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

                                    FORM 10-K

(Mark one)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                  For the fiscal year ended September 30, 2001

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                           Commission File No. 1-12655

                          HomeSide International, Inc.
             (Exact name of registrant as specified in its charter)

<TABLE>
                    Delaware                                                                59-3387041
                    --------                                                                ----------
<S>                                                                             <C>
(State or other jurisdiction of incorporation or organization)                  (I.R.S. Employer Identification No.)
</TABLE>

                   7301 Baymeadows Way, Jacksonville, FL 32256
               (Address of principal executive offices) (Zip Code)

                                 (904) 281-3000
              (Registrant's telephone number, including area code)

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


Title of each class                          Outstanding at December 27, 2001
-------------------                          --------------------------------
Common stock $0.01 par value                          1.724 shares
Class C non-voting common stock $1.00 par value           none


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [_]

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

<PAGE>

                                     PART I

ITEM 1. BUSINESS

General

     HomeSide  International,  Inc. (the "Company" or  "HomeSide"),  through its
wholly-owned operating subsidiary,  HomeSide Lending, Inc. ("HomeSide Lending"),
is one of the largest full service residential mortgage banking companies in the
United States. The Company was formerly known as HomeSide, Inc. ("HomeSide, Inc.
Predecessor").  On February 10, 1998,  National  Australia  Bank  Limited.  (the
"National")  acquired  all  outstanding  shares of the common stock of HomeSide,
Inc. and the Company adopted a fiscal year end of September 30 to conform to the
fiscal  year  of  the  National  (see  Note  2  of  the  Consolidated  Financial
Statements).  HomeSide,  Inc.  Predecessor  commenced  operations  by  acquiring
BankBoston Mortgage Corporation,  the mortgage banking subsidiary of BankBoston,
N.A.,  on March  16,  1996  and  subsequently  purchased  the  mortgage  banking
operations  of  Barnett  Banks,  Inc.  Unless  otherwise  designated,  the  term
"HomeSide" refers to the Company for the periods subsequent to February 10, 1998
and to HomeSide, Inc. Predecessor for the periods March 16, 1996 to February 10,
1998.

     HomeSide  is  currently  headquartered  in  Jacksonville,  Florida,  and at
September  30,  2001 ranks as the 6th  largest  mortgage  servicer  and the 10th
largest mortgage loan originator in the United States based on data published by
Inside Mortgage Finance.  On December 11, 2001, the National  announced the sale
of  HomeSide's  operating  platform  and  certain  of its  operating  assets  to
Washington Mutual,  Inc. ("WaMu").  As such, WaMu will acquire all of HomeSide's
servicing  technology,  and other  corporate  assets  including  the  wholesale,
correspondent  and consumer  direct  production  channels and servicing sites in
Jacksonville,  Florida  and San  Antonio,  Texas.  The  Company  will retain the
mortgage servicing rights asset ("MSR") and related financial hedges.  Following
the  consummation  of the  transactions  contemplated  by the Asset Purchase and
Liability Assumption Agreement with WaMu, HomeSide's servicing portfolio will be
subserviced  by WaMu.  The  transaction is anticipated to close during the first
calendar quarter of 2002, subject to customary closing conditions.

     The residential mortgage market, which totaled  approximately $5.6 trillion
at September 30, 2001, is the largest debt market in the world.  The residential
mortgage  market has grown at a compound annual rate of  approximately  8% since
1985.  HomeSide competes in a mortgage banking market which is highly fragmented
with no single company  controlling  or dominating the market.  At September 30,
2001,  the  largest  originator  represented  9.2% of the market and the largest
servicer   represented   8.6%,  while  the  top  30  originators  and  servicers
represented  71.6%  and  64.4% of  their  markets,  respectively,  based on data
published by Inside  Mortgage  Finance.  Residential  mortgage  lenders  compete
primarily  on the basis of loan  pricing  and  service,  making  effective  cost
management essential. The industry has experienced rapid consolidation which has
been accelerated by the introduction of significant technology  improvements and
the economies of scale present in mortgage  servicing.  The top 10 mortgage loan
servicers have increased their aggregate market share from 17% in 1990 to 49% as
of September 30, 2001.

     In  originating  mortgages,  HomeSide  focuses on variable cost channels of
production,  including  correspondent,  broker,  consumer direct,  affinity, and
co-issue  sources.  HomeSide  also pursues  strategic  relationships  with other
production sources to acquire and service residential mortgage loans. Management
believes that these  variable cost  channels of  production  deliver  consistent
origination  opportunities  for  HomeSide  without  the  fixed  cost  investment
associated with traditional  retail mortgage branch networks.  HomeSide believes
that its  ongoing  investment  in  technology  will  further  enhance and expand
existing   processing   capabilities  and  improve  its  efficiency.   Based  on
independent  surveys of direct cost per loan and loans  serviced  per  employee,
management  believes that HomeSide has been one of the industry's most efficient
mortgage  servicers.  The Company's  average cost per employee  approximates the
average cost per employee of its major competitors.

     HomeSide's business activities consist primarily of:

         Mortgage  production:  origination  and purchase of residential  single
     family mortgage loans through multiple channels  including  correspondents,
     strategic partners,  mortgage brokers,  co-issue partners,  direct consumer
     telemarketing, affinity programs, and online mortgage services;

         Servicing:   administration,   collection  and  remittance  of  monthly
     mortgage  principal  and  interest  payments,  collection  and  payment  of
     property  taxes and  insurance  premiums  and  management  of certain  loan
     default activities;

         Secondary  marketing:  sale of residential single family mortgage loans
     as pools  underlying  mortgage-backed  securities  guaranteed  or issued by
     governmental  or  quasi-governmental  agencies or as whole loans or private
     securities to investors; and


                                       2

<PAGE>

         Risk  management:  program  designed to protect and manage the value of
     the Company's mortgage loans held for sale and mortgage commitment pipeline
     and to protect the economic  performance  of the servicing  portfolio  that
     could otherwise be adversely  affected by loan  prepayments due to declines
     in interest rates.

Production

     HomeSide  participates  in several  origination  channels,  with a focus on
wholesale origination.  Since the acquisition of BancBoston Mortgage Corporation
("BBMC"),   wholesale  channels  (correspondent,   co-issue,  and  broker)  have
represented more than 90% of HomeSide's total production.  Excluding the volumes
purchased from  BankBoston,  N.A.,  Barnett Bank, N.A.  ("Barnett") and Banc One
Mortgage  Corporation,  no single source within the  correspondent,  co-issue or
broker channels  accounted for more than 7% of total  production since March 16,
1996.  HomeSide's other origination channels include internet and telemarketing,
direct mail campaigns and other  advertising,  and mortgages related to affinity
group and co-branding partnerships.  HomeSide also purchases servicing rights in
bulk  from  time to time.  HomeSide  customarily  sells  all the  loans  that it
originates or purchases while retaining the servicing rights to such loans. This
multi-channel   production  base  provides  access  to  and  flexibility   among
production channels in a wide variety of market and economic conditions.

     HomeSide  competes  nationwide  by  offering  a wide  variety  of  mortgage
products  designed to respond to consumer  needs and tailored to address  market
competition.  HomeSide is primarily an  originator of fixed rate 15- and 30-year
mortgage loans,  which  collectively  represented 98% of the total production in
the fiscal year ended  September  30, 2001,  96% of the total  production in the
fiscal  year ended  September  30, 2000 and 98% of the total  production  in the
fiscal year ended September 30, 1999. HomeSide also offers other products,  such
as ARMs, balloon, and jumbo mortgages.

     HomeSide's   national   loan   production   operation   has   resulted   in
geographically  diverse  originations,  enabling  HomeSide to diversify its risk
across  many  markets  in the  United  States.  HomeSide's  servicing  portfolio
composition  reflects  its  production  markets.  The  largest  segments  of the
servicing  portfolio by state on September  30, 2001 were  California  (11.5% of
unpaid principal  balance),  Florida (9.2%),  Illinois (6.6%),  Texas (6.2%) and
Michigan  (4.8%).  The largest  segments of the servicing  portfolio by state on
September 30, 2000 were California (12.4% of unpaid principal balance),  Florida
(8.7%),  Illinois (8.1%), Texas (5.9%) and Michigan (5.5%). The largest segments
of the servicing portfolio by state on September 30, 1999 were California (11.8%
of unpaid principal balance),  Florida (9.7%), Illinois (8.5%), Texas (5.6%) and
Michigan (5.0%). The table on page six provides additional information regarding
the  Company's  servicing  portfolio,  which  is  reflective  of its  production
markets.

     The  mortgage  banking  industry is generally  subject to seasonal  trends.
These trends reflect the general national pattern of sales and resales of homes.
Sales and resales of homes  typically  peak during the spring and summer seasons
and decline to lower levels from  mid-November  through  February.  Refinancings
tend to be less seasonal and more closely  related to changes in interest rates.
Historically, changes in the interest rate environment have mitigated the impact
of seasonality on HomeSide's  results of  operations.  In addition,  delinquency
rates  typically  rise in the winter  months,  which result in higher  servicing
costs.  However,  late charge income has historically  been sufficient to offset
such incremental expenses.

     HomeSide  strives to  maintain  and improve  its  reputation  as one of the
largest, most efficient  originators of mortgage loans nationwide.  Its variable
cost loan  origination  channels can be adjusted to  accommodate  varying market
sizes and allow HomeSide to remain competitive through interest rate cycles.

Wholesale Production

Correspondent Production

     Through  its   correspondent   program,   HomeSide   purchases  loans  from
approximately  950 commercial  banks,  savings and loan  associations,  licensed
mortgage lenders and other financial intermediaries. The correspondent takes the
mortgage  application  and  processes  the loan,  which is  either  underwritten
through  contract  underwriters  or, in some cases,  the  correspondent  to whom
underwriting  authority has been delegated.  Closing  documents are submitted to
HomeSide  for legal  review and funding.  The  participants  in this program are
prequalified  and monitored on an ongoing basis by HomeSide.  If a correspondent
subsequently   fails  to  meet  HomeSide's   requirements,   HomeSide  typically
terminates  the  relationship.  Correspondents  are also  required to repurchase
loans in the event of fraud or  misrepresentation in the origination process and
for certain other reasons.

Co-Issue Production

     Co-issue  production,  which represents the purchase of servicing rights of
new production originated by correspondents under contracts to deliver specified
volumes on a monthly or quarterly  basis,  is another main source of  HomeSide's
production.  The  co-issue  correspondent  controls the entire loan process from
application to closing.  This arrangement  particularly  suits large originators
who have the ability to deliver on an automated basis. Reflecting this delegated
underwriting authority, the co-issue correspondent is obligated to  make certain


                                       3

<PAGE>

representations  and warranties and is required to repurchase loans in the event
of fraud or  misrepresentation  in the origination  process or for certain other
reasons.

Broker Production

     Under its broker program, HomeSide funds loans at closing from a network of
approximately 2,300 mortgage brokers nationwide. The broker controls the process
of application  and loan  processing.  A pre-closing  quality  control review is
performed  by HomeSide to verify the  borrower's  credit.  All loans  originated
through brokers are underwritten by HomeSide's  approved contract  underwriters.
Loans are funded by HomeSide  and may be closed in either the  broker's  name or
HomeSide's  name.  Participants  in this  program  prequalify  on the  basis  of
creditworthiness,  mortgage  lending  experience and reputation.  Each broker is
subject to annual and ongoing reviews by HomeSide.

Direct Production

     HomeSide's direct production  includes soliciting loans via its website and
the use of telemarketing from several sources, including refinancing of mortgage
loans in HomeSide's  existing servicing  portfolio,  leads generated from direct
mail campaigns and other  advertising,  and mortgages  related to affinity group
and co-branding  partnerships.  HomeSide believes that these efforts will have a
significant  effect on increasing  the  percentage  of loans  captured from loan
prepayments in HomeSide's servicing portfolio.  Refinancing retention represents
the percentage of loans refinanced  through  HomeSide's direct channel that were
serviced by HomeSide prior to refinancing.

Bulk Acquisition

     Bulk acquisition is the large scale purchase of mortgage  servicing rights.
In connection with such acquisitions,  HomeSide does not purchase the underlying
mortgage loans which were originated by other originators. HomeSide may purchase
servicing rights on an exclusive basis or through a competitive bidding process.

Underwriting and Quality Control

Underwriting

     HomeSide's  loans are  underwritten in accordance  with applicable  Federal
National  Mortgage  Association  ("Fannie  Mae"),  Federal  Home  Loan  Mortgage
Corporation  ("FHLMC" or "Freddie Mac"),  Veterans  Administration  ("VA"),  and
Federal Housing  Administration  ("FHA") guidelines,  as well as certain private
investor  requirements.  The  underwriting  process is organized by  origination
channel  and by loan  type.  HomeSide  currently  employs  underwriters  with an
average of ten years of underwriting experience.

     HomeSide requires  approximately  50% of its correspondent  lenders to have
their loans underwritten by third party contract underwriters prior to purchase.
These  contract  underwriters  are  designated by HomeSide and include  Mortgage
Guaranty  Insurance  Corp. and Republic  Mortgage  Insurance  Company.  HomeSide
grants  delegated  underwriting  status to the  remaining  approximately  50% of
correspondents  which enables the correspondents to submit conventional loans to
HomeSide without prior  underwriting  approval.  100% of HomeSide's broker loans
are  underwritten by these contract  underwriters or by HomeSide's  underwriting
employees.  Generally,  HomeSide  grants  delegated  underwriting  status to its
larger correspondents who meet financial strength, delinquency, underwriting and
quality control standards,  and such correspondents are monitored regularly. The
FHA and VA require that loans be underwritten  by the  originating  lender on an
Agency-approved  or  delegated  basis.  If  issuance  of  FHA  guarantees  or VA
insurance certificates is denied, the correspondent must repurchase the loan.

     HomeSide's  underwriting  process for its retail  production  operation  is
fully automated.  The automated underwriting  technology uses third-party vendor
systems to analyze credit risk.  HomeSide believes that these  technologies have
contributed to improved  productivity  and reduced  underwriting  and processing
turnaround time.

Quality Control

     HomeSide  maintains a  compliance  and quality  assurance  department  that
operates independently of the production,  underwriting, secondary marketing and
loan administration  department. For its production compliance process, HomeSide
randomly selects a statistical sample or 10% of closed loans monthly,  whichever
is less,  of certain loan  products and  customers  for review.  In addition,  a
random  risk-based  audit of  approximately  200 conforming  conventional  loans
receive a fraud audit  monthly.  These reviews  include  reunderwriting  of such
loans,  ordering  second  appraisals  on 10% of the sample,  reverifying  funds,
employment and final applications and reordering credit reports. In addition,  a
full underwriting  review is conducted on (i) all jumbo loans that become thirty
days  delinquent  in the  first  four  payments  and  jumbo  loans  that go into
foreclosure in the first thirty-six months and (ii) all conventional  loans that

                                       4

<PAGE>
become  sixty  days  delinquent  in the first six  payments.  Document  and file
reviews are also undertaken to ensure regulatory compliance. In addition, random
reviews  of the  servicing  portfolio,  covering  selected  aspects  of the loan
administration process, are conducted.

     HomeSide monitors the performance of loan underwriting through a variety of
quality  assurance  reports,  U.S.  Department of Housing and Urban  Development
("HUD")  reports  and audits,  the VA reports and audits,  reviews and audits by
regulatory  agencies,  investor reports and mortgage  insurance  company audits.
According to HomeSide's quality control findings, less than 5% of its loans have
underwriting  issues that affect  salability to the secondary  market.  Flaws in
these   loans  are   generally   corrected;   otherwise,   the   holder  of  the
mortgage-backed  security is indemnified  against  future losses  resulting from
such  flaws  by  HomeSide  or,   ultimately,   the  originating   correspondent.
Correspondents  or co-issue partners are required to repurchase any flawed loans
originated by them.

Secondary Marketing

     HomeSide  customarily sells all loans that it originates or purchases while
retaining the servicing rights to such loans. HomeSide aggregates mortgage loans
into pools and sells these  pools,  as well as  individual  mortgage  loans,  to
investors  principally at prices  established  under forward sales  commitments.
HomeSide's  FHA and VA  loans  are  generally  pooled  and  sold in the  form of
Government  National  Mortgage  Association  ("Ginnie  Mae" or "GNMA")  Mortgage
Backed Securities.  Conforming  conventional mortgage loans are generally pooled
and exchanged under the purchase and guarantee programs sponsored by Fannie Mae.
HomeSide pays certain  guarantee  fees to the Agencies in connection  with these
programs  and then  sells  the GNMA and  Fannie  Mae  securities  to  securities
dealers. A limited number of mortgage loans (i.e. non-conforming loans) are sold
to private  investors on a  servicing-released  basis. For the fiscal year ended
September  30, 2001,  approximately  95% of the  mortgage  loans  originated  by
HomeSide were sold to Fannie Mae (61%) and GNMA (34%). For the fiscal year ended
September  30, 2000,  approximately  97% of the  mortgage  loans  originated  by
HomeSide were sold to Fannie Mae (53%) and GNMA (44%). For the fiscal year ended
September  30, 1999,  approximately  94% of the  mortgage  loans  originated  by
HomeSide  were sold to Fannie  Mae  (49%),  GNMA  (28%),  and FHLMC  (17%).  The
remaining were sold to private investors.

     The sale of mortgage  loans may generate a gain or loss to HomeSide.  Gains
or losses result primarily from two factors. First, HomeSide may purchase a loan
at a price  that may be  higher  or lower  than  HomeSide  would  receive  if it
immediately  sold the loan in the secondary  market.  These pricing  differences
occur principally as a result of competitive  pricing  conditions in the primary
loan origination market. Second, gains or losses may result from fluctuations in
interest  rates  that  create  changes  in the  market  value  of the  loans  or
commitments  to purchase  loans,  from the time the interest rate  commitment is
given to the mortgagor until the loan is sold to an investor.

     HomeSide  assesses  the  interest  rate risk  associated  with  outstanding
commitments that it has extended to fund loans and hedges the interest rate risk
of these  commitments  based upon a number of factors,  including  the remaining
term of the commitment,  the interest rate at which the commitment was provided,
current  interest  rates  and  interest  rate  volatility.  HomeSide  constantly
monitors  these  factors  and  adjusts  its  hedging on a daily basis as needed.
HomeSide uses the Quantitative Risk Management system, a sophisticated  hedging,
reporting and evaluation system, which has the ability to perform analyses under
various  interest  rate  scenarios.  HomeSide's  interest rate risk is currently
hedged using a combination  of forward sales of mortgage  backed  securities and
over-the-counter  options,  including  both  puts and  calls,  on  fixed  income
securities.  HomeSide  generally  commits to sell to investors for delivery at a
future time for a stated price all of its closed  loans and a percentage  of the
mortgage  loan  commitments  for which the interest  rate has been  established.
HomeSide aims to price loans competitively, hedge the interest rate risk of loan
originations  and sell  loans  on a  break-even  basis.  HomeSide  realizes  net
servicing  revenue from the future  servicing of the loans sold.  For the fiscal
years ended  September  30, 2001,  2000 and 1999,  HomeSide has not  experienced
secondary marketing losses on an aggregate basis.

     HomeSide's  policy  is to sell  mortgage  loans  on a  non-recourse  basis.
However,  in the case of VA loans  aggregated to form GNMA pools,  the VA's loan
guarantees do not cover the entire principal balance of the loan and HomeSide is
responsible  for  losses,  which  exceed  the VA's  guaranteed  limitations.  In
connection   with   HomeSide's   loan   exchanges  and  sales,   HomeSide  makes
representations  and  warranties  customary in the  industry  relating to, among
other things,  compliance with laws,  regulations and program standards,  and to
the accuracy of information.  In the event of a breach of these  representations
and warranties,  HomeSide typically corrects such problems,  but if the problems
cannot be corrected may be required to repurchase  such loans.  In cases where a
correspondent  originates  loans,  HomeSide may sell the flawed loan back to the
correspondent under a repurchase obligation.

Loan Servicing

     HomeSide derives its revenues  predominantly from its servicing operations.
Since its  formation,  HomeSide has also  maintained a risk  management  program
designed  to protect,  within  certain  parameters,  the  economic  value of its
servicing  portfolio,  which is subject to prepayment  risk when interest  rates
decline, providing mortgagors with refinancing opportunities.

     Loan servicing includes  collecting payments of principal and interest from
borrowers,  remitting  aggregate  loan  payments to  investors,  accounting  for
principal and interest  payments,  holding  escrow funds for payment of mortgage
related  expenses  such  as  taxes  and  insurance,  making  advances  to  cover
delinquent payments,  inspecting the mortgaged premises as required,  contacting

                                       5

<PAGE>

delinquent mortgagors, supervising foreclosures and property dispositions in the
event of unremedied  defaults,  and other  miscellaneous  duties related to loan
administration. HomeSide collects servicing fees from monthly mortgage payments.
These  fees  generally  range  from  0.25% to 0.50% of the  declining  principal
balances of the loans per annum.  HomeSide's  weighted average servicing fee net
of guaranty fees and including  ancillary  income was 0.474% for the fiscal year
ended  September 30, 2001,  0.476% for the fiscal year ended  September 30, 2000
and 0.467% for the fiscal year ended September 30, 1999. HomeSide also maintains
certain  subservicing  relationships  whereby  servicing is performed by another
servicer  under  an  agreement  with  HomeSide,   which  remains   contractually
responsible  for  servicing  the  loans.  Subservicing  relationships  are often
entered  into  as  part  of a  bulk  servicing  acquisition  where  the  selling
institution  continues to perform  servicing  until the loans are transferred to
the purchasing  institution.  . Following the  consummation of the  transactions
contemplated by the Asset Purchase and Liability Assumption Agreement with WaMu,
HomeSide's servicing portfolio will be subserviced by WaMu.

HomeSide's servicing strategy has been to build its mortgage servicing portfolio
and benefit  from the  economies  of scale  inherent in the  business.  HomeSide
currently  services  substantially all of the mortgage loans that it originates.
In  addition,  HomeSide  has  purchased  the  rights to service  mortgage  loans
originated by other lenders.

     HomeSide strives to enhance the  profitability of its servicing  activities
through low cost and  efficient  processes.  This  objective is pursued  through
highly automated,  cost effective processing systems,  strategic  outsourcing of
selected  servicing   functions  and  effective  control  of  delinquencies  and
foreclosures.  HomeSide  outsources  functions relating to insurance,  taxes and
default management to third party vendors, contributing to HomeSide's ability to
maintain a highly variable cost structure. Using a variety of factors, including
loans serviced per employee and direct cost per loan,  management  believes that
HomeSide  is one of the  nation's  most  efficient  servicers  based on industry
surveys.

Servicing Portfolio Composition

     HomeSide  originates  and  purchases  servicing  rights for mortgage  loans
nationwide.  The broad geographic distribution of HomeSide's servicing portfolio
reflects  the  national  scope of  HomeSide's  origination  and  bulk  servicing
acquisition.  Ten states accounted for 56.8% of the outstanding unpaid principal
balance ("UPB") of HomeSide's total servicing portfolio,  and the largest volume
by state is  California  with a 11.5% share of the total  portfolio on September
30, 2001. Ten states  accounted for 59.4% of the  outstanding  UPB of HomeSide's
total servicing  portfolio and the largest volume by state was California with a
12.4% share of the total  portfolio on September 30, 2000. Ten states  accounted
for 59.8% of the outstanding UPB of HomeSide's total servicing portfolio and the
largest  volume  by  state  was  California  with an 11.8%  share  of the  total
portfolio  on September  30, 1999.  HomeSide  actively  monitors the  geographic
distribution  of its  servicing  portfolio  to  maintain  a mix  that  it  deems
appropriate and makes adjustments, as it considers necessary.

The  following  table sets forth the  geographic  distribution  of the Company's
servicing portfolio as of September 30, 2001, 2000 and 1999:

                        Servicing Portfolio by State (a)

<TABLE>
                                 At September 30, 2001         At September 30, 2000          At September 30, 1999
                                 ---------------------         ---------------------          ---------------------
    (dollars in millions)         UPB          % of UPB          UPB         % of UPB          UPB          % of UPB
                                  ---          --------          ---         --------          ---          --------
<S>                            <C>               <C>           <C>            <C>            <C>              <C>
California                     $ 20,892          11.5%         $18,924        12.4%          $ 16,334          11.8%
Florida                          16,798           9.2           13,221         8.7             13,424           9.7
Illinois                         11,962           6.6           12,322         8.1             11,740           8.5
Texas                            11,363           6.2            8,911         5.9              7,825           5.6
Michigan                          8,688           4.8            8,346         5.5              6,981           5.0
New York                          7,894           4.3            6,285         4.1              4,809           3.5
Georgia                           7,194           3.9            4,669         3.1              3,936           2.8
Connecticut                       7,060           3.9            6,749         4.4              6,737           4.9
New Jersey                        5,972           3.3            4,587         3.0                 (b)           (b)
Maryland                          5,581           3.1            5,012         3.3              4,924           3.5
Massachusetts                     5,554           3.0            5,903         3.9              6,295           4.5
Arizona                           5,220           2.9            4,558         3.0              4,402           3.2
Indiana                           4,597           2.5            4,620         3.0              4,240           3.1
Other (b)                        63,630          34.8           48,137        31.6             47,101          33.9
                               ------------------------------------------------------------------------------------
Total                          $182,405         100.0%        $152,244       100.0%          $138,748         100.0%
                               ====================================================================================
</TABLE>

(a)  Servicing  statistics  are based on loans  serviced by HomeSide and exclude
     loans  purchased  but not yet on the  servicing  system of $5.0  billion at
     September 30, 2001, $21.1 billion at September 30, 2000 and $6.9 billion at
     September 30, 1999. The increased amount in fiscal year 2000 was due to the
     increase in bulk  acquisitions  during the fourth quarter that had not been
     transferred onto the servicing system.


                                       6

<PAGE>
(b)  No other state represents more than 3.0% of HomeSide's  servicing portfolio
     at September 30, 2001, 2000 or 1999.

Servicing Portfolio by Loan Type

     At September 30, 2001,  HomeSide's  servicing  portfolio consisted of $54.5
billion  FHA/VA  servicing  and $132.9  billion of  conventional  servicing.  At
September 30, 2000, HomeSide's servicing portfolio consisted of $53.5 billion of
FHA/VA servicing and $119.8 billion of conventional  servicing. At September 30,
1999,  HomeSide's  servicing  portfolio  consisted  of $44.2  billion  of FHA/VA
servicing and $101.4 billion of conventional servicing.

     The weighted average interest rate of the loans in the Company's  servicing
portfolio was 7.50% at September 30, 2001, 7.58% at September 30, 2000 and 7.44%
at September 30, 1999. HomeSide's servicing portfolio of loans was stratified by
interest rate as follows:

                    Servicing Portfolio by Interest Rate (a)

<TABLE>
                             At September 30, 2001                 At September 30, 2000              At September 30, 1999
                             ---------------------                 ---------------------              ---------------------
                        UPB                                   UPB                                   UPB
                        ---                                   ---                                   ---
                    (dollars in              Cumulative  (dollars in                Cumulative   (dollars in              Cumulative
Interest Rate         millions)   % of UPB    % of UPB     millions)    % of UPB     % of UPB      millions)    % of UPB   %of UPB
-------------                     --------     --------                 --------     --------        --------   --------  ----------
<S>                  <C>           <C>         <C>        <C>           <C>          <C>         <C>             <C>        <C>
Less than 6.0%       $    553        0.3%        0.3%     $    397        0.3%         0.3%      $    631          0.5%       0.5%

6.0% to 6.9%           39,788       21.8        22.1        30,821       20.2         20.5         32,353         23.3       23.8

7.0% to 7.9%           97,044       53.2        75.3        75,520       49.6         70.1         77,552         56.0       79.8

8.0% to 8.9%           37,169       20.4        95.7        37,596       24.7         94.8         22,258         16.0       95.8

9.0% to 9.9%            6,281        3.4        99.1         6,340        4.2         99.0          4,085          2.9       98.7

10.0% to 10.9%          1,249        0.7        99.8         1,218        0.8         99.8          1,435          1.0       99.7

Over 11.0%                321        0.2       100.0           352        0.2        100.0            434          0.3      100.0
                     -------------------                  -------------------                    ---------------------
        Total        $182,405      100.0%                 $152,244      100.0%                   $138,748        100.0%
                     ===================                  ===================                    =====================
</TABLE>

(a)  Servicing  statistics  are based on loans  serviced by HomeSide and exclude
     loans purchased not yet on servicing system.

Loan Servicing Portfolio Delinquencies, Foreclosures and Losses

     HomeSide is affected by loan  delinquencies  and  defaults on loans that it
services. Under certain types of servicing contracts,  particularly contracts to
service loans that have been pooled or securitized, HomeSide must forward all or
part of the scheduled payments to the owner of the loan, even when loan payments
are delinquent. Also, to protect their liens on mortgaged properties,  owners of
loans  usually  require a servicer  to  advance  scheduled  mortgage  and hazard
insurance and tax payments even if  sufficient  escrow funds are not  available.
HomeSide is generally reimbursed, subject to certain limitations with respect to
FHA/VA  loans as described  below,  by the  mortgage  owner or from  liquidation
proceeds for payments  advanced  that the servicer is unable to recover from the
mortgagor, although the timing of such reimbursements is typically uncertain. In
the interim,  HomeSide  absorbs the cost of funds  advanced  during the time the
advance  is  outstanding.   Further,  HomeSide  bears  the  increased  costs  of
collection  activities on delinquent and defaulted loans. HomeSide also foregoes
servicing income from the time such loans become  delinquent until  foreclosure,
when,  if any  proceeds  are  available,  HomeSide  may  recover  such  amounts.
Delinquency  rates  typically rise in the winter months,  which result in higher
servicing   costs.   However  income  from  late  payment  fees  collected  have
historically been sufficient to offset such incremental expenses.

     HomeSide  periodically  incurs losses  attributable to servicing FHA and VA
loans for investors, including actual losses for final disposition of loans that
have been  foreclosed or assigned to the FHA or VA and accrued  interest on such
FHA or VA loans for which payment has not been  received.  The VA guarantees the
initial losses on a loan. The guaranteed amount generally ranges from 20% to 35%
of  the  original  principal  balance.  Before  each  foreclosure  sale,  the VA
determines  whether to bid by comparing  the  estimated net sale proceeds to the
outstanding principal balance and the servicer's accumulated  reimbursable costs
and fees.  If this amount is a loss and exceeds the  guaranteed  amount,  the VA
typically issues a no-bid and pays the servicer the guaranteed amount.  Whenever
a no-bid is issued,  the servicer absorbs the loss, if any, in excess of the sum
of the  guaranteed  principal  and amounts  recovered at the  foreclosure  sale.
HomeSide's  historical  delinquency and foreclosure  rate experience on VA loans
has generally been consistent with that of the industry.

     For   HomeSide,    servicing   losses   on    investor-owned    loans   and
foreclosure-related expenses, primarily representing losses on VA loans, totaled
$32.3 million for the fiscal year ended  September  30, 2001,  $33.3 million for
the fiscal year ended  September  30, 2000 and $31.7 million for the fiscal year
ended September 30, 1999.  Management  believes that it has an adequate level of
reserve  for  servicing  losses  on  investor-owned  loans  based on  HomeSide's
servicing  volume,  portfolio  composition,  credit quality and historical  loss
rates,  as well as  estimated  future  losses.  Servicing  losses are  generally
greatest during the three to six year age of the loan.

                                       7

<PAGE>

Risk Management of Mortgage Servicing Rights

     Mortgage  servicing rights represent the capitalized value of the estimated
future net servicing revenues associated with the Company's servicing portfolio.
The Company maintains a risk management program designed to protect the value of
mortgage servicing rights from changes in value due to changes in estimated loan
prepayment speeds, which are mainly influenced by changes in interest rates.

     The value of mortgage servicing rights is extremely sensitive to changes in
interest  rates  since  interest  rates are the  primary  driver  of actual  and
projected prepayment rates. As interest rates decline, prepayment rates increase
as a result of actual and expected  refinancing  activities of  borrowers.  As a
result,  the value of mortgage  servicing  rights decreases in value as interest
rates decline and,  generally,  at accelerating rates depending in large measure
on the note rates of the underlying  loans in relation to market interest rates.
The value of the  Company's  mortgage  servicing  rights is based on the present
value of expected  cash flows  received  over the life of the loan using  vendor
models  which  incorporate  prepayment  estimates to forecast  estimated  future
servicing revenues, servicing costs, ancillary revenues, escrow earnings, credit
losses and other expenses.

