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					                                                         FREDDIE MAC
                                              CONSOLIDATED STATEMENTS OF INCOME
                                                                                                                                           Year Ended December 31,

                                                                                                                            2003                       2002                      2001
                                                                                                                      (dollars in millions, except share-related amounts)
Interest income
   Mortgage loans                                                                                                 $             4,251        $             4,290       $            4,385
   Mortgage-related securities in the Retained portfolio                                                                       29,051                     30,039                   26,847
   Cash and investments                                                                                                         3,796                      4,147                    4,136
      Total interest income                                                                                                    37,098                     38,476                   35,368
Interest expense
   Short-term debt                                                                                                             (2,785)                    (4,303)                  (9,056)
   Long-term debt                                                                                                             (22,083)                   (21,337)                 (17,494)
      Total interest expense on debt securities                                                                               (24,868)                   (25,640)                 (26,550)
   Due to Participation Certificate investors                                                                                  (1,641)                    (1,236)                  (1,027)
      Total interest expense                                                                                                  (26,509)                   (26,876)                 (27,577)
Income (expense) related to derivatives                                                                                        (1,091)                    (2,075)                    (343)
Net interest income                                                                                                              9,498                     9,525                    7,448

Non-interest income
   Management and guarantee income (includes interest on Guarantee asset for Participation
      Certificates of $244, $242 and $252)                                                                                       1,638                     1,516                    1,392
   Gains (losses) on "Guarantee asset for Participation Certificates, at fair value"                                            (1,461)                   (2,176)                    (789)
   Income (expense) on "Guarantee obligation for Participation Certificates"                                                       925                       592                      203
   Derivative gains (losses)                                                                                                        39                     5,302                   (2,313)
   Hedge accounting gains (losses)                                                                                                 644                       187                     (294)
   Gains (losses) on investment activity                                                                                        (1,114)                    1,799                      191
   Gains (losses) on debt retirement                                                                                            (1,775)                     (674)                    (356)
   Resecuritization fees                                                                                                           352                       276                      135
   Other income                                                                                                                    493                       321                      229
Non-interest income (loss)                                                                                                         (259)                   7,143                   (1,602)

Non-interest expense
   Provision for credit losses                                                                                                     (10)                       (128)                      (32)
   REO operations income (expense)                                                                                                  23                          13                        (7)
   Salaries and employee benefits                                                                                                 (624)                       (593)                     (537)
   Occupancy expense                                                                                                               (52)                        (42)                      (35)
   Housing tax credit partnerships                                                                                                (200)                       (160)                     (121)   -
   Minority interests in earnings of consolidated subsidiaries                                                                    (157)                       (184)                     (208)
   Other expenses                                                                                                               (1,201)                       (771)                     (452)
Non-interest expense                                                                                                            (2,221)                   (1,865)                  (1,392)
Income before income tax expense and cumulative effect of change in accounting principles                                        7,018                    14,803                    4,454
Income tax expense                                                                                                              (2,202)                   (4,713)                  (1,339)
Income before cumulative effect of change in accounting principles, net of taxes                                                 4,816                    10,090                    3,115
Cumulative effect of change in accounting principles, net of taxes of $24                                                            -                         -                       43
Net income                                                                                                        $              4,816       $            10,090       $            3,158
   Preferred stock dividends and issuance costs on redeemed preferred stock (including
   $-, $5 and $- of issuance costs on redeemed preferred stock)                                                                    (216)                      (239)                     (217)
Net income available to common stockholders                                                                       $              4,600       $             9,851       $            2,941

Basic earnings per common share before cumulative effect of change in accounting
    principles, net of taxes                                                                                      $                6.69      $             14.22       $                4.19
Cumulative effect of change in accounting principles, net of taxes                                                                    -                        -                        0.06
Basic earnings per common share after cumulative effect of change in accounting
    principles, net of taxes                                                                                      $                6.69      $             14.22       $                4.25

Diluted earnings per common share before cumulative effect of change in accounting
    principles, net of taxes                                                                                      $                6.68      $             14.17       $                4.17
Cumulative effect of change in accounting principles, net of taxes                                                                    -                        -                        0.06
Diluted earnings per common share after cumulative effect of change in accounting
    principles, net of taxes                                                                                      $                6.68      $             14.17       $                4.23

Weighted average common shares outstanding (thousands)
     Basic                                                                                                                    687,094                   692,727                   692,603
     Diluted                                                                                                                  688,675                   695,116                   695,973

Dividends per common share                                                                                        $                1.04      $                0.88     $                0.80

The Notes To Consolidated Financial Statements included in our Information Statement dated September 24, 2004 are an integral part of these consolidated financial statements.



