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CERTIFICATE OF DESIGNATION OF TERMS OF 

NON-CUMULATIVE CONVERTIBLE SERIES 2004-1 PREFERRED STOCK 

1. Designation, Par Value and Number of Shares. 

The designation of the series of preferred stock of the Federal National Mortgage 

Association (“Fannie Mae”) created by this resolution shall be “ Non-Cumulative Convertible 

Series 2004-1 Preferred Stock” (the “Series 2004-1 Preferred Stock”), and the number of shares 

initially constituting the Series 2004-1 Preferred Stock is 25,000. Shares of Series 2004-1 

Preferred Stock will have no par value and a stated value and liquidation preference of $100,000 

per share. The Board of Directors of Fannie Mae, or a duly authorized committee thereof, in its 

sole discretion, may reduce the number of shares of Series 2004-1 Preferred Stock, provided 

such reduction is not below the number of shares of Series 2004-1 Preferred Stock then 

outstanding. 

2. Dividends. 

(a) Holders of record of Series 2004-1 Preferred Stock (each individually a “Holder”, 

or collectively the “Holders”) will be entitled to receive, when, as and if declared by the Board of 

Directors of Fannie Mae, or a duly authorized committee thereof, in its sole discretion out of 

funds legally available therefor, non-cumulative quarterly cash dividends which will accrue from 

and including the Issue Date (as defined in Section 5(f) below) and will be payable on March 31, 

June 30, September 30 and December 31 of each year (each, a “Dividend Payment Date”), 

commencing March 31, 2005, at the annual rate of $5,375.00 per share or 5.375% of the stated 

value and liquidation preference of $100,000 per share. If a Dividend Payment Date is not a 

Business Day, the related dividend (if declared) will be paid on the next succeeding Business 

Day with the same force and effect as though paid on the Dividend Payment Date, without any 

increase to account for the period from such Dividend Payment Date through the date of actual 

payment. A “Business Day” shall mean any day other than a Saturday, Sunday, or a day on 

which banking institutions in New York, New York are authorized by law to close. Dividends 

will be paid to Holders on the record date fixed by the Board of Directors or a duly authorized 

committee thereof, which may not be earlier than 45 days or later than 10 days prior to the 

applicable Dividend Payment Date. If declared, the initial dividend, which will be for the period 

from and including the Issue Date to but excluding March 31, 2005, will be $1,358.68 per share 

and will be payable on March 31, 2005 and, thereafter, if declared, quarterly dividends will be 

$1,343.75 per share. After the initial dividend, the dividend period relating to a Dividend 

Payment Date will be the period from and including the preceding Dividend Payment Date to but 

excluding the related Dividend Payment Date. If Fannie Mae redeems the Series 2004-1 

Preferred Stock, the dividend that would otherwise be payable for the then-current quarterly 

dividend period accrued to but excluding the date of redemption will be included in the 

redemption price of the shares redeemed and will not be separately payable. Dividends payable 

on the Series 2004-1 Preferred Stock for any period greater or less than a full dividend period 

will be computed on the basis of a 360-day year consisting of twelve 30-day months. The 

amount of dividends per share payable at redemption will be rounded to the fourth digit after the 

decimal point. (If the fifth digit to the right of the decimal point is five or greater, the fourth digit 

will be rounded up by one.) 
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(b) No dividend (other than dividends or distributions paid in shares of, or options, 

warrants or rights to subscribe for or purchase shares of, the common stock of Fannie Mae or any 

other stock of Fannie Mae ranking, as to the payment of dividends and the distribution of assets 

upon dissolution, liquidation or winding up of Fannie Mae, junior to the Series 2004-1 Preferred 

Stock) may be declared or paid or set apart for payment on Fannie Mae’s common stock (or on 

any other stock of Fannie Mae ranking, as to the payment of dividends, junior to the Series 2004-

1 Preferred Stock) unless dividends have been declared and paid or set apart (or ordered to be set 

apart) on the Series 2004-1 Preferred Stock for the then-current quarterly dividend period; 

provided, however, that the foregoing dividend preference shall not be cumulative and shall not 

in any way create any claim or right in favor of the Holders of Series 2004-1 Preferred Stock in 

the event that dividends have not been declared or paid or set apart (or ordered to be set apart) on 

the Series 2004-1 Preferred Stock in respect of any prior dividend period. If the full dividend on 

the Series 2004-1 Preferred Stock is not paid for any quarterly dividend period, the Holders of 

Series 2004-1 Preferred Stock will have no claim in respect of the unpaid amount so long as no 

dividend (other than those referred to above) is paid on Fannie Mae’s common stock (or any 

other stock of Fannie Mae ranking, as to the payment of dividends, junior to the Series 2004-1 

Preferred Stock) for such dividend period. 

(c) The Board of Directors of Fannie Mae, or a duly authorized committee thereof, 

may, in its discretion, choose to pay dividends on the Series 2004-1 Preferred Stock without the 

payment of any dividends on Fannie Mae’s common stock (or any other stock of Fannie Mae 

ranking, as to the payment of dividends, junior to the Series 2004-1 Preferred Stock). 

(d) No full dividends shall be declared or paid or set apart for payment on any stock 

of Fannie Mae ranking, as to the payment of dividends, on a parity with the Series 2004-1 

Preferred Stock for any period unless full dividends have been declared and paid or set apart for 

payment on the Series 2004-1 Preferred Stock for the then-current quarterly dividend period. 

When dividends are not paid in full upon the Series 2004-1 Preferred Stock and all other classes 

or series of stock of Fannie Mae, if any, ranking, as to the payment of dividends, on a parity with 

the Series 2004-1 Preferred Stock, all dividends declared upon shares of Series 2004-1 Preferred 

Stock and all such other stock of Fannie Mae will be declared pro rata so that the amount of 

dividends declared per share of Series 2004-1 Preferred Stock and all such other stock will in all 

cases bear to each other the same ratio that accrued dividends per share of Series 2004-1 

Preferred Stock (but without, in the case of any noncumulative preferred stock, accumulation of 

unpaid dividends for prior dividend periods) and such other stock bear to each other. 

