liquidation.

The above indemnities shall constitute obligations of the Issuer and the Guarantor separate and independent from their other obligations under the other provisions of these presents and shall apply irrespective of any indulgence granted by the Trustee or the Noteholders, the Receiptholders or the Couponholders from time to time and shall continue in full force and effect, notwithstanding the judgment or filing of any proof or proofs in any bankruptcy, insolvency or liquidation of the Issuer or the Guarantor for a liquidated sum or sums in respect of amounts due under these presents (other than this Clause). Any such deficiency as aforesaid shall be deemed to constitute a loss suffered by the Noteholders, the Receiptholders and the Couponholders and no proof or evidence of any actual loss shall be required by the Issuer or the Guarantor or its liquidator or liquidators.

22.

NEW TRUSTEE

(A)

The power to appoint a new trustee of these presents shall be vested in the Issuer but no person shall be appointed who shall not previously have been approved by an Extraordinary Resolution. One or more persons may hold office as trustee or trustees of these presents but such trustee or trustees shall be or include a Trust Corporation. Whenever there shall be more than two trustees of these presents, the majority of such trustees shall be competent to execute and exercise all the duties, powers, trusts,

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authorities and discretions vested in the Trustee by these presents, provided that a Trust Corporation shall be included in such majority. Any appointment of a new trustee of these presents shall as soon as practicable thereafter be notified by the Issuer to the Agent and the Noteholders.

SEPARATE AND CO-TRUSTEES

(B) Notwithstanding the provisions of subclause (A) above, the Trustee may, upon giving prior notice to the Issuer (but without the consent of the Issuer, the Guarantor, the Noteholders, the Receiptholders or the Couponholders), appoint any person established or resident in any jurisdiction (whether a Trust Corporation or not) to act either as a separate trustee or as a co-trustee jointly with the Trustee:

(i)	if the Trustee considers such appointment to be in the interests of the Noteholders;
(ii)	for the purposes of conforming to any legal requirements, restrictions or conditions in any jurisdiction in which any particular act or acts is or are to be performed; or
(iii)	for the purposes of obtaining a judgment in any jurisdiction or the enforcement in any jurisdiction of either a judgment already obtained or any of the provisions of these presents against the Issuer or the Guarantor.

Each of the Issuer and the Guarantor irrevocably appoints the Trustee to be its attorney in its name and on its behalf to execute any such instrument of appointment. Such a person shall (subject always to the provisions of these presents) have such trusts, powers, authorities and discretions (not exceeding those conferred on the Trustee by these presents) and such duties and obligations as shall be conferred or imposed by the instrument of appointment. The Trustee shall have power in like manner to remove any such person. Such reasonable remuneration as the Trustee may pay to any such person, together with any attributable Liabilities incurred by it in performing its function as such separate trustee or co-trustee, shall, for the purposes of these presents, be treated as Liabilities incurred by the Trustee.

23. TRUSTEE’S RETIREMENT AND REMOVAL

A trustee of these presents may retire at any time on giving not less than 60 days prior written notice to the Issuer, without giving any reason and without being responsible for any Liabilities incurred by reason of such retirement. The Noteholders may, by Extraordinary Resolution, remove any trustee or trustees for the time being of these presents. The Issuer and the Guarantor undertake that in the event of the only trustee of these presents which is a Trust Corporation giving notice under this Clause or being removed by Extraordinary Resolution, they will use reasonable endeavours to procure that a new trustee of these presents, being a Trust Corporation, is appointed as soon as reasonably practicable thereafter. The retirement or removal of any such trustee shall not become effective until a successor trustee being a Trust Corporation is appointed. If, in such circumstances, no appointment of such a new trustee has become effective within 60 days of the date of such notice or Extraordinary Resolution, the Trustee shall be entitled to appoint a Trust Corporation as trustee of these presents, but no such appointment shall take effect unless previously approved by an Extraordinary Resolution.

24. TRUSTEE’S POWERS TO BE ADDITIONAL

The powers conferred upon the Trustee by these presents shall be in addition to any powers which may from time to time be vested in the Trustee by the general law or as a holder of any of the Notes, Receipts or Coupons.

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25.	NOTICES
	Any notice or demand to the Issuer, the Guarantor or the Trustee to be given, made or served for any purposes under these presents shall be given, made or served by sending the same by pre-paid post (first class if inland, first class airmail if overseas) or facsimile transmission or by delivering it by hand as follows:

to the Issuer	4500 Park Granada Calabasas California 91302 U.S.A.
	(Attention:	Jennifer Sandefur
		Senior Managing Director and
		Treasurer)
	Facsimile No.	001 818 225 4001
to the Guarantor:	4500 Park Granada
	Calabasas
	California 91302
	U.S.A.
	(Attention:	Jennifer Sandefur
		Senior Managing Director
		and Treasurer)
	Facsimile No.	001 818 225 4001
to the Trustee:	Winchester House
	1 Great Winchester Street
	London EC2N 2DB
	(Attention:	the Managing Director)
	Facsimile No.	+44 207 547 5782

or to such other address or facsimile number as shall have been notified (in accordance with this Clause) to the other parties hereto and any notice or demand sent by post as aforesaid shall be deemed to have been given, made or served three days in the case of inland post or seven days in the case of overseas post after despatch and any notice or demand sent by facsimile transmission as aforesaid shall be deemed to have been given, made or served 24 hours after the time of despatch, provided that in the case of a notice or demand given by facsimile transmission, such notice or demand shall forthwith be confirmed by post. The failure of the addressee to receive such confirmation shall not invalidate the relevant notice or demand given by facsimile transmission.

26.	GOVERNING LAW
	These presents are governed by, and shall be construed in accordance with, English law.

27.

SUBMISSION TO JURISDICTION

(A)

Each of the Issuer and the Guarantor irrevocably agrees for the benefit of the Trustee, the Noteholders, the Receiptholders and the Couponholders that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with these presents and that accordingly any suit, action or proceedings arising out of or in connection with these presents (together referred to as Proceedings), may be brought in the courts of England. Each of the Issuer

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and the Guarantor irrevocably and unconditionally waives and agrees not to raise any objection which it may have now or subsequently to the laying of the venue of any Proceedings in the courts of England and any claim that any Proceedings have been brought in an inconvenient forum and further irrevocably and unconditionally agrees that a judgment in any Proceedings brought in the courts of England shall be conclusive and binding upon it and may be enforced in the courts of any other jurisdiction. Nothing in this Clause shall limit any right to take Proceedings against the Issuer or the Guarantor in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not.

(B) Each of the Issuer and the Guarantor irrevocably and unconditionally appoints GLN Representatives Limited at its registered office for the time being (being at the date hereof at 20^th Floor, City Point, 1 Ropemaker Street, London EC2Y 9HT) and in the event of its ceasing so to act, will appoint such other person as the Trustee may approve and as the Issuer or the Guarantor may nominate in writing to the Trustee for the purpose of accepting service of process on its behalf in England in respect of any Proceedings. Each of the Issuer and the Guarantor:

(i)	agrees to procure that, so long as any of the Notes issued by it remains liable to prescription, there shall be in force an appointment of such a person approved by the Trustee with an office in London with authority to accept service as aforesaid;
(ii)	agrees that failure by any such person to give notice of such service of process to the Issuer or the Guarantor shall not impair the validity of such service or of any judgment based thereon; and
(iii)	agrees that nothing in these presents shall affect the right to serve process in any other manner permitted by law.

28.	COUNTERPARTS
	This Trust Deed and any trust deed supplemental hereto may be executed and delivered in any number of counterparts, all of which, taken together, shall constitute one and the same deed and any party to this Trust Deed or any trust deed supplemental hereto may enter into the same by executing and delivering a counterpart.
29.	CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
	A person which is not a party to this Trust Deed or any trust deed supplemental hereto has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Trust Deed or any trust deed supplemental hereto, but this does not affect any right or remedy of a third party which exists or is available apart from that Act.

IN WITNESS whereof this Trust Deed has been executed as a deed by the Issuer, the Guarantor and the Trustee and delivered on the date stated on page 1.

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SCHEDULE 1

TERMS AND CONDITIONS OF THE NOTES

     This Note is one of a Series (as defined below) of Notes issued by Countrywide Financial Corporation (the “Issuer”) constituted by a Trust Deed dated 15 August, 2005 (such Trust Deed as modified and/or supplemented and/or restated from time to time, the “Trust Deed”) made between the Issuer, Countrywide Home Loans, Inc. as guarantor (the “Guarantor”) and Deutsche Trustee Company Limited (the “Trustee”, which expression shall include any successor as trustee).

     References herein to the “Notes” shall be references to the Notes of this Series and shall mean:

(i)	in relation to any Notes represented by a global Note, units of the lowest Specified Denomination in the Specified Currency;
(ii)	definitive Notes issued in exchange for a global Note; and
(iii)	any global Note.

     The Notes, the Receipts (as defined below) and the Coupons (as defined below) have the benefit of an amended and restated Agency Agreement (the “Agency Agreement” dated 15 August, 2005 made between the Issuer, the Guarantor, Deutsche Bank AG, London Branch as issuing and principal paying agent and agent bank (the “Agent”, which expression shall include any successor agent specified in the applicable Final Terms), the other paying agents named therein (together, where the context so permits, with the Agent, the “Paying Agents”, which expression shall include any additional or successor paying agents) and the Trustee.

     Interest bearing definitive Notes (unless otherwise indicated in the applicable Final Terms) have interest coupons (“Coupons”) and, if indicated in the applicable Final Terms, talons for further Coupons (“Talons”) attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons. Definitive Notes repayable in instalments have receipts (“Receipts”) for the payment of the instalments of principal (other than the final instalment) attached on issue.

     The Final Terms for this Note (or the relevant provisions thereof) is attached to or endorsed on this Note and supplements these Terms and Conditions and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with these Terms and Conditions, replace or modify these Terms and Conditions for the purposes of this Note. References to the “applicable Final Terms” are to the Final Terms (or the relevant provisions thereof) attached to or endorsed on this Note.

     The Trustee acts for the benefit of the holders for the time being of the Notes (the “Noteholders”, which expression shall, in relation to any Notes represented by a global Note, be construed as provided below), the holders of the Receipts (the “Receiptholders”) and the holders of the Coupons (the “Couponholders”, which expression shall, unless the context otherwise requires, include the holders of the Talons), in accordance with the provisions of the Trust Deed.

     As used herein, “Tranche” means Notes which are identical in all respects (including as to listing) and “Series” means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (i) expressed to be consolidated and form a single series and (ii) identical in all respects (including as to listing) except for their respective Issue Dates, Interest Commencement Dates and/or Issue Prices.

     Copies of the Trust Deed, the Agency Agreement and the applicable Final Terms are available for inspection during normal business hours at the registered office for the time being of the Trustee (being at 15 August, 2005 at Winchester House, 1 Great Winchester Street, London EC2N 2DB) and at the specified

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office of each of the Paying Agents, save that, if this Note is neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic Area in circumstances where a prospectus is required to be published under the Prospectus Directive, the applicable Final Terms will only be available for inspection by a Noteholder holding one or more unlisted Notes of that Series and such Noteholder must produce evidence satisfactory to the Trustee or, as the case may be, the relevant Paying Agent as to its holding of Notes and as to identity. The Noteholders, the Receiptholders and the Couponholders are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Trust Deed, the Agency Agreement and the applicable Final Terms which are applicable to them. These Terms and Conditions include summaries of, and are subject to the detailed provisions of, the Trust Deed.

     Words and expressions defined in the Trust Deed or the Agency Agreement or used in the applicable Final Terms shall have the same meanings where used in these Terms and Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Agency Agreement and the Trust Deed, the Trust Deed will prevail and, in the event of inconsistency between the Agency Agreement or the Trust Deed and the applicable Final Terms, the applicable Final Terms will prevail.

1. Form, Denomination and Title

     The Notes are in bearer form and, in the case of definitive Notes, serially numbered, in the Specified Currency and the Specified Denomination(s). Notes of one Specified Denomination may not be exchanged for Notes of another Specified Denomination.

     This Note is a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index Linked Interest Note, an Index Linked Redemption Note, an Instalment Note, a Dual Currency Note or a Partly Paid Note or a combination of any of the foregoing or any other type of Note, depending upon the Interest Basis and Redemption/Payment Basis shown in the applicable Final Terms.

     Definitive Notes are issued with Coupons attached, unless they are Zero Coupon Notes in which case references to Coupons and Couponholders in these Terms and Conditions are not applicable.

     Subject as set out below, title to the Notes, Receipts and Coupons will pass by delivery. The Issuer, the Guarantor, the Replacement Agent (which is defined in the Agency Agreement as the Paying Agent in London) and any Paying Agent may deem and treat the bearer of any Note, Receipt or Coupon as the absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any global Note, without prejudice to the provisions set out in the next succeeding paragraph.

     For so long as any of the Notes is represented by a global Note held on behalf of Euroclear Bank S.A./N.V., as operator of the Euroclear System (“Euroclear”) and/or Clearstream Banking, société anonyme (“Clearstream, Luxembourg”) each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Guarantor, the Agent and any other Paying Agent and the Trustee as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on the Notes, for which purpose the bearer of the relevant global Note shall be treated by the Issuer, the Guarantor, the Agent and any other Paying Agent and the Trustee as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant global Note and the expressions “Noteholder” and “holder of Notes” and related expressions shall be construed accordingly. Notes which are represented by a global Note will be transferable only in accordance with the rules and procedures for the time being of Euroclear or of Clearstream, Luxembourg, as the case may be.

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     References to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system approved by the Issuer, the Agent and the Trustee.

2. Status of the Notes

     The Notes and the relative Receipts and Coupons are direct, unconditional, unsubordinated and unsecured obligations of the Issuer and rank pari passu among themselves and (save for certain debts required to be preferred by law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the Issuer, from time to time outstanding.

3. Status of the Guarantee

     The payment of the principal and interest in respect of the Notes and all other moneys payable by the Issuer under or pursuant to the Trust Deed has been unconditionally and irrevocably guaranteed by the Guarantor under the Trust Deed. The obligations of the Guarantor under the Guarantee are direct, unconditional, unsubordinated and unsecured obligations of the Guarantor and pari passu and (save for certain debts required to be preferred by law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the Guarantor, from time to time outstanding.

4. Interest

(a) Interest on Fixed Rate Notes

     Each Fixed Rate Note bears interest on its outstanding nominal amount (or, if it is a Partly Paid Note, the amount paid up) from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest Payment Date(s) in each year up to and including the Maturity Date.

     Except as provided in the applicable Final Terms, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest Payment Date will, if so specified in the applicable Final Terms, amount to the Broken Amount so specified.

     As used in these Terms and Conditions, “Fixed Interest Period” means the period from (and including) an Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.

