Fannie Mae 2008 Annual Report Download - page 357

(2)
In the computation of diluted EPS, convertible preferred stock dividends are added back to net income (loss) available
to common stockholders when the assumed conversion of the preferred shares is dilutive and is assumed to be
converted from the beginning of the period. For the years ended December 31, 2008, 2007 and 2006, the assumed
conversion of the preferred shares had an anti-dilutive effect.
(3)
Amount for the year ended December 31, 2008 includes 1.4 billion weighted-average shares of common stock that
would be issued upon the full exercise of the warrant issued to Treasury from the date the warrant was issued through
December 31, 2008.
(4)
In 2006, amount represents incremental shares from in-the-money nonqualified stock options and other performance
awards. Weighted-average options and performance awards to purchase approximately 22 million, 23 million and
20 million shares of common stock for the years ended December 31, 2008, 2007 and 2006, respectively, were
outstanding in each period, but were excluded from the computation of diluted EPS since they would have been anti-
dilutive.
(5)
Represents incremental shares from the assumed conversion of outstanding convertible preferred stock when the
assumed conversion of the preferred shares is dilutive and is assumed to be converted from the beginning of the year.
(6)
Amount is net of preferred stock dividends and issuance costs at redemption.
14. Stock-Based Compensation Plans
We have two stock-based compensation plans, the 1985 Employee Stock Purchase Plan and the Stock
Compensation Plan of 2003. Under these plans, we offer various stock-based compensation programs where
we provide employees an opportunity to purchase Fannie Mae common stock or we periodically make stock
awards to certain employees in the form of nonqualified stock options, performance share awards, restricted
stock awards, restricted stock units or stock bonus awards. As a result of our senior preferred stock purchase
agreement with Treasury, we may not issue any Fannie Mae equity securities (other than the senior preferred
stock, the warrant and the common stock issuable upon exercise of the warrant) without the consent of
Treasury, unless the equity issuance is pursuant to a binding commitment existing on the date of
conservatorship. As such, we currently do not intend to grant equity compensation to employees under these
plans.
In connection with our stock-based compensation plans, we recorded compensation expense of $97 million,
$118 million and $116 million for 2008, 2007 and 2006, respectively. We recognized $1 million, $2 million
and $2 million of compensation cost related to stock awards granted prior to the adoption of SFAS 123R to
employees eligible for retirement for 2008, 2007 and 2006, respectively.
Stock-Based Compensation Plans
The 1985 Employee Stock Purchase Plan (the “1985 Purchase Plan”) provides employees an opportunity to
purchase shares of Fannie Mae common stock at a discount to the fair market value of the stock during
specified purchase periods. Our Board of Directors sets the terms and conditions of offerings under the 1985
Purchase Plan, including the number of available shares and the size of the discount. There were no offerings
under the 1985 Purchase Plan during 2006 to 2008. The aggregate maximum number of shares of common
stock available for employee purchase is 50 million. Since inception, we have made available
38,039,742 shares under the 1985 Purchase Plan. In any purchase period, the maximum number of shares
available for purchase by an eligible employee is the largest number of whole shares having an aggregate fair
market value on the first day of the purchase period that does not exceed $25,000. The shares offered under
the 1985 Purchase Plan are authorized and unissued shares of common stock or treasury shares.
The Stock Compensation Plan of 2003 (the “2003 Plan”) is the successor to the Stock Compensation Plan of
1993 (the “1993 Plan”). The 2003 Plan enables us to make stock awards in various forms and combinations.
Under the 2003 Plan, these include stock options, stock appreciation rights, restricted stock, restricted stock
units, performance share awards and stock bonus awards. The aggregate maximum number of shares of
common stock available for award to employees and non-management directors under the 2003 Plan is
F-79
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)