    [Appendix]
    [Government-Sponsored Enterprises]
    [From the U.S. Government Printing Office, www.gpo.gov]

    [[Page 1123]]

                        GOVERNMENT-SPONSORED ENTERPRISES

        This chapter contains descriptions of and data on the Government-
    sponsored enterprises listed below. These enterprises were established
    and chartered by the Federal Government for public policy purposes. They
    are not included in the Federal budget because they are private
    companies. However, because of their public purpose, detailed statements
    of financial operations and condition are presented, to the extent such
    information is available, on a basis that is as consistent as
    practicable with the basis for the budget data of Government agencies.
    These statements are not reviewed by the President; they are presented
    as submitted by the enterprises.

        --The Student Loan Marketing Association is a for-profit financial
            corporation chartered by Congress in 1972 under the Higher
            Education Act (HEA) to help increase the availability of student
            loans. Sallie Mae carries out secondary market and other
            functions.

        --The Federal National Mortgage Association and the Federal Home
            Loan Mortgage Corporation provide   assistance to the secondary
            market for residential mortgages. Both are supervised by the
            Department of Housing and Urban Development  for  their  roles
            in helping to finance low-, moderate-, and middle-income
            housing; both are regulated for financial safety and soundness
            by the Office of Federal Housing Enterprise Oversight.

        --Institutions of the Farm Credit System the Agricultural Credit
            Bank and Farm Credit Banks--provide financial assistance to
            agriculture. They are supervised by the Farm Credit
            Administration.

        --The Federal Agricultural Mortgage Corporation, under the
            supervision of the Farm Credit Administration, provides a
            secondary mortgage market for agricultural real estate and rural
            housing loans as well as for farm and business loans guaranteed
            by the U.S. Department of Agriculture.

        --The Federal Home Loan Banks assist thrift institutions, banks,
            insurance companies, and credit unions in providing financing
            for housing and community development and are supervised by the
            Federal Housing Finance Board.

                       STUDENT LOAN MARKETING ASSOCIATION

                       Student Loan Marketing Association

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-1500-0-3-502      2002 actual   2003 est.   2004 est.
    ----------------------------------------------------------------------------
    1111  Limitation on direct loans........
    1131  Direct loan obligations...........      13,245      15,272      17,230
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....      13,245      15,272      17,230
    ----------------------------------------------------------------------------

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........      41,032      41,932      27,965
    1231  Disbursements: Direct loan
            disbursements...................      13,245      15,272      17,230
          Repayments:

    1251    Repayments and prepayments......      -1,921      -5,240      -3,657
    1252    Proceeds from loan asset sales
              or discounted.................     -10,425     -24,000     -23,000
    1264  Write-offs for default: Other
            adjustments, net................           1           1           1
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........      41,932      27,965      18,539
    ---------------------------------------------------------------------------

        The Student Loan Marketing Association (Sallie Mae) was created as a
    shareholder-owned government sponsored enterprise (GSE) by the Education
    Amendments of 1972 to expand funds available for student loans by
    providing liquidity to lenders engaged in the Federal Family Education
    Loan Program (FFELP), formerly the guaranteed student loan program
    (GSLP). Sallie Mae was privatized in 1997 pursuant to the authority
    granted by the Student Loan Marketing Association Reorganization Act of
    1996. The GSE is a wholly owned subsidiary of SLM Corporation and must
    wind down and be liquidated by September 30, 2008. In January 2002, the
    GSE's board of directors announced that it expects to complete the
    dissolution of the GSE by September 30, 2006. Under legislation passed
    in 1998, if USA Education, Inc. affiliates with a depository
    institution, the GSE must wind down within two years (unless such period
    is extended by the Department of the Treasury).
        The GSE provides liquidity through direct purchase of insured
    student loans from eligible lenders and through warehousing advances,
    which are loans to lenders secured by insured student loans, Government
    or agency securities, or other acceptable collateral. In capital
    shortage areas, the GSE is authorized, at the request of Federal
    officials, to make insured loans directly to students. The GSE is
    authorized to advance funds to State agencies that will provide loans to
    students. The GSE is also authorized to provide a secondary market for
    noninsured loans; to serve as a guarantee agency in support of loan
    availability at the request of the Secretary of Education; to purchase
    and underwrite student loan revenue bonds; to provide certain additional
    services as determined by its board of directors to be supportive of the
    credit needs of students generally; and to provide financing for
    academic facilities and equipment. As described below, however, many of
    these activities are limited or precluded under the privatization
    legislation.
        The GSE is authorized by the Health Professions Educational
    Assistance Act of 1976 to provide a secondary market for federally
    insured loans to graduate health professions students.
        Generally, under the privatization legislation, the GSE cannot
    engage in any new business activities or acquire any additional program
    assets other than purchasing student loans and serving, at the request
    of the Secretary of Education, as a lender-of-last-resort. The GSE can
    continue to make warehousing advances under contractual commitments
    existing on August 7, 1997.
        Operations.--The forecast data with respect to operations are based
    on certain general economic and specific FFELP loan volume assumptions
    and should not be relied upon as an official forecast of the
    corporation's future business.

                              ANNUAL LOAN ACTIVITY

                            [In millions of dollars]

                                         2002 actual  2003 est.   2004 est.
    Guaranteed student loans:
      Stafford:
        Purchased.......................       8,098       8,489       9,577
        Warehoused......................         670          --          --
      PLUS/SLS: Purchased...............         880       1,114       1,257
                                        ------------------------------------
          Subtotal, Guaranteed student
            loans.......................       9,648       9,603      10,834
    Other...............................       3,597       5,669       6,396
                                        ------------------------------------
          Total.........................      13,245      15,272      17,230
                                        ====================================

        Financing.--The GSE is financed by borrowing in the private debt
    markets and securitizing its assets. The GSE must

    [[Page 1124]]

    wind down and be liquidated by September 30, 2008 although the GSE has
    announced that it expects to complete the wind-down and liquidation two
    years earlier. All obligations of the GSE remaining upon liquidation
    must be placed into a defeasance trust. The GSE's outstanding adjustable
    rate cumulative preferred stock, which was required to be redeemed prior
    to such date was redeemed on December 10, 2001.
        The financial data contained in this material relating to future
    periods represents estimates that have been prepared specifically for
    inclusion in the President's Budget. These data should not be viewed as
    official forecasts of the corporation's future position, nor should they
    be used as a basis for making financial or investment decisions relating
    to the corporation. The data have been developed on the basis of certain
    economic assumptions that are subject to periodic review and revision.
    Consequently, the estimates are subject to forecast error and actual
    results from future business operations are likely to differ from these
    data.