     If interest is required to be calculated for a period other than a Fixed Interest Period, such interest shall be calculated by applying the Rate of Interest to each Specified Denomination, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention.

     “Day Count Fraction” means, in respect of the calculation of an amount of interest in accordance with this Condition 4(a):

(i) if “Actual/Actual (ISMA)” is specified in the applicable Final Terms:

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(a)

in the case of Notes where the number of days in the relevant period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (the “Accrual Period”) is equal to or shorter than the Determination Period during which the Accrual Period ends, the number of days in such Accrual Period divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Dates (as specified in the applicable Final Terms) that would occur in one calendar year; or

(b)

in the case of Notes where the Accrual Period is longer than the Determination Period during which the Accrual Period ends, the sum of:

(1)	the number of days in such Accrual Period falling in the Determination Period in which the Accrual Period begins divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates (as specified in the applicable Final Terms) that would occur in one calendar year; and
(2)	the number of days in such Accrual Period falling in the next Determination Period divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and

(ii) if “30/360” is specified in the applicable Final Terms, the number of days in the period from and including the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to but excluding the relevant payment date (such number of days being calculated on the basis of a year of 360 days with 12 30-day months) divided by 360.

     In these Terms and Conditions:

     “Determination Period” means the period from (and including) a Determination Date to (but excluding) the next Determination Date (including, where either the Interest Commencement Date or the final Interest Payment Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending on the first Determination Date falling after, such date); and

     “sub-unit” means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, means one cent.

(b    Interest on Floating Rate Notes and Index Linked Interest Notes

(i)    Interest Payment Dates

     Each Floating Rate Note and Index Linked Interest Note bears interest on its outstanding nominal amount (or, if it is a Partly Paid Note, the amount paid up) from (and including) the Interest Commencement Date and such interest will be payable in arrear on either:

(A)	the Specified Interest Payment Date(s) (each an “Interest Payment Date”) in each year specified in the applicable Final Terms; or
(B)	if no Specified Interest Payment Date(s) is/are specified in the applicable Final Terms, each date (each an “Interest Payment Date”) which falls the number of months or other

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period specified as the Specified Period in the applicable Final Terms after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date.

     Such interest will be payable in respect of each Interest Period (which expression shall, in these Terms and Conditions, mean the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date).

     If a Business Day Convention is specified in the applicable Final Terms and (x) if there is no numerically corresponding day in the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention specified is:

(1)	in any case where Specified Periods are specified in accordance with Condition 4(b)(i)(B) above, the Floating Rate Convention, such Interest Payment Date (i) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions of (B) below shall apply mutatis mutandis or (ii) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (A) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (B) each subsequent Interest Payment Date shall be the last Business Day in the month which falls in the Specified Period after the preceding applicable Interest Payment Date; or
(2)	the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or
(3)	the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day, unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or
(4)	the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day.

     In these Terms and Conditions, “Business Day” means a day which is both:

(A)

a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London and any Additional Business Centre specified in the applicable Final Terms; and

(B)

either (1) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (if other than London and any Additional Business Centre and which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Melbourne and Wellington, respectively) or (2) in relation to any sum payable in euro, a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System (the “TARGET System”) is open.

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(ii) Rate of Interest

     The Rate of Interest payable from time to time in respect of Floating Rate Notes and Index Linked Interest Notes will be determined in the manner specified in the applicable Final Terms.

(A) ISDA Determination for Floating Rate Notes

     Where ISDA Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA Rate plus or minus (as indicated in the applicable Final Terms) the Margin (if any). For the purposes of this sub-paragraph (A), “ISDA Rate” for an Interest Period means a rate equal to the Floating Rate that would be determined by the Agent under an interest rate swap transaction if the Agent were acting as Calculation Agent for that swap transaction under the terms of an agreement incorporating the 2000 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc. and as amended and updated as at the Issue Date of the first Tranche of the Notes (the “ISDA Definitions”) and under which:

(1)	the Floating Rate Option is as specified in the applicable Final Terms;
(2)	the Designated Maturity is a period specified in the applicable Final Terms; and
(3)	the relevant Reset Date is either (i) if the applicable Floating Rate Option is based on the London inter-bank offered rate (“LIBOR”) or on the Euro-zone inter-bank offered rate (“EURIBOR”) the first day of that Interest Period or (ii) in any other case, as specified in the applicable Final Terms.

     For the purposes of this sub-paragraph (A), “Floating Rate”, “Calculation Agent”, “Floating Rate Option”, “Designated Maturity” and “Reset Date” have the meanings given to those terms in the ISDA Definitions.

(B)   Screen Rate Determination for Floating Rate Notes

     Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either:

(1)	the offered quotation; or
(2)	the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the offered quotations,

(expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page as at 11.00 a.m. (London time, in the case of LIBOR, or Brussels time, in the case of EURIBOR) on the Interest Determination Date in question plus or minus (as indicated in the applicable Final Terms) the Margin (if any), all as determined by the Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations.

                 The Agency Agreement contains provisions for determining the Rate of Interest in the event that the Relevant Screen Page is not available or if, in the case of (1) above, no such quotation appears or, in the case

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of (2) above, fewer than three such offered quotations appear, in each case as at the time specified in the preceding paragraph.

     If the Reference Rate from time to time in respect of Floating Rate Notes is specified in the applicable Final Terms as being other than LIBOR or EURIBOR, the Rate of Interest in respect of such Notes will be determined as provided in the applicable Final Terms.

(iii) Minimum and/or Maximum Rate of Interest

     If the applicable Final Terms specifies a Minimum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (ii) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest.

     If the applicable Final Terms specifies a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (ii) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest.

(iv) Determination of Rate of Interest and Calculation of Interest Amounts

     The Agent, in the case of Floating Rate Notes, and the Calculation Agent, in the case of Index Linked Interest Notes, will at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. In the case of Index Linked Interest Notes, the Calculation Agent will notify the Agent of the Rate of Interest for the relevant Interest Period as soon as practicable after calculating the same.

     The Agent will calculate the amount of interest (the “Interest Amount”) payable on the Floating Rate Notes or Index Linked Interest Notes in respect of each Specified Denomination for the relevant Interest Period. Each Interest Amount shall be calculated by applying the Rate of Interest to each Specified Denomination, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention.

     “Day Count Fraction” means, in respect of the calculation of an amount of interest for any Interest Period:

(i)	if “Actual/365” or “Actual/Actual (ISDA)” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Interest Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Interest Period falling in a non-leap year divided by 365);
(ii)	if “Actual/365 (Fixed)” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365;
(iii)	if “Actual/365 (Sterling)” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366;
(iv)	if “Actual/360” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 360;

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(v)

if “30/360”, “360/360” or “Bond Basis” is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months (unless (a) the last day of the Interest Period is the 31st day of a month but the first day of the Interest Period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30-day month, or (b) the last day of the Interest Period is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month)); and

(vi)

if “30E/360” or “Eurobond Basis” is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months, without regard to the date of the first day or last day of the Interest Period unless, in the case of the final Interest Period, the Maturity Date is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month).

(v) Notification of Rate of Interest and Interest Amounts

     The Agent will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the Issuer, the Trustee and any stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed and notice thereof to be published in accordance with Condition 13 as soon as possible after their determination but in no event later than the fourth London Business Day thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly notified to each stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed and to the Noteholders in accordance with Condition 13. For the purposes of this paragraph, the expression “London Business Day” means a day (other than a Saturday or a Sunday) on which commercial banks and foreign exchange markets are open for general business in London.

(vi) Determination or calculation by Trustee

     If for any reason at any relevant time the Agent or, as the case may be, the Calculation Agent defaults in its obligation to determine the Rate of Interest or the Agent defaults in its obligation to calculate any Interest Amount in accordance with sub-paragraph (ii)(A) or (B) above or as otherwise specified in the applicable Final Terms, as the case may be, and, in each case, in accordance with sub-paragraph (iv) above, the Trustee shall determine the Rate of Interest at such rate as, in its absolute discretion (having such regard as it shall think fit to the foregoing provisions of this Condition, but subject always to any minimum or maximum Rate of Interest specified in the applicable Final Terms), it shall deem fair and reasonable in all the circumstances or, as the case may be, the Trustee shall calculate the Interest Amount(s) in such manner as it shall deem fair and reasonable in all the circumstances and each such determination or calculation shall be deemed to have been made by the Agent or the Calculation Agent, as applicable.

(vii) Certificates to be final

     All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 4(b), whether by the Agent or, if applicable, the Calculation Agent or the Trustee, shall (in the absence of wilful default, bad faith or manifest error) be binding on the Issuer, the Guarantor, the Agent, the Calculation Agent (if applicable), the other Paying Agents, the Trustee and all Noteholders, Receiptholders and Couponholders and (in the absence as aforesaid) no liability to the Issuer, the Guarantor, the Noteholders, the Receiptholders or the Couponholders shall attach to the Agent or (if applicable) the Calculation Agent or the Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions.

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(c) Dual Currency Notes

     In the case of Dual Currency Notes, if the rate or amount of interest falls to be determined by reference to an exchange rate, the rate or amount of interest payable shall be determined in the manner specified in the applicable Final Terms.

(d) Partly Paid Notes

     In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest will accrue as aforesaid on the paid-up nominal amount of such Notes and otherwise as specified in the applicable Final Terms.

(e) Accrual of Interest

     Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof, payment of principal is improperly withheld or refused. In such event, interest will continue to accrue as provided in the Trust Deed.

5. Payments

(a) Method of Payment

     Subject as provided below:

(i)	payments in a Specified Currency other than euro or U.S. dollars will be made by transfer to an account in the relevant Specified Currency (which, in the case of a payment in Japanese Yen to a non-resident of Japan, shall be a non-resident account) maintained by the payee with, or by a cheque in such Specified Currency drawn on, a bank in the principal financial centre of the country of such Specified Currency (which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Melbourne and Wellington, respectively);
(ii)	payments in euro will be made by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque; and
(iii)	payments in U.S. dollars will be made by transfer to a U.S. dollar account maintained by the payee with a bank outside the United States (which expression, as used in this Condition 5, means the United States of America, including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction), or by cheque drawn on a United States bank.

     In no event will payment be made by a cheque mailed to an address in the United States or by transfer to an account maintained by the payee with a bank located in the United States. Payments will be subject in all cases to any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 7. References to “Specified Currency” will include any successor currency under applicable law.

(b) Presentation of definitive Notes, Receipts and Coupons

     Payments of principal in respect of definitive Notes will (subject as provided below) be made in the manner provided in paragraph (a) above only against surrender (or, in the case of part payment of any sum due, endorsement) of definitive Notes, and payments of interest in respect of definitive Notes will (subject as

44

provided below) be made as aforesaid only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Coupons, in each case at the specified office of any Paying Agent outside the United States (which expression, as used herein, means the United States of America (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction)).

     Payments of instalments of principal (if any) in respect of definitive Notes, other than the final instalment, will (subject as provided below) be made in the manner provided in paragraph (a) above against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Receipt. Payment of the final instalment will be made in the manner provided in paragraph (a) above only against presentation and surrender (or in the case of part payment of any sum due, endorsement) of the relevant Note. Each Receipt must be presented for payment of the relevant instalment together with the definitive Note to which it appertains. Receipts presented without the definitive Note to which they appertain do not constitute valid obligations of the Issuer. Upon the date on which any definitive Note becomes due and repayable, unmatured Receipts (if any) relating thereto (whether or not attached) shall become void and no payment shall be made in respect thereof.

     Fixed Rate Notes in definitive form (other than Dual Currency Notes or Index Linked Notes) should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relative missing Coupon at any time before the expiry of 10 years after the Relevant Date (as defined in Condition 7) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 8) or, if later, five years from the date on which such Coupon would otherwise have become due, but in no event thereafter. Notwithstanding the provisions of this paragraph, if any such Fixed Rate Notes in definitive form should be issued on terms such that, on the presentation for payment of any such Note without any unmatured Coupons attached thereto or surrendered therewith, the amount required by this paragraph to be deducted would be greater than the Early Redemption Amount otherwise due for payment, then, upon the due date for redemption of any such Note, such unmatured Coupons (whether or not attached) shall become void (and no payment shall be made in respect thereof) as shall be required so that, upon application of the provisions of this paragraph in respect of such Coupons as have not so become void, the amount required by this paragraph to be deducted would not be greater than the Early Redemption Amount otherwise due for payment. Where the application of the foregoing sentence requires some but not all of the unmatured Coupons relating to a Note to become void, the relevant Paying Agent shall determine which unmatured Coupons are to become void, and shall select for such purpose Coupons maturing on later dates in preference to Coupons maturing on earlier dates.

     Upon any Fixed Rate Note in definitive form becoming due and repayable prior to its Maturity Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof.

     Upon the date on which any Floating Rate Note, Dual Currency Note or Index Linked Note in definitive form becomes due and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for further Coupons shall be made in respect thereof.

     If the due date for redemption of any definitive Note is not an Interest Payment Date, interest (if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against surrender of the relevant definitive Note.

     Payments of principal and interest (if any) in respect of Notes represented by any global Note will (subject as provided below) be made in the manner specified above in relation to definitive Notes and

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otherwise in the manner specified in the relevant global Note against presentation or surrender, as the case may be, of such global Note at the specified office of any Paying Agent outside the United States. A record of each payment made against presentation or surrender of such global Note, distinguishing between any payment of principal and any payment of interest, will be made on such global Note by such Paying Agent and such record shall be prima facie evidence that the payment in question has been made.

     The holder of a global Note shall be the only person entitled to receive payments in respect of Notes represented by such global Note and the Issuer or, as the case may be, the Guarantor will be discharged by payment to, or to the order of, the holder of such global Note in respect of each amount so paid. Each of the persons shown in the records of Euroclear or Clearstream, Luxembourg as the beneficial holder of a particular nominal amount of Notes represented by such global Note must look solely to Euroclear or Clearstream, Luxembourg, as the case may be, for his share of each payment so made by the Issuer or, as the case may be, the Guarantor to, or to the order of, the holder of such global Note.

     Notwithstanding the foregoing, if any amount of principal and/or interest in respect of this Note is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest in respect of this Note will be made at the specified office of a Paying Agent in the United States if:

(i)	the Issuer has appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars at such specified offices outside the United States of the full amount of principal and interest on the Notes in the manner provided above when due;
(ii)	payment of the full amount of such principal and interest at all such specified offices outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions on the full payment or receipt of principal and interest in U.S. dollars; and
(iii)	such payment is then permitted under United States law without involving, in the opinion of the Issuer and the Guarantor, adverse tax consequences to the Issuer or the Guarantor.

