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2004 Annual Report

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

To our Shareholders:

I am pleased to write you this second annual letter as Chairman and CEO of Freddie Mac – the first covering developments under the company’s new leadership team.

What began as a triage year became a year of mounting progress. By the end of 2004, our steps forward had begun to build real momentum. While we still have many challenges, I feel good about where we are and where we’re going.

Our progress has come in three phases. First, we acted to repair the company’s accounting, reputation and key relationships. Second, we laid a strong organizational foundation for the future. This has meant putting in place a tested and talented senior management team and reorganizing the company to be more agile, control costs and move toward operating excellence. Third, we are taking specific steps to build on this foundation, fulfill our vital public mission and produce lasting value for our shareholders.

Freddie Mac’s employees are highly able, loyal and committed to our mission. The key is providing the right kind of leadership and sense of urgency. Read more from Richard Syron.

Segment 1 of the Report contains the following information:

Table of Contents

BOARD OF DIRECTORS

EXPLANATORY NOTE
BUSINESS
   Financial Information about Segments
   Business Review
   Market Overview
   Mortgage Purchase and Guarantee Activity
   The To Be Announced Market
   Resecuritization
   Portfolio Investment
   PC Market-Making and Support Activities
   Mortgage Security Performance and Other Market
     Support Activities
   Regulation and Governmental Relationships
PROPERTIES
LEGAL PROCEEDINGS
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
MARKET PRICE FOR THE COMPANY'S COMMON EQUITY, RELATED STOCKHOLDER
  MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
FORWARD-LOOKING STATEMENTS
SELECTED FINANCIAL DATA

Segment 2 of the Report contains the following information:

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS
    EXECUTIVE SUMMARY
    OUR RETAINED AND TOTAL MORTGAGE PORTFOLIOS
    CRITICAL ACCOUNTING POLICIES AND ESTIMATES
    CONSOLIDATED RESULTS OF OPERATIONS
    CONSOLIDATED BALANCE SHEETS ANALYSIS
    AVERAGE CONSOLIDATED BALANCE SHEETS AND
      RATE/VOLUME ANALYSIS
    CONSOLIDATED FAIR VALUE BALANCE SHEETS
    VOLUME STATISTICS
    LIQUIDITY AND CAPITAL RESOURCES
    OFF-BALANCE SHEET ARRANGEMENTS

Segment 3 of the Report contains the following information:

RISK MANAGEMENT
        Risk Oversight
        Operational Risk
        Interest-Rate and Other Market Risks
        Credit Risks
QUARTERLY SELECTED FINANCIAL DATA
SUBSEQUENT ACCOUNTING REVISIONS
VOLUNTARY COMMITMENTS

Segment 4 of the Report contains the following information:

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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
INDEX OF ACRONYMS