                            Statement of Operations (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-1500-0-3-502    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
    0101  Revenue...........................       2,952          2,527
    0102  Expense...........................      -2,850         -1,861
                                            ------------ --------------  ------------  -------------
    0105  Net income or loss (-)............         102            666
    -----------------------------------------------------------------------------------------------

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-1500-0-3-502    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
          Investments in US securities:

    1102    Treasury securities, par........       1,597          1,727         1,624          1,543
    1104    Agency securities, par..........
    1106    Receivables, net................       1,207            953           658            605
    1201  Investments in other securities,
            net.............................       4,829          2,442         2,319          2,498
    1206  Receivables, net..................       1,669          1,865         1,287          1,184
    1207  Advances and prepayments..........          11             58            40             37
          Net value of assets related to
              direct loans receivable and
              acquired defaulted guaranteed
              loans receivable:

    1601    Direct loans, gross.............      41,185         42,094        28,073         18,611
    1603    Allowance for estimated
              uncollectible loans and
              interest (-)..................        -153           -162          -108            -72
                                            ------------ --------------  ------------  -------------
    1699      Value of assets related to
                direct loans................      41,032         41,932        27,965         18,539
    1801  Cash and other monetary assets....          71             70            49             45
    1803  Property, plant and equipment, net
            *...............................
    1901  Other assets......................         310            524           361            332
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................      50,726         49,571        34,303         24,783
        LIABILITIES:
    2202  Interest payable..................         332            311           218            157
    2203  Debt..............................      47,321         45,720        32,100         22,964
    2207  Other.............................       1,762          1,633         1,143            823
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............      49,415         47,664        33,461         23,944
        NET POSITION:
    3300  Invested Capital..................       1,311          1,907           842            839
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............       1,311          1,907           842            839
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position      50,726         49,571        34,303         24,783
    -----------------------------------------------------------------------------------------------
        * In the first quarter of 2001, in accordance with the Privatization
    Act, the GSE transferred substantially all of its fixed assets and real
    estate to certain private non-GSE entities in USA education.

                      FEDERAL NATIONAL MORTGAGE ASSOCIATION

                               Portfolio Programs

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-2500-0-3-371      2002 actual   2003 est.   2004 est.
    ----------------------------------------------------------------------------
    1131  Direct loan obligations...........     345,928     459,822     229,093
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....     345,928     459,822     229,093
    ----------------------------------------------------------------------------

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........     700,484     759,733     885,814
          Disbursements:

    1231    Direct loan disbursements.......     294,678     439,638     229,961
    1232    Purchase of loans assets........       9,790       1,561       1,053
    1251  Repayments: Repayments and
            prepayments.....................    -249,905    -315,118    -127,135
    1264  Write-offs for default: Other
            adjustments, net................       4,686
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........     759,733     885,814     989,693
    ---------------------------------------------------------------------------

        The Federal National Mortgage Association (Fannie Mae) is a
    federally-chartered, privately-owned company with a public mission to
    provide stability and to increase the liquidity of the residential
    mortgage market and to help increase the availability of mortgage credit
    to low- and moderate-income families and in underserved areas. In
    carrying out its mission, Fannie Mae engages primarily in two forms of
    business: investing in portfolios of residential mortgages and
    guaranteeing residential mortgage securities. As of September 30, 2002,
    Fannie Mae held a net mortgage portfolio totaling $751 billion and had
    net outstanding guaranteed mortgage-backed securities of $990 billion.
        Through a federal charter, Congress has equipped Fannie Mae with
    certain attributes to help it carry out its public mission. These
    include an exemption from state and local taxes (except real property
    taxes), and an exemption of its debt and mortgage securities from
    Securities and Exchange Commission registration requirements. An
    additional advantage is that the Secretary of the Treasury may purchase
    and hold up to $2.25 billion of securities issued by Fannie Mae under
    terms and conditions and at prices determined by the Secretary to be
    appropriate. Securities guaranteed by Fannie Mae and debt issued by the
    company are solely the corporation's obligations and are not backed by
    the full faith and credit of the U.S. Government. The common stock of
    the corporation is owned by the public, is fully transferable, and
    trades on the New York, Midwest, and Pacific stock exchanges.
        Fannie Mae was established in 1938 to assist private markets in
    providing a steady supply of funds for housing. Fannie Mae was
    originally a subsidiary of the Reconstruction Finance Corporation and
    was permitted to purchase only loans insured by the Federal Housing
    Administration (FHA). In 1954, Fannie Mae was restructured as a mixed
    ownership (part government, part private) corporation. Congress sold the
    government's remaining interest in Fannie Mae in 1968 and completed the
    transformation to private shareholder ownership in 1970. Using the
    proceeds from the sale of subordinated debentures, Fannie Mae paid the
    Treasury $216 million for the government's preferred stock, which was
    retired, and for the Treasury's interest in the corporation's earned
    surplus. As a result, the corporation was taken off the federal budget.
        In 1992, Congress reaffirmed and clarified Fannie Mae's role in the
    housing finance system through charter act amendments included in the
    Federal Housing Enterprises Financial Safety and Soundness Act of 1992
    (``The Act''). Fannie

    [[Page 1125]]

    Mae's charter purposes, as amended by the Act, are: ``to provide
    stability in the secondary market for residential mortgages; respond
    appropriately to the private capital market; provide ongoing assistance
    to the secondary market for residential mortgages (including activities
    relating to mortgages on housing for low- and moderate-income families
    involving a reasonable economic return that may be less than the return
    earned on other activities); and promote access to mortgage credit
    throughout the Nation (including central cities, rural areas, and
    underserved areas) by increasing the liquidity of mortgage investments
    and improving the distribution of investment capital for residential
    mortgage financing.''
        In December 1995, the U.S. Department of Housing and Urban
    Development (HUD) set affordable housing goals for 1996-1999 and
    established the requirements for counting mortgage purchases to low- and
    moderate-income families and families living in underserved areas with
    specific census tract and minority concentration requirements. Under
    that regulations, the low- and moderate-income goal was 42 percent; the
    geographically targeted goal was 24 percent and the special affordable
    housing goal was 14 percent. These goals were also in effect for 2000.
    Fannie Mae exceeded all of the housing goals in 2000 with low- and
    moderate-income purchases at 49 percent, geographically targeted
    purchases at 31 percent, and special affordable housing purchases at 19
    percent.
        In October 2000, HUD set new affordable housing goals for the period
    covering 2001 to 2003. The goals are 50 percent for the low- and
    moderate-income goal, 31 percent for the geographically targeted goal,
    and 20 percent for the special affordable housing goal.
        In 2001, Fannie Mae dramatically expanded the financing it provided
    for low- and moderate- income households, and for minority households.
    In 2001, Fannie Mae financed over $87 billion in loans to nearly 680,000
    minority families. It also financed over $132 billion in loans to over
    1,500,000 low- and moderate-income families. Fannie Mae exceeded all of
    the housing goals in 2001. From 1996 to 2001, Fannie Mae increased its
    low- and moderate-income purchases from 45.4 percent to 52.0 percent,
    its underserved areas purchases from 28.2 percent to 32.5 percent, and
    its purchases for the special afforable goal from 17.4 percent to 21.6
    percent.
        The Act also established the Office of Federal Housing Enterprise
    Oversight (OFHEO), an independent office within HUD, headed by a
    Director who reports directly to the Congress. OFHEO has statutory
    responsibility for ensuring that Fannie Mae is adequately capitalized
    and operating in a safe and sound manner. Included among the express
    statutory authorities of the Director is the authority to conduct
    examinations of the financial health of the company and to issue minimum
    and risk-based capital standards. The minimum capital requirements are
    computed from statutorily established ratios that are applied to the
    assets and off-balance sheet risks of Fannie Mae. The risk-based capital
    standard determines the amount of capital that Fannie Mae must hold to
    withstand the impact of simultaneous adverse credit and interest rate
    stresses over a 10-year period, plus an additional 30 percent to cover
    management and operations risk. Total capital (shareholder's equity plus
    allowance for loan losses) at the end of September 2002 was $27.278
    billion. The company has continued to remain in compliance with
    applicable capital standards and has been deemed adequately capitalized
    by OFHEO since its first classification in June 1993.
        On September 30, 2002, OFHEO implemented its resk-based capital
    stress test for the first time, finding that as of that date Fannie
    Mae's total capital of $27.278 billion exceeded the risk based capital
    requirement by $5.838 billion. In addition, responding to the
    President's call for corporate leaders to provide the most accurate,
    timely, and useful information, Fannie Mae made a voluntary and
    irrevocable decision to register its common stock with the Securities
    and Exchange Commission under the Securities and Exchange Act of 1934.
        For the four quarters ending September 2002, Fannie Mae earned $6.2
    billion.
        The financial data contained in this material relating to future
    periods represent estimates that have been prepared specifically for
    inclusion in the President's Budget. These data should not be viewed as
    an official forecast of the corporation's future position, nor should
    they be used as a basis for making financial or investment decisions
    relating to the corporation. The data have been developed on the basis
    of certain economic assumptions that are subject to periodic review and
    revision. Consequently, the estimates are subject to forecast error and
    actual results from future business operations are likely to differ from
    these data.