(c) Payment Day

     If the date for payment of any amount in respect of any Note, Receipt or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay. For these purposes, “Payment Day” means any day which is:

(i) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in:

(A)	the relevant place of presentation;
(B)	London; and
(C)	any Additional Financial Centre specified in the applicable Final Terms; and

(ii) either (1) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (if other than the place of presentation, London and any Additional Financial Centre and which, if

46

the Specified Currency is Australian dollars or New Zealand dollars, shall be Melbourne and Wellington, respectively or (2) in relation to any sum payable in euro, a day on which the TARGET System is open.

(d) Interpretation of Principal and Interest

     Any reference in these Terms and Conditions to principal in respect of the Notes shall be deemed to include, as applicable:

(i)	any additional amounts which may be payable with respect to principal under Condition 7;
(ii)	the Final Redemption Amount of the Notes;
(iii)	the Early Redemption Amount of the Notes;
(iv)	the Optional Redemption Amount(s) (if any) of the Notes;
(v)	in relation to Notes redeemable in instalments, the Instalment Amounts;
(vi)	in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 6(e)); and
(vii)	any premium and any other amounts (other than interest) which may be payable by the Issuer under or in respect of the Notes.

     Any reference in these Terms and Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts (other than interest) which may be payable with respect to interest under Condition 7.

6. Redemption and Purchase

(a) At Maturity

     Unless previously redeemed or purchased and cancelled as specified below, each Note will be redeemed by the Issuer at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable Final Terms in the relevant Specified Currency on the Maturity Date.

(b) Redemption for Tax Reasons

     The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (if this Note is neither a Floating Rate Note nor an Index Linked Interest Note) or on any Interest Payment Date (if this Note is either a Floating Rate Note or an Index Linked Interest Note), on giving not less than 30 nor more than 60 days’ notice to the Agent and, in accordance with Condition 13, the Noteholders (which notice shall be irrevocable), if:

(i) on the occasion of the next payment due under the Notes, the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 7 or the Guarantor would be unable for reasons outside its control to procure payment by the Issuer and in making payment itself would be required to pay such additional amounts in each case as a result of any change in, or amendment to, the laws or regulations of the United States of America or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such

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	laws or regulations, which change or amendment becomes effective on or after the Issue Date of the first Tranche of the Notes; and
(ii)	such obligation cannot be avoided by the Issuer or, as the case may be, the Guarantor taking reasonable measures available to it,

provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or, as the case may be, the Guarantor would be obliged to pay such additional amounts were a payment in respect of the Notes then due.

     Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver to the Agent a certificate signed by two Directors of the Issuer or, as the case may be, two Directors of the Guarantor stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred, and an opinion of independent legal advisers of recognised standing to the effect that the Issuer or, as the case may be, the Guarantor has or will become obliged to pay such additional amounts as a result of such change or amendment.

     In addition if the Issuer or, if applicable, the Guarantor determines, based upon a written opinion of independent United States legal counsel, that any payment made outside the United States by the Issuer, the Guarantor or any Paying Agent of principal or interest due in respect of any Note, Receipt or Coupon would, under any laws or regulations of the United States of America having current or scheduled future effect, be subject to any certification, identification or other information reporting requirement of any kind, the effect of which is the disclosure to the Issuer, the Guarantor, any Paying Agent or any governmental authority of the nationality, residence or identity (as distinguished from, for example, status as a United States Alien (as defined in Condition 7)) of a beneficial owner of such Note, Receipt or Coupon who is a United States Alien the Issuer, at its option, will either (x) redeem the Notes, in whole but not in part, or (y) if and so long as the conditions of Condition 7 are satisfied, pay the additional amounts specified in Condition 7.

     The right of the Issuer to exercise such option will not apply where the requirement otherwise giving rise to such option (1) would not be applicable to a payment made by the Issuer, the Guarantor or any Paying Agent (i) directly to the beneficial owner or (ii) to a custodian, nominee or other agent of the beneficial owner, (2) can be satisfied by such custodian, nominee or other agent certifying that such beneficial owner is a United States Alien, provided that in each case referred to in sub-paragraphs (1)(ii) and (2) payment by such custodian, nominee or agent of such beneficial owner is not otherwise subject to any such requirement (other than a requirement which is imposed on a custodian, nominee or other agent described in (4) of this sentence) or (3) would not be applicable to payment made by at least one other Paying Agent or (4) is applicable to a payment to a custodian, nominee or other agent of the beneficial owner who is a United States person, a controlled foreign corporation for United States tax purposes, a foreign person 50 per cent. or more of whose gross income for the 3-year period ending with the close of its taxable year preceding the year of payment is effectively connected with a United States trade or business, or is otherwise related to the United States.

     Such determination and election will be made as soon as practicable, and the Issuer will promptly publish notice thereof (the “Determination Notice”) stating the effective date of such certification, identification or other information or reporting requirement, whether the Notes shall be redeemed or that the additional amounts specified in Condition 7 should be paid and (if applicable) the last date by which the redemption of the Notes must take place.

     If an election has been made that the Notes shall be redeemed, such redemption will take place on such date (being an Interest Payment Date if this Note is either a Floating Rate Note or an Index Linked Interest Note), not later than one year after the publication of the Determination Notice, as the Issuer elects by notice to the Noteholders in accordance with Condition 13 at least 60 days before the date fixed for redemption.

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     Notwithstanding the foregoing, the Notes will not be so redeemed if the Issuer subsequently determines, based on an opinion of independent United States legal counsel, no less than 30 days prior to the redemption date, that subsequent payments would not be subject to any such requirement, in which case the Issuer will promptly publish notice of such determination and any earlier redemption notice will be revoked and of no further effect.

     Notes redeemed pursuant to this Condition 6(b) will be redeemed at their Early Redemption Amount referred to in paragraph (e) below together (if appropriate) with interest accrued to (but excluding) the date of redemption.

(c) Redemption at the Option of the Issuer (Issuer Call)

     If Issuer Call is specified in the applicable Final Terms, the Issuer shall, having given:

(i)	not less than 30 nor more than 60 days’ notice to the Noteholders in accordance with Condition 13; and
(ii)	not less than 30 days before the giving of the notice referred to in (i), notice to the Agent;

(which notices shall be irrevocable), redeem all or some only of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) specified in, or determined in the manner specified in, the applicable Final Terms together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such partial redemption must be of a nominal amount not less than the Minimum Redemption Amount or not more than the Maximum Redemption Amount. In the case of a partial redemption of Notes, the Notes to be redeemed (“Redeemed Notes”) will be selected individually by lot, in the case of Redeemed Notes represented by definitive Notes, and in accordance with the rules of Euroclear and/or Clearstream, Luxembourg, in the case of Redeemed Notes represented by a global Note, not more than 60 days prior to the date fixed for redemption (such date of selection being hereinafter called the “Selection Date”). In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 13 not less than 30 days prior to the date fixed for redemption.

     The aggregate nominal amount of Redeemed Notes represented by definitive Notes shall bear the same proportion to the aggregate nominal amount of all Redeemed Notes as the aggregate nominal amount of definitive Notes outstanding bears to the aggregate nominal amount of the Notes outstanding, in each case on the Selection Date, provided that such first mentioned nominal amount shall, if necessary, be rounded downwards to the nearest integral multiple of the Specified Denomination, and the aggregate nominal amount of Redeemed Notes represented by a global Note shall be equal to the balance of the Redeemed Notes. No exchange of the relevant global Note will be permitted during the period from and including the Selection Date to and including the date fixed for redemption pursuant to this paragraph (c) and notice to that effect shall be given by the Issuer to the Noteholders in accordance with Condition 13 at least 5 days prior to the Selection Date.

(d) Redemption at the Option of the Noteholders (Investor Put)

     If Investor Put is specified in the applicable Final Terms, upon the holder of any Note giving to the Issuer in accordance with Condition 13 not less than 30 nor more than 60 days’ notice (which shall be irrevocable) the Issuer will, upon the expiry of such notice, redeem, subject to, and in accordance with, the terms specified in the applicable Final Terms, such Note on the Optional Redemption Date and at the Optional Redemption Amount together, if appropriate, with interest accrued to (but excluding) the Optional Redemption Date.

     If this Note is in definitive form, to exercise the right to require redemption of this Note the holder of this Note must deliver such Note at the specified office of any Paying Agent at any time during normal

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business hours of such Paying Agent falling within the notice period, accompanied by a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent (a “Put Notice”) and in which the holder must specify a bank account (or, if payment is by cheque, an address) to which payment is to be made under this Condition.

(e) Early Redemption Amounts

     For the purpose of paragraph (b) above and Condition 9, the Notes will be redeemed at the Early Redemption Amount calculated as follows:

(i)	in the case of Notes with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount thereof;
(ii)	in the case of Notes (other than Zero Coupon Notes but including Instalment Notes and Partly Paid Notes) with a Final Redemption Amount which is or may be less or greater than the Issue Price or which is payable in a Specified Currency other than that in which the Notes are denominated, at the amount specified in, or determined in the manner specified in, the applicable Final Terms or, if no such amount or manner is so specified in the Final Terms, at their nominal amount; or
(iii)	in the case of Zero Coupon Notes, at an amount (the “Amortised Face Amount”) calculated in accordance with the following formula:
	Early Redemption Amount = RP 6 (1 + AY)y
	Where:
	“RP” means the Reference Price;
	“AY” means the Accrual Yield expressed as a decimal; and
	“y” is a fraction the numerator of which is equal to the number of days (calculated on the basis of a 360-day year consisting of 12 months of 30 days each) from (and including) the Issue Date of the first Tranche of the Notes of such Series to (but excluding) the date fixed for redemption of such Notes or (as the case may be) the date upon which such Notes become due and repayable, and the denominator of which is 360,

or on such other calculation basis as may be specified in the applicable Final Terms.

(f) Instalments

     Instalment Notes will be redeemed in the Instalment Amounts and on the Instalment Dates. In the case of early redemption, the Early Redemption Amount will be determined pursuant to paragraph (e) above.

(g) Partly Paid Notes

     Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordance with the provisions of this Condition and the applicable Final Terms.

(h) Purchases

     The Issuer, the Guarantor or any of the other Subsidiaries (as defined in the Trust Deed) of the Issuer may at any time purchase Notes (provided that, in the case of definitive Notes, all unmatured Receipts,

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Coupons and Talons appertaining thereto are purchased therewith) at any price in the open market or otherwise. Such Notes may be held, reissued, resold or, at the option of the Issuer or the Guarantor, surrendered to any Paying Agent for cancellation.

(i) Cancellation

     All Notes which are redeemed will forthwith be cancelled (together with all unmatured Receipts and Coupons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and the Notes purchased and cancelled pursuant to paragraph (h) above (together with all unmatured Receipts and Coupons cancelled therewith) shall be forwarded to the Agent and cannot be reissued or resold.

(j) Late payment on Zero Coupon Notes

     If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to paragraph (a), (b), (c) or (d) above or upon its becoming due and repayable as provided in Condition 9 is improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the amount calculated as provided in paragraph (e)(iii) above as though the references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note becomes due and payable were replaced by references to the date which is the earlier of:

(i)	the date on which all amounts due in respect of such Zero Coupon Note have been paid; and
(ii)	five days after the date on which the full amount of the moneys payable has been received by the Agent or the Trustee and notice to that effect has been given to the Noteholders in accordance with Condition 13.

7. Taxation

     Subject to certain exceptions and limitations set forth below, all payments of principal and interest in respect of the Notes, Receipts and Coupons by the Issuer or the Guarantor will be made without withholding or deduction for or on account of any present or future taxes or duties of whatever nature imposed or levied by or on behalf of the United States of America or any political subdivision or any authority thereof or therein having power to tax unless such withholding or deduction is required by law. In such event, the Issuer or, as the case may be, the Guarantor will pay such additional amounts as shall be necessary in order that the net amounts received by the holders of the Notes, Receipts or Coupons after such withholding or deduction shall equal the respective amounts of principal and interest which would otherwise have been receivable in respect of the Notes, Receipts or Coupons, as the case may be, in the absence of such withholding or deduction; except that no such additional amounts shall be payable with respect to any Note, Receipt or Coupon as a result of withholding or deduction on account of any one or more of the following:

(i) any tax, assessment or other governmental charge that is imposed or withheld solely by reason of the holder of a Note, Receipt or Coupon (a “Holder”), or a fiduciary, settler, beneficiary, member or shareholder of such holder being considered as:

(a)	being or having been present or engaged in a trade or business in the United States or having had a permanent establishment in the United States of America;
(b)	having a current or former relationship with the United States of America, including a relationship as a citizen or resident thereof;

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(c)	being or having been a foreign or domestic personal holding company, a passive foreign investment company or a controlled foreign corporation with respect to the United States of America or a corporation that has accumulated earnings to avoid United States federal income tax;
(d)	being or having been a “10-per cent. shareholder” of all classes of stock of the Issuer or, as the case may be, the Guarantor as defined in section 871(h)(3) of the United States Internal Revenue Code of 1986, as amended (the “Code”) or any successor provision; or
(e)	being a bank receiving payments on an extension of credit made pursuant to a loan agreement entered into the ordinary course of its trade or business;

(ii)	any Holder that is not the sole beneficial owner of a Note, Receipt or Coupon or that is a fiduciary or partnership, but only to the extent that a beneficiary or settler with respect to the fiduciary, a beneficial owner or a member of the partnership would not have been entitled to the payment of an additional amount had such beneficiary, settler, beneficial owner or member received directly its beneficial or distributive share of the payment;
(iii)	any tax, assessment or other governmental charge that is imposed or withheld solely by reason of a failure of the Holder or any other person to comply with certification, identification or information reporting requirements concerning the nationality, residence, identity or connection with the United States of America of the Holder or beneficial owner of such Note, Receipt or Coupon, if compliance is required by statute, by regulation or the United States Treasury Department or by an applicable income tax treaty to which the United States of America is a party as a precondition to exemption from such tax, assessment or other governmental charge;
(iv)	any tax, assessment or other governmental charge that is imposed other than by withholding from a Note, Receipt or Coupon;
(v)	any tax, assessment or other governmental charge that would not have been so imposed but for the presentation or surrender by the Holder for payment on a date more than 30 days after the Relevant Date except to the extent that the Holder would have been entitled to an additional amount on presenting the same for payment on such thirtieth day;
(vi)	any estate, inheritance, gift, sales, excise, transfer, wealth or personal property tax or similar tax assessment or other governmental charge;
(vii)	any tax, assessment or other governmental charge required to be withheld by any paying agent from any payment of principal of or interest on any Note, Receipt or Coupon if such payment can be made without such withholding by any other paying agent;
(viii)	any tax, duty, assessment or other governmental charge required to be made pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive; or
(ix)	in the case of any combination of items (i), (ii), (iii), (iv), (v), (vi), (vii) and (viii).

