2002 Annual Report

The complete report has been divided into four segments for easier online viewing and printing.

To our Shareholders:

The following is Freddie Mac's annual report for 2002. As you know, 2003 was an especially difficult year for the company and, as a consequence, we are late issuing the 2002 annual report. We very much regret the delay. Throughout the past year, we have worked to complete the restatement of financial results for 2000, 2001 and 2002 and provide you the information as quickly as possible, but our guiding principle has been to ensure that we did not sacrifice accuracy for the sake of speed. This was part of our two-track strategy to complete the review of financial processes and controls, while maintaining business performance and focus on our mission.

In November 2003, Freddie Mac issued its restated results. As restated, Freddie Mac's net income for 2002 was $10.09 billion, or $14.18 per diluted common share. The company reported regulatory core capital of $28.99 billion as of December 31, 2002, and stockholders' equity at that date was $31.33 billion. While these results were presented publicly in November, the complete restated financial results are discussed in detail in the pages that follow. Read the full text of the letter from Shawn O'Malley [PDF 236K]

Segment 1 of the Report [PDF 236K] contains the following information:

Board of Directors
Senior Management

Table of Contents

FORWARD-LOOKING STATEMENTS
EXPLANATORY NOTE
BUSINESS
   General Development of Business
   Financial Information about Segments
   Business Review
   Market Overview
   Mortgage Purchase and Guarantee Activity
   The To Be Announced, or TBA, Market
   Resecuritization
   Portfolio Investment
   PC Market-Making and Support Activities
   Regulation and Governmental Relationships
PROPERTIES
LEGAL PROCEEDINGS
SUBSEQUENT EVENTS
   Board of Directors and Management
   Legal Proceedings
   Legislative Developments
   Regulatory Developments
   Mortgage Security Performance
   Affordable Housing Initiatives
   Tax Contingencies
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
MARKET PRICE FOR THE COMPANY'S COMMON EQUITY AND RELATED
  STOCKHOLDER MATTERS
    Market Information
    Dividends
    Holders
    Securities Authorized for Issuance under Equity
      Compensation Plans
SELECTED FINANCIAL DATA 

Segment 2 of the Report [PDF 209K] contains the following information:

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS
    RESTATEMENT RESULTS
    FINANCIAL HIGHLIGHTS
    CRITICAL ACCOUNTING POLICIES
    CONSOLIDATED RESULTS OF OPERATIONS
    CONSOLIDATED BALANCE SHEETS ANALYSIS
    AVERAGE BALANCE SHEETS AND RATE/VOLUME ANALYSIS
    CONSOLIDATED FAIR VALUE BALANCE SHEETS
    VOLUME STATISTICS
    LIQUIDITY AND CAPITAL RESOURCES
        Liquidity
        Capital Resources

Segment 3 of the Report [PDF 225K] contains the following information:

    RISK MANAGEMENT
        Operational Risk
            Internal Control Weaknesses
            Overview of Operational Risk Management
            Management of Freddie Mac's Operational
              Risks
            Interest-Rate Risk and Other Market Risks
            Sources of Interest-Rate Risk and Other
              Market Risks
        Interest-Rate Risk Management and Use of
          Derivatives
            Derivative-Related Risks
            Interest-Rate Derivative Tables
            Measurement of Interest-Rate Risk
        Credit Risk
            Mortgage Credit Risk
            Institutional Credit Risk
    OTHER REGULATORY MATTERS
    QUARTERLY SELECTED FINANCIAL DATA SUBSEQUENT
      ACCOUNTING REVISIONS
    VOLUNTARY COMMITMENTS 

Segment 4 of the Report [PDF 451K] contains the following information:

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
  AND FINANCIAL DISCLOSURE
DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
  MANAGEMENT AND RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INDEMNIFICATION AND OTHER REIMBURSEMENTS OF DIRECTORS,
  OFFICERS AND EMPLOYEES
PRINCIPAL ACCOUNTANT FEES AND SERVICES
CERTIFICATIONS
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED
  FIXED CHARGES AND PREFERRED STOCK DIVIDENDS