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-2500-0-3-371    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
    1101  Fund balances.....................         267             10
          Investments in US securities:

    1102    Treasury securities, par........       1,325          1,600
    1104    Other...........................      58,342         51,758        56,255         71,067
          Net value of assets related to
              direct loans receivable and
              acquired defaulted guaranteed
              loans receivable:

    1601    Direct loans (net of discount)..     655,318        728,723       880,524        972,594
    1602    Federal Agencies................      31,684         29,428         9,903         21,372
    1603    Allowance for estimated
              uncollectible loans and
              interest (-)..................        -201           -220          -260           -273
                                            ------------ --------------  ------------  -------------
    1699      Value of assets related to
                direct loans................     686,801        757,931       890,167        993,693
    1801  Cash and other monetary assets....      19,686         26,141         7,417         10,741
    1803  Property, plant and equipment, net         229            271
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................     766,650        837,711       953,839      1,075,501
        LIABILITIES:
    2101  Accounts payable..................         727            702
    2102  Accrued interest payable..........       8,628          9,248        10,011         11,029
    2105  Other.............................          17             16
    2203  Debt..............................     726,992        800,255       909,686      1,023,547
    2204  Estimated liability for loan
            guarantees......................      15,374         12,081         9,959          9,888
    2206  Pension and other actuarial
            liabilities.....................         402            444
    2207  Subtotal, Federal taxes payable...         730              1
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............     752,870        822,747       929,656      1,044,464
        NET POSITION:
          Cumulative results of operations:

    3300    Cumulative results of operations      24,541         28,779
    3300    Change in Stockholder Equity....     -10,763        -13,815        24,183         31,037
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............      13,778         14,964        24,183         31,037
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position     766,650        837,711       953,839      1,075,501
    -----------------------------------------------------------------------------------------------

                             mortgage-backed securities

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-2501-0-3-371      2002 actual   2003 est.   2004 est.
    ----------------------------------------------------------------------------
    1131  Direct loan obligations...........     649,569     768,572     388,794
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....     649,569     768,572     388,794
    ----------------------------------------------------------------------------

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........   1,228,131   1,458,945   1,637,638
    1231  Disbursements: Direct loan
            disbursements...................     623,991     768,572     388,794
    1251  Repayments: Repayments and
            prepayments.....................    -393,177    -589,879    -259,625
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........   1,458,945   1,637,638   1,766,807
    ---------------------------------------------------------------------------

        According to accounting practices for private corporations, the
    mortgages in the pools of loans supporting the mortgage-backed
    securities are considered to be owned by the holders of these
    securities. Consequently, on the books of the Federal National Mortgage
    Association (Fannie Mae), these mortgages

    [[Page 1126]]

    are not considered assets and the securities outstanding are not
    considered liabilities. However, the concepts of the budget of the U.S.
    Government consider these mortgages and mortgage-backed securities to be
    assets and liabilities, respectively, of Fannie Mae. For the purposes of
    this document, therefore, they are presented as assets and liabilities
    in the accompanying schedules. On the schedule of Status of direct loans
    for mortgage-backed securities, the items labeled ``New loans'' and
    ``Recoveries: Repayments and prepayments'' are budgetary terms. However,
    from the Corporation's perspective, these items are ``Amounts issued''
    and ``Amounts passed through to the holders of securities'',
    respectively.
        The financial data contained in this material relating to future
    periods represent estimates that have been prepared specifically for
    inclusion in the President's Budget. These data should not be viewed as
    an official forecast of the corporation's future position, nor should
    they be used as a basis for making financial or investment decisions
    relating to the corporation. The data have been developed on the basis
    of certain economic assumptions that are subject to periodic review and
    revision. Consequently, the estimates are subject to forecast error and
    actual results from future business operations are likely to differ from
    these data.

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-2501-0-3-371    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
          Net value of assets related to
              direct loans receivable and
              acquired defaulted guaranteed
              loans receivable:

    1601    Direct loans, gross.............   1,228,734      1,459,533     1,638,221      1,767,397
    1603    Allowance for estimated
              uncollectible loans and
              interest (-)..................        -603           -588          -583           -590
                                            ------------ --------------  ------------  -------------
    1699      Value of assets related to
                direct loans................   1,228,131      1,458,945     1,637,638      1,766,807
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................   1,228,131      1,458,945     1,637,638      1,766,807
        LIABILITIES:
    2104  Resources payable.................   1,020,828      1,458,945     1,637,638      1,766,807
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............   1,020,828      1,458,945     1,637,638      1,766,807
    -----------------------------------------------------------------------------------------------

                     FEDERAL HOME LOAN MORTGAGE CORPORATION

                               Portfolio Programs

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-4420-0-3-371      2002 actual   2003 est.   2004 est.
    ----------------------------------------------------------------------------
    1131  Direct loan obligations...........     199,904     257,422     162,859
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....     199,904     257,422     162,859
    ----------------------------------------------------------------------------

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........     470,850     530,694     586,800
    1231  Disbursements: Direct loan
            disbursements...................     199,904     257,422     162,859
    1251  Repayments: Repayments and
            prepayments.....................    -140,060    -201,316    -101,959
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........     530,694     586,800     647,700
    ---------------------------------------------------------------------------