     The Company's risk  management  program  involves the use of a portfolio of
risk  management  derivative  instruments,  which  increase in value as interest
rates decline.  More  specifically,  management uses a combination of derivative
instruments  designed to provide effective offset to changes in the value of the
mortgage servicing rights in different interest rate scenarios. The Company also
attempts  to  manage  basis  risk,  term  sector  risk,  and  liquidity  risk by
diversifying  its  portfolio  with an array of derivative  instruments  that are
approved  for use by the  Company's  Asset and  Liability  Management  Committee
("ALCO")  which,  under  delegated  authority  from the Board,  sets policies in
relation to the management of market risk,  corporate  funding and balance sheet
management.  Representatives of the Company's ALCO report to the National's ALCO
concerning  risk  management and also  participate in the National's  group ALCO
meetings.  Accordingly,  the hedge portfolio is generally  comprised of mortgage
products,  swap products and treasury products that are structured along various
points  of the  yield  curve.  See  "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations - Risk Management  Activities" for
the fiscal years ended September 30, 2001, 2000 and 1999.

Servicing Technology

     HomeSide's proprietary servicing technology  accommodates all areas of loan
servicing,   including   loan   setup  and   maintenance,   cashiering,   escrow
administration,  investor  accounting,  customer service and default management.
The platform is mainframe  based,  with on-line,  real-time  architecture and is
supported by an experienced staff of technology providers.

     At September 30, 2001, approximately 2.1 million loans were serviced on the
proprietary  servicing system. With additional  enhancements,  this architecture
has been modeled to support between 9.0 and 12.0 million loans.  The system will
also  permit   continued   development  of  workflow  and  other   client-server
applications that contribute to increased productivity.

Regulation

     As a United States  subsidiary  of a foreign  bank,  HomeSide is subject to
regulation, supervision and examination by the Federal Reserve Board. HomeSide's
mortgage  banking  business is also subject to the rules and regulations of HUD,
FHA,  the VA,  Fannie Mae,  FHLMC or Freddie  Mac,  GNMA or Ginnie Mae and other
regulatory  agencies  with  respect to  originating,  processing,  underwriting,
selling, securitizing and servicing mortgage loans. In addition, there are other
federal and state  statutes and  regulations  affecting such  activities.  These
rules and  regulations,  among other things,  impose  licensing  obligations  on
HomeSide,  prohibit  discrimination and establish underwriting  guidelines which
include  provisions for inspections  and  appraisals,  require credit reports on
prospective  borrowers and set maximum loan amounts.  Moreover,  lenders such as
HomeSide are required annually to submit audited financial  statements to Fannie
Mae,  FHLMC,  GNMA and HUD and to  comply  with  each  regulatory  entity's  own
financial  requirements.  HomeSide's  business is also subject to examination by
Fannie Mae, FHLMC and GNMA and state regulatory  agencies at all times to assure
compliance with applicable regulations, policies and procedures.

     Mortgage  origination  activities  are subject to the provisions of various
federal and state statutes including, among others, the Equal Credit Opportunity
Act,  the Federal  Truth-in  Lending Act,  RESPA,  the Fair Housing Act, and the
regulations  promulgated  thereunder,  which  among other  provisions,  prohibit
discrimination,  prohibit  unfair and deceptive  trade practices and require the
disclosure of certain basic  information to mortgagors  concerning  credit terms
and settlement costs, limit fees and charges paid by borrowers and lenders,  and
otherwise  regulate  terms and  conditions of credit and the procedures by which
credit  is  offered  and  administered.  Many of the  aforementioned  regulatory
requirements  are designed to protect the interests of  consumers,  while others
protect the owners or insurers of mortgage  loans.  Failure to comply with these
requirements  can lead to loss of  approved  status,  termination  of  servicing
contracts without compensation to the servicers,  demands for indemnification or
loan repurchases,  class action lawsuits and administrative enforcement actions.
Such regulatory  requirements are subject to change from time to time and may in
the future become more restrictive,  thereby making compliance more difficult or
expensive or otherwise restricting HomeSide's ability to conduct its business as
it is now conducted.


                                       8

<PAGE>

     There are  various  other  state and local laws and  regulations  affecting
HomeSide's  operations.  HomeSide  is  licensed  in those  states  that  require
licensing to originate,  purchase and/or service  mortgage  loans.  Conventional
mortgage  operations  may also be subject to state  usury  statutes.  FHA and VA
loans are exempt from the effect of such statutes.

Competition

     Mortgage bankers operate in a highly  competitive and fragmented market. As
of September 30, 2001, the largest  originator of loans  represented 9.2% of the
market and the largest servicer  represented  8.6%, while the top 30 originators
and servicers represented 71.6% and 64.4% of their markets, respectively,  based
on data published by Inside Mortgage Finance.

             TOP 10 ORIGINATORS AND SERVICERS (dollars in billions)

<TABLE>
 Originations for First Nine Months - 2001            Servicing Portfolio at September 30, 2001
<S>                                         <C>       <C>                                                 <C>
 1  Chase Home Finance, NJ                  $133.3     1  Washington Mutual, WA                           $484.0
 2  Wells Fargo Home Mortgage, IA            123.7     2  Wells Fargo Home Mortgage, IA                    476.0
 3  Washington Mutual, WA                    120.7     3  Chase Home Finance, NJ                           427.1
 4  Countrywide Credit Industries, CA         88.8     4  Bank of America Mtg. & Affiliates, NC            338.4
 5  Bank of America Mtg. & Affiliates, NC     61.2     5  Countrywide Credit Industries,CA                 318.7
 6  ABN AMRO Mortgage Group, MI               53.3     6  HomeSide Lending, Inc., FL                       187.4
 7  GMAC Mortgage Corp., PA                   36.7     7  GMAC Mortgage Corp., PA                          186.3
 8  National City Mortgage Co., OH            36.3     8  ABN AMRO Mortgage Group, MI                      136.6
 9  Dime/North American Mtg. Co., CA          34.1     9  First Nationwide Mortgage, CA                    114.7
10 HomeSide Lending, Inc., FL                 34.0    10 CitiMortgage Inc., MO                             103.9
</TABLE>

Source:  Inside Mortgage Finance.

     Given  the high  level of  competition  in the  market by  mortgage  banks,
financial   institutions,   and  other  providers  of  financial  services,  the
underwriting  guidelines and servicing  requirements  set by the participants in
the secondary markets are standardized.  As a result,  mortgage banking products
(i.e., mortgage loans and the servicing of those loans) have become difficult to
differentiate.  Therefore,  mortgage  bankers compete  primarily on the basis of
price or service, making effective cost management essential.

     Mortgage bankers  generally seek to develop cost efficiencies in one of two
ways:  economies  of scale or  specialization.  Large  full-service  national or
regional  mortgage bankers have sought economies of scale through an emphasis on
wholesale  originations,  the introduction of automated  processing  systems and
expansion through acquisition.  Smaller companies frequently identify and pursue
a particular expertise or customer base in an attempt to create a market niche.

     The industry has experienced rapid consolidation which has been accelerated
by the introduction of significant technology  improvements and the economies of
scale  present in  mortgage  servicing.  The  automation  of many  functions  in
mortgage  banking,  especially  those  related to  servicing,  has reduced costs
significantly for industry participants. Many mortgage bankers that were not low
cost, high volume producers or did not operate in a low cost  specialized  field
experienced earnings declines in the nineties, causing many to exit the business
or to be acquired. Surviving cost effective firms purchased servicing portfolios
or other  companies to expand their servicing  economies of scale,  while others
acquired market niche operations. As evidence of this consolidation,  the top 10
mortgage loan servicers have increased their aggregate  market share from 17% in
1990 to 49% as of September 30, 2001.

Employees

     As of  September  30,  2001,  2000 and  1999,  respectively,  HomeSide  had
approximately  2,797  total  employees,  2,340 total  employees  and 2,611 total
employees,  substantially all of who were full-time  employees.  HomeSide has no
unionized  employees and considers its relationship with its employees generally
to be satisfactory.

ITEM 2. PROPERTIES

     HomeSide's  corporate,   administrative,  and  servicing  headquarters  are
located in Jacksonville,  Florida, in facilities,  which comprise 144,227 square
feet of owned  space and  approximately  426,144  square  feet of leased  space.
Included in the leased total is  approximately  103,153 square feet of warehouse
space used for storing certain loan files, loan servicing documents,  furniture,
fixtures and  equipment.  In addition,  HomeSide  leases  approximately  328,118
square feet of office space in various locations across the United States.


                                       9

<PAGE>

On October 2, 2000,  HomeSide sold its facility  located in San Antonio,  Texas.
The sale included land, building, and building improvements with the sales price
exceeding the property's carrying value.  HomeSide  subsequently entered into an
operating lease agreement to lease back the property for a term of five years at
a rate of $2.6 million per year. The  transaction  met the  qualifications  of a
sale-leaseback,  in  accordance  with  SFAS  No.  98  "Accounting  for  Leases",
resulting in immediate  recognition  of gain in the amount of $4.5 million and a
deferred  gain of $7.3  million  which  will be  amortized  over the life of the
lease.

HomeSide  believes  that its current  facilities  are  adequate  for its present
operations.

ITEM 3. LEGAL PROCEEDINGS

     HomeSide is a  defendant  in a number of legal  proceedings  arising in the
normal course of business.  HomeSide, in management's  estimation,  has recorded
adequate   reserves  in  the  financial   statements  for  pending   litigation.
Management,  after  reviewing  all actions and  proceedings  pending  against or
involving  HomeSide,  considers  that the  aggregate  liability or loss, if any,
resulting from the final outcome of these  proceedings  will not have a material
effect on the financial position of HomeSide.

     In recent years,  the mortgage  banking  industry has been subject to class
action  lawsuits  which  allege   violations  of  federal  and  state  laws  and
regulations,  including the propriety of collecting  and paying various fees and
charges.  Class action  lawsuits may be filed in the future against the mortgage
banking industry.

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

     None.

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS

     As a consequence  of the  acquisition  by the National,  there is no active
market for the Registrant's common equity.  HomeSide is an indirect wholly-owned
subsidiary of the National. However, as indicated in Note 21 of the Consolidated
Financial  Statements,  HomeSide  entered into an Asset  Purchase and  Liability
Assumption  Agreement  with  Washington  Mutual  ("WaMu") on December  11, 2001,
whereby,  WaMu has agreed to acquire all of HomeSide's  servicing technology and
other  corporate  assets  including the  wholesale,  correspondent  and consumer
direct production channels and the servicing sites in Jacksonville,  Florida and
San Antonio,  Texas.  The Company will retain the mortgage  servicing rights and
related financial hedges.


                                       10

<PAGE>
                                     PART II

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The selected  consolidated  financial and operating  information of HomeSide set
forth below for the fiscal years ended  September 30, 2001, 2000 and 1999 should
be read in  conjunction  with, and is qualified in its entirety by reference to,
the Consolidated  Financial  Statements and the notes thereto and in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations"  of HomeSide  included  elsewhere  in this  document.  The  selected
financial and operating  information of HomeSide  Predecessor set forth below is
for the periods  from March 1, 1997 to  February  10, 1998 and March 16, 1996 to
February 28, 1997.

<TABLE>
                                            For the Period    For the Period    For the Period     For the Period     For the Period
                                            October 1, 2000   October 1, 1999   October 1, 1998   February 11, 1998   March 1, 1997
                                             to September      to September      to September       to September       to February
                                               30, 2001          30, 2000          30, 1999           30, 1998           10, 1998
                                            ---------------   ---------------   ---------------   -----------------   --------------
<S>                                          <C>               <C>               <C>                <C>                    <C>
Selected Statement of Earnings Data:
Revenues:
Mortgage servicing fees                      $    876,446      $    732,164      $    609,522       $    315,510           398,159
Amortization of mortgage servicing rights        (623,269)         (405,728)         (409,929)          (191,693)         (210,200)
Valuation provision of mortgage servicing
rights                                         (2,556,450)               --                --                 --                --
Risk management of mortgage servicing
rights                                            872,873                --                --                 --                --
                                             ------------      ------------      ------------       ------------       -----------
   Net servicing (expense) revenue             (1,430,400)          326,436           199,593            123,817           187,959
Interest income                                   122,928           121,951           181,173             99,749            97,050
Interest expense                                 (164,647)         (168,651)         (132,161)           (70,761)          (97,028)
                                             ------------      ------------      ------------       ------------       -----------
  Net interest (expense) revenue                  (41,719)          (46,700)           49,012             28,988                22
Net mortgage origination revenue                  197,534            68,475           155,937             79,179            85,206
Other income                                       16,207             5,683             5,844             11,028             1,671
                                             ------------      ------------      ------------       ------------       -----------
  Total (expenses) revenues                    (1,258,378)          353,894           410,386            243,012           274,858

Expenses:
Salaries and employee benefits                    139,022           112,634           132,716             73,983            75,419
Occupancy and equipment                            43,764            31,980            28,319             13,107            15,447
Servicing losses on investor-owned loans
and foreclosure-related expenses                   32,348            33,301            31,749             21,202            21,974
Impairment of goodwill and other
intangible assets                                 590,005                --                --                 --                --
Goodwill amortization                              32,080            35,896            35,817             22,780                --
Other expenses                                     69,166            52,502            60,939             39,825            39,415
                                             ------------      ------------      ------------       ------------       -----------
    Total expenses                                906,385           266,313           289,540            170,897           152,255
(Loss) income before income taxes,
extraordinary item and cumulative effect
of a change in accounting principle            (2,164,763)           87,581           120,846             72,115           122,603
Income tax (benefit) expense                     (267,121)           38,269            59,181             37,009            47,816
                                             ------------      ------------      ------------       ------------       -----------
Net (loss) income before extraordinary
item and cumulative effect of a change in
accounting principle                           (1,897,642)           49,312            61,665             35,106            74,787
Extraordinary item-gain on early
extinguishment of debt, net of income tax
expense of $567                                       987                --                --                 --                --
Cumulative effect of a change in
accounting for derivative instruments and
hedging activities, net of tax expense of
$507                                                  883                --                --                 --                --
                                             ------------      ------------      ------------       ------------       -----------
Net (loss) income                            $ (1,895,772)     $     49,312      $     61,665       $     35,106       $    74,787
                                             ============      ============      ============       ============       ===========
Selected Balance Sheet Data at Period
End:
Mortgage loans held for sale, net            $  1,845,766      $  1,441,216      $  1,292,562       $  2,048,989       $ 1,292,403
Mortgage servicing rights, net                  2,615,225         4,464,312         3,488,957          1,779,180         1,781,314
Total assets                                    6,278,445         7,267,033         6,391,355          5,751,557         3,883,603
Bank credit facility                            1,748,000         1,735,400         1,505,401          2,749,000         2,074,956
Commercial paper                                  400,000         1,500,000         1,163,903                 --                --
Long-term debt                                  1,821,551         1,899,772         1,331,292          1,337,783           900,466
Total liabilities                               4,998,156         5,993,816         5,117,813          4,488,605         3,294,470
Total stockholders' equity                      1,280,289         1,273,217         1,273,542          1,262,952           589,133
                                             ============      ============      ============       ============       ===========
Selected Operating Data:
Volume of loan production                    $ 40,877,783      $ 20,286,100      $ 30,933,088       $ 16,826,364       $20,529,530
Loan servicing portfolio (at period end)      187,367,008       173,310,242       145,551,780        115,800,362        99,956,050
Loan servicing portfolio (average
outstanding during the period)                184,994,882       153,965,875       130,413,226        107,821,822        96,083,220
Weighted average interest rate of the
servicing portfolio (at perioed end)                 7.50%             7.58%             7.44%             7.72%              7.85%
Weighted average servicing fee of the
servicing portfolio, net of guaranty fees
and including ancillary income (for the
period)                                             0.474%            0.476%            0.467%            0.468%             0.439%
</TABLE>
                                       11

<PAGE>

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

     HOMESIDE - FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999

General

HomeSide  International,   Inc.  (the  "Company"  or  "HomeSide"),  through  its
wholly-owned  subsidiary,  HomeSide  Lending,  Inc.,  is one of the largest full
service   residential   mortgage   banking   companies  in  the  United  States.
Historically,  HomeSide's  strategy has been to emphasize variable cost mortgage
loan  originations,  low cost mortgage  servicing and effective risk management.
HomeSide is currently  headquartered in Jacksonville,  Florida, and at September
30,  2001  ranks as the 6th  largest  mortgage  servicer  and the  10th  largest
mortgage  loan  originator  during the first  nine  months of 2001 in the United
States based on data published by Inside Mortgage Finance. On December 11, 2001,
the National announced the sale of HomeSide's  operating platform and certain of
its operating assets to Washington  Mutual,  Inc.  ("WaMu").  As such, WaMu will
acquire all of  HomeSide's  servicing  technology,  and other  corporate  assets
including the wholesale,  correspondent and consumer direct production  channels
and servicing sites in Jacksonville, Florida and San Antonio, Texas. The Company
will retain the mortgage  servicing  rights asset ("MSR") and related  financial
hedges. Following the consummation of the transactions contemplated by the Asset
Purchase and Liability  Assumption  Agreement  with WaMu,  HomeSide's  servicing
portfolio will be  subserviced by WaMu. The  transaction is anticipated to close
during  the  first  calendar  quarter  of 2002,  subject  to  customary  closing
conditions.

On February 10, 1998, National Australia Bank Limited. (the "National") acquired
all outstanding shares of the common stock of the Company. As consideration, the
National  paid  $27.825 per share for all of the  outstanding  common  stock and
$17.7 million cash to retire all outstanding  stock options.  The total purchase
price was  approximately  $1.2 billion.  The  transaction was accounted for as a
purchase.  As a result,  all assets and liabilities  were recorded at their fair
value on February 11, 1998,  and the purchase  price in excess of the fair value
of net assets acquired of $719.6 million was recorded as goodwill. Following the
transaction  described  above,  the National owns 100% of the  Company's  common
stock and the  Company  has become an indirect  wholly-owned  subsidiary  of the
National.  The Company also adopted a fiscal year end of September 30 to conform
to the fiscal year of the National. In September 2001, management of the Company
determined that the carrying value of goodwill exceeded its recoverable  amount,
based on an estimated market sale value of the Company. As a result, the Company
recorded an impairment charge of $579.8 million to write-off the goodwill asset.
At the same time,  $10.2 million of other  intangible  assets were  written-off.
Additionally,  during the fiscal  year ended  September  30,  2001,  the Company
issued .724  additional  shares to the  National for a total  purchase  price of
$1.968 billion.

Forward-Looking Statements

The Private  Securities  Litigation  Reform Act of 1995 provides a "safe harbor"
for certain  forward-looking  statements.  This report contains  forward-looking
statements,  which  reflect the  Company's  current views with respect to future
events and financial performance.  These forward-looking  statements are subject
to certain risks and  uncertainties,  including those  identified  below,  which
could cause actual results to differ materially from historical results or those
anticipated.  The words "believe," "expect,"  "anticipate," "intend," "estimate"
and other  expressions,  which  indicate  future  events  and  trends,  identify
forward-looking  statements,  which  speak only as of their  dates.  The Company
undertakes  no  obligation  to  publicly  update or revise  any  forward-looking
statements  whether as a result of new information,  future events or otherwise.
The  following  factors  could cause actual  results to differ  materially  from
historical results or those anticipated: (1) the Company's ability to grow which
is  dependent  on its ability to obtain  additional  financing in the future for
originating  loans,  investment in servicing  rights,  working capital,  capital
expenditures and general corporate purposes, (2) economic factors may negatively
affect the  Company's  profitability  as the  frequency of loan default tends to
increase in rising  rate  environments  and (3)  changes in  interest  rates may
affect the volume of loan  originations  and  acquisitions,  the  interest  rate
spread on loans  held for sale,  the amount of gain or loss on the sale of loans
and  the  value  of  the  Company's   servicing   portfolio.   These  risks  and
uncertainties  are  more  fully  detailed  in the  Company's  filings  with  the
Securities and Exchange Commission.

Mortgage Banking

Mortgage  banking is a  specialized  branch of the financial  services  industry
which  primarily   involves  (i)  originating  and  purchasing   mortgage  loans
("origination"  and/or  "production");  (ii) selling the originated mortgages to
third parties either as mortgage-backed securities or as whole loans ("secondary
marketing");  (iii)  servicing  of  mortgage  loans on  behalf  of the  ultimate
purchasers,  which  includes  the  collection  and  disbursement  of payments of
mortgage  principal  and  interest,  the  collection  of  payments  of taxes and
insurance  premiums to pay property taxes and insurance  premiums and management
of certain loan default activities  (collectively,  "servicing");  and (iv) risk
management,  a program designed to protect and manage the value of the Company's
mortgage loans held for sale and mortgage commitment pipeline and to protect the
economic  performance  of  the  servicing  portfolio  that  could  otherwise  be
adversely  affected by increased  loan  prepayments  due to declines in interest
rates.


                                       12

<PAGE>

Mortgage bankers originate loans generally  through two channels:  wholesale and
direct.  Wholesale  origination  involves the origination of mortgage loans from
sources other than  homeowners,  including  mortgage  brokers and other mortgage
lenders.  Direct  origination  typically  includes  (i)  networks of retail loan
offices  with sales  staff that  solicit  business  from  homeowners,  realtors,
builders   and  other  real  estate   professionals,   (ii)   centers  that  use
telemarketing,  direct mail,  and  advertising  to market loans directly to home
buyers or  homeowners,  (iii)  affinity and  co-branding  partnerships  and (iv)
corporate  relocation programs.  Once originated or purchased,  mortgage bankers
hold the  loans  temporarily  ("warehousing")  until  they are  sold,  typically
earning an interest  spread equal to the difference  between the loan's interest
rate and the cost of financing the loan.  Each loan is sold either  excluding or
including  the  associated  right to service the loan  ("servicing  retained" or
"servicing released," respectively).

Mortgage bankers rely mainly on short-term borrowings,  such as warehouse lines,
to finance the  origination  of mortgages that are sold.  Mortgage  bankers also
borrow on a longer  term basis to finance  their  servicing  assets and  working
capital  requirements.  Revenues consist primarily of those related to servicing
and, to a lesser extent, fees and interest spreads from originations.  The major
expenses  of a mortgage  banker  include  costs of  financing,  operating  costs
related to origination and servicing and the amortization of mortgage  servicing
rights.

Mortgage  bankers  typically seek to retain the rights to service the loans they
originate or acquire in order to generate recurring fee income. The purchase and
sale of  servicing  rights can occur on a  loan-by-loan  basis  ("flow") or on a
portfolio (group of loans) basis ("bulk" or  "mini-bulk").  Prices for servicing
rights  are  typically  stated  as a  multiple  of  the  servicing  fee  or as a
percentage of the outstanding  unpaid principal  balance for a group of mortgage
loans.  Values of servicing  portfolios are generally based on the present value
of the  servicing  fee income  stream,  net of servicing  costs,  expected to be
received over the estimated life of the loans.  The assets of a mortgage banking
company  consist  primarily of mortgage loans held for sale and the value of the
servicing rights.

Loan Production Activities

As a multi-channel  loan production  lender,  HomeSide has one of the industry's
largest  correspondent  lending production  operations,  a full-service brokered
loan  program and a national  production  center for  consumer  direct  mortgage
lending.  HomeSide also purchases servicing rights in bulk from time to time. By
focusing  on  production  channels  with a  variable  cost  structure,  HomeSide
minimizes the fixed costs associated with  traditional  mortgage branch offices.
For the nine months  ended  September  30,  2001,  HomeSide was ranked the tenth
largest  originator in the United States,  according to Inside Mortgage Finance,
with   approximately   2.3%  market  share  of  the   estimated   $1.5  trillion
single-family mortgage origination market.

The following  information  regarding loan production activities for HomeSide is
presented  to aid in  understanding  the  results of  operations  and  financial
condition of HomeSide for the fiscal years ended  September  30, 2001,  2000 and
1999 (in millions):

<TABLE>
                                         For the Fiscal        For the Fiscal        For the Fiscal
                                           Year Ended            Year Ended           Year Ended
                                       September 30, 2001    September 30, 2000    September 30, 1999
                                       ------------------    ------------------    ------------------
<S>                                         <C>                   <C>                 <C>
Wholesale:
  Correspondent                             $15,690               $ 8,660              17,927
  Co-issue(a)                                18,922                 9,053               7,737
  Broker                                      4,573                 1,945               3,818
                                            -------               -------             -------
    Total wholesale                          39,185                19,658              29,482
Direct                                        1,693                   628               1,451
                                            -------               -------             -------
   Total production                          40,878                20,286              30,933
Bulk acquisitions(b)                         14,950                28,624              35,608
                                            -------               -------             -------
   Total production and acquisitions        $55,828               $48,910             $66,541
                                            =======               =======             =======


----------
<FN>

(a)  Represents the  acquisition of servicing  rights,  which occurs  concurrent
     with  the  origination  of the loan by a third  party  or on a flow  basis.
     Amounts  represent the unpaid  principal  balance of mortgage debt to which
     the acquired servicing rights relate.

(b)  Represents  the  acquisition  of servicing  rights from  another  servicer.
     Amounts  represent the unpaid  principal  balance of mortgage debt to which
     the acquired servicing rights relate.
</FN>

</TABLE>

Total loan production,  excluding bulk  acquisitions,  was $40.9 billion for the
fiscal year ended  September  30,  2001, a 102%  increase  compared to the $20.3
billion  for the  fiscal  year  ended  September  30,  2000.  Fiscal  year ended
September  30, 2000 was a 34% decrease  compared to $30.9 billion for the fiscal
year ended September 30, 1999.

Correspondent  lending volume increased 81% in fiscal year 2001 from fiscal year
2000.  For fiscal year 2000,  correspondent  lending  volume  declined 52% below
fiscal year 1999. Co-issue volume increased 109% in fiscal year 2001 compared to
the prior year. For fiscal year 2000,  co-issue volume increased 17% compared to
fiscal year  1999.  The increase in correspondent lending and co-issue volume in


                                       13

<PAGE>

fiscal  year 2001 was the  result  of the  decrease  in  interest  rates,  which
increased  the level of  originations.  The  decrease in  correspondent  lending
volume in fiscal  year 2000 was the result of an  increase  in  interest  rates,
which  decreased  the level of  originations.  The  increase in co-issue  volume
during  fiscal  year 2000 was the  result of the  integration  of two  Preferred
Partners  offset by lower  origination  resulting  from higher  interest  rates.
Preferred Partners will sell a significant  portion of the residential  mortgage
loans they originate to HomeSide over five years.

The  interest  rate  environment  has  significantly  affected  the  size of the
mortgage origination market, primarily refinances.  When interest rates decline,
as occurred in 2001 and 1999,  increasing numbers of mortgagors  refinance their
loans which increases the size of the origination  market.  In this environment,
HomeSide strives to keep production at sustainable  levels should interest rates
reverse course and the size of the  origination  market  decrease.  During 2000,
when interest rates increased and activity decreased, HomeSide's strategy was to
emphasize its acquisitions to maintain and increase the servicing portfolio.

Economies of scale are vital to the  long-term  viability of mortgage  servicing
and are increasingly  important to remain competitive in the industry.  Although
the market for bulk  acquisitions  decreased  in fiscal  year 2001,  the Company
continued to pursue growth  opportunities  through bulk acquisitions of mortgage
servicing  rights and  through  Preferred  Partnership  arrangements.  Preferred
partnerships  generally  include a bulk  servicing  acquisition  and an  ongoing
mortgage origination flow. HomeSide services loans on a priority basis on behalf
of its  Preferred  Partners and offers the customer  mortgage-related  products.
Preferred Partner relationships  contributed 19% of HomeSide's production during
fiscal year 2001.

Servicing Portfolio

Management  believes  that HomeSide is one of the most  efficient  mortgage loan
servicers in the industry based on its servicing cost per loan and the number of
loans  serviced per employee.  The servicing  operation  makes  extensive use of
state-of-the-art  technology,  process  re-engineering  and expense  management.
HomeSide's  focus on efficient  and low cost  processes  is pursued  through the
selective use of automation  as well as the  strategic  outsourcing  of selected
servicing  functions and effective  control of delinquencies  and  foreclosures.
With a  portfolio  size of  $187.4  billion,  HomeSide  services  the  loans  of
approximately 2.1 million homeowners from across the United States and endeavors
to protect the value of this important asset by a sophisticated  risk management
strategy.  At September 30, 2001, HomeSide was ranked the sixth largest servicer
in the United States,  with approximately 3.3% market share of the $5.6 trillion
single family mortgages outstanding, according to Inside Mortgage Finance.

The following  information  on the dollar amounts of loans serviced is presented
to aid in  understanding  the results of operations  and financial  condition of
HomeSide  for the fiscal  years  ended  September  30,  2001,  2000 and 1999 (in
millions):

<TABLE>
                                           For the Fiscal               For the Fiscal              For the Fiscal
                                             Year Ended                   Year Ended                  Year Ended
                                         September 30, 2001           September 30, 2000          September 30, 1999
                                         ------------------           ------------------          ------------------
<S>                                                <C>                         <C>                          <C>
Balance at beginning of period                     $173,310                    $145,552                     $115,800
Additions                                            58,828                      48,910                       66,541
Reductions:
   Scheduled amortization                             5,312                       4,268                        3,386
   Prepayments                                       35,481                      15,640                       30,413
   Foreclosures                                         859                       1,045                        1,296
   Sales of servicing                                 3,119                         199                        1,694
                                                   --------                    --------                     --------
Total reductions                                     44,771                      21,152                       36,789
                                                   --------                    --------                     --------
Balance at end of period                           $187,367                    $173,310                     $145,552
                                                   ========                    ========                     ========
</TABLE>

The number of loans  serviced at September  30, 2001 was  2,052,128  compared to
1,932,370 at September 30, 2000 compared to 1,669,051 at September 30, 1999.


                                       14

<PAGE>
Results of Operations  for the fiscal year ended  September 30, 2001 compared to
the fiscal year ended  September  30, 2000 and fiscal year ended  September  30,
1999

Summary

HomeSide's net (loss) income was ($1.9) billion, $49.3 million and $61.7 million
for the fiscal  years ended  September  30, 2001,  2000 and 1999,  respectively.
Total  (expenses)  revenues  were ($1.3)  billion,  $353.9  million,  and $410.4
million  for  the  fiscal  years  ended  September  30,  2001,  2000  and  1999,
respectively.  Decreases in net (loss) income and total  (expenses)  revenues is
primarily due to the impact of the valuation  provision for the mortgage serving
rights driven by the acceleration of the projected prepayments speeds associated
with declining  mortgage  interest rates.  The U.S.  housing market  experienced
unprecedented  record low mortgage rates and high mortgage  prepayment  activity
during fiscal year 2001.  Total expenses were $906.4 million for the fiscal year
ended  September  30, 2001, a $640.1  million  increase  compared to fiscal year
ended  September  30, 2000.  The increase was  primarily due to an impairment of
goodwill and other intangible  assets recognized to earnings and higher expenses
associated  with the increase in  production  volumes,  growth of the  servicing
portfolio,  and higher prepayment activity. Total expenses for fiscal year ended
September  30, 2000,  decreased 8% compared to fiscal year ended  September  30,
1999, primarily as a result of decreases in production volume.

Net Servicing (Expense) Revenue

Net servicing  (expense) revenue is comprised of mortgage servicing fees, net of
guaranty fees, ancillary income, risk management results and valuation provision
related to the mortgage  servicing rights asset.  Mortgage  servicing rights are
the rights to receive a portion of the interest  coupon and fees  collected from
the mortgagor for performing specified servicing  activities.  The total cost of
loans originated or acquired is allocated between the mortgage  servicing rights
and the mortgage  loans,  without the servicing  rights,  based on relative fair
values.  The value of servicing  rights  acquired  through bulk  acquisitions is
capitalized at cost.

Mortgage  servicing rights are amortized in proportion to and over the period of
the estimated net servicing revenue. Mortgage servicing rights are evaluated for
impairment  by comparing the carrying  amount of the  servicing  rights to their
fair  value.  Fair  value is  estimated  based on the  market  prices of similar
mortgage  servicing assets and on discounted  future net cash flows  considering
market   prepayment   estimates,    historical   prepayment   rates,   portfolio
characteristics,  interest  rates and other  economic  factors.  For purposes of
measuring  impairment,  the  mortgage  servicing  rights are  stratified  by the
predominant risk  characteristics  which include product types of the underlying
loans and interest rates of mortgage  notes.  Impairment,  if any, is recognized
through a valuation  reserve  for each  impaired  stratum.  Prior to the quarter
ended September 30, 2001, the Company  estimated future  prepayment speeds based
on  the  application  of a  forward  interest  rate  bias.  In  considering  the
National's  intent to pursue a sale of HomeSide and the lack of liquidity in the
market, as well as other increasing  uncertainties relating to the interest rate
environment,  during the quarter ended September 30, 2001, the Company estimated
future prepayment speeds based on a static method.

