OFFERING CIRCULAR

6,500,000 Shares

Variable Rate, Non-Cumulative

Freddie Mac V

Preferred Stock

Initial Dividend Rate: 4.817% (from January 26, 2001 through

March 31, 2003)

Variable Dividend Rate: 2-year CMT Rate plus 0.10%

Dividend Rate Cap: 11%

Payment Dates: March 31, June 30, September 30 and

December 31 of each year, beginning March 31,

2001

Dividend Rate Reset: As of April 1, 2003 and as of April 1 every two

years thereafter; we reset the dividend rate

based on the 2-year CMT Rate determined two

business days before the reset date plus 0.10%

Dividend Adjustment: We will adjust the dividend if speciÑed adverse

changes to the dividends-received deduction

occur before July 26, 2002

Liquidation Preference: $50 per share plus current dividends

Optional Redemption: On March 31, 2003 and on March 31 every two

years thereafter

Issue Date: January 26, 2001

Listing: New York Stock Exchange (pending)

We alone are responsible for our obligations under and for making payments on the Preferred

Stock. The Preferred Stock is not guaranteed by, and is not a debt or obligation of, the

United States or any federal agency or instrumentality other than Freddie Mac.

Initial Public Underwriting Proceeds to

OÅering Price(1) Discount Freddie Mac(1)(2)

Per Share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $50.00 $0.4375 $49.5625

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $325,000,000 $2,843,750 $322,156,250

(1) Plus any accrued dividends from January 26, 2001.

(2) Before deducting estimated expenses of $250,000.

Lehman Brothers

First Tennessee Bank NA Merrill Lynch & Co.

Blaylock & Partners, L.P. Goldman, Sachs & Co.

Bear, Stearns & Co. Inc. Morgan Stanley Dean Witter

Credit Suisse First Boston Salomon Smith Barney

The date of this OÅering Circular is January 23, 2001.
The Underwriters may engage in transactions that aÅect the price of the Preferred Stock,

including over-allotment, stabilizing and short-covering transactions in the Preferred Stock, and

the imposition of a penalty bid, in connection with the OÅering. For a description of these

activities, see Underwriting.

ADDITIONAL INFORMATION

You should read this OÅering Circular together with:

‚ the CertiÑcate of Creation, Designation, Powers, Preferences, Rights, Privileges, QualiÑcations, Limitations, Restrictions, Terms and Conditions (the ""CertiÑcate of Designation'') for the Variable Rate, Non-Cumulative Preferred Stock (the ""Preferred

Stock''), which will be in substantially the form attached as Appendix A;

‚ our press release and unaudited Ñnancial statements issued on January 18, 2001 and

attached as Appendix B; and

‚ our Information Statement dated March 31, 2000 and our Information Statement

Supplements dated May 15, 2000, August 14, 2000 and November 14, 2000 (together,

the ""Information Statement'').

This OÅering Circular incorporates the Information Statement by reference, which means that

we are disclosing information to you by referring to it rather than by providing you with a separate

copy. It is considered part of this OÅering Circular. We also furnish our common stockholders with

annual reports containing Ñnancial information audited by independent public accountants and

quarterly reports containing unaudited Ñnancial information. You can obtain copies of any of these

documents by contacting us at:

Freddie Mac

Shareholder Relations Department

8200 Jones Branch Drive

McLean, Virginia 22102-3110

Telephone: 1-800-FREDDIE (800-373-3343)

Our Information Statement, Information Statement Supplements and annual report also are

available on the ""Shareholders'' page of our Internet Web-Site (http://www.freddiemac.com).

Because of applicable securities law exemptions, we have not registered the Preferred Stock

with any federal or state securities commission. No securities commission has reviewed this

OÅering Circular.

Dividends paid on the Preferred Stock have no exemption under federal law from federal,

state or local taxation.

Some jurisdictions may by law restrict the distribution of this OÅering Circular and the oÅer,

sale and delivery of the Preferred Stock. Persons who receive this OÅering Circular should know

about and observe any such restrictions.

2
SUMMARY

This summary contains selected information about the Preferred Stock. You should refer to the

remainder of this OÅering Circular for further information.

Issuer ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Federal Home Loan Mortgage Corporation or ""Freddie

Mac,'' a shareholder-owned government-sponsored

enterprise.

Security OÅered ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,500,000 shares of Variable Rate, Non-Cumulative Preferred Stock, with a $50 per share redemption price and

liquidation preference.

Dividends:

Initial Dividend Rate ÏÏÏÏÏÏÏÏÏÏ 4.817% per annum. Dividends will accrue at the initial

dividend rate from January 26, 2001 through March 31,

2003. The dividend rate will reset as of April 1, 2003 and as

of April 1 every two years thereafter; we reset the dividend

rate based on the 2-year CMT Rate determined two

business days before the reset date plus 0.10%.

Variable Dividend Rate ÏÏÏÏÏÏÏÏ 2-year CMT Rate plus 0.10%. For information about how

and when we determine the 2-year CMT Rate, see

Description of Preferred Stock Ì Dividends Ì Determination of CMT Rate.

Rate Cap ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11% per annum (maximum 2-year CMT Rate of 10.90%

plus 0.10%)

Calculation AgentÏÏÏÏÏÏÏÏÏÏÏÏÏ Freddie Mac

FrequencyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We will pay non-cumulative dividends quarterly, when, as

and if declared by our Board of Directors.

Payment Dates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We will pay dividends on March 31, June 30, September 30 and December 31 of each year, or the next business

day, beginning March 31, 2001.

DRD ProtectionÏÏÏÏÏÏÏÏÏÏÏÏÏÏ If an amendment to the Internal Revenue Code of 1986

(the ""Code'') enacted before July 26, 2002 reduces the

percentage of the dividends-received deduction below 70%,

we will increase the amount of dividends we pay on the

Preferred Stock to oÅset the eÅect of that reduction.

However, we will not make any adjustment to the extent

that the percentage of the dividends-received deduction is

reduced below 50%. An adjustment may result in a dividend rate in excess of 11% per annum.

Preferences ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ The Preferred Stock will receive a preference over our

common stock and any other junior stock as to dividends

and upon liquidation. The Preferred Stock will rank equally

with our other currently outstanding series of preferred

stock as to dividends and upon liquidation.

3
Optional Redemption ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ On March 31, 2003 and on March 31 every two years

thereafter, we will have the option to redeem the Preferred

Stock, in whole or in part, at the price of $50 per share plus

the amount that would otherwise be payable as the dividend for the quarterly dividend period ending on the

redemption date.

Liquidation Rights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ If Freddie Mac is dissolved or liquidated, you will be

entitled to receive, out of any assets available for distribution to our shareholders, up to $50 per share plus the

dividend for the then-current quarterly dividend period

accrued through the liquidation payment date.

Voting Rights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ None, except in the case of speciÑed changes in the terms

of the Preferred Stock.

Preemptive and Conversion RightsÏÏÏ None.

RatingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ The Preferred Stock will be rated ""aa3'' by Moody's

Investors Service, Inc. (""Moody's'') and ""AA-'' by Standard & Poor's Ratings Services (""S&P''). See Ratings.

Use of Proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We will use the proceeds for general corporate purposes,

including the purchase of residential mortgages, the redemption of previously issued shares of preferred stock, the

repayment of outstanding debt and the repurchase of outstanding shares of our stock.

Transfer Agent, Dividend Disbursing

Agent and Registrar ÏÏÏÏÏÏÏÏÏÏÏÏÏ First Chicago Trust Company, a division of EquiServe.

Exchange Listing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We have applied to list the Preferred Stock on the New

York Stock Exchange (the ""NYSE'').

4
SUMMARY SELECTED FINANCIAL DATA

Year Ended December 31,

2000(1) 1999 1998 1997 1996

(dollars in millions, except per share amounts)

BALANCE SHEET

Retained portfolio(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 385,693 $ 324,443 $ 255,009 $ 164,421 $ 137,755

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 459,297 $ 386,684 $ 321,421 $ 194,597 $ 173,866

Primary capital base ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 15,621 $ 12,297 $ 11,603 $ 8,215 $ 7,411

Adjusted total capital base ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 15,766 $ 12,427 $ 11,765 $ 8,736 $ 7,901

MORTGAGE PURCHASE AND FINANCING ACTIVITIES

New business purchasesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 207,423 $ 272,472 $ 288,338 $ 121,490 $ 128,565

Number of new business purchases (# of loans)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,465,280 2,058,330 2,396,651 1,085,046 1,232,540

PC issuances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 166,901 $ 233,031 $ 250,564 $ 114,258 $ 119,702

Total PCs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 822,310 $ 749,081 $ 646,459 $ 579,385 $ 554,260

INCOME STATEMENT

Net interest income on earning assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,838 $ 2,540 $ 1,927 $ 1,631 $ 1,542

Management and guarantee income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,489 $ 1,405 $ 1,307 $ 1,298 $ 1,249

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,547 $ 2,223 $ 1,700 $ 1,395 $ 1,243

Earnings per common share:(3)

BasicÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 3.41 $ 2.97 $ 2.32 $ 1.90 $ 1.65

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 3.40 $ 2.96 $ 2.31 $ 1.88 $ 1.63

Dividends per common share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.68 $ 0.60 $ 0.48 $ 0.40 $ 0.35

Return on common equity(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23.7% 25.5% 24.1% 23.3% 22.2%

(1) The Ñnancial statements for the year ended December 31, 2000 have not been audited.

(2) Excludes related purchase and sale premiums, discounts and deferred fees, reserve for losses on retained mortgages and net

unrealized gain (loss) on available-for-sale guaranteed mortgage securities.

(3) ""Earnings per common share-basic'' are computed based on weighted average common shares outstanding. ""Earnings per common

share-diluted'' are computed based on the total of weighted average common shares outstanding and the eÅect of dilutive common

equivalent shares outstanding.

(4) Annual computations reÖects the simple average of quarterly returns. Quarterly returns are computed as annualized ""Net income''

less preferred stock dividends divided by the simple average of the beginning and ending balances of ""Stockholders' equity,'' net of

preferred stock (at redemption value).

5
FREDDIE MAC

Freddie Mac was chartered by Congress on July 24, 1970 under the Federal Home Loan

Mortgage Corporation Act (the ""Freddie Mac Act''). Our statutory purposes are:

‚ to provide stability in the secondary market for residential mortgages,

‚ to respond appropriately to the private capital market,

‚ to provide ongoing assistance to the secondary market for residential mortgages

(including activities relating to mortgages on housing for low- and moderate-income

families involving a reasonable economic return that may be less than the return earned

on other activities), and

‚ to promote access to mortgage credit throughout the United States (including central

cities, rural areas and other underserved areas) by increasing the liquidity of mortgage

investments and improving the distribution of investment capital available for residential

mortgage Ñnancing.

Our principal activity is the purchase and Ñnancing of single-family and multifamily mortgages.

We Ñnance our purchases of residential mortgages and mortgage securities with securitization

Ñnancing and debt Ñnancing. Securitization Ñnancing involves the securitization of purchased

mortgages in the form of guaranteed mortgage passthrough securities. Debt Ñnancing involves the

use of debt securities, other liabilities and equity capital to Ñnance mortgages and mortgage-related

securities we hold as portfolio investments. We also engage in other activities that help us to fulÑll

our statutory purposes. Neither the United States nor any agency or instrumentality of the United

States (other than Freddie Mac) is obligated, either directly or indirectly, to fund our mortgage

purchase or Ñnancing activities.

We are subject to two primary types of risk in the conduct of our business: credit risk associated

with the mortgages we purchase and the institutions with which we do business; and interest-rate

risk that principally results from mismatches between the maturities of the assets and liabilities

associated with our mortgage portfolio. We also are subject to operational risk associated with losses

that may occur due to human error, system failure, fraud or circumvention of internal controls. For a

discussion of the impact and management of these risks, see Management's Discussion and Analysis

of Financial Condition and Results of Operations in the Information Statement.

Our principal oÇce is in McLean, Virginia. We have regional oÇces that are primarily

responsible for the performance of various marketing activities and quality control procedures. These

oÇces are located in Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; McLean, Virginia; New

York, New York and Woodland Hills, California.

A more detailed discussion of our business appears under Business in the Information

Statement.

6
USE OF PROCEEDS

We will use the net proceeds from the sale of Preferred Stock for general corporate purposes,

including the purchase of residential mortgages, the redemption of shares of preferred stock we have

previously issued, the repayment of outstanding indebtedness and the repurchase of outstanding

shares of our stock. The precise amounts and timing of the application of the proceeds will depend

upon our funding requirements.

We engage in Ñnancing transactions continuously. The amount and nature of these transactions

are dependent upon a number of factors, including the volume of mortgage prepayments and

mortgages we purchase, as well as general market conditions.

7
CAPITALIZATION

The following table shows our capitalization at December 31, 2000 and as adjusted to reÖect

the sale of the Preferred Stock. You should read this table together with our Ñnancial statements

and other information contained in the Information Statement.