        The Federal Home Loan Mortgage Corporation (Freddie Mac), is a
    federally-charted, shareholder-owned, private company with a public
    mission to provide stability and increase the liquidity of the
    residential mortgage market, and to help increase the availability of
    mortgage credit to low- and moderate-income families and in underserved
    areas. In carrying out its mission, Freddie Mac engages primarily in two
    forms of business: investing in portfolios of residential mortgages and
    guaranteeing residential mortgage securities. As of September 30, 2002,
    Freddie Mac held a net mortgage portfolio totaling $531 billion and had
    net outstanding guaranteed mortgage-backed securities of $730 billion.
        Through a federal charter, Congress has equipped Freddie Mac with
    certain advantages over wholly private firms in carrying out these
    activities. These advantages include an exemption from state and local
    taxes (except real property taxes), and an exemption for their debt and
    mortgage securities from SEC filing registration requirements. An
    additional advantage is that the Secretary of the Treasury may purchase
    and hold up to $2.25 billion of securities issued by Freddie Mac under
    terms and conditions and at prices determined by the Secretary to be
    appropriate. Securities guaranteed by Freddie Mac and debt issued by the
    company are explicitly not backed by the full faith and credit of the
    U.S. Government. The common stock of the corporation is owned by private
    shareholders is fully transferable, and trades on the New York and
    Pacific stock exchanges.
        Freddie Mac was established in 1970 under the Emergency Home Finance
    Act. Congress chartered Freddie Mac to provide mortgage lenders with an
    organized national secondary market enabling them to manage their
    conventional mortgage portfolio more effectively and gain indirect
    access to a ready source of additional funds to meet new demands for
    mortgages. Freddie Mac serves as a conduit facilitating the flow of
    investment dollars from the capital markets to mortgage lenders, and
    ultimately, to homebuyers, increasing the amount of mortgage credit
    available and making it more affordable.
        The Financial Institutions Reform, Recovery, and Enforcement Act of
    1989 (FIRREA) significantly changed the corporate governance of Freddie
    Mac. The company's three member Board of Directors, which had
    corresponded with the Federal Home Loan Bank Board, was replaced with an
    eighteen member Board of Directors. Thirteen board members are elected
    annually by shareholders and five are annually appointed by the
    President of the United States. In addition, FIRREA converted Freddie
    Mac's 60 million shares of non-voting, senior participating preferred
    stock into voting common stock. As a result, the corporation was taken
    off the federal budget.
        FIRREA also clarified Freddie Mac's role in the housing finance
    delivery system through amendments to its charter act. Specifically,
    FIRREA established Freddie Mac's public mission: ``to provide stability
    in the secondary market for residential mortgages; respond appropriately
    to the private capital market; and provide ongoing assistance to the
    secondary market for residential mortgages (including activities
    relating to mortgages on housing for low- and moderate-income families
    involving a reasonable economic return that may be less than the return
    earned on other activities.'' The Federal Housing Enterprise Financial
    Safety and Soundness Act of 1992 (``The Act'') added to Freddie Mac's
    public mission the promotion of ``access to mortgage credit throughout
    the Nation (including central cities, rural areas, and underserved
    areas) by increasing the liquidity of mortgage investments and improving
    the distribution of investment capital for residential mortgage
    financing.''
        The Act also established affordable housing goals that are designed
    to improve the flow of mortgage funds to low- and moderate-income
    families and families in central cities, rural areas, and other
    underserved areas. In December 1995, the U.S. Department of Housing and
    Urban Development (HUD) affordable housing goals for 1996-1999 and
    established the requirements for counting mortgage purchases for meeting
    these goals. The goals provide that, of the total number of dwelling
    units financed by Freddie Mac's mortgage purchases, 42 percent meet the
    low- and moderate-income goal, 24 percent meet the geographically
    targeted goal, and 14 percent

    [[Page 1127]]

    meet the special affordable goal. Additionally, within the special
    affordable goal was a multifamily mortgage purchase target for Freddie
    Mac of $1.0 billion. In an October 2000 rule, HUD applied the 1996-1999
    goals to 2000 and established new goals for 2001-2003: 50 percent for
    the low- and moderate-income goal, 31 percent for the geographically
    targeted goal, 20 percent for the special affordable housing goal and a
    multifamily target for Freddie Mac of $2.1 billion.
        Freddie Mac exceeded all of the housing goals in 2001 with low- and
    moderate-income purchases of 53.4 percent, geographically targeted
    purchases of 31.7 percent, special affordable purchases of 22.6 percent,
    and the multifamily portion of the special affordable purchases of $4.7
    billion in qualifying multifamily mortgages.
        The Act also enhanced the regulatory oversight of Freddie Mac by
    establishing the Office of Federal Housing Enterprise Oversight (OFHEO),
    an independent office within HUD, headed by a Director appointed by the
    President. OFHEO is responsible for ensuring that Freddie Mac is
    adequately capitalized and operating in a safe and sound manner.
    Included among the express statutory authorities of the Director is the
    authority to conduct examinations of the financial health of the company
    and to issue minimum and risk-based capital standards. The minimum
    capital requirements are computed from statutorily established ratios
    that are applied to the assets and off-balance sheet risks of Freddie
    Mac. The risk-based capital standard determines the amount of capital
    that Freddie Mac must hold to withstand the impact of simultaneous
    adverse credit and interest rate stresses over a 10-year period, plus an
    additional amount to cover management and operations risk. OFHEO
    published risk-based capital standards in September 2001 that became
    fully enforceable in September 2002.
        On September 30, 2002, OFHEO implemented its risk-based capital
    stress test for the first time. On December 30, 2002, OFHEO announced
    that as of September 30, Freddie Mac's total capital of $23.101 billion
    exceeded its risk-based capital requirement by $18.182 billion and that
    Freddie Mac's core capital of $22.656 billion exceeded its minimum
    capital requirement by $2.118 billion. In addition, responding to the
    President's call for the corporate leader to provide the most accurate,
    timely, and useful information, Freddie Mac made a voluntary and
    irrevocable decision to register its common stock with the Securities
    and Exchange Commission under the Securities and Exchange Act of 1934.
        For the four quarters ending September 2002, Freddie Mac recorded
    net income of $4.75 billion.
        The financial data contained in this material relating to future
    periods represent estimates that have been prepared specifically for
    inclusion in the President's budget. These data should not be viewed as
    an official forecast of the corporation's future position, nor should
    they be used as a basis for making financial or investment decisions
    relating to the corporation. The data have been developed on the basis
    of certain economic assumptions that are subject to periodic review and
    revision. Consequently, the estimates are subject to forecast error and
    actual results from future business operations are likely to differ from
    these data.
        According to generally accepted accounting principles utilized by
    private corporations, the mortgages in the pools of loans supporting PCs
    are considered to be owned by the holder of these securities. Therefore,
    Freddie Mac does not show these mortgages as assets. However, the budget
    philosophy of the United States Government includes these mortgages and
    mortgages pass-through securities as assets and liabilities,
    respectively, of Freddie Mac. For the purpose of this document,
    therefore, they are presented as assets and liabilities in the
    accompanying schedules. On the Status of Direct Loans schedule for
    mortgage pass-through securities, the items labeled ``Disbursements''
    and ``Repayments'' are budgetary terms. However, from Freddie Mac's
    perspective, these amounts represent ``Sales of PCs'' and ``Amounts
    passed through to PC holders,'' respectively.