The Company  incurred net servicing  (expense) of ($1.4)  billion for the fiscal
year ended  September  30,  2001  compared  to net  servicing  revenue of $326.4
million  and $199.6  million for the fiscal  year ended  September  30, 2000 and
1999, respectively.  The decrease in net servicing revenues in fiscal year ended
September 30, 2001 is primarily due to the impact of the valuation provision for
the mortgage servicing rights.

Mortgage  servicing  fees  increased  20% to $876.4  million for the fiscal year
ended  September  30,  2001,  from  $732.2  million  for the  fiscal  year ended
September 30, 2000. The servicing  portfolio  increased  $14.1 billion to $187.4
billion at September 30, 2001, compared to $173.3 billion at September 30, 2000,
an 8% increase.  These increases were primarily due to higher production volumes
resulting from a declining  mortgage rate environment.  Mortgage  servicing fees
increased 20% from $609.5  million in fiscal 1999,  to $732.2  million in fiscal
2000. The portfolio grew 19% from $145.6 billion at September 30, 1999 to $173.3
billion at  September  30,  2000.  These  increases  were  primarily a result of
strategic bulk  acquisitions  and growth through the loan  production  channels.
HomeSide's  weighted  average  interest  rates  of  the  mortgage  loans  in the
servicing  portfolio  for the fiscal year were 7.50%,  7.58% and 7.44% at fiscal
years ended  September  30,  2001,  2000 and 1999,  respectively.  The  weighted
average servicing fee, net of guarantee fees and including ancillary income, for
the  servicing  period was 0.474% for the fiscal year ended  September 30, 2001,
compared  to 0.476% for  fiscal  year ended  September  30,  2000 and .0467% for
fiscal year ended September 30, 1999.

Amortization  expense  increased 54% to $623.3 million for the fiscal year ended
September 30, 2001 from $405.7  million for the fiscal year ended  September 30,
2000 due to  increased  prepayment  rates  associated  with  declining  mortgage
interest  rates.  Amortization  expenses  decreased  $4.2 million in fiscal year
ended September 30, 2000 from $409.9 million for fiscal year ended September 30,
1999 primarily from the decrease in prepayment rates.  Amortization  charges are
highly dependent upon the level of prepayments  during the period and changes in
prepayment expectations, which are significantly influenced by the direction and
level of long-term  interest  rate  movements.  A decrease in mortgage  interest
rates  results  in an  increase  in  prepayment  estimates  used in  calculating
periodic amortization expense,  while an increase in rates results in a decrease
in prepayment  estimates.  Because mortgage  servicing rights are amortized over
the expected period of service fee revenues,  an increase in mortgage prepayment
activity typically results in a shorter estimated life of the mortgage servicing

                                       15

<PAGE>

assets and, accordingly,  higher amortization expense. Conversely, a decrease in
mortgage prepayment activity typically results in a longer estimated life of the
mortgage servicing assets and lower amortization expense.

During  the year  ended  September  30,  2001,  the  Federal  Reserve  Board cut
short-term rates 369 bps, which resulted in unprecedented  refinancing activity.
As a result, the Company recorded a valuation provision of $2.56 billion related
to an  impairment  valuation  of mortgage  servicing  rights for the fiscal year
ended September 30, 2001.

As announced on September 4, 2001, the Company  discovered an incorrect interest
rate assumption in the mortgage  servicing rights ("MSR")  valuation model which
caused  the  model to under  estimate  the MSR's  sensitivity  to  movements  in
interest rates,  particularly in a falling rate  environment.  Had the valuation
model  included  the  correct  interest  rate  assumption,  the model would have
estimated   faster  loan  prepayment   speeds  and,  as  a  result,   yielded  a
significantly  different asset profile. The correction of the incorrect interest
rate   assumption,   caused  the  Company  to  determine   that  the   inception
documentation   required  to  apply  hedge  accounting   pursuant  to  Financial
Accounting Standards No. 133, "Accounting for Derivative and Hedging Activities"
("SFAS 133"), was inadequate to support the  characteristics  of the hedged item
and its exposure to changes in hedged  risk.  Therefore,  the Company  concluded
that the application of hedge accounting was  inappropriate for those derivative
instruments  designed to hedge the  exposure to changes in the fair value of the
mortgage servicing rights assets. As a result, the Company recognized a net gain
of $872.9  million  to current  earnings  related to the change in fair value of
these derivatives for the fiscal year ended September 30, 2001.

Net Interest (Expense) Revenue

Net interest  (expense)  revenue is driven by the level of interest  rates,  the
direction in which rates are moving,  the  associated  spread between short- and
long-term  interest rates and the rates at which HomeSide is able to borrow, and
the growth in net assets.  These factors  influence the size of the  residential
mortgage  origination market,  HomeSide's loan production volumes,  the interest
income  HomeSide earns on its mortgages held for sale and interest rates paid to
its lenders.  These factors also influence risk  management  results that affect
funding requirements.

Loan refinancing  levels are the largest  contributors to changes in the size of
the mortgage  origination  market.  As interest  rates  decline,  more borrowers
refinance their mortgages,  resulting in an increase in the mortgage origination
market.  Higher loan  production  volumes result in higher  average  balances of
mortgages held for sale and  consequently  higher levels of interest income from
interest earned on such loans prior to their sale. This higher level of interest
income is partially offset by the lower rates earned on the loans.

Conversely,  as interest rates rise, fewer borrowers  refinance their mortgages,
resulting  in  a  decrease  in  the  mortgage  origination  market.  Lower  loan
production  volumes result in lower average  balances of loans held for sale and
consequently  lower levels of interest income from interest earned on such loans
prior to their  sale.  This lower  level of  interest  income  due to  decreased
volumes is partially offset by the higher rates earned on the loans.

Overall   borrowing  costs  also  fluctuate  with  changes  in  interest  rates.
Currently, the interest expense HomeSide pays to finance mortgage loans held for
sale and other net assets is generally  calculated  with reference to short-term
interest rates. In addition,  because mortgage loans held for sale earn interest
based on longer term interest rates;  the level of net interest  revenue is also
influenced by the spread between long-term and short-term interest rates.

Net interest (expense) revenue totaled $(41.7) million for the fiscal year ended
September  30,  2001,  compared  to ($46.7)  million  for the fiscal  year ended
September  30, 2000.  The 11%  decrease in net  interest  expense in fiscal 2001
compared  to  2000  was  primarily  due  to a  widening  of the  spread  between
short-term and long-term rates partially offset by an increase in net assets due
to higher production volumes and servicing portfolio growth.

Net interest (expense) revenue totaled $(46.7) million for the fiscal year ended
September 30, 2000 compared to $49.0 million for the fiscal year ended September
30, 1999.  Net interest  earned on mortgage  loans held for sale  decreased as a
result of decreased  production during the fiscal year ended September 30, 2000.
Net  interest  revenue  was also  decreased  by  increased  interest  expense on
borrowings  to fund  the  mortgage  servicing  assets.  These  decreases  to net
interest  revenue were  partially  offset by increased  credits earned on escrow
deposits due to higher interest rates during the fiscal year ended September 30,
2000.

Net Mortgage Origination Revenue

Net mortgage  origination revenue is comprised of fees earned on the origination
of mortgage  loans,  fees charged to review loan  documents for  purchased  loan
production, risk management results, and gains and losses on the sale of loans.

Net mortgage  origination  revenue was $197.5  million for the fiscal year ended
September 30, 2001 compared to $68.5 million for the fiscal year ended September
30,  2000.  This  increase  in  fiscal  year 2001 is due to  declining  mortgage
interest rates, which resulted in increased  production volumes and margins. Net
mortgage  origination  revenue of $68.5 million for fiscal year ended 2000,  was

                                       16

<PAGE>
$87.4 million below the $155.9 million for fiscal year ended September 30, 1999,
as a  result  of the  high  production  of loans  due to a lower  interest  rate
environment in 1999.

Other Income

Other  income was $16.2  million for the fiscal year ended  September  30, 2001,
compared to $5.7 million for fiscal year ended September 30, 2000. This increase
primarily  resulted  from  a  sale-leaseback  transaction  involving  HomeSide's
facility in San Antonio,  Texas  entered into on October 2, 2000.  In accordance
with SFAS No. 98 "Accounting for Leases",  HomeSide recognized an immediate gain
of $4.5 million and recorded a deferred  gain of $7.3 million which is amortized
over the life of the lease with $1.4 million  recorded to current year earnings.
Additionally,  income  associated with realty taxes fees increased during fiscal
year 2001 primarily as a result of higher  production  volumes.  Other income of
$5.7 million for the fiscal year ended  September 30, 2000 was  relatively  flat
compared to $5.8 million for the fiscal year ended September 30, 1999.

Salaries and Employee Benefits

Salaries and employee  benefits  expense was $139.0  million for the fiscal year
ended  September 30, 2001  compared to $112.6  million for the fiscal year ended
September  30, 2000.  Salary  expenses  were $132.7  million for the fiscal year
ended September 30, 1999. The average number of full-time  equivalent  employees
increased to 2,797 for the fiscal year ended  September  30, 2001 from 2,340 for
the fiscal  year ended  September  30,  2000 and from 2,611 for the fiscal  year
ended  September  1999.  The  increase  is  attributable  to  higher  prepayment
activity, higher production volumes resulting in higher commissions,  incentives
and an increase in temporary and overtime staff.

Occupancy and Equipment Expense

Occupancy and equipment expense primarily  includes rental expense,  repairs and
maintenance  costs,  certain  computer  software  expenses and  depreciation  of
HomeSide's  premises and  equipment.  Occupancy  and  equipment  expense for the
fiscal year ended  September  30, 2001 was $43.8  million  compared to $32.0 and
$28.3  million  for  the  fiscal  years  ended  September  30,  2000  and  1999,
respectively.  The increases in fiscal year 2001 were primarily  attributable to
the  additional  leased space and  technology  related assets used in support of
growth in the mortgage servicing portfolio.

Servicing Losses on Investor-Owned Loans and Foreclosure-Related Expenses

Servicing losses on investor-owned loans represent  anticipated losses primarily
attributable to servicing FHA and VA loans for investors.  These amounts include
actual losses for final disposition of loans, non-recoverable foreclosure costs,
accrued  interest for which  payment has been denied and estimates for potential
losses based on HomeSide's experience as a servicer of government loans.

The servicing losses on investor-owned  loans and  foreclosure-related  expenses
totaled $32.3 million for the fiscal year ended September 30, 2001,  compared to
$33.3  million for the fiscal year ended  September  30, 2000.  The decrease was
mainly  attributable  to a decline in per unit serving  losses  resulting from a
shift in the geographic mix and  composition of the servicing  portfolio for the
fiscal year 2001. For fiscal year ended September 30, 2000,  servicing losses on
investor-owed  loans and  foreclosure-related  expenses  resulted in 5% increase
from the $31.7 million in fiscal year ended September 30, 1999.

Included in the balance of accounts payable and accrued liabilities is a reserve
for  estimated  servicing  losses on  investor-owned  loans of $13.3  million at
September  30, 2001 and $16.7  million at  September  30,  2000,  and 1999.  The
reserve  has been  established  for  potential  losses  related to the  mortgage
servicing  portfolio.  Increases  to the  reserve  are  charged to  earnings  as
servicing  losses on  investor-owned  loans. The reserve is decreased for actual
losses  incurred  related  to  the  mortgage  servicing  portfolio.   HomeSide's
historical  loss  experience  on VA loans  generally  has been  consistent  with
industry experience.  Management believes that HomeSide has an adequate level of
reserve based on servicing  volume,  portfolio  composition,  credit quality and
historical loss rates, as well as estimated future losses.


                                       17

<PAGE>

The  following   table  sets  forth   HomeSide's   delinquency  and  foreclosure
experience:

                        Servicing Portfolio Delinquencies
                             (percent by loan count)
<TABLE>
                                            September 30,   September 30,   September 30,
                                                2001            2000            1999
                                            -------------   -------------   -------------
<S>                                            <C>              <C>           <C>
Servicing Portfolio Delinquencies,
excluding bankruptcies (at end of period)
          30 days                              3.40%            2.81%         3.33%
          60 days                              0.70%            0.62%         0.64%
          90+ days                             0.41%            0.55%         0.53%
                                               ----            -----          ----
               Total past due                  4.51%            3.98%         4.50%
                                               ====            =====          ====
          Foreclosures pending                 0.72%            0.45%         0.61%
                                               ====            =====          ====
Weighted average portfolio age in months       48.8             47.9          44.1
</TABLE>

Other Expenses

Other expenses  consist mainly of  professional  fees,  communications  expense,
advertising  and public  relations,  data  processing  expenses and certain loan
origination expenses.  The level of other expenses fluctuates in part based upon
the  level of  HomeSide's  mortgage  servicing  portfolio  and  loan  production
volumes.

Other expenses were $69.2 million for the fiscal year ended  September 30, 2001,
compared to $52.5  million for the fiscal year ended  September  30, 2000, a 32%
increase. Higher production volumes,  servicing portfolio growth and an increase
in prepayment  activity  primarily drove the increase in other  expenses.  Other
expenses  decreased  $8.4  million  in fiscal  year 2000  compared  to the $60.9
million for fiscal  year ended  September  30,  1999,  due to lower  consulting,
advertising,  litigation and insurance  expenses  associated  with a decrease in
production volumes in fiscal year 2000.

Impairment of goodwill and other intangible assets

In September 2001,  management of the Company determined that the carrying value
of goodwill and other intangible assets exceeded its recoverable  amount,  based
on an  estimated  market  sale value of the  Company.  As a result,  the Company
recorded an  impairment  charge of $579.8  million to write-off the goodwill and
$10.2 million to write-off other intangible assets.

Income Tax (Benefit) Expense

The Company's  income tax (benefit)  expense was ($267.1) million for the fiscal
year ended September 30, 2001, $38.3 million for the fiscal year ended September
30, 2000,  and $59.2 million for the fiscal year ended  September 30, 1999.  The
effective  income tax rates for the fiscal years ended  September 30, 2001, 2000
and 1999 were approximately 12%, 44%, and 49%, respectively. The decrease in the
effective tax rate for fiscal year 2001 was due to a net loss resulting from the
impact of the valuation  provision of mortgage servicing rights. The decrease in
income  tax  expense  in fiscal  year  2000 was  primarily  attributable  to the
decrease  in  income  before  income  taxes,  as  well as the  decreases  in the
effective  income tax rate  primarily  resulting from a change in the geographic
mix of the  portfolio  into  states  with  lower  tax rates  and a  decrease  in
production volume in states with higher tax rates.

Risk Management Activities

Mortgage  banking  entities face a broad range of risk that must be  proactively
managed  to  achieve  success  in  the  industry.   The  Company   utilizes  the
enterprise-wide  risk management  structure that is comprised of a common policy
framework and a set of controls that are utilized to achieve  standardization of
risks.  Each  business  function  is  responsible  for using  standardized  risk
assessment   templates   along   with  best   practices   methodology   for  the
identification  and  quantification  of the particular risk it is exposed to and
for the implementation of appropriate policies and procedures.


                                       18

<PAGE>

The Company's Risk Council,  comprising  executive and senior management as well
as  representation  from internal audit, is the principal  operating risk policy
decision  making body within the Company.  Risk  Council's role is to constantly
monitor and assess the  Company's  risk profile in existing and future  business
operations,  and to assist  business units in the design and  implementation  of
appropriate risk management policies and strategies.

The Risk Council provides direction and oversight for many types of risks such
as credit, operations, legislative compliance, e-commerce, business continuity
and disaster recovery. Certain of the Company's other major risk areas (e.g.
market risk) are more fully discussed below.

Risk Management of Market Risk

Market risk recognizes the potential change in the value of assets,  liabilities
and other  financial  commitments  as a result of changes in asset  prices along
with  changes in actual and  projected  interest  rates.  HomeSide  continues to
review and enhance  its  strategies  and  underlying  policies  relating to risk
management  of market risk based on changes in the market  environment.  Certain
members of the  Company's  Risk Council also  comprise the  Company's  Asset and
Liability  Management  Committee ("ALCO") which, under delegated  authority from
the Board, sets policies in relation to the management of market risk, corporate
funding and balance sheet  management.  Representatives  of the  Company's  ALCO
report to the National's ALCO concerning risk management and also participate in
the National's group ALCO meetings.

As more fully  discussed in the notes to the financial  statements,  the Company
adopted  SFAS No.  133,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities",  effective  October  1,  2000.  Accordingly,  for  the  year  ended
September 30, 2001, all of the Company's risk management derivative  instruments
are recorded at fair value.  Changes in the value of risk management  derivative
instruments  designated  as  qualifying  fair value  hedging  relationships  are
recognized  in  current  earnings  along  with the  changes  in the value of the
qualifying hedged assets or liabilities. Changes in the value of risk management
derivative  instruments designated as qualifying cash flow hedging relationships
of forecasted loan sale transactions are recorded to other comprehensive  income
("OCI") and reclassified to earnings concurrent with settlement of the loan sale
transactions.  The accounting  policies  relevant to derivative  instruments and
hedging  activities for each of the Company's key risk management areas are more
fully discussed in Note 3 to the Consolidated Financial Statements.

Market Environment

During  the last  fiscal  year,  the US  market  has  experienced  unprecedented
volatility  in the  interest  rate  environment.  In  response to the slowing US
economy,  the Federal  Reserve has lowered  interest rates on several  occasions
resulting in a decline in short-term interest rates of 369 basis points.

Despite  the  sluggish  economy,  the US  housing  sector has  remained  strong.
Purchase volumes have been solid and refinancing  activities have hit levels not
seen since  mid-1998.  This has  resulted in  increased  production  volumes and
improved results in the Company's  production  channels.  However, the declining
interest rate environment and extensive refinancing  activities have resulted in
higher  prepayment  activity  adversely  impacting  the  value of the  Company's
mortgage servicing asset.

Continued uncertainties  surrounding future monetary policy and the state of the
US economy have  resulted in  significant  volatility  in interest  rate spreads
between  short  and  long  term  rates,  placing  considerable  pressure  on the
Company's  hedge  performance.  As  more  fully  discussed  in  note  3  of  the
Consolidated Financial Statements, HomeSide utilizes a combination of derivative
instruments to create a hedge  portfolio  that is intended to provide  effective
protection of the value of the Company's mortgage servicing rights from interest
rate risk. The volatile interest rate environment discussed above has negatively
impacted the effectiveness of these derivative instruments.

Following is a summary of risk management  activities and results for the fiscal
year ended September 30, 2001:

Risk Management of Loan Production Activities

The Company  maintains a risk management  program to protect and manage interest
rate risk and pricing risk associated with its mortgage  commitment pipeline and
mortgage  inventory.  In the normal  course of  business,  the  Company  extends
interest rate lock commitments ("IRLCs" or "commitments") to borrowers who apply
for loan funding and meet certain credit and underwriting criteria. IRLCs in the
mortgage  pipeline  expose the Company to interest  rate and pricing  risk. In a
rising rate environment,  the aggregate value of the Company's commitments tends
to decrease in value and,  generally,  at an  accelerating  rate. In a declining
rate  environment,  the value of the Company's  commitments tends to increase in
value.  However,  the rate of increase in the value tends to  decelerate  as the
likelihood of the borrower closing on the loan decreases if market rates decline
by a meaningful amount versus the borrower's committed rate. As part of its risk
management processes, the Company has devoted substantial resources and modeling
solutions to enable  management  to project the  expected  percent of IRLCs that
will  ultimately fund under  different  interest rate scenarios  (referred to as
"pull-through  rates"). The success of the Company's risk management  strategies



                                       19

<PAGE>
relies on proactive  analysis of historical  and projected  pull-through  rates.
However,  since borrower behavior cannot be perfectly  predicted and modeled, an
element of economic  ineffectiveness  can be expected in the Company's  pipeline
hedging relationships.

In the aggregate,  the Company's  strategy  involves the use of a combination of
mortgage  forward   delivery   commitments  and  mortgage  options  to  maintain
appropriate  risk management  coverage  related to IRLCs.  The Company  utilizes
mortgage forward delivery contracts to hedge a baseline portion of the Company's
pipeline composed of interest rate lock commitments that management believes are
probable of closing.  Additionally,  the  Company  utilizes  options on mortgage
securities  and certain other products to hedge an element of the pipeline which
is considered more uncertain of closing,  and for which  pull-through  rates are
likely to be volatile.  During the year ended  September 30, 2001, a net gain of
approximately  $6.4  million   attributable  to  pipeline  hedging  results  was
recognized  to  earnings.  Pursuant to the  requirements  of SFAS 133 (which are
discussed in note 3 to the Company's consolidated financial statements) interest
rate lock  commitments  and related risk management  derivative  instruments are
accounted  for as  non-designated  derivatives  with  changes  in  their  values
recorded to current earnings.

Interest  rate  lock  commitments  that  are  ultimately   funded  (closed)  are
classified  as loans held for sale and are  included in the  Company's  mortgage
inventory.  Closed loans in the mortgage  inventory are also subject to interest
rate and pricing risk. The Company's risk management program involves the use of
mortgage  forward  delivery  contracts  to  hedge  100%  of its  agency-eligible
conforming  loans as forecasted  loan sales.  Pursuant to the terms of SFAS 133,
the Company accounts for the forward  delivery  contracts as cash flow hedges of
forecasted loan sales. The forward  contracts  achieve  effective offset against
the changes in the value of the loans in that the forward contracts  effectively
fix the future loan delivery  price.  At September  30, 2001,  losses on forward
delivery contracts of $13.3 million were included in other comprehensive  income
(OCI).  Pursuant to the  requirements  of SFAS 133, the unrealized  gains in OCI
will be recognized to earnings on the loan  settlement  dates, as the forecasted
loan sales are consummated over the next 90 days.

Risk Management of Mortgage Servicing Rights

Mortgage  servicing  rights  represent  the  capitalized  value of the estimated
future net servicing revenues associated with the Company's servicing portfolio.
The Company maintains a risk management program intended to protect the value of
mortgage servicing rights from changes in value due to changes in estimated loan
prepayment speeds, which are mainly influenced by changes in interest rates.

The value of mortgage  servicing  rights is  extremely  sensitive  to changes in
interest  rates  since  interest  rates are the  primary  driver  of actual  and
projected prepayment rates. As interest rates decline, prepayment rates increase
as a result of actual and expected  refinancing  activities of  borrowers.  As a
result,  the value of mortgage  servicing  rights decreases in value as interest
rates decline and,  generally,  at accelerating rates depending in large measure
on the note rates of the underlying  loans in relation to market interest rates.
The value of the  Company's  mortgage  servicing  rights is based on the present
value of expected  cash flows  received  over the life of the loan using  vendor
models  which  incorporate  prepayment  estimates to forecast  estimated  future
servicing revenues, servicing costs, ancillary revenues, escrow earnings, credit
losses and other  expenses.  Prior to the quarter ended  September 30, 2001, the
Company estimated future prepayment speeds based on the application of a forward
interest rate bias. In  considering  the  National's  intent to pursue a sale of
HomeSide and the lack of liquidity  in the market,  as well as other  increasing
uncertainties  relating to the  interest  rate  environment,  during the quarter
ended September 30, 2001, the Company  estimated future  prepayment speeds based
on a static method.

The Company's risk  management  program  involves the use of a portfolio of risk
management  derivative  instruments,  which  increase in value as interest rates
decline.  More  specifically,   management  uses  a  combination  of  derivative
instruments  designed to offset  changes in the value of the mortgage  servicing
rights in different interest rate scenarios. The Company also attempts to manage
basis risk, term sector risk, and liquidity risk by  diversifying  its portfolio
with an  array  of  derivative  instruments  that  are  approved  for use by the
Company's  ALCO.  Accordingly,  the hedge  portfolio is  generally  comprised of
mortgage products, swap products and treasury products that are structured along
various points of the yield curve. The Company expects to continue to review and
expand its risk management framework.

During  the year  ended  September  30,  2001,  the  Federal  Reserve  Board cut
short-term rates 369 bps, which resulted in unprecedented  refinancing activity.
As a result, the Company recorded a valuation provision of $2.56 billion related
to an  impairment  valuation  of mortgage  servicing  rights for the fiscal year
ended September 30, 2001.

As announced on September 4, 2001, the Company  discovered an incorrect interest
rate assumption in the mortgage  servicing rights ("MSR")  valuation model which
caused  the  model to under  estimate  the MSR's  sensitivity  to  movements  in
interest rates,  particularly in a falling rate  environment.  Had the valuation
model  included  the  correct  interest  rate  assumption,  the model would have
estimated   faster  loan  prepayment   speeds  and,  as  a  result,   yielded  a
significantly  different asset profile. The correction of the incorrect interest
rate assumption caused the Company to determine that the inception documentation
required to apply hedge accounting  pursuant to Financial  Accounting  Standards
No. 133,  "Accounting for Derivative and Hedging  Activities"  ("SFAS 133"), was
inadequate to support the characteristics of the hedged item and its exposure to
changes in hedged risk. Therefore, the Company concluded that the application of
hedge accounting was inappropriate for those derivative  instruments designed to
hedge the exposure to changes in the fair value of the mortgage servicing rights

                                       20

<PAGE>

assets.  As a result,  the Company  recognized  a net gain of $872.9  million to
current  earnings  related to the change in fair value of these  derivatives for
the fiscal year ended September 30, 2001.

For additional  information  regarding the risk management of mortgage servicing
rights, refer to Notes 3 and 14 to the Consolidated Financial Statements.

Risk Management of Corporate Funding

As part of its corporate  funding and balance sheet management  strategies,  the
Company  maintains a desired level of its total  borrowings  through  short-term
funding sources.  To meet the Company's  financing needs,  short-term funding is
provided  through the  Company's  commercial  paper  program and its  short-term
facility with the National. Additionally, the Company can alter its weighting in
fixed-rate funding by converting  medium-term notes to floating rate. During the
year ended September 30, 2001, the Company was party to $650 million in interest
rate swaps which were effective in converting $650 million of medium-term  notes
to LIBOR-based  funding.  As discussed in Note 3 to the  Consolidated  Financial
Statements,  the interest rate swaps were  accounted for as fair value hedges of
the designated medium-term notes.

Liquidity and Capital Resources

The Company's  principal  financing needs are the financing of loan  origination
activities and the investment in mortgage servicing rights. To meet these needs,
the Company  currently  utilizes funding from an independent  syndicate of banks
and from the National,  commercial  paper,  medium-term notes and cash flow from
operations.  In the  past,  the  Company  has also  utilized  short-term  credit
facilities.

Operations

Net cash  provided  by  operations  was $741.3  million  for  fiscal  year ended
September 30, 2001, $513.4 million for fiscal year ended September 30, 2000, and
$1,444.6  million for the fiscal year ended September 30, 1999. The primary uses
of cash in operations were to fund loan origination and pay corporate  expenses.
Cash provided from  servicing  fee income,  loan sales and principal  repayments
offset these uses of cash.  Cash flows from loan  origination are dependent upon
current economic conditions and the level of long-term interest rates. Decreases
in  long-term  interest  rates  generally  result  in  higher  loan  refinancing
activity, which results in higher cash demands to meet increased loan production
levels.  Higher  cash  demands  to meet  increased  loan  production  levels are
primarily met through  borrowings  and loan sales.  Increases in long term rates
generally result in lower loan refinancing activity, which results in lower cash
demands to meet production levels.

Investing

Net cash used in investing activities was $863.3 million,  $1,461.6 million, and
$1,374.1  million for the fiscal years ended September 30, 2001, 2000, and 1999,
respectively. For the fiscal years ended September 30, 2001, 2000 and 1999, cash
was used for the purchase and origination of mortgage  servicing  rights and the
purchases of premises and  equipment.  In fiscal years ended  September 30, 2000
and 1999, cash was also used for the purchase of risk management  contracts.  In
fiscal year ended September 30, 2001, uses of cash were partially offset by cash
provided by early pool buyout  reimbursements  and proceeds from risk management
contracts.  In fiscal years ended September 30, 2000 and 1999, uses of cash were
partially offset by cash provided by early pool buyout programs.

Financing

Net cash provided by financing activities was $714.5 million, $856.1 million and
$97.3  million for the fiscal  years  ended  September  30,  2001,  2000,  1999,
respectively.  The primary source of cash from financing  activities  during the
fiscal year ended  September  30, 2001 was from  additional  issuances of common
stock.  The primary source of cash from financing  activities  during the fiscal
year ended  September  30,  2000 was from the  issuance  of  medium-term  notes,
issuance of commercial paper, and net borrowings from HomeSide's line of credit.
The primary  use of cash in  financing  activities  during the fiscal year ended
September 30, 2001 was for repayment of commercial paper  borrowings.  Cash used
in financing  activities during the fiscal year ended September 30, 2000 was for
the  re-payment of medium-term  and  short-term  notes and dividends paid to the
Parent.  The primary source of cash from financing  activities during the fiscal
year ended  September  30, 1999 was from the  issuance of  commercial  paper and
short-term notes. Cash used in financing activities during the fiscal year ended
September 30, 1999 was for the re-payment of borrowings  from HomeSide's line of
credit and dividends to the Parent.

Following the closing of the Asset Sale and Liability  Assumption Agreement with
WaMu,  the Company  expects that to the extent cash  generated  from the closing
proceeds and the retained  assets is  inadequate  to meet its  liquidity  needs,
those needs can be met through external facilities and inter-company  borrowings
with the National.


                                       21

<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest  rate risk is the most  significant  market  risk  affecting  HomeSide.
Interest rate risk is the possibility  that changes in interest rates will cause
unfavorable  changes  in net income or in the value of  interest  rate-sensitive
assets, liabilities and commitments. From a corporate perspective, the economics
of the Company's production and servicing lines-of-business can be leveraged, in
part, to mitigate the Company's  exposure to interest rate risk. In addition and
as part  of its  risk  management  programs,  the  Company  purchases  financial
instruments  and  enters  into  financial  agreements  in the  normal  course of
business  to manage its  exposure  to  interest  rate  risk.  The  Company  uses
financial instruments for the purpose of managing interest rate risks to protect
the value of its mortgage loans held for sale and mortgage commitment  pipeline.
Additionally,  risk  management  instruments  are  used by  HomeSide  to  manage
interest rate risk  associated with the value of its mortgage  servicing  rights
which have  characteristics such that they tend to decrease in value as interest
rates decline and increase in value as interest rates rise.  Interest rate swaps
are also used to  effectively  convert  fixed-rate  funding  sources to floating
rate.  The  Company has no market risk  sensitive  instruments  held for trading
purposes.

Management  actively  monitors and manages its  exposure to interest  rate risk.
Various valuation tools are employed to perform sensitivity analyses in order to
quantify the financial  impact of changes in interest rates.  These analyses are
performed for various  interest rate scenarios to capture the expected  economic
change in market value of  rate-sensitive  assets,  liabilities and commitments.
Additionally,  the  analyses are  performed  to capture the expected  accounting
impact on future earnings for a specified time frame.

Several modeling techniques are utilized including static shock, option adjusted
spread,  option pricing,  and discounted cash flow models.  A number of key rate
sensitive  assumptions are included in the modeling such as implied  volatility,
prepayment  rates,  and yield  requirements.  Various  analyses of the Company's
exposure to interest  rate risk are reviewed on at least a monthly  basis by the
Company's Asset/Liability Committee, which reports to the Board of Directors.

The  sensitivity   analyses  described  above  were  applied  to  the  Company's
rate-sensitive  assets,  liabilities,  commitments  and the Company's  financial
instruments  at  September  30, 2001.  At that time,  the  sensitivity  analyses
reflect  that a sudden and  sustained  50 basis  point  increase  in rates would
result in a negative  variance to net income,  exclusive of changes in the value
of the mortgage servicing rights asset and associated derivative instruments, of
approximately  $12.0 million over a simulated 12-month period.  Additionally,  a
sudden 50 basis point  increase in interest rates would result in an approximate
increase in earnings of $96.0 million relative to the net change in value of the
mortgage servicing rights asset and associated derivative instruments.  A sudden
and  sustained  50 basis  point  decrease  in rates  would  result in a positive
variance to net income of approximately  $7.0 million over a simulated  12-month
period, exclusive of changes to the value of the mortgage servicing rights asset
and  associated  derivative  instruments.  A sudden 50 basis  point  decrease in
interest  rates  would  result in an  approximate  increase in earnings of $54.0
million  relative to the net change in value of the  mortgage  servicing  rights
asset and  associated  derivative  instruments.  The  analysis  for the mortgage
servicing rights asset and associated derivative  instruments is a point in time
estimate derived using  characteristics of the servicing portfolio and the hedge
profile  as of  September  30,  2001.  Had this  analysis  been  performed  at a
different point in time,  results may have varied  significantly.  This analysis
also assumes the Company is able to demonstrate hedge  effectiveness and qualify
for hedge  accounting  treatment  pursuant to the  provisions  of SFAS 133.  The
results of these analyses did not reflect  impairment of rate-sensitive  assets.
The sensitivity  analyses are based on planned product volumes and margins and a
number of  assumptions,  which are  regularly  updated to reflect the  Company's
latest views on the business and interest rate environments.