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     As used herein, “United States Alien” means any corporation, partnership, individual or fiduciary that is, for United States Federal income tax purposes, a foreign corporation, a non-resident alien individual, a non-resident fiduciary of a foreign estate or trust, or a foreign partnership one or more of the members of which is, for United States Federal income tax purposes, a foreign corporation, a non-resident alien individual or a non-resident fiduciary of a foreign estate or trust.

     Notwithstanding the above, if and so long as a certification, identification or other information reporting requirement referred to in the third paragraph of Condition 6(b) would be fully satisfied by payment of a backup withholding tax or similar charge, the Issuer may elect, by so stating in the Determination Notice, to have the following provisions of this Condition 7 apply in lieu of the provisions of the third paragraph of Condition 6(b).

     In such event, the Issuer, failing which, if applicable, the Guarantor, will pay as additional amounts such amounts as may be necessary so that every net payment made following the effective date of such requirements outside the United States of America by it, the Guarantor (if applicable) or any of the Paying Agents of principal or interest due in respect of any Note, Receipt or Coupon of which the beneficial owner is a United States Alien (but without any requirement that the nationality, residence or identity of such beneficial owner be disclosed to the Issuer, any Paying Agent or any governmental authority), after withholding or deduction for or on account of such backup withholding tax or similar charge (other than a backup withholding tax or similar charge which (1) is the result of a certification, identification or other information reporting requirement which would not be applicable in the circumstances described in the fourth paragraph of Condition 6(b) or (2) is imposed as a result of any of the circumstances described in paragraph (i) or (v) above or any combination thereof), will not be less than the amount provided for in such Note, Receipt or Coupon to be then due and payable.

     If the Issuer or, if applicable, the Guarantor elects to pay such additional amounts and so long as they are obligated to pay the same, the Issuer nonetheless may subsequently redeem the Notes in accordance with Condition 6(b).

     As used in these Terms and Conditions, the “Relevant Date” means the date on which a payment in respect of a Note, Receipt or Coupon first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Agent or the Trustee on or prior to such due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect is duly given to the Noteholders in accordance with Condition 13.

8. Prescription

     The Notes, Receipts and Coupons will become void unless presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) after the Relevant Date (as defined in Condition 7) therefor.

     There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for payment in respect of which would be void pursuant to this Condition or Condition 5(b) or any Talon which would be void pursuant to Condition 5(b).

9. Events of Default

(A) If any one or more of the following events (each an “Event of Default”) shall occur and is continuing, the Trustee at its discretion may, and if so requested in writing by the holders of at least one quarter in nominal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders shall (subject to being indemnified and/or secured to its satisfaction), give notice to the Issuer that the Notes are, and they shall thereupon immediately become, due and repayable at their Early Redemption Amount, together with accrued interest as provided in the Trust Deed:

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(a)	if default is made in the payment of any principal or interest due in respect of the Notes or any of them and the default continues for a period of 30 days in the case of interest; or
(b)	if the Issuer or the Guarantor fails to perform or observe any of its other obligations under these Terms and Conditions or the Trust Deed and (except in any case where, in the opinion of the Trustee, the failure is incapable of remedy when no such continuation or notice as is hereinafter mentioned will be required) the failure continues for the period of 60 days next following the service by the Trustee on the Issuer or the Guarantor (as the case may be) of notice requiring the same to be remedied; or
(c)	if any Indebtedness for Borrowed Money of the Issuer or the Guarantor becomes due and repayable prematurely by reason of an event of default (however described) or the Issuer or the Guarantor fails to make any payment in respect of any Indebtedness for Borrowed Money on the due date for payment or any security given by the Issuer or the Guarantor for any Indebtedness for Borrowed Money becomes enforceable or if default is made by the Issuer or the Guarantor in making any payment due under any guarantee and/or indemnity given by it in relation to any Indebtedness for Borrowed Money of any other person provided that no such event shall constitute an Event of Default unless the relative Indebtedness for Borrowed Money either alone or when aggregated with other Indebtedness for Borrowed Money relative to all (if any) other such events which shall have occurred shall amount to at least U.S.$100,000,000 (or its equivalent in any other currency); or
(d)	the entry of a decree or order for relief in respect of the Issuer or the Guarantor by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws of the United States of America, as now or hereafter constituted, or any other Federal or State bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Issuer or the Guarantor or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or
(e)	the commencement by the Issuer or the Guarantor of a voluntary case under the Federal bankruptcy laws of the United States of America, as now or hereafter constituted, or any other applicable Federal or State bankruptcy, insolvency or other similar law, or the consent by it to the entry of an order for relief in an involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Issuer or the Guarantor or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of any corporate action in furtherance of any of the foregoing.

(B) (1) The Trustee may at any time, at its discretion and without notice, take such proceedings against the Issuer and/or the Guarantor as it may think fit to enforce the provisions of the Trust Deed, the Notes, the Receipts and the Coupons, but it shall not be bound to take any such proceedings or any other action in relation to the Trust Deed, the Notes, the Receipts or the Coupons unless (a) it shall have been so directed by an Extraordinary Resolution of the Noteholders or so requested in writing by the holders of at least one-quarter in nominal amount of the Notes then outstanding, and (b) it shall have been indemnified and/or secured to its satisfaction;

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(2) No Noteholder, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer or the Guarantor unless the Trustee, having become bound so to proceed, fails so to do within a reasonable period and the failure shall be continuing.

     For the purposes of this Condition, “Indebtedness for Borrowed Money” means any present or future indebtedness (whether being principal, premium, interest or other amounts) for or in respect of (i) money borrowed, (ii) liabilities under or in respect of any acceptance or acceptance credit or (iii) any notes, bonds, debentures, debenture stock, loan stock or other securities offered, issued or distributed whether by way of public offer, private placing, acquisition consideration or otherwise and whether issued for cash or in whole or in part for a consideration other than cash.

10. Replacement of Notes, Receipts, Coupons and Talons

     Should any Note, Receipt, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Replacement Agent upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer and the Replacement Agent may reasonably require. Mutilated or defaced Notes, Receipts, Coupons or Talons must be surrendered before replacements will be issued.

11. Agent and Paying Agents

     The names of the initial Agent and the other initial Paying Agents and their initial specified offices are set out below.

     The Issuer and the Guarantor are entitled, with the prior written approval of the Trustee, to vary or terminate the appointment of any Paying Agent and/or appoint additional or other Paying Agents and/ or approve any change in the specified office through which any Paying Agent acts, provided that:

(i)	so long as the Notes are listed on any stock exchange or admitted to listing by any other relevant authority, there will at all times be a Paying Agent with a specified office in such place as may be required by the rules and regulations of the relevant stock exchange or other relevant authority;
(ii)	there will at all times be a Paying Agent with a specified office in a city approved by the Trustee in continental Europe;
(iii)	there will at all times be an Agent; and
(iv)	the Issuer and the Guarantor undertake that they will ensure that they maintain a Paying Agent in a Member State of the European Union that is not obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive.

     In addition, the Issuer and the Guarantor shall forthwith appoint a Paying Agent having a specified office in New York City in the circumstances described in the final paragraph of Condition 5(b). Any variation, termination, appointment or change shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30 nor more than 45 days’ prior notice thereof shall have been given to the Noteholders in accordance with Condition 13.

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12. Exchange of Talons

     On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 8.

13. Notices

     All notices regarding the Notes shall be published in a leading English language daily newspaper of general circulation in London. It is expected that such publication will be made in the Financial Times in London. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules and regulations of any other stock exchange or other relevant authority on which the Notes are for the time being listed or by which they have been admitted to trading. Any such notice will be deemed to have been given on the date of the first publication or, where required to be published in more than one newspaper, on the date of the first publication in each such newspaper or, where published in such newspapers on different dates, the last date of such first publication. If publication as provided above is not practicable, notice will be given in such other manner and shall be deemed to have been given on such date, as the Trustee may approve. Receiptholders and Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to Noteholders in accordance with this Condition.

     Until such time as any definitive Notes are issued, there may, so long as the global Note(s) is or are held in its/their entirety on behalf of Euroclear and Clearstream, Luxembourg, be substituted for such publication in such newspaper(s) the delivery of the relevant notice to Euroclear and Clearstream, Luxembourg for communication by them to the Noteholders and, in addition, for so long as any Notes are listed on a stock exchange or are admitted to trading by another relevant authority and the rules of that stock exchange or relevant authority so require, such notice will be published in a daily newspaper of general circulation in the place or places required by those rules. Any such notice shall be deemed to have been given to the Noteholders on the seventh day after the day on which the said notice was given to Euroclear and Clearstream, Luxembourg.

     Notices to be given by any Noteholder shall be in writing and given by lodging the same, together with the related Note or Notes, with the Agent. Whilst any of the Notes is represented by a global Note, such notice may be given by any Noteholder to the Agent via Euroclear and/or Clearstream, Luxembourg, as the case may be, in such manner as the Agent and Euroclear and/or Clearstream, Luxembourg, as the case may be, may approve for this purpose.

14. Meetings of Noteholders, Modification and Waiver

     The Trust Deed contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Notes, the Receipts, the Coupons or any of the provisions of the Trust Deed. Such a meeting may be convened by the Issuer or the Guarantor or by Noteholders holding not less than five per cent. in nominal amount of the Notes for the time being remaining outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons holding or representing not less than a clear majority in nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of which includes the modification of certain provisions of the Notes, Receipts or Coupons or the Trust Deed (including modifying the date of maturity of the Notes or any date for payment of interest thereon, reducing or cancelling the amount of principal or the rate of interest payable in respect of the Notes or altering the currency of payment of the Notes, Receipts or Coupons), the quorum shall be one or more persons holding or representing not less than two-thirds in nominal amount of the Notes for the time being outstanding, or at any adjourned such meeting one or more persons holding or

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representing not less than one-third in nominal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of the Noteholders shall be binding on all the Noteholders, whether or not they are present at the meeting, and on all Receiptholders and Couponholders.

     The Trustee may agree, without the consent of the Noteholders, Receiptholders or Couponholders, to any modification (subject to certain exceptions) of, or to the waiver or authorisation of any breach or proposed breach of, any of these Terms and Conditions or any of the provisions of the Trust Deed, or determine, without any such consent as aforesaid, that any Event of Default or Potential Event of Default (as defined in the Trust Deed) shall not be treated as such, which in any such case is not, in the opinion of the Trustee, materially prejudicial to the interests of the Noteholders or may agree, without any such consent as aforesaid, to any modification which is of a formal, minor or technical nature or to correct a manifest error or an error which is, in the opinion of the Trustee, proven.

     Any such modification shall be binding on the Noteholders, the Receiptholders and the Couponholders and, unless the Trustee otherwise agrees, any such modification shall be notified to the Noteholders in accordance with Condition 13 as soon as practicable thereafter.

     In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation or determination), the Trustee shall have regard to the general interests of the Noteholders as a class but shall not have regard to any interests arising from circumstances particular to individual Noteholders, Receiptholders or Couponholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise for individual Noteholders, Receiptholders or Couponholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Noteholder, Receiptholder or Couponholder be entitled to claim, from the Issuer, the Guarantor, the Trustee or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders or Couponholders except to the extent already provided for in Condition 7 and/or any undertaking given in addition to, or in substitution for, Condition 7 pursuant to the Trust Deed.

15. Further Issues

     The Issuer shall be at liberty from time to time without the consent of the Noteholders, Receiptholders or Couponholders to create and issue further notes having terms and conditions the same as the Notes or the same in all respects save for the amount and date of the first payment of interest thereon and so that the same shall be consolidated and form a single Series with the outstanding Notes. The Trust Deed contains provisions for convening a single meeting of the Noteholders and the holders of Notes of other Series where the Trustee so decides.

16. Consolidation, Merger and Transfer of Assets

     The Trust Deed provides that neither the Issuer nor the Guarantor may consolidate with, or merge into, any corporation, or transfer its assets substantially as an entirety to any person, unless (a) the successor corporation or transferee assumes the Issuer’s or, as the case may be, the Guarantor’s obligations in respect of the Notes, the Receipts and the Coupons and under the Trust Deed, (b) after giving effect to the relevant transaction, no Event of Default or Potential Event of Default (as defined in the Trust Deed) shall have occurred and be continuing and (c) certain other conditions set out in the Trust Deed are complied with.

17. Redenomination

     (a) Where redenomination is specified in the applicable Final Terms as being applicable, the Issuer may, without the consent of the Noteholders, the Receiptholders and the Couponholders, on giving prior notice to the Trustee, the Agent, Euroclear and Clearstream, Luxembourg and at least 30 days’ prior

57

notice to the Noteholders in accordance with Condition 13, elect that, with effect from the Redenomination Date specified in the notice, the Notes shall be redenominated in euro.

     Except as otherwise specified in the applicable Final Terms the election will have effect as follows:

(i)	the Notes and the Receipts shall be deemed to be redenominated in euro in the denomination of euro 0.01 with a nominal amount for each Note and Receipt equal to the nominal amount of that Note or Receipt in the Specified Currency, converted into euro at the Established Rate, provided that, if the Issuer determines, with the agreement of the Agent and with the approval of the Trustee, that the then current market practice in respect of the redenomination in euro of internationally offered securities is different from the provisions specified above, such provisions shall be deemed to be amended so as to comply with such market practice and the Issuer shall promptly notify the Noteholders, the stock exchange (if any) on which the Notes may be listed, the Trustee and the Paying Agents of such deemed amendments;
(ii)	if definitive Notes are required to be issued after the Redenomination Date, they shall be issued at the expense of the Issuer in the denominations of euro 1,000, euro 10,000, euro 100,000 and (but only to the extent of any remaining amounts less than euro 1,000 or such smaller denominations as the Agent and the Trustee may approve) euro 0.01 and such other denominations as the Agent and the Trustee shall determine and as shall be notified to the Noteholders, the London Stock Exchange, if the Notes are listed on such exchange, and the Trustee. If such definitive Notes are issued they will be obtainable at the specified office of the Replacement Agent;
(iii)	save to the extent that an Exchange Notice has been given in accordance with paragraph (v) below, the amount of interest due in respect of the Notes will be calculated by reference to the aggregate nominal amount of Notes presented (or, as the case may be, in respect of which Coupons are presented) for payment by the relevant holder and the amount of such payment shall be rounded down to the nearest euro 0.01;
(iv)	after the Redenomination Date, all payments in respect of the Notes, the Receipts and the Coupons other than payments of interest in respect of periods commencing before the Redenomination Date, will be made solely in euro as though references in the Notes to the Specified Currency were to euro. Payments will be made in euro by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque
(v)	if issued prior to the Redenomination Date, all unmatured Coupons denominated in the Specified Currency (whether or not attached to the Notes) will become void with effect from the date on which the Issuer gives notice (the “Exchange Notice”) that replacement euro-denominated Notes, Receipts and Coupons are available for exchange (provided that such securities are so available) and no payments will be made in respect of them. The payment obligations contained in any Notes and Receipts so issued will also become void on that date although those Notes and Receipts will continue to constitute valid exchange obligations of the Issuer. New euro-denominated Notes, Receipts and Coupons will be issued in exchange for Notes, Receipts and Coupons denominated in the Specified Currency in such manner as the Agent may specify and as shall be notified to the Noteholders in the Exchange Notice and to the London Stock Exchange, if the Notes are listed on such exchange. If such new euro-denominated Notes are issued they will be obtainable at the specified office of the Replacement Agent. No Exchange Notice may be given less than 15 days prior to any date for payment of principal or interest on the Notes;

58

(vi)	if the Notes are Fixed Rate Notes and interest for any period ending on or after the Redenomination Date is required to be calculated for a period ending other than on an Interest Payment Date, it will be calculated by applying the Rate of Interest to each Specified Denomination, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention;
(vii)	if the Notes are Floating Rate Notes the applicable Final Terms specifies any relevant changes to the provisions relating to interest; and
(viii)	such other changes shall be made to these Terms and Conditions and/or the Trust Deed and/or the Agency Agreement as the Issuer may decide, after consultation with the Agent and with the prior written approval of the Trustee, and as may be specified in the notice, to conform them to conventions then applicable to instruments denominated in euro or to enable the Notes to be consolidated with one or more issues of other notes, whether or not originally denominated in the Specified Currency or euro. Any such other changes will not take effect until after they have been notified to the Noteholders in accordance with Condition 13. The Issuer will also notify the London Stock Exchange of any other such changes, if the Notes are listed on such exchange.