December 31, 2000

(unaudited)

As

Actual Adjusted(1)

(dollars in millions)

Debt Securities:

Notes and bonds payable due within one year:

Discount notes, medium-term notes and securities sold under

agreements to repurchase ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $150,782 $150,782

Current portion of long-term debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,794 32,794

Notes and bonds payable due after one year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 243,178 243,178

Total debt securities, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 426,754 426,754

Subordinated Borrowings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 145 145

Stockholders' Equity(2): Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption

value(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 250 250

6.125% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(4) 287 287

6.14% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(5) ÏÏ 600 600

5.81% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(6) ÏÏ 150 150

5% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(7) ÏÏÏÏÏ 400 400

Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption

value(8) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 220 220

5.1% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(8) ÏÏÏ 400 400

5.3% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(9) ÏÏÏ 200 200

5.1% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(10)ÏÏÏ 150 150

5.79% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(11)ÏÏ 250 250

Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption

value(12) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 288 288

Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption

value(13) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 325

Common stock, $0.21 par value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 152 152

Additional paid-in capitalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 428 425

Retained earnings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,630 11,630

Net unrealized gain on certain investments reported at fair value, net of taxes ÏÏÏÏÏÏÏÏÏÏÏ 456 456

Less: treasury stock, at cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,024) (1,024)

Total stockholders' equityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,837 15,159

Total capitalization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 441,736 442,058

(1) ""As adjusted'' reÖects anticipated proceeds of $325 million from the issuance of 6.5 million shares of Preferred Stock and the

deduction of $3 million in estimated transaction costs. The actual costs may diÅer.

(2) Preferred stock amounts reÖect redemption values as shown. Costs associated with the issuance of preferred stock are included in

additional paid-in capital.

(3) Optional redemption on or after June 30, 2001.

(4) Optional redemption on or after December 31, 2001.

(5) Optional redemption on or after June 30, 2002.

(6) Optional redemption on or after October 27, 1998.

(7) Optional redemption on or after March 31, 2003.

(8) Optional redemption on or after September 30, 2003.

(9) Optional redemption on or after October 30, 2000.

(10) Optional redemption on or after March 31, 2004.

(11) Optional redemption on or after June 30, 2009.

(12) Optional redemption on December 31, 2004 and on December 31 every Ñve years thereafter.

(13) Optional redemption on March 31, 2003 and on March 31 every two years thereafter.

See Notes 7 and 8 to the Consolidated Financial Statements included in the Information

Statement for further information about our debt securities, subordinated borrowings and stockholders' equity. Amounts of debt securities and subordinated borrowings are net of unamortized

discounts, premiums and hedging gains or losses.

We engage in transactions aÅecting stockholders' equity from time to time and we issue or

retire debentures, notes and other debt obligations on an ongoing basis. Accordingly, on any date

after December 31, 2000, stockholders' equity may diÅer, and the amount of debt obligations

outstanding will diÅer, and may diÅer substantially, from the Ñgures contained in this capitalization

table.

8
SELECTED FINANCIAL DATA

We have summarized or derived the following selected Ñnancial data for the years 1996

through 2000 from our audited consolidated Ñnancial statements or our internal accounting records.

These data should be read in conjunction with the audited consolidated Ñnancial statements and

notes to consolidated Ñnancial statements that are presented in our Information Statement.

Adjustments included in the table are of a normal, recurring nature.

Year Ended December 31,

2000(1) 1999 1998 1997 1996

(Dollars in millions, except per share amounts)

Balance Sheet

Retained portfolio(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 385,693 $ 324,443 $ 255,009 $ 164,421 $ 137,755

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 459,297 $ 386,684 $ 321,421 $ 194,597 $ 173,866

Debt securities, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 426,754 $ 360,581 $ 287,234 $ 172,321 $ 156,491

Total liabilities(3)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 443,865 $ 374,602 $ 309,978 $ 186,154 $ 166,271

Capital base:

Stockholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 14,837 $ 11,525 $ 10,835 $ 7,521 $ 6,731

Reserve for mortgage losses(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 784 772 768 694 680

Primary capital base ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,621 12,297 11,603 8,215 7,411

Subordinated borrowings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 145 130 162 521 490

Adjusted total capital baseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 15,766 $ 12,427 $ 11,765 $ 8,736 $ 7,901

Total PCsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 822,310 $ 749,081 $ 646,459 $ 579,385 $ 554,260

Freddie Mac PCs held in retained portfolio ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 246,209 $ 211,198 $ 168,108 $ 103,400 $ 81,195

Primary capital ratio(5) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.51% 1.33% 1.45% 1.23% 1.15%

Adjusted total capital ratio(6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.52% 1.34% 1.47% 1.30% 1.22%

Total mortgage portfolioÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 961,794 $ 862,326 $ 733,360 $ 640,406 $ 610,820

New Business Purchase and Financing Activities

New business purchases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 207,423 $ 272,472 $ 288,338 $ 121,490 $ 128,565

Number of new business purchases (# of loans) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,465,280 2,058,330 2,396,651 1,085,046 1,232,540

PC issuances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 166,901 $ 233,031 $ 250,564 $ 114,258 $ 119,702

Structured securitizations(7) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 48,202 $ 119,565 $ 135,162 $ 84,366 $ 34,145

Income Statement and Performance Ratios

Net interest income on earning assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,838 $ 2,540 $ 1,927 $ 1,631 $ 1,542

Management and guarantee income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,489 $ 1,405 $ 1,307 $ 1,298 $ 1,249

Total revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4,457 $ 4,055 $ 3,337 $ 3,029 $ 2,875

Income before income taxes and extraordinary item ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 3,534 $ 3,161 $ 2,356 $ 1,964 $ 1,797

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,547 $ 2,223 $ 1,700 $ 1,395 $ 1,243

Earnings per common share:(8)

BasicÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 3.41 $ 2.97 $ 2.32 $ 1.90 $ 1.65

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 3.40 $ 2.96 $ 2.31 $ 1.88 $ 1.63

Weighted average common shares outstanding (in thousands):(8)

BasicÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 693,555 696,042 679,790 684,937 709,453

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 696,448 700,211 684,658 691,701 714,878

Dividends per common share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.68 $ 0.60 $ 0.48 $ 0.40 $ 0.35

Dividend payout ratio on common stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20.03% 20.14% 20.65% 21.08% 21.26%

Return on common equity(9) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23.7% 25.5% 24.1% 23.3% 22.2%

Return on total equity(10) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20.2% 20.3% 19.4% 19.5% 19.7%

Return on average assets and contingencies(11) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.26% 0.26% 0.24% 0.21% 0.20%

Ratio of earnings to Ñxed charges(12) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.14:1 1.16:1 1.16:1 1.17:1 1.19:1

Ratio of earnings to combined Ñxed charges and preferred stock dividends(12) 1.13:1 1.14:1 1.15:1 1.16:1 1.18:1

(1) The Ñnancial statements for the year ended December 31, 2000 have not been audited.

(2) Excludes related purchase and sale premiums, discounts and deferred fees, reserve for losses on retained mortgages and net

unrealized gain (loss) on available-for-sale guaranteed mortgage securities.

(3) Excludes ""Reserves for losses on Mortgage Participation CertiÑcates'' and ""Subordinated borrowings.''

(4) ""Reserve for losses on retained mortgages'' plus ""Reserve for losses on Mortgage Participation CertiÑcates.''

(5) ""Primary capital base'' divided by the sum of ""Total assets'' and ""Total PCs'' less ""Freddie Mac PCs held in retained portfolio.''

(6) ""Adjusted total capital base'' divided by the sum of ""Total assets'' and ""Total PCs'' less ""Freddie Mac PCs held in retained portfolio.''

(7) Includes issuances of mortgage-related securities in which the cash Öows are structured into various classes having a variety of features, the

majority of which qualify for treatment as Real Estate Mortgage Investment Conduits (""REMICs'') under the Internal Revenue Code.

(8) ""Earnings per common share-basic'' are computed based on weighted average common shares outstanding. ""Earnings per common sharediluted'' are computed based on the total of weighted average common shares outstanding and the eÅect of dilutive common equivalent

shares outstanding.

(9) Annual computation reÖects the simple average of quarterly returns. Quarterly returns are computed as annualized ""Net income'' less

preferred stock dividends divided by the simple average of the beginning and ending balances of ""Stockholders' equity,'' net of preferred

stock (at redemption value).

(10) Annual computation reÖects the simple average of quarterly returns. Quarterly returns are computed as annualized ""Net income'' divided by

the simple average of the beginning and ending balances of ""Stockholders' equity.''

(11) Annual computation reÖects the simple average of quarterly returns. Quarterly returns are computed as annualized ""Net income'' divided by

the simple average of the beginning and ending balances of ""Total assets'' and ""Total PCs'' less ""Freddie Mac PCs held in retained

portfolio.''

(12) Earnings represent consolidated pre-tax income plus consolidated Ñxed charges, less interest capitalized. Fixed charges include interest

(including amounts capitalized) and the portion of net rental expense deemed representative of interest.

9
IMPLEMENTATION OF SFAS NO. 133

On January 1, 2001, we implemented Statement of Financial Accounting Standards (""SFAS'')

No. 133, ""Accounting for Derivative Instruments and Hedging Activities'' (""SFAS 133''), which

required that we recognize on balance sheet all derivatives as either assets or liabilities measured at

their fair value. The adoption of this standard did not aÅect our previously issued Ñnancial

statements up to and including the December 31, 2000 Ñnancial results. In the Ñrst quarter 2001,

we, as required, will report the impact of SFAS 133 as a cumulative eÅect of a change in accounting

principle. We currently expect that the net cumulative after-tax adjustment required by SFAS 133

will increase ""Net Income'' by approximately $10 to $20 million. Additionally, the mark-to-market

adjustment related to certain derivatives that will now be reported as a component of ""Total

stockholders' equity'' will decrease ""Total stockholders' equity'' by approximately $2.5 billion.

Management anticipates that the adoption of SFAS 133 may increase (perhaps materially) the

volatility of both ""Net income'' and ""Total stockholders' equity'' in future periods. Consistent with

other generally accepted accounting principles (""GAAP'')-based equity valuation adjustments, the

change in GAAP-based equity due to SFAS 133 will not aÅect our regulatory core capital, which is

equal to stockholders' equity excluding certain mark-to-market adjustments (such as the adjustment required by SFAS 133). Furthermore, the change in GAAP-based equity due to SFAS 133

will not adversely aÅect the fair value of our equity, which we determine based on fair value

estimates of all assets and liabilities measured pursuant to SFAS No. 107, ""Disclosure About Fair

Value of Financial Instruments.''

10
REGULATION AND GOVERNMENTAL RELATIONSHIPS

From time to time, our statutory, structural and regulatory relationships with the federal

government may be subject to review or modiÑcation. While our status as a government-sponsored

enterprise is often advantageous, proposals have been advanced that could adversely aÅect the

fulÑllment of our statutory purposes, as well as our results of operations. A more detailed discussion

of our regulatory and governmental relationships appears under Regulation and Governmental

Relationships in the Information Statement.

DESCRIPTION OF PREFERRED STOCK

The Preferred Stock will have the terms shown in the CertiÑcate of Designation attached as

Appendix A. The following is a summary of those terms.

General

Section 306(f) of the Freddie Mac Act authorizes us to issue an unlimited number of shares of

preferred stock. The shares of Preferred Stock we are oÅering will have a par value of $1.00 per

share and will be created by the CertiÑcate of Designation.

First Chicago Trust Company, New York, New York, will be the transfer agent, dividend

disbursing agent and registrar for the Preferred Stock.

Authorized Issuance

Our Board of Directors has authorized us to issue the shares of Preferred Stock. The Board

may increase the authorized number of shares at any time, without the consent of the holders of

Preferred Stock.

Dividends

General

Dividends on shares of the Preferred Stock are not mandatory. If you own shares of Preferred

Stock, you will be entitled to receive non-cumulative, quarterly cash dividends which will accrue

from but not including January 26, 2001 and will be payable on March 31, June 30, September 30

and December 31 of each year (each, a ""Dividend Payment Date''), beginning on March 31, 2001.

However, dividends are payable only if declared by our Board of Directors in its sole discretion, out

of funds legally available for dividend payments.

If a Dividend Payment Date is not a Business Day, the related dividend will be paid on the next

Business Day with the same eÅect as though paid on the Dividend Payment Date, without any

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

payment. For these purposes, ""Business Day'' means a day other than (a) Saturday or Sunday,

(b) a day on which New York City banks are closed or (c) a day on which our oÇces are closed.

We will make dividend payments to holders of record on the record date established by our Board of

Directors, which will be from 10 to 45 days before the applicable Dividend Payment Date.

The dividend rate for the period from January 26, 2001 through and including March 31, 2003

will be 4.817%. Thereafter, dividends will accrue at a variable per annum rate equal to the CMT

Rate plus 0.10%, but not greater than 11%. On April 1, 2003, and on April 1 every two years

11
thereafter, we will replace the previous dividend rate with a new dividend rate equal to the thencurrent CMT Rate plus 0.10%. We will determine the CMT Rate for each two-year period on the

second Business Day before the Ñrst day of that period (each, a ""CMT Determination Date'').