(e) No dividends may be declared or paid or set apart for payment on any shares of 

Series 2004-1 Preferred Stock if at the same time any arrears exist or default exists in the 

payment of dividends on any outstanding class or series of stock of Fannie Mae ranking, as to the 

payment of dividends, prior to the Series 2004-1 Preferred Stock. 

(f) Holders of Series 2004-1 Preferred Stock will not be entitled to any dividends, 

whether payable in cash or property, other than as herein provided and will not be entitled to 

interest, or any sum in lieu of interest, in respect of any dividend payment. 
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3. Optional Redemption. 

(a) The Series 2004-1 Preferred Stock shall not be redeemable prior to January 5, 

2008. On or after that date, subject to (x) the notice provisions set forth in Section 3(b) below, 

(y) receipt of any required regulatory approval and (z) any further limitations which may be 

imposed by law, Fannie Mae may redeem the Series 2004-1 Preferred Stock, in whole or in part, 

at any time or from time to time, out of funds legally available therefor, at the redemption price 

of $105,000 per share plus an amount equal to the amount of the dividend (whether or not 

declared) for the then-current quarterly dividend period accrued to but excluding the date of such 

redemption, but without accumulation of unpaid dividends on the Series 2004-1 Preferred Stock 

for prior dividend periods. If less than all of the outstanding shares of Series 2004-1 Preferred 

Stock are to be redeemed, Fannie Mae will select the shares to be redeemed from the outstanding 

shares not previously called for redemption by lot or pro rata (as nearly as possible) or by any 

other method that the Board of Directors of Fannie Mae, or a duly authorized committee thereof, 

in its sole discretion deems equitable. 

(b) In the event Fannie Mae shall redeem any or all of the Series 2004-1 Preferred 

Stock as aforesaid, Fannie Mae will give notice of any such redemption to Holders of Series 

2004-1 Preferred Stock not less than 20 days prior to the date fixed by the Board of Directors of 

Fannie Mae, or duly authorized committee thereof, for such redemption. Each such notice will 

state: (1) the number of shares of Series 2004-1 Preferred Stock to be redeemed and, if fewer 

than all of the shares of Series 2004-1 Preferred Stock held by a Holder are to be redeemed, the 

number of shares to be redeemed from such Holder; (2) the redemption price; (3) the redemption 

date; (4) the place at which a Holder’s certificate(s) representing shares of Series 2004-1 

Preferred Stock must be presented upon such redemption; and (5) the date on which a Holder’s 

conversion rights, if any, as to the shares of Series 2004-1 Preferred Stock to be redeemed shall 

terminate. Failure to give notice, or any defect in the notice, to any Holder of Series 2004-1 

Preferred Stock shall not affect the validity of the proceedings for the redemption of shares of 

any other Holder of Series 2004-1 Preferred Stock being redeemed. 

(c) Notice having been given as herein provided, from and after the redemption date, 

dividends on the Series 2004-1 Preferred Stock called for redemption shall cease to accrue and 

such Series 2004-1 Preferred Stock called for redemption will no longer be deemed outstanding, 

and all rights of the Holders thereof as registered holders of such shares of Series 2004-1 

Preferred Stock will cease. Upon surrender in accordance with said notice of the certificate(s) 

representing shares of Series 2004-1 Preferred Stock so redeemed (properly endorsed or assigned 

for transfer, if the Board of Directors of Fannie Mae, or a duly authorized committee thereof, 

shall so require and the notice shall so state), such shares shall be redeemed by Fannie Mae at the 

redemption price aforesaid. Any shares of Series 2004-1 Preferred Stock that shall at any time 

have been redeemed shall, after such redemption, be cancelled and not reissued. In case fewer 

than all the shares represented by any such certificate are redeemed, a new certificate shall be 

issued representing the unredeemed shares without cost to the Holder thereof. 

(d) The Series 2004-1 Preferred Stock will not be subject to any mandatory 

redemption, sinking fund or other similar provisions. In addition, Holders of Series 2004-1 

Preferred Stock will have no right to require redemption of any shares of Series 2004-1 Preferred 

Stock. 
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4. Liquidation Rights. 

(a) Upon any voluntary or involuntary dissolution, liquidation or winding up of 

Fannie Mae, after payment or provision for the liabilities of Fannie Mae and the expenses of 

such dissolution, liquidation or winding up, the Holders of outstanding shares of the Series 2004-

1 Preferred Stock will be entitled to receive out of the assets of Fannie Mae or proceeds thereof 

available for distribution to stockholders, before any payment or distribution of assets is made to 

holders of Fannie Mae’s common stock (or any other stock of Fannie Mae ranking, as to the 

distribution of assets upon dissolution, liquidation or winding up of Fannie Mae, junior to the 

Series 2004-1 Preferred Stock), the amount of $100,000 per share plus an amount equal to the 

dividend (whether or not declared) for the then-current quarterly dividend period accrued to but 

excluding the date of such liquidation payment, but without accumulation of unpaid dividends on 

the Series 2004-1 Preferred Stock for prior dividend periods. 

(b) If the assets of Fannie Mae available for distribution in such event are insufficient 

to pay in full the aggregate amount payable to Holders of Series 2004-1 Preferred Stock and 

holders of all other classes or series of stock of Fannie Mae, if any, ranking, as to the distribution 

of assets upon dissolution, liquidation or winding up of Fannie Mae, on a parity with the Series 

2004-1 Preferred Stock, the assets will be distributed to the Holders of Series 2004-1 Preferred 

Stock and holders of all such other stock pro rata, based on the full respective preferential 

amounts to which they are entitled (but without, in the case of any noncumulative preferred 

stock, accumulation of unpaid dividends for prior dividend periods). 

(c) Notwithstanding the foregoing, Holders of Series 2004-1 Preferred Stock will not 

be entitled to be paid any amount in respect of a dissolution, liquidation or winding up of Fannie 

Mae until holders of any classes or series of stock of Fannie Mae ranking, as to the distribution 

of assets upon dissolution, liquidation or winding up of Fannie Mae, prior to the Series 2004-1 

Preferred Stock have been paid all amounts to which such classes or series are entitled. 