                                                                                                 1
                                                                                       FREDDIE MAC
                                                                               CONSOLIDATED BALANCE SHEETS
                                                                                                                                                                     December 31,                       December 31,
                                                                                                                                                                         2003                               2002
                                                                                                                                                                                     (dollars in millions)
Assets
Retained portfolio
  Mortgage loans:
       Held for investment, at amortized cost                                                                                                                 $                   57,804           $           57,483
       Reserve for losses on mortgage loans held for investment                                                                                                                     (174)                        (177)
       Held for sale, at lower of cost or market value                                                                                                                             2,530                        6,635
           Mortgage loans, net of reserve                                                                                                                                         60,160                       63,941
  Mortgage-related securities:
       Available for sale, at fair value (includes $282 and $367 pledged as collateral that may be
         repledged)                                                                                                                                                              581,326                      496,265
       Trading, at fair value (includes $32 and $89 pledged as collateral that may be repledged)                                                                                  18,200                       29,104
       Participation Certificate residuals, at fair value                                                                                                                            671                          412
           Total mortgage-related securities                                                                                                                                     600,197                      525,781
Retained portfolio                                                                                                                                                               660,357                      589,722

Cash and investments
Cash and cash equivalents                                                                                                                                                         23,142                       10,792
Investments:
   Mortgage-related securities:
    Trading, at fair value (includes $6 and $2 pledged as collateral that may be repledged)                                                                                       32,817                       32,366
    Participation Certificate residuals, at fair value                                                                                                                                (5)                           8
   Non-mortgage-related securities:
    Available for sale, at fair value (includes $- and $350 pledged as collateral that may be repledged)                                                                          31,228                       66,419
    Trading, at fair value (includes $23 and $62 pledged as collateral that may be repledged)                                                                                      1,314                        2,409
            Total non-mortgage-related securities                                                                                                                                 32,542                       68,828
            Total mortgage-related and non-mortgage-related securities                                                                                                            65,354                      101,202
   Securities purchased under agreements to resell and Federal funds sold                                                                                                         20,582                       23,043
Cash and investments                                                                                                                                                             109,078                      135,037
Accounts and other receivables, net                                                                                                                                                8,067                       10,611
Derivative assets, at fair value                                                                                                                                                  16,180                       10,393
Guarantee asset for Participation Certificates, at fair value                                                                                                                      3,686                        2,445
Real estate owned, net                                                                                                                                                               795                          594
Other assets                                                                                                                                                                       5,286                        3,447
    Total assets                                                                                                                                            $                    803,449           $          752,249
Liabilities and stockholders' equity
Debt securities, net
Senior debt:
  Due within one year                                                                                                                                       $                    295,262           $          244,429
  Due after one year                                                                                                                                                             438,738                      415,662
Subordinated debt, due after one year                                                                                                                                              5,613                        5,605
Total debt securities, net                                                                                                                                                       739,613                      665,696
Due to Participation Certificate investors                                                                                                                                        13,205                       35,080
Accrued interest payable                                                                                                                                                           7,345                        7,286
Guarantee obligation for Participation Certificates                                                                                                                                2,904                        1,427
Derivative liabilities, at fair value                                                                                                                                                357                          967
Reserve for guarantee losses on Participation Certificates                                                                                                                           125                           88
Other liabilities                                                                                                                                                                  6,484                        8,066
  Total liabilities                                                                                                                                                              770,033                      718,610
Commitments and contingencies
Minority interests in consolidated subsidiaries                                                                                                                                    1,929                        2,309
Stockholders' equity
Preferred stock, at redemption value                                                                                                                                               4,609                        4,609
Common stock, $0.21 par value, 726,000,000 shares authorized, 725,882,280 shares issued and
 688,573,911 shares and 687,375,999 shares outstanding, respectively                                                                                                                 152                          152
Additional paid-in capital                                                                                                                                                           814                          744
Retained earnings                                                                                                                                                                 28,837                       24,955
Accumulated other comprehensive income (loss), (AOCI) net of taxes, related to:
 Available-for-sale securities                                                                                                                                                     6,349                       12,217
 Cash flow hedge relationships                                                                                                                                                    (7,837)                      (9,877)
 Minimum pension liability                                                                                                                                                           (10)                           -
   Total accumulated other comprehensive income (loss), net of taxes                                                                                                              (1,498)                       2,340
Treasury stock, at cost, 37,308,369 shares and 38,506,281 shares, respectively                                                                                                    (1,427)                      (1,470)
  Total stockholders' equity                                                                                                                                                      31,487                       31,330
  Total liabilities and stockholders' equity                                                                                                                $                    803,449           $          752,249

The Notes To Consolidated Financial Statements included in our Information Statement dated September 24, 2004 are an integral part of these consolidated financial statements.