If we declare a dividend for the March 31 Dividend Payment Date, that initial dividend, which

will be for the ""Dividend Period'' from but not including January 26, 2001 through and including

March 31, 2001, will be $0.4282 per share and will be payable on March 31, 2001. Thereafter, the

""Dividend Period'' relating to a Dividend Payment Date will be the period from but not including

the preceding Dividend Payment Date through and including the related Dividend Payment Date.

We will compute the amount of dividends payable for any period shorter than a full Dividend

Period on the basis of twelve 30-day months and a 360-day year. We will compute any dividends

payable on the Preferred Stock for each full Dividend Period by dividing the annual dividend by

four. If we redeem the Preferred Stock, we will include the dividend that would otherwise be

payable for the Dividend Period ending on the date of redemption in the redemption price of the

shares redeemed. We will not pay this dividend to you separately.

Determination of CMT Rate

We determine the ""CMT Rate'' as follows:

1. The CMT Rate for any CMT Determination Date will be the rate (not greater than

10.90%) equal to the weekly average interest rate of U.S. Treasury securities having an index

maturity of two years for the week that ends immediately before the week in which the relevant

CMT Determination Date falls, as that rate appears on page ""7052'' on Telerate (or any other

page that replaces the 7052 page on that service or any successor service) under the heading

"". . . Treasury Constant Maturities . . . Federal Reserve Board Release H.15 . . . Mondays

Approximately 3:45 p.m.''

2. If the applicable rate described in clause 1 above is not displayed on Telerate page 7052

at 3:00 p.m., New York City time, on the CMT Determination Date, then the CMT Rate will

be the Treasury constant maturity rate applicable to a two-year index maturity for the weekly

average as published in H.15(519).

3. If the applicable rate described in clause 2 above does not appear in H.15(519) at 3:00

p.m., New York City time, on the CMT Determination Date, then the CMT Rate will be the

Treasury constant maturity rate, or other U.S. Treasury rate, applicable to a two-year index

maturity with reference to the CMT Determination Date, that:

‚ is published by the Board of Governors of the Federal Reserve System or the U.S.

Department of the Treasury; and

‚ we have determined to be comparable to the applicable rate formerly displayed on

Telerate page 7052 and published in H.15(519).

4. If the rate described in clause 3 above does not appear at 3:00 p.m., New York City

time, on the CMT Determination Date, then the CMT Rate will be the yield to maturity of the

arithmetic mean of the secondary market oÅered rates for Treasury notes having an original

maturity of approximately two years and a remaining term to maturity of not less than one year,

and in a representative amount, as of approximately 3:30 p.m., New York City time, on the

CMT Determination Date, as quoted by three primary U.S. government securities dealers in

12
New York City that we select. In selecting these oÅered rates, we will request quotations from

Ñve primary dealers and will disregard the highest quotation Ì or, if there is equality, one of

the highest Ì and the lowest quotation Ì or, if there is equality, one of the lowest. Treasury

notes are direct, non-callable, Ñxed rate obligations of the U.S. government.

5. If we are unable to obtain three quotations of the kind described in clause 4 above, the

CMT Rate will be the yield to maturity of the arithmetic mean of the secondary market oÅered

rates for Treasury notes with an original maturity longer than two years and a remaining term to

maturity closest to two years, and in a representative amount, as of approximately 3:30 p.m.,

New York City time, on the CMT Determination Date, as quoted by three primary U.S.

government securities dealers in New York City that we select. In selecting these oÅered rates,

we will request quotations from Ñve primary dealers and will disregard the highest quotation Ì

or, if there is equality, one of the highest Ì and the lowest quotation Ì or, if there is equality,

one of the lowest. If two Treasury notes with an original maturity longer than two years have

remaining terms to maturity that are equally close to two years, we will obtain quotations for

the Treasury note with the shorter remaining term to maturity.

6. If fewer than Ñve but more than two primary dealers are quoting oÅered rates as

described above in clause 5, then the CMT Rate for the CMT Determination Date will be

based on the arithmetic mean of the oÅered rates so obtained, and neither the highest nor the

lowest of those quotations will be disregarded.

7. If two or fewer primary dealers are quoting oÅered rates as described above in clause 5,

the CMT Rate in eÅect for the new Dividend Period will be the CMT Rate in eÅect for the

prior Dividend Period.

""H.15(519)'' means the weekly statistical release entitled ""Statistical Release H.15(519),'' or

any successor publication, published by the Board of Governors of the Federal Reserve System.

In the absence of clear error, our determination of the CMT Rate and dividend rate will be Ñnal

and binding. You can obtain the CMT Rates and the dividend rates for the current and preceding

Dividend Periods by contacting us at:

Freddie Mac

Investor Inquiry

8200 Jones Branch Drive

McLean, Virginia 22102-3110

Telephone: (800-336-FMPC)

(703-450-3777 within Washington, D.C. area)

e-mail: Investor Inquiry@freddiemac.com

Preferences and Limitations

The Preferred Stock will rank prior to our Voting Common Stock, par value $0.21 per share

(the ""Common Stock''), with respect to dividends, as provided in the CertiÑcate of Designation.

We will not declare or pay any dividend on the Common Stock or any other junior stock unless

dividends have been declared and paid or set apart, or ordered to be set apart, on the Preferred Stock

for the then-current Dividend Period. The Preferred Stock will rank equally with respect to

dividends with our currently outstanding classes of Preferred Stock (the ""Existing Preferred

Stock''), which are listed in Section 1 of the CertiÑcate of Designation.

13
Dividends on the Preferred Stock are not cumulative. If we do not pay a dividend on the

Preferred Stock, the holders of the Preferred Stock will have no claim to a payment as long as we do

not pay a dividend for the then-current period on our Common Stock, any other junior stock, or the

Existing Preferred Stock.

Our Board of Directors may, in its discretion, choose to pay dividends on the Preferred Stock

without paying dividends on the Common Stock.

We intend to issue subordinated debt in the near future. The terms of the subordinated debt

may provide for the deferral of interest payments under certain speciÑed circumstances of Ñnancial

distress. The terms of the subordinated debt are expected to prohibit the payment of dividends on

our stock, including the Preferred Stock, during any period when we have deferred paying interest

on such subordinated debt.

We will not declare or pay any dividends on the Preferred Stock if at the same time any arrears

or default exists in the payment of dividends on any outstanding class or series of our stock ranking

prior to the Preferred Stock with respect to the payment of dividends. At the time of issuance of the

Preferred Stock, no class or series of our stock ranking prior to the Preferred Stock will exist.

Holders of shares of the Preferred Stock will not be entitled to any dividends, whether payable

in cash or property, other than as described above and will not be entitled to interest, or any sum in

lieu of interest, in respect of any dividend payment. See Regulatory Matters below for a description

of possible regulatory restrictions on our ability to pay dividends.

Changes in the Dividends-Received Percentage

General

If one or more amendments to the Code enacted before July 26, 2002 reduce the percentage of

the dividends-received deduction (currently 70%) as speciÑed in section 243(a)(1) of the Code or

any successor provision (the ""Dividends-Received Percentage''), we will make certain adjustments

in the dividends payable on the Preferred Stock, and Post Declaration Date Dividends and

Retroactive Dividends may become payable, as described below.

We will adjust the amount of each dividend per share of Preferred Stock for dividend payments

made on or after the eÅective date of such a change in the Code, by multiplying the amount of the

dividend payable described above under Dividends Ì General (before adjustment) by a factor,

which will be the number determined in accordance with the following formula (the ""DRD

Formula''), and rounding the result to the nearest cent (with one-half cent rounded up):

1-.35(1-.70)

1-.35(1-DRP)

For the purposes of the DRD Formula, ""DRP'' means the Dividends-Received Percentage

(expressed as a decimal) applicable to the dividend in question; however, if the Dividends-Received

Percentage applicable to the dividend in question is less than 50%, then the DRP will equal .50. If

the amount of any dividend payable on the Preferred Stock is adjusted through the application of the

DRD Formula, the resulting dividend rate may exceed 11% per annum. No amendment to the

Code, other than a change in the percentage of the dividends-received deduction in section

243(a)(1) of the Code or any successor provision, or a change in the percentage of the dividendsreceived deduction for certain categories of stock that is applicable to the Preferred Stock, will give

rise to an adjustment.

14
No adjustment in the dividends will be made, and no Post Declaration Date Dividends or

Retroactive Dividends will be payable, as a result of any amendment to the Code enacted on or after

July 26, 2002.

If we receive either an unqualiÑed opinion of nationally recognized independent tax counsel or

a private letter ruling or similar form of assurance from the Internal Revenue Service (the ""IRS'')

that an amendment does not apply to a dividend payable on the Preferred Stock, then the

amendment will not result in an adjustment, in Post Declaration Date Dividends or in Retroactive

Dividends. Any opinion of counsel must be based upon the legislation amending or establishing the

DRP or upon a published pronouncement of the IRS. Unless the context otherwise requires,

references to dividends in this OÅering Circular will mean dividends as adjusted by the DRD

Formula. Our calculation of the dividends as so adjusted will be Ñnal.

If we adjust the amount of dividends or if we are going to pay Post Declaration Date Dividends

or Retroactive Dividends, we will notify you of that fact.

Post Declaration Date Dividends

If an amendment to the Code as described above is enacted after the dividend payable on a

Dividend Payment Date has been declared but before that dividend is paid, the amount of the

dividend payable will not be increased. Instead, additional dividends (""Post Declaration Date

Dividends'') equal to the excess of:

‚ the product of the dividend we paid on that Dividend Payment Date and the DRD

Formula (where the DRP used in the DRD Formula would be equal to the greater of

the Dividends-Received Percentage applicable to the dividend in question and .50), over

‚ the dividend we paid on that Dividend Payment Date

will be payable, if declared, to holders of Preferred Stock on the record date applicable to the next

succeeding Dividend Payment Date, in addition to any other amounts payable on that date.

Retroactive Dividends

If an amendment to the Code as described above is enacted and the reduction in the DividendsReceived Percentage retroactively applies to a Dividend Payment Date on which we previously paid

dividends on the Preferred Stock (an ""AÅected Dividend Payment Date''), we will pay, if declared,

additional dividends (""Retroactive Dividends'') to holders of Preferred Stock on the record date

applicable to the next succeeding Dividend Payment Date Ì or, if the amendment is enacted after

the dividend payable on such Dividend Payment Date has been declared, to holders of Preferred

Stock on the record date applicable to the second succeeding Dividend Payment Date following the

date of enactment. The Retroactive Dividends will equal the excess of:

‚ the product of the dividend we paid on each AÅected Dividend Payment Date and the

DRD Formula (where the DRP used in the DRD Formula would be equal to the

greater of the Dividends-Received Percentage and .50 applied to each AÅected

Dividend Payment Date), over

‚ the sum of the dividends we paid on each AÅected Dividend Payment Date.

We will make only one payment of Retroactive Dividends for any such amendment.

15
Optional Redemption

The Preferred Stock will not be redeemable before March 31, 2003. On that date and on

March 31 every two years thereafter, we may redeem the Preferred Stock, in whole or in part, out of

legally available funds. The redemption price will be $50.00 per share plus an amount equal to the

amount of the dividend that would otherwise be payable for the Dividend Period ending on the date

of redemption. If we redeem less than all of the outstanding shares of the Preferred Stock, we will

select shares to be redeemed by lot or pro rata (as nearly as possible) or by any other method which

we deem equitable.

We will give notice of optional redemption by mail to holders of the Preferred Stock from 30

days to 60 days before the redemption date. Each notice will state the number of shares of Preferred

Stock being redeemed, the redemption price, the redemption date and the place at which a holder's

Preferred Stock certiÑcates must be presented for redemption.

On and after the redemption date, the shares of Preferred Stock called for redemption will no

longer be deemed outstanding, and all rights of the holders of those shares will cease.

The terms of the subordinated debt we intend to issue are expected to prohibit us from

redeeming our stock, including the Preferred Stock, during any period when we have deferred

paying interest on the subordinated debt. The terms of the subordinated debt may provide for the

deferral of interest payments under certain speciÑed circumstances of Ñnancial distress.

See Regulatory Matters below for a description of possible regulatory restrictions on our ability

to redeem the Preferred Stock.

Regulatory Matters

Neither our right to declare dividends on nor our right to redeem the Preferred Stock is

currently subject to prior regulatory approval. Under the Federal Housing Enterprises Financial

Safety and Soundness Act of 1992 (the ""GSE Act''), our ability to exercise these rights may be

subject to regulatory approval only if we fail to meet applicable capital standards.

The GSE Act established our minimum capital, critical capital and risk-based capital

standards.

The GSE Act has required that we maintain ""core capital'' in an amount that equals or exceeds

the levels established under the minimum and critical capital standards since the GSE Act was

enacted in 1992. In June 1996, the Director (the ""Director'') of the OÇce of Federal Housing

Enterprise Oversight (""OFHEO'') issued a Ñnal minimum capital regulation that interprets the

minimum capital standard and implements a calculation methodology similar to the methodology

OFHEO applied on an interim basis since the GSE Act was enacted.