(b) Definitions

     In these Conditions, the following expressions have the following meanings:

     “Established Rate” means the rate for the conversion of the Specified Currency (including compliance with rules relating to roundings in accordance with applicable European Community regulations) into euro established by the Council of the European Union pursuant to Article 123 of the Treaty;

     “euro” means the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty;

     “Redenomination Date” means (in the case of interest bearing Notes) any date for payment of interest under the Notes or (in the case of Zero Coupon Notes) any date, in each case specified by the Issuer in the notice given to the Noteholders pursuant to paragraph (a) above which falls on or after the date on which the country of the Specified Currency first participates in the third stage of European economic and monetary union; and

     “Treaty” means the Treaty establishing the European Communities, as amended by the Treaty on European Union and the Treaty of Amsterdam.

18. Indemnification of the Trustee and its contracting with the Issuer and the Guarantor

     The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking action unless indemnified and/or secured to its satisfaction.

     The Trust Deed also contains provisions pursuant to which the Trustee is entitled, inter alia, (i) to enter into business transactions with the Issuer and/or the Guarantor and/or any of the Issuer’s other Subsidiaries and to act as trustee for the holders of any other securities issued or guaranteed by, or relating to, the Issuer and/or the Guarantor and/or any of the Guarantor’s other Subsidiaries, (ii) to exercise and enforce its rights, comply with its obligations and perform its duties under or in relation to any such transactions or, as the case may be, any such trusteeship without regard to the interests of, or consequences

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for, the Noteholders, Receiptholders or Couponholders, and (iii) to retain and not be liable to account for any profit made or any other amount or benefit received thereby or in connection therewith.

19. Contracts (Rights of Third Parties) Act 1999

     No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Note, but this does not affect any right or remedy of any person which exists or is available apart from that Act.

20. Governing law and submission to jurisdiction

     (a) The Trust Deed, the Notes, the Receipts and the Coupons are governed by, and shall be construed in accordance with, English law.

     (b) Each of the Issuer and the Guarantor has in the Trust Deed agreed, for the exclusive benefit of the Trustee, the Noteholders, the Receiptholders and the Couponholders that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with the Trust Deed, the Notes, the Receipts and/or the Coupons and that accordingly any suit, action or proceedings (together referred to as “Proceedings”) arising out of or in connection with the Trust Deed, the Notes, the Receipts and/or the Coupons may be brought in such courts.

     Each of the Issuer and the Guarantor has in the Trust Deed irrevocably waived any objection which it may have now or hereafter to the laying of the venue of any such Proceedings in any such court and any claim that any such Proceedings have been brought in an inconvenient forum and has in the Trust Deed further irrevocably agreed that a judgment in any such Proceedings brought in the English courts shall be conclusive and binding upon it and may be enforced in the courts of any other jurisdiction.

     Nothing contained in this Condition shall limit any right to take Proceedings against the Issuer or the Guarantor in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not.

     Each of the Issuer and the Guarantor has in the Trust Deed appointed GLN Representatives Limited at its registered office (being at 15 August, 2005 at 20th Floor, City Point, 1 Ropemaker Street, London EC2Y 9HT, England) as its agent for service of process, and undertaken that, in the event of GLN Representatives Limited ceasing so to act or ceasing to be registered in England, it will appoint another person as its agent for service of process in England in respect of any Proceedings.

     Nothing herein shall affect the right to serve proceedings in any other manner permitted by law.

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AGENT

Deutsche Bank AG, London Branch
Winchester House
1 Great Winchester Street
London EC2N 2DB

OTHER PAYING AGENT

Deutsche Bank Luxembourg S.A.
2 boulevard Konrad Adenauer
L-115 Luxembourg

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SCHEDULE 2

FORMS OF GLOBAL AND DEFINITIVE NOTES, RECEIPT, COUPON, TALON AND CERTIFICATE

PART 1

FORM OF TEMPORARY GLOBAL NOTE

[ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]¹

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).]²

COUNTRYWIDE FINANCIAL CORPORATION
(the Issuer)
(incorporated with limited liability in the State of Delaware)

Unconditionally and irrevocably guaranteed by
COUNTRYWIDE HOME LOANS, INC.
(incorporated with limited liability in the State of New York)

TEMPORARY GLOBAL NOTE

This Note is a Temporary Global Note in respect of a duly authorised issue of Notes of the Issuer (the Notes) of the Nominal Amount, Specified Currency(ies) and Specified Denomination(s) as are specified in the Final Terms applicable to the Notes (the Final Terms), a copy of which is annexed hereto. References herein to the Conditions shall be to the Terms and Conditions of the Notes as set out in to the Trust Deed (as defined below) as supplemented, replaced and modified by the Final Terms but, in the event of any conflict between the provisions of the said Conditions and the information in the Final Terms, the Final Terms will prevail. Words and expressions defined in the Conditions shall bear the same meanings when used in this Global Note. This Global Note is issued subject to, and with the benefit of, the Conditions and a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the Trust Deed) dated 15 August 2005 and made between the Issuer, Countrywide Home Loans, Inc. as guarantor and Deutsche Trustee Company Limited as trustee for the holders of the Notes.

The Issuer, subject as hereinafter provided and subject to and in accordance with the Conditions and the Trust Deed, promises to pay to the bearer hereof on each Instalment Date (if the Notes are repayable in instalments) and on the Maturity Date and/or on such earlier date(s) as all or any of the Notes represented by this Global Note may become due and repayable in accordance with the Conditions and the Trust Deed, the amount payable under the Conditions in respect of such Notes on each such date and to pay interest (if any) on the nominal amount of the Notes from time to time represented by this Global Note calculated and payable as provided in the Conditions and the Trust Deed together with any other sums payable under the

1	To appear on Notes with a maturity of more than 183 days.
2	To appear on Notes with a maturity of 183 days or less.

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Conditions and the Trust Deed, upon presentation and, at maturity, surrender of this Global Note at the specified office of the Agent at Winchester House, 1 Great Winchester Street, London EC2N 2DB, England or such other specified office as may be specified for this purpose in accordance with the Conditions or at the specified office of any of the other Paying Agents located outside the United States, its territories and possessions (except as provided in the Conditions) from time to time appointed by the Issuer in respect of the Notes. On any redemption or payment of an instalment or interest being made in respect of, or purchase and cancellation of, any of the Notes represented by this Global Note details of such redemption, payment, purchase and cancellation (as the case may be) shall be entered by or on behalf of the Issuer in Schedule One hereto and the relevant space in Schedule One hereto recording any such redemption, payment, purchase and cancellation (as the case may be) shall be signed by or on behalf of the Issuer. Upon any such redemption, payment of an instalment, purchase and cancellation the nominal amount of this Global Note and the Notes represented by this Global Note shall be reduced by the nominal amount of such Notes so redeemed or purchased and cancelled or the amount of such instalment. The nominal amount from time to time of this Global Note and of the Notes represented by this Global Note following any such redemption, payment of an instalment, purchase and cancellation as aforesaid or any exchange as referred to below shall be the nominal amount most recently entered in the relevant column in Part 2, 3 or 4 of Schedule One hereto or in Schedule Two hereto.

Payments of principal and interest (if any) due prior to the Exchange Date (as defined below) will only be made to the bearer hereof to the extent that there is presented to the Agent by Clearstream Banking, société anonyme (Clearstream, Luxembourg) or Euroclear Bank S.A./N.V. as operator of the Euroclear System (Euroclear) a certificate in or substantially in the form set out in Error! Reference source not found. of Schedule 1 to the Trust Deed to the effect that it has received from or in respect of a person entitled to a particular nominal amount of the Notes represented by this Global Note (as shown by its records) a certificate in or substantially in the form of Certificate “A” as set out in Error! Reference source not found. of Schedule 1 to the Trust Deed. The bearer of this Global Note will not (unless upon due presentation of this Global Note for exchange, delivery of the appropriate number of Definitive Notes (together, if applicable, with the Receipts, Coupons and Talons appertaining thereto in or substantially in the forms set out in Parts 3, 4, 5 and 6 of Schedule 1 to the Trust Deed) or, as the case may be, issue and delivery (or, as the case may be, endorsement) of the Permanent Global Note is improperly withheld or refused and such withholding or refusal is continuing at the relevant payment date) be entitled to receive any payment hereon due on or after the Exchange Date.

On or after the date (the Exchange Date) which is 40 days after the Issue Date, this Global Note may be exchanged (free of charge) in whole or in part for, as specified in the Final Terms, either Definitive Notes and (if applicable) Receipts, Coupons and/or Talons (on the basis that all the appropriate details have been included on the face of such Definitive Notes and (if applicable) Receipts, Coupons and/or Talons and the relevant information supplementing, replacing or modifying the Conditions appearing in the Final Terms has been endorsed on or attached to such Definitive Notes) or a Permanent Global Note in or substantially in the form set out in Part 2 of Schedule 1 to the Trust Deed (together with the Final Terms attached thereto) upon notice being given by Euroclear and/or Clearstream, Luxembourg acting on the instructions of any holder of an interest in this Global Note and subject, in the case of Definitive Notes, to such notice period as is specified in the Final Terms. If Definitive Notes and (if applicable) Receipts, Coupons and/or Talons have already been issued in exchange for all the Notes represented for the time being by the Permanent Global Note, then this Global Note may only thereafter be exchanged for Definitive Notes and (if applicable) Receipts, Coupons and/or Talons pursuant to the terms hereof. Presentation of this Global Note for exchange shall be made by the bearer hereof on any day (other than a Saturday or Sunday) on which banks are open for business in London at the office of the Agent specified above. The Issuer shall procure that Definitive Notes or (as the case may be) the Permanent Global Note, shall be so issued and delivered in exchange for only that portion of this Global Note in respect of which there shall have been presented to the Agent by Euroclear or Clearstream, Luxembourg a certificate in or substantially in the form set out in Error! Reference source not found. of Schedule 1 to the Trust Deed to the effect that it has received from or in respect of a person entitled to a particular nominal amount of the Notes represented by this Global Note (as shown by its records) a certificate in or substantially in the form of Certificate “A” as set out in Error! Reference source not found. of Schedule 1 to the Trust Deed. On an exchange of the whole of this Global Note, this Global Note shall be surrendered to the Agent.

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On an exchange of part only of this Global Note, details of such exchange shall be entered by or on behalf of the Issuer in Schedule Two hereto and the relevant space in Schedule Two hereto recording such exchange shall be signed by or on behalf of the Issuer, whereupon the nominal amount of this Global Note and the Notes represented by this Global Note shall be reduced by the nominal amount of this Global Note so exchanged. On any exchange of this Global Note for a Permanent Global Note, details of such exchange shall be entered by or on behalf of the Issuer in Schedule Two to the Permanent Global Note and the relevant space in Schedule Two thereto recording such exchange shall be signed by or on behalf of the Issuer.

Until the exchange of the whole of this Global Note as aforesaid, the bearer hereof shall (subject as provided in the next paragraph) in all respects (except as otherwise provided herein) be entitled to the same benefits as if he were the bearer of Definitive Notes and the relative Receipts, Coupons and/or Talons (if any) in the form(s) set out in Parts 3, 4, 5 and 6 (as applicable) of Schedule 1 to the Trust Deed.

Each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or Clearstream, Luxembourg as the holder of a particular nominal amount of the Notes represented by this Global Note (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes, save in the case of manifest error) shall be treated by the Issuer, the Trustee, the Agent and any other Paying Agent as the holder of such nominal amount of such Notes for all purposes, other than with respect to the payment of principal and interest on such nominal amount of such Notes, the right to which shall be vested, as against the Issuer, solely in the bearer of this Global Note in accordance with and subject to the terms of this Global Note and the Trust Deed.

This Global Note is governed by, and shall be construed in accordance with, English law.

This Global Note shall not be valid unless authenticated by Deutsche Bank AG, London Branch as Agent.

No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Global Note, but this does not affect any right or remedy of any person which exists or is available apart from that Act.

IN WITNESS whereof the Issuer has caused this Global Note to be signed manually or in facsimile by two persons duly authorised on its behalf.

COUNTRYWIDE FINANCIAL CORPORATION

By:		By
	Duly Authorised		Duly Authorised

Authenticated without recourse, warranty or liability by

Deutsche Bank AG, London Branch
as Agent.

     By:

Authorised Officer

64

Schedule One

PART I

INTEREST PAYMENTS

				Confirmation of
				payment by or on
	Interest Payment	Total amount of	Amount of	behalf of the
Date made	Date	interest payable	interest paid	Issuer

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PART II

PAYMENT OF INSTALMENT AMOUNTS

			Remaining nominal
			amount of this	Confirmation of
	Total amount of	Amount of	Global Note	payment by or on
	Instalment Amounts	Instalment Amounts	following such	behalf of the
Date made	payable	paid	payment*	Issuer

^* See most recent entry in Part II, III or IV or Schedule Two in order to determine this amount.

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PART III

REDEMPTIONS

			Remaining nominal
			amount of this	Confirmation of
	Total amount		Global Note	redemption by or on
	of principal	Amount of	following such	behalf of the
Date made	payable	principal paid	redemption*	Issuer

^* See most recent entry in Part II, III or IV or Schedule Two in order to determine this amount.