(d) Neither the sale, lease or exchange (for cash, shares of stock, securities or other 

consideration) of all or substantially all of the property and assets of Fannie Mae, nor the merger, 

consolidation or combination of Fannie Mae into or with any other corporation or the merger, 

consolidation or combination of any other corporation or entity into or with Fannie Mae, shall be 

deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes 

of this Section 4. 

(e) After payment of the full amount of the distribution of assets upon dissolution, 

liquidation or winding up of Fannie Mae to which they are entitled pursuant to subsections (a), 

(b) and (c) of this Section 4, the Holders of Series 2004-1 Preferred Stock will not be entitled to 

any further participation in any distribution of assets by Fannie Mae. 

5. Conversion Rights. 

(a) Any number of whole (but not fractional) shares of Series 2004-1 Preferred Stock 

shall be convertible at any time, at the option of the Holders thereof, into fully paid and nonassessable shares of common stock of Fannie Mae at a conversion price of $94.31 per share of 

common stock, no par value, of Fannie Mae (equivalent to a conversion rate of 1,060.3329 
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shares of common stock of Fannie Mae for each share of Series 2004-1 Preferred Stock), subject 

to adjustment as described in Section 5(f) below (the “Conversion Price”), provided, however, 

that the right to convert shares of Series 2004-1 Preferred Stock called for redemption pursuant 

to Section 3 shall terminate at the close of business on the Business Day immediately preceding 

the redemption date for such shares, unless Fannie Mae shall default in making payment of the 

redemption price. 

(b) To exercise the conversion right, the Holder of each share of Series 2004-1 

Preferred Stock to be converted shall surrender the certificate representing such share, duly 

endorsed or assigned to Fannie Mae or in blank, at the principal office of the transfer agent 

accompanied by written notice to Fannie Mae that the Holder thereof elects to convert such 

share. Unless the shares issuable on conversion are to be issued in the same name as the name in 

which such share is registered, in which case Fannie Mae shall bear the related taxes, each share 

surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory 

to Fannie Mae, duly executed by the Holder or such Holder’s duly authorized attorney and an 

amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to Fannie 

Mae demonstrating that such taxes have been paid). 

(c) Each conversion of shares of Series 2004-1 Preferred Stock shall be deemed to 

have been effected immediately prior to the close of business on the date on which the 

certificates for such shares shall have been surrendered and such notice (and, if applicable, 

payment of an amount equal to the dividend payable on such shares) received by Fannie Mae as 

aforesaid, and the person or persons in whose name or names any certificate or certificates for 

shares of common stock of Fannie Mae shall be issuable upon such conversion shall be deemed 

to have become the holder or holders of record of the shares represented thereby at such time on 

such date, and such conversion shall be at the Conversion Price in effect at such time and on 

such date unless the stock transfer books of Fannie Mae shall be closed on that date, in which 

event such person or persons shall be deemed to have become such holder or holders of record at 

the close of business on the next succeeding day on which such stock transfer books are open, 

but such conversion shall be at the Conversion Price in effect on the date on which such shares 

have been surrendered and such notice received by Fannie Mae. 

(d) Holders of shares of Series 2004-1 Preferred Stock at the close of business on a 

record date shall be entitled to receive the dividend payable on such shares on the corresponding 

Dividend Payment Date notwithstanding the conversion of such shares following such record 

date and on or prior to such Dividend Payment Date. However, certificates representing shares 

of Series 2004-1 Preferred Stock surrendered for conversion during the period between the close 

of business on any record date and ending on the corresponding Dividend Payment Date (except 

shares converted after the issuance of a notice of redemption with respect to a redemption date 

during such period) shall be accompanied by payment of an amount equal to the dividend 

payable on such shares on such Dividend Payment Date. Except as provided above, Fannie Mae 

shall make no payment or allowance for unpaid dividends, whether or not in arrears, on 

converted shares or for dividends on the shares of common stock of Fannie Mae that are issued 

upon such conversion. 

As promptly as practicable after the surrender of certificates evidencing shares of Series 

2004-1 Preferred Stock as aforesaid, Fannie Mae shall issue and shall deliver at such office to the 
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related Holder, or on such Holder’s written order, a certificate or certificates for the number of 

full shares of common stock of Fannie Mae issuable upon the conversion of such shares in 

accordance with the provisions of this Section 5, and any fractional interest in respect of a share 

of common stock of Fannie Mae arising upon such conversion shall be settled as provided in 

Section 5(e) below. 

(e) No fractional shares of scrip representing fractions of a share of common stock of 

Fannie Mae shall be issued upon conversion of shares of Series 2004-1 Preferred Stock. Instead 

of any fractional interest in a share of common stock of Fannie Mae that would otherwise be 

deliverable upon the conversion of a share of Series 2004-1 Preferred Stock, Fannie Mae shall 

pay to the Holder of such share an amount in cash in respect of such fractional interest based 

upon the Current Market Price of a share of common stock of Fannie Mae on the date of 

conversion. If more than one share of Series 2004-1 Preferred Stock shall be surrendered for 

conversion at one time by the same Holder, the number of full shares of common stock of Fannie 

Mae issuable upon conversion thereof shall be computed on the basis of the aggregate number of 

shares of Series 2004-1 Preferred Stock so surrendered. 

(f) The Conversion Price shall be adjusted from time to time as follows: 

(i) If Fannie Mae shall after the date on which the shares of Series 2004-1 

Preferred Stock are first issued (the “Issue Date”) (A) pay a dividend or make a 

distribution to all holders of its common stock in shares of common stock of Fannie Mae, 

(B) subdivide its outstanding common stock into a greater number of shares, (C) combine 

its outstanding common stock into a smaller number of shares or (D) issue any shares by 

reclassification of its common stock, the Conversion Price in effect at the opening of 

business on the day following the date fixed for the determination of stockholders entitled 

to receive such dividend or distribution or at the opening of business on the day following 

the day on which such subdivision, combination or reclassification becomes effective, as 

the case may be, shall be adjusted so that the Holder of any share of Series 2004-1 

Preferred Stock thereafter surrendered for conversion shall be entitled to receive the 

number of shares of common stock of Fannie Mae that such Holder would have owned or 

have been entitled to receive after the happening of any of the events described above had 

such share been converted immediately prior to the record date in the case of a dividend 

or distribution or the effective date in the case of a subdivision, combination or 

reclassification. An adjustment made pursuant to this clause (i) shall become effective 

immediately after the opening of business on the day next following the record date 

(except as provided in subsection (j) below) in the case of a dividend or distribution and 

shall become effective immediately after the opening of business on the day next 

following the effective date in the case of a subdivision, combination or reclassification. 