The GSE Act does not require us to maintain ""total capital'' at a level that equals or exceeds

the risk-based capital standard until the Director issues a Ñnal risk-based capital regulation

establishing the risk-based capital stress test (and the risk-based capital level cannot be determined

from the GSE Act alone).

The Director of OFHEO has issued a proposed regulation to implement the risk-based capital

standard. We submitted to OFHEO detailed, written comments on the proposal. We commented

that we believe the basic framework proposed by OFHEO is sound, but a number of changes in the

16
components of the stress tests are necessary in order to align capital to risk as envisioned in the GSE

Act. Our comments in this regard included recommendations regarding the measurement of the

benchmark for regional credit loss experience for single-family mortgages, single-family and

multifamily credit risk and prepayment models, treatment of non-borrower credit risk, projection of

the U.S. Treasury yield curve and non-U.S. Treasury interest rates, and assumptions as to refunding

and operation expenses. The comments emphasized the importance of implementing the infrastructure systems and procedures, including treatment of new activities that are needed to make the

stress test operational and the proposal workable. Our comments also identiÑed options to make the

implementation of the proposed regulation accurate, predictable and timely. Copies of those

comments are available upon request.

When the rule is completed, OFHEO will submit the rule to the OÇce of Management and

Budget for Ñnal clearance and publication in the Federal Register. We understand that OFHEO

hopes to complete this process in the Ñrst half of 2001. We believe that a reasonable implementation

of the risk-based capital standard, when Ñnalized, would be consistent with our internal assessment

of capital adequacy.

The Ñnal risk-based capital regulation becomes eÅective when issued but, until the risk-based

capital regulation has been in eÅect for one year, the Director must base any classiÑcation of our

capital adequacy solely on whether our core capital is equal to or exceeds the minimum and critical

capital levels.

Subject to the applicability of the risk-based capital standard described above, we may pay a

dividend without prior OFHEO approval if the payment would not decrease our total capital to an

amount less than our risk-based capital level and would not decrease the core capital level to an

amount less than our minimum capital level. Beginning one year after the Ñnal risk-based capital

regulation is issued, if our total capital is less than the risk-based capital level, but our core capital

equals or exceeds the minimum capital level, we are prohibited from making a dividend payment

that would decrease our core capital to an amount less than the minimum capital level. At any time,

if our core capital is less than the minimum capital level, we may make a dividend payment only if

the dividend payment satisÑes certain statutory standards and would not decrease our core capital to

less than the critical capital level and if the Director approves the payment.

In addition to the preceding requirements that relate directly to the payment of dividends, the

Director has authority, under certain conditions, to require that we submit for the Director's

approval a capital restoration plan or that we restrict our activities, either of which also could aÅect

the payment of dividends. SpeciÑcally, if the Director determines, after the risk-based capital

regulation has been in eÅect for one year, that we fail to meet the risk-based capital standard, or if

the Director determines, at any time, that we fail to meet the minimum capital standard, we will be

required to submit for the Director's approval a capital restoration plan setting forth a feasible plan

for restoring our capital level. In addition, if we at any time fail to meet the minimum capital

standard, the Director is authorized to impose various limitations on our activities. If, at any time,

the Director determines that we fail to meet the critical capital standard, the Director may appoint a

conservator.

17
If the Director does not approve a required capital restoration plan or determines that we have

failed to make reasonable eÅorts to comply with such a plan, then the Director may treat us as not

meeting capital standards that we otherwise meet and take the actions authorized when we do not

meet such standards. Similarly, beginning one year after OFHEO issues a Ñnal risk-based capital

regulation, if the Director determines that we are engaging in conduct not approved by the Director

that could result in a rapid depletion of core capital or that the value of the property subject to

mortgages we hold or have securitized has decreased signiÑcantly, the Director is authorized to treat

us as not meeting capital standards that we otherwise meet.

If we fail to meet or are treated by the Director as not meeting applicable capital standards and

the Director has reasonable cause to believe that we are engaging in or about to engage in any

conduct (which could include the payment of dividends) that threatens to result in a material

depletion of our core capital, then the Director is authorized to commence proceedings under which,

after a hearing, the Director could issue a cease-and-desist order prohibiting such conduct. If we

meet all applicable capital standards and the Director determines that the conduct in question is

likely to cause a signiÑcant depletion of core capital, the Director is authorized to commence

proceedings under which, after a hearing, the Director could issue a cease-and-desist order

prohibiting such conduct. In addition, regardless of whether we meet applicable capital standards, if

the Director determines that such conduct is likely to cause a signiÑcant depletion of core capital,

insolvency or otherwise cause irreparable harm to Freddie Mac, the Director can issue a temporary

cease-and-desist order without a hearing, which would be eÅective until completion of the ceaseand-desist proceedings.

The Director has the authority to require us to submit a report to the Director regarding any

capital distribution (including any dividend) declared by us before we make the distribution.

The foregoing discussion with respect to the payment of dividends is equally applicable to our

redemption of the Preferred Stock and is based on our understanding and interpretations of the

relevant provisions of the GSE Act. OFHEO has not yet issued any deÑnitive guidance as to its

interpretations of these provisions of the GSE Act. Until OFHEO has provided such guidance, we

cannot be certain that the foregoing discussion will be consistent with OFHEO's interpretation in

every respect. A more detailed discussion of the regulatory oversight of our capitalization and the

terms used above appears under Regulation and Governmental Relationships Ì Regulation of

Freddie Mac Ì OFHEO Oversight in the Information Statement.

No Preemptive Rights and No Conversion

As a holder of Preferred Stock, you will not have any preemptive right to purchase or subscribe

for any other shares, rights, options or other securities. You will not have any right to convert your

shares into or exchange your shares for any other class or series of our stock or obligations.

No Voting Rights

Section 306(f) of the Freddie Mac Act prohibits the holders of Preferred Stock from voting for

the election of any member of our Board of Directors. Except as described under Amendments

below, as a holder you will not be entitled to vote.

18
Liquidation Rights

If Freddie Mac voluntarily or involuntarily dissolves, liquidates or winds up our business, then,

after payment of or provision for our liabilities and the expenses of dissolution, liquidation or winding

up, the holders of the outstanding shares of the Preferred Stock will be entitled to receive out of our

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

Common Stock or any other junior stock, $50.00 per share plus an amount equal to the dividend for

the then-current quarterly Dividend Period accrued through and including the date of the

liquidation payment.

In the event of our dissolution, liquidation or winding up, the rights of the Preferred Stock rank

equally with those of the Existing Preferred Stock. If our assets available for distribution to

shareholders are insuÇcient to pay in full the aggregate amount payable to holders of the Preferred

Stock, the Existing Preferred Stock and any other class or series of stock of equal priority upon

liquidation, the assets will be distributed to the holders of Preferred Stock, the Existing Preferred

Stock and such other stock pro rata, based on the amounts to which they are entitled.

Notwithstanding the foregoing, holders of the Preferred Stock will not be entitled to be paid

any amount in respect of our dissolution, liquidation or winding up until holders of any classes or

series of our stock ranking prior to the Preferred Stock upon liquidation have been paid all amounts

to which they are entitled.

Our consolidation, merger or combination with or into any other corporation or entity, or the

sale of all or substantially all of our property or business, will not constitute a liquidation, dissolution

or winding up for purposes of these provisions on liquidation rights.

Additional Classes or Series of Stock

We will have the right to create and issue additional classes or series of stock ranking prior to,

equally with or junior to the Preferred Stock, as to dividends, liquidation or otherwise, without the

consent of holders of the Preferred Stock.

Amendments

Without the consent of the holders of the Preferred Stock, we will have the right to amend the

CertiÑcate of Designation to cure any ambiguity, to correct or supplement any term which may be

defective or inconsistent with any other term or to make any other provisions so long as the

amendment does not materially and adversely aÅect the interests of the holders of the Preferred

Stock. Otherwise, we may amend the CertiÑcate of Designation only with the consent of the holders

of at least two-thirds of the outstanding shares of Preferred Stock. On matters requiring consent,

each holder will be entitled to one vote per share.

NYSE Listing

We have applied to list the Preferred Stock on the NYSE. Approval of our application will be

subject, among other things, to satisfactory distribution of the Preferred Stock.

19
CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The Preferred Stock and payments on it are generally subject to taxation by the United States

and other taxing jurisdictions to the same extent as stock of any other corporation. The following

discussion addresses some of the U.S. federal income tax consequences that may result from

ownership of the Preferred Stock by a U.S. person who holds the Preferred Stock as a capital asset.

For this purpose, a U.S. person is an individual who is a citizen or resident of the United States

for federal income tax purposes, a corporation, partnership or other type of entity organized under

the laws of the United States or any State (other than a partnership that is not treated as a U.S.

person under any applicable Treasury regulations), an estate whose income is subject to U.S. federal

income tax regardless of its source, or a trust if a court within the United States is able to exercise

primary supervision of the administration of the trust and one or more U.S. persons have the

authority to control all substantial decisions of the trust. Notwithstanding the preceding sentence, to

the extent provided in Treasury regulations, certain trusts in existence on August 20, 1996, and

treated as U.S. persons prior to such date, that elect to continue to be treated as U.S. persons, also

will be U.S. persons.

This discussion does not purport to address all rules which may apply to particular investors.

Investors are encouraged to consult their own tax advisors regarding the federal, state, local and

foreign tax considerations applicable to an investment in the Preferred Stock.

This discussion reÖects current federal income tax laws and regulations and administrative and

judicial interpretations. Changes to any of these that occur after the date of this OÅering Circular

may aÅect the tax consequences that we describe.

Dividends

Distributions on the Preferred Stock which are paid out of current earnings and proÑts, or

earnings and proÑts accumulated after 1984, generally constitute dividends taxable as ordinary

income. To the extent that the amount of any distribution paid on a share of Preferred Stock

exceeds the current or accumulated earnings and proÑts for federal income tax purposes attributable

to that share, such excess will be treated Ñrst as a return of capital (rather than as ordinary income)

and will be applied against and reduce the holder's adjusted tax basis in that share of Preferred

Stock. Any such amount in excess of the holder's adjusted tax basis will then be taxed as capital

gain. For purposes of the remainder of this discussion, it is assumed that dividends paid with respect

to the Preferred Stock will constitute dividends for U.S. federal income tax purposes.

Dividends received by corporations generally will be eligible for the dividends-received

deduction. The dividends-received deduction is available only with respect to a dividend received on

stock held for more than 45 days (or more than 90 days in the case of a dividend on preferred stock

attributable to periods aggregating in excess of 366 days), including the day of disposition but not

the day of acquisition. This holding period must be satisÑed during the 90-day period (180-day

period in the case of a preferred stock dividend attributable to periods aggregating in excess of 366

days) beginning on the date which is 45 (90) days before the date on which the stock becomes exdividend with respect to the dividend. The length of time that a corporate shareholder is deemed to

have held stock for these purposes is reduced for periods during which the shareholder's risk of loss

with respect to the stock is diminished by reason of the existence of certain options, contracts to sell,

short sales or other similar transactions. The amount of such deduction generally will equal 70

percent of the amount of the dividends received, subject to reduction in certain events, including

20
where a holder has indebtedness outstanding that is directly attributable to an investment in the

Preferred Stock. For this purpose, indebtedness of a depository institution attributable to deposits

received in the ordinary course of its business is not treated as indebtedness directly attributable to

an investment in the Preferred Stock.

For purposes of the corporate alternative minimum tax, alternative minimum taxable income is

increased by 75 percent of the amount by which a corporation's adjusted current earnings exceeds its

alternative minimum taxable income prior to the addition of the applicable tax preference item. The

amount of any dividend that is included in a corporate shareholder's adjusted current earnings will

not be reduced by any dividends-received deduction otherwise allowable with respect to that

dividend.

Dispositions, Including Redemptions

Any sale, exchange, redemption (except as discussed below) or other disposition of the

Preferred Stock generally will result in taxable gain or loss equal to the diÅerence between the

amount received and the shareholder's adjusted tax basis in the Preferred Stock. Such gain or loss

generally will be capital gain or loss and will be long-term capital gain or loss if the holding period

for the Preferred Stock exceeds one year.

A redemption of Preferred Stock may be treated as a dividend, rather than as payment in

exchange for the Preferred Stock, unless the redemption is ""not essentially equivalent to a dividend''

with respect to the holder within the meaning of section 302(b)(1) of the Code. In applying this

standard, the holder must take into account not only the Preferred Stock and other stock of Freddie

Mac that it owns directly, but also the Preferred Stock and other stock of Freddie Mac that it

constructively owns within the meaning of section 318 of the Code. A redemption payment made to

a holder will be ""not essentially equivalent to a dividend'' if it results in a ""meaningful reduction'' in

the holder's aggregate stock interest in Freddie Mac. Because of the ambiguities in applying this

rule, each holder should consult its own tax advisor to determine whether a redemption of Preferred

Stock will be treated as a dividend or as payment in exchange for the Preferred Stock. If the

redemption payment is treated as a dividend, the rules discussed above under ""Dividends'' apply.