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PART IV

PURCHASES AND CANCELLATIONS

		Remaining nominal
	Part of nominal	amount of this	Confirmation of
	amount of this	Global Note	purchase and
	Global Note	following such	cancellation by or
	purchased and	purchase and	on behalf of the
Date made	cancelled	cancellation*	Issuer

^* See most recent entry in Part II, III or IV or Schedule Two in order to determine this amount.

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Schedule Two

EXCHANGES

FOR DEFINITIVE NOTES OR PERMANENT GLOBAL NOTE

     The following exchanges of a part of this Global Note for Definitive Notes or a part of a Permanent Global Note have been made:

	Nominal amount of
	this Global Note
	exchanged for	Remaining nominal
	Definitive Notes or	amount of this
	a part of a	Global Note	Notation made by or
	Permanent Global	following such	on behalf of the
Date made	Note	exchange*	Issuer

^* See most recent entry in Part II, III or IV or Schedule Two in order to determine this amount.

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PART 2

FORM OF PERMANENT GLOBAL NOTE

[ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]¹

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).]²

COUNTRYWIDE FINANCIAL CORPORATION
(the Issuer)
(incorporated with limited liability in the State of Delaware)

Unconditionally and irrevocably guaranteed by
COUNTRYWIDE HOME LOANS, INC.
(incorporated with limited liability in the State of New York)

PERMANENT GLOBAL NOTE

This Note is a Permanent Global Note in respect of a duly authorised issue of Notes of the Issuer (the Notes) of the Nominal Amount, Specified Currency(ies) and Specified Denomination(s) as are specified in the Final Terms applicable to the Notes (the Final Terms), a copy of which is annexed hereto. References herein to the Conditions shall be to the Terms and Conditions of the Notes as set out in to the Trust Deed (as defined below) as supplemented, replaced and modified by the Final Terms but, in the event of any conflict between the provisions of the said Conditions and the information in the Final Terms, the Final Terms will prevail. Words and expressions defined in the Conditions shall bear the same meanings when used in this Global Note. This Global Note is issued subject to, and with the benefit of, the Conditions and a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the Trust Deed) dated 15 August 2005 and made between the Issuer, Countrywide Home Loans, Inc. as guarantor and Deutsche Trustee Company Limited as trustee for the holders of the Notes.

The Issuer, subject to and in accordance with the Conditions and the Trust Deed, promises to pay to the bearer hereof on each Instalment Date (if the Notes are repayable in instalments) and on the Maturity Date and/or on such earlier date(s) as all or any of the Notes represented by this Global Note may become due and repayable in accordance with the Conditions and the Trust Deed, the amount payable under the Conditions in respect of such Notes on each such date and to pay interest (if any) on the nominal amount of the Notes from time to time represented by this Global Note calculated and payable as provided in the Conditions and the Trust Deed together with any other sums payable under the Conditions and the Trust Deed, upon presentation and, at maturity, surrender of this Global Note at the specified office of the Agent at Winchester House, 1 Great Winchester Street, London EC2N 2DB, England or such other office as may be specified for this purpose in accordance with the Conditions or at the specified office of any of the other Paying Agents located outside the United States, its territories and possessions (except as provided in the Conditions) from time to time appointed by the Issuer in respect of the Notes. On any redemption or payment of an instalment

1	To appear on Notes with a maturity of more than 183 days.
2	To appear on Notes with a maturity of 183 days or less.

70

or interest being made in respect of, or purchase and cancellation of, any of the Notes represented by this Global Note details of such redemption, payment, purchase and cancellation (as the case may be) shall be entered by or on behalf of the Issuer in Schedule One hereto and the relevant space in Schedule One hereto recording any such redemption, payment, purchase and cancellation (as the case may be) shall be signed by or on behalf of the Issuer. Upon any such redemption, payment of an instalment, purchase and cancellation the nominal amount of this Global Note and the Notes represented by this Global Note shall be reduced by the nominal amount of such Notes so redeemed or purchased and cancelled or the amount of such instalment. The nominal amount from time to time of this Global Note and of the Notes represented by this Global Note following any such redemption, payment of an instalment, purchase and cancellation as aforesaid or any exchange as referred to below shall be the nominal amount most recently entered in the relevant column in Part 2, 3 or 4 of Schedule One hereto or in Schedule Two hereto.

On any exchange of the Temporary Global Note issued in respect of the Notes for this Global Note or any part hereof, details of such exchange shall be entered by or on behalf of the Issuer in Schedule Two hereto and the relevant space in Schedule Two hereto recording such exchange shall be signed by or on behalf of the Issuer, whereupon the nominal amount of this Global Note and the Notes represented by this Global Note shall be increased by the nominal amount of the Temporary Global Note so exchanged.

This Global Note may be exchanged (free of charge) in whole, but not in part, for Definitive Notes and (if applicable) Receipts, Coupons and/or Talons in or substantially in the forms set out in Parts 3, 4, 5 and 6 of Schedule 1 to the Trust Deed (on the basis that all the appropriate details have been included on the face of such Definitive Notes and (if applicable) Receipts, Coupons and/or Talons and the relevant information supplementing, replacing or modifying the Conditions appearing in the Final Terms has been endorsed on or attached to such Definitive Notes) either, as specified in the applicable Final Terms:

(i) upon not less than 60 days’ written notice being given to the Agent by Euroclear Bank S.A./N.V. as operator of the Euroclear System (Euroclear) and/or Clearstream Banking, société anonyme (Clearstream, Luxembourg) (acting on the instructions of any holder of an interest in this Global Note) or the Trustee; or

(ii) in the case of Notes with a maturity of 183 days or less only upon the occurrence of an Exchange Event.

     An Exchange Event means:

(1)	an Event of Default has occurred and is continuing;
(2)	the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no alternative clearing system satisfactory to the Trustee is available; or
(3)	the Issuer has or will become obliged to pay additional amounts as provided for or referred to in Condition 7 which would not be required were the Notes in definitive form.

     Upon the occurrence of an Exchange Event:

(i)	the Issuer will promptly give notice to Noteholders in accordance with Condition 13 upon the occurrence of such Exchange Event; and
(ii)	Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in this Global Note) or the Trustee may give notice to the Agent requesting exchange and, in the event of the occurrence of an Exchange Event as described in (3) above, the

71

Issuer may also give notice to the Agent requesting exchange. Any such exchange shall occur on a date specified in the notice not later than 60 days after the date of receipt of the first relevant notice by the Agent.

The first notice requesting exchange in accordance with the above provisions shall give rise to the issue of Definitive Notes for the total nominal amount of Notes represented by this Global Note.

Any such exchange as aforesaid will be made upon presentation of this Global Note by the bearer hereof on any day (other than a Saturday or Sunday) on which banks are open for business in London at the office of the Agent specified above.

The aggregate nominal amount of Definitive Notes issued upon an exchange of this Global Note will be equal to the aggregate nominal amount of this Global Note. Upon exchange of this Global Note for Definitive Notes, the Agent shall cancel it or procure that it is cancelled.

Until the exchange of the whole of this Global Note as aforesaid, the bearer hereof shall (subject as provided in the next paragraph) in all respects be entitled to the same benefits as if he were the bearer of Definitive Notes and the relative Receipts, Coupons and/or Talons (if any) in the form(s) set out in Parts 3, 4, 5 and 6 (as applicable) of Schedule 1 to the Trust Deed.

Each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or Clearstream, Luxembourg as the holder of a particular nominal amount of the Notes represented by this Global Note (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes, save in the case of manifest error) shall be treated by the Issuer, the Trustee, the Agent and any other Paying Agent as the holder of such nominal amount of such Notes for all purposes, other than with respect to the payment of principal and interest on such nominal amount of such Notes, the right to which shall be vested, as against the Issuer, solely in the bearer of this Global Note in accordance with and subject to the terms of this Global Note and the Trust Deed.

This Global Note is governed by, and shall be construed in accordance with, English law.

This Global Note shall not be valid unless authenticated by Deutsche Bank AG, London Branch as Agent.

No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Global Note, but this does not affect any right or remedy of any person which exists or is available apart from that Act.

IN WITNESS whereof the Issuer has caused this Global Note to be signed manually or in facsimile by two persons duly authorised on its behalf.

COUNTRYWIDE FINANCIAL CORPORATION

By:	Duly Authorised	By:	Duly Authorised
Authenticated without recourse, warranty or liability by Deutsche Bank AG, London Branch as Agent.
By:	Authorised Officer

72

Schedule One

PART I

INTEREST PAYMENTS

				Confirmation of
				payment by or on
	Interest Payment	Total amount of	Amount of interest	behalf of the
Date made	Date	interest payable	paid	Issuer

73

PART II

PAYMENT OF INSTALMENT AMOUNTS

			Remaining nominal
			amount of this	Confirmation of
	Total amount	Amount of	Global Note	payment by or on
	of Instalment	Instalment Amounts	following such	behalf of the
Date made	Amounts payable	paid	payment*	Issuer

^* See most recent entry in Part II, III or IV or Schedule Two in order to determine this amount.

74

PART III

REDEMPTIONS

			Remaining nominal
			amount of this	Confirmation of
	Total amount		Global Note	redemption by or on
	of principal	Amount of	following such	behalf of the
Date made	payable	principal paid	redemption*	Issuer

^* See most recent entry in Part II, III or IV or Schedule Two in order to determine this amount.

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PART IV

PURCHASES AND CANCELLATIONS

		Remaining nominal
	Part of nominal	amount of this	Confirmation of
	amount of this	Global Note	purchase and
	Global Note	following such	cancellation by or
	purchased and	purchase and	on behalf of the
Date made	cancelled	cancellation*	Issuer

^* See most recent entry in Part II, III or IV or Schedule Two in order to determine this amount.

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Schedule Two

EXCHANGES

		Increased nominal
	Nominal amount of	amount of this
	Temporary Global	Global Note	Notation made by or
	Note exchanged for	following such	on behalf of the
Date made	this Global Note	exchange*	Issuer

^* See most recent entry in Part II, III or IV of Schedule One or in this Schedule Two in order to determine this amount.

77

PART 3

FORM OF DEFINITIVE NOTE

[ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]¹

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).]²

COUNTRYWIDE FINANCIAL CORPORATION
(the Issuer)
(incorporated with limited liability in the State of Delaware)

Unconditionally and irrevocably guaranteed by
COUNTRYWIDE HOME LOANS, INC.
(incorporated with limited liability in the State of New York)

[Specified Currency and Nominal Amount of Tranche]
NOTES DUE
[Year of Maturity]

This Note is one of a Series of Notes of [Specified Currency(ies) and Specified Denomination(s)] each of the Issuer (Notes). References herein to the Conditions shall be to the Terms and Conditions [endorsed hereon/set out in Error! Reference source not found. to the Trust Deed (as defined below) which shall be incorporated by reference herein and have effect as if set out herein] as supplemented, replaced and modified by the relevant information (appearing in the Final Terms (the Final Terms)) endorsed hereon but, in the event of any conflict between the provisions of the said Conditions and such information in the Final Terms, such information will prevail. Words and expressions defined in the Conditions shall bear the same meanings when used in this Note. This Note is issued subject to, and with the benefit of, the Conditions and a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the Trust Deed) dated 15 August 2005 and made between the Issuer, Countrywide Home Loans, Inc. as guarantor and Deutsche Trustee Company Limited as trustee for the holders of the Notes.

The Issuer, subject to and in accordance with the Conditions and the Trust Deed, promises to pay to the bearer hereof on [each Instalment Date and] the Maturity Date or on such earlier date as this Note may become due and repayable in accordance with the Conditions and the Trust Deed, the amount payable on redemption of this Note and to pay interest (if any) on the nominal amount of this Note calculated and payable as provided in the Conditions and the Trust Deed together with any other sums payable under the Conditions and the Trust Deed.

This Note shall not be valid unless authenticated by Deutsche Bank AG, London Branch as Agent.

IN WITNESS whereof this Note has been executed on behalf of the Issuer.

1	To appear on all Notes with a maturity of more than 183 days.
2	To appear on all Notes with a maturity of 183 days or less.

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COUNTRYWIDE FINANCIAL CORPORATION

By:		By:
	.		.
	Duly Authorised		Duly Authorised

Authenticated without recourse, warranty or liability by

Deutsche Bank AG, London Branch
as Agent.

By:
	Authorised Officer

79

[Conditions]

[Conditions to be as set out in Error! Reference source not found. to this Trust Deed or such other form as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s), but shall not be endorsed if not required by the relevant Stock Exchange]

80

Final Terms

[Here to be set out the text of the relevant information supplementing,
replacing or modifying the Conditions which appears in the
Final Terms relating to the Notes]

81

PART 4

FORM OF RECEIPT

COUNTRYWIDE FINANCIAL CORPORATION

[Specified Currency and Nominal Amount of Tranche]
NOTES DUE
[Year of Maturity]

Series No. [       ]

Receipt for the sum of [       ] being the instalment of principal payable in accordance with the Terms and Conditions applicable to the Note to which this Receipt appertains (the Conditions) on [      ].

This Receipt is issued subject to and in accordance with the Conditions which shall be binding upon the holder of this Receipt (whether or not it is for the time being attached to such Note) and is payable at the specified office of any of the Paying Agents set out on the reverse of the Note to which this Receipt appertains (and/or any other or further Paying Agents and/or specified offices as may from time to time be duly appointed and notified to the Noteholders).

This Receipt must be presented for payment together with the Note to which it appertains. The Issuer shall have no obligation in respect of any Receipt presented without the Note to which it appertains or any unmatured Receipts.

[ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]¹

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).]²

1	To appear on all Receipts appertaining to Notes with a maturity of more than 183 days.
2	To appear on all Receipts appertaining to Notes with a maturity of 183 days or less.

82

PART 5

FORM OF COUPON

On the front:

COUNTRYWIDE FINANCIAL CORPORATION

[Specified Currency and Nominal Amount of Tranche]
NOTES DUE
[Year of Maturity]

Series No. [       ]

[Coupon appertaining to a Note in the denomination of [Specified Currency and Specified Denomination]].¹

Part A

[For Fixed Rate Notes:

This Coupon is payable to bearer, separately	Coupon for
negotiable and subject to the Terms and	[      ]
Conditions of the said Notes.	due on [     ], [       ]]

Part B

[For Floating Rate Notes or Indexed Interest Notes:

Coupon for the amount due in accordance with

the Terms and Conditions endorsed on,

attached to or incorporated by reference

into the said Notes on [the Interest Payment

Date falling in [      ] [      ]/[      ]].

This Coupon is payable to bearer, separately

negotiable and subject to such Terms and

Conditions, under which it may become void

before its due date.]

[ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]²

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).]¹

1	Delete where the Notes are all of the same denomination.
2	To appear on all Coupons appertaining to Notes with a maturity of more than 183 days.
1	To appear on all Coupons appertaining to Notes with a maturity of 183 days or less.

83

PART 6

FORM OF TALON

On the front:

COUNTRYWIDE FINANCIAL CORPORATION

[Specified Currency and Nominal Amount of Tranche]
NOTES DUE
[Year of Maturity]

Series No. [     ]

[Talon appertaining to a Note in the denomination of [Specified Currency and Specified Denomination]] ¹ .

On and after [     ] further Coupons [and a further Talon]² appertaining to the Note to which this Talon appertains will be issued at the specified office of any of the Paying Agents set out on the reverse hereof (and/or any other or further Paying Agents and/or specified offices as may from time to time be duly appointed and notified to the Noteholders) upon production and surrender of this Talon.

This Talon may, in certain circumstances, become void under the Terms and Conditions endorsed on the Note to which this Talon appertains.

[ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]³

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).]⁴

1	Delete where the Notes are all of the same denomination.
2	Not required on last Coupon sheet.
3	[To appear on all Talons appertaining to Notes with a maturity of more than 183 days.]
4	[To appear on all Talons appertaining to Notes with a maturity of 183 days or less.]

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On the back of Receipts, Coupons and Talons:

AGENT

DEUTSCHE BANK AG, LONDON BRANCH
Winchester House
1 Great Winchester Street
London EC2N 2DB

OTHER PAYING AGENT

Deutsche Bank Luxembourg S.A.
2, boulevard Konrad Adenauer
L-1115 Luxembourg

85

PART 7

FORM OF CERTIFICATE TO BE PRESENTED BY EUROCLEAR OR CLEARSTREAM,
LUXEMBOURG

COUNTRYWIDE FINANCIAL CORPORATION

[Title of Notes]

(the “Securities”)

This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organisations appearing in our records as persons being entitled to a portion of the nominal amount set forth below (our Member Organisations) substantially to the effect set forth in the temporary Global Note representing the Securities, as of the date hereof, [ ] nominal amount of the above-captioned Securities (i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source (United States persons), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Sections 1.165-12(c)(1)(v) (financial institutions) purchasing for their own account or for resale, or (b) acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the Issuer or the Issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and to the further effect that United States or foreign financial institutions described in Clause (iii) above (whether or not also described in Clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

If the Securities are of the category contemplated in Section 230.903(c)(3) of Regulation S under the Securities Act of 1933, as amended, then this is also to certify with respect to such principal amount of Securities set forth above that, except as set forth below, we have received in writing, by tested telex or by electronic transmission, from our Member Organisations entitled to a portion of such principal amount, certifications with respect to such portion, substantially to the effect set forth in the temporary Global Note representing the Securities.

We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the temporary Global Note excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as of the date hereof.

We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings or official enquiries are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings or enquiries.

Dated:     , 20[ ]¹

¹ To be dated no earlier than the date to which this certification relates, namely (a) the payment date or (b) the Exchange Date.

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Yours faithfully,

[Euroclear Bank S.A./N.V.

as operator of the Euroclear System]

or

[Clearstream Banking, société anonyme]

By:                         

87

CERTIFICATE “A”

COUNTRYWIDE FINANCIAL CORPORATION

[Title of Notes]

(the Securities)

This is to certify that as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are owned by person(s) that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source (United States person(s)), (ii) are owned by United States person(s) that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v)) (financial institutions) purchasing for their own account or for resale, or (b) acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise the Issuer or the Issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by United States or foreign financial institution(s) for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in addition if the owner of the Securities is a United States or foreign financial institution described in Clause (iii) above (whether or not also described in Clause (i) or (ii)) this is to further certify that such financial institution has not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

If the Securities are of the category contemplated in Section 230.903(c)(2) of Regulation S under the Securities Act of 1933, as amended, (the Act) then this is also to certify that, except as set forth below, the Securities are beneficially owned by (a) non-U.S. person(s) or (b) U.S. person(s) who purchased the Securities in transactions which did not require registration under the Act. As used in this paragraph, the term U.S. person has the meaning given to it by Regulation S under the Act.

As used herein, United States means the United States of America (including the States and the District of Columbia); and its possessions include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Securities held by you for our account in accordance with your operating procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date.

This certification excepts and does not relate to [     ] of such interest in the above Securities in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Securities (or, if relevant, exercise of any right or collection of any interest) cannot be made until we do so certify.

We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings or official enquiries are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings or enquiries.

88

Dated:        , 20[   ]¹

Name of person making certification

By:                                    

1. To be dated no earlier than the fifteenth day prior to the date to which this certification relates, namely (a) the payment date or (b) the Exchange Date.

89

SCHEDULE 3

PROVISIONS FOR MEETINGS OF NOTEHOLDERS

1. (A) As used in this Schedule the following expressions shall have the following meanings unless the context otherwise requires:

(i) voting certificate shall mean an English language certificate issued by a Paying Agent and dated in which it is stated:

(a) that on the date thereof Notes (whether in definitive form or represented by a Global Note and not being Notes in respect of which a block voting instruction has been issued and is outstanding in respect of the meeting specified in such voting certificate or any adjourned such meeting) were deposited with such Paying Agent or (to the satisfaction of such Paying Agent) were held to its order or under its control or blocked in an account with a clearing system and that no such Notes will cease to be so deposited or held or blocked until the first to occur of:

(1)	the conclusion of the meeting specified in such certificate or, if later, of any adjourned such meeting; and
(2)	the surrender of the certificate to the Paying Agent who issued the same; and

(b) that the bearer thereof is entitled to attend and vote at such meeting and any adjourned such meeting in respect of the Notes represented by such certificate;

(ii) block voting instruction shall mean an English language document issued by a Paying Agent and dated in which:

(a) it is certified that Notes (whether in definitive form or represented by a Global Note and not being Notes in respect of which a voting certificate has been issued and is outstanding in respect of the meeting specified in such block voting instruction and any adjourned such meeting) have been deposited with such Paying Agent or (to the satisfaction of such Paying Agent) were held to its order or under its control or blocked in an account with a clearing system and that no such Notes will cease to be so deposited or held or blocked until the first to occur of:

(1)

the conclusion of the meeting specified in such document or, if later, of any adjourned such meeting; and

(2)

the surrender to the Paying Agent not less than 48 hours before the time for which such meeting or any adjourned such meeting is convened of the receipt issued by such Paying Agent in respect of each such deposited Note which is to be released or (as the case may require) the Note or Notes ceasing with the agreement of the Paying Agent to be held to its order or under its control or so blocked and the giving of notice by the Paying Agent to the Issuer in accordance with paragraph 17 hereof of the necessary amendment to the block voting instruction;

90

(b)	it is certified that each holder of such Notes has instructed such Paying Agent that the vote(s) attributable to the Note or Notes so deposited or held or blocked should be cast in a particular way in relation to the resolution or resolutions to be put to such meeting or any adjourned such meeting and that all such instructions are during the period commencing 48 hours prior to the time for which such meeting or any adjourned such meeting is convened and ending at the conclusion or adjournment thereof neither revocable nor capable of amendment;
(c)	the aggregate principal amount of the Notes so deposited or held or blocked are listed distinguishing with regard to each such resolution between those in respect of which instructions have been given as aforesaid that the votes attributable thereto should be cast in favour of the resolution and those in respect of which instructions have been so given that the votes attributable thereto should be cast against the resolution; and
(d)	one or more persons named in such document (each hereinafter called a proxy) is or are authorised and instructed by such Paying Agent to cast the votes attributable to the Notes so listed in accordance with the instructions referred to in (c) above as set out in such document;

(iii)

24 hours shall mean a period of 24 hours including all or part of a day upon which banks are open for business in both the place where the relevant meeting is to be held and in each of the places where the Paying Agents have their specified offices (disregarding for this purpose the day upon which such meeting is to be held) and such period shall be extended by one period or, to the extent necessary, more periods of 24 hours until there is included as aforesaid all or part of a day upon which banks are open for business in all of the places as aforesaid; and

(iv)

48 hours shall mean a period of 48 hours including all or part of two days upon which banks are open for business both in the place where the relevant meeting is to be held and in each of the places where the Paying Agents have their specified offices (disregarding for this purpose the day upon which such meeting is to be held) and such period shall be extended by one period or, to the extent necessary, more periods of 24 hours until there is included as aforesaid all or part of two days upon which banks are open for business in all of the places as aforesaid.

(B) A holder of a Note (whether in definitive form or represented by a Global Note) may obtain a voting certificate in respect of such Note from a Paying Agent or require a Paying Agent to issue a block voting instruction in respect of such Note by depositing such Note with such Paying Agent or (to the satisfaction of such Paying Agent) by such Note being held to its order or under its control or being blocked in an account with a clearing system, in each case not less than 48 hours before the time fixed for the relevant meeting and on the terms set out in subparagraph (A)(i)(a) or (A)(ii)(a) above (as the case may be), and (in the case of a block voting instruction) instructing such Paying Agent to the effect set out in subparagraph (A)(ii)(b) above. The holder of any voting certificate or the proxies named in any block voting instruction shall for all purposes in connection with the relevant meeting or adjourned meeting of Noteholders be deemed to be the holder of the Notes to which such voting certificate or block voting instruction relates and the Paying Agent with which such Notes have been deposited or the person holding the same to the order or under the control of such Paying Agent or the clearing system in which such Notes have been blocked shall be deemed for such purposes not to be the holder of those Notes.

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2.	The Issuer, the Guarantor or the Trustee may at any time and the Issuer shall upon a requisition in writing in the English language signed by the holders of not less than five per cent. in nominal amount of the Notes for the time being outstanding, convene a meeting of the Noteholders and if the Issuer makes default for a period of seven days in convening such a meeting the same may be convened by the Trustee or the requisitionists. Every such meeting shall be held at such time and place as the Trustee may appoint or approve.
3.	At least 21 days’ notice (exclusive of the day on which the notice is given and the day on which the meeting is to be held) specifying the place, day and hour of meeting shall be given to the holders of the relevant Notes prior to any meeting of such holders in the manner provided by Condition 13. Such notice, which shall be in the English language, shall state generally the nature of the business to be transacted at the meeting thereby convened but (except for an Extraordinary Resolution) it shall not be necessary to specify in such notice the terms of any resolution to be proposed. Such notice shall include statements, if applicable, to the effect that Notes may, not less than 48 hours before the time fixed for the meeting, be deposited with Paying Agents or (to their satisfaction) held to their order or under their control or blocked in an account with a clearing system for the purpose of obtaining voting certificates or appointing proxies. A copy of the notice shall be sent by post to the Trustee (unless the meeting is convened by the Trustee), to the Issuer (unless the meeting is convened by the Issuer) and to the Guarantor (unless the meeting is convened by the Guarantor).
4.	A person (who may but need not be a Noteholder) nominated in writing by the Trustee shall be entitled to take the chair at the relevant meeting or adjourned meeting but if no such nomination is made or if at any meeting or adjourned meeting the person nominated shall not be present within 15 minutes after the time appointed for holding the meeting or adjourned meeting the Noteholders present shall choose one of their number to be Chairman, failing which the Issuer may appoint a Chairman. The Chairman of an adjourned meeting need not be the same person as was Chairman of the meeting from which the adjournment took place.
5.	At any such meeting one or more persons present holding Definitive Notes or voting certificates or being proxies and holding or representing in the aggregate not less than one-twentieth of the nominal amount of the Notes for the time being outstanding shall (except for the purpose of passing an Extraordinary Resolution) form a quorum for the transaction of business and no business (other than the choosing of a Chairman) shall be transacted at any meeting unless the requisite quorum be present at the commencement of the relevant business. The quorum at any such meeting for passing an Extraordinary Resolution shall (subject as provided below) be one or more persons present holding Definitive Notes or voting certificates or being proxies and holding or representing in the aggregate a clear majority in nominal amount of the Notes for the time being outstanding PROVIDED THAT at any meeting the business of which includes any of the following matters (each of which shall, subject only to Clause 19(B)(ii), only be capable of being effected after having been approved by Extraordinary Resolution) namely:

(i)	reduction or cancellation of the amount payable or, where applicable, modification, except where such modification is in the opinion of the Trustee bound to result in an increase, of the method of calculating the amount payable or modification of the date of payment or, where applicable, of the method of calculating the date of payment in respect of any principal or interest in respect of the Notes;
(ii)	alteration of the currency in which payments under the Notes, Receipts and Coupons are to be made;
(iii)	alteration of the majority required to pass an Extraordinary Resolution;
(iv)	the sanctioning of any such scheme or proposal as is described in paragraph 18(I) below; and

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(v) alteration of this proviso or the proviso to paragraph 6 below;

the quorum shall be one or more persons present holding Definitive Notes or voting certificates or being proxies and holding or representing in the aggregate not less than two-thirds of the nominal amount of the Notes for the time being outstanding.

6.	If within 15 minutes (or such longer period not exceeding 30 minutes as the Chairman may decide) after the time appointed for any such meeting a quorum is not present for the transaction of any particular business, then, subject and without prejudice to the transaction of the business (if any) for which a quorum is present, the meeting shall if convened upon the requisition of Noteholders be dissolved. In any other case it shall stand adjourned to the same day in the next week (or if such day is a public holiday the next succeeding business day) at the same time and place (except in the case of a meeting at which an Extraordinary Resolution is to be proposed in which case it shall stand adjourned for such period, being not less than 13 clear days nor more than 42 clear days, and to such place as may be appointed by the Chairman either at or subsequent to such meeting and approved by the Trustee). If within 15 minutes (or such longer period not exceeding 30 minutes as the Chairman may decide) after the time appointed for any adjourned meeting a quorum is not present for the transaction of any particular business, then, subject and without prejudice to the transaction of the business (if any) for which a quorum is present, the Chairman may either (with the approval of the Trustee) dissolve such meeting or adjourn the same for such period, being not less than 13 clear days (but without any maximum number of clear days), and to such place as may be appointed by the Chairman either at or subsequent to such adjourned meeting and approved by the Trustee, and the provisions of this sentence shall apply to all further adjourned such meetings. At any adjourned meeting one or more persons present holding Definitive Notes of the relevant one or more Series or voting certificates or being proxies (whatever the nominal amount of the Notes so held or represented by them) shall (subject as provided below) form a quorum and shall have power to pass any Extraordinary Resolution or other resolution and to decide upon all matters which could properly have been dealt with at the meeting from which the adjournment took place had the requisite quorum been present PROVIDED THAT at any adjourned meeting the quorum for the transaction of business comprising any of the matters specified in the proviso to paragraph 5 above shall be one or more persons present holding Definitive Notes or voting certificates or being proxies and holding or representing in the aggregate not less than one-third of the nominal amount of the Notes for the time being outstanding.
7.	Notice of any adjourned meeting at which an Extraordinary Resolution is to be submitted shall be given in the same manner as notice of an original meeting but as if 10 were substituted for 21 in paragraph 3 above and such notice shall state the relevant quorum. Subject as aforesaid it shall not be necessary to give any notice of an adjourned meeting.
8.	Every question submitted to a meeting shall be decided in the first instance by a show of hands and 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 the vote or votes (if any) to which he may be entitled as a Noteholder or as a holder of a voting certificate or as a proxy.
9.	At any meeting unless a poll is (before or on the declaration of the result of the show of hands) demanded by the Chairman, the Issuer, the Guarantor, the Trustee or any person present holding a Definitive Note of the relevant Series or a voting certificate or being a proxy (whatever the nominal amount of the Notes so held or represented by him) a declaration by the Chairman that a resolution has been carried or carried by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution.
10.	Subject to paragraph 12 below, if at any such meeting a poll is so demanded it shall be taken in such manner and subject as hereinafter provided either at once or after an adjournment as the Chairman

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directs and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded as at the date of the taking of the poll. The demand for a poll shall not prevent the continuance of the meeting for the transaction of any business other than the motion on which the poll has been demanded.