                                                                                                                      2
                                             FREDDIE MAC
                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                                                                                        Year Ended December 31,

                                                                                                  2003                           2002                    2001
                                                                                      Shares         Amount               Shares     Amount       Shares    Amount
                                                                                                                      (dollars and shares in millions)
Preferred stock, at redemption value
   Balance, beginning of year                                                               92        $      4,609             92       $      4,596               64       $     3,195
   Preferred stock issuances                                                                 -                   -              6                300               28             1,401
   Preferred stock redemptions                                                               -                   -             (6)              (287)               -                 -
  Preferred stock, end of year                                                              92               4,609             92              4,609               92             4,596

Common stock, par value
   Balance, beginning of year                                                              726                  152           726                152               726             152
  Common stock, end of year                                                                726                  152           726                152               726             152

Additional paid-in capital
   Balance, beginning of year                                                                                   744                              671                               624
   Stock-based compensation, before tax effect of $23, $23 and $21                                               64                               65                                60
   Income tax benefit from employee stock option exercises                                                       16                               16                                30
   Preferred stock issuance costs                                                                                 -                               (2)                              (13)
   Common stock issuances                                                                                       (10)                              (6)                              (30)
  Additional paid-in capital, end of year                                                                       814                              744                               671

Retained earnings
   Balance, beginning of year                                                                               24,955                           15,710                              13,326
   Net income                                                                                                4,816                           10,090                               3,158
   Preferred stock dividends declared                                                                         (216)                            (234)                               (217)
   Common stock dividends declared                                                                            (718)                            (611)                               (557)
  Retained earnings, end of year                                                                            28,837                           24,955                              15,710

AOCI, net of taxes
   Balance, beginning of year                                                                                2,340                              (557)                             1,084
   Changes in unrealized gains (losses) related to available-
    for-sale securities, net of reclassification adjustments                                                (5,868)                            8,017                              3,116
   Changes in unrealized gains (losses) related to cash flow
    hedge relationships, net of reclassification adjustments                                                 2,040                            (5,120)                            (2,117)
   Change in minimum pension liability                                                                         (10)                                -                                  -
   Cumulative effect of change in accounting principle                                                           -                                 -                             (2,640)
  AOCI, net of taxes, end of year                                                                           (1,498)                            2,340                               (557)

Treasury stock, at cost
   Balance, beginning of year                                                               39              (1,470)            31               (948)              33            (1,024)
   Common stock issuances                                                                   (2)                 43             (1)                33               (2)               76
   Common stock repurchases                                                                  -                   -              9               (555)               -                 -
  Treasury stock, end of year                                                               37              (1,427)            39             (1,470)              31              (948)

Total stockholders' equity                                                                            $     31,487                      $    31,330                         $    19,624

Comprehensive income
   Net income                                                                                         $      4,816                      $    10,090                         $     3,158
   Changes in AOCI, net of taxes, net of reclassification adjustments                                       (3,838)                           2,897                              (1,641)
Total comprehensive income                                                                            $         978                     $    12,987                         $     1,517

The Notes To Consolidated Financial Statements included in our Information Statement dated September 24, 2004 are an integral part of these consolidated financial statements.