Information Reporting and Backup Withholding

Payments of dividends on shares of Preferred Stock held of record by U.S. persons other than

corporations and other exempt holders are required to be reported to the IRS.

Backup withholding of U.S. federal income tax at a rate of 31 percent may apply to payments

made with respect to shares of Preferred Stock, as well as payments of proceeds from the sale of

shares of Preferred Stock, to holders that are not ""exempt recipients'' and that fail to provide certain

identifying information (such as the taxpayer identiÑcation number of the holder) in the manner

required. Individuals generally are not exempt recipients, whereas corporations and certain other

entities generally are exempt recipients.

LEGAL INVESTMENT CONSIDERATIONS

You should consult your own legal advisors to determine whether the shares of Preferred Stock

constitute legal investments for you and whether the shares of Preferred Stock can be used as

collateral for borrowings. In addition, Ñnancial institutions should consult their legal advisors or

regulators in determining the appropriate treatment of the shares of Preferred Stock under riskbased capital or similar rules.

21
If you are subject to legal investment laws and regulations or to review by regulatory

authorities, you may be subject to restrictions on investing in the shares of Preferred Stock.

Institutions regulated by the Comptroller of the Currency, the Board of Governors of the Federal

Reserve System, the Federal Deposit Insurance Corporation, the OÇce of Thrift Supervision, the

National Credit Union Administration, the Department of the Treasury or any other federal or state

agency with similar authority should review any applicable regulations, policy statements and

guidelines before purchasing or pledging the shares of Preferred Stock.

UNDERWRITING

Under the terms of an underwriting agreement (the ""Underwriting Agreement''), we have

agreed to sell to the Underwriters named below, and the Underwriters, for whom Lehman Brothers

Inc. is acting as representative, have severally agreed to purchase from us, the shares of Preferred

Stock opposite their names.

Number of Shares

Underwriter of Preferred Stock

Lehman Brothers Inc. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,250,000

First Tennessee Bank National Association ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 650,000

Merrill Lynch, Pierce, Fenner & Smith Incorporated ÏÏÏÏÏÏÏÏ 650,000

Blaylock & Partners, L.P. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 325,000

Bear, Stearns & Co. Inc. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 325,000

Credit Suisse First Boston Corporation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 325,000

Goldman, Sachs & Co. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 325,000

Morgan Stanley & Co. Incorporated ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 325,000

Salomon Smith Barney Inc. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 325,000

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,500,000

The Underwriting Agreement requires the Underwriters to take and pay for all of the shares of

Preferred Stock, if any are taken.

The Underwriters propose to oÅer a portion of the Preferred Stock directly to the public at the

initial oÅering price shown on the cover page of this OÅering Circular, plus accrued dividends, if

any, from January 26, 2001, and a portion to certain dealers at that price less a concession of not

more than $0.25 per share. The Underwriters may allow, and the dealers may reallow, a concession

of not more than $0.20 per share on sales to certain brokers and dealers. After the shares of

Preferred Stock are released for sale to the public, the Underwriters may vary the oÅering price and

other selling terms.

Until this oÅering, there has been no public market for the Preferred Stock. We have applied to

list the Preferred Stock on the NYSE. Trading of the Preferred Stock on the NYSE is expected to

commence within a fourteen-day period after the initial delivery of the Preferred Stock. The

Underwriters have advised us that they intend to make a market in the Preferred Stock prior to the

commencement of trading on the NYSE, but are not obliged to do so and may discontinue any such

market making at any time without notice.

In connection with the oÅering, the Underwriters may purchase and sell the Preferred Stock in

the open market. These transactions may include over-allotment and stabilizing transactions and

purchases to cover syndicate short positions created in connection with the oÅering. Stabilizing

transactions consist of certain bids or purchases for the purpose of preventing or retarding a decline

in the market price of the Preferred Stock. Syndicate short positions involve the sale by the

Underwriters of a greater number of shares of Preferred Stock than they are required to purchase

22
from us in the oÅering. The Underwriters also may impose a penalty bid, whereby selling

concessions allowed to syndicate members or other broker-dealers for securities sold in the oÅering

for their account may be reclaimed by the syndicate if such shares of Preferred Stock are

repurchased by the Underwriters in stabilizing or covering transactions. These activities may

stabilize, maintain or otherwise aÅect the market price of the Preferred Stock, which may be higher

than the price that might otherwise prevail in the open market; and these activities, if commenced,

may be discontinued at any time. These transactions may be eÅected in the over-the-counter market

or otherwise.

We and the Underwriters have agreed to indemnify each other against certain liabilities in

connection with the oÅering and sale of the Preferred Stock.

Some of the Underwriters, dealers or agents may engage in transactions with us and perform

services for us in the ordinary course of business.

RATINGS

Moody's will assign the Preferred Stock a rating of ""aa3.'' A rating of ""aa'' is the second

highest rating that Moody's assigns to preferred stock. An issue which is rated ""aa'' is considered by

Moody's to be a ""high-grade preferred stock.'' According to Moody's, this rating indicates that

""there is a reasonable assurance the earnings and asset protection will remain relatively well

maintained in the foreseeable future.'' The numerical modiÑer ""3'' indicates that the issue ranks in

the lower end of the generic rating category of ""aa.''

S&P will assign the Preferred Stock a rating of ""AA¿.'' A rating of ""AA'' is the second highest

rating that S&P assigns to preferred stock. An issue which is rated ""AA'' is considered by S&P to be

a ""high-quality, Ñxed-income security.'' According to S&P, this rating indicates that ""the capacity

to pay preferred stock dividends is very strong, although not as overwhelming as for issues rated

AAA.'' The addition of the minus (¿) sign indicates that the issue ranks in the lower end of the

generic rating category ""AA.''

A security rating is not a recommendation to buy, sell or hold securities and may be subject to

revision or withdrawal at any time by the assigning rating organization.

INDEPENDENT PUBLIC ACCOUNTANTS

The Consolidated Financial Statements of Freddie Mac included in the Information Statement

have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their

report with respect thereto.

LEGAL MATTERS

Maud Mater, Esq., our Executive Vice President-General Counsel and Secretary, will render

an opinion on the legality of the Preferred Stock. As of December 31, 2000, Ms. Mater was the

beneÑcial owner of 85,097 shares of Common Stock and options covering an additional 136,442

shares of Common Stock. Cleary, Gottlieb, Steen & Hamilton is representing the Underwriters on

legal matters concerning the Preferred Stock.

23
Appendix A

FREDDIE MAC

CERTIFICATE OF CREATION, DESIGNATION, POWERS,

PREFERENCES, RIGHTS, PRIVILEGES, QUALIFICATIONS,

LIMITATIONS, RESTRICTIONS, TERMS AND CONDITIONS

of

VARIABLE RATE, NON-CUMULATIVE PREFERRED STOCK

(Par Value $1.00 Per Share)

I, MAUD MATER, Secretary of the Federal Home Loan Mortgage Corporation, a government-sponsored enterprise of the United States of America (""Freddie Mac'' or the ""Corporation''),

do hereby certify that, pursuant to authority vested in the Board of Directors of Freddie Mac by

Section 306(f) of the Federal Home Loan Mortgage Corporation Act, as amended (12 U.S.C.

Û1455(f)), the Board of Directors adopted FHLMC Resolution 99-22 on September 10, 1999,

which resolution is now, and at all times since such date has been, in full force and eÅect, and that

the Chairman and Chief Executive OÇcer, pursuant to the authority delegated to him by such

resolution, approved the Ñnal terms of the public issuance and sale of the preferred stock of Freddie

Mac designated above.

The Variable Rate, Non-Cumulative Preferred Stock shall have the following designation,

powers, preferences, rights, privileges, qualiÑcations, limitations, restrictions, terms and conditions:

1. Designation, Par Value, Number of Shares and Seniority

The class of preferred stock of Freddie Mac created hereby (the ""Non-Cumulative Preferred

Stock'') shall be designated ""Variable Rate, Non-Cumulative Preferred Stock,'' shall have a par

value of $1.00 per share and shall consist of 6,500,000 shares. The Board of Directors shall be

permitted to increase the authorized number of such shares at any time. The Non-Cumulative

Preferred Stock shall rank prior to the Voting Common Stock of Freddie Mac (the ""Common

Stock'') to the extent provided in this CertiÑcate and shall rank, both as to dividends and upon

liquidation, on a parity with the Variable Rate, Non-Cumulative Preferred Stock issued on

November 5, 1999, the 5.79% Non-Cumulative Preferred Stock issued on July 21, 1999, the 5.1%

Non-Cumulative Preferred Stock issued on March 9, 1999, the 5.3% Non-Cumulative Preferred

Stock issued on October 28, 1998, the 5.1% Non-Cumulative Preferred Stock issued on September 23, 1998, the Variable Rate, Non-Cumulative Preferred Stock issued on September 23, 1998

and September 29, 1998, the 5% Non-Cumulative Preferred Stock issued on March 23, 1998, the

5.81% Non-Cumulative Preferred Stock issued on October 27, 1997, the 6.14% Non-Cumulative

Preferred Stock issued on June 3, 1997, the 6.125% Non-Cumulative Preferred Stock issued on

November 1, 1996 and the Variable Rate, Non-Cumulative Preferred Stock issued on April 26,

1996 (collectively, the ""Existing Preferred Stock'').

2. Dividends

(a) Holders of outstanding shares of Non-Cumulative Preferred Stock will be entitled to

receive, ratably, non-cumulative quarterly cash dividends which will accrue from but not including

January 26, 2001 and will be payable on March 31, June 30, September 30 and December 31 of

A-1
each year (each, a ""Dividend Payment Date''), beginning on March 31, 2001, when as and if

declared by the Board of Directors in its sole discretion, out of funds legally available for dividend

payments. If a Dividend Payment Date is not a ""Business Day,'' the related dividend will be paid on

the next Business Day with the same force and eÅect 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. For these purposes, ""Business Day'' means a day other than (i) a Saturday or

Sunday, (ii) a day on which New York City banks are closed or (iii) a day on which the oÇces of

Freddie Mac are closed. Dividends will be paid to holders of record on the record date Ñxed by the

Board of Directors, not to be earlier than 45 days or later than 10 days preceding the applicable

Dividend Payment Date.

The dividend rate for the period from January 26, 2001 through and including March 31, 2003

will be 4.817%. Thereafter, dividends will accrue at a variable per annum rate (not greater than

11%) equal to the ""CMT Rate'' (as deÑned below) plus 0.10%. On April 1, 2003, and on April 1

every two years thereafter, the previous dividend rate will be replaced by the then-current CMT

Rate plus 0.10%. The CMT Rate for each two-year period will be determined by Freddie Mac on

the second Business Day immediately preceding the Ñrst day of such period (each, a ""CMT

Determination Date''). If declared, the initial dividend, which will be for the ""Dividend Period''

from but not including January 26, 2001 through and including March 31, 2003, will be $0.4282 per

share and will be payable on March 31, 2001. Thereafter, the ""Dividend Period'' relating to a

Dividend Payment Date will be the period from but not including the preceding Dividend Payment

Date through and including the related Dividend Payment Date. The amount of dividends payable

for any period shorter than a full Dividend Period shall be computed on the basis of twelve 30-day

months and a 360-day year. The amount of dividends payable for each full Dividend Period will be

determined by dividing the annual dividend by four. If Freddie Mac redeems the Non-Cumulative

Preferred Stock, the dividend that would otherwise be payable for the Dividend Period ending on the

date of redemption will be included in the redemption price of the shares redeemed and will not be

separately payable.

(b) The ""CMT Rate'' for any CMT Determination Date will be the rate (not greater than

10.90%) equal to:

(1) the weekly average interest rate of U.S. Treasury securities having an index maturity

of two years for the week that ends immediately before the week in which the relevant CMT

Determination Date falls, as that rate appears on page ""7052'' on Telerate (or such other page

as may replace the 7052 page on that service or any successor service) under the heading

"". . . Treasury Constant Maturities . . . Federal Reserve Board Release H.15 . . . Mondays

Approximately 3:45 p.m.''

(2) If the applicable rate described in clause (1) above is not displayed on Telerate page

7052 at 3:00 p.m., New York City time, on the relevant CMT Determination Date, then the

CMT Rate will be the Treasury constant maturity rate applicable to a two-year index maturity

for the weekly average as published in H.15(519) (as deÑned below).

(3) If the applicable rate described in clause (2) above does not appear in H.15(519) at

3:00 p.m., New York City time, on the relevant CMT Determination Date, then the CMT Rate

A-2
will be the Treasury constant maturity rate, or other U.S. Treasury rate, applicable to a twoyear index maturity with reference to the relevant CMT Determination Date, that:

(A) is published by the Board of Governors of the Federal Reserve System or the

U.S. Department of the Treasury; and

(B) is determined by Freddie Mac to be comparable to the applicable rate formerly

displayed on Telerate page 7052 and published in H.15(519).

