Freddie Mac 2004 Annual Report Download - page 99

‚ temporarily deploy capital until the capital can be redeployed into Retained portfolio investments
or credit guarantee business opportunities;
‚ maintain capital reserves to meet mortgage funding needs;
‚ provide diverse sources of liquidity; and
‚ help manage the interest-rate risk inherent in mortgage-related assets.
The non-mortgage-related securities in the Cash and investments portfolio consist principally of asset-
backed securities and other marketable assets that can be readily converted to cash. During 2004, we adjusted
the investment strategy for the Cash and investments portfolio and, as a result, this portfolio did not hold
corporate debt securities or preferred stock at December 31, 2004. The non-mortgage investments in this
portfolio may expose us to institutional credit risk and the risk that the investments will decline in value due to
market-driven events such as credit downgrades or changes in interest rates and other market conditions. See
""RISK MANAGEMENT Ì Credit Risks Ì Institutional Credit Risk'' for more information.
At December 31, 2003, the Cash and investments portfolio included certain mortgage-related securities
that were not included in the Retained portfolio since they were acquired in conjunction with the PC market-
making and support activities conducted through our Securities Sales & Trading Group business unit and
external Money Manager program, both of which ceased operations during the fourth quarter of 2004.
Consequently, we held no mortgage-related securities in the Cash and investments portfolio at December 31,
2004, compared to $32.8 billion at December 31, 2003. In addition, our Securities Sales & Trading Group
business unit and external Money Manager program held approximately $8.3 billion of securities purchased
under agreements to resell at December 31, 2003, which we subsequently disposed of during 2004. For
additional information on our Cash and investments portfolio, see ""CONSOLIDATED BALANCE
SHEETS ANALYSIS Ì Cash and Investments.''
Contractual Obligations
""Table 47 Ì SpeciÑed Contractual Obligations by Year (at December 31, 2004)'' includes aggregated
information about the listed categories of our contractual obligations. These contractual obligations aÅect our
short- and long-term liquidity and capital resource needs. Table 47 includes information about undiscounted
future cash payments due under these contractual obligations, aggregated by type of contractual obligation,
including the contractual maturity proÑle of our consolidated debt securities and other liabilities reported on
our consolidated balance sheets and our operating leases at December 31, 2004. The timing of actual future
payments may diÅer from those presented in this table due to a number of factors, including discretionary debt
repurchases. Our contractual obligations include other purchase obligations that are enforceable and legally
binding. For purposes of the table, purchase obligations are included through the termination date speciÑed in
the respective agreements, even if the contract is renewable. Many of the purchase agreements for goods or
services include clauses that would allow us to cancel the agreement prior to the expiration of the contract
within a speciÑed notice period; however, the table includes such obligations without regard to such
termination clauses (unless actual notice of our intention to terminate the agreement has been communicated
to the counterparty).
Table 47 excludes guarantee obligations, which represent our obligations to stand ready to perform under
our guarantees of the payment of principal and interest of PCs and Structured Securities, as the amount and
timing of payments under these arrangements are generally contingent upon the occurrence of future events.
The liabilities on our consolidated balance sheets associated with our guarantee obligations are included in the
caption Guarantee obligation for Participation CertiÑcates. See ""NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES'' to the consolidated Ñnancial statements for additional information about our
guarantee obligations.
The funding policy for our tax-qualiÑed deÑned beneÑt pension plan, or Pension Plan, is generally to
contribute an amount equal to at least the minimum required contribution, if any, but no more than the
maximum amount deductible for federal income tax purposes each year. Based on a preliminary analysis, we
currently believe that under applicable law no minimum contribution will be required and no tax-deductible
contribution will be permitted for 2005. Therefore, we do not currently expect to contribute to our Pension
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