Freddie Mac 2004 Annual Report Download - page 234

NOTE 18: MINORITY INTERESTS
The equity and net earnings attributable to the minority stockholder interests in consolidated subsidiaries
are reported in the consolidated balance sheets as Minority interests in consolidated subsidiaries and in the
consolidated statements of income as Minority interests in earnings of consolidated subsidiaries, respectively.
The majority of the balances in these accounts relate to the company's two majority-owned REITs.
In February 1997, Freddie Mac formed two majority-owned REIT subsidiaries funded through the
issuance of common stock (99.9 percent of which is held by Freddie Mac) and a total of $4.0 billion of
perpetual, step-down preferred stock issued to outside investors. The dividend rate on the step-down preferred
stock is 13.3 percent from initial issuance through 2006 (the ""initial term''). Beginning in 2007, the dividend
rate will step-down to 1.0 percent. Dividends on this preferred stock accrue in arrears. The balance of the two
step-down preferred stock issuances as recorded within Minority interests in consolidated subsidiaries on the
consolidated balance sheets totaled $1.5 billion and $1.9 billion at December 31, 2004 and 2003, respectively.
The preferred stock is redeemable by the REITs under certain circumstances described in the preferred stock
oÅering documents as a ""tax event redemption.'' Additionally, after an initial period ending December 31,
2006, the REITs may be able to retire the preferred stock under favorable Ñnancing terms in accordance with
the terms of the preferred stock. The REITs may decide to redeem the preferred stock in the future depending
on market conditions and other factors. See ""NOTE 14: INCOME TAXES'' for more information
concerning the REITs.
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