(4) If the rate described in clause (3) above does not appear at 3:00 p.m., New York City

time, on the relevant CMT Determination Date, then the CMT Rate will be the yield to

maturity of the arithmetic mean of the secondary market oÅered rates for Treasury notes

having an original maturity of approximately two years and a remaining term to maturity of not

less than one year, and in a representative amount, as of approximately 3:30 p.m., New York

City time, on the relevant CMT Determination Date, as quoted by three primary U.S.

government securities dealers in New York City selected by Freddie Mac. In selecting these

oÅered rates, Freddie Mac will request quotations from Ñve primary dealers and will disregard

the highest quotation Ì or, if there is equality, one of the highest Ì and the lowest quotation Ì or, if there is equality, one of the lowest. Treasury notes are direct, non-callable, Ñxed

rate obligations of the U.S. government.

(5) If Freddie Mac is unable to obtain three quotations of the kind described in clause

(4) above, the CMT Rate will be the yield to maturity of the arithmetic mean of the secondary

market oÅered rates for Treasury notes with an original maturity longer than two years and a

remaining term to maturity closest to two years, and in a representative amount, as of

approximately 3:30 p.m., New York City time, on the relevant CMT Determination Date, as

quoted by three primary U.S. government securities dealers in New York City selected by

Freddie Mac. In selecting these oÅered rates, Freddie Mac will request quotations from Ñve

primary dealers and will disregard the highest quotation Ì or, if there is equality, one of the

highest Ì and the lowest quotation Ì or, if there is equality, one of the lowest. If two Treasury

notes with an original maturity longer than two years have remaining terms to maturity that are

equally close to two years, Freddie Mac will obtain quotations for the Treasury note with the

shorter remaining term to maturity.

(6) If fewer than Ñve but more than two primary dealers are quoting oÅered rates as

described in clause (5) above, then the CMT Rate for the relevant CMT Determination Date

will be based on the arithmetic mean of the oÅered rates so obtained, and neither the highest

nor the lowest of those quotations will be disregarded.

(7) If two or fewer primary dealers are quoting oÅered rates as described in clause (5)

above, the CMT Rate in eÅect for the new Dividend Period will be the CMT Rate in eÅect for

the prior Dividend Period.

""H.15(519)'' means the weekly statistical release entitled ""Statistical Release H.15(519),'' or

any successor publication, published by the Board of Governors of the Federal Reserve System.

Absent manifest error, Freddie Mac's determination of the CMT Rate and the dividend rate

will be Ñnal and binding.

No dividends shall be declared or paid or set apart for payment on the Common Stock or any

other class or series of stock ranking junior to or (except as hereinafter provided) on a parity with

the Non-Cumulative Preferred Stock with respect to the payment of dividends unless dividends

A-3
have been declared and paid or set apart (or ordered by the Board of Directors to be set apart) for

payment on the outstanding Non-Cumulative Preferred Stock in respect of the then-current

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 Non-Cumulative

Preferred Stock in the event that Freddie Mac shall not have declared or paid or set apart (or the

Board of Directors shall not have ordered to be set apart) dividends on the Non-Cumulative

Preferred Stock in respect of any prior Dividend Period. In the event that Freddie Mac shall not pay

any one or more dividends or any part thereof on the Non-Cumulative Preferred Stock, the holders

of the Non-Cumulative Preferred Stock shall not have any claim in respect of such non-payment so

long as no dividend is paid on any junior or parity stock in violation of the next preceding sentence.

(c) If, prior to July 26, 2002, one or more amendments to the Internal Revenue Code of 1986,

as amended (the ""Code''), are enacted that reduce or eliminate the percentage of the dividendsreceived deduction as speciÑed in section 243(a)(1) of the Code or any successor provision (the

""Dividends-Received Percentage''), including any change applicable only to certain categories of

stock, which change is applicable to the Preferred Stock, certain adjustments may be made in

respect of the dividends payable by the Corporation, and Post Declaration Date Dividends and

Retroactive Dividends (as such terms are deÑned below) may become payable, as described below.

The amount of each dividend payable (if declared) per share of Non-Cumulative Preferred

Stock for dividend payments made on or after the eÅective date of such change in the Code will be

adjusted by multiplying the amount of the dividend payable pursuant to Section 2(a) (before

adjustment) by a factor, which shall be the number determined in accordance with the following

formula (the ""DRD Formula''), and rounding the result to the nearest cent (with one-half cent

rounded up):

1-.35(1-.70)

1-.35(1-DRP)

For the purposes of the DRD Formula, ""DRP'' means the Dividends-Received Percentage

(expressed as a decimal) applicable to the dividend in question; provided, however, that if the

Dividends-Received Percentage applicable to the dividend in question is less than 50%, then the

DRP will equal .50. In the event an adjustment to any dividend payable on the Non-Cumulative

Preferred Stock is made pursuant to this Section 2(c), the resulting dividend rate may exceed %

per annum. No amendment to the Code, other than a change in the percentage of the dividendsreceived deduction set forth in section 243(a)(1) of the Code or any successor provision, or a

change in the percentage of the dividends-received deduction for certain categories of stock, which

change is applicable to the Preferred Stock, will give rise to an adjustment.

Notwithstanding the foregoing provisions, if, with respect to any such amendment, the

Corporation receives either an unqualiÑed opinion of nationally recognized independent tax counsel

selected by the Corporation or a private letter ruling or similar form of assurance from the Internal

Revenue Service (the ""IRS'') to the eÅect that such an amendment does not apply to a dividend

payable on the Non-Cumulative Preferred Stock, then such amendment shall not result in the

adjustment provided for pursuant to the DRD Formula with respect to such dividend. The opinion

referenced in the previous sentence shall be based upon the legislation amending or establishing the

DRP or upon a published pronouncement of the IRS addressing such legislation. Unless the context

otherwise requires, references to dividends herein shall mean dividends as adjusted by the DRD

A-4
Formula. The Corporation's calculation of the dividends payable as so adjusted shall be Ñnal and not

subject to review, absent manifest error.

Notwithstanding the foregoing, if any such amendment to the Code is enacted after the

dividend payable on a Dividend Payment Date has been declared but before such dividend is paid,

the amount of the dividend payable on such Dividend Payment Date shall not be increased. Instead,

additional dividends (the ""Post Declaration Date Dividends''), equal to the excess, if any, of (x) the

product of the dividend paid by the Corporation on such Dividend Payment Date and the DRD

Formula (where the DRP used in the DRD Formula would be equal to the greater of the DividendsReceived Percentage applicable to the dividend in question and .50) over (y) the dividend paid by

the Corporation on such Dividend Payment Date, shall be payable (if declared) to holders of NonCumulative Preferred Stock on the record date applicable to the next succeeding Dividend Payment

Date, in addition to any other amounts payable on such date.

If any such amendment to the Code is enacted and the reduction in the Dividends-Received

Percentage retroactively applies to a Dividend Payment Date as to which the Corporation previously

paid dividends on the Non-Cumulative Preferred Stock (each, an ""AÅected Dividend Payment

Date''), the Corporation shall pay (if declared) additional dividends (the ""Retroactive Dividends'')

to holders on the record date applicable to the next succeeding Dividend Payment Date (or, if such

amendment is enacted after the dividend payable on such Dividend Payment Date has been

declared, to holders on the record date applicable to the second succeeding Dividend Payment Date

following the date of enactment) in an amount equal to the excess of (x) the product of the dividend

paid by the Corporation on each AÅected Dividend Payment Date and the DRD Formula (where

the DRP used in the DRD Formula would be equal to the greater of the Dividends-Received

Percentage and .50 applied to each AÅected Dividend Payment Date) over (y) the sum of the

dividend paid by the Corporation on each AÅected Dividend Payment Date. The Corporation will

make only one payment of Retroactive Dividends for any such amendment. Notwithstanding the

foregoing provisions, if, with respect to any such amendment, the Corporation receives either an

unqualiÑed opinion of nationally recognized independent tax counsel selected by the Corporation or

a private letter ruling or similar form of assurance from the IRS to the eÅect that such amendment

does not apply to a dividend payable on an AÅected Dividend Payment Date for the NonCumulative Preferred Stock, then such amendment will not result in the payment of Retroactive

Dividends with respect to such AÅected Dividend Payment Date. The opinion referenced in the

previous sentence must be based upon the legislation amending or establishing the DRP or upon a

published pronouncement of the IRS addressing such legislation.

In the event that the amount of dividends payable per share of the Non-Cumulative Preferred

Stock is adjusted pursuant to the DRD Formula and/or Post Declaration Date Dividends or

Retroactive Dividends are to be paid, the Corporation will give notice of each such adjustment and,

if applicable, any Post Declaration Date Dividends and Retroactive Dividends to be given as soon as

practicable to the holders of Non-Cumulative Preferred Stock.

(d) Notwithstanding any other provision of this CertiÑcate, the Board of Directors, in its

discretion, may choose to pay dividends on the Non-Cumulative Preferred Stock without the

payment of any dividends on the Common Stock or any other class or series of stock from time to

time outstanding ranking junior to the Non-Cumulative Preferred Stock with respect to the

payment of dividends.

A-5
(e) No dividend shall be declared or paid or set apart for payment on any shares of the

Non-Cumulative Preferred Stock if at the same time any arrears or default exists in the payment of

dividends on any outstanding class or series of stock of Freddie Mac ranking prior to or (except as

provided herein) on a parity with the Non-Cumulative Preferred Stock with respect to the payment

of dividends. If and whenever dividends, having been declared, shall not have been paid in full, as

aforesaid, on shares of the Non-Cumulative Preferred Stock and on the shares of any other class or

series of stock of Freddie Mac ranking on a parity with the Non-Cumulative Preferred Stock with

respect to the payment of dividends, all such dividends that have been declared on shares of the

Non-Cumulative Preferred Stock and on the shares of any such other class or series shall be paid

pro rata, so that the respective amounts of dividends paid per share on the Non-Cumulative

Preferred Stock and on such other class or series shall in all cases bear to each other the same ratio

that the respective amounts of dividends declared but unpaid per share on the shares of the

Non-Cumulative Preferred Stock (including any adjustments due to changes in the Dividends-Received Percentage) and on the shares of such other class or series bear to each other.

(f) Holders of shares of the Non-Cumulative Preferred Stock shall not be entitled to any

dividends, in cash or in property, other than as herein provided and shall not be entitled to interest,

or any sum in lieu of interest, on or in respect of any dividend payment.

3. Optional Redemption

(a) The Non-Cumulative Preferred Stock shall not be redeemable prior to March 31, 2003.

On that date and on March 31 every two years thereafter, subject to the notice provisions set forth in

Section 3(b) below and to any further limitations which may be imposed by law, Freddie Mac may

redeem the Non-Cumulative Preferred Stock, in whole or in part, out of funds legally available

therefor, at the redemption price of $50.00 per share plus an amount, determined in accordance with

Section 2 above, equal to the amount of the dividend that would otherwise be payable for the

Dividend Period ending on the date of such redemption. If less than all of the outstanding shares of

the Non-Cumulative Preferred Stock are to be redeemed, Freddie Mac shall select 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 which Freddie Mac in its sole discretion deems

equitable.

(b) In the event Freddie Mac shall redeem any or all of the Non-Cumulative Preferred Stock

as aforesaid, notice of such redemption shall be given by Freddie Mac by Ñrst class mail, postage

prepaid, mailed neither less than 30 nor more than 60 days prior to the redemption date, to each

holder of record of the shares of the Non-Cumulative Preferred Stock being redeemed, at such

holder's address as the same appears in the books and records of Freddie Mac. Each such notice

shall state the number of shares being redeemed, the redemption price, the redemption date and the

place at which such holder's certiÑcate(s) representing shares of the Non-Cumulative Preferred

Stock must be presented for cancellation or exchanges, as the case may be, upon such redemption.

Failure to give notice, or any defect in the notice, to any holder of the Non-Cumulative Preferred

Stock shall not aÅect the validity of the proceedings for the redemption of shares of any other holder

of the Non-Cumulative Preferred Stock being redeemed.

(c) Notice having been mailed as aforesaid, from and after the redemption date speciÑed

therein and upon payment of the consideration set forth in Section 3(a) above, said shares of the

Non-Cumulative Preferred Stock shall no longer be deemed to be outstanding, and all rights of the

A-6
holders thereof as holders of the Non-Cumulative Preferred Stock shall cease, with respect to shares

so redeemed.

(d) Any shares of the Non-Cumulative Preferred Stock which shall have been redeemed shall,

after such redemption, no longer have the status of authorized, issued or outstanding shares.

4. No Voting Rights

Except as set forth in Section 9(h) below, the shares of the Non-Cumulative Preferred Stock

shall not have any voting powers, either general or special.

5. No Conversion or Exchange Rights

The holders of shares of the Non-Cumulative Preferred Stock shall not have any right to

convert such shares into or exchange such shares for any other class or series of stock or obligations

of Freddie Mac.

