Fannie Mae 2004 Annual Report Download - page 189

respectively, which, together with our total capital, constituted 4.0%, 3.3% and 2.7% of our on-balance sheet
assets as of December 31, 2004, 2003 and 2002, respectively. Qualified subordinated debt with a remaining
maturity of less than five years did not receive a partial credit in this calculation.
We issued $4.0 billion and $3.5 billion of qualifying subordinated debt securities in 2003 and 2002,
respectively. We have not issued any subordinated debt securities since 2003. Under our agreement with
OFHEO, we intend to resume the issuance of subordinated debt once we return to timely financial reporting.
In May 2006, $1.6 billion of our qualifying subordinated debt matured. As of the date of this filing, we have
$11.0 billion in outstanding qualifying subordinated debt.
Dividends
In January 2005, our Board of Directors reduced our quarterly dividend rate by 50%, from $0.52 per share of
common stock to $0.26 per share of common stock. We reduced our common stock dividend rate in order to
increase our capital surplus, which was a component of our capital restoration plan.
We have paid quarterly common stock dividends of:
• $0.39 per share for the first and second quarters of 2003;
• $0.45 per share for the third and fourth quarters of 2003;
• $0.52 per share for each quarter of 2004;
• $0.26 per share for each quarter of 2005; and
• $0.26 per share for the first, second and third quarters of 2006.
On October 17, 2006, the Board of Directors declared common stock dividends of $0.26 per share for the
fourth quarter of 2006, which was paid on November 27, 2006. On December 6, 2006, the Board of Directors
increased the quarterly common stock dividend to $0.40 per share. The Board determined that the increased
dividend would be effective beginning in the fourth quarter of 2006, and therefore declared a special common
stock dividend of $0.14 per share, payable on December 29, 2006, to stockholders of record on December 15,
2006. This special dividend of $0.14, combined with our previously declared dividend of $0.26 paid on
November 27, 2006, will result in a total common stock dividend of $0.40 per share for the fourth quarter of
2006.
Our Board of Directors has also approved preferred stock dividends for the period commencing December 31,
2003, up to but excluding December 31, 2006. See “Notes to Consolidated Financial Statements—Note 17,
Preferred Stock” for detailed information on our preferred stock dividends.
OFF-BALANCE SHEET ARRANGEMENTS
We enter into certain business arrangements to facilitate our statutory purpose of providing liquidity to the
secondary mortgage market and to reduce our exposure to interest rate fluctuations. We form arrangements to
meet the financial needs of our customers and manage our credit, market or liquidity risks. Some of these
arrangements are not recorded in the consolidated balance sheets or may be recorded in amounts different
from the full contract or notional amount of the transaction, depending on the nature or structure of, and
accounting required to be applied to, the arrangement. These arrangements are commonly referred to as “off-
balance sheet arrangements,” and expose us to potential losses in excess of the amounts recorded in the
consolidated balance sheets.
The most significant off-balance sheet arrangements that we engage in result from the mortgage loan
securitization and resecuritization transactions that we routinely enter into as part of the normal course of our
business operations. Our Single-Family Credit Guaranty business generates most of its revenues through the
guaranty fees earned from these securitization transactions. In addition, our HCD business generates a
significant amount of its revenues through the guaranty fees earned from these securitization transactions. We
also enter into other guaranty transactions and hold LIHTC partnership interests that are considered off-balance
sheet arrangements.
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