If any dividend or distribution of the type described in paragraph (A) above is declared 

but not so paid or made, the Conversion Price shall again be adjusted to the Conversion 

Price which would then be in effect if such dividend or distribution had not been 

declared. 

(ii) If Fannie Mae shall issue after the Issue Date rights, options or warrants to 

all holders of its common stock entitling them to subscribe for or purchase shares of 

common stock of Fannie Mae (or securities convertible into or exchangeable for shares of 
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common stock of Fannie Mae) at a price per share (or having a conversion price per 

share) less than the Fair Market Value per share of common stock of Fannie Mae on the 

record date for the determination of stockholders entitled to receive such rights, options 

or warrants, then the Conversion Price in effect at the opening of business on the day next 

following such record date shall be adjusted to equal the price determined by multiplying 

(I) the Conversion Price in effect immediately prior to the opening of business on the day 

following the date fixed for such determination by (II) a fraction, the numerator of which 

shall be the sum of (A) the number of shares of common stock of Fannie Mae outstanding 

on the close of business on the date fixed for such determination and (B) the number of 

shares that the aggregate offering price of the total number of shares of common stock of 

Fannie Mae so offered for subscription or purchase (or the aggregate conversion price of 

the convertible securities so offered) would purchase at such Fair Market Value, and the 

denominator of which shall be the sum of (A) the number of shares of common stock of 

Fannie Mae outstanding on the close of business on the date fixed for such determination 

and (B) the number of additional shares of common stock of Fannie Mae so offered for 

subscription or purchase (or into which the convertible securities so offered are 

convertible) pursuant to such rights, options or warrants. Such adjustment shall become 

effective immediately after the opening of business on the day next following such record 

date (except as provided in subsection (j) below). To the extent that shares of common 

stock of Fannie Mae (or securities convertible into shares of common stock of Fannie 

Mae) are not delivered pursuant to such rights, options or warrants, upon the expiration or 

termination of such rights, options or warrants the Conversion Price shall be readjusted to 

the Conversion Price which would then be in effect had the adjustments made upon the 

issuance of such rights, options or warrants been made on the basis of the delivery of 

only the number of shares of common stock of Fannie Mae (or securities convertible into 

shares of common stock of Fannie Mae) actually delivered. In the event that such rights, 

options or warrants are not so issued, the Conversion Price shall again be adjusted to be 

the Conversion Price which would then be in effect if such date fixed for the 

determination of stockholders entitled to receive such rights, options or warrants had not 

been fixed. In determining whether any rights, options or warrants entitle the holders of 

shares of common stock of Fannie Mae to subscribe for or purchase shares of common 

stock of Fannie Mae at less than the Fair Market Value, there shall be taken into account 

any consideration received by Fannie Mae upon issuance and upon exercise of such 

rights, options or warrants, the value of such consideration, if other than cash, to be 

determined by Fannie Mae’s Chief Executive Officer or Board of Directors. 

(iii) If Fannie Mae shall distribute to all holders of its common stock any of its 

capital stock or evidence of its indebtedness or assets (excluding (1) dividends or 

distributions paid exclusively in cash, (2) dividends or distributions of shares of common 

stock of Fannie Mae treated under clause (i) above, (3) rights, options and warrants 

treated under clause (ii) above and (4) shares, stock, securities or other property treated 

under subsection (g) below) (any of the foregoing being hereinafter in this clause (iii) 

called the “Securities”), then in each case the Conversion Price shall be adjusted so that it 

shall equal the price determined by multiplying (I) the Conversion Price in effect 

immediately prior to the close of business on the date fixed for the determination of 

stockholders entitled to receive such distribution by (II) a fraction, the numerator of 

which shall be the Fair Market Value per share of common stock of Fannie Mae on the 
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record date mentioned below less the then fair market value (as determined by Fannie 

Mae’s Chief Executive Officer or Board of Directors, whose determination shall be 

conclusive) of the portion of the capital stock or assets or evidences of indebtedness so 

distributed applicable to one common share of common stock of Fannie Mae, and the 

denominator of which shall be the Fair Market Value per share of common stock of 

Fannie Mae on the record date mentioned below. Such adjustment shall become effective 

immediately at the opening of business on the business day next following (except as 

provided in subsection (j) below) the record date for the determination of stockholders 

entitled to receive such distribution. In the event that such distribution is not so made, the 

Conversion Price shall again be adjusted to be the Conversion Price which would then be 

in effect if such distribution had not been declared. For the purposes of this clause (iii), 

the distribution of a Security, which is distributed not only to the holders of Fannie Mae’s 

common stock on the date fixed for the determination of stockholders entitled to such 

distribution of such Security, but also is distributed with each share of common stock of 

Fannie Mae delivered to a person converting a share of Series 2004-1 Preferred Stock 

after such determination date, shall not require an adjustment of the Conversion Price 

pursuant to this clause (iii). 