For  additional  information,  see  "Management's  Discussion  and  Analysis  of
Financial  Condition and Results of Operations  -"Risk  Management  Activities",
Note 13,  "Disclosures  About Fair Value of Financial  Instruments" and Note 14,
"Risk  Management and Financial  Instruments"  in the Notes to the  Consolidated
Financial Statements.


                                       22

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          Independent Auditors' Report

The Board of Directors
HomeSide International, Inc.

We have  audited  the  accompanying  consolidated  balance  sheets  of  HomeSide
International,  Inc. and subsidiaries as of September 30, 2001 and 2000, and the
related consolidated  statements of income and comprehensive income,  changes in
stockholder's  equity,  and cash  flows for each of the years in the three  year
period ended September 30, 2001. These consolidated financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial   position  of  HomeSide
International,  Inc. and subsidiaries as of September 30, 2001 and 2000, and the
results  of their  operations  and their cash flows for each of the years in the
three year  period  ended  September  30,  2001 in  conformity  with  accounting
principles generally accepted in the United States of America.

As discussed in Note 3 to the  consolidated  financial  statements,  the Company
adopted  Statement of Financial  Accounting  Standards No. 133,  "Accounting for
Derivatives and Hedging Activities",  effective October 1, 2000 and Statement of
Financial  Accounting Standards No. 140, "Accounting for Transfers and Servicing
of Financial Assets and  Extinguishments  of  Liabilities",  effective March 31,
2001.

KPMG LLP
Jacksonville, Florida
November 2, 2001


                                       23

<PAGE>

                  HOMESIDE INTERNATIONAL, INC. and SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    (Dollars in Thousands, Except Share Data)

<TABLE>
                                                                                   September 30,   September 30,
                                                                                        2001          2000
                                                                                   ------------    ------------
<S>                                                                                 <C>              <C>
ASSETS
Cash and cash equivalents                                                           $   703,439      $  110,737
Mortgage loans held for sale, net                                                     1,845,766       1,441,216
Mortgage servicing rights, net                                                        2,615,225       4,464,312
Risk management instruments at fair value, net                                          437,758              --
Early pool buyout advances                                                               55,595         141,255
Accounts receivable, net                                                                488,918         324,028
Premises and equipment, net                                                              81,811          80,052
Goodwill, net                                                                                --         612,018
Other assets                                                                             49,933          93,415
                                                                                    -----------      ----------
Total Assets                                                                        $ 6,278,445      $7,267,033
                                                                                    ===========      ==========

LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued liabilities                                            $ 1,020,255      $  587,275
Notes Payable                                                                         2,148,000       3,235,400
Long-term debt                                                                        1,821,551       1,899,772
Deferred income taxes, net                                                                8,350         271,369
                                                                                    -----------      ----------

Total Liabilities                                                                   $ 4,998,156      $5,993,816
                                                                                    -----------      ----------

Commitments and Contingencies

Stockholder's Equity:
Common stock:
Class A Common stock, $.01 par value; 100 shares authorized and 1.724 shares and
1 share issued and outstanding at September 30, 2001 and 2000                       $        --      $       --
Class C non-voting common stock, $1.00 par value, 195,000 shares
authorized; 0 shares issued and outstanding                                                  --              --
Additional paid-in capital                                                            3,199,302       1,231,302
(Accumulated deficit) Retained earnings                                              (1,902,687)         41,915
Accumulated other comprehensive loss                                                    (16,326)             --
                                                                                    -----------      ----------
Total Stockholder's Equity                                                            1,280,289       1,273,217
                                                                                    -----------      ----------
Total Liabilities and Stockholder's Equity                                          $ 6,278,445      $7,267,033
                                                                                    ===========      ==========
</TABLE>

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


                                       24

<PAGE>
                  HOMESIDE INTERNATIONAL, INC. and SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                             (Dollars in Thousands)

<TABLE>
                                                             For the Fiscal       For the Fiscal        For the Fiscal
                                                               Year Ended            Year Ended           Year Ended
                                                           September 30, 2001    September 30, 2000    September 30, 1999
                                                           ------------------    ------------------    ------------------
<S>                                                         <C>                     <C>                   <C>
REVENUES:
Mortgage servicing fees                                     $   876,446             $ 732,164             $ 609,522
Amortization of mortgage servicing rights                      (623,269)             (405,728)             (409,929)
Valuation provision of mortgage servicing rights             (2,556,450)                   --                    --
Risk management of mortgage servicing rights                    872,873                    --                    --
                                                            -----------             ---------             ---------
    Net servicing (expense) revenue                          (1,430,400)              326,436               199,593

Interest income                                                 122,928               121,951               181,173
Interest expense                                               (164,647)             (168,651)             (132,161)
                                                            -----------             ---------             ---------
    Net interest (expense) revenue                              (41,719)              (46,700)               49,012

Net mortgage origination revenue                                197,534                68,475               155,937
Other income                                                     16,207                 5,683                 5,844
                                                            -----------             ---------             ---------
    Total (Expenses) Revenues                                (1,258,378)              353,894               410,386

EXPENSES:
Salaries and employee benefits                                  139,022               112,634               132,716
Occupancy and equipment                                          43,764                31,980                28,319
Servicing losses on investor-owned loans
and foreclosure-related expenses                                 32,348                33,301                31,749
Impairment of goodwill and other intangible assets              590,005                    --                    --
Goodwill amortization                                            32,080                35,896                35,817
Other expenses                                                   69,166                52,502                60,939
                                                            -----------             ---------             ---------
    Total Expenses                                              906,385               266,313               289,540

(Loss) income before income taxes, extraordinary item
and cumulative effect of a change in accounting
principle                                                    (2,164,763)               87,581               120,846
Income tax (benefit) expense                                   (267,121)               38,269                59,181
                                                            -----------             ---------             ---------

(Loss) income before extraordinary item and cumulative
effect of a change in accounting principle                   (1,897,642)               49,312                61,665

Extraordinary item -  gain on early extinguishment of
debt, net of income tax expense of $567                             987                    --                    --
Cumulative effect of a change in accounting for                                            --                    --
derivative instruments and hedging activities, net of
income tax expense of $507                                          883                    --                    --
                                                            -----------             ---------             ---------

Net (loss) income                                            (1,895,772)               49,312                61,665

Other comprehensive income, net of tax:
      Cumulative effect of a change in accounting
      for derivative instruments and hedging activities          (9,133)                   --                    --
      Net gains on current period cash flow                     (17,396)                   --                    --
      Less: reclassification adjustment for losses
      included in net income                                     10,203                    --                    --
                                                            -----------             ---------             ---------
Other comprehensive (loss)                                      (16,326)                   --                    --
                                                            -----------             ---------             ---------

Comprehensive (loss) income                                 $(1,912,098)            $  49,312             $  61,665
                                                            ===========             =========             =========
</TABLE>

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

                                       25

<PAGE>

                  HOMESIDE INTERNATIONAL, INC. and SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
                    (dollars in thousands, except share data)

<TABLE>
                                     Total        Common Stock        Additional                      Other
                                   Number of   -------------------     Paid-in     Retained      Comprehensive
                                    Shares     Class A    Class C      Capital     Earnings         Income          Total
                                 ---------------------------------------------------------------------------------------------
<S>                                        <C>     <C>        <C>     <C>          <C>             <C>           <C>
Balance, September 30, 1998                1       $--        $--     $1,227,846   $    35,106     $     --      $ 1,262,952
Net income                                                                              61,665                        61,665
Dividends declared and paid to
Parent                                                                                 (54,531)                      (54,531)
Additional paid-in capital
associated
with acquisition by the National                                           3,456                                       3,456
                                 ---------------------------------------------------------------------------------------------
Balance, September 30, 1999                1        --         --      1,231,302        42,240           --        1,273,542

Net income                                                                              49,312                        49,312
Dividends declared and paid to
Parent                                                                                 (49,637)                      (49,637)
                                 ---------------------------------------------------------------------------------------------
Balance, September 30, 2000                1        --         --      1,231,302        41,915           --        1,273,217

Net loss                                                                            (1,895,772)                   (1,895,772)
Other comprehensive loss                                                                            (16,326)         (16,326)
Dividends declared and paid to
Parent                                                                                 (48,830)                      (48,830)
Additional paid-in capital
associated with capital
infusions by the National               .724                           1,968,000                                   1,968,000
                                 ---------------------------------------------------------------------------------------------
Balance, September 30, 2001            1.724        --         --     $3,199,302   $(1,902,687)    $(16,326)     $ 1,280,289
                                 =============================================================================================
</TABLE>

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


                                       26

<PAGE>

                  HOMESIDE INTERNATIONAL, INC. and SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)

<TABLE>
                                                                 For the Fiscal       For the Fiscal      For the Fiscal
                                                                   Year Ended           Year Ended          Year Ended
                                                               September 30, 2001   September 30, 2000  September 30, 1999
                                                               ------------------   ------------------  -------------------
<S>                                                             <C>                     <C>                <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net (loss) income                                               $(1,895,772)            $    49,312        $    61,665
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Amortization of mortgage servicing rights                           623,269                 405,728            409,929
Depreciation and amortization                                        50,593                  45,994             40,444
Cumulative effect of a change in accounting for
derivative instruments and hedging activities, net                     (883)                     --                 --
Change in fair value of net hedged assets                            (4,504)                     --                 --
Risk management of mortgage servicing rights                       (872,873)                     --                 --
Valuation provision of mortgage servicing rights                  2,556,450                      --                 --
Servicing losses on investor-owned loans                              4,427                   8,721              5,523
Change in deferred income tax liability                            (271,054)                 38,269             59,181
Origination, purchase and sale of loans held for sale, net of
repayments                                                         (376,378)               (148,654)           756,427
Change in accounts receivable                                      (173,985)                (78,306)             5,473
Impairment of goodwill and other intangible assets                  590,005                      --                 --
Change in other assets and accounts payable and accrued
liabilities                                                         511,963                 192,311            105,968
                                                                -----------             -----------        -----------
    Net cash provided by operating activities                       741,258                 513,375          1,444,610

CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of premises and equipment                                  (22,814)                (24,594)           (30,561)
Acquisition of mortgage servicing rights                         (1,330,632)             (1,120,824)        (1,221,594)
Net proceeds from (purchases of) from risk management
contracts                                                           404,644                (510,013)          (546,421)
Early pool buyout reimbursements, net                                85,462                 193,798            424,520
                                                                -----------             -----------        -----------
    Net cash used in investing activities                          (863,340)             (1,461,633)        (1,374,056)

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Net borrowings from (repayments to) banks                            12,600                 229,999         (1,240,498)
Issuance of commercial paper, net of repayments                  (1,100,000)                336,097          1,163,903
Issuance of medium term notes                                       250,000                 885,000                 --
Repayment of medium term notes                                     (225,000)                     --                 --
Issuance of notes payable                                           446,000                      --            230,000
Repayment of notes payable                                         (446,000)               (230,000)                --
Payment of debt issue costs                                          (2,791)                 (5,024)              (708)
Repayment of long-term debt                                        (139,195)               (310,299)              (869)
Issuance of common stock                                          1,968,000                      --                 --
Dividends paid to the National                                      (48,830)                (49,637)           (54,531)
                                                                -----------             -----------        -----------
    Net cash provided by financing activities                       714,784                 856,136             97,297

Net increase (decrease) in cash and cash equivalents                592,702                 (92,122)           167,851
Cash and cash equivalents at beginning of period                    110,737                 202,859             35,008
                                                                -----------             -----------        -----------

Cash and cash equivalents at end of period                      $   703,439             $   110,737        $   202,859
                                                                ===========             ===========        ===========

Supplemental disclosure of cash flow information:
Interest paid                                                       181,252                 142,842            128,914
Income taxes paid                                                        43                     348             18,847
Income taxes refunded                                                    18                  12,673              4,192
Impact of cash flow hedges on other comprehensive income, net        16,326                      --                 --
</TABLE>

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


                                       27

<PAGE>

                  HOMESIDE INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION

HomeSide  International,   Inc.  ("HomeSide"  or  the  "Company"),  through  its
wholly-owned  subsidiary,   HomeSide  Lending,  Inc.  ("HomeSide  Lending"),  is
primarily  engaged in the  mortgage  banking  business  and as such  originates,
purchases, sells and services mortgage loans throughout the United States.

The Company was formerly known as HomeSide, Inc. ("HomeSide, Inc. Predecessor").
As discussed in Note 2, on February 10, 1998,  National  Australia Bank Limited.
(the  "National")  acquired  all  outstanding  shares  of the  common  stock  of
HomeSide,  Inc.  Predecessor  and the  Company  adopted  a  fiscal  year  end of
September  30 to conform  to the fiscal  year of the  National.  HomeSide,  Inc.
Predecessor  commenced operations by acquiring BankBoston Mortgage  Corporation,
the mortgage  banking  subsidiary  of the former  BankBoston,  N.A. on March 16,
1996.  HomeSide,  Inc. Predecessor  subsequently  purchased the mortgage banking
operations  of Barnett  Banks,  Inc.  The  accompanying  consolidated  financial
statements  of HomeSide  include the accounts of HomeSide and its  subsidiaries,
after elimination of all material intercompany balances and transactions.

On September 4, 2001, the National announced its intention to pursue the sale of
the Company.

2.   ORGANIZATION

On December  11,  1995,  HomeSide,  Inc.  Predecessor  was formed by an investor
group,  consisting  of Thomas  H. Lee  Company  and  Madison  Dearborn  Partners
(collectively,   the  "Investors"),  and  signed  a  definitive  stock  purchase
agreement with The First National Bank of Boston  ("BankBoston") for the purpose
of acquiring  certain assets and  liabilities of the mortgage  banking  business
owned by  BankBoston.  BankBoston  received  cash and an  ownership  interest in
HomeSide,  Inc.  Predecessor.  The  transaction  closed  on March  15,  1996 and
HomeSide, Inc. Predecessor began operations on March 16, 1996.

On May 31, 1996,  Barnett Banks,  Inc.  ("Barnett") sold certain of its mortgage
banking  operations,  primarily  its  servicing  portfolio,  mortgage  servicing
operations and proprietary mortgage banking software systems, to HomeSide,  Inc.
Predecessor.  Barnett received cash and an ownership interest in HomeSide,  Inc.
Predecessor.  From May 31, 1996 until the 1997 public  offering of common stock,
the  Investors  as a group,  BankBoston  and  Barnett  each owned  approximately
one-third of HomeSide,  Inc.  Predecessor.  Following the public  offering,  the
Investors  as  a  group,   BankBoston   and  Barnett   owned  in  the  aggregate
approximately 79% of the outstanding common stock.

On February 10, 1998, National Australia Bank Limited. (the "National") acquired
all outstanding  shares of the common stock of HomeSide.  As consideration,  the
National paid $27.825 per share for all of the outstanding common stock and paid
$17.7 million cash to retire all outstanding  stock options.  The total purchase
price was  approximately  $1.2 billion.  The National paid for the purchase with
borrowed and available  funds.  The transaction was accounted for as a purchase.
As a result,  all assets and  liabilities  were  recorded at their fair value on
February  11, 1998,  and the  purchase  price in excess of the fair value of net
assets  acquired of $719.6 million was recorded as goodwill.  Goodwill from this
transaction  was  reduced  by $15.7  million  in  September  2000  (See Note 3).
Following the  transaction  described  above,  the National now owns 100% of the
Company's  common  stock and the  Company  has become an  indirect  wholly-owned
subsidiary of the National. HomeSide also adopted a fiscal year end of September
30 to conform to the fiscal year of the  National.  During the fiscal year ended
September 30, 2001,  the Company issued .724  additional  shares to the National
for a total purchase price of $1.968 billion.

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

The  preparation of financial  statements  and notes thereto in conformity  with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make estimates and assumptions  that affect the reported
amounts of assets,  liabilities,  revenues and expenses and the disclosed amount
of  contingent  liabilities.   On  an  ongoing  basis,  management  reviews  its
estimates,  including those related to risk management,  litigation,  contracts,
credit losses, and mortgage servicing rights.  Although the Company has internal
control  systems in place to ensure that  estimates  can be  reliably  measured,
actual results may differ from those estimates.  It is not anticipated that such
differences would be material.


                                       28

<PAGE>

Mortgage loans

Mortgage  loans held for sale are carried at the lower of aggregate cost or fair
value.  Fair value is based on the contract  prices at which the mortgage  loans
will be sold or, if the loans are not  committed  for sale,  the current  market
price. Mortgage loans are typically sold within three months.

Mortgage  loans held for  investment  are included in other assets and stated at
the lower of cost or fair value at the time the permanent  investment  decisions
are made.  Discounts,  if any, are amortized  over the  anticipated  life of the
investment.

Loans are placed on  non-accrual  status  when any portion of the  principal  or
interest  is  ninety  days past due or  earlier  when  concern  exists as to the
ultimate  collectibility  of  principal  or  interest.  When loans are placed on
nonaccrual status, the related interest  receivable is reversed against interest
income of the current period. Interest payments received on nonaccrual loans are
applied as a reduction of the  principal  balance when concern  exists as to the
ultimate  collection of principal;  otherwise,  such payments are  recognized as
interest  income.  Loans are removed from  nonaccrual  status when principal and
interest become current and they are anticipated to be fully collectible.

Mortgage servicing rights

Mortgage  servicing  rights are the rights to receive a portion of the  interest
coupon and fees collected from the mortgagor for performing  specified servicing
activities.  The total cost of loans originated or acquired is allocated between
the mortgage  servicing  rights and the mortgage  loans,  without the  servicing
rights,  based on relative fair values.  The value of servicing  rights acquired
through bulk acquisitions is capitalized at cost.

Mortgage  servicing rights are amortized in proportion to and over the period of
the estimated net servicing revenue. Mortgage servicing rights are evaluated for
impairment  by comparing the carrying  amount of the  servicing  rights to their
fair  value.  Fair  value is  estimated  based on the  market  prices of similar
mortgage  servicing assets and on discounted  future net cash flows  considering
market   prepayment   estimates,    historical   prepayment   rates,   portfolio
characteristics,  interest  rates and other  economic  factors.  For purposes of
measuring  impairment,  the  mortgage  servicing  rights are  stratified  by the
predominant risk  characteristics  which include product types of the underlying
loans and interest rates of mortgage  notes.  Impairment,  if any, is recognized
through a valuation reserve for each impaired stratum.

Cash

Cash and cash  equivalents  include  cash and due from  banks,  interest-bearing
deposits and margin deposits with an original  maturity of three months or less.
Margin  deposits  associated  with  the risk  management  program  for  mortgage
servicing  rights and interest rate swaps for debt  instruments  are  maintained
with brokers in accordance  with the  requirements  of  International  Swap Deal
Agreements. Margin deposits with counterparties amounted to approximately $506.7
million at  September  30, 2001 and $84.0  million at September  30,  2000.  The
Company also maintains  margin  deposits on behalf of  counterparties  of $662.3
million and $0 at September  30, 2001 and 2000,  respectively.  Such amounts are
included in accounts payable and accrued liabilities.

Accounts receivable

Accounts  receivable  includes  advances,  consisting  primarily of payments for
property  taxes and  insurance  premiums,  accrued  servicing  fees,  as well as
principal  and interest  remitted to investors  before they are  collected  from
mortgagors,  made  in  connection  with  loan  servicing  activities.   Accounts
receivable  also  includes  interest  receivable  on loans  held for sale and on
margin  account  balances,  loans  purchased  from  mortgage-backed   securities
serviced by HomeSide for others and mortgage  claims  filed  primarily  with the
Federal Housing Authority ("FHA") and the Veterans Administration ("VA").

Early pool buyout advances and sales

Early pool buyout advances consist of delinquent  government loans in process of
foreclosure  that have been  purchased  from  pools.  The  program  reduces  the
unreimbursed interest expense that HomeSide incurs. The funding of the purchases
of these  delinquent  loans for the early pool  buyout  program is  recorded  as
interest  expense.  Interest income earned from the guarantor  agency during the
foreclosure process is accrued to match the funding expense incurred.  Scheduled
interest  payments made to the investor before the loans were purchased from the
pool are  recorded as early pool  buyout  advances  with a reserve for  advances
which are estimated as being uncollectible.

The early pool buyout advances consist of $36.0 million in delinquent government
loans that have been  purchased  from  pools and $19.6  million  representing  a
conditional  option to repurchase  certain  eligible loans from investor  pools.
When  certain  conditions  are met,  the  Company  has the  unilateral  right to



                                       29

<PAGE>

repurchase certain loans from investor pools which are subject to the removal of
account provisions on defaulted loans required by Financial Accounting Standards
No.  140,  "Accounting  for  Transfer  and  Servicing  of  Financial  Assets and
Extinguishment  of  Liabilities"  ("SFAS 140").  A  corresponding  $19.6 million
liability  is  included  in accounts  payable  and  accrued  liabilities  in the
accompanying consolidated balance sheets.

Premises and equipment

Premises  and  equipment  are  carried  at cost less  accumulated  depreciation.
Depreciation  is computed  using the  straight-line  method  over the  estimated
useful  lives  of  the  assets,  which  range  up  to  thirty  years.  Leasehold
improvements  are  amortized  over  the  shorter  of the  estimated  life of the
improvement or the term of the lease.

Long-lived assets are evaluated regularly for  other-than-temporary  impairment.
If  circumstances  suggest that their value may be impaired,  an  assessment  of
recoverability is performed prior to any write-down of the asset.

The Company capitalizes certain software development and implementation costs in
accordance  with  SOP  98-1,  "Accounting  for the  Costs of  Computer  Software
Developed or Obtained for Internal Use."  Development and  implementation  costs
are expensed until the Company has  determined  that the software will result in
probable  future  economic  benefits and management has committed to funding the
project.  Thereafter,  all direct  external  implementation  costs and  purchase
software costs are capitalized and amortized using the straight-line method over
the remaining estimated useful lives, not exceeding five years.

Goodwill and Other Intangible Assets

Goodwill,  representing the excess of the purchase  consideration  over the fair
value of the  identifiable  net assets acquired on the date of  acquisition,  is
recognized as an asset.  Goodwill is amortized  from the date of  acquisition by
systematic  charges on a  straight-line  basis against income over the period in
which the  benefits  are  expected to arise,  but not  exceeding  20 years.  The
carrying  value of  goodwill  is reviewed at least  annually  and  assessed  for
recoverability  based on future undiscounted cash flows from operations.  If the
carrying value of goodwill  exceeds the value of the expected  future  benefits,
the difference is charged against income.

In September 2001,  management of the Company determined that the carrying value
of goodwill exceeded its recoverable  amount,  based on an estimated market sale
value of the Company.  As a result, the Company recorded an impairment charge of
$579.8 million to write-off the goodwill asset. At the same time,  $10.2 million
of other intangible assets were written-off.

An analysis of goodwill, net is as follows (in thousands):

                                        September 30, 2001   September 30, 2000
                                        ------------------   ------------------
Beginning balance                           $ 612,018            $ 663,729
Amortization *                                (32,212)             (36,039)
Goodwill adjustment                                --              (15,672)
Impairment of goodwill                       (579,806)                  --
                                        ---------------------------------------
Ending balance                              $      --            $ 612,018
                                        =======================================

* For fiscal year 2001,  goodwill  amortization  included  amortization of $32.1
million from the  acquisition  of HomeSide by the National and $0.1 million from
the  acquisition of Loan America.  For fiscal year 2000,  goodwill  amortization
included  amortization  of $35.9 million from the acquisition of HomeSide by the
National and $0.1 million from the acquisition of Loan America.

Mortgage servicing fees

Mortgage servicing fees represent  servicing and other fees earned for servicing
mortgage  loans owned by investors,  net of guaranty  fees.  Servicing  fees are
generally calculated on the outstanding principal balances of the loans serviced
and are recognized as income over the period of service.

Related  custodial  deposits are segregated in trust accounts,  principally held
with depository institutions, and are not included in the accompanying financial
statements.

Interest income

Interest  income is accrued on the  mortgage  loans held for sale and early pool
buyout balances.


                                       30

<PAGE>

Interest expense

Interest expense is reduced by credits received from depository institutions for
custodial balances placed with such institutions.

Net mortgage origination revenue

Mortgage  origination  revenue  includes gains and losses from sales of mortgage
loans and fees associated with the origination and purchase of mortgage loans.

Servicing losses on investor-owned loans and foreclosure-related expenses

HomeSide  records  losses  attributable  to  servicing  FHA  and  VA  loans  for
investors.  These amounts include actual losses for final  disposition of loans,
foreclosure-related   expenses,   accrued   interest   for  which   payment   is
uncollectible and estimates for potential losses based on HomeSide's  experience
as a servicer of government loans.

A reserve for estimated  servicing losses on  investor-owned  loans is available
for potential losses related to the mortgage servicing portfolio and is included
in accounts payable and accrued liabilities (see Note 8).

Income taxes

Current tax  liabilities or assets are recognized  through charges or credits to
the current tax provision for the estimated  taxes payable or refundable for the
current year.

Deferred tax  liabilities  are  recognized for temporary  differences  that will
result in amounts  taxable in the future and deferred tax assets are  recognized
for  temporary  differences  and tax benefit  carryforwards  that will result in
amounts  deductible or creditable in the future. Net deferred tax liabilities or
assets are recognized  through charges or credits to the deferred tax provision.
A deferred tax valuation  reserve is  established  if it is more likely than not
that all or a portion of the deferred  tax assets will not be realized.  Changes
in the deferred tax valuation reserve are recognized  through charges or credits
to the  deferred  tax  provision.  The  effect of  enacted  changes  in tax law,
including  changes in tax rates,  on  deferred  tax  assets and  liabilities  is
recognized in income in the period that includes the enactment date.

Risk Management and Accounting for Derivative Instruments and Hedging Activities

The Company has developed  risk  management  programs and processes  designed to
manage market risk associated  with the Company's  business  activities.  Market
risk  recognizes the potential  change in the value of assets,  liabilities  and
other  financial  commitments  as a result of changes in asset prices along with
changes  in  actual  and  projected  interest  rates.  Interest  rate  risk is a
predominant  risk that further  influences a number of other business risks such
as pricing risk,  prepayment risk,  valuation risk, balance sheet management and
funding  risk.  It is the  Company's  policy to mitigate  and hedge  market risk
through its risk management programs.  As such, the Company utilizes a number of
derivative instruments to manage these risks.

Effective October 1, 2000, the Company adopted Statement of Financial Accounting
Standards No. 133,  "Accounting for Derivatives  and Hedging  Activities"  (SFAS
133), as amended.  Accordingly,  all derivative instruments used to hedge market
risk  associated with the Company's  business  activities are recognized at fair
value on the balance sheet and either designated as fair value hedges, cash flow
hedges or are non-designated pursuant to the Company's risk management policies.
If  certain  conditions  are met,  the  Company  may  apply  "hedge  accounting"
treatment which permits  offsetting  changes in the fair value of the derivative
instruments with changes in the corresponding hedged item to the extent that the
changes  in the value of the  derivative  instruments  are highly  effective  in
relation to changes in the exposure related to the hedged item. In the case of a
qualifying cash flow hedge,  changes in the value of the derivative  instruments
that have been highly  effective are  recognized in other  comprehensive  income
("OCI"),  until such time that  earnings  are  affected by the cash flows of the
underlying hedged item.

Risk Management of the Mortgage Pipeline

The  Company's   mortgage   committed   pipeline  includes  interest  rate  lock
commitments  ("IRLCs" or "commitments") that have been extended to borrowers who
have applied for loan funding and meet certain  defined credit and  underwriting
criteria.  All of the  Company's  IRLCs will be classified as held for sale upon
funding of the  underlying  loan.  Effective  with the adoption of SFAS 133, the
Company   classifies  and  accounts  for  IRLCs  as  non-designated   derivative
instruments. Accordingly, IRLCs are recorded at fair value with changes in value
recorded to current  earnings.  Risk  management  derivative  contracts  used to
economically   hedge  the  IRLCs  are  also  classified  and  accounted  for  as
non-designated  derivatives.  In summary,  since a derivative  instrument cannot
hedge another  derivative  instrument (for accounting  purposes) the pipeline is
effectively accounted for as a mark-to-market book of business.


                                       31

<PAGE>
The fair value of the Company's  IRLCs generally  approximate  zero at inception
(the lock-in date) since the Company's practice is to extend loan commitments at
market  rates of interest  and to exclude  from its fair value  calculation  the
normal  profit  margin  associated  with the future loan sale  transaction.  The
future  loan  execution  involves  the  sale of the  loan  and,  typically,  the
retention of the servicing  rights.  IRLCs have value  characteristics  that are
somewhat  analogous to certain option contracts in that the commitments tend to:
(i) decrease in value at an accelerating rate as interest rates increase and the
probability of the borrower's loan closing increases, and (ii) increase in value
at a  decelerating  rate as interest  rates decline and the  probability  of the
borrower's  loan closing  decreases.  The Company  manages the interest rate and
pricing  risks  associated  with its IRLCs by using  mortgage  forward  delivery
contracts,   options  on   mortgage-backed   securities  and  certain   treasury
instruments.  The Company's risk management program employs the use of financial
modeling to maintain a high degree of economic  correlation  between the changes
in values of the IRLCs and the related non-designated derivatives.  However, due
to  imprecision  in projecting  the timing and rate of loan closings  (which are
influenced by borrower behavior),  some level of economic ineffectiveness can be
expected.

Gains/(losses)  on interest rate lock commitments  represent the change in value
of the  commitments  from the rate-lock  inception date to the loan funding date
(for those  commitments that are funded),  or to the current  reporting date for
those IRLCs that are open at September  30, 2001.  The basis of the IRLCs at the
loan funding  date,  representing  cumulative  gains or losses on the IRLCs,  is
included as a component of the initial cost basis of the loans.

Risk Management of Mortgage Inventory

The Company's  mortgage inventory includes closed loans that are held for resale
pending  completion  of  normal   post-closing   review,   collateral   document
preparation  and other pooling  requirements  necessary to  consummate  the sale
and/or securitization.  Based on the loan status, as well as historical delivery
patterns  and  investor  settlement  dates,  the Company is able to forecast the
amount and timing of loan sales. The Company's risk management  program involves
the  use  of  mortgage  forward   delivery   contracts  to  hedge  100%  of  its
agency-eligible  conforming  loans as forecasted loan sales. At the inception of
the hedge, the Company formally  documents the relationship  between the forward
delivery  contracts and the forecasted loan sales as well as its risk management
objective and strategy for undertaking the hedge transactions. The dollar amount
of the forward  delivery  contracts  along with the underlying rate and terms of
the contracts are equivalent to the  forecasted  loan sales that are probable of
occurring.  Hence,  the forward delivery  contracts  effectively fix the forward
sales price and thereby  substantially  eliminate interest rate and pricing risk
to the Company.

Risk Management of Mortgage Servicing Rights

Mortgage  servicing  rights permit HomeSide to receive a portion of the interest
coupon and fees collected from the mortgagor for performing  specified servicing
activities.  The mortgage notes underlying the mortgage  servicing rights permit
the borrower to prepay the loan. As a result,  the value of the related mortgage
servicing  rights tends to diminish in periods of declining  interest  rates and
increase in value in periods of rising rates. This tendency subjects HomeSide to
substantial  interest  rate risk.  It also  directly  affects the  volatility of
reported earnings because mortgage  servicing rights are carried at the lower of
amortized cost or fair value. It is HomeSide's policy to mitigate and hedge this
risk through its risk management program.

The risk management  instruments used by HomeSide have characteristics such that
they tend to increase in value as interest rates decline. Conversely, these risk
management  instruments  tend to  decline  in  value  as  interest  rates  rise.
Accordingly,  changes in the value of these hedge  instruments will tend to move
inversely  with  changes  in  value of  HomeSide's  mortgage  servicing  rights.
HomeSide utilizes a number of risk management  derivative  instruments to manage
the interest  rate risk  associated  with its mortgage  servicing  rights.  Such
instruments  include  interest  rate swaps,  swaptions  and caps and options and
futures on exchange traded Treasury and Eurodollar  contracts.  Given the unique
value determinants of mortgage  servicing rights,  management uses a combination
of derivative  instruments  to construct a hedge  portfolio  that is intended to
provide effective  protection of the value of the Company's  mortgage  servicing
rights from interest rate risk.