                                                                                                  3
                                                           FREDDIE MAC
                                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                                                                 Year Ended December 31,
                                                                                                                                      2003                 2002                      2001
                                                                                                                                                   (dollars in millions)
 Cash flows from operating activities
   Net income                                                                                                                   $          4,816          $      10,090          $       3,158
   Adjustments to reconcile net income to net cash provided by operating activities:
      Cumulative effect of change in accounting principles (pre-tax)                                                                           -                       -                   (67)
      Hedge accounting (gains) losses                                                                                                       (644)                   (187)                  294
      Unrealized (gains) losses on derivatives not in hedge accounting relationships, net                                                 (1,079)                 (5,941)                1,857
      Asset amortization -- premiums, discounts and hedging basis adjustments                                                                995                    (404)                 (645)
      Debt amortization -- premiums and discounts on long-term debt and hedging basis
         adjustments                                                                                                                       2,458                  1,272                    547
      Losses on debt retirement                                                                                                            1,775                    674                    356
      Provision for credit losses                                                                                                             10                    128                     32
      (Gains) losses on investment activity                                                                                                2,625                 (1,784)                  (231)
      (Decrease) increase in deferred income taxes                                                                                           737                  2,690                   (245)
      Purchases of held-for-sale mortgages                                                                                               (82,074)               (55,275)               (24,837)
      Sales of held-for-sale mortgages                                                                                                    84,329                 49,035                 20,362
      Repayments of held-for-sale mortgages                                                                                                  390                  1,097                    262
      Net decrease in trading securities                                                                                                   8,935                  7,170                  2,535
      Change in accounts and other receivables, net                                                                                        4,206                  1,678                  1,345
      Change in amounts due to Participation Certificate investors, net                                                                  (21,875)                 7,705                 20,879
      Change in accrued interest payable                                                                                                     (40)                   344                  1,237
      Change in income taxes payable                                                                                                      (1,090)                  (484)                   601
      Change in Guarantee asset for Participation Certificates, at fair value                                                             (1,362)                   711                   (381)
      Change in Guarantee obligation for Participation Certificates                                                                        1,606                    272                    378
      Change in Participation Certificate residuals, at fair value                                                                          (389)                   326                     (9)
      Other, net                                                                                                                             153                  2,647                 (2,639)
      Net cash provided by operating activities                                                                                            4,482                 21,764                 24,789
 Cash flows from investing activities
      Purchases of available-for-sale securities                                                                                       (446,036)               (451,510)              (387,561)
      Proceeds from sales of available-for-sale securities                                                                              142,167                 172,964                102,771
      Proceeds from maturities of available-for-sale securities                                                                         243,390                 182,955                141,699
      Purchases of held-for-investment mortgages                                                                                        (18,602)                (13,656)               (13,735)
      Repayments of held-for-investment mortgages                                                                                        15,841                  13,372                 13,197
      Proceeds from sales of REO                                                                                                          1,369                     980                    771
      Net decrease (increase) in securities purchased under agreements to resell and
         Federal funds sold                                                                                                                2,461                 10,457                (24,084)
      Derivative premiums and terminations, net                                                                                            3,333                 (4,062)                (2,202)
      Investments in housing tax credit partnerships                                                                                         (32)                   (65)                   (77)
      Net cash used for investing activities                                                                                             (56,109)               (88,565)              (169,221)
 Cash flows from financing activities
      Proceeds from issuance of short-term debt                                                                                         900,073                2,048,131              2,455,070
      Repayments of short-term debt                                                                                                    (882,000)              (2,100,103)            (2,362,620)
      Proceeds from issuance of long-term debt                                                                                          258,371                  269,386                205,213
      Repayments of long-term debt                                                                                                     (210,841)                (141,257)              (150,316)
      Repayments of minority interest in consolidated subsidiaries                                                                         (376)                    (350)                  (325)
      Proceeds from issuance of preferred stock, net of issuance costs                                                                        -                      298                  1,388
      Redemption of preferred stock                                                                                                           -                     (287)                     -
      Proceeds from issuance of common stock                                                                                                 33                       27                     46
      Repurchases of common stock                                                                                                             -                     (555)                     -
      Payment of cash dividends on preferred stock and common stock                                                                        (934)                    (845)                  (774)
      Repayment of housing tax credit partnerships notes payable                                                                           (349)                    (316)                  (186)
      Net cash provided by financing activities                                                                                          63,977                   74,129                147,496
        Net increase (decrease) in cash and cash equivalents                                                                              12,350                  7,328                  3,064
        Cash and cash equivalents at beginning of period                                                                                  10,792                  3,464                    400
        Cash and cash equivalents at end of period                                                                              $         23,142          $      10,792          $       3,464
 Supplemental cash flow information
 Cash paid for:
      Interest                                                                                                                  $         22,852          $      21,994          $      18,324
      Derivative interest carry                                                                                                              578                  3,239                    244
      Income taxes                                                                                                                         2,538                  2,491                    977
 Non-cash investing and financing activities:
      Securitized and retained available-for-sale securities formed from prior period
         purchases of held-for-sale mortgages                                                                                              1,681                   2,910                    362
      Transfers from mortgage loans to REO                                                                                                 1,663                   1,197                    910
      Investments in housing tax credit partnerships financed by notes payable                                                               702                     896                    427
      Transfers from available-for-sale securities to trading securities in conjunction with
         the implementation of SFAS 133                                                                                                        -                       -                36,336
      Transfers from held-for-sale mortgages to held-for-investment mortgages                                                                179                     209                   411

The Notes To Consolidated Financial Statements included in our Information Statement dated September 24, 2004 are an integral part of these consolidated financial statements.

				
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