(iv) If Fannie Mae shall, by dividend or otherwise, distribute in any calendar 

quarter to all holders of its common stock cash (excluding any cash that is distributed (1) 

upon a Transaction (as defined in subsection (g) below), (2) as part of a distribution 

treated in clause (iii) above or (3) as part of a voluntary or involuntary liquidation, 

dissolution or winding up of Fannie Mae) in an aggregate amount that, when combined 

with the aggregate amount of any other distributions to all holders of shares of common 

stock of Fannie Mae made exclusively in cash within the same calendar quarter as to such 

distribution and in respect of which no adjustment pursuant to this clause (iv) has been 

made, exceeds $0.52 per share of common stock of Fannie Mae (subject to adjustment 

consistent with other provisions of this Section 5, the “Dividend Threshold Amount”), 

then in each case the Conversion Price shall be adjusted so that it shall equal the price 

determined by multiplying (Y) the Conversion Price in effect immediately prior to the 

close of business on the date fixed for the determination of stockholders entitled to 

receive such distribution by (Z) a fraction, the numerator of which shall be the Fair 

Market Value per share of Fannie Mae’s common stock on the record date mentioned 

below less an amount per share equal to (A) if the distribution resulting in the applicable 

adjustment pursuant to the clause (iv) is a quarterly dividend, the excess of such 

combined amount over the Dividend Threshold Amount or (B) if such distribution is not 

a quarterly dividend, the full amount of such combined amount, and the denominator of 

which shall be the Fair Market Value per share of Fannie Mae’s common stock on the 

record date mentioned below. Such adjustment shall become effective immediately at the 

opening of business on the business day next following (except as provided in subsection 

(j) below) the record date for the determination of stockholders entitled to receive such 

distribution. In the event such distribution is not so made, the Conversion Price shall 

again be adjusted to be the Conversion Price which would then be in effect if such 

distribution had not been declared. 

(v) If a tender or exchange offer made by Fannie Mae or any subsidiary of 

Fannie Mae for all or any portion of Fannie Mae’s common stock shall expire and such 
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tender or exchange offer shall require the payment to stockholders (based on the 

acceptance (up to any maximum specified in the terms of such offer) of Purchased Shares 

(as defined below)) of aggregate consideration having a fair market value which exceeds 

the average of the daily Current Market Prices per share of Fannie Mae’s common stock 

for each of the 10 consecutive Trading Days next succeeding the last time (the 

“Expiration Time”) tenders or exchanges could have been made pursuant to such tender 

or exchange offer, then in each case the Conversion Price shall be adjusted so that it shall 

equal the price determined by multiplying (Y) the Conversion Price in effect immediately 

prior to the close of business on the date fixed for the determination of stockholders 

entitled to receive such distribution by (Z) a fraction, the numerator of which shall be the 

product of the number of shares of common stock of Fannie Mae (including any 

Purchased Shares) outstanding at the Expiration Time multiplied by the average of the 

daily Current Market Prices per share of Fannie Mae’s common stock for each of the 10 

consecutive Trading Days next succeeding the Expiration Time, and the denominator of 

which shall be the sum of (x) the fair market value of the aggregate consideration payable 

to stockholders based on the acceptance (up to any maximum specified in the terms of 

such offer) of all shares validly tendered and not withdrawn as of the Expiration Time 

(the shares deemed so accepted, up to any such maximum, being referred to as the 

“Purchased Shares”) and (y) the product of the number of shares of common stock of 

Fannie Mae outstanding (less any Purchased Shares) at the Expiration Time multiplied by 

the average of the daily Current Market Prices per share of Fannie Mae common stock 

for each of the 10 consecutive Trading Days next succeeding the Expiration Time. Such 

adjustment shall become effective immediately at the opening of business on the business 

day next following the Expiration Time. In the event that Fannie Mae is obligated to 

purchase or exchange shares pursuant to any such tender or exchange offer, but Fannie 

Mae is permanently prevented by applicable law from effecting any such purchases or 

exchanges or all such purchases or exchanges are rescinded, the Conversion Price shall 

again be adjusted to be the Conversion Price which would then be in effect if such tender 

or exchange offer had not been made. 

(vi) No adjustment in the Conversion Price shall be required unless such 

adjustment would require a cumulative increase or decrease of at least 1% in such 

Conversion Price; provided, however, that any adjustments that by reason of this clause 

(vi) are not required to be made shall be carried forward and taken into account in any 

subsequent adjustment until made; and provided, further, that Fannie Mae shall be 

required to make such carried forward adjustments, regardless of whether the aggregate 

adjustment is less than 1% of the Conversion Price, within the earlier of (1) one year of 

the first such adjustment carried forward, (2) the date on which the carried forward 

adjustments first equal 1% of the Conversion Price and (3) the business day after which 

Fannie Mae gives notice of the exercise, if any, of its right to redeem shares of Series 

2004-1 Preferred Stock pursuant to Section 3 hereof. Notwithstanding any other 

provisions of this Section 5, Fannie Mae shall not be required to make any adjustment of 

the Conversion Price for the issuance of any common stock pursuant to any plan 

providing for the reinvestment of dividends or interest payable on securities of Fannie 

Mae and the investment of additional optional amounts in common stock under such 

plan. All calculations under this Section 5 shall be made to the nearest cent (with $.005 

being rounded upward) or to the nearest one-tenth of a share (with .05 of a share being 
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rounded upward), as the case may be. Anything in this subsection (f) to the contrary 

notwithstanding, Fannie Mae shall be entitled, to the extent permitted by law, to make 

such reductions in the Conversion Price, in addition to those required by this subsection 

(f), as it in its discretion shall determine to be advisable in order that any dividend or 

distribution made by it to its stockholders shall not be taxable. 

(g) If Fannie Mae shall be party to any transaction (including, without limitation, a 

merger, consolidation, statutory share exchange, self tender offer for all or substantially all of its 

common stock, sale of all or substantially all of its assets or recapitalization of its common stock 

and excluding any transaction as to which subsection (f)(i) of this Section 5 applied) (each of the 

foregoing being referred to herein as a “Transaction”), in each case as a result of which shares of 

common stock of Fannie Mae shall be converted into the right to receive shares, stock, securities 

or other property (including cash or any combination thereof), each share of Series 2004-1 

Preferred Stock which is not converted into the right to receive shares, stock, securities or other 

property in connection with such Transaction shall thereafter be convertible into the kind and 

amount of shares, stock, securities and other property (including cash or any combination 

thereof) receivable upon the consummation of such Transaction by a holder of that number of 

shares of common stock of Fannie Mae into which one share of Series 2004-1 Preferred Stock 

was convertible immediately prior to such Transaction, assuming such holder of shares of 

common stock of Fannie Mae (i) is not a Person with which Fannie Mae consolidated or into 

which Fannie Mae merged or which merged into Fannie Mae or to which such sale or transfer 

was made, as the case may be (a “Constituent Person”), or an affiliate of a Constituent Person 

and (ii) failed to exercise its rights of the election, if any, as to the kind or amount of shares, 

stock, securities and other property (including cash) receivable upon such Transaction (each a 