During  the year  ended  September  30,  2001,  the  Federal  Reserve  Board cut
short-term rates 369 bps, which resulted in unprecedented  refinancing activity.
As a result, the Company recorded a valuation provision of $2.56 billion related
to an  impairment  valuation  of mortgage  servicing  rights for the fiscal year
ended September 30, 2001.

As announced on September 4, 2001, the Company  discovered an incorrect interest
rate assumption in the mortgage  servicing rights ("MSR")  valuation model which
caused  the  model to under  estimate  the MSR's  sensitivity  to  movements  in
interest rates,  particularly in a falling rate  environment.  Had the valuation
model  included  the  correct  interest  rate  assumption,  the model would have
estimated   faster  loan  prepayment   speeds  and,  as  a  result,   yielded  a
significantly  different asset profile. The correction of the incorrect interest
rate assumption caused the Company to determine that the inception documentation
required to apply hedge accounting  pursuant to Financial  Accounting  Standards
No. 133,  "Accounting for Derivative and Hedging  Activities"  ("SFAS 133"), was
inadequate to support the characteristics of the hedged item and its exposure to
changes in hedged risk. Therefore, the Company concluded that the application of
hedge accounting was inappropriate for those derivative  instruments designed to
hedge the exposure to changes in the fair value of the mortgage servicing rights

                                       32

<PAGE>
assets.  As a result,  the Company  recognized  a net gain of $872.9  million to
current  earnings  related to the change in fair value of these  derivatives for
the fiscal year ended September 30, 2001.

Risk Management of Corporate Funding

To meet its funding  requirements,  the Company  periodically issues fixed-rate,
medium-term  notes  which are  converted  to  floating-rate  debt as part of its
Corporate  funding  strategies.  As of the fiscal year ended September 30, 2001,
the  Company  had $650  million of  fixed-rate,  medium term notes that had been
swapped to floating rates of interest with $650.0  million in notional  interest
rate swaps.  The Company has  designated  the interest  rate swaps as fair value
hedges of the  change in value of the  medium-term  notes due to LIBOR  interest
rates. At the inception of the hedge, the Company formally documents the hedging
relationships between the hedge instruments and the hedged items, as well as the
risk management  objectives and strategy for undertaking the hedge transactions.
The  medium-term  notes  are not  pre-payable  and the  essential  terms  of the
interest  rate  swaps  are  equivalent  to  those  of  the  medium-term   notes.
Accordingly,  the Company expects that changes in the value of the interest rate
swaps will offset the changes in the value of the fixed-rate  debt  attributable
to LIBOR interest  rates.  During the fiscal year ended  September 30, 2001, the
value of the interest rate swap contracts  increased by $40.1 million and offset
the  changes in the fair value of the  medium-term  notes due to the hedge risk.
The fair value of interest rate swap  contracts  designated as fair value hedges
of medium-term notes was $39.9 million at September 30, 2001.

Termination of Hedging Relationships

The Company employs a number of risk management  monitoring procedures to ensure
that the designated hedging relationships are demonstrating, and are expected to
continue to  demonstrate,  a high level of  effectiveness.  Hedge  accounting is
discontinued  on a  prospective  basis  if it is  determined  that  the  hedging
relationship  is no longer  effective or expected to be effective in  offsetting
changes in the fair value or cash flows of the hedge  item,  or if a  forecasted
transaction is no longer  probable of occurring.  Additionally,  the Company may
elect  to  de-designate  a hedge  relationship  during  an  interim  period  and
re-designate  upon the  re-balancing  of a hedge  profile and the  corresponding
hedge relationship. When hedge accounting is discontinued, the Company continues
to carry the  derivative  instruments  at fair value with changes in their value
recorded  to  earnings.  However,  in the  case of a fair  value  hedge  that is
discontinued,  the carrying  amount of the previously  hedged asset or liability
may not be adjusted for changes in their fair value,  except in the case where a
decline in fair value creates  impairment to the Company.  In the case of a cash
flow hedge of a forecasted  transaction that is no longer probable of occurring,
gains and losses that were previously  accumulated in other comprehensive income
are immediately recognized to earnings.

Fair Value of Derivative Instruments

Derivative  Contracts:  The fair value of mortgage forward  delivery  contracts,
options on mortgage-backed securities and exchange traded futures and options on
Treasury  and  Eurodollar  contracts  are  determined  based on  market  quotes.
Interest  rate swaps,  swaptions  and caps are  determined  based on  discounted
valuation models and are periodically validated against dealer quotes.

Interest  Rate Lock  Commitments  Classified as  Derivatives:  The fair value of
interest rate lock commitments is determined  using a vendor provided  valuation
model, which references market quotes of the underlying mortgages. The valuation
model also  considers  a number of other key value  determinants  including  the
remaining  commitment  period, the rate of the commitment in relation to current
market rates,  interest rate volatility and the probability of the loan closing.
The   probability  of  the  loan  closing  is  estimated   based  on  historical
pull-through  rates which are stored in matrix detail within the model  database
by product type for an  established  set of interest rate shock  scenarios.  The
fair value of the Company's IRLCs generally  approximate  zero at inception (the
lock-in  date) since the  Company's  practice is to extend loan  commitments  at
market  rates of interest  and to exclude  from its fair value  calculation  the
normal profit margin associated with the future loan sale transactions.

Other  Derivatives:  The Company uses certain  derivatives to economically hedge
the funding activities associated with government loans that are repurchased out
of GNMA (Government  National Mortgage  Association)  pools that the Company has
previously sold. However,  the Company does not designate a hedging relationship
for  these  derivatives  for  hedge  accounting   purposes.   Accordingly,   net
gains/(losses)  on these derivatives of $(0.2) million for the fiscal year ended
September 30, 2001, were recorded to income and included as a component of other
income in the accompanying  consolidated  statements of income and comprehensive
income.

Statement of cash flows

For  purposes  of  reporting  on the  statement  of cash  flows,  cash  and cash
equivalents  include  cash  and  due  from  banks,  margin  deposits  held  with
counterparties and interest-bearing  deposits with an original maturity of three
months or less.

New accounting standards

In July 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 141, "Business  Combinations"  ("SFAS 141")
which supercedes APB No.16 "Business  Combinations" and SFAS 38, "Accounting for

                                       33

<PAGE>

Reacquisition  Contingencies  of  Purchased  Enterprises".  SFAS 141 changes the
existing  accounting  treatment  for  business  combinations  to allow  only the
purchase method.  The statement applies to all business  combinations  initiated
after June 30, 2001.  Management  does not expect the adoption of this statement
to have a material impact on the financial statements.

In June 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 142, "Goodwill and Other Intangible Assets"
("SFAS  142")  which  supercedes  APB Opinion No. 17,  Intangible  Assets.  This
statement  addresses how intangible  assets should be accounted for in financial
statements  upon their  acquisition  and also how they should be  accounted  for
after they have been  initially  recognized  in the  financial  statements.  The
provisions  of this  statement  are required to be applied  starting with fiscal
years  beginning  after  December 15, 2001.  Early  application is permitted for
entities  with fiscal years  beginning  after March 15, 2001,  provided that the
first  interim  financial  statements  have not  been  previously  issued.  This
statement is required to be applied at the beginning of an entity's  fiscal year
and to be applied to all goodwill and other  intangible  assets  reported in its
financial  statements  Management  does  not  expect  the  requirements  of this
standard to have a significant impact on the financial statements.

In June 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No.  143,  "Accounting  for  Asset  Retirement
Obligations"  ("SFAS 143"), which addresses  financial  accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
for the associated  retirement costs. That Statement applies to all entities and
covers legal obligations (arising from laws, statutes,  contracts, etc.) that an
entity must satisfy when  disposing of  tangible,  long-lived  assets.  SFAS 143
doesn't  apply to a  lessee's  obligations  that are  considered  minimum  lease
payments or contingent rentals. In addition,  obligations that arise solely from
a plan to dispose of a long-lived  asset in accordance with SFAS 121" Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of",  aren't  covered  by the  provisions  of SFAS 143.  The  standard  requires
entities  to  record  the fair  value  of a  liability  for an asset  retirement
obligation  in the  period  in  which it is  incurred.  When  the  liability  is
initially  recorded,  the entity  capitalizes a cost by increasing  the carrying
amount of the related  long-lived asset. Over time, the liability is accreted to
its present value each period,  and the capitalized cost is depreciated over the
useful life of the related asset.  Upon  settlement of the liability,  an entity
either settles the  obligation for its recorded  amount or incurs a gain or loss
upon settlement. The standard is effective for fiscal years beginning after June
15, 2002.  Management  does not expect the adoption of this  statement to have a
material impact on the financial statements.

In July 2001,  the Securities and Exchange  Commission  issued Staff  Accounting
Bulletin No. 102 ("SAB 102") which expresses certain of the staff's views on the
development,  documentation  and  application  of a systematic  methodology  for
determining  allowances  for loan and lease losses in accordance  with generally
accepted  accounting  principles.  In  particular,  the guidance  focuses on the
documentation  the staff  normally  would  expect  registrants  to  prepare  and
maintain in support of their  allowances  for loan losses.  Management  believes
that it is currently in compliance with the requirements of SAB 102.

In August,  2001, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards  No. 144,  "Accounting  for the  Impairment  or
Disposal  of  Long-Lived   Assets"  ("SFAS  144")  which  supersedes  SFAS  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be  Disposed  Of" and  provides a single  accounting  model for the  disposal of
long-lived assets.  Although  retaining many of the fundamental  recognition and
measurement  provisions of SFAS 121, the new rules also supersede the provisions
of APB  Opinion  No. 30,  "Reporting  the  Results of  Operations-Reporting  the
Effects of Disposal of a Segment of a Business,  and Extraordinary,  Unusual and
Infrequently  Occurring Events and  Transactions",  with regard to reporting the
effects of a disposal of a segment of a business and required  future  operating
losses from discontinued  operations to be displayed in discontinued  operations
in the period(s) in which the losses are incurred.  This  Statement  also amends
ARB No. 51, "Consolidated  Financial Statements",  to eliminate the exception to
consolidation for a subsidiary for which control is likely to be temporary. SFAS
144 is effective for fiscal years beginning after December 15, 2001.  Management
is  currently  evaluating  the  requirements  of this  standard  and has not yet
determined the impact on the financial statements.

4.   ACQUISITIONS AND STRATEGIC ALLIANCES

Strategic Alliance with Cendant Mortgage Corporation

On June 15, 1999,  HomeSide  announced  that it had formed a strategic  alliance
with  Cendant  Mortgage  Corporation.  Cendant  Mortgage  had agreed to sell the
servicing  rights of up to $7.0 billion in mortgage  loans  annually to HomeSide
over a five-year  period.  On March 31,  2000,  HomeSide  and  Cendant  Mortgage
entered into a replacement  agreement,  whereby Cendant  Mortgage agreed to sell
the servicing  rights of up to $9.0 billion in mortgage  loans  annually but, no
less  than an amount  based on their  quarterly  flow  volume.  The  replacement
agreement expires March 31, 2004.

For the year ended  September  30, 2001,  HomeSide has  purchased  the rights to
service $1.6 billion of Cendant Mortgage's portfolio, representing approximately
10,202  loans.  On  September  19, 2001,  the  Strategic  Alliance  with Cendant
Mortgage Corporation was terminated.


                                       34

<PAGE>

Strategic Alliance with Banc One

On April 1, 1998,  HomeSide  entered  into an  agreement  with Banc One Mortgage
Corporation to acquire the mortgage  servicing assets of Banc One.  HomeSide and
Banc One have also entered into a Preferred Partner agreement,  whereby Banc One
will sell a significant  portion of its residential  mortgage loan production to
HomeSide over five years on a whole loan basis. The total purchase consideration
for the  mortgage  servicing  assets  was  $201.0  million  cash.  The  mortgage
servicing  rights acquired relate to mortgage  servicing loans of $16.6 billion.
The transaction closed on June 5, 1998 and was accounted for as a purchase.  The
remaining unamortized aggregate purchase price over the fair value of net assets
acquired was written-off during the year ended September 30, 2001 (see Note 3).

On March 4, 1999,  HomeSide  agreed to purchase  or  sub-service  the  servicing
portfolio  of  First  Chicago  NBD  Mortgage  Company  ("First  Chicago").  This
transaction  represents a modification and an expansion of HomeSide's  strategic
alliance with Banc One Mortgage  Corporation  ("Banc One"). This resulted in (i)
an increase in HomeSide's servicing portfolio of approximately $18 billion; (ii)
a change in Banc One's  residential  mortgage loan  delivery  method to HomeSide
from a whole loan  basis to a  servicing  rights-only  flow  basis;  and (iii) a
commitment from First Chicago to sell the servicing  rights  associated with its
residential mortgage production to HomeSide on a flow basis.

As of  September  30,  2001,  the  combined  unpaid  principal  balance of loans
serviced by HomeSide from Banc One was $25.3 billion.

Strategic Alliance with People's Bank

On November 23, 1998,  HomeSide agreed to purchase or sub-service  approximately
$5 billion in mortgage servicing from People's Bank, the largest mortgage lender
in  Connecticut.  People's Bank also became a Preferred  Partner,  committing to
sell a significant  portion of the  residential  mortgage loans it originates to
HomeSide for five years. As of September 30, 2001, the unpaid principal  balance
of loans serviced by HomeSide from People's Bank was $5.3 billion.

Acquisition of Loan America's Mortgage Loan Network

On April 6, 1998,  HomeSide  signed an agreement  with  NationsBank  Corporation
("NationsBank") whereby NationsBank agreed to sell HomeSide a national wholesale
mortgage  loan  network  which was  formerly  owned by Barnett  Banks,  Inc. The
transaction closed on May 29, 1998. The remaining unamortized aggregate purchase
price over the fair value of net assets acquired was written-off during the year
ended September 30, 2001 (see Note 3).


5.   MORTGAGE SERVICING RIGHTS

An analysis of mortgage servicing rights is as follows (in thousands):

                          September 30, 2001    September 30, 2000
                          ------------------    ------------------

Beginning balance             $ 4,464,312           $3,488,957
Additions                       1,330,632            1,120,824
Net deferred hedge loss                --              260,259
Amortization                     (623,269)            (405,728)
Valuation Provision            (2,556,450)                  --
                          ----------------------------------------
Ending balance                $ 2,615,225           $4,464,312
                          ========================================

Mortgage servicing rights are evaluated for impairment by comparing the carrying
amount  of the  servicing  rights  to their  fair  value,  based  on  discounted
anticipated  future net cash flows.  Prior to the quarter  ended  September  30,
2001, the Company estimated future prepayment speeds based on the application of
a forward  interest rate bias. In considering the National's  intent to pursue a
sale of  HomeSide  and the lack of  liquidity  in the  market,  as well as other
increasing  uncertainties relating to the interest rate environment,  during the
quarter ended September 30, 2001, the Company estimated future prepayment speeds
based on a static method. At September 30, 2001, the estimated fair value of the
mortgage  servicing rights  approximated  carrying value. The valuation used the
following  assumptions:  a  weighted-average  discount  rate  of  10.16%  and  a
weighted-average prepayment speed of 388.


                                       35

<PAGE>

Activity in the  valuation  reserve for mortgage  servicing  rights for the year
ending September 30, 2001 is as follows (in thousands):

                    September 30, 2001
                    ------------------

Beginning balance        $       --
Additions                 2,556,450
Recoveries                       --
                         ----------
Ending balance           $2,556,450
                         ==========


6.   EARLY POOL BUYOUT SALES

On November  30,  1998,  HomeSide  formed a  wholly-owned  subsidiary,  HomeSide
Funding  Corporation  ("HomeSide  Funding"),  whose  sole  purpose is to acquire
delinquent  loans from  HomeSide's  servicing  portfolio that are insured by the
Federal  Housing  Administration  or  guaranteed  by the  Department of Veterans
Affairs. The purchases are funded through sales to a trust.

In December 1998,  HomeSide entered into a Pooling and Servicing  Agreement with
Banc One Trust Company,  N.A., as Trustee,  and HomeSide Funding, as Transferor,
pursuant to which  approximately $487 million of delinquent  mortgage loans were
sold to  HomeSide  Funding  during the fiscal  year ended  September  30,  1999.
Subsequently,  these loans were  securitized  and sold to the HomeSide  Mortgage
Loan Buyout Trust 1998-A (Trust). Approximately $414 million and $112 million of
delinquent  loans were sold to HomeSide  Funding  during the fiscal  years ended
September 30, 2001 and 2000,  respectively.  These loans were also  subsequently
sold to the Trust. The total principal amount of loans  outstanding in the Trust
as of September 30, 2001 approximated  $355.7 million.  HomeSide held a residual
interest  in loans sold to HomeSide  Funding in the amount of $61.5  million and
$29.4 million for years ended September 30, 2001 and 2000, respectively. For the
fiscal year ended  September  30, 2001,  fair value was  estimated  based on the
average recovery periods and other economic factors.

HomeSide Lending recognized pretax gains of $4.67 million and $1.32 million from
loans  securitized  and sold during the year ended  September 30, 2001 and 2000,
respectively.  Such amounts are calculated  based on the difference  between the
loan  carrying  amount  and  their  related  fair  value  at the time of sale to
HomeSide Funding.

Key economic  assumptions used in measuring the fair value of retained interests
at the date of securitization  resulting from  securitizations  completed during
the year were as follows:

                                                            Year Ended
                                                         September 30, 2001
---------------------------------------------------------------------------

Weighted-average recovery period (in months)                   12.10
Weighted-average discount rate (annual rate)                    5.35%
Weighted-average anticipated foreclosure related costs          2.83%

Key economic assumptions used in measuring the fair value of HomeSide's retained
interests  at  September  30,  2001 and the  effect  on the fair  value of those
retained interests from adverse changes in those assumptions are as follows:

Dollars in thousands                                  September 30, 2001
------------------------------------------------------------------------

Fair value of retained interests                          $74,806
Weighted-average expected foreclosure related costs          1.73%
Weighted-average discount rate (annual rate)                 2.88%
      Impact of 10% adverse change                        $(1,193)
      Impact of 20% adverse change                        $(2,386)
Weighted-average recovery period (in months)                10.13
      Impact of 10% adverse change                        $  (968)
      Impact of 20% adverse change                        $(2,014)


                                       36

<PAGE>

The above sensitivities are hypothetical and should be used with caution. As the
amounts  indicate,  changes in fair value  based on  variations  in  assumptions
generally  cannot be  extrapolated  because  the  relationship  of the change in
assumption  to the change in fair value may not be linear.  Also, in this table,
the effect of a variation  in a particular  assumption  on the fair value of the
retained  interest is  calculated  without  changing  any other  assumption.  In
reality,  changes in one factor may result in changes in another  (for  example,
changes in average  recovery period could result in changes in discount  rates),
which might magnify or counteract the sensitivities.

The following table  summarizes cash flows between  HomeSide and  securitization
special purpose entity:

                                                      Year Ended
Dollars in thousands                             September 30, 2001
-------------------------------------------------------------------

Proceeds from new securitizations                      $397,133
Other cash flows received on retained interest         $ 25,090

Actual  credit  losses were $6.21  million,  $7.93 million and $1.08 million for
years ended September 30, 2001, 2000 and 1999, respectively.

7.   PREMISES AND EQUIPMENT

Premises and equipment consist of the following (in thousands):

<TABLE>

                                            September 30, 2001   September 30, 2000
                                            ---------------------------------------
<S>                                             <C>                  <C>
Land                                            $  2,701             $  3,451
Buildings and building improvements                6,638                9,969
Furniture and equipment                           46,864               37,475
Software                                          54,367               41,761
Leasehold improvements                            12,711               10,889
                                            ---------------------------------------
                                                 123,281              103,545
Accumulated depreciation and amortization        (41,470)             (23,493)
                                            ---------------------------------------
Ending balance                                  $ 81,811             $ 80,052
                                            =======================================
</TABLE>

On October 2, 2000,  HomeSide sold its facility  located in San Antonio,  Texas.
The sale included land, building, and building improvements with the sales price
exceeding the property's carrying value.  HomeSide  subsequently entered into an
operating lease agreement to lease back the property for a term of five years at
a rate of $2.6 million per year. The  transaction  met the  qualifications  of a
sale-leaseback,  in  accordance  with  SFAS  No.  98  "Accounting  for  Leases",
resulting in immediate  recognition  of gain in the amount of $4.5 million and a
deferred  gain of $7.3  million  which  will be  amortized  over the life of the
lease.

8.   RESERVE FOR ESTIMATED SERVICING LOSSES ON INVESTOR-OWNED LOANS

An analysis of the reserve for estimated servicing losses on investor-owned
loans is as follows (in thousands):

<TABLE>
                                                           For the Fiscal         For the Fiscal
                                                              Year Ended           Year Ended
                                                         September 30, 2001     September 30, 2000
                                                         -----------------------------------------
<S>                                                          <C>                    <C>
Beginning balance                                            $16,650                $ 16,650
Provision for servicing losses on investor-owned loans         4,427                   8,721
Charge-offs                                                   (8,813)                (10,038)
Recoveries                                                     1,036                   1,317
                                                         -----------------------------------------
Ending balance                                               $13,300                  16,650
                                                         =========================================
</TABLE>


                                       37

<PAGE>

9.   NOTES PAYABLE

Notes payable consist of the following (in thousands):

<TABLE>
                                                                  Weighted Average Interest Rate
                                                                 ---------------------------------
                                             Total Outstanding   At Period End   During the Period
                                             -----------------   ---------------------------------

<S>                                              <C>                 <C>             <C>
Commercial Paper                                 $  400,000          3.53%           5.06%
National Australia Bank Unsecured Facility        1,748,000          3.46%           5.22%
                                                 ----------
  Total, September 30, 2001                      $2,148,000          3.47%           5.19%
                                                 ==========


Commercial Paper                                  1,500,000          6.63%           6.16%
National Australia Bank Unsecured Facility        1,735,400          6.70%           6.25%
                                                 ----------
  Total, September 30, 2000                      $3,235,400          6.67%           6.21%
                                                 ==========
</TABLE>

HomeSide has an established  commercial paper program,  which is supported by an
independent  syndicate  of banks under a credit  facility.  On October 16, 2000,
HomeSide  entered into a $1.5 billion  back-up credit  facility.  This agreement
replaced HomeSide's previous bank credit facility and was scheduled to terminate
on October 15, 2001 (see Note 21).  Borrowings  under the credit  facility  bear
interest at rates per annum,  based on, at HomeSide's option, (i) the Eurodollar
rate plus an applicable margin,  (ii) the greater of the federal funds rate plus
an applicable  margin or the prime rate,  (iii) in the case of swingline  loans,
the  federal  funds  rate  plus an  applicable  margin,  or (iv) in the  case of
competitive bid loans, the lowest competitive Eurodollar or fixed rate submitted
by a bidding  lender.  The  credit  agreement  contains  covenants  that  impose
limitations  and  restrictions on HomeSide,  including  requirements to maintain
certain net worth and ratio  requirements.  The  primary  purpose of this credit
facility  is to  provide  liquidity  back-up  for  HomeSide's  commercial  paper
program. The outstanding commercial paper reduces available borrowings under the
credit facility.  At September 30, 2001, there were no amounts outstanding under
the credit facility and HomeSide is in compliance with all requirements included
in the credit agreement.

On July 31, 2001,  HomeSide entered into an agreement for an unsecured revolving
credit facility with the National, which agreement replaced a previous unsecured
revolving  credit facility with the National  initially  established on June 23,
1998 and thereafter  renewed on an annual basis. Under the anew credit facility,
HomeSide can borrow up to $2.42 billion through and including  January 30, 2002,
and up to $1.92 billion from January 31, 2002 through July 30, 2002,  subject to
limits imposed by regulatory  authorities.  Borrowings under the credit facility
may be  overnight  or  for  periods  of 7,  30,  60 or 90  days.  For  overnight
borrowings,  the interest  rate is determined by the National at the time of the
borrowing.  For borrowings other than overnight, the interest rate is charged at
the  corresponding   LIBOR  rate  of  the  maturity  period.  This  facility  is
cross-defaulted to the Chase facility.


10.  LONG-TERM DEBT

Long-term debt,  including the fair value adjustments  resulting from the merger
with the National, consists of the following (in thousands):

                        September 30, 2001   September 30, 2000
                        ------------------   ------------------
Medium-term notes           $1,799,945           $1,735,281
11.25% notes                        --              141,959
Mortgage note payable           21,606               22,532
                            ----------           ----------
  Total                     $1,821,551           $1,899,772
                            ==========           ==========


                                       38

<PAGE>

Medium-term notes

As of September 30, 2001, the outstanding  medium-term  notes issued by HomeSide
Lending under its shelf registration statement were as follows (in thousands):

      Issue Date     Outstanding Balance   Coupon Rate   Maturity Date
      ----------     -------------------   -----------   -------------
June 30, 1997          $  200,000             6.88%      June 30, 2002
July 31, 1997             200,000             6.75%      August 1, 2004
May 22, 1998              225,000             6.20%      May 15, 2003
June 9, 2000              215,000             7.07% *    June 10, 2002
June 9, 2000              200,000             6.89% *    April 9, 2002
June 9, 2000               85,000             7.07% *    June 10, 2002
August 1, 2000             75,000             6.97% *    August 1, 2002
September 14, 2000         75,000             6.79% *    September 16, 2002
September 14, 2000         60,000             6.94% *    September 15, 2003
September 14, 2000         25,000             7.00%      September 16, 2002
September 15, 2000        100,000             6.79% *    September 16, 2002
September 15, 2000         50,000             6.86% *    September 16, 2002
December 4, 2000          125,000             6.98% *    December 4, 2002
December 4, 2000           75,000             6.98% *    December 4, 2002
December 4, 2000           50,000             6.87% *    December 4, 2002
                       ----------
  Total                $1,760,000
                       ==========

* Represents initial interest rate for floating rate note

As of September  30, 2001,  the  outstanding,  fixed rate  medium-term  notes of
$650.0 million had been  effectively  converted by interest rate swap agreements
to floating-rate  notes.  During the year ended September 30, 2001, the value of
the  interest  rate swap  contracts  increased  by $40.1  million and offset the
changes in the fair value of the medium-term  notes due to hedged risk. The fair
value of the interest  rate swap  contracts  designated  as fair value hedges of
medium-term  notes was $39.9 million at September  30, 2001.  (See note 14.) The
weighted average borrowing rates on medium-term  borrowings issued for the years
ended  September 30, 2001 and  September  30, 2000,  including the effect of the
interest rate swap agreements, were 5.69% and 6.60%, respectively.  Net proceeds
from the issuances were primarily used to reduce the amounts  outstanding  under
the bank credit agreement and to fund acquisition of the servicing rights.

Mortgage note payable

In connection with the acquisition of BancBoston Mortgage Corporation,  HomeSide
assumed a mortgage  note  payable  that is due in 2017 and bears  interest  at a
stated rate of 9.5%.  HomeSide's  main office  building is pledged as collateral
for the mortgage note payable.  The balance of the mortgage payable at September
30, 2001,  including the fair value  adjustments  resulting from the merger with
the National, was $21.6 million.

11.25 % Notes

On September 30, 2000,  the Company had $130 million  outstanding  on a previous
issue of 11.25% notes (the "Notes")  with a maturity  date of May 15, 2003.  The
Notes were redeemable at the option of the Company,  in whole or in part, at any
time on or after May 15, 2001, at certain fixed  redemption  prices.  On May 16,
2001 the Company  redeemed the 11.25% notes at the redemption price set forth in
the Notes.  The Company  recognized a $1.0  million  after tax gain on the early
extinguishment  of the debt, which is disclosed as an extraordinary  item in the
accompanying consolidated statements of income and comprehensive income.


                                       39

<PAGE>

Principal payments due on long-term debt

Principal  payments due on long-term  debt at September  30, 2001 are as follows
(in thousands):

Fiscal Year
-----------
2002                                                      $1,025,363
2003                                                         535,398
2004                                                         200,437
2005                                                             481
2006                                                             528
Thereafter                                                    10,100
Unamortized purchase accounting premium                        9,299
Fair value of designated hedges of medium-term notes          39,945
                                                          ----------
  Total                                                   $1,821,551
                                                          ==========

11.  INCOME TAXES

Amounts  provided  for  income  tax  expense  are based on income  reported  for
financial statement purposes and do not necessarily  represent amounts currently
payable under tax laws.  Deferred  income taxes,  which arise  principally  from
temporary  differences  between the period in which certain  income and expenses
are  recognized for financial  accounting  purposes and the period in which they
affect taxable income, are included in the amounts provided for income taxes.

The  Company  files a  consolidated  federal  income tax return.  All  companies
included in the consolidated federal income tax return are jointly and severally
liable for any tax assessments based on such consolidated return.

Components of the provision for income taxes were as follows (in thousands):

<TABLE>
                    For the Fiscal          For the Fiscal           For the Fiscal
                      Year Ended              Year Ended              Year Ended
                  September 30, 2001      September 30, 2000      September 30, 1999
                  ------------------------------------------------------------------
<S>                  <C>                     <C>                      <C>
Current:
     Federal         $   4,500               $    --                  $    --
     State                  --                    --                       --
                  ------------------------------------------------------------------
                         4,500                    --                       --

Deferred
     Federal          (260,074)               42,359                   52,775
     State             (10,980)               (4,090)                   6,406
                  ------------------------------------------------------------------
                      (271,054)               38,269                   59,181
                  ------------------------------------------------------------------
Total                $(266,554)              $38,269                  $59,181
                  ==================================================================
</TABLE>

The following is a  reconciliation  of the statutory  federal income tax rate to
the  effective  income tax rate as reflected in the  consolidated  statements of
income.

<TABLE>
                                        For The Fiscal          For The Fiscal         For The Fiscal
                                          Year Ended              Year Ended             Year Ended
                                      September 30, 2001      September 30, 2000     September 30, 1999
                                     ------------------------------------------------------------------

<S>                                        <C>                       <C>                  <C>
Statutory federal income tax rate          (35.0%)                   35.0%                35.0%
State income and franchise taxes,
       net of federal tax effect            (1.5%)                    1.5%                 3.0%
Goodwill                                     9.9%                    12.7%                11.0%
Valuation Allowance                         14.1%                      --                   --
Reduction in state accrual rate               --                     (5.5%)                 --
Other                                        0.2%                      --                   --
                                     ------------------------------------------------------------------
      Effective income tax rate            (12.3%)                   43.7%                49.0%
                                     ==================================================================
</TABLE>


                                       40

<PAGE>

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and deferred tax  liabilities are presented below (in
thousands):

<TABLE>
                                                       September 30, 2001   September 30, 2000
                                                       ---------------------------------------
<S>                                                      <C>                   <C>
Deferred tax assets:
   Net operating loss carryforwards                      $  209,731            $ 244,019
   Alternative minimum tax credit carryforward               10,995                4,001
   Goodwill write-off                                         4,647                   --
   Valuation provision for mortgage servicing rights        933,104                   --
   Purchase Accounting Adjustment                            30,207               35,928
   Other assets                                                 736               22,272
                                                       ---------------------------------------
Total gross deferred tax assets before valuation
allowance                                                $1,189,420            $ 306,220
   Valuation Allowance                                     (305,400)                  --
                                                       ---------------------------------------
Net deferred tax assets                                  $  884,020            $ 306,220
                                                       ---------------------------------------

Deferred tax liabilities:
   Loss reserves                                         $   (2,002)           $  (8,123)
   Mortgage servicing fees                                 (561,164)            (434,727)
   Hedge activities                                        (298,871)            (102,589)
   Other liabilities                                        (30,333)             (32,150)
                                                       ---------------------------------------
   Total deferred tax liabilities                          (892,370)            (577,589)
                                                       ---------------------------------------

Net deferred tax asset/(liability)                       $   (8,350)           $(271,369)
                                                       =======================================
</TABLE>

In assessing  the  realizability  of deferred tax assets,  management  considers
whether it is more likely than not that some  portion or all of the deferred tax
assets will not be realized.  The ultimate realization of deferred tax assets is
dependent  upon the  generation of future  taxable  income during the periods in
which these temporary  differences become deductible.  Management  considers the
scheduled reversal of deferred tax liabilities,  projected future taxable income
and tax planning strategies in making this assessment.  Accordingly, a valuation
allowance  of $305,400 has been  established  for the year ended  September  30,
2001.  The Company has  consolidated  tax net operating  loss  carryforwards  at
September 30, 2001. These carryforwards expire in the years 2012 to 2020.


