Fannie Mae 2005 Annual Report Download - page 161

• We generated net cash of $78.1 billion in operating activities in 2005, primarily due to net income and a
net decrease in trading securities. Our cash generated by operating activities was partially offset by
purchases of HFS loans.
• We generated net cash of $139.4 billion in investing activities in 2005, primarily due to proceeds we
received from sales and maturities of AFS securities and proceeds from the sale of held-for-investment
(“HFI”) loans as we reduced our portfolio. The cash increases were partially offset by advances to lenders
and purchases of AFS securities and HFI loans.
• We used net cash of $217.4 billion in financing activities in 2005, primarily for the net redemption of
short-term and long-term debt.
Cash Flows for the Year Ended December 31, 2004
During the year ended December 31, 2004, cash and cash equivalents decreased by $740 million, or 22%, to
$2.7 billion as of December 31, 2004 as compared to the prior year.
• We generated net cash of $41.6 billion in operating activities in 2004, primarily due to net income and a
net decrease in trading securities. Our cash generated by operating activities was partially offset by
purchases of HFS loans.
• We used net cash of $16.8 billion in investing activities in 2004, primarily due to advances to lenders and
purchases of AFS securities and HFI loans. The cash we used in investing activities was partially offset
by proceeds we received from maturities of AFS securities and repayments of HFI loans.
• We used net cash of $25.5 billion in financing activities in 2004, primarily for the redemption of short-
term and long-term debt. The cash we used in financing activities was offset primarily by issuances of our
short-term and long-term debt.
Cash Flows for the Year Ended December 31, 2003
During the year ended December 31, 2003, our cash and cash equivalents increased by $1.7 billion, or 97%, to
$3.4 billion as of December 31, 2003 as compared to the prior year.
• We generated net cash of $58.2 billion in operating activities in 2003, primarily due to net income and a
net decrease in trading securities. Our cash generated by operating activities was partially offset by
purchases of HFS loans.
• We used net cash of $152.7 billion in investing activities in 2003, primarily due to advances to lenders
and purchases of AFS securities and HFI loans. Our cash used in investing activities was partially offset
by proceeds we received from maturities and sales of AFS securities and repayments of HFI loans.
• We raised net cash of $96.2 billion in financing activities in 2003, primarily by issuing short-term and
long-term debt. Our cash provided by financing activities was partially offset primarily by redemption of
short-term and long-term debt.
Capital Management
Our objective in managing capital is to maximize long-term stockholder value through the pursuit of business
opportunities that provide attractive returns while maintaining capital at levels sufficient to ensure compliance
with both regulatory and internal capital requirements.
Capital Adequacy Requirements
We are subject to capital adequacy requirements established by the 1992 Act. The statutory capital framework
incorporates two different quantitative assessments of capital—both a minimum capital requirement and a risk-
based capital requirement. While the minimum capital requirement is ratio-based, the risk-based capital
requirement is based on simulated stress test performance. Pursuant to the 1992 Act, we are required to
maintain sufficient capital to meet both of these requirements in order to be classified as “adequately
capitalized.” In addition, pursuant to our May 2006 consent order with OFHEO, we are currently required to
maintain a 30% capital surplus over our statutory minimum capital requirement, which is referred to as the
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