def14a
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Registrant o
Check the appropriate box:
o Preliminary
Proxy Statement
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Rule 14a-6(e)(2))
þ Definitive Proxy
Statement
o Definitive
Additional Materials
o Soliciting
Material Under Rule 14a-12
Federal National Mortgage Association
(Name of Registrant as Specified in
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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1. Title of each class of securities to which
transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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Proposed maximum aggregate value of transaction:
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Check box if any part of the fee is offset as provided by
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and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
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1. Amount previously paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
3900 Wisconsin Avenue NW
Washington, DC 20016
November 2, 2007
Dear Shareholder:
We cordially invite you to attend the annual shareholders
meeting of the Federal National Mortgage Association (Fannie
Mae). The meeting will be held on Friday, December 14,
2007, at 10:00 A.M. (local time) at the Hilton Washington,
1919 Connecticut Avenue, NW, Washington, DC 20009.
At the meeting, shareholders will vote on a number of important
matters. Our 2006 Annual Report to Shareholders includes our
audited financial statements for the year ended
December 31, 2006, along with a discussion and analysis of
our financial results. Please take the time to review our 2006
Annual Report to Shareholders and to read carefully each of the
proposals described in the enclosed proxy statement.
Whether or not you plan to attend, please vote by Internet,
telephone, or mark, sign, date, and return your proxy card, so
that your shares are represented at the meeting.
Thank you for your continued support of Fannie Mae.
Sincerely,
Stephen B. Ashley
Chairman of the Board
This Proxy Statement and the accompanying form of proxy
are first being sent to our common shareholders on or about
November 2, 2007.
3900 Wisconsin Avenue NW
Washington, DC 20016
Notice of Annual Meeting of Shareholders
Dear Shareholder:
Fannie Maes 2007 Annual Meeting of Shareholders will be
held on Friday, December 14, 2007, at 10:00 A.M.
(local time) at the Hilton Washington, 1919 Connecticut Avenue,
NW, in Washington, DC 20009.
At the meeting, shareholders will be asked to:
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elect 12 directors, each for a term ending on the date of
our next annual meeting,
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ratify the selection by the Audit Committee of
Deloitte & Touche LLP as our independent registered
public accounting firm for 2007,
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approve an amendment to the Fannie Mae Stock Compensation Plan
of 2003,
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act on certain shareholder proposals, and
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consider any other business that may properly come before the
meeting.
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The close of business on October 22, 2007, is the record
date for determining shareholders entitled to notice of, and to
vote at, the annual meeting.
In accordance with new rules approved by the Securities and
Exchange Commission (SEC), we sent a Notice of
Internet Availability of Proxy Materials on or about
November 2, 2007, and provided access to our proxy
materials over the Internet, beginning on November 2, 2007,
for the holders of record and beneficial owners of our common
stock as of the close of business on the record date.
Your proxy is important. Whether or not you plan to attend the
annual meeting, please vote by Internet, telephone, or mark,
sign, date, and return your proxy card, so that your shares will
be represented at the annual meeting.
By Order of the Board of Directors,
Beth A. Wilkinson
Secretary
November 2, 2007
Table of
Contents
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Page
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5
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8
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8
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8
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9
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11
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11
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13
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14
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14
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16
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17
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17
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18
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22
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23
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25
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29
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33
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33
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41
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42
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59
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61
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62
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71
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76
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76
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77
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77
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About
the 2007 Annual MeetingQ and A
Who is soliciting my vote?
The Board of Directors of Fannie Mae is soliciting your vote at
the 2007 annual meeting of Fannie Maes common shareholders.
Who can vote at the 2007 annual meeting?
You are entitled to vote or direct the voting of your shares of
Fannie Mae common stock if you were a shareholder at the close
of business on October 22, 2007, which is the record date
for the Annual Meeting (the Record Date). Both
shareholders of record and street
name holders are entitled to vote or direct the voting
of their Fannie Mae common stock.
You are a shareholder of record if you hold
Fannie Mae common stock that is registered in your name at our
transfer agent, Computershare, Inc.
You are a street name holder if you hold the
common stock indirectly through a nominee, such as a broker,
bank or similar institution.
What will I be voting on?
You will be voting on:
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Election of 12 directors (see page 17)
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Ratification of Deloitte & Touche, LLP, as Fannie
Maes independent registered public accounting firm for
2007 (see page 61)
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Approval of an amendment to the Fannie Mae Stock Compensation
Plan of 2003 (see page 62)
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Two shareholder proposals (see page 71)
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How do I vote?
The manner in which you may vote depends on whether you were a
shareholder of record or a street name holder on the Record Date.
If you were a shareholder of record on the Record Date:
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you can attend the annual meeting and vote in person
(you will need personal identification for admission to
the annual meeting), or
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you can vote by proxy, whether or not you attend
the annual meeting
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You may vote by proxy in three ways.