12.  LEASE COMMITMENTS

HomeSide leases office facilities and equipment under non-cancelable leases that
include renewal options and escalation  clauses,  which extend into 2010. Rental
expense for leases of office  facilities and equipment was $12.3  million,  $9.8
million and $8.8 million for the years ended  September 30, 2001, 2000 and 1999,
respectively.  HomeSide's  minimum future lease  commitments  are as follows (in
thousands):

Fiscal Year
-----------
2002              $ 9,921
2003                9,816
2004                8,341
2005                7,561
2006                4,883
Thereafter         13,933
                  -------
  Total           $54,455
                  =======

13.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair  value  estimates  are made as of a  specific  point  in time  based on the
characteristics   of  the  financial   instruments   and  the  relevant   market
information.  Where  available,  quoted  market prices are used. In other cases,
fair values are based on estimates  using other  valuation  techniques,  such as
discounting estimated future cash flows using a rate commensurate with the risks
involved or other acceptable methods. These techniques involve uncertainties and
are  significantly  affected  by the  assumptions  used and the  judgments  made
regarding risk  characteristics of various financial  instruments,  prepayments,
discount  rates,  estimates  of  future  cash  flows,  future  anticipated  loss
experience and other factors.  Changes in assumptions could significantly affect
these estimates.  Independent market data may not be available to validate those
fair value estimates that are based on internal valuation techniques.  Moreover,

                                       41

<PAGE>

such fair value  estimates  may not be  indicative  of the amounts that could be
realized in an immediate sale of the instrument.  Also because of differences in
methodologies  and assumptions  used to estimate fair value,  the Company's fair
values should not be compared to those of other companies.

Fair  value  estimates  are  based on  existing  financial  instruments  without
attempting to estimate the value of anticipated future business and the value of
assets  and  liabilities   that  are  not  considered   financial   instruments.
Accordingly,  the aggregate  fair value  amounts  presented do not represent the
underlying  value of the  Company.  For  certain  assets  and  liabilities,  the
information required is supplemented with additional  information relevant to an
understanding of the fair value.

The methods and  assumptions  used to estimate  the fair values of each class of
financial instruments are as follows:

Cash and cash equivalents

The carrying amount reported in the balance sheet approximates fair value.

Mortgage loans held for sale

Fair values are based on the estimated value at which the loans could be sold in
the secondary  market.  These loans are priced to be sold with servicing  rights
retained, as this is the Company's normal business practice. The carrying amount
reported in the balance sheet approximates fair value.

Accounts receivable

With the  exception  of the  residual  interest  retained in  HomeSide  Funding,
accounts   receivable  carrying  amount  approximates  fair  value  due  to  the
relatively current aging of the receivable balances.  The difference between the
carrying value and the fair value of the Company's retained residual interest in
HomeSide Funding is $13.3 million at September 30, 2001.

Early pool buyout advances

Carrying amounts are considered to approximate fair value.

Risk management contracts

The fair value of options on  mortgage-backed  securities  and  exchange  traded
futures and options on Treasury and Eurodollar contracts are determined based on
market quotes.  Interest rate swaps,  swaptions and caps are determined based on
discounted  valuation  models  and are  periodically  validated  against  dealer
quotes.  For fiscal year ended September 30, 2001,  carrying value  approximates
fair value and is included in risk  management  instruments at fair value,  net.
The carrying amount relating to these contracts is included in accounts  payable
and accrued liabilities as of September 30, 2000.

Accounts payable and accrued liabilities and notes payable

The carrying  amount of the accounts  payable and accrued  liabilities and notes
payable  reported in the balance  sheet  approximates  its fair value due to the
short-term nature of the borrowings under the credit agreements.

Long-term debt

Fair value of long-term debt is estimated by discounting  estimated  future cash
flows using a rate  consistent  with the  Company's  current  borrowing  rate as
adjusted for the effects of certain prepayment penalties.

Commitments to originate mortgage loans

Fair value is estimated  using quoted  market  prices for  securities  backed by
similar loans adjusted for differences in loan characteristics.

Forward contracts to sell mortgages

Forward contracts to sell mortgages,  which represent legally binding agreements
to sell loans to permanent  investors at a specified price or yield,  are valued
using market prices for securities  backed by similar loans and are reflected in
the fair values of the risk management instruments at fair value, net.


                                       42

<PAGE>

Options on mortgage-backed securities, Eurodollar futures and U.S. Treasury bond
and note futures

The fair values of options are estimated based on actual market quotes.

Interest rate swaps

The fair  values  of  interest  rate  swaps are  based on  discounted  cash flow
valuation models and are periodically validated against dealer quotes.

Fair Value

The fair  values of the  Company's  financial  instruments  are as  follows  (in
thousands):

<TABLE>
                                                       September 30, 2001             September 30, 2000
                                                 ------------------------------------------------------------
                                                 Carrying Amount    Fair Value   Carrying Amount   Fair Value
                                                 ------------------------------------------------------------
<S>                                                <C>              <C>            <C>            <C>
ASSETS
Cash and cash equivalents                          $  703,439       $  703,439     $  110,737     $   110,737
Mortgage loans held for sale                        1,845,766        1,845,766      1,441,216       1,449,449
Accounts receivable                                   488,918          502,218        324,028         324,028
Risk management instruments at fair value, net        437,758          437,758             --              --
Early pool buyout advances                             55,595           55,595        141,255         141,255

LIABILITIES
Notes payable                                       2,148,000        2,148,000      3,235,400       3,235,400
Long-term debt                                      1,821,551        1,798,162      1,899,772       1,899,919
Accounts payable and accrued liabilities            1,020,225        1,020,225        542,500         542,500
Risk management contracts for
    Mortgage servicing rights                              --               --         44,568          44,568
Risk management contracts for
    early pool buyout advances                             --               --            207             207

OFF-BALANCE SHEET(1)
Commitments to originate mortgage loans                    --               --             --           6,974
Mandatory forward contracts to sell mortgages              --               --             --         (15,324)
Options on mortgage-backed securities                      --               --            832             104
Options on U.S treasury bond futures                       --               --             36              30
Interest rate swaps on debt instruments                    --               --             --            (147)
</TABLE>

----------
(1)  Parenthesis denote a liability

Fair value estimates are made as of a specific point in time,  based on relevant
market data and information about the financial  instrument.  These estimates do
not reflect any premium or discount that could result from offering for sale the
Company's entire holding of a particular financial instrument. Because no active
market  exists for some portion of the  Company's  financial  instruments,  fair
value  estimates  are  based  on  judgments   regarding   future  expected  loss
experience,  current economic conditions,  current interest rates and prepayment
trends, risk characteristics of various financial instruments and other factors.

These estimates are subjective in nature and involve  uncertainties  and matters
of significant  judgment and,  therefore,  cannot be determined  with precision.
Changes in any of these  assumptions  used in calculating  fair value would also
significantly  affect the  estimates.  Further,  the fair value  estimates  were
calculated  as of  September  30,  2001 and 2000.  Subsequent  changes in market
interest rates and prepayment  assumptions could  significantly  change the fair
value.

14.  RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

Risk management

The Company has developed  risk  management  programs and processes  designed to
manage market risk associated with the Company's  business  activities.  As more
fully described  herein,  interest rate risk is a predominant  risk that further

                                       43
<PAGE>

influences a number of other  business  risks such as pricing  risk,  prepayment
risk,  valuation risk, balance sheet management and funding risk. As part of its
risk  management   programs,   the  Company  utilizes  a  number  of  derivative
instruments to manage these risks.

In June of 1998, the Financial  Accounting  Standards Board issued  Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging  Activities"  (SFAS  133).  SFAS 133,  as amended  standardizes  the
accounting for derivative  instruments and hedging  activities and requires that
all  derivative  instruments  be  recognized as assets and  liabilities  at fair
value. If certain  conditions are met, "hedge accounting" may be applied and the
derivative  instruments  may be  specifically  designated as: (a) a hedge of the
exposure to changes in the fair value of a  recognized  asset or liability or an
unrecognized firm commitment  ("fair value hedge"),  (b) a hedge of the exposure
to  variability  of cash flows of a recognized  asset,  liability or  forecasted
transaction  ("cash  flow  hedge")  or (c) a hedge of certain  foreign  currency
exposures. In the case of a qualifying fair value hedge, changes in the value of
the  derivative  instruments  that have been highly  effective are recognized in
current earnings along with the change in value of the designated hedge item. In
the case of a qualifying cash flow hedge, changes in the value of the derivative
instruments   that  have  been  highly   effective   are   recognized  in  other
comprehensive income ("OCI"),  until such time that earnings are affected by the
cash flows of the underlying hedged item. In either a fair value hedge or a cash
flow hedge,  net earnings are impacted to the extent the changes in the value of
the derivative  instruments do not perfectly  offset the changes in the value of
the hedge items (so called  "ineffectiveness").  Derivative instruments that are
non-designated  or do not  meet  the  relevant  hedge  accounting  criteria  are
accounted for at fair value with gains and losses recorded to current  earnings.
The Company is not a party to any foreign currency hedge relationships.

Effective with its first fiscal quarter  beginning  October 1, 2000, the Company
adopted  SFAS 133 as  required.  Accordingly,  all  derivative  instruments  are
recognized  on balance  sheet at fair value and are  either  designated  as fair
value hedges, cash flow hedges, or are non-designated  pursuant to the Company's
risk  management  policies.  At  October  1,  2000,  the  Company  recognized  a
cumulative-effect  transition  adjustment  of $1.4  million to increase  pre-tax
income for the effect of the change in accounting principle.  Additionally,  the
Company recognized a pre-tax  cumulative-effect  transition adjustment to reduce
OCI by $14.4 million. The transition adjustments are more fully explained in the
following  sections  along  with  the  risk  management   activities  and  hedge
accounting  results for the fiscal year ended  September 30, 2001. The impact of
the accounting for risk management  activities  pursuant to SFAS 133 is expected
to create a level of ongoing volatility in reported financial results.

Risk Management of Loan Production Activities

Loan  production  activities  include the origination or acquisition of mortgage
loans, the warehousing of those loans in inventory and the resale of those loans
to investors in the  secondary  mortgage  market.  The Company  maintains a risk
management  program to protect and manage  interest  rate risk and pricing  risk
associated  with its mortgage  committed  pipeline and mortgage  inventory.  The
Company does not presently originate or acquire loans for investment (portfolio)
purposes.

Risk Management of Mortgage Pipeline

The  Company's   mortgage   committed   pipeline  includes  interest  rate  lock
commitments  ("IRLCs" or "commitments") that have been extended to borrowers who
have applied for loan funding and meet certain  defined credit and  underwriting
criteria.  All of the  Company's  IRLCs will be classified as held for sale upon
funding of the  underlying  loan.  Effective  with the adoption of SFAS 133, the
Company   classifies  and  accounts  for  IRLCs  as  non-designated   derivative
instruments. Accordingly, IRLCs are recorded at fair value with changes in value
recorded to current  earnings.  Risk  management  derivative  contracts  used to
economically   hedge  the  IRLCs  are  also  classified  and  accounted  for  as
non-designated  derivatives.  In summary,  since a derivative  instrument cannot
hedge another  derivative  instrument (for accounting  purposes) the pipeline is
effectively accounted for as a mark-to-market book of business.

The fair value of the Company's  IRLCs generally  approximate  zero at inception
(the lock-in date) since the Company's practice is to extend loan commitments at
market  rates of interest  and to exclude  from its fair value  calculation  the
normal  profit  margin  associated  with the future loan sale  transaction.  The
future  loan  execution  involves  the  sale of the  loan  and,  typically,  the
retention of the servicing  rights.  IRLCs have value  characteristics  that are
somewhat  analogous to certain option contracts in that the commitments tend to:
(i) decrease in value at an accelerating rate as interest rates increase and the
probability of the borrower's loan closing increases, and (ii) increase in value
at a  decelerating  rate as interest  rates decline and the  probability  of the
borrower's  loan closing  decreases.  The Company  manages the interest rate and
pricing  risks  associated  with its IRLCs by using  mortgage  forward  delivery
contracts,   options  on   mortgage-backed   securities  and  certain   treasury
instruments.  The Company's risk management program employs the use of financial
modeling to maintain a high degree of economic  correlation  between the changes
in values of the IRLCs and the related non-designated derivatives.  However, due
to  imprecision  in projecting  the timing and rate of loan closings  (which are
influenced by borrower behavior),  some level of economic ineffectiveness can be
expected.


                                       44

<PAGE>

Following is a summary of the net  gains/(losses)  recognized on  non-designated
risk  management  derivatives  related to the pipeline at September 30, 2001 (in
thousands):

                                                     For the year ended
                                                     September 30, 2001
                                                     ------------------
Gains on IRLCs recognized to income                        $ 63,613

(Losses) on mortgage forward delivery contracts             (49,007)
(Losses) on options contracts                                (8,709)
                                                           --------
   Total losses recognized to income                        (57,716)

Net gains recognized on non-designated derivatives         $  5,897
                                                           ========

Gains/(losses)  on interest rate lock commitments  represent the change in value
of the  commitments  from the rate-lock  inception date to the loan funding date
(for those  commitments that are funded),  or to the current  reporting date for
those IRLCs that are open at September  30, 2001.  The basis of the IRLCs at the
loan funding  date,  representing  cumulative  gains or losses on the IRLCs,  is
included as a component  of the initial  cost basis of the loans.  Approximately
$13.2 million of the net gains recognized on IRLCs (reported for the fiscal year
ended  September  30,  2001,  above) were  applied to the  initial  basis of the
underlying  loans funded.  The balance of the gains  totaling  $23.3 million are
recognized as open  derivative  contracts at September 30, 2001 and are recorded
at fair value in the consolidated balance sheets.

Risk Management of Mortgage Inventory

The Company's  mortgage inventory includes closed loans that are held for resale
pending  completion  of  normal   post-closing   review,   collateral   document
preparation  and other pooling  requirements  necessary to  consummate  the sale
and/or  securitization.  Based  on the  status  of such,  as well as  historical
delivery patterns and investor settlement dates, the Company is able to forecast
the  amount  and  timing of loan  sales.  Approximately  $1.681  billion  of the
Company's  loans at  September  30,  2001 are  conforming  loans which have been
underwritten  pursuant to the requirements of the secondary  marketing  agencies
(FNMA,  FHLMC or GNMA as  appropriate).  The Company's risk  management  program
involves  the use of mortgage  forward  delivery  contracts to hedge 100% of its
agency-eligible  conforming  loans as  forecasted  loan sales.  At September 30,
2001,  $1.681 billion of mortgage forward delivery  contracts were designated as
cash flow hedges. At the inception of the hedge, the Company formally  documents
the relationship  between the forward delivery contracts and the forecasted loan
sales as well as its risk management  objective and strategy for undertaking the
hedge  transactions.  The dollar amount of the forward delivery  contracts along
with the  underlying  rate and  terms of the  contracts  are  equivalent  to the
forecasted  loan  sales that are  probable  of  occurring.  Hence,  the  forward
delivery  contracts   effectively  fix  the  forward  sales  price  and  thereby
substantially eliminate interest rate and pricing risk to the Company.

Mortgage loans held for sale at September 30, 2001 include  non-conforming loans
aggregating $164.7 million, which will be sold to non-agency, private investors.
During the fiscal  year  ended  September  30,  2001,  gains of $0.4  million on
non-designated mortgage forward delivery contracts maintained as economic hedges
of non-conforming loans were recorded to earnings and included as a component of
net mortgage  origination  revenue in the consolidated  statements of income and
comprehensive income.

The fair value of risk management hedging relationships at September 30, 2001 is
as follows (in thousands):

Mortgage Pipeline:
IRLCs at period end                                       $ 23,253
Non-designated mortgage forward delivery contracts         (30,406)
Options on mortgage-backed securities                       (3,655)
                                                          --------
   Total fair value of pipeline derivatives                (10,808)

Mortgage Inventory:
Designated mortgage forward delivery contracts              13,270
Non-designated mortgage forward delivery contracts          (1,038)
                                                          --------
   Total fair value of derivatives related to inventory     12,232

Net asset recorded for fair value derivatives             $  1,424
                                                          ========


                                       45

<PAGE>

At  September  30,  2001,   the  carrying  value  of  mortgages  held  for  sale
approximated fair value of $1.846 billion. Cumulative gains related to the hedge
instruments in the amount of $13.3 million were recorded in OCI at September 30,
2001 and will be reclassified  to earnings  during the next 90 days,  concurrent
with the  recognition in earnings of the changes in cash flows of the forecasted
loan sales.

Transition Adjustments and Current Period Activity in OCI

As discussed  above,  the  cumulative  effect of the adoption of SFAS 133 was to
increase  pre-tax net income by $1.4 million.  This amount relates solely to the
mortgage  pipeline  at  October  1, 2000 and  represents  the net  effect of the
adjustments necessary to record IRLCs and the related non-designated derivatives
at fair value.

The  pre-tax  cumulative-effect  transition  adjustment  to reduce  OCI by $14.4
million  relates solely to the hedging  activities of the mortgage  inventory at
October 1, 2000. Specifically,  this amount represents the cumulative losses (to
September 30, 2000) of mortgage forward delivery contracts that were off-balance
sheet prior to the adoption of SFAS 133. Such  cumulative  losses did not exceed
cumulative  unrealized gains in the designated  mortgage inventory at October 1,
2000.  Pursuant to the  requirements  of SFAS 133,  cumulative  losses in OCI of
$14.4 million were reclassified to earnings during the twelve-month period ended
September 30, 2001,  concurrent  with the recognition of the gains (or favorable
variability  in cash  flows) of the  related  forecasted  loan  sales  that were
settled.  Gains and  losses  on such  hedge  relationships  related  to  settled
transactions are included as a component of net mortgage  origination revenue in
the accompanying consolidated statements of income and comprehensive income.

Activity  in OCI  related  to cash  flow  hedges  of  forecasted  loan  sales is
summarized as follows for the year ended September 30, 2001 (in thousands):

<TABLE>
<CAPTION>
                                                                                     Tax
                                                                     Before-tax   (expense)    Net-of-tax
                                                                       Amount     or benefit     amount
                                                                     ------------------------------------
<S>                                                                   <C>          <C>         <C>
Balance at September 30, 2000                                         $     --     $    --     $     --
Cumulative effect of a change in accounting for hedging activities     (14,383)      5,250       (9,133)
Net losses on current period cash flow hedges                          (14,607)     (2,789)     (17,396)
Reclassification of losses to net income                                15,719      (5,516)      10,203
                                                                     ------------------------------------
Balance at September 30, 2001                                         $(13,271)    $(3,055)    $(16,326)
                                                                     ====================================
</TABLE>

Risk Management of Mortgage Servicing Rights

HomeSide utilizes a number of risk management  derivative  instruments to manage
the interest  rate risk  associated  with its mortgage  servicing  rights.  Such
instruments  include interest rate swaps,  swaptions and caps,  mortgage forward
delivery  contracts,  options on  mortgage-backed  securities,  and  options and
futures on exchange traded Treasury and Eurodollar  contracts.  Given the unique
value determinants of mortgage  servicing rights,  management uses a combination
of derivative  instruments  to construct a hedge  portfolio  that is intended to
provide effective  protection of the value of the Company's  mortgage  servicing
rights from interest rate risk.

During the year ended  September 30, 2001, the Company did not qualify for hedge
accounting  pursuant  to the  requirements  of SFAS 133 for  mortgage  servicing
rights.  As a result,  for the fiscal year ended  September 30, 2001 the Company
recognized  a net gain of $872.9  million  to  current  earnings  related to the
change in fair value of its derivative  instruments with no corresponding  hedge
offset relative to the change in the fair value of the mortgage servicing rights
asset. The Company recorded a valuation provision of $2.56 billion related to an
impairment  valuation  of  mortgage  servicing  rights for the fiscal year ended
September 30, 2001.  Additionally,  the fair value of the  Company's  derivative
instruments  used in the risk management of mortgage  servicing rights is $421.2
million at September 30, 2001.

Credit Risk

The fair value of  HomeSide's  risk  management  contracts on Treasury  options,
mortgage pass-throughs,  options on mortgage pass-throughs,  Eurodollar futures,
and  options  on  Eurodollar  futures  is based on quoted  market  prices of the
underlying  instruments  at September  30, 2001 and 2000.  The notional  amounts
represent  the par  value of the  underlying  U.S.  Treasury  bonds or notes and
mortgages,  as applicable.  However,  the notional amounts are not recognized in
the balance  sheet and should not be  considered  as a measure of credit risk or
future cash requirements.

The fair value of HomeSide's risk  management  contracts in interest rate swaps,
interest  rate  caps/floors  and options on interest rate swaps  (swaptions)  is
based on discounted  cash flow valuation  models and is  periodically  validated
against dealer  quotes.  The notional  amounts  represent only the balances upon

                                       46

<PAGE>

which future interest  payments are based.  Therefore,  the notional amounts are
not recognized in the balance sheet and should not be considered as a measure of
credit risk or future cash requirements.

The amount of the risk management  contracts  maintained  depends on a number of
factors  including  the  size of the  mortgage  servicing  portfolio,  projected
convexity of the mortgage  servicing  rights,  interest rates, and interest rate
volatility. HomeSide is subject to market risk to the extent that interest rates
fluctuate; however, the purpose of the risk management contracts is to hedge the
value of the mortgage  servicing  rights  portfolio.  HomeSide's risk management
financial  instruments  profile is designed to correlate  with  movements in the
value of the mortgage servicing rights.

Cash  requirements  for  HomeSide's  swaps and swaption  contracts  are based on
interest rate movements over time,  with cash receipts based on a  predetermined
fixed rate and cash payments based on a floating  rate.  Cash  requirements  for
option  contracts are limited to premiums paid.  Cash  requirements  for futures
contracts,  when held, are based on satisfying margin requirements with clearing
brokers and are managed based on limits  approved by HomeSide's  risk management
committee.

The risk  associated  with these  instruments  is the  exposure  to current  and
expected   market   movements   in  interest   rates  and  the  ability  of  the
counterparties  to meet  the  terms  of the  contracts.  The  options,  futures,
mortgage   pass-throughs  and  swaption   contracts   generally  require  future
performance on the part of the counterparty upon exercise of the option contract
by HomeSide.  The swap contracts  require regular cash payments between HomeSide
and the counterparties for the term of the contract.

HomeSide  is  exposed  to  credit  loss in the  event of  nonperformance  by the
counterparties to the various  instruments.  HomeSide controls credit and market
risk  associated  with  interest rate products by  establishing  and  monitoring
limits  with  counterparties  as to the  types and  degree of risks  that may be
undertaken.  HomeSide's  exposure  to credit risk in the event of default by the
counterparties  for the risk management  option contracts on mortgage  servicing
rights was $187.0  million at September  30, 2001 and $31.5 million at September
30, 2000.

The amount of credit risk associated  with risk management  interest rate swaps,
interest  rate  caps/floors,  and interest  rate  swaptions  related to mortgage
servicing  rights if all  counterparties  failed  completely  was  approximately
$921.3 million and $118.1 million at September 30, 2001 and 2000,  respectively.
Such amounts at September 30, 2001 are before  consideration  of amounts held by
HomeSide as collateral, which totaled $662.3 million.

As discussed in Note 3, HomeSide purchases financial instruments and enters into
financial  agreements  with  off-balance  sheet  risk in the  normal  course  of
business  through the  origination  and selling of mortgage loans and as part of
its risk management  programs.  These instruments  involve,  to varying degrees,
elements of credit and interest rate risk. Credit risk is the possibility that a
loss may occur if a counterparty to a transaction  fails to perform according to
the terms of the contract.  Interest rate risk is the possibility  that a change
in interest rates will cause the value of a financial  instrument to decrease or
become more costly to settle.

HomeSide  regularly enters into  commitments to originate and purchase  mortgage
loans at a future date subject to compliance with stated conditions. Commitments
to originate  mortgage loans have off-balance  sheet risk to the extent HomeSide
does not have matching  commitments  to sell loans,  which  exposes  HomeSide to
lower  of cost  or  market  valuation  adjustments  in a  rising  interest  rate
environment.  Additionally,  the extension of a commitment,  which is subject to
HomeSide's  credit review and approval  policies,  gives rise to credit exposure
when certain borrowing conditions are met and the loan is made. Until such time,
it represents only potential  exposure.  The obligation to lend may be voided if
the customer's financial condition deteriorates or if the customer fails to meet
certain  conditions.  Commitments to originate mortgage loans do not necessarily
reflect future cash requirements since some of the commitments will not be drawn
upon before  expiration.  Commitments  to originate  mortgage loans totaled $3.5
billion and $1.7 billion at September 30, 2001 and 2000, respectively.

HomeSide's  exposure to credit risk in the event of default by the  counterparty
for mandatory forward  commitments to sell mortgage loans and related options is
the difference  between the contract price and the current market price,  offset
by any available margins retained by HomeSide or an independent  clearing agent,
which approximated $0 at September 30, 2001 and 2000.

HomeSide  periodically  utilizes risk management financial instruments to manage
interest  rate risk related to the value of its early pool buyout  advances.  At
September 30, 2001, there were no positions  outstanding  related to hedging the
early pool buyout advances, and therefore,  no credit risk associated with these
instruments.

The amount of credit risk as of September  30, 2001 and  September  30, 2000, if
all  counterparties  failed  completely and if the margins,  if any, retained by
HomeSide  or an  independent  clearing  agent  were to become  unavailable,  was
approximately  $284.4  million and $149.6  million,  respectively,  for all risk
management  instruments related to mortgage servicing rights,  early pool buyout
advances and the origination and selling of mortgage loans.


                                       47

<PAGE>

The amounts of credit risk  associated  with interest rate swaps related to debt
instruments  at September  30, 2001 and  September  30, 2000 were  approximately
$39.9 million and $1.7 million, respectively.

The  following  is a summary of HomeSide 's notional  amounts and fair values of
interest rate products (in thousands):

<TABLE>
                                                           September 30,                September 30,
                                                               2001                         2000
                                                   ---------------------------------------------------------
                                                    Notional                       Notional
                                                     Amount      Fair Value (1)     Amount     Fair Value (1)
                                                   ----------------------------------------------------------
<S>                                                <C>             <C>          <C>             <C>
Purchased commitments to sell mortgage loans:
  Mandatory forward contracts                      $ 3,432,251     $(42,578)    $ 2,468,602     $ (15,324)
  Options on mortgage-backed securities              1,800,000      (11,753)        507,000           104
  Options on U.S. treasury bond futures                     --           --          30,000            30

Purchased commitments to buy mortgage loans:
  Mandatory forward contracts                           95,145          (60)             --            --
Risk management contracts on
   mortgage servicing rights:
   Options on U.S. treasury bond futures             2,840,000          709              --            --
   Options on mortgage pass-throughs                        --           --       1,200,000           739
   Over the counter options on U.S. treasury
         bond/notes                                         --           --         900,000          (189)
   Mortgage pass-throughs and total return swaps    15,057,518      116,865       4,435,000        27,707
   Interest rate swaps and
      interest rate swaps with caps                 52,549,000      222,413      18,675,000      (206,150)

   Interest rate swaptions                          30,827,500       80,510      22,347,500       133,325
Risk management contracts on early pool buyout
advances:

    Options on eurodollar futures                           --           --         175,000          (207)
 Interest rate swaps on debt instruments               650,000       39,945         750,000          (147)


<FN>
(1) Parentheses  denote  liability.  Fair value represents the amount at which a
given instrument  could be exchanged in an arms length  transaction with a third
party as of the  balance  sheet  date.  See also Note 13  regarding  fair  value
disclosures of financial instruments.
</FN>

</TABLE>
Mortgage loans sold with recourse

HomeSide sells mortgage loans with recourse to various investors and retains the
servicing rights and  responsibility for credit losses on these loans. The total
outstanding  balance of loans sold with recourse does not necessarily  represent
future cash outflows. The total outstanding principal balance of loans sold with
recourse was $28.5  million and $25.5  million at  September  30, 2001 and 2000,
respectively.

Servicing commitment to investors

HomeSide  is  required  to submit to certain  investors,  primarily  Ginnie Mae,
guaranteed  principal and interest  payments from the underlying  mortgage loans
regardless of actual collections.

Purchase mortgage servicing rights commitments

HomeSide routinely enters into commitments to purchase mortgage servicing rights
associated  with mortgages  originated by third  parties,  subject to compliance
with stated conditions.  These commitments to purchase mortgage servicing rights
correspond  to mortgage  loans having an  aggregate  loan  principal  balance of
approximately  $7.3  billion and $2.7  billion at September  30,  2001and  2000,
respectively.

Geographical concentration of credit risk

HomeSide is engaged in business nationwide and has no material concentration of
credit risk in any geographic region.


                                       48

<PAGE>

15.  STOCKHOLDERS' EQUITY

On April 2, 2001 and October 23, 2000 the Company  paid  dividends to the Parent
in the amounts of $24.0 million and $24.0 million,  respectively.  Additionally,
on September 30, 2001 the Company paid  dividends to the Parent in the amount of
$0.8 million.  On July 24, 2001,  National Australia Bank Limited,  the ultimate
parent of  HomeSide,  by and through  various  intermediate  holding  companies,
entered  into a stock  subscription  agreement  with  HomeSide  in the amount of
$150.0 million for the issuance of additional  shares of HomeSide  common stock.
On September 7, 2001, the National,  by and through various intermediate holding
companies,  announced  its  intention  to enter into a stock  subscription  with
HomeSide in the amount of $1.818  billion for the issuance of additional  shares
of HomeSide  common stock.  HomeSide  received the entire amount of this capital
infusion during the month of September 2001.

16.  CONTINGENCIES

HomeSide,  along  with its  subsidiaries,  is a  defendant  in a number of legal
proceedings arising in the normal course of business.  HomeSide, in management's
estimation,  has recorded  adequate  reserves in the  financial  statements  for
pending  litigation.  Management,  after  reviewing all actions and  proceedings
pending against or involving HomeSide,  considers that the aggregate liabilities
or loss, if any,  resulting from the final outcome of these proceedings will not
have a material  effect on the  financial  position,  results of  operations  or
liquidity of HomeSide.

17.  EMPLOYEE BENEFITS

HomeSide  offers a 401(k) defined  contribution  benefit plan in which employees
may contribute a portion of their compensation.  Substantially all employees are
eligible  for  participation  in the plan.  The Company  matches 100% of amounts
contributed  up to 4% of an employee's  compensation.  Further,  the Company may
contribute  additional  amounts at its discretion.  Total expense related to the
benefit plan was approximately  $6.5 million,  $5.5 million and $5.2 million for
the fiscal years ended September 30, 2001,  September 30, 2000 and September 30,
1999,  respectively.  The Company offers a noncontributory deferred compensation
plan to senior  executives,  at a nominal  administrative  cost to the  Company.
During the year ended  September  30, 2001,  the Company  fully funded the plan.
Plan assets  totaled  $16.9  million and $0 and plan  liabilities  totaled $16.9
million and $5.5 million at September 30, 2001 and 2000, respectively.  In April
2001, one of the  participants  elected to  irrevocably  waive rights to receive
benefits in the Executive  Deferred  Compensation Plan in lieu of an endorsement
split-dollar   policy.   Under  the  terms  of  the   endorsement   split-dollar
arrangement,  the employer owns the life insurance policy and endorses the death
benefit  interest  to the  individual.  The  Company  agreed  to pay  all of the
premiums  and is entitled  to the cash  surrender  value of the policy.  For the
fiscal year ended  September 30, 2001, the cash surrender value of the policy is
$0.35  million.  The Company  retained a liability  of $2.9  million for the net
present  value of the  future  cash  payments  to be made by the  Company on the
participant's split-dollar contract.

On October 1, 2001,  HomeSide  Lending,  Inc. (the "Plan  Sponsor") and National
Australia  Bank Limited  adopted the 2001  Long-Term  Incentive  Plan (the "2001
LTIP") to  encourage  and  retain  certain  key  employees  to  achieve  certain
performance  targets. The 2001 LTIP benefits executives who have been determined
to be a member of a select group of management or highly  compensated  employees
("Participants")  within the meaning of ERISA  Section  301(a)(3).  Participants
were  selected by a committee  consisting of the  Executive  General  Manager of
People and Culture of  National  Australia  Bank  Limited,  the Chief  Executive
Officer of the Plan Sponsor and the Managing Director of National Australia Bank
Limited ("Plan  Committee").  The maximum  aggregate  amount of awards under the
2001 LTIP is $10.0 million ("Pool"). All payments provided under the  2001  LTIP
will be paid by the Plan  Sponsor.  The plan period  is the period  beginning on
April 1, 2001 and ending on March 31, 2003 (the "Plan Period").