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4420-0-3-371    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
    1201  Investments in other securities,
            net.............................      65,964         89,355        70,422         78,038
    1206  Receivables, net..................      22,762         31,024        23,732         22,020
          Net value of assets related to
              direct loans receivable and
              acquired defaulted guaranteed
              loans receivable:

    1601    Retained mortgage inventory.....     475,213        542,568       595,562        655,901
    1603    Allowances (-)..................        -327           -153          -168           -185
                                            ------------ --------------  ------------  -------------
    1699      Value of assets related to
                direct loans................     474,886        542,415       595,394        655,716
    1801  Cash and other monetary assets....         583          7,116         5,608          6,215
    1803  Property, plant and equipment, net         774          1,095           838            777
    1901  Other assets......................       6,938         10,975         8,396          7,790
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................     571,907        681,980       704,390        770,556
        LIABILITIES:
    2101  Accounts payable..................         763            530           546            599
    2202  Interest payable..................       4,452          5,243         5,403          5,925
    2203  Debt..............................     531,312        618,651       637,561        699,126
    2207  Other Liabilities.................      20,874         34,990        36,060         39,541
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............     557,401        659,414       679,570        745,191
        NET POSITION:
    3100  Invested capital..................      14,506         22,566        24,820         25,365
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............      14,506         22,566        24,820         25,365
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position     571,907        681,980       704,390        770,556
    -----------------------------------------------------------------------------------------------

                           Mortgage-Backed Securities

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-4440-0-3-371      2002 actual   2003 est.   2004 est.
    ----------------------------------------------------------------------------
    1131  Direct loan obligations...........     342,244     431,996     209,536
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....     342,244     431,996     209,536
    ----------------------------------------------------------------------------

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........     635,844     730,341     853,209
    1231  Disbursements: Direct loan
            disbursements...................     342,244     431,996     209,536
    1251  Repayments: Repayments and
            prepayments.....................    -247,747    -309,128    -144,713
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........     730,341     853,209     918,032
    ---------------------------------------------------------------------------

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4440-0-3-371    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
    1901  Underlying Mortgages..............     635,844        730,341       853,209        918,032
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................     635,844        730,341       853,209        918,032
        LIABILITIES:
    2104  Resources payable.................     635,844        730,341       853,209        918,032
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............     635,844        730,341       853,209        918,032
    -----------------------------------------------------------------------------------------------

                               FARM CREDIT SYSTEM

        The Farm Credit System is a government sponsored enterprise that
    provides privately financed credit to agricultural and rural
    communities. The major functional entities of the system are: (1)
    Agricultural Credit Bank (ACB), (2) Farm Credit Banks (FCB), and (3)
    direct lender associations. The history and specific functions of the
    bank entities are discussed after the presentation of financial
    schedules for each bank entity. As part of the Farm Credit System (FCS),
    these entities are regulated and examined by the Farm Credit
    Administration (FCA), an independent Federal agency. The ad

    [[Page 1128]]

    ministrative costs of FCA are financed by assessments of system
    institutions. System banks finance loans from sales of bonds to the
    public and their own capital funds. The system bonds issued by the banks
    are not guaranteed by the U.S. Government either as to principal or
    interest. The bonds are backed by an insurance fund, administered by the
    Farm Credit System Insurance Corporation (FCSIC), an independent Federal
    agency that collects insurance premiums from member banks to pay its
    administrative expenses and fund insurance reserves. All of the banks'
    current operating expenses are paid from their own income and do not
    require budgetary resources from the Federal Government.

                            Agricultural Credit Bank

        CoBank, ACB is headquartered in Denver, Colorado and serves eligible
    cooperatives nationwide, and provides funding to Agricultural Credit
    Associations (ACAs) in one of its regions. CoBank, ACB is the only
    Agricultural Credit Bank in the Farm Credit System. An ACB operates
    under statutory authority that combines the authorities of a FCB and a
    Bank for Cooperatives (BC). In exercising its FCB authority, CoBank
    ACB's charter limits its lending to ACAs located in the region
    previously served by the Farm Credit Bank of Springfield. As an entity
    lending to Cooperatives, CoBank is independently chartered to provide
    credit and related services nationwide to eligible cooperatives
    primarily engaged in farm supply, grain, marketing and processing
    (including sugar and dairy). CoBank also makes loans to rural utilities,
    including telecommunications companies and it provides international
    loans for the financing of agricultural exports.

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-4130-0-3-351      2002 actual   2003 est.   2004 est.
    ----------------------------------------------------------------------------
    1131  Direct loan obligations...........      71,546      75,000      75,000
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....      71,546      75,000      75,000
    ----------------------------------------------------------------------------

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........      19,588      20,466      23,878
    1231  Disbursements: Direct loan
            disbursements...................      71,491      75,000      75,000
    1251  Repayments: Repayments and
            prepayments.....................     -70,538     -71,646     -74,115
          Write-offs for default:

    1263    Direct loans....................         -75
    1264    Other adjustments, net..........                      58          70
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........      20,466      23,878      24,833
    ---------------------------------------------------------------------------

                            Statement of Operations (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4130-0-3-351    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
    0101  Total interest income.............       1,689          1,226         1,456          1,514
    0102  Total interest expense............      -1,223           -672          -926           -963
                                            ------------ --------------  ------------  -------------
    0105  Net income or loss (-)............         466            554           530            551
    0111  Other income......................          41             52            42             43
    0112  Other expense.....................        -301           -374          -320           -333
                                            ------------ --------------  ------------  -------------
    0115  Net income or loss (-)............        -260           -322          -278           -290
                                            ------------ --------------  ------------  -------------
    0191  Total revenues....................       1,730          1,278         1,498          1,557
                                            ------------ --------------  ------------  -------------
    0192  Total expenses....................      -1,524         -1,046        -1,246         -1,296
                                            ------------ --------------  ------------  -------------
    0195  Total income or loss (-)..........         206            232           252            261
                                            ------------ --------------  ------------  -------------
    0199  Total comprehensive income........         206            232           252            261
    -----------------------------------------------------------------------------------------------

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4130-0-3-351    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
    1201  Cash and investment securities....       4,775          5,269         5,805          6,037
    1206  Accrued interest receivable on
            loans...........................         174            135           137            143
          Net value of assets related to
              direct loans receivable and
              acquired defaulted guaranteed
              loans receivable:

    1601    Direct loans, gross.............      19,588         20,466        23,878         24,833
    1603    Allowance for estimated
              uncollectible loans and
              interest (-)..................        -324           -379          -411           -421
                                            ------------ --------------  ------------  -------------
    1699      Value of assets related to
                direct loans................      19,264         20,087        23,467         24,412
    1803  Property, plant and equipment, net         450            476           438            432
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................      24,663         25,967        29,847         31,024
        LIABILITIES:
    2104  Resources payable.................         363            417           276            298
          Accounts payable:

    2201    Consolidated systemwide and
              other bank bonds..............      21,275         22,513        26,199         27,247
    2201    Notes payable and other
              interest-bearing liabilities..         604            601           610            626
    2202  Accrued interest payable..........         222            149           152            155
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............      22,464         23,680        27,237         28,326
        NET POSITION:
    3300  Cumulative results of operations..       2,199          2,287         2,610          2,698
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............       2,199          2,287         2,610          2,698
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position      24,663         25,967        29,847         31,024
    -----------------------------------------------------------------------------------------------