11.	The Chairman may with the consent of (and shall if directed by) any such meeting adjourn the same from time to time and from place to place but no business shall be transacted at any adjourned meeting, except business which might lawfully (but for lack of required quorum) have been transacted at the meeting from which the adjournment took place.
12.	Any poll demanded at any such meeting on the election of a Chairman or on any question of adjournment shall be taken at the meeting without adjournment.
13.	The Trustee and its lawyers and any director, officer or employee of a corporation being a trustee of these presents and any director or officer of the Issuer or, as the case may be, the Guarantor and its or their lawyers and any other person authorised so to do by the Trustee may attend and speak at any meeting. Save as aforesaid, but without prejudice to the proviso to the definition of “outstanding” in Clause 1, no person shall be entitled to attend and speak, nor shall any person be entitled to vote at any meeting of Noteholders or join with others in requesting the convening of such a meeting or to exercise the rights conferred on Noteholders by Condition 9 unless he either produces the Definitive Note or Definitive Notes of which he is the holder or a voting certificate or is a proxy. No person shall be entitled to vote at any meeting in respect of Notes held by, for the benefit of, or on behalf of, the Issuer, the Guarantor or any other Subsidiary of the Issuer. Nothing herein shall prevent any of the proxies named in any block voting instruction from being a director, officer or representative of or otherwise connected with the Issuer or the Guarantor.
14.	Subject as provided in paragraph 13 hereof at any meeting:

(A)

on a show of hands every person who is present in person and produces a Definitive Note or voting certificate or is a proxy shall have one vote; and

(B)

on a poll every person who is so present shall have one vote in respect of each U.S.$1 or such other amount as the Trustee may in its absolute discretion stipulate (or, in the case of meetings of holders of Notes denominated in another currency, such amount in such other currency as the Trustee in its absolute discretion may stipulate) in nominal amount of the Definitive Notes so produced or represented by the voting certificate so produced or in respect of which he is a proxy.

Without prejudice to the obligations of the proxies named in any block voting instruction any person entitled to more than one vote need not use all his votes or cast all the votes to which he is entitled in the same way.

15.

The proxies named in any block voting instruction need not be Noteholders.

16.

Each block voting instruction together (if so requested by the Trustee) with proof satisfactory to the Trustee of its due execution on behalf of the relevant Paying Agent shall be deposited by the relevant Paying Agent at such place as the Trustee shall approve not less than 24 hours before the time appointed for holding the meeting or adjourned meeting at which the proxies named in the block voting instruction propose to vote and in default the block voting instruction shall not be treated as valid unless the Chairman of the meeting decides otherwise before such meeting or adjourned meeting proceeds to business. A notarially certified copy of each block voting instruction shall be deposited with the Trustee before the commencement of the meeting or adjourned meeting but the Trustee shall not thereby be obliged to investigate or be concerned with the validity of or the authority of the proxies named in any such block voting instruction.

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17.

Any vote given in accordance with the terms of a block voting instruction shall be valid notwithstanding the previous revocation or amendment of the block voting instruction or of any of the relevant Noteholders’ instructions pursuant to which it was executed provided that no intimation in writing of such revocation or amendment shall have been received from the relevant Paying Agent by the Issuer at its principal office (or such other place as may have been required or approved by the Trustee for the purpose) by the time being 24 hours and 48 hours respectively before the time appointed for holding the meeting or adjourned meeting at which the block voting instruction is to be used.

18.

A meeting of the Noteholders shall in addition to the powers hereinbefore given have the following powers exercisable only by Extraordinary Resolution (subject to the provisions relating to quorum contained in paragraphs 5 and 6 above) namely:

(A)	Power to sanction any compromise or arrangement proposed to be made between the Issuer, the Guarantor, the Trustee, any Appointee and the Noteholders, Receiptholders and Couponholders or any of them.
(B)	Power to sanction any abrogation, modification, compromise or arrangement in respect of the rights of the Trustee, any Appointee, the Noteholders, the Receiptholders, Couponholders, the Issuer, the Guarantor or against any other or others of them or against any of their property whether such rights shall arise under these presents or otherwise.
(C)	Power to assent to any modification of the provisions of these presents which shall be proposed by the Issuer, the Guarantor, the Trustee or any Noteholder.
(D)	Power to give any authority or sanction which under the provisions of these presents is required to be given by Extraordinary Resolution.
(E)	Power to appoint any persons (whether Noteholders or not) as a committee or committees to represent the interests of the Noteholders and to confer upon such committee or committees any powers or discretions which the Noteholders could themselves exercise by Extraordinary Resolution.
(F)	Power to approve of a person to be appointed a trustee and power to remove any trustee or trustees for the time being of these presents.
(G)	Power to discharge or exonerate the Trustee and/or any Appointee from all liability in respect of any act or omission for which the Trustee and/or such Appointee may have become responsible under these presents.
(H)	Power to authorise the Trustee and/or any Appointee to concur in and execute and do all such deeds, instruments, acts and things as may be necessary to carry out and give effect to any Extraordinary Resolution.
(I)	Power to sanction any scheme or proposal for the exchange or sale of the Notes for or the conversion of the Notes into or the cancellation of the Notes in consideration of shares, stock, notes, bonds, debentures, debenture stock and/or other obligations and/or securities of the Issuer or any other company formed or to be formed, or for or into or in consideration of cash, or partly for or into or in consideration of such shares, stock, notes, bonds, debentures, debenture stock and/or other obligations and/or securities as aforesaid and partly for or into or in consideration of cash and for the appointment of some person with power on behalf of the Noteholders to execute an instrument of transfer of the Registered Notes held by them in favour of the persons with or to whom the Notes are to be exchanged or sold respectively.

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19.	Any resolution passed at a meeting of the Noteholders duly convened and held in accordance with these presents shall be binding upon all the Noteholders whether present or not present at such meeting and whether or not voting and upon all Receiptholders and Couponholders and each of them shall be bound to give effect thereto accordingly and the passing of any such resolution shall be conclusive evidence that the circumstances justify the passing thereof. Notice of the result of the voting on any resolution duly considered by the Noteholders shall be published in accordance with Condition 13 by the Issuer within 14 days of such result being known PROVIDED THAT the non-publication of such notice shall not invalidate such result.
20.	The expression Extraordinary Resolution when used in these presents means (a) a resolution passed at a meeting of the Noteholders duly convened and held in accordance with these presents by a majority consisting of not less than three-fourths of the persons voting thereat upon a show of hands or if a poll is duly demanded by a majority consisting of not less than three-fourths of the votes cast on such poll; or (b) a resolution in writing signed by or on behalf of all the Noteholders, which resolution in writing may be contained in one document or in several documents in like form each signed by or on behalf of one or more of the Noteholders.
21.	Minutes of all resolutions and proceedings at every meeting of the Noteholders shall be made and entered in books to be from time to time provided for that purpose by the Issuer and any such minutes as aforesaid if purporting to be signed by the Chairman of the meeting at which such resolutions were passed or proceedings transacted shall be conclusive evidence of the matters therein contained and until the contrary is proved every such meeting in respect of the proceedings of which minutes have been made shall be deemed to have been duly held and convened and all resolutions passed or proceedings transacted thereat to have been duly passed or transacted.

22. (A) If and whenever the Issuer shall have issued and have outstanding Notes of more than one Series the foregoing provisions of this Schedule shall have effect subject to the following modifications:

(i)	a resolution which in the opinion of the Trustee affects the Notes of only one Series shall be deemed to have been duly passed if passed at a separate meeting of the holders of the Notes of that Series;
(ii)	a resolution which in the opinion of the Trustee affects the Notes of more than one Series but does not give rise to a conflict of interest between the holders of Notes of any of the Series so affected shall be deemed to have been duly passed if passed at a single meeting of the holders of the Notes of all the Series so affected;
(iii)	a resolution which in the opinion of the Trustee affects the Notes of more than one Series and gives or may give rise to a conflict of interest between the holders of the Notes of one Series or group of Series so affected and the holders of the Notes of another Series or group of Series so affected shall be deemed to have been duly passed only if passed at separate meetings of the holders of the Notes of each Series or group of Series so affected; and
(iv)	to all such meetings all the preceding provisions of this Schedule shall mutatis mutandis apply as though references therein to Notes and Noteholders were references to the Notes of the Series or group of Series in question or to the holders of such Notes, as the case may be.

(B) If the Issuer shall have issued and have outstanding Notes which are not denominated in U.S. dollars in the case of any meeting of holders of Notes of more than one currency the principal amount of such Notes shall (i) for the purposes of paragraph 2 above be the equivalent in U.S. dollars at the spot rate of a bank nominated by the Trustee for the

96

conversion of the relevant currency or currencies into U.S. dollars on the seventh dealing day prior to the day on which the requisition in writing is received by the Issuer and (ii) for the purposes of paragraphs 5, 6 and 14 above (whether in respect of the meeting or any adjourned such meeting or any poll resulting therefrom) be the equivalent at such spot rate on the seventh dealing day prior to the day of such meeting. In such circumstances, on any poll each person present shall have one vote for each U.S.$1 (or such other U.S. dollar amount as the Trustee may in its absolute discretion stipulate) in principal amount of the Notes (converted as above) which he holds or represents.

23. Subject to all other provisions of these presents the Trustee may without the consent of any of the Issuer, the Guarantor, the Noteholders, the Receiptholders or the Couponholders prescribe such further regulations regarding the requisitioning and/or the holding of meetings of Noteholders and attendance and voting thereat as the Trustee may in its sole discretion think fit.

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SIGNATORIES

EXECUTED as a DEED by	)
COUNTRYWIDE FINANCIAL CORPORATION	)
acting by	)	JENNIFER S SANDEFUR
acting under the authority of that	)
company in the presence of:	)
Witness’s Signature:		M. KEITH JACKSON
Name:		M. KEITH JACKSON
Address:		5220 LAS VIRGENES
		CALABASAS, CA 91302
Occupation:		ATTORNEY
EXECUTED as a DEED by	)
COUNTRYWIDE HOME LOANS,	)
INC. acting by	)	JENNIFER S SANDEFUR
acting under the authority of that	)
company in the presence of:	)
Witness’s Signature:		M. KEITH JACKSON
Name:		M. KEITH JACKSON
Address:		5220 LAS VIRGENES
		CALABASAS, CA 91302
Occupation:		ATTORNEY
THE COMMON SEAL of DEUTSCHE	)
TRUSTEE COMPANY LIMITED	)
was affixed to this deed in	)	SEAL
the presence of:	)

Director	SALLY WALKER
Associate Director	SINEAD CLERKIN

98

Allen & Overy LLP

TRUST DEED

COUNTRYWIDE FINANCIAL

CORPORATION

and

COUNTRYWIDE HOME LOANS,

INC.

and

DEUTSCHE TRUSTEE COMPANY

LIMITED

relating to a

U.S.$5,000,000,000

Euro Medium Term Note Programme

15 August 2005

EX-10.108

exv10w108

EX-12.1

Exhibit 12.1

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES
EXHIBIT 12.1 — COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands)

The following table sets forth the ratio of earnings to fixed charges of the Company for the nine months ended September 30, 2005 and 2004, the years ended December 31, 2004, 2003, and 2002, ten-month period ended December 31, 2001, and the fiscal year ended February 28, 2001 computed by dividing net fixed charges (interest expense on all debt plus the interest element (one-third) of operating leases) into earnings (earnings before income taxes and fixed charges).

											Ten Months		Fiscal Year
	Nine Months Ended				Year Ended						Ended		Ended
	September 30,				December 31,						December 31,		February 28,
(Dollars are in thousands)	2005		2004		2004		2003		2002		2001		2001
Net earnings	$	1,889,195	$	1,827,739	$	2,197,574	$	2,372,950	$	841,779	$	486,006	$	374,153
Income tax expense		1,246,361		1,126,597		1,398,299		1,472,822		501,244		302,613		211,882
Interest expense		3,814,165		1,765,302		2,608,338		1,940,207		1,461,066		1,474,719		1,330,724
Interest portion of rental expense		69,837		41,525		53,562		36,565		26,671		16,201		17,745
Earnings available to cover fixed charges	$	7,019,558	$	4,761,163	$	6,257,773	$	5,822,544	$	2,830,760	$	2,279,539	$	1,934,504
Fixed charges:
Interest expense	$	3,814,165	$	1,765,302	$	2,608,338	$	1,940,207	$	1,461,066	$	1,474,719	$	1,330,724
Interest portion of rental expense		69,837		41,525		53,562		36,565		26,671		16,201		17,745
Total fixed charges	$	3,884,002	$	1,806,827	$	2,661,900	$	1,976,772	$	1,487,737	$	1,490,920	$	1,348,469
Ratio of earnings to fixed charges		1.81		2.64		2.35		2.95		1.90		1.53		1.43

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Angelo R. Mozilo, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Countrywide Financial Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2005

/s/ Angelo R. Mozilo

Angelo R. Mozilo

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

     I, Eric P. Sieracki, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Countrywide Financial Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2005

/s/ Eric P. Sieracki

Eric P. Sieracki

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q of Countrywide Financial Corporation (the “Company”) for the quarter ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Angelo R. Mozilo, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Angelo R. Mozilo

Angelo R. Mozilo

Chief Executive Officer

November 8, 2005

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Countrywide Financial Corporation and will be retained by Countrywide Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q of Countrywide Financial Corporation (the “Company”) for the quarter ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Eric P. Sieracki, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Eric P. Sieracki

Eric P. Sieracki

Chief Financial Officer

November 8, 2005

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Countrywide Financial Corporation and will be retained by Countrywide Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.