The 2001 LTIP provides for awards to Participants  based on minimum required net
income performance  targets for each six months during the Plan Period specified
in the 2001 LTIP. Payment of a Participant's  individual allocation of the total
amount  available  for  payment  under the 2001 LTIP  upon  satisfaction  of the
performance  targets  ("Awards")  will  ordinarily  be made on or before May 15,
2003.

The 2001 LTIP  provides  that in the event the Parent is subject of a successful
takeover  or if Plan  Sponsor is sold (a sale by the  Parent to  another  party,
unrelated to Parent,  of a portion or the whole of the Plan  Sponsor),  the Pool
will be fully earned and will be vested upon the completion of the sale.  Unless
otherwise required by a Participant's  individual employment agreement,  payment
of Awards shall be made upon the 90th day after the  completion  of a successful
takeover  of Parent or sale of the Plan  Sponsor to those  Participants  who are
still  employed by the Plan Sponsor on such date and to qualified  Participants.
The  consummation of those  transactions  contemplated by the Asset Purchase and
Liability  Assumption  Agreement between HomeSide and WaMu will result in a full
vesting  of the  $10.0 million  total  award  pool  and  payment  of  awards  90
days thereafter.


                                       49

<PAGE>

18.  QUARTERLY FINANCIAL DATA (Unaudited)

<TABLE>
(in thousands)                           For the Three     For the Three     For the Three        For the Three
                                         Months Ended       Months Ended      Months Ended        Months Ended
                                      September 30, 2001    June 30, 2001*   March 31, 2001*   December 31, 2000*
                                      ------------------   ---------------   ---------------   ------------------
<S>                                      <C>                 <C>               <C>                 <C>
(Expense) Revenue                        $  (737,927)        $(330,735)        $(27,492)           $(162,224)
Expenses                                     670,784            83,071           74,580               77,950
(Benefit) for income taxes                      (725)         (147,845)         (34,058)             (84,493)
Extraordinary item, net                           --               987               --                   --
Change in accounting principle, net               --                --               --                  883
                                      ---------------------------------------------------------------------------
Net income                               $(1,407,986)        $(264,974)        $(68,014)           $(154,798)
                                      ===========================================================================
</TABLE>

<TABLE>
   (in thousands)                        For the Three      For the Three     For the Three      For the Three
                                         Months Ended        Months Ended     Months Ended       Months Ended
                                      September 30, 2000    June 30, 2000    March 31, 2000    December 31, 1999
                                      ------------------   ---------------   ---------------   ------------------
<S>                                         <C>                 <C>              <C>                <C>
Revenue                                     $86,125             $82,422          $93,210            $92,134
Expenses                                     71,026              66,949           59,264             69,071
Provision for income taxes                    8,786               8,923           15,666              4,893
                                      ---------------------------------------------------------------------------
Net income                                  $ 6,313             $ 6,550          $18,280            $18,170
                                      ===========================================================================
</TABLE>

<TABLE>
   (in thousands)                        For the Three      For the Three     For the Three      For the Three
                                          Months Ended      Months Ended      Months Ended        Months Ended
                                      September 30, 1999    June 30, 1999    March 31, 1999    December 31, 1998
                                      ------------------   ---------------   ---------------   ------------------
<S>                                         <C>                <C>               <C>               <C>
Revenue                                     $96,833            $103,910          $105,211          $104,432
Expenses                                     64,366              74,784            74,268            76,122
Provision for income taxes                   14,747              14,354            15,561            14,519
                                      ---------------------------------------------------------------------------
Net income                                  $17,720            $ 14,772          $ 15,382          $ 13,791
                                      ===========================================================================

<FN>
* as restated
</FN>
</TABLE>

19.  PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

                                 BALANCE SHEETS

                                         September 30, 2001   September 30, 2000
                                         ------------------   ------------------
                                                  (Dollars in thousands)
ASSETS
Investment in subsidiary                     $ 1,277,760         $1,366,996
Other assets                                       2,946             54,094

                                             -----------         ----------
Total Assets                                 $ 1,280,706         $1,421,090
                                             ===========         ==========

LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued expenses        $       417         $    5,914
Long-term debt                                        --            141,959
                                             -----------         ----------
Total Liabilities                                    417            147,873
                                             -----------         ----------
Commitments and Contingencies

Stockholder's Equity:
  Common stock                                        --                 --
  Additional paid-in capital                   3,199,302          1,231,302
  (Accumulated deficit) Retained earnings     (1,902,687)            41,915
  Other comprehensive loss                       (16,326)                --
                                             -----------         ----------
Total Stockholder's Equity                     1,280,289          1,273,217
                                             -----------         ----------
Total Liabilities and Stockholder's Equity   $ 1,280,706         $1,421,090
                                             ===========         ==========



                                       50

<PAGE>

                              STATEMENTS OF INCOME

<TABLE>
                                                       For the Fiscal       For the Fiscal       For the Fiscal
                                                         Year Ended           Year Ended           Year Ended
                                                     September 30, 2001   September 30, 2000   September 30, 1999
                                                     ------------------   ------------------   ------------------
                                                                        (Dollars in thousands)
<S>                                                     <C>                     <C>                  <C>
REVENUES:
Dividends from subsidiary                               $   200,809             $ 64,294             $69,166
                                                        -----------        --------------------------------------
  Total revenues                                            200,809               64,294              69,166
                                                        -----------        --------------------------------------

EXPENSES:
Interest expense                                              6,090                9,702               9,680
Other expenses                                               14,790                  852                 852
                                                        -----------        --------------------------------------
  Total expenses                                             20,880               10,554              10,532
                                                        -----------        --------------------------------------

Income before income taxes, extraordinary item and
equity in undistributed income of subsidiary
                                                            179,929               53,740              58,634
Income tax expense (benefit)                                 35,778                3,541              (3,652)
                                                        -----------        --------------------------------------

Income before extraordinary item and equity in
undistributed income of subsidiary                          144,151               50,199              62,286
Extraordinary item - gain on early extinguishment
of debt, net of income tax of $567                              987                   --                  --
Loss from subsidiary                                     (2,040,910)                (887)               (621)
                                                        -----------        --------------------------------------
Net (loss) income                                       $(1,895,772)            $ 49,312             $61,665
                                                        ===========        ======================================

</TABLE>

                            STATEMENTS OF CASH FLOWS

<TABLE>

                                                       For the Fiscal       For the Fiscal       For the Fiscal
                                                         Year Ended           Year Ended           Year Ended
                                                     September 30, 2001   September 30, 2000   September 30, 1999
                                                     ------------------   ------------------   ------------------
                                                                        (Dollars in thousands)
<S>                                                     <C>                     <C>                 <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net (loss) income                                       $(1,895,772)            $ 49,312            $ 61,665
Adjustments to reconcile net (loss) income to net
cash provided by operating activities
  Amortization                                               (3,874)              (4,950)             (5,810)
  Equity in undistributed earnings of subsidiary          2,040,910                  887                 621
  Impairment of goodwill                                     14,009                    -                   -
  Change in other assets and accounts payable
    and accrued liabilities                                  32,423                4,388              (1,945)
                                                        -----------             --------            --------
 Net cash provided by operating activities                  187,696               49,637              54,531
                                                        -----------             --------            --------

CASH FLOWS USED IN FINANCING ACTIVITIES:
Repayment of long-term debt                                (138,866)                  --                  --
Dividends paid to the National                              (48,830)             (49,637)            (54,531)
                                                        -----------             --------            --------
Net cash used in financing activities                      (187,696)             (49,637)            (54,531)
                                                        -----------             --------            --------

Cash and cash equivalents at beginning of period                 --                   --                  --
Cash and cash equivalents at end of period                       --                   --                  --
                                                        -----------             --------            --------
                                                        $        --             $     --            $     --
                                                        ===========             ========            ========

</TABLE>


                                       51

<PAGE>

20.  OTHER RELATED PARTY TRANSACTIONS

On July 31, 2001,  HomeSide entered into an agreement for an unsecured revolving
credit facility with the National, which agreement replaced a previous unsecured
revolving credit facility with the National,  initially  established on June 23,
1998 and  thereafter  renewed  on an  annual  basis.  Under the  amended  credit
facility,  HomeSide can borrow up to $2.42 billion through and including January
30, 2002,  and up to $1.92  billion from January 31, 2002 through July 30, 2002,
subject to limits imposed by regulatory authorities. Borrowings under the credit
facility may be overnight or for periods of 7, 30, 60 or 90 days.  For overnight
borrowings,  the interest  rate is determined by the National at the time of the
borrowing.  For borrowings other than overnight, the interest rate is charged at
the corresponding LIBOR rate of the maturity period.

HomeSide earned management fees charged to affiliate  companies of approximately
$0.7 million for the fiscal year ended  September 30, 2001, $2.5 million for the
fiscal year ended  September 30, 2000 and $0.5 million for the fiscal year ended
September 30, 1999.

21.  SUBSEQUENT EVENTS (unaudited)

On October 1, 2001,  HomeSide adopted a Long Term Incentive Plan for the benefit
of key executive employees. See "Item 11 - Executive Compensation."

HomeSide has a commercial paper program supported by an independent syndicate of
banks under a $1.5 billion back-up credit facility which was established October
16, 2000 and was scheduled to terminate on October 15, 2001. On October 1, 2001,
the termination date for this credit facility was extended to December 20, 2001.
This credit facility was terminated on December 18, 2001, when HomeSide  entered
into a new back-up credit  facility for $920 million led by JP Morgan Chase Bank
(the "Chase  Facility").  Upon consummation of the transactions  contemplated by
the  Asset  Purchase  and  Liability  Assumption  Agreement  with  WaMu,  it  is
anticipated that this credit facility will be terminated.

On December 11, 2001,  the National  announced the sale of HomeSide's  operating
platform and certain of its operating  assets to WaMu.  WaMu will acquire all of
HomeSide's  servicing technology and other corporate assets including wholesale,
correspondent  and consumer  direct  production  channels and servicing sites in
Jacksonville,  Florida  and San  Antonio,  Texas.  Under  the terms of the Asset
Purchase and Liability  Assumption Agreement with WaMu, WaMu will acquire US$1.9
billion in assets,  primarily consisting of HomeSide's US $1.8 billion warehouse
and  pipeline  mortgage  loans.  The  National  will  retain the MSR and related
financial  hedges at the date of completion.  Following the  consummation of the
transactions  contemplated  by  the  Asset  Purchase  and  Liability  Assumption
Agreement with WaMu, HomeSide's servicing portfolio will be subserviced by WaMu.
It is anticipated  that the transaction will close in the first calendar quarter
of 2002, subject to customary closing conditions.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                                   MANAGEMENT

The  following  table sets forth the name,  age and position with the Company of
each  person  who is an  executive  officer  ("Executive")  or  director  of the
Company:

<TABLE>
        Name                     Age   Position
<S>                               <C>  <C>
Joseph J. Whiteside ..........    60   Chairman of the Board and Chief Executive Officer , Director
Robert MC. Prowse ............    57   Director
Richard E. McKinnon...........    51   Director
Tzu Ming Lao..................    44   Director
Gary W. Fiedler...............    57   President and Chief Operating Officer, Director
Gordon J. Lefevre.............    41   Vice President, Chief Financial Officer and Treasurer
Susan E. Lester...............    45   Vice President, Chief Financial Officer and Treasurer
Robert J. Jacobs..............    49   Executive Vice President and Secretary and General Counsel
William Glasgow, Jr...........    52   Vice President - Servicing
Mark F. Johnson...............    47   Vice President - Production
</TABLE>


                                       52

<PAGE>
The  directors  and officers of the Company are elected each year by vote of the
shareholder  and  directors,  respectively.  Each of the officers and  directors
shall serve  until their  successors  are elected and  qualified  or until their
earlier  resignation or removal.  It is expected that corporate  officers of the
Company will be appointed annually by its Board of Directors.

Joseph J.  Whiteside  has  served as  Chairman  of the Board and a  Director  of
HomeSide  International  since 2000 and has been the  Chairman  of the Board and
Chief  Executive  Officer since August 2001. Mr.  Whiteside has over 30 years of
financial management experience,  primarily in banking and mortgage lending. Mr.
Whiteside  began  his  banking  career  in 1966 at  Mellon  Bank in  Pittsburgh,
Pennsylvania. Beginning in 1982, he served as Executive Vice President and Chief
Financial  Officer at four publicly  owned bank holding  companies.  During that
time, Whiteside served one year as President and Chief Executive Officer of Banc
New England  Mortgage  Company.  Since 1996,  Whiteside  has served as a special
advisor to the National  Australia Bank Limited and HomeSide  Lending,  Inc. Mr.
Whiteside  became  the  Chairman  of the  Board  of both  HomeSide  Lending  and
International  in May 2001 and was named Chief  Executive  Officer in  September
2001. Mr.  Whiteside has served as the director for the Job for Youths  program,
the Civic Light Opera,  the  Financial  Executive  Institute and as a trustee at
Seton Hill College.

Robert MC. Prowse has served as a Director of HomeSide International since 1998.
Mr. Prowse is the Executive General Manager of National  Australia Bank Limited,
the parent  since 1998.  Mr.  Prowse  served as the Chief  Financial  Officer of
National Australia Bank Limited, the parent, from 1998 to 1999 and previously as
the Managing Director of Bank of New Zealand from 1992 to 1997.

Richard E.  McKinnon  has served as a Director of HomeSide  International  since
2000. Mr. McKinnon is Chief Financial  Officer of National  Australia Bank since
2000.  Prior to 2000, he was Head of Investments and  Acquisitions  Advisory for
National Australia Bank.

Tzu Ming Lao has served as a Director of HomeSide  Internaitonal since 2001. Mr.
Lao is  General  Manager,  Global  Market  Risk and  Prudential  Control  of the
National Australia Bank Limited, Melbourne, Australia. Mr. Lao has over 21 years
of  financial  experience.  He began his  career in 1980  with  Arthur  Young in
London.  In 1986,  he joined the Bank of New  Zealand,  Australia to establish a
regional  internal audit function  specializing in finance,  capital markets and
information  technology.  Mr. Lao joined the National  Australia Bank Limited in
1989 to establish a capital  market audit  function  for the  wholesale  banking
business  and has  served  in an  oversight  role in the Group  Risk  Management
Division since 1995.

Gary W.  Fiedler  has served as a Director  and  President  and Chief  Operating
Officer of both HomeSide Lending and  International  since 2001. Mr. Fiedler has
over 30 years in the financial service industry. Mr. Fiedler began his career in
1969 at Mellon Bank in Pittsburgh,  Pennsylvania.  Mr.  Fiedler opened  Mellon's
first loan production  office in Los Angeles and served as its London-based Vice
President.  In 1980,  Mr. Fiedler became the Vice President and Manager of Wells
Fargo Bank's London  branch.  From 1982 through 1987,  Mr.  Fiedler held various
executive level positions at First Interstate Bancorp, culminating in his tenure
as Chairman and Chief Executive  Officer of First Interstate Bank of Nevada.  In
1987,  Mr.  Fiedler  served as  Chairman  and Chief  Executive  Officer of Hogan
Systems, Inc., a Dallas-based supplier of technology services to banks. In 1990,
Mr. Fiedler joined Equimark Corporation, located in Pittsburgh, Pennsylvania, as
Chairman and Chief  Executive  Officer.  Since 1993,  Mr.  Fiedler has completed
various  business  turnaround  assignments at several private  companies.  Also,
during this time,  Mr.  Fiedler held the position of Executive Vice President of
PNC Bank.

Gordon J. Lefevre joined  HomeSide in September 2001 serving as Chief  Financial
Officer until November 14, 2001. Mr. Lefevre has over 18 years of  international
financial  experience.  He began his  career in 1983 at  Deloitte,  Haskins  and
Sells.  In 1987, he joined First  National Bank of South Africa,  where he was a
Senior Manager. In 1990, he moved to Melbourne, Australia as a Senior Manager at
KPMG. Mr. Lefevre joined the National Australia Bank, Melbourne,  Australia,  in
1995 as a senior member of the Bank's acquisition team. In 2000, he relocated to
Glasgow,  Scotland  and served as General  Manager,  Finance  and  Strategy  for
National Australia Group Europe Limited.

Susan E. Lester  joined  HomeSide in October  2001.  She became Chief  Financial
Officer of both HomeSide  Lending and  International  on November 14, 2001.  Ms.
Lester has over 24 years of financial  experience.  She began her career in 1977
with  Ernst & Young in Chicago  and later in  Minneapolis.  In 1988,  she joined
First Bank System,  Inc., the predecessor to U.S.  Bancorp,  where she served as
Senior Vice  President  and  Controller.  In 1994,  she  relocated  to Hartford,
Connecticut  where she was the  Chief  Financial  Officer  of  Shawmut  National
Corporation.  In 1995,  she returned to U.S.  Bancorp  where she served as Chief
Financial Officer until 2000.

Robert J. Jacobs has served as Secretary of HomeSide Intentional since 1996. Mr.
Jacobs has been Vice  President of HomeSide  International  and  Executive  Vice
President and Secretary of HomeSide Lending since 1996. Mr. Jacobs has served as
a Director of HomeSide  Lending  since March 14,  1996.  From 1987 to 1996,  Mr.
Jacobs  served as a Senior  Vice  President  and Chief  Legal  Officer  of Chase
Manhattan  Mortgage  Corporation,  and served as General  Counsel  for  Citicorp
Savings of Florida from 1984 to 1986.  Mr.  Jacobs is a former  President of the
Mortgage Bankers Association of Florida.

William  Glasgow,  Jr. has served as Vice  President  of HomeSide  International
since 1996. Mr. Glasgow has served as Vice President of Loan  Administration for
HomeSide  Lending since 1991.  From 1989 to 1991,  Mr.  Glasgow served as Senior
Vice President with Citicorp Mortgage Inc. in St. Louis, Missouri.

                                       53

<PAGE>

Mark F.  Johnson has served as Vice  President of HomeSide  International  since
1996. Mr. Johnson has served as Vice President of Production of HomeSide Lending
since 1992.  From 1988 to 1992,  Mr. Johnson served as Senior Vice President and
Director of Wholesale Lending for HomeSide.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded to, earned by or paid to
the  Company's  Chief  Executive  Officer  and the  Company's  four most  highly
compensated  executive  officers other than the CEO for all services rendered in
all  capacities to the Company and its  subsidiaries  for the fiscal years ended
September 30, 2001, 2000, and 1999.

                           Summary Compensation Table

<TABLE>
                                                                               Long-Term
                                                                          Compensation Awards
                                                   Annual Compensation    -------------------
   Name and Principal                   Fiscal   ----------------------     Options and LTIP      All Other
HomeSide International Position          Year     Salary     Bonus              Bonus           Compensation
---------------------------------------------------------------------------------------------------------------
<S>                                      <C>     <C>        <C>              <C>                    <C>
Joseph J. Whiteside ................     2001    $ 38,500   $168,750(g)              --             $  2,000(h)
      Chairman  & CEO                    2000          --         --                 --                   --
                                         1999          --         --                 --                   --
---------------------------------------------------------------------------------------------------------------
Hugh R. Harris .....................     2001     510,400    470,000(a)      $2,170,800(e)            15,300(f)
      Former President & COO*            2000     470,000    500,000(a)         100,000(b)           814,800(d)
                                         1999     435,385    470,000(a)         100,000(b)           816,000(c)
---------------------------------------------------------------------------------------------------------------
Mark F. Johnson ....................     2001     275,200    195,000(a)         937,700(e)            15,300(f)
      Vice President                     2000     255,000    215,000(a)          40,000(b)           377,300(d)
                                         1999     240,577    170,000(a)          40,000(b)           378,500(c)
---------------------------------------------------------------------------------------------------------------
William Glasgow, Jr ................     2001     275,200    195,000(a)         937,700(e)            15,300(f)
      Vice President                     2000     255,000    215,000(a)          40,000(b)           377,300(d)
                                         1999     240,577    170,000(a)          40,000(b)           378,500(c)
---------------------------------------------------------------------------------------------------------------
Joe K. Pickett .....................     2001     375,000    470,000(a)       2,209,700(e)            15,300(f)
      Former Chairman & CEO**            2000     450,000    500,000(a)         100,000(b)           814,800(d)
                                         1999     450,000    500,000(a)         150,000(b)           816,000(c)
---------------------------------------------------------------------------------------------------------------
Kevin D. Race ......................     2001     390,400    350,000(a)       1,548,500(e)            15,300(f)
      Vice President                     2000     350,000    350,000(a)          60,000(b)           352,300(d)
                                         1999     321,154    300,000(a)          60,000(b)           353,500(c)
---------------------------------------------------------------------------------------------------------------
W. Blake Wilson ....................     2001     331,700    350,000(a)       1,520,700(e)            15,300(f)
      Former Chief Financial Officer*    2000          --         --                 --                   --
                                         1999          --         --                 --                   --
---------------------------------------------------------------------------------------------------------------
</TABLE>

* Acted until September 4, 2001

** Retired June 30, 2001

(a)  Bonus amounts relate to the annual bonus under  employment  agreements with
     the National paid during the years ended September 30, 2001, 2000 and 1999,
     respectively.

(b)  Options to purchase common stock of National Australia Bank Limited.

(c)  Includes  amounts  received  for  (1)  matching   contributions  under  the
     Company's 401K plan of $6,400 with respect to each  individual,  (2) profit
     sharing contributions of $9,600 with respect to each individual, and (3) an
     annual  bonus  pursuant  to their  respective  employment  agreements  (See
     "Employment  Contracts  and  Termination  of Employment  Arrangements")  of
     $800,000 with respect to Messrs. Pickett and Harris,  $337,500 with respect
     to Mr. Race, and $362,500 with respect to Messrs. Johnson and Glasgow.

(d)  Includes  amounts  received  for  (1)  matching   contributions  under  the
     Company's 401K plan of $6,800 with respect to each  individual,  (2) profit
     sharing contributions of $8,000 with respect to each individual, and (3) an
     annual  bonus  pursuant  to their  respective  employment  agreements  (See
     "Employment  Contracts  and  Termination  of Employment  Arrangements")  of
     $800,000 with respect to Messrs. Pickett and Harris,  $337,500 with respect
     to Mr. Race, and $362,500 with respect to Messrs. Johnson and Glasgow.

(e)  Includes Stock options exercised during the fiscal year ended September 30,
     2001 of $251,900  with respect to Mr.  Harris,  of $168,500 with respect to
     Messrs.  Johnson and Glasgow,  of $290,800 with respect to Mr. Pickett,  of
     $202,300 with respect to Mr. Race and $174,500 with respect to Mr.  Wilson.
     Pursuant to employment  contracts  established in 1998, Long-Term Incentive
     Bonuses of $1,918,900 with respect to Messrs.  Harris and Mr.  Pickett,  of
     $769,200  with respect to Messrs. Johnson and Glasgow,  of $1,346,200  with

                                       54

<PAGE>

     respect  to  Messrs.  Race and  Wilson  were paid  based on the three  year
     performance period of April 1, 1998 to March 31, 2001.  Performance targets
     were achieved for years 1998/1999 and 1999/2000, but not 2000/2001.

(f)  Includes amounts received for (1) matching contribution under the Company's
     401K plan of $6,800  with  respect to each  individual  (2) profit  sharing
     contributions of $8,500 with respect to each individual.

(g)  Signing bonus.

(h)  Matching contribution under the Company's 401K plan.

   Option Grants for the Fiscal Years ended September 30, 2001, 2000 and 1999

     The following  table provides  information on option grants with respect to
common stock of the Parent,  National  Australia  Bank  Limited,  for the fiscal
years ended September 30, 2001,  2000 and 1999 to the named executive  officers.
Pursuant to applicable  regulations of the  Securities  and Exchange  commission
(the  "Commission"),  the following table also sets forth the hypothetical value
which might have been  realized  with respect to such  options  based on assumed
rates of stock appreciation of 5% and 10% compounded annually from date of grant
to the end of the option terms:

<TABLE>
                                                Individual
                                                 Grants                                  Potential Realizable
                                --------------------------------------------------             Value at
                                 Number of                                           Assumed Annual Rates of Stock
                                Securities    % of Total                                 Price Appreciation for
                                Underlying      Options                                        Option
                                  Options      Granted to    Exercise                         Term (e)
                       Fiscal     Granted      Employees      Price     Expiration   -----------------------------
        Name            Year       (#)       in the period   ($/Sh)       Date            5%              10%
------------------------------------------   -------------   --------   ----------   ------------     ------------
<S>                     <C>     <C>                 <C>       <C>        <C>             <C>          <C>
Joe K. Pickett**        2001         --             --            --           --              --             --
                        2000    100,000(b)          (d)       $11.54     03/23/08        $839,523     $1,361,503
                        1999    150,000(c)           1%        18.43     03/19/04          37,500        772,500
------------------------------------------------------------------------------------------------------------------
Hugh R. Harris*         2001    150,000(a)          (d)        13.68     03/23/09         674,824      1,388,913
                        2000    100,000(b)          (d)        11.54     03/23/08         839,523      1,361,503
                        1999    100,000(c)          (d)        18.43     03/19/04          25,000        515,000
------------------------------------------------------------------------------------------------------------------
Kevin D. Race*          2001     60,000(a)          (d)        13.68     03/23/09         269,930        555,565
                        2000     60,000(b)          (d)        11.54     03/23/08         503,714        816,902
                        1999     60,000(c)          (d)        18.43     03/19/04          15,000        309,000
------------------------------------------------------------------------------------------------------------------
W. Blake Wilson*        2001     50,000(a)          (d)        13.68     03/23/09         224,941        462,971
                        2000         --             --            --           --              --             --
                        1999         --             --            --           --              --             --
------------------------------------------------------------------------------------------------------------------
Mark F. Johnson         2001     40,000(a)          (d)        13.68     03/23/09         179,953        370,377
                        2000     40,000(b)          (d)        11.54     03/23/08         335,809        544,601
                        1999     40,000(c)          (d)        18.43     03/19/04          10,000        206,000
------------------------------------------------------------------------------------------------------------------
William Glasgow, Jr.    2001     40,000(a)          (d)        13.68     03/23/09         179,953        370,377
                        2000     40,000(b)          (d)        11.54     03/23/08         335,809        544,601
                        1999     40,000(c)          (d)        18.43     03/19/04          10,000        206,000
------------------------------------------------------------------------------------------------------------------
</TABLE>

* Acted until September 4, 2001

** Retired June 30, 2001

(a)  Options granted during the fiscal year ended September 30, 2001 pursuant to
     National  Australia  Bank's Executive Share Option Plan. The options may be
     exercised  during the period  from March 23, 2004 to March 23, 2009 only if
     on any day during this period the total return to shareholders  exceeds 65%
     of the exercise  price.  In  addition,  a  performance  hurdle based on the
     maximum total  shareholder  return of NAB relative to the total shareholder
     return of a group of companies during the exercise period of the options is
     required  to be met  before the  options  can be  exercised.  This group of
     companies  is to be based on the ASX Top 50, when the options are  granted.
     The total return includes the value of dividends and the share price growth
     over the relevant period.

(b)  Options granted during the fiscal year ended September 30, 2000 pursuant to
     National  Australia  Bank's Executive Share Option Plan. The options may be
     exercised  during the period  from March 23, 2003 to March 23, 2008 only if
     on any day during this period the total return to shareholders  exceeds 65%
     of the exercise  price.  In  addition,  a  performance  hurdle based on the
     maximum total  shareholder  return of NAB relative to the total shareholder
     return of a group of companies during the exercise period of the options is
     required  to be met  before the  options  can be  exercised.  This group of
     companies  is to be based on the ASX Top 50, when the options are  granted.
     The total return includes the value of dividends and the share price growth
     over the relevant period.

(c)  Options granted during the fiscal year ended September 30, 1999 pursuant to
     National  Australia  Bank's Executive Share Option Plan. The options may be
     exercised  during the period  from March 19, 2002 to March 19, 2004 only if
     on any day during this period the total return to shareholders  exceeds 65%
     of the exercise price. The total return includes the value of dividends and
     the share price growth over the relevant period.


                                       55

<PAGE>

(d)  Represents  less than 1% of the total  options  granted  to the  National's
     employees during the fiscal years ended September 30, 2001, 2000 and 1999.

(e)  These values are based on assumed rates of appreciation only. Actual gains,
     if any, on shares acquired on option  exercises are dependent on the future
     performance  of the  National's  Common  Stock and in  accordance  with the
     Executive  Share Option Plan.  The market  price of the  National's  common
     stock was $12.60,  $13.82 and $14.64 at September 30, 2001,  2000 and 1999,
     respectively.

     Aggregated  Option  Exercises  and Option Values for the Fiscal Years Ended
September 30, 2001, 2000 and 1999

     The following  table provides  information on option  exercises  during the
fiscal years ended  September 30, 2001, 2000 and 1999 with respect to the Common
Stock  of the  National  and on the  values  of the  named  executive  officers'
unexercised options at September 30, 2001, 2000 and 1999:

<TABLE>
                                  Shares                 Number of Securities            Value of Unexercised
                                 Acquired               Underlying Unexercised                In-the-Money
                        Fiscal      on       Value       Options at Year-End (#)          Options at Year-End
         Name            Year    Exercise   Realized   Exercisable   Unexercisable   Exercisable   Unexercisable
-----------------------------------------   --------   -----------   -------------   -----------   -------------
   <S>                   <C>         <C>       <C>         <C>           <C>             <C>        <C>
   Joe K. Pickett**      2001        0         $0          0                  --         $0               --
                         2000        0          0          0             100,000          0         $228,000(b)
                         1999        0          0          0             150,000          0                 (c)
----------------------------------------------------------------------------------------------------------------
   Hugh R. Harris*       2001        0         $0          0             150,000         $0          162,000(a)
                         2000        0          0          0             100,000          0          228,000(b)
                         1999        0          0          0             100,000          0                 (c)
----------------------------------------------------------------------------------------------------------------
   Kevin D. Race*        2001        0         $0          0              60,000         $0           64,800(a)
                         2000        0          0          0              60,000          0          136,800(b)
                         1999        0          0          0              60,000          0                 (c)
----------------------------------------------------------------------------------------------------------------
   W. Blake Wilson*      2001        0         $0          0              50,000         $0           54,000(a)
                         2000        -         -           -                  --         --          136,800(b)
                         1999        -         -           -                  --         --                 (c)
----------------------------------------------------------------------------------------------------------------
   Mark F. Johnson       2001        0         $0          0              40,000         $0           43,200(a)
                         2000        0          0          0              40,000          0           91,200(b)
                         1999        0          0          0              40,000          0                 (c)
----------------------------------------------------------------------------------------------------------------
 William Glasgow, Jr.    2001        0         $0          0              40,000         $0           43,200(a)
                         2000        0          0          0              40,000          0           91,200(b)
                         1999        0          0          0              40,000          0                 (c)
----------------------------------------------------------------------------------------------------------------
</TABLE>

* Acted until September 4, 2001

** Retired June 30, 2001

(a)  Value of unexercised  in-the-money  stock options represents the difference
     between the exercise  price of the stock  options and the closing  price of
     the National's Common Stock on September 30, 2001.

(b)  Value of unexercised  in-the-money  stock options represents the difference
     between the exercise  price of the stock  options and the closing  price of
     the National's Common Stock on September 30, 2000.

(c)  No options  granted  during the fiscal year ended  September  30, 1999 were
     in-the-money at September 30, 1999.

LONG-TERM INCENTIVE PLANS

On October 1, 2001,  HomeSide  Lending,  Inc. (the "Plan  Sponsor") and National
Australia  Bank Limited  adopted the 2001  Long-Term  Incentive  Plan (the "2001
LTIP") to  encourage  and  retain  certain  key  employees  to  achieve  certain
performance  targets. The 2001 LTIP benefits executives who have been determined
to be a member of a select group of management or highly  compensated  employees
("Participants")  within the meaning of ERISA  Section  301(a)(3).  Participants
were  selected by a committee  consisting of the  Executive  General  Manager of
People and Culture of  National  Australia  Bank  Limited,  the Chief  Executive
Officer of the Plan Sponsor and the Managing Director of National Australia Bank
Limited ("Plan  Committee").  The maximum  aggregate  amount of awards under the
2001 LTIP is  $10,000,000  ("Pool").  All payments  provided under the 2001 LTIP
will be paid by the Plan  Sponsor.  The plan period is the period  beginning  on
April 1, 2001 and ending on March 31, 2003 (the "Plan Period").

The 2001 LTIP provides for awards to Participants  based on minimum required net
income performance  targets for each six months during the Plan Period specified
in the 2001 LTIP. Payment of a Participant's  individual allocation of the total
amount  available  for  payment  under the 2001 LTIP  upon  satisfaction  of the
performance  targets  ("Awards")  will  ordinarily  be made on or before May 15,
2003.