                       Statement of Changes in Net Worth (in millions of dollars)

    -----------------------------------------------------------------------------------------------
                          99-4130            2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
    Beginning balance of net worth..........       1,753          2,199         2,287          2,610
                                            ============ ==============  ============  =============

      Capital stock and participations
        issued..............................         300              0           230              1
      Capital stock and participations
        retired.............................          58             72            75             82
      Net income............................         207            232           252            262
      Cash/Dividends/Patronage Distributions        (48)           (79)          (84)           (93)
      Other, net............................          45              7             0              0
                                            ------------ --------------  ------------  -------------
    Ending balance of net worth.............       2,199          2,287         2,610          2,698
    -----------------------------------------------------------------------------------------------

                             Financing Activities (in millions of dollars)

    -----------------------------------------------------------------------------------------------
                          99-4130            2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
    Beginning balance of outstanding system
        obligations.........................      20,971         21,275        22,513         26,199
                                            ============ ==============  ============  =============

      Consolidated systemwide and other bank
        bonds issued........................       7,038          9,680        10,000         10,500
      Consolidated systemwide and other bank
        bonds retired.......................       6,897          8,252         6,324          9,462
      Consolidated systemwide notes, net....         162             12            10             10
      Other (Net)...........................           0          (201)             0              0
                                            ------------ --------------  ------------  -------------
    Ending balance of outstanding system
        obligations.........................      21,275         22,513        26,199         27,247
    -----------------------------------------------------------------------------------------------

                                Farm Credit Banks

                   Status of Direct Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-4160-0-3-371      2002 actual   2003 est.   2004 est.
    ----------------------------------------------------------------------------
    1131  Direct loan obligations...........      65,114      60,122      59,567
                                               ---------   ---------  ----------
    1150  Total direct loan obligations.....      65,114      60,122      59,567
    ----------------------------------------------------------------------------

        Cumulative balance of direct loans
                    outstanding:
    1210  Outstanding, start of year........      52,445      58,165      60,690
    1231  Disbursements: Direct loan
            disbursements...................      65,102      59,034      58,426
    1251  Repayments: Repayments and
            prepayments.....................     -59,380     -56,509     -56,259
    1264  Write-offs for default: Other
            adjustments, net................          -2
                                               ---------   ---------  ----------
    1290    Outstanding, end of year........      58,165      60,690      62,857
    ---------------------------------------------------------------------------
        Note.--Loans outstanding at end of year do not include nonaccrual
    loans and sales contracts.

        The Agricultural Credit Act of 1987 (1987 Act) required the Federal
    Land Banks (FLBs) and Federal Intermediate Credit Banks (FICBs) to merge
    into a Farm Credit Bank (FCB) in each of the 12 Farm Credit districts.
    The FCBs

    [[Page 1129]]

    operate under statutory authority that combines the prior authorities of
    the FLB and the FICB. No merger occurred in the Jackson district in 1988
    because the FLB was in receivership. Pursuant to section 410(e) of the
    1987 Act, as amended by the Farm Credit Banks Safety and Soundness Act
    of 1992, the FICB of Jackson merged with the FCB of Columbia on October
    1, 1993. Mergers and consolidations of FCBs across district lines, that
    began in 1992 continued through mid-1995. As a result of this
    restructuring activity, 6 FCBs headquartered in the following cities,
    remain: AgFirst FCB, Columbia, South Carolina; AgriBank FCB, St. Paul,
    Minnesota; FCB of Wichita, Wichita, Kansas; FCB of Texas, Austin, Texas;
    and Western FCB, Sacramento, California.
        The FCBs serve as discount banks and as of October 1, 2002 provided
    funds to 15 Federal Land Credit Associations (FLCA), 3 Production Credit
    Associations (PCAs), and 85 Agricultural Credit Associations (ACAs).
    These direct lender associations, in turn, make short-term production
    loans (PCAs and ACAs) and long-term real estate loans (FLCAs and ACAs)
    to eligible farmers and ranchers. FCBs can also lend to local financing
    institutions, including commercial banks, as authorized by the Farm
    Credit Act of 1971, as amended.
        All the capital stock of the FICB's, from organization in 1923 to
    December 31, 1956, was held by the U.S. Government. The 1956 Act
    provided a long-range plan for the eventual ownership of the credit
    banks by the production credit associations and the gradual retirement
    of the Government's investment in the banks. This retirement was
    accomplished in full on December 31, 1968. The last of the Government
    capital that had been invested in the FLB's was repaid in 1947.

                            Statement of Operations (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4160-0-3-371    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
    0101  Total interest income.............       3,631          2,646         2,607          2,826
    0102  Total interest expense............      -3,076         -2,093        -2,077         -2,285
                                            ------------ --------------  ------------  -------------
    0105  Net income or loss (-)............         555            553           530            541
    0111  Other income......................          79             96            67             60
    0112  Other expenses....................        -225           -133          -221           -217
                                            ------------ --------------  ------------  -------------
    0115  Net income or loss (-)............        -146            -37          -154           -157
                                            ------------ --------------  ------------  -------------
    0191  Total revenues....................       3,710          2,742         2,674          2,886
                                            ------------ --------------  ------------  -------------
    0192  Total expenses....................      -3,301         -2,226        -2,298         -2,502
                                            ------------ --------------  ------------  -------------
    0195  Total income or loss (-)..........         409            516           376            384
                                            ------------ --------------  ------------  -------------
    0199  Total comprehensive income........         409            516           376            384
    -----------------------------------------------------------------------------------------------

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4160-0-3-371    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
    1201  Cash and investment securities....      10,431         10,514        11,769         12,335
    1206  Accrued Interest Receivable.......         677            530           511            535
          Net value of assets related to
              direct loans receivable and
              acquired defaulted guaranteed
              loans receivable:

    1601    Direct loans, gross.............      52,446         58,169        61,873         65,281
    1603    Allowance for estimated
              uncollectible loans and
              interest (-)..................        -252           -153          -153           -154
                                            ------------ --------------  ------------  -------------
    1699      Value of assets related to
                direct loans................      52,194         58,016        61,720         65,127
    1803  Property, plant and equipment, net         396            412           349            357
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................      63,698         69,472        74,349         78,354
        LIABILITIES:
    2104  Resources payable.................         443            513           517            517
          Accounts payable:

    2201    Consolidated systemwide and
              other bank bonds..............      58,010         63,794        68,438         72,203
    2201    Notes payable and other
              interest-bearing liabilities..         360            370           297            301
    2202  Accrued interest payable..........         447            367           398            416
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............      59,260         65,044        69,650         73,437
        NET POSITION:
    3300  Cumulative results of operations..       4,437          4,428         4,699          4,917
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............       4,437          4,428         4,699          4,917
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position      63,697         69,472        74,349         78,354
    -----------------------------------------------------------------------------------------------

                       Statement of Changes in Net Worth (in millions of dollars)