6. No Preemptive Rights

No holder of the Non-Cumulative Preferred Stock shall as such holder have any preemptive

right to purchase or subscribe for any other shares, rights, options or other securities of any class of

Freddie Mac which at any time may be sold or oÅered for sale by Freddie Mac.

7. Liquidation Rights and Preference

(a) Except as otherwise set forth herein, upon the voluntary or involuntary dissolution,

liquidation or winding up of Freddie Mac, after payment of or provision for the liabilities of Freddie

Mac and the expenses of such dissolution, liquidation or winding up, the holders of the outstanding

shares of the Non-Cumulative Preferred Stock shall be entitled to receive out of the assets of

Freddie Mac available for distribution to stockholders, before any payment or distribution shall be

made on the Common Stock or any other class or series of stock of Freddie Mac ranking junior to

the Non-Cumulative Preferred Stock upon liquidation, the amount of $50.00 per share plus an

amount, determined in accordance with Section 2 above, equal to the dividend, if any, otherwise

payable for the then-current Dividend Period accrued through and including the date of payment in

respect of such dissolution, liquidation or winding up, and the holders of the outstanding shares of

any class or series of stock of Freddie Mac ranking on a parity with the Non-Cumulative Preferred

Stock upon liquidation shall be entitled to receive out of the assets of Freddie Mac available for

distribution to stockholders, before any such payment or distribution shall be made on the Common

Stock or any other class or series of stock of Freddie Mac ranking junior to the Non-Cumulative

Preferred Stock and to such parity stock upon liquidation, any corresponding preferential amount to

which the holders of such parity stock may, by the terms thereof, be entitled; provided, however,

that if the assets of Freddie Mac available for distribution to stockholders shall be insuÇcient for the

payment of the full amounts to which the holders of the outstanding shares of the Non-Cumulative

Preferred Stock and the holders of the outstanding shares of such parity stock shall be entitled to

receive upon such dissolution, liquidation or winding up of Freddie Mac as aforesaid, then, subject

to paragraph (b) of this Section 7, all of the assets of Freddie Mac available for distribution to

stockholders shall be distributed to the holders of outstanding shares of the Non-Cumulative

Preferred Stock and to the holders of outstanding shares of such parity stock pro rata, so that the

amounts so distributed to holders of the Non-Cumulative Preferred Stock and to holders of such

A-7
classes or series of such parity stock, respectively, shall bear to each other the same ratio that the

respective distributive amounts to which they are so entitled (including any adjustment due to

changes in the Dividends-Received Percentage) bear to each other. After the payment of the

aforesaid amounts to which they are entitled, the holders of outstanding shares of the

Non-Cumulative Preferred Stock and the holders of outstanding shares of any such parity stock

shall not be entitled to any further participation in any distribution of assets of Freddie Mac.

(b) Notwithstanding the foregoing, upon the dissolution, liquidation or winding up of Freddie

Mac, the holders of shares of the Non-Cumulative Preferred Stock then outstanding shall not be

entitled to be paid any amounts to which such holders are entitled pursuant to paragraph (a) of this

Section 7 unless and until the holders of any classes or series of stock of Freddie Mac ranking prior

upon liquidation to the Non-Cumulative Preferred Stock shall have been paid all amounts to which

such classes or series are entitled pursuant to their respective terms.

(c) Neither the sale of all or substantially all of the property or business of Freddie Mac, nor

the merger, consolidation or combination of Freddie Mac into or with any other corporation or

entity, shall be deemed to be a dissolution, liquidation or winding up for the purpose of this

Section 7.

8. Additional Classes or Series of Stock

The Board of Directors 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 Freddie Mac,

and to determine and Ñx 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

or on a parity with or junior to the Non-Cumulative Preferred Stock as to dividends or upon

liquidation or otherwise.

9. Miscellaneous

(a) Any stock of any class or series of Freddie Mac shall be deemed to rank:

(i) prior to the shares of the Non-Cumulative Preferred Stock, either as to dividends or

upon liquidation, 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 Freddie

Mac, as the case may be, in preference or priority to the holders of shares of the

Non-Cumulative Preferred Stock;

(ii) on a parity with shares of the Non-Cumulative Preferred Stock, either as to dividends

or upon liquidation, whether or not the dividend rates or amounts, dividend payment dates or

redemption of liquidation prices per share, if any, be diÅerent from those of the

Non-Cumulative 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

Freddie Mac, 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 the Non-Cumulative Preferred Stock; and

(iii) junior to shares of the Non-Cumulative Preferred Stock, either as to dividends or

upon liquidation, if such class or series shall be Common Stock, or if the holders of shares of

the Non-Cumulative Preferred Stock shall be entitled to receipt of dividends or of amounts

A-8
distributable upon dissolution, liquidation or winding up of Freddie Mac, as the case may be, in

preference or priority to the holders of shares of such class or series.

(b) Freddie Mac and any agent of Freddie Mac may deem and treat the holder of a share or

shares of Non-Cumulative Preferred Stock, as shown in Freddie Mac's books and records, as the

absolute owner of such share or shares of Non-Cumulative Preferred Stock for the purpose of

receiving payment of dividends in respect of such share or shares of Non-Cumulative Preferred

Stock and for all other purposes whatsoever, and neither Freddie Mac nor any agent of Freddie Mac

shall be aÅected by any notice to the contrary. All payments made to or upon the order of any such

person shall be valid and, to the extent of the sum or sums so paid, eÅectual to satisfy and discharge

liabilities for moneys payable by Freddie Mac on or with respect to any such share or shares of

Non-Cumulative Preferred Stock.

(c) The shares of the Non-Cumulative Preferred Stock, when duly issued, shall be fully paid

and non-assessable.

(d) The Non-Cumulative Preferred Stock shall be issued, and shall be transferable on the

books of Freddie Mac, only in whole shares, it being intended that no fractional interests in shares of

Non-Cumulative Preferred Stock shall be created or recognized by Freddie Mac.

(e) For purposes of this CertiÑcate, the term ""Freddie Mac'' means the Federal Home Loan

Mortgage Corporation and any successor thereto by operation of law or by reason of a merger,

consolidation or combination.

(f) This CertiÑcate and the respective rights and obligations of Freddie Mac and the holders of

the Non-Cumulative Preferred Stock with respect to such Non-Cumulative Preferred Stock shall be

construed in accordance with and governed by the laws of the United States, provided that the law

of the Commonwealth of Virginia shall serve as the federal rule of decision in all instances except

where such law is inconsistent with Freddie Mac's enabling legislation, its public purposes or any

provision of this CertiÑcate.

(g) Any notice, demand or other communication which by any provision of this CertiÑcate is

required or permitted to be given or served to or upon Freddie Mac shall be given or served in

writing addressed (unless and until another address shall be published by Freddie Mac) to Freddie

Mac, 8200 Jones Branch Drive, McLean, Virginia 22102, Attn: Executive Vice President-General

Counsel and Secretary. Such notice, demand or other communication to or upon Freddie Mac shall

be deemed to have been suÇciently given or made only upon actual receipt of a writing by Freddie

Mac. Any notice, demand or other communication which by any provision of this CertiÑcate is

required or permitted to be given or served by Freddie Mac hereunder may be given or served by

being deposited Ñrst class, postage prepaid, in the United States mail addressed (i) to the holder as

such holder's name and address may appear at such time in the books and records of Freddie Mac or

(ii) if to a person or entity other than a holder of record of the Non-Cumulative Preferred Stock, to

such person or entity at such address as appears to Freddie Mac to be appropriate at such time.

Such notice, demand or other communication shall be deemed to have been suÇciently given or

made, for all purposes, upon mailing.

(h) Freddie Mac, by or under the authority of the Board of Directors, may amend, alter,

supplement or repeal any provision of this CertiÑcate pursuant to the following terms and conditions:

A-9
(i) Without the consent of the holders of the Non-Cumulative Preferred Stock, Freddie

Mac may amend, alter, supplement or repeal any provision of this CertiÑcate to cure any

ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or

questions arising under this CertiÑcate, provided that such action shall not materially and

adversely aÅect the interests of the holders of the Non-Cumulative Preferred Stock.

(ii) The consent of the holders of at least 66 2/3% of all of the shares of the NonCumulative Preferred Stock at the time outstanding, given in person or by proxy, either in

writing or by a vote at a meeting called for the purpose at which the holders of shares of the

Non-Cumulative Preferred Stock shall vote together as a class, shall be necessary for

authorizing, eÅecting or validating the amendment, alteration, supplementation or repeal of the

provisions of this CertiÑcate if such amendment, alteration, supplementation or repeal would

materially and adversely aÅect the powers, preferences, rights, privileges, qualiÑcations,

limitations, restrictions, terms or conditions of the Non-Cumulative Preferred Stock. The

creation and issuance of any other class or series of stock, or the issuance of additional shares of

any existing class or series of stock of Freddie Mac (including the Non-Cumulative Preferred

Stock), whether ranking prior to, on a parity with or junior to the Non-Cumulative Preferred

Stock, shall not be deemed to constitute such an amendment, alteration, supplementation or

repeal.

(iii) Holders of the Non-Cumulative Preferred Stock shall be entitled to one vote per

share on matters on which their consent is required pursuant to subparagraph (ii) of this

paragraph (h). In connection with any meeting of such holders, the Board of Directors shall Ñx

a record date, neither earlier than 60 days nor later than 10 days prior to the date of such

meeting, and holders of record of shares of the Non-Cumulative Preferred Stock on such

record date shall be entitled to notice of and to vote at any such meeting and any adjournment.

The Board of Directors, or such person or persons as it may designate, may establish reasonable

rules and procedures as to the solicitation of the consent of holders of the Non-Cumulative

Preferred Stock at any such meeting or otherwise, which rules and procedures shall conform to

the requirements of any national securities exchange on which the Non-Cumulative Preferred

Stock may be listed at such time.

(i) RECEIPT AND ACCEPTANCE OF A SHARE OR SHARES OF THE NON-CUMULATIVE PREFERRED STOCK BY OR ON BEHALF OF A HOLDER SHALL CONSTITUTE

THE UNCONDITIONAL ACCEPTANCE BY THE HOLDER (AND ALL OTHERS HAVING

BENEFICIAL OWNERSHIP OF SUCH SHARE OR SHARES) OF ALL OF THE TERMS

AND PROVISIONS OF THIS CERTIFICATE. NO SIGNATURE OR OTHER FURTHER

MANIFESTATION OF ASSENT TO THE TERMS AND PROVISIONS OF THIS CERTIFICATE SHALL BE NECESSARY FOR ITS OPERATION OR EFFECT AS BETWEEN

FREDDIE MAC AND THE HOLDER (AND ALL SUCH OTHERS).

A-10
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Freddie Mac this

26th day of January, 2001.

®Seal©

Maud Mater, Secretary

A-11
B-1 

 Appendix B

FOR IMMEDIATE RELEASE 

January 18, 2001 

MEDIA CONTACT: GISELA VALLANDIGHAM 

703.903.2558 

INVESTOR CONTACT: BILL STEPHENS 

703.903.2798 

FREDDIE MAC ANNOUNCES RECORD EARNINGS FOR 2000 

2000 Earnings Per Share Up 15 Percent 

McLean, VA—Freddie Mac (NYSE:FRE) today announced record diluted 

earnings per common share of $3.40 for 2000, a 15 percent increase over 1999 diluted 

earnings per common share of $2.96. Net income for 2000 was $2.547 billion, a 15 

percent increase over 1999 net income of $2.223 billion. 

Fourth quarter 2000 diluted earnings per common share of $0.89 represent a 13 

percent increase over fourth quarter 1999 diluted earnings per common share of $0.79. 

Net income for the fourth quarter 2000 was $663 million, compared to $594 million for 

the same period a year ago and $645 million for third quarter 2000. 

“2000 was another excellent year for Freddie Mac, building upon our 

extraordinary record of performance,” said Leland C. Brendsel, Chairman and Chief 

Executive Officer. “We delivered high-quality earnings growth of 15 percent, while 

keeping credit and interest-rate risk at conservative levels. We achieved our 30th

consecutive year of profitability, and our return on common equity exceeded 20 percent 

for the 19th year in a row.” 

Brendsel added, “We ended the year with rock-solid financial strength, well 

protected from economic volatility and ready to meet the nation’s housing finance needs 

for years to come. Our tremendous success in fulfilling our mission has earned us broad 

public support. The enhancements to our capital management and disclosure practices 

that we announced in October raise the already high standard of information we provide 

to investors and far exceed current industry practice.” 

David W. Glenn, Vice Chairman and President, said, “Solid portfolio growth, 

stable margins and continued credit strength drove our performance during the year. We 

recorded high-quality, double-digit portfolio growth in both lines of business, and our 

credit losses for the year represented just over 1 basis point of our total mortgage 

portfolio.” 

NewsRelease
B-2 

Freddie Mac—Quarterly Earnings 

January 18, 2001 

Page 2 

Glenn added, “Worldwide demand for our debt remains strong. During the year, 

we issued nearly $60 billion in dollar-denominated Reference NotesSM. In addition, our 

innovative EuroReference NoteSM Programme met an outstanding reception, becoming 

one of the most active, liquid issues on the Euro bond market.” 