                                       56

<PAGE>

The 2001 LTIP  provides  that in the  event the  National  is the  subject  of a
successful  takeover  or if Plan  Sponsor  is sold  (a sale by the  National  to
another party,  unrelated to the National, of a portion or the whole of the Plan
Sponsor),  the Pool will be fully earned and will be vested upon the  completion
of the sale. Unless otherwise required by a Participant's  individual employment
agreement,  payment  of  Awards  shall  be made  upon the  90th  day  after  the
completion  of a  successful  takeover of Parent or sale of the Plan  Sponsor to
those  Participants  who are still employed by the Plan Sponsor on such date and
to qualified Participants.  The consummation of those transactions  contemplated
by the Asset Purchase and Liability  Assumption  Agreement  between HomeSide and
WaMu will  result in a full  vesting  of the  $10,000,000  total  award pool and
payment of awards 90 days thereafter.

The Plan  Sponsor  reserves  the  right at any time to  modify or amend the 2001
LTIP,  subject to  Participants'  rights  under the 2001 LTIP and with the prior
written approval of the Plan Committee.

     LONG-TERM INCENTIVE PLANS
     Estimated Future Payouts under non-stock price-based plans

<TABLE>
--------------------   ----------    --------------------------------   -------------   ---------   -----------
                       Number of
                       shares,
                       units or
                       other         Performance  or other period
Name of Officer (a)    rights (b)    until  maturation  or payout (c)   Threshold (d)   Target(e)   Maximum (f)
--------------------   ----------    --------------------------------   -------------   ---------   -----------
<S>                    <C>           <C>                                <C>             <C>         <C>
Joseph J. Whiteside    NA            March 31, 2003                     0               N/A         $1,500,000
--------------------   ----------    --------------------------------   -------------   ---------   -----------
Gary W. Fiedler        NA            March 31, 2003                     0               N/A          1,500,000
--------------------   ----------    --------------------------------   -------------   ---------   -----------
Susan E. Lester        NA            March 31, 2003                     0               N/A            350,000
--------------------   ----------    --------------------------------   -------------   ---------   -----------
Mark F. Johnson        NA            March 31, 2003                     0               N/A            600,000
--------------------   ----------    --------------------------------   -------------   ---------   -----------
William Glasgow, Jr.   NA            March 31, 2003                     0               N/A            600,000
--------------------   ----------    --------------------------------   -------------   ---------   -----------
</TABLE>

(a) Pursuant to Item 402(a)3 of  Regulation  S-K,  disclosure  is made as to Mr.
Whiteside,   Chief  Executive  Officer,  and  the  Company's  four  most  highly
compensated officers other than the CEO.

(b) The 2001 LTIP does not provide for a  specified  number of shares,  units or
other rights on a per  Participant  basis.  Rather,  the Plan Committee has full
discretion to allocate incentive compensation awards among Participants.

(c) The 2001 LTIP provides incentive  compensation for performance over a 2-year
Plan Period (as defined in the 2001 LTIP), with awards payable at the end of the
Plan Period. The Plan Period commences April 1, 2001 and ends on March 31, 2003.
Payments to  Participants  will be made on or before May 15, 2003  provided  the
Participants  satisfy the continued  employment  requirement of the 2001 LTIP or
the individual  Participant's  employment  agreement,  as  applicable.  However,
payments  may  be  made  to  Participants  prior  to  that  date  under  certain
circumstances,  including death, disability,  retirement, termination other than
for cause, sale of the Company,  resignation and transfer, subject to applicable
provisions in the employment agreements of certain Participants.

(d) There is no minimum  award  payable  under the 2001 LTIP.  Rather,  the Plan
Committee (or, in certain instances as set forth in the Plan, individual members
of the Plan Committee) has full  discretion to award  incentive  compensation or
not.

(e) The 2001 LTIP does not  provide for  individual  target  goals or  specified
incentive  compensation  payable to  individual  Participants  for achieving any
target.

(f) The 2001 LTIP does not provide for a maximum incentive  compensation  award.
However,  the table sets forth estimated  maximum payouts to the named executive
officers.

Employment Agreements and  Termination  of Employment  Arrangements

     Effective  in May and  September  2001,  National  Australia  Bank  Limited
entered into employment agreements and otherwise agreed to employment terms with
a select group of executive employees  ("Executives") of HomeSide Lending,  Inc.
and is obligated to pay such salaries during the Executives'  term of employment
with HomeSide Lending.

     Employment  Agreements  with the  National:  Each of the  named  management
executive  officers  have  agreed  to terms  of  employment  with the  National.
Although it is anticipated  that the named  management  executive  officers will
enter into written  employment  agreements with the National,  they have not yet
done so. The  remaining   executive  officers  are party to  written  employment
agreements with the Company.  The agreed upon employment terms between the named
management  executive  officers  and the  National  and the  written  employment
agreements  between  the  company  and  the  remaining  executive  officers  are
collectively referred to herein as the "Employment Agreements."

                                       57

<PAGE>

The annual salary of the Chief Executive Officer and the four most highly
compensated officers are as follows:

     Employment Agreement/Compensatory Plan Annual
                    Base Salary

Title                                                Amount
------------------------------------------------   ---------

Chairman & Chief Executive Officer                 $500,000
President and Chief Operating Officer               500,000
Vice President-Chief Financial Officer              350,000
Vice President-Servicing                            280,000
Vice President-Production                           280,000

The terms of  employment  range  from  eighteen  months  to two  years  based on
effective date of the Employment Agreement ("Employment Period"). The Executives
are eligible to participate in the 2001 LTIP.

The Employment  Agreements also provide that each Executive will be (i) entitled
to  participate  in  employee  benefit  plans  as may be in  effect  for  senior
executives  of the Company from time to time,  (ii) entitled to paid vacation in
accordance  with  the  vacation  policy   applicable  to  the  Company's  senior
executives, (iii) reimbursed by the Company for reasonable business expenses and
(iv) entitled to receive the same perquisites  that such Executives  received at
the effective time of the employment agreement.  On a limited basis, some of the
Employment  Agreements  provide  for  housing  allowance,   participation  in  a
short-term bonus plan,  participation in an annual bonus plan and/or eligible to
be consider for  participation  in any offers made under the National  Australia
Bank Executive  Share Option Plan No. 2 (the "NAB Plan") in accordance  with the
NAB Plan rules as applicable from time to time.

Each  Employment  Agreement may be terminated  by the  applicable  Executive for
"good reason," and by the Company for "cause",  as such terms are defined in the
Employment Agreement, or by voluntary resignation of the Executive,  upon thirty
(30) days'  written  notice in as defined in the  Employment  Agreement.  In the
event during the  Employment  Period,  the Company  terminates the Executive for
"any reason" other than for "cause" or "disability" or the Executive  terminates
employment for "good  reason",  the Company shall pay to the Executive in a lump
sum in cash within thirty (30) days after the date of termination  the aggregate
of the sum of unpaid  portion of  Executive  salary  earned  through the date of
termination,  an amount  ranging  from 12 to 24 months of the  Executive's  base
salary,  any relevant  bonuses in  accordance  with the terms of the  Employment
Agreement  and vested  2001 LTIP  Awards,  in  accordance  with the terms of the
Employment Agreement.

In the event  the  Executive's  employment  is  terminated  for  "cause"  or the
Executive  terminates his employment without "good reason" during the Employment
Period, the Employment  Agreement will be terminated without further obligations
to the  Executive  other than the  obligation to pay or provide to the Executive
the unpaid portion of Executive Salary earned through date of termination as set
forth in the terms of the Employment Agreement.

DEFERRED COMPENSATION PLAN

The Company has adopted that certain NAB Group - USA Deferred Compensation Plan,
effective  as of  February  10,  1998 (the  "Plan"),  for the benefit of certain
employees of HomeSide  Lending,  Inc., all of whom  constitute a select group of
management or highly  compensated  employees  ("Participants").  Pursuant to the
provisions of the Plan,  HomeSide  Lending,  Inc. was designated a Participating
Employer.

The  purpose of the Plan is to provide  participants  the  opportunity  to defer
receipt of salary,  bonus,  and other specified cash  compensation.  The Plan is
intended  to  benefit  a  "select  group of  management  or  highly  compensated
employees"  within the  meaning of  Sections  201,  301 and 401 of the  Employee
Retirement  Income  Security  Act  of  1974,  as  amended  ("ERISA"),  and to be
therefore exempt from the requirements of Parts 2, 3 and 4 of Title I of ERISA.

The Plan was  amended  on March 20,  2001 and May 31,  2001,  to permit  interim
distributions,  to establish a maximum amount to be paid on interim distribution
dates,  to  provide  greater  flexibility  in  Termination  Benefit  installment
payments as well as in changing the Termination  Benefit payment election and to
delete  Change of Control  from the Plan as an event  giving  rise to a lump sum
payout of a Participant's Account Balance.

                                       58

<PAGE>

Payments from the Plan are made to Participants  upon  termination,  disability,
death,  or upon approval of a withdrawal  request  based on financial  hardship.
Each Participate is entitled to a Termination Benefit in an amount equal to such
Participant's adjusted Termination Benefit Balance as of the end of the month of
Termination,   with   payment  in  either  an  single  lump  sum  or  in  annual
installments.  In the event of disability,  a Participant  may elect to commence
immediate distribution in accordance with the form of payment previously elected
under the Termination Benefit In addition,  there is no longer an automatic lump
sum payout in the event of a Change of Control.  Payments will be accelerated to
a lump sum payout in the event of an  Involuntary  Termination of Employment and
shall be paid to each  Participant in accordance with the payment  provisions of
the Plan. Upon the death of a Participant, the beneficiary will be paid a single
lump sum in the amount of the Participant's Account Balance on date of death.

The Company has the right to withhold  from any payment  made under the Plan (or
any amount  deferred into the Plan) any taxes  required by law to be withheld in
respect of such  payment  (or  deferral).  The  Company  bears the  expenses  of
administering the Plan.

The Deferred Compensation Committee (as that term is defined in the Plan) may at
any time modify,  amend, or terminate the Plan, provided that such modification,
amendment,  or  termination  shall not cancel,  reduce,  or otherwise  adversely
affect  the  amount of  benefits  of any  Participant  accrued  (and any form of
payment  elected)  as of  the  date  of any  such  modification,  amendment,  or
termination, without the consent of the Participant.

The Company has entered into a trust  agreement  with  SunTrust Bank pursuant to
which it will fund its obligations under the plan. This type of trust instrument
is commonly referred to as a "Rabbi Trust."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Capital Stock of the Company

All of the outstanding common stock of HomeSide International,  Inc., consisting
of 1.724 shares, is owned by the National.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On July 31, 2001,  HomeSide entered into an agreement for an unsecured revolving
credit facility with the National, which agreement replaced a previous unsecured
revolving credit facility with the National,  initially  established on June 23,
1998 and thereafter renewed on an annual basis..  Under the new credit facility,
HomeSide can borrow up to $2.42 billion through and including  January 30, 2002,
and up to $1.92 billion from January 31, 2002 through July 30, 2002,  subject to
limits imposed by regulatory  authorities.  Borrowings under the credit facility
may be  overnight  or  for  periods  of 7,  30,  60 or 90  days.  For  overnight
borrowings,  the interest  rate is determined by the National at the time of the
borrowing.  For borrowings other than overnight, the interest rate is charged at
the corresponding LIBOR rate of the maturity period.

HomeSide earned management fees charged to affiliate  companies of approximately
$0.7 million for the fiscal year ended  September 30, 2001, $2.5 million for the
fiscal year ended  September 30, 2000 and $0.5 million for the fiscal year ended
September 30, 1999

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a)  The following documents are filed as a part of this Report:

          1.   Financial Statements: See Part II, Item 8 hereof.

          2.   Financial Statement Schedule and Auditors' Report

All schedules  omitted are inapplicable or the information  required is shown in
the Consolidated Financial Statements or notes thereto.

          3.   The following exhibits are submitted herewith:

Unless  otherwise  indicated,  all Exhibits are incorporated by reference to the
Company's Registration Statement on Form S-4, No. 333-06737.

                                       59

<PAGE>

Number                Description
------                -----------
3.1                   Certificate of  Incorporation  of HomeSide  Lending,  Inc.
                      (incorporated  by  reference  to the  Company's  Quarterly
                      Report on Form 10-Q for the quarter ended March 31, 2000)
3.2***                By-Laws of HomeSide Lending, Inc.
4.1                   Form of Common Stock Certificate
10.1                  Stock Purchase  Agreement  dated December 11, 1995 between
                      HomeAmerica  Capital,  Inc.  (currently known as HomeSide,
                      Inc.) and The First  National  Bank of Boston  (the  "BBMC
                      Purchase Agreement")
10.2                  Amendment  No. 1, dated as of March 15, 1996,  to the BBMC
                      Purchase Agreement
10.3                  Marketing  Agreement  dated as of March 15,  1996  between
                      HomeSide, Inc. and The First National Bank of Boston
10.4                  Repurchase  of  Mortgage  Loan  Servicing   Rights  Letter
                      Agreement  between  The  First  National  Bank  of  Boston
                      (currently  known  as  BankBoston,  N.A.)  and  BancBoston
                      Mortgage Corporation (currently known as HomeSide Lending,
                      Inc.)
10.5                  Operating Agreement effective as of March 15, 1996 between
                      The  First  National  Bank of Boston  (currently  known as
                      BankBoston,  N.A.)  and  BancBoston  Mortgage  Corporation
                      (currently known as HomeSide Lending, Inc.)
10.6                  Brokered  Loan  Purchase  and Sale  Agreement  dated as of
                      March 15, 1996  between  BancBoston  Mortgage  Corporation
                      (currently  known as HomeSide  Lending,  Inc.) and each of
                      The  First  National  Bank of Boston  (currently  known as
                      BankBoston N.A.), Bank of Boston Connecticut, Rhode Island
                      Hospital Trust  National Bank and Bank of Boston  Florida,
                      N.A.
10.7                  Master  Take-Out  Commitment  dated as of March  15,  1996
                      between BancBoston Mortgage  Corporation  (currently known
                      as HomeSide Lending,  Inc.) and each of The First National
                      Bank of Boston (currently known as BankBoston, N.A.), Bank
                      of  Boston   Connecticut,   Rhode  Island  Hospital  Trust
                      National Bank and Bank of Boston Florida, N.A.
10.8                  Neighborhood  Assistance  Corporation of America  Mortgage
                      Loan  Take-Out  Commitment  dated  as of  March  15,  1996
                      between BancBoston Mortgage  Corporation  (currently known
                      as HomeSide Lending,  Inc.) and The First National Bank of
                      Boston (currently known as BankBoston, N.A.)
10.9(TRIANGLE)        PMSR Flow  Agreement  dated as of March 15,  1996  between
                      BancBoston  Mortgage   Corporation   (currently  known  as
                      HomeSide  Lending,  Inc.) and each of The  First  national
                      Bank of Boston (currently known as BankBoston, N.A.), Bank
                      of  Boston   Connecticut,   Rhode  Island  Hospital  Trust
                      National Bank and Bank of Boston Florida, N.A.
10.10(TRIANGLE)       Mortgage Loan  Servicing  Agreement  dated as of March 15,
                      1996 between BancBoston  Mortgage  Corporation  (currently
                      known as  HomeSide  Lending,  Inc.)  and each of the First
                      National Bank of Boston, Bank of Boston Connecticut, Rhode
                      Island  Hospital  Trust  National  Bank and Bank of Boston
                      Florida, N.A.
10.11                 Stock Purchase Agreement dated as of March 4, 1996 between
                      Grant America,  Inc.  (currently known as HomeSide,  Inc.)
                      and Barnett Banks, Inc. (the "BMC Purchase Agreement")
10.12                 Amendment  No.  1,  dated as of May 31,  1996,  to the BMC
                      Purchase Agreement
10.13                 Tax Indemnity  Letter  Agreement dated as of March 4, 1996
                      between  Barnett  Mortgage  Company  (currently  known  as
                      HomeSide Holdings, Inc.) and Barnett Banks, Inc.
10.14                 Amended and Restated Shareholder Agreement dated as of May
                      31, 1996 among HomeSide, Inc. and the shareholders thereof
10.15                 Amended and Restated  Registration  Rights Agreement dated
                      as of May 31,  1996  between  HomeSide,  Inc.  and certain
                      shareholders thereof
10.16                 Marketing  Agreement  dated  as of May  31,  1996  between
                      HomeSide, Inc. and Barnett Banks, Inc.
10.17                 Transitional  Services  Agreement dated as of may 31, 1996
                      between  Barnett Banks,  Inc.,  Barnett  Mortgage  Company
                      (currently known as HomeSide Holdings, Inc.) and HomeSide,
                      Inc.
10.18                 Operating  Agreement  dated  as of May  31,  1996  between
                      HomeSide Lending, Inc. and Barnett Banks, Inc.
10.19(TRIANGLE)       Mortgage Loan Servicing  Agreement dated as of April, 1996
                      between HomeSide Lending, Inc. and Barnett Banks, Inc.
10.20(TRIANGLE)       PMSR  Flow  Agreement  dated  as of May 31,  1996  between
                      HomeSide Lending, Inc. and Barnett Banks, Inc.

                                       60

<PAGE>

10.21                 Correspondent   Agreement   dated  May  16,  1996  between
                      HomeSide Lending, Inc. and Barnett Banks, Inc.
10.22                 Delegated  Underwriting Agreement dated as of May 15, 1996
                      between HomeSide Lending, Inc. and HomeSide Holdings, Inc.
10.23*                Amended and Restated Credit  Agreement dated as of January
                      31, 1997 among HomeSide Lending,  Inc.,  Honolulu Mortgage
                      Company,  Inc., the Lenders parties thereto, and The Chase
                      Manhattan  Bank  as  Administrative   Agent  (the  "Credit
                      Agreement")
10.24*                Amended and Restated Holdings Pledge Agreement dated as of
                      January 31, 1997 between  HomeSide  Lending,  Inc. and The
                      Chase  Manhattan  Bank,  as  Administrative  Agent for the
                      Lenders parties to the Credit Agreement
10.25*                Amended and Restated  HomeSide  Lending  Pledge  Agreement
                      dated as of January 31,  1997  between  HomeSide  Lending,
                      Inc. and The Chase Manhattan Bank, as Administrative Agent
                      for the Lenders parties to the Credit Agreement
10.26*                Amended  and  Restated  BMC Pledge  Agreement  dated as of
                      January 31, 1997 between HomeSide  Holdings,  Inc. and The
                      Chase  Manhattan  Bank,  as  Administrative  Agent for the
                      Lenders parties to the Credit Agreement
10.27                 Registration  Rights  Agreement  dated as of May 14,  1996
                      among  HomeSide,  Inc.  and Merrill  Lynch & Co.,  Merrill
                      Lynch, Pierce,  Fenner & Smith Incorporated,  Smith Barney
                      Inc. and Friedman, Billings, Ramsey & Co., Inc.
10.28*                Amended and Restated Holdings Guaranty dated as of January
                      31, 1997 by HomeSide, Inc. in favor of The Chase Manhattan
                      Bank, as  Administrative  Agent for the Lenders parties to
                      the Credit Agreement
10.29*                Amended and Restated HomeSide Lending Guaranty dated as of
                      January 31, 1997 by HomeSide Lending, Inc. in favor of The
                      Chase  Manhattan  Bank,  as  Administrative  Agent for the
                      Lenders parties to the Credit Agreement
10.30*                Amended and  Restated  Subsidiaries  Guaranty  dated as of
                      January 31, 1997 by each of SWD Properties, Inc., Stockton
                      Plaza, Inc.,  HomeSide Lending Mortgage  Securities,  Inc.
                      and Honolulu Mortgage Company,  Inc. in favor of The Chase
                      Manhattan  Bank, as  Administrative  Agent for the Lenders
                      parties to the Credit Agreement
10.31*                Amended and Restated BMC Guaranty  dated as of January 31,
                      1997 by  HomeSide  Holdings,  Inc.  in favor of The  Chase
                      Manhattan  Bank, as  Administrative  Agent for the Lenders
                      parties to the Credit Agreement
10.32*                Amended  and  Restated   Security  and  Collateral  Agency
                      Agreement  dated as of January 31, 1997  between  HomeSide
                      Lending,   Inc.   and  The  Chase   Manhattan   Bank,   as
                      Administrative Agent for the Lenders parties to the Credit
                      Agreement
10.33*                Amended  and  Restated   Security  and  Collateral  Agency
                      Agreement  dated as of January 31, 1997  between  Honolulu
                      Mortgage  Company,  Inc. and The Chase  Manhattan Bank, as
                      Administrative Agent for the Lenders parties to the Credit
                      Agreement
10.34*                Amended  and  Restated   Security  and  Collateral  Agency
                      Agreement  dated as of January 31, 1997  between  HomeSide
                      Holdings,   Inc.  and  The  Chase   Manhattan   Bank,   as
                      Administrative Agent for the Lenders parties to the Credit
                      Agreement
10.35                 Intercreditor  Agreement  dated as of May 31, 1996 between
                      HomeSide Lending, Inc. HomeSide Holdings,  The Bank of New
                      York,  as  Trustee,  and  The  Chase  Manhattan  Bank,  as
                      Administrative Agent under the Credit Agreement
10.36                 HomeSide,  Inc. Time  Accelerated  Restricted Stock Option
                      Plan
10.37                 HomeSide, Inc. Non-Qualified Stock Option Plan
10.38                 Class B Non-Voting  Common Stock Issuance  Agreement dated
                      as of March 14,  1996  between  HomeSide,  Inc.  and Smith
                      Barney Inc.
10.39                 Transitional Services Agreement dated as of March 15, 1996
                      between The First National Bank of Boston (currently known
                      as BankBoston,  N.A.) and BancBoston Mortgage  Corporation
                      (currently known as HomeSide Lending, Inc.)
10.40                 Transitional Services Agreement dated as of March 15, 1996
                      between The First National Bank of Boston (currently known
                      as BankBoston,  N.A.) and BancBoston Mortgage  corporation
                      (currently known as HomeSide Lending, Inc.)
10.41                 Management  Agreement  dated as of March 15, 1996  between
                      BancBoston  Mortgage   Corporation   (currently  known  as
                      HomeSide  Lending,  Inc.) and The First  National  Bank of
                      Boston (currently known as BankBoston, N.A.)
10.42                 Management  Agreement  dated as of March 15, 1996  between
                      BancBoston  Mortgage   Corporation   (currently  known  as
                      HomeSide Lending, Inc.) and Thomas H. Lee Company
10.43                 Management  Agreement  dated as of March 15, 1996  between
                      BancBoston  Mortgage   Corporation   (currently  known  as
                      HomeSide  Lending,  Inc.) and Madison  Dearborn  Partners,
                      Inc.

                                              61

<PAGE>
10.44                 Management  Stockholder Agreement dated as of May 15, 1996
                      between HomeSide,  Inc., The First National Bank of Boston
                      (currently known BankBoston,  N.A.),  Thomas H. Lee Equity
                      Fund III,  L.P. and certain  affiliates  thereof,  Madison
                      Dearborn Capital  Partners,  L.P. and certain employees of
                      HomeSide Lending, Inc. and its subsidiaries
10.45                 Management  Agreement  dated  as of May 31,  1996  between
                      HomeSide Lending, Inc. and Barnett Banks, Inc.
10.46                 Form of HomeSide Severance Agreement
10.47                 Loan and Security Agreement dated January 15, 1997 between
                      HomeSide  Lending,  Inc.  and  The  Chase  Manhattan  Bank
                      (incorporated  by  reference  to  Company's   Registration
                      Statement on Form S-1 Registration No. 333-17685).
10.48*                First  Amendment  dated  February  28,  1997 to  Loan  and
                      Security Agreement dated January 15, 1997 between HomeSide
                      Lending, Inc. and The Chase Manhattan Bank
10.49*                Second Amendment dated March 31, 1997 to Loan and Security
                      Agreement dated January 15, 1997 between HomeSide Lending,
                      Inc. and The Chase Manhattan Bank.
10.50*                Loan and Security  Agreement  dated March 14, 1997 between
                      HomeSide Lending,  Inc. and Merrill Lynch Mortgage Capital
                      Inc.
10.51*                First  Amendment dated March 31, 1997 to Loan and Security
                      Agreement dated March 14, 1997 between  HomeSide  Lending,
                      Inc. and Merrill Lynch Mortgage Capital Inc.
10.52*                Third  Amendment dated April 11, 1997 to Loan and Security
                      Agreement dated January 15, 1997 between HomeSide Lending,
                      Inc. and The Chase Manhattan Bank.
10.53*                Second Amendment dated April 14, 1997 to Loan and Security
                      Agreement dated March 14, 1997 between  HomeSide  Lending,
                      Inc. and Merrill Lynch Mortgage Capital Inc.
10.54*                Fourth Amendment dated April 29, 1997 to Loan and Security
                      Agreement dated January 15, 1997 between HomeSide Lending,
                      Inc. and The Chase Manhattan Bank.
10.55*                Third  Amendment dated April 29, 1997 to Loan and Security
                      Agreement dated March 14, 1997 between  HomeSide  Lending,
                      Inc. and Merrill Lynch Mortgage Capital Inc.
10.56                 Amendment  dated as of  September  30,  1997 to the Credit
                      Agreement  dated as of January 31, 1997  (incorporated  by
                      reference  to  Quarterly  Report on Form 10-Q of Company's
                      for Quarter ended November 30,1997).
10.57*                Second  Amendment  dated as of  December  31,  1997 to the
                      Credit Agreement dated as of January 31, 1997.
10.58*                Employment     Agreement    and     Confidentiality    and
                      Non-Competition  Agreement,  each dated as of October  25,
                      1997,  each  between  HomeSide  Lending,  Inc.  and Joe K.
                      Pickett.
10.59*                Employment     Agreement    and     Confidentiality    and
                      Non-Competition  Agreement,  each dated as of October  25,
                      1997,  each  between  HomeSide  Lending,  Inc. and Hugh R.
                      Harris.
10.60*                Employment     Agreement    and     Confidentiality    and
                      Non-Competition  Agreement,  each dated as of October  25,
                      1997,  each between  HomeSide  Lending,  Inc. and Kevin D.
                      Race.
10.61*                Employment     Agreement    and     Confidentiality    and
                      Non-Competition  Agreement,  each dated as of October  25,
                      1997,  each  between  HomeSide  Lending,  Inc. and William
                      Glasgow.
10.62*                Employment     Agreement    and     Confidentiality    and
                      Non-Competition  Agreement,  each dated  October 25, 1997,
                      each between HomeSide Lending, Inc., and Mark F. Johnson.
10.63**               HomeSide Lending, Inc. Long Term Incentive Plan.
10.64**               NAB  Group - USA  Deferred  Compensation  Plan,  effective
                      February 10, 1998.
10.65**               Revolving  Credit  Agreement  dated as of October 18, 1999
                      among  HomeSide  Lending,  the  lenders  thereto and Chase
                      Manhattan Bank as Administrator.
10.66                 Unsecured  Revolving  Credit Agreement and Promissory Note
                      dated June 23, 1998  between  HomeSide  Lending,  Inc. and
                      National  Australia Bank (incorporated by reference to the
                      Company's  Quarterly  Report on Form 10-Q for the  quarter
                      ended June 30, 1998).
10.67                 First Amendment dated June 22, 1999 to Unsecured Revolving
                      Credit  Agreement  dated June 23,  1998  between  HomeSide
                      Lending  ,  Inc.  and  National   Australia  Bank  Limited
                      (incorporated  by  reference  to the  Company's  Quarterly
                      Report on Form 10-Q for the quarter ended June 30, 1999)
10.68                 Amended and Restated  Renewal  Promissory  Note dated June
                      22, 1999  between  HomeSide  Lending,  Inc.  and  National
                      Australia Bank Limited  (incorporated  by reference to the
                      Company's  Quarterly  Report on Form 10-Q for the  quarter
                      ended June 30, 1999)
10.69***              Second   Amendment   dated  June  21,  2000  to  Unsecured
                      Revolving Credit Agreement between HomeSide Lending,  Inc.
                      and National Australia Bank Limited.
10.70***              Second Amended and Restated Renewal  Promissory Note dated
                      June 21, 2000 between HomeSide Lending,  Inc. and National
                      Australia   Bank  Limited.   10.71***   Revolving   Credit
                      Agreement  dated as of October  16,  2000  among  HomeSide
                      Lending,  the  lenders  thereto  and  Chase  Manhattan  as
                      Administrator.

                                       62

<PAGE>

10.72***              Trust  under NAB Group - USA  Deferred  Compensation  Plan
                      Dated as of July 6, 2000 between HomeSide Lending Inc, and
                      SunTrust Bank.
10.73+                Third Amendment dated June 20, 2001 to Unsecured Revolving
                      Credit  Agreement  between  HomeSide  Lending,   Inc.  and
                      National Australia Bank Limited.
10.74+                Third Amended and Restated  Renewal  Promissory Note dated
                      June 20, 2001 between HomeSide Lending,  Inc. and National
                      Australia Bank Limited.
10.75+                Unsecured  Revolving  Credit Agreement dated July 31, 2001
                      between HomeSide Lending, Inc. and National Australia Bank
                      Limited.
10.76+                Promissory  Note  dated  July 31,  2001  between  HomeSide
                      Lending, Inc. and National Australia Bank Limited.
10.77+                Employment  Agreement  with Hugh R.  Harris  dated May 17,
                      2001.
10.78+                Employment  Agreement  with  Kevin D.  Race  dated May 17,
                      2001.
10.79+                Employment  Agreement  with W. Blake  Wilson dated May 17,
                      2001.
10.80+                Employment  Agreement  with Mark F. Johnson  dated May 17,
                      2001.
10.81+                Employment  Agreement with William Glasgow,  Jr. dated May
                      17, 2001.
10.82+                Reserved for future use.
10.83+                Reserved for future use.
10.84+                Reserved for future use.
10.85(TRIANGLE)       HomeSide Lending, Inc. 2001 Long-Term Incentive Plan dated
(TRIANGLE)+           as of October 1, 2001.
10.86+                First Amended NAB Group-USA  Deferred  Compensation  Plan,
                      amended November 14, 2000.
10.87+                Second Amended NAB Group-USA  Deferred  Compensation Plan,
                      amended March 20, 2001.
10.88+                Third Amended NAB Group-USA  Deferred  Compensation  Plan,
                      amended May 31, 2001.
10.89+                Asset   Purchase/Liability   Assumption   Agreement  dated
                      December 11, 2001.
21.1                  List of subsidiaries of HomeSide International, Inc.
27.1                  Financial Data Schedule

----------
* Incorporated by reference to Exhibits of HomeSide Lending, Inc.'s (a
wholly-owned subsidiary of the Registrant) Registration Statement on Form S-1,
Registration No. 333-21193

(TRIANGLE) Portions of this Exhibit have been omitted pursuant to an order by
the Securities and Exchange Commission granting confidential treatment.

** Incorporated by reference to Annual Report on Form 10-K of the Company for
the fiscal year ended September 30, 1999.
*** Incorporated by reference to Annual Report on Form  10-K of  the Company for
the fiscal year ended September 30, 2000.

----------
+ Filed Herewith.

(TRIANGLE)(TRIANGLE)  Confidential  treatment of a portion of this  document has
been requested.

     (b)  Reports on form 8-K

     HomeSide  International  filed no  reports  on form 8-K  during  the  three
months  ended September 30, 2001.

                                       63

<PAGE>

                                   SIGNATURES

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

                                             HomeSide International, Inc.
                                             (Registrant)

                                             By:
                                                   --------/s/--------------
                                                   Joseph J. Whiteside
                                                   Chairman, Chief Executive
                                                   Officer and Director

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed by the following  persons on behalf of the  registrant in
the capacities and on the dates indicated.

<TABLE>
         Signature                             Title                                  Date
         ---------                             -----                                  ----

<S>                    <C>                                                <C>
                       Chairman, Chief Executive Officer and Director     December 27, 2001
   ------/s/---------
  Joseph J. Whiteside

                       President, Chief Operating Officer and Director    December 27, 2001
   ------/s/ -------
  Gary W. Fiedler

                       Vice President and Chief Financial Officer         December 27, 2001
   ------/s/--------
  Susan E. Lester

                       Director                                           December 27, 2001
   ------/s/--------
  Tzu Ming Lao

                       Director                                           December 27, 2001
   -----------------
  Robert MC. Prowse

                       Director                                           December 27, 2001
   -----------------
  Richard E. McKinnon
</TABLE>

                                       64