“Non-Electing Share”) (provided that if the kind and amount of shares, stock, securities and 

other property (including cash) receivable upon such Transaction is not the same for each NonElecting Share, the kind and amount receivable by each Non-Electing Share shall be deemed to 

be the kind and amount receivable per share by plurality of the Non-Electing Shares). Fannie 

Mae shall not be a party to any Transaction unless the terms of such Transaction are consistent 

with the provisions of this subsection (g), and it shall not consent or agree to the occurrence of 

any Transaction until Fannie Mae has entered into an agreement with the successor or purchasing 

entity, as the case may be, for the benefit of the Holders of the Series 2004-1 Preferred Stock that 

will contain provisions enabling the Holders of the Series 2004-1 Preferred Stock that remains 

outstanding after such Transaction to convert into the consideration received by holders of shares 

of common stock of Fannie Mae at the Conversion Price in effect immediately prior to such 

Transaction. The provisions of this subsection (g) shall similarly apply to successive 

Transactions. 

(h) If: 

(i) the Conversion Price is required to be adjusted in accordance with Section 

5(f) above; or 

(ii) there shall be any reclassifications of Fannie Mae’s common stock (other 

than an event to which subsection (f)(i) of this Section 5 applied) or any consolidation or 

merger to which Fannie Mae is a party and for which approval of any stockholders of 

Fannie Mae is required, or a statutory share exchange involving the conversion or 
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exchange of Fannie Mae’s common stock into securities or other property, or a self 

tender offer by Fannie Mae for all or substantially all of its outstanding common stock, or 

the sale or transfer of all or substantially all of the assets of Fannie Mae as an entirety and 

for which approval of stockholders of Fannie Mae is required; or 

(iii) there shall occur the voluntary or involuntary liquidation, dissolution or 

winding up of Fannie Mae, 

then Fannie Mae shall cause to be filed with the transfer agent and shall cause to be mailed to the 

Holders of the Series 2004-1 Preferred Stock at their addresses as shown on the stock transfer 

records of Fannie Mae, as promptly as possible, but at least 15 days prior to the applicable date 

hereinafter specified, a notice stating (A) the date on which a record is to be taken for the 

purpose of the related distribution or rights, options or warrants, or, if a record is not to be taken, 

the date as of which the holders of Fannie Mae’s common stock to be entitled to such 

distribution or rights, options or warrants are to be determined or (B) the date on which the 

related reclassification, subdivision, combination, consolidation, merger, statutory share 

exchange, sale, transfer, liquidation, dissolution or winding up is expected to become effective, 

and the date as of which it is expected that holders of Fannie Mae’s common stock shall be 

entitled to exchange their shares for securities or other property, if any, deliverable upon such 

reclassification, subdivision, combination, consolidation, merger, statutory share exchange, sale, 

transfer, liquidation, dissolution or winding up. Failure to give or receive such notice or any 

defect therein shall not affect the legality or validity of the proceedings described in this Section 

5. 

(i) Whenever the Conversion Price is adjusted as herein provided, Fannie Mae shall 

promptly file with the transfer agent an officer’s certificate setting forth the Conversion Price 

after such adjustment and setting forth a brief statement of the facts requiring such adjustment, 

which certificate shall be conclusive evidence of the correctness of such adjustment absent 

manifest error. Promptly after delivery of such certificate, Fannie Mae shall prepare a notice of 

such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the 

effective date such adjustment becomes effective and shall mail such notice of such adjustment 

of the Conversion Price to the Holder of each share of Series 2004-1 Preferred Stock at such 

Holder’s last address as shown on the stock transfer records of Fannie Mae. 

(j) In any case in which Section 5(f) above provides that an adjustment of the 

Conversion Price shall become effective on the date next following the record date for an event, 

Fannie Mae may defer until the occurrence of such event (A) issuing to the Holder of any Series 

2004-1 Preferred Stock converted after such record date and before the occurrence of such event 

the additional shares of common stock of Fannie Mae issuable upon such conversion by reason 

of the adjustment required by such event over and above the shares of common stock of Fannie 

Mae issuable upon such conversion before giving effect to such adjustment and (B) 

fractionalizing any share of Series 2004-1 Preferred Stock and/or paying to such Holder any 

amount of cash in lieu of any fraction pursuant to Section 5(e) above. 

(k) There shall be no adjustment of the Conversion Price in case of the issuance of 

any capital stock by Fannie Mae in a reorganization, acquisition or other similar transaction 

except as specifically set forth in this Section 5. If any action or transaction would require 
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adjustment of the Conversion Price pursuant to more than one subsection of this Section 5, only 

one adjustment shall be made, and such adjustment shall be the amount of adjustment that has 

the highest absolute value. 

(l) If Fannie Mae shall take any action affecting its common stock, other than action 

described in this Section 5, that in the opinion of its Board of Directors would materially 

adversely affect the conversion rights of the Holders of the Series 2004-1 Preferred Stock, the 

Conversion Price for the Series 2004-1 Preferred Stock may be adjusted, to the extent permitted 

by law, in such manner, if any, and at such time, as Fannie Mae’s Board of Directors, in its sole 

discretion, may determine to be equitable in the circumstances. 

(m) Fannie Mae covenants that it will at all times reserve and keep available, free 

from preemptive rights, out of the aggregate of its authorized but unissued common stock, for the 

purpose of effecting conversion of the Series 2004-1 Preferred Stock, the full number of shares 

of common stock of Fannie Mae deliverable upon the conversion of all outstanding shares of 

Series 2004-1 Preferred Stock not theretofore converted and will use its reasonable efforts to 

cause such shares to be approved for listing on the New York Stock Exchange (the “NYSE”) 

prior to their issuance. For purposes of this subsection (m), the number of shares of common 

stock of Fannie Mae that shall be deliverable upon the conversion of all outstanding shares of 

Series 2004-1 Preferred Stock shall be computed as if at the time of computation all such 

outstanding shares were held by a single Holder. 

Fannie Mae covenants that any shares of common stock of Fannie Mae issued upon 

conversion of the Series 2004-1 Preferred Stock shall be validly issued, fully paid and nonassessable. 