Revenues

Freddie Mac’s total revenues for 2000 reached $4.457 billion, a 10 percent 

increase over 1999 total revenues of $4.055 billion. For fourth quarter 2000, total 

revenues were $1.159 billion, an increase of 10 percent over fourth quarter 1999 total 

revenues of $1.049 billion, and up from $1.125 billion in third quarter 2000. 

Net interest income on earning assets totaled $2.838 billion for 2000, a 12 percent 

growth from 1999 net interest income on earning assets of $2.540 billion. The increase 

in net interest income for full-year 2000 was driven by a $53.5 billion, or 18 percent, 

increase in the average balance of the retained portfolio. Net interest income on earning 

assets grew to $738 million in fourth quarter 2000, compared to $664 million in fourth 

quarter 1999 and $737 million in third quarter 2000. The increase in net interest income 

from third quarter 2000 was driven by a $15.7 billion, or 4 percent, increase in the 

average balance of the retained portfolio.

For full-year 2000, on a fully taxable equivalent (FTE) basis, the net interest yield 

on earning assets was 0.75 percent, compared to 0.80 percent in 1999. In fourth quarter 

2000, FTE net interest yield was 0.74 percent, compared to 0.80 percent in fourth quarter 

1999 and 0.77 percent in third quarter 2000. 

In 2000 recognized net gains on hedging activities, which are reported as part of 

Other income, net, totaled $71 million and contributed 2 basis points to the full-year FTE 

comprehensive net interest yield. In 1999 recognized net hedging gains were $22 million 

and had a 1 basis point impact on FTE comprehensive net interest yield. 

 
B-3 

Freddie Mac—Quarterly Earnings 

January 18, 2001 

Page 3 

In fourth quarter 2000, recognized net hedging gains totaled $13 million and 

contributed 1 basis point to FTE comprehensive net interest yield. In fourth quarter 1999, 

recognized net hedging gains totaled $5 million and contributed 1 basis point to the 

quarter’s FTE comprehensive net interest yield. For third quarter 2000, recognized net 

hedging gains totaled $2 million and had no effect on the quarter’s FTE comprehensive 

net interest yield. 

In 2000 management and guarantee fee income totaled $1.489 billion, a 6 percent 

increase over 1999 management and guarantee fee income of $1.405 billion. The average 

balance of Total PCs increased by $62 billion, or 9 percent in 2000, and the average 

guarantee fee rate for 2000 was 19.3 basis points, compared to 19.8 basis points in 1999. 

Management and guarantee fee income totaled $383 million in fourth quarter 

2000, compared to $362 million in fourth quarter 1999 and $372 million in third quarter 

2000. During fourth quarter 2000, the average balance of Total PCs increased by $29 

billion, or 4 percent from third quarter 2000, while the average guarantee fee rate was 

19.1 basis points, compared to 19.2 basis points in third quarter 2000. 

Other income, net, totaled $130 million in 2000, compared to $110 million in 

1999. In fourth quarter 2000, Other income, net, was $38 million, up from $23 million in 

fourth quarter 1999 and $16 million in third quarter 2000. Other income, net, which 

generally includes resecuritization fees and gains and losses related to certain hedging 

and investment activities, may fluctuate from period to period. 

Credit 

Full-year 2000 credit-related expenses (the provision for mortgage losses plus 

REO operations expense) totaled $106 million, down 33 percent from 1999. The 

provision for mortgage losses was reduced 33 percent from $60 million in 1999 to $40 

million in 2000, while REO operations expense decreased 33 percent from $99 million in 

1999 to $66 million in 2000. 

Fourth quarter 2000 credit-related expenses totaled $25 million, compared to $40 

million for fourth quarter 1999 and $21 million for third quarter 2000. The provision for 

mortgage losses was $10 million for fourth quarter 2000, compared to $15 million for 

fourth quarter 1999 and unchanged from third quarter 2000. 
B-4 

Freddie Mac—Quarterly Earnings 

January 18, 2001 

Page 4 

In 2000 total mortgage charge-offs were $28 million, down from $56 million in 

1999. Single-family charge-offs were $32 million, down from $59 million in 1999. 

Multifamily recoveries of amounts previously charged off totaled $4 million in 2000, 

compared to $3 million in 1999. 

In fourth quarter 2000, mortgage charge-offs were $6 million, compared to $10 

million in fourth quarter 1999 and unchanged from third quarter 2000. Fourth quarter 

2000 single-family charge-offs were $8 million, compared to $9 million in fourth quarter 

1999 and $7 million in third quarter 2000. Multifamily recoveries were $2 million in 

fourth quarter 2000, compared to $1 million of charge-offs for fourth quarter 1999 and $1 

million of recoveries in third quarter 2000. 

 

For full-year 2000, credit losses (charge-offs plus REO operations expense) 

represented 1.1 basis points of the average total mortgage portfolio (excluding nonFreddie Mac securities), compared to 2.0 basis points in 1999. Annualized fourth quarter 

2000 credit losses were 1.0 basis point of the average total mortgage portfolio, compared 

to 1.8 basis points in fourth quarter 1999 and 0.8 basis points in third quarter 2000. 

At December 31, 2000, total REO balances were $348 million, down from $438 

million at December 31, 1999 and $364 million at September 30, 2000. Single-family 

REO balances were $346 million at December 31, 2000, down from $437 million at 

December 31, 1999 and $363 million at September 30, 2000. Multifamily REO balances 

were $2 million at December 31, 2000, up from $1 million at both December 31, 1999 

and September 30, 2000. 

Administrative Expenses

In 2000 administrative expenses totaled $713 million, compared to $655 million 

in 1999. Annualized administrative expenses represented 8.0 basis points of the average 

total mortgage portfolio in 2000, compared to 8.1 basis points in 1999. Fourth quarter 

2000 administrative expenses were $184 million, compared to $167 million in fourth 

quarter 1999 and $180 million in third quarter 2000. Annualized administrative expenses 

represented 7.9 basis points of the average total mortgage portfolio in fourth quarter 2000, 

compared to 7.8 basis points for the same period a year ago and 8.0 basis points in third 

quarter 2000. 
B-5 

Freddie Mac—Quarterly Earnings 

January 18, 2001 

Page 5 

Capital

The corporation’s primary capital base (stockholders’ equity plus the reserve for 

mortgage losses) totaled $15.621 billion at December 31, 2000, compared to $12.297 

billion at December 31, 1999 and $13.972 billion at September 30, 2000. 

Extraordinary Item

 Freddie Mac recorded net after-tax gains of $8 million (or $0.01 per diluted 

common share) in 2000 as a result of the repurchase of debt, compared to net after-tax 

gains of $5 million (or $0.01 per diluted common share) in 1999. In fourth quarter 2000, 

there were no gains or losses on the repurchase of debt. During fourth quarter 1999, net 

after-tax gains from the repurchase of debt totaled $8 million (or $0.01 per diluted 

common share). During third quarter 2000, net after-tax gains from the repurchases of 

debt totaled $3 million (no impact on a diluted common share basis).

Conference Call 

 

Freddie Mac will host a conference call discussing the corporation’s fourth quarter 

2000 results today at 5 p.m. eastern time. The conference call will be web cast live on 

Freddie Mac’s web site at http://www.freddiemac.com. 

A telephone recording of this conference call will be available continuously 

beginning at 11:00 p.m. eastern time Thursday, January 18, 2001 until midnight 

Thursday, February 1, 2001. To access this recording, call 1-800-475-6701 and use 

access code 564677. 

* * * * 
B-6 

Freddie Mac—Quarterly Earnings 

January 18, 2001 

Page 6 

Freddie Mac’s quarterly announcements of earnings results sometimes contain 

forward-looking statements pertaining to management’s current expectations as to 

Freddie Mac’s future business plans, results of operations and/or financial condition. 

Management’s expectations for the corporation’s future necessarily involve a number of 

assumptions and estimates, and various factors could cause actual results to differ 

materially from these expectations. These assumptions and factors are discussed in the 

corporation’s Annual Report to Shareholders and its Information Statement and quarterly 

Information Statement Supplements. 

Freddie Mac is a stockholder-owned corporation established by Congress in 

support of homeownership and rental housing. Freddie Mac purchases single-family and 

multifamily residential mortgages and mortgage-related securities, which it finances 

primarily by issuing mortgage passthrough securities and debt instruments in the capital 

markets. Over the years, Freddie Mac has opened doors for one in six homebuyers in 

America. 

Freddie Mac’s earnings releases and other financial disclosures are available on 

the Shareholders’ page of our World Wide Web site at http://www.freddiemac.com. 
FREDDIE MAC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME 

(unaudited)

(dollars in millions, except per share amounts)

Quarter Ended Twelve Months Ended

December 31, September 30, December 31, December 31, December 31,

2000 2000 1999 2000 1999

Net interest income on earning assets $ 738 $ 737 $ 664 $ 2,838 $ 2,540

Management and guarantee income 383 372 362 1,489 1,405

Other income, net 38 16 23 130 110

 Total revenues 1,159 1,125 1,049 4,457 4,055

Provision for mortgage losses (10) (10) (15) (40) (60)

REO operations expense (15) (11) (25) (66) (99)

Administrative expenses (184) (180) (167) (713) (655)

Housing tax credit partnerships (26) (26) (18) (104) (80)

 Total non-interest expense (235) (227) (225) (923) (894)

Income before income taxes and extraordinary item 924 898 824 3,534 3,161

Income taxes (261) (256) (238) (995) (943)

Income before extraordinary item, net of taxes 663 642 586 2,539 2,218

Extraordinary gain on retirement of debt, net of taxes - 3 8 8 5

 Net income $ 663 $ 645 $ 594 $ 2,547 $ 2,223

 Preferred stock dividends (45) (45) (42) (180) (153)

 Net income available to common stockholders $ 618 $ 600 $ 552 $ 2,367 $ 2,070

Earnings per common share before extraordinary item

 Basic $ 0.89 $ 0.86 $ 0.78 $ 3.40 $ 2.97

 Diluted $ 0.89 $ 0.86 $ 0.78 $ 3.39 $ 2.95

Earnings per common share 

 Basic $ 0.89 $ 0.87 $ 0.79 $ 3.41 $ 2.97

 Diluted $ 0.89 $ 0.86 $ 0.79 $ 3.40 $ 2.96

Weighted average common shares outstanding (thousands)

 Basic 692,278 691,543 696,560 693,555 696,042

 Diluted 695,870 693,719 700,092 696,448 700,211
December 31, September 30, December 31,

2000 2000 1999

Assets

Retained porfolio, net $ 385,117 $ 359,304 $ 322,569

Investments 48,572 48,817 41,852

Other assets 25,608 25,225 22,263

 Total Assets $ 459,297 $ 433,346 $ 386,684

Liabilities and Stockholders' Equity

Total debt securities, net plus subordinated borrowings $ 426,899 $ 406,936 $ 360,711

Guarantees

 Total Mortgage Participation Certificates (Total PCs) 822,310 790,891 749,081

 Less--Underlying mortgages (822,310) (790,891) (749,081)

- - -

Other liabilities 17,561 13,218 14,448

Stockholders' equity 14,837 13,192 11,525

 Total Liabilities and Stockholders' Equity $ 459,297 $ 433,346 $ 386,684

(dollars in millions)

FREDDIE MAC

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)
If you intend to purchase Preferred Stock, you

should rely only on the information in this OÅer- 6,500,000 Shares ing Circular, including the information in the

disclosure documents that we have incorporated by

reference. We have not authorized anyone to provide you with diÅerent information. Freddie Mac

This OÅering Circular and the incorporated documents may not be correct after their dates.

We are not oÅering the CertiÑcates in any juris- Variable Rate,

diction that prohibits their oÅer. Non-Cumulative

Preferred Stock

(Liquidation Preference

$50.00 Per Share)

TABLE OF CONTENTS

DescriptionPage

Additional Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2

Summary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3

Summary Selected Financial Data ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5

Freddie Mac ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6

Use of ProceedsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7

CapitalizationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 Lehman Brothers

Y

Selected Financial Data ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 First Tennessee Bank NA Implementation of SFAS No. 133 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10

Regulation and Governmental Relationships ÏÏÏÏÏÏÏÏ 11 Merrill Lynch & Co.

Description of Preferred Stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11 Blaylock & Partners, L.P. Certain Federal Income Tax ConsequencesÏÏÏÏÏÏÏÏÏ 20 Bear, Stearns & Co. Inc. Legal Investment Considerations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21

Underwriting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22 Credit Suisse First Boston

Ratings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23 Goldman, Sachs & Co.

Independent Public AccountantsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23 Morgan Stanley Dean Witter Legal Matters ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23 Salomon Smith Barney Appendix A Ì CertiÑcate of Designation ÏÏÏÏÏÏÏÏÏÏ A-1

Appendix B Ì Press Release and Unaudited

Financial Statements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ B-1 January 23, 2001