    -----------------------------------------------------------------------------------------------
                          99-4160            2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
    Beginning balance of net worth..........       4,377          4,437         4,428          4,699
                                            ============ ==============  ============  =============

      Capital stock and participations
        issued..............................          93             80           109             82
      Capital stock and participations
        retired.............................         142            260            29             27
      Surplus Retired.......................           9              2            16              0
      Net income............................         409            516           375            384
      Cash/Dividends/Patronage Distributions       (289)          (247)         (222)          (229)
      Other, net............................         (1)           (97)            54              9
                                            ------------ --------------  ------------  -------------
    Ending balance of net worth.............       4,437          4,428         4,699          4,917
    -----------------------------------------------------------------------------------------------

                  Financing Activities (in millions of dollars)

        --------------------------------------------------------------------
                        99-4160                 2001 actual     2002 actual      2003 est.      2004 est.
        --------------------------------------------------------------------
    Beginning balance of outstanding system
      obligations...........................           52,115          58,010         64,029          70,077
                                               ==============  ==============  =============  ==============

      Consolidated systemwide and other bank
        bonds issued........................           38,723          50,737         52,063          55,383
      Consolidated systemwide and other bank
        bonds retired.......................           34,342          44,692         47,184          50,841
      Consolidated systemwide notes, net....            1,514            (26)          1,169           (453)
                                               --------------  --------------  -------------  --------------

    Ending balance of outstanding system
      obligations...........................           58,010          64,029         70,077          74,165
    -------------------------------------------------------------------------------------------------------

                    Federal Agricultural Mortgage Corporation

                                  (Farmer Mac)

        Farmer Mac is authorized under the Farm Credit Act of 1971 (the
    Act), as amended by the Agricultural Credit Act of 1987, to create a
    secondary market for agricultural real estate and rural home mortgages.
    The Farmer Mac title of the Act was amended by the 1990 farm bill to
    authorize Farmer Mac to purchase, pool, and securitize the guaranteed
    portions of farmer program, rural business and community development
    loans guaranteed by the United States Department of Agriculture (USDA).
    The Farmer Mac title was further amended in 1991 to clarify Farmer Mac's
    authority to issue debt obligations, provide for the establishment of
    minimum capital standards, establish the Office of Secondary Market
    Oversight at the Farm Credit Administration (FCA), and expand the
    agency's rulemaking authority. Most recently, the Farm Credit System
    Reform Act of 1996 (1996 Act) amended the Farmer Mac title to allow
    Farmer Mac to purchase loans directly from lenders and to issue and
    guarantee mortgage-backed securities without requiring that a minimum
    cash reserve or subordinated (first loss) interest be maintained by
    poolers as had been required under its original authority. The 1996 Act
    expanded FCA's regulatory authority to include provisions for
    establishing a conservatorship or receivership, if necessary, and
    provided for increased core capital requirements at Farmer Mac phased in
    over three years.
        Farmer Mac operates through two programs, ``Farmer Mac I,'' which
    involves mortgage loans secured by first liens on agricultural real
    estate or rural housing (qualified loans), and ``Farmer Mac II,'' which
    involves the guaranteed portions of USDA guaranteed loans. Farmer Mac
    operates by: (i) purchasing, or committing to purchase, newly originated
    or existing qualified loans or guaranteed portions from lenders; (ii)
    purchasing ``AgVantage'' bonds backed by qualified loans or guaranteed
    portions from lenders; and (iii) exchanging qualified loans or
    guaranteed portions for guaranteed securities.

    [[Page 1130]]

    Loans purchased by Farmer Mac are aggregated into pools that back Farmer
    Mac guaranteed securities which are held by Farmer Mac or sold into the
    capital markets. Farmer Mac is intended to attract new capital for
    financing qualified loans and guaranteed portions, foster increased
    long-term, fixed-rate lending, and provide greater liquidity to
    agricultural and rural lenders.
        Farmer Mac is governed by a 15 member Board of Directors. Ten Board
    members are elected by stockholders, including five by the Farm Credit
    System and five by commercial lenders. Five are appointed by the
    President, subject to Senate confirmation.

                                    Financing

        Financial support and funding for Farmer Mac's operations come from
    several sources: sale of common and preferred stock; issuance of debt
    obligations; and net income from operations. Under procedures specified
    in the Act, Farmer Mac may issue obligations to the U.S. Treasury in a
    cumulative amount not to exceed $1.5 billion to fulfill its guarantee
    obligations.
        As of September 30, 2002, Farmer Mac's core capital exceeded
    statutory requirements. Additionally, Farmer Mac's regulatory capital
    (core capital plus the allowance for loan loses) exceeded the amount of
    required regulatory capital as determined by the risk-based capital
    rule, with which Farmer Mac was required to be in compliance on May 23,
    2002.

                                   Guarantees

        Farmer Mac provides a guarantee of timely payment of principal and
    interest on securities backed by qualified loans or pools of qualified
    loans. These securities are not guaranteed by the United States, and are
    not ``government securities''.
        Farmer Mac is subject to reporting requirements under securities
    laws and its guaranteed mortgage-backed securities are subject to
    registration with the Securities and Exchange Commission under the 1933
    and 1934 Securities Acts.

                                   Regulation

        Farmer Mac is federally regulated by the FCA's Office of Secondary
    Market Oversight (OSMO). OSMO is responsible for the supervision,
    examination of and rulemaking for Farmer Mac.

                 Status of Guaranteed Loans (in millions of dollars)

    ----------------------------------------------------------------------------
    Identification code 99-4180-0-3-351      2002 actual   2003 est.   2004 est.
    ----------------------------------------------------------------------------
    2131  Guaranteed loan commitments.......       2,306       1,000       1,000
                                               ---------   ---------  ----------
    2150  Total guaranteed loan commitments.       2,306       1,000       1,000
    ----------------------------------------------------------------------------

        Cumulative balance of guaranteed loans
                    outstanding:
    2210  Outstanding, start of year........       4,894       6,000       6,000
    2231  Disbursements of new guaranteed
            loans...........................       2,306       1,000       1,000
    2251  Repayments and prepayments........      -1,200      -1,000      -1,000
                                               ---------   ---------  ----------
    2290    Outstanding, end of year........       6,000       6,000       6,000
    ----------------------------------------------------------------------------

        Memorandum:
    2299  Guaranteed amount of guaranteed
            loans outstanding, end of year..       6,000       6,000       6,000
    ---------------------------------------------------------------------------

                            Statement of Operations (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4180-0-3-351    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
        Revenue:
    0101  Net Interest Income...............          22             25            25             30
    0101  Guarantee Fee Income..............          10             12            12             15
    0102  Expense...........................         -23            -27           -27            -30
                                            ------------ --------------  ------------  -------------
    0105  Net income or loss (-)............           9             10            10             15
                                            ------------ --------------  ------------  -------------
    0199  Total comprehensive income........           9             10            10             15
    -----------------------------------------------------------------------------------------------

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4180-0-3-351    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
    1201  Investment in securities..........         853            853           853          1,000
    1206  Receivables, net..................           4              4             4             50
    1207  Advances and prepayments..........          18             18            18             50
          Net value of assets related to
              direct loans receivable:

    1401    Direct loans receivable, gross..       1,998          2,198         2,198          2,000
    1402    Interest receivable.............          46             55            55             75
                                            ------------ --------------  ------------  -------------
    1499      Net present value of assets
                related to direct loans.....       2,044          2,253         2,253          2,075
    1801  Cash and other monetary assets....          89            100           100            500
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................       3,008          3,228         3,228          3,675
        LIABILITIES:
    2201  Accounts payable..................           6              7             7             25
    2202  Interest payable..................          18             21            21             75
    2203  Debt..............................       2,870          3,074         3,064          3,385
    2204  Liabilities for loan guarantees...           9             11            11             20
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............       2,903          3,113         3,103          3,505
        NET POSITION:
    3300  Invested capital..................         105            115           125            170
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............         105            115           125            170
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position       3,008          3,228         3,228          3,675
    -----------------------------------------------------------------------------------------------

                          FEDERAL HOME LOAN BANK SYSTEM

                             Federal Home Loan Banks

                            Status of Direct Loans (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4200-0-3-371    2002 actual      2003 est.     2004 est.
    -----------------------------------------------------------------------------------------------
    1111  Limitation on direct loans........
    1131  Direct loan obligations...........   3,684,259      3,684,259     3,684,259
                                            ------------ --------------  ------------
    1150  Total direct loan obligations.....   3,684,259      3,684,259     3,684,259
    --------------------------------------------------------------------------------------------------
        Cumulative balance of direct loans
            outstanding:
    1210  Outstanding, start of year........     489,413        537,812       537,812
    1231  Disbursements: Direct loan
            disbursements...................   3,684,259      3,684,386     3,684,386
    1251  Repayments: Repayments and
            prepayments.....................  -3,644,317     -3,684,386    -3,684,386
    1264  Write-offs for default: Other
            adjustments, net................       8,457
                                            ------------ --------------  ------------
    1290    Outstanding, end of year........     537,812        537,812       537,812
    -----------------------------------------------------------------------------------------------

        The 12 Federal Home Loan Banks were chartered by the Federal Home
    Loan Bank Board under the authority of the Federal Home Loan Bank Act of
    1932 (the Act). The FHLBanks are under the supervision of the Federal
    Housing Finance Board. The common mission of the FHLBanks is to
    facilitate the extension of credit through their members. To accomplish
    this mission, the FHLBanks make loans, called advances, and provide
    other credit products and services to their 7,992 member commercial
    banks, savings associations, insurance companies, and credit unions.
    Advances and letters of credit must be fully secured by eligible
    collateral and long-term advances may be made only for the purpose of
    providing funds for residential housing finance. However, ``community
    financial institutions'' may also use long-term advances to finance
    small businesses, small farms, and small agribusinesses. Additionally,
    specialized advance programs provide funds for community reinvestment
    and affordable housing programs. All regulated financial depositories
    and insurance companies engaged in residential housing finance are
    eligible for membership. Each FHLBank operates in a geographic district
    designated by the Board and together the

    [[Page 1131]]

    FHLBanks cover all of the United States as well as the District of
    Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the
    Northern Mariana Islands.
        Advances outstanding on September 30, 2002 totaled approximately
    $491 billion, a net increase of approximately $24 billion from the
    September 30, 2001 level of $469 billion.
        The principal source of funds for the lending operation is the sale
    of consolidated obligations to the public. On September 30, 2002, $611
    billion of these obligations were outstanding. The consolidated
    obligations are not guaranteed by the U.S. Government as to principal or
    interest. Other sources of lendable funds include members' deposits and
    capital. Deposits totaled $29 billion and total capital amounted to $36
    billion as of September 30, 2002. Funds not immediately needed for
    advances to members are invested.
        The capital stock of the Federal Home Loan Banks is owned entirely
    by the members. Initially the U.S. Government purchased stock of the
    banks in the amount of $125 million. The banks had repurchased the
    Government's investment in full by mid-1951.
        The operating expenses of the FHLBanks are paid from their own
    income and are not included in the Budget of the United States. Included
    in these expenses are the assessments by the Finance Board to cover its
    administrative and other costs. The Finance Board's budget and
    expenditures, however, are included in the budget of the United States.
        The Act, as amended in 1989, requires each FHLBank to operate an
    Affordable Housing Program (AHP). Each FHLBank provides subsidies in the
    form of direct grants or below-market rate advances for members that use
    the funds for qualifying affordable housing projects. The FHLBank System
    sets aside for its AHPs the greater of $100 million annually or 10
    percent of net income. The Act, as amended in 1999, also requires that
    the FHLBanks contribute 20 percent of net earnings annually to assist in
    the payment of interest on bonds issued by the Resolution Funding
    Corporation.
        The forecast data for 2003 and 2004 contained in this material
    represents estimates and should not be construed as an official forecast
    of the FHLBanks System's future position.

                            Statement of Operations (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4200-0-3-371    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
    0101  Revenue...........................      36,404         26,247        26,247         26,247
    0102  Expense (excludes payments to
            REFCORP)........................     -34,312        -23,830       -23,830        -23,830
                                            ------------ --------------  ------------  -------------
    0105  Net income or loss (-)............       2,092          2,417         2,417          2,417
    -----------------------------------------------------------------------------------------------

                                 Balance Sheet (in millions of dollars)

    -----------------------------------------------------------------------------------------------
    Identification code   99-4200-0-3-371    2001 actual    2002 actual     2003 est.      2004 est.
    -----------------------------------------------------------------------------------------------
        ASSETS:
          Investments in US securities:

    1102    Treasury securities, net........         206            206           206            206
    1201  Investments in other securities,
            net.............................     193,470        215,261       215,261        215,261
    1206  Accounts receivable...............       3,248          3,014         3,014          3,014
    1401  Net value of assets related to
            direct loans receivable: Direct
            loans receivable, gross.........     489,413        537,812       537,812        537,812
    1801  Cash and other monetary assets....       1,013            573           573            573
    1803  Property, plant and equipment, net         126            140           140            140
    1901  Other assets......................       3,712          4,223         4,223          4,223
                                            ------------ --------------  ------------  -------------
    1999    Total assets....................     691,188        761,229       761,229        761,229
        LIABILITIES:
    2101  REFCORP and Affordable Housing
            Program.........................         778            822           822            822
    2202  Interest payable..................       5,538          5,383         5,383          5,383
    2203  Debt..............................     611,338        667,561       667,561        667,561
          Other:

    2207    Deposit funds and other
              borrowings....................      29,571         30,197        30,197         30,197
    2207    Other...........................      10,839         21,312        21,312         21,312
                                            ------------ --------------  ------------  -------------
    2999    Total liabilities...............     658,064        725,275       725,275        725,275
        NET POSITION:
    3100  Invested capital..................      33,124         35,954        35,954         35,954
                                            ------------ --------------  ------------  -------------
    3999    Total net position..............      33,124         35,954        35,954         35,954
                                            ------------ --------------  ------------  -------------
    4999  Total liabilities and net position     691,188        761,229       761,229        761,229
    -----------------------------------------------------------------------------------------------