Freddie Mac 2004 Annual Report Download - page 97

Short-Term Debt. We raise funds to meet our operating cash needs primarily through the issuance of
Reference Bills» securities and other discount notes, which are short-term instruments with maturities of one
year or less that are sold on a discounted basis, paying only principal at maturity. Our Reference Bills»
program consists of large issues of short-term debt that we auction to dealers through the Internet on a regular
schedule. We currently auction Reference Bills»securities with one-, three- and six-month maturities weekly.
We auction Reference Bills»securities with 12-month maturities every four weeks. We issue discount notes
with maturities ranging from one day to one year in response to investor demand and our cash needs.
Short-term debt also includes certain Medium-term Notes that have original maturities of one year or
less.
Long-Term Debt. We issue long-term debt primarily through our Medium-term Notes program and
our Reference Notes» securities program. Medium-term Notes have a variety of structures, including callable
and non-callable Ñxed-rate securities, zero coupon securities and variable-rate securities. Reference Notes»
securities are regularly issued non-callable Ñxed-rate securities.
Medium-term Notes. We issue a variety of Ñxed- and Öoating-rate Medium-term Notes with
various maturities ranging up to 30 years. Medium-term Notes with original maturities of one year or less
are classiÑed as short-term debt. Medium-term Notes typically contain call provisions, eÅective as early
as three months or as late as ten years after the securities are issued.
Reference Notes». Through our Reference Notes»securities program, we sell large issues of long-
term debt that provide investors worldwide with a high-quality, liquid investment vehicle. Some of our
Reference Notes»securities are sold through Internet auctions. Newly issued Reference Notes»
securities have maturities ranging from two through ten years. We primarily issue securities denominated
in U.S. dollars, although we also issue securities denominated in various other currencies, particularly
Euros. We hedge our exposure to changes in foreign currency exchange rates by entering into swap
transactions that eÅectively convert foreign-denominated obligations to U.S. dollar denominated obliga-
tions. See ""RISK MANAGEMENT Ì Interest-Rate Risk and Other Market Risks Ì Sources of
Interest-Rate Risk and Other Market Risks'' for more information.
The investor base for our debt is predominantly institutional. However, we also conduct weekly oÅerings
of FreddieNotes»securities, a Medium-term Notes program designed to meet the investment needs of retail
investors.
Subordinated Debt. In October 2000, we announced plans to initiate periodic issuances of subordinated
debt securities, which we refer to as Freddie SUBS» securities, as part of a series of voluntary commitments
regarding our Ñnancial operations and disclosures designed to further strengthen our transparency, capital
adequacy and market discipline. The Freddie SUBS» program is in addition to the subordinated debt issued
prior to October 2000. During 2001 and 2002, we completed a total of four oÅerings of Freddie SUBS» that
provided approximately $5.5 billion in net proceeds. During 2004 and 2003, we did not issue any Freddie
SUBS». Our ability to issue subordinated debt may be limited until we return to timely Ñnancial reporting.
See ""VOLUNTARY COMMITMENTS'' for additional information.
Financing Calendars. Annually, we publish Ñnancing calendars for the upcoming year, which are
intended to provide clarity and transparency with regard to the timing of new debt issues and reopening of
prior issues, the anticipated size of individual oÅerings and settlement dates. All Reference Notes» securities,
4Reference Notes» securities and Reference Bills» securities issued during 2004 and the Ñrst Ñve months of
2005 were issued in accordance with our previously announced Ñnancing calendars.
Our Ñnancing calendars underscore our goal of aligning our interests with investors while also ensuring
that we have the Öexibility to oÅer the marketplace securities of the appropriate size and maturity. In addition,
we have supplemented our calendars by publishing the ""Quarterly Funding Announcement,'' or QFA, which
promotes additional transparency and predictability by detailing our expected funding activity for the
upcoming quarter. We also publish detailed funding summaries on a monthly basis, which outline our funding
activity for the previous month. The QFA and the monthly funding summaries are available on our website,
www.FreddieMac.com. (We are providing this Internet address solely for the information of interested
persons. We do not intend this Internet address to be an active link and are not using references to this
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