(n) Fannie Mae will pay any and all documentary stamp or similar issue or transfer 

taxes payable in respect of the issue or delivery of shares of common stock of Fannie Mae or 

other securities or property on conversion of the Series 2004-1 Preferred Stock pursuant hereto; 

provided, however, that Fannie Mae shall not be required to pay any tax that may be payable in 

respect of any transfer involved in the issue or delivery of shares of common stock of Fannie 

Mae or other securities or property in a name other than that of Holder of the Series 2004-1 

Preferred Stock to be converted, and no such issue or delivery shall be made unless and until the 

person requesting such issue or delivery has paid to Fannie Mae the amount of any such tax or 

established, to the reasonable satisfaction of Fannie Mae, that such tax has been paid. 

“Current Market Price” of publicly traded common stock of Fannie Mae or any other 

class of capital stock or other security of Fannie Mae or any other issuer for any day shall mean 

the last reported sales price, regular way, on such day, or, if no sale takes place on such day, the 

average of the reported closing bid and asked prices on such day, regular way, in either case as 

reported on the NYSE or, if such security is not listed or admitted for trading on the NYSE, on 

the principal national securities exchange on which such security is listed or admitted for trading 

or, if not listed or admitted for trading on any national securities exchange, on the NASDAQ 

National Market or, if such security is not quoted on such NASDAQ National Market, the 

average of the closing bid and asked prices on such day in the over-the-counter market as 

reported by NASDAQ or, if bid and asked prices for such security on such day shall not have 

been reported through NASDAQ, the average of the bid and asked prices on such day as 
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furnished by any NYSE member firm regularly making a market in such security selected for 

such purpose by Fannie Mae’s Chief Executive Officer or Board of Directors. 

“Fair Market Value” shall mean the average of the daily Current Market Prices per share 

of common stock of Fannie Mae for each of the ten consecutive Trading Days ending on the 

earlier of the day in question and the day before the “ex” date with respect to the issuance or 

distribution requiring such computation. The term “ ‘ex’ date,” when used with respect to any 

issuance or distribution, means the first day on which the shares of common stock of Fannie Mae 

trade regular way, without the right to receive such issuance or distribution, on the exchange or 

in the market, as the case may be, used to determine that day’s Current Market Price. 

“Trading Day” shall mean any day on which the securities in question are traded on the 

NYSE or, if such securities are not listed or admitted for trading on the NYSE, on the principal 

national securities exchange on which such securities are listed or admitted or, if not listed or 

admitted for trading on any national securities exchange, on the NASDAQ National Market or, if 

such securities are not quoted on such NASDAQ National Market, in the applicable securities 

market in which the securities are traded. 

6. No Pre-Emptive Rights. 

No Holder of Series 2004-1 Preferred Stock shall be entitled as a matter of right to 

subscribe for or purchase, or have any pre-emptive right with respect to, any part of any new or 

additional issue of stock of any class whatsoever, or of securities convertible into any stock of 

any class whatsoever, or any other shares, rights, options or other securities of any class 

whatsoever, whether now or hereafter authorized and whether issued for cash or other 

consideration or by way of dividend. 

7. Voting Rights; Amendments. 

(a) Except as provided below, the Holders of Series 2004-1 Preferred Stock will not 

be entitled to any voting rights, either general or special. 

(b) Without the consent of the Holders of Series 2004-1 Preferred Stock, Fannie Mae 

will have the right to amend, alter, supplement or repeal any terms of this Certificate or the 

Series 2004-1 Preferred Stock (1) to cure any ambiguity, or to cure, correct or supplement any 

provision contained in this Certificate of Designation that may be defective or inconsistent with 

any other provision herein or (2) to make any other provision with respect to matters or questions 

arising with respect to the Series 2004-1 Preferred Stock that is not inconsistent with the 

provisions of this Certificate of Designation so long as such action does not materially and 

adversely affect the interests of the Holders of Series 2004-1 Preferred Stock; provided, 

however, that any increase in the amount of authorized or issued Series 2004-1 Preferred Stock 

or the creation and issuance, or an increase in the authorized or issued amount, of any other class 

or series of stock of Fannie Mae, whether ranking prior to, on a parity with or junior to the Series 

2004-1 Preferred Stock, as to the payment of dividends or the distribution of assets upon 

dissolution, liquidation or winding up of Fannie Mae, or otherwise, will not be deemed to 

materially and adversely affect the interests of the Holders of Series 2004-1 Preferred Stock. 
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(c) Except as set forth in paragraph (b) of this Section 7, the terms of this Certificate 

or the Series 2004-1 Preferred Stock may be amended, altered, supplemented, or repealed only 

with the consent of the Holders of at least two-thirds of the shares of Series 2004-1 Preferred 

Stock then outstanding, given in person or by proxy, either in writing or at a meeting of 

stockholders at which the Holders of Series 2004-1 Preferred Stock shall vote separately as a 

class. On matters requiring their consent, Holders of Series 2004-1 Preferred Stock will be 

entitled to one vote per share. 

(d) The rules and procedures for calling and conducting any meeting of Holders 

(including, without limitation, the fixing of a record date in connection therewith), the 

solicitation and use of proxies at such a meeting, the obtaining of written consents, and any other 

aspect or matter with regard to such a meeting or such consents shall be governed by any rules 

that the Board of Directors of Fannie Mae, or a duly authorized committee thereof, in its 

discretion, may adopt from time to time, which rules and procedures shall conform to the 

requirements of any national securities exchange on which the Series 2004-1 Preferred Stock are 

listed at the time. 

8. Additional Classes or Series of Stock. 

The Board of Directors of Fannie Mae, or a duly authorized committee thereof, shall have 

the right at any time in the future to authorize, create and issue, by resolution or resolutions, one 

or more additional classes or series of stock of Fannie Mae, and to determine and fix the 

distinguishing characteristics and the relative rights, preferences, privileges and other terms of 

the shares thereof. Any such class or series of stock may rank prior to, on a parity with or junior 

to the Series 2004-1 Preferred Stock as to the payment of dividends or the distribution of assets 

upon dissolution, liquidation or winding up of Fannie Mae, or otherwise. 

9. Priority. 

For purposes of this Certificate of Designation, any stock of any class or series of Fannie 

Mae shall be deemed to rank: 

(a) Prior to the shares of Series 2004-1 Preferred Stock, either as to the payment of 

dividends or the distribution of assets upon dissolution, liquidation or winding up of Fannie Mae, 

if the holders of such class or series shall be entitled to the receipt of dividends or of amounts 

distributable upon dissolution, liquidation or winding up of Fannie Mae, as the case may be, in 

preference or priority to the Holders of shares of Series 2004-1 Preferred Stock. 

(b) On a parity with shares of Series 2004-1 Preferred Stock, either as to the payment 

of dividends or the distribution of assets upon dissolution, liquidation or winding up of Fannie 

Mae, whether or not the dividend rates or amounts, dividend payment dates or redemption or 

liquidation prices per share, if any, be different from those of the Series 2004-1 Preferred Stock, 

if the holders of such class or series shall be entitled to the receipt of dividends or of amounts 

distributable upon dissolution, liquidation or winding up of Fannie Mae, as the case may be, in 

proportion to their respective dividend rates or amounts or liquidation prices, without preference 

or priority, one over the other, as between the holders of such class or series and the Holders of 

shares of Series 2004-1 Preferred Stock. 
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(c) Junior to shares of Series 2004-1 Preferred Stock, either as to the payment of 

dividends or the distribution of assets upon dissolution, liquidation or winding up of Fannie Mae, 

if such class shall be common stock of Fannie Mae or if the Holders of shares of Series 2004-1 

Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon 

dissolution, liquidation or winding up of Fannie Mae, as the case may be, in preference or 

priority over the holders of such class or series. 

(d) The shares of Preferred Stock of Fannie Mae designated “5.25% Non-Cumulative 

Preferred Stock, Series D” (the “Series D Preferred Stock”), “5.10% Non-Cumulative Preferred 

Stock, Series E” (the “Series E Preferred Stock”), “Variable Rate Non-Cumulative Preferred 

Stock, Series F” (the “Series F Preferred Stock”), “Variable Rate Non-Cumulative Preferred 

Stock, Series G” (the “Series G Preferred Stock”), “5.81% Non-Cumulative Preferred Stock, 

Series H” (the “Series H Preferred Stock”), “5.375% Non-Cumulative Preferred Stock, Series I” 

(the “Series I Preferred Stock”), “Variable Rate Non-Cumulative Preferred Stock, Series J” (the 

“Series J Preferred Stock”), “Variable Rate Non-Cumulative Preferred Stock, Series K” (the 

“Series K Preferred Stock”), “5.125% Non-Cumulative Preferred Stock, Series L” (the “Series L 

Preferred Stock”), 4.75% Non-Cumulative Preferred Stock, Series M (“the Series M Preferred 

Stock”), “5.50% Non-Cumulative Preferred Stock, Series N” (the “Series N Preferred Stock”) 

and “Non-Cumulative Preferred Stock, Series O” (the “Series O Preferred Stock”) shall be 

deemed to rank on a parity with shares of Series 2004-1 Preferred Stock as to the payment of 

dividends and the distribution of assets upon dissolution, liquidation or winding up of Fannie 

Mae. Accordingly, the holders of record of Series D Preferred Stock, the holders of record of 

Series E Preferred Stock, the holders of record of Series F Preferred Stock, the holders of record 

of Series G Preferred Stock, the holders of record of Series H Preferred Stock, the holders of 

record of Series I Preferred Stock, the holders of record of Series J Preferred Stock, the holders 

of record of Series K Preferred Stock, the holders of record of Series L Preferred Stock, the 

holders of record of Series M Preferred Stock, the holders of record of Series N Preferred Stock, 

the holders of record of Series O Preferred Stock and the Holders of the Series 2004-1 Preferred 

Stock shall be entitled to the receipt of dividends and of amounts distributable upon dissolution, 

liquidation or winding up of Fannie Mae, as the case may be, in proportion to their respective 

dividend rates or amounts or liquidation prices, without preference or priority, one over the 

other. 

10. Transfer Agent, Dividend Disbursing Agent and Registrar. 

Fannie Mae hereby appoints EquiServe Trust Company, N.A., as its initial transfer agent, 

dividend disbursing agent and registrar for the Series 2004-1 Preferred Stock. Fannie Mae may at 

any time designate an additional or substitute transfer agent, dividend disbursing agent and 

registrar for the Series 2004-1 Preferred Stock. 

11. Notices. 

Any notice provided or permitted by this Certificate of Designation to be made upon, or 

given or furnished to, the Holders of Series 2004-1 Preferred Stock by Fannie Mae shall be made 

by first-class mail, postage prepaid, to the addresses of such Holders as they appear on the books 

and records of Fannie Mae. Such notice shall be deemed to have been sufficiently made upon 

deposit thereof in the United States mail. Notwithstanding anything to the contrary contained 
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herein, in the case of the suspension of regular mail service or by reason of any other cause it 

shall be impracticable, in Fannie Mae’s judgment, to give notice by mail, then such notification 

may be made, in Fannie Mae’s discretion, by publication in a newspaper of general circulation in 

The City of New York or by hand delivery to the addresses of Holders as they appear on the 

books and records of Fannie Mae. 

12. Registration Rights Agreement. 

The Holders of Series 2004-1 Preferred Stock shall be entitled to the benefits of the 

Registration Rights Agreement, executed by Fannie Mae and dated as of the date of issuance of 

the Series 2004-1 Preferred Stock. Holders of the Series 2004-1 Preferred Stock may obtain a 

copy of the Registration Rights Agreement from the transfer agent for the Series 2004-1 

Preferred Stock. 

Receipt and acceptance of a share or shares of the Series 2004-1 Preferred Stock by 

or on behalf of a Holder shall constitute the unconditional acceptance by such Holder (and 

all others having beneficial ownership of such share or shares) of all of the terms and 

provisions of this Certificate of Designation. No signature or other further manifestation of 

assent to the terms and provisions of this Certificate of Designation shall be necessary for 

its operation or effect as between Fannie Mae and the Holder (and all such others).