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Vote by Internet. To vote on the
Internet, go to www.proxyvote.com to complete an electronic
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proxy card. You will need the
12-digit
Control Number included on your Notice of Internet Availability
and on your proxy card.
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Vote by telephone. To vote by
telephone, dial
(800) 690-6903
using a touch-tone telephone and follow the recorded
instructions. You will need the
12-digit
Control Number included on your Notice of Internet Availability
and on your proxy card.
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Vote by Mail. To vote by mail,
complete, sign, date and return your proxy card in the
postage-paid envelope provided.
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If you were a street name holder on the Record Date:
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you can attend the annual meeting and vote in person
only if you (1) present evidence of your ownership
of Fannie Mae common stock as of the close of business on the
Record Date, such as a bank or brokerage account statement,
(2) present personal identification for admission to the
meeting, and (3) obtain a proxy from the nominee that holds
your shares, or
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you can vote by proxy, whether or not you attend
the annual meeting, in any of the following ways:
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Vote by Internet. To vote on the
Internet, go to the internet address provided on your voting
instruction card and complete an electronic voting instruction
card.
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Vote by telephone. To vote over the
telephone, dial the toll-free number provided on your voting
instruction card using a touch-tone telephone and follow the
recorded instructions.
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Vote by Mail. To vote by mail,
complete, sign, date, and return your voting instruction card in
the envelope provided.
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To ensure your vote is counted, please remember to submit your
vote so that it is received by December 13, 2007.
How many votes do I have?
You will have one vote for each share of Fannie Mae common stock
you owned on the Record Date.
How many votes can be cast by all shareholders?
978,167,971, consisting of one vote for each share of
Fannie Mae common stock that was outstanding on the Record Date.
The number of shares of common stock outstanding include the
number of
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shares of restricted stock. No other class of voting stock is
outstanding. There is no cumulative voting.
How many shares of common stock must be present to hold
the annual meeting?
Shares of common stock representing a majority of the votes that
can be cast, or voted, by all holders of common stock, or
489,083,986 shares, must be present in person or
represented by proxy to hold the meeting.
Can I change my vote?
Yes. Any shareholder giving a proxy has the power to revoke it
at any time before it is exercised.
You may revoke your proxy by:
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submitting a new proxy over the Internet or by telephone,
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sending, or presenting in person at the annual meeting, a new,
more recently dated proxy or voting instruction card that has
been signed by the person executing the prior proxy or voting
instruction card,
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delivering a written statement to the Secretary of Fannie Mae at
the address in the Notice of the Annual Meeting stating that the
proxy is revoked, or
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attending the annual meeting and voting in person as described
above under How do I vote?
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How are my votes counted?
Election of Directors
You may vote FOR or AGAINST the election of any
director, but may not abstain from voting. Under our Bylaws as
amended in 2007, directors are elected by a majority vote in
uncontested elections and by plurality vote in contested
elections. A contested election is one in which the number of
nominees exceeds the number of directors to be elected.
For the election of directors at the 2007 annual meeting, the
number of nominees is not expected to exceed the number of
directors to be elected, and therefore, majority voting will
govern.
As a result, the number of shares cast FOR a director must
exceed the number of votes cast AGAINST that director in order
for the director to be elected. If a director who receives FOR
votes that total less than the majority of the votes cast, that
director will be required to tender his or her
resignation to the Board of Directors for its consideration.
Ratification of Selection of Auditors, Approval of Amendment
to Stock Compensation Plan, and Shareholder Proposals
You may vote FOR or AGAINST or you may ABSTAIN from voting on
each of the other proposals. Each of the other proposals will
pass if a majority of the votes cast on the particular proposal
are voted FOR that proposal. Therefore, abstentions will not
have any effect on the outcome of a vote on such proposal.
If I return a signed proxy or voting instruction card
without indicating my vote, how will my shares be voted?
If you return a signed proxy or voting instruction card without
indicating your vote, your shares will be voted:
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FOR the director nominees listed on the card,
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FOR ratification of Deloitte & Touche LLP as Fannie
Maes independent registered public accounting firm for
2007,
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FOR approval of an amendment to the Fannie Mae Stock
Compensation Plan of 2003, and
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AGAINST the shareholder proposals.
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If any other matter or business is brought before the annual
meeting or any adjournment thereof, the proxy holders may vote
the proxy in their discretion.
Can my shares be voted if I do not vote by telephone, by
Internet, or by returning my proxy or voting instruction card,
and I do not attend the annual meeting?
If you are a shareholder of record and do not vote shares
registered in your name, your shares will not be voted.
If you are a street name holder and do not direct your
nominee as to how to vote your shares, your broker generally may
vote your shares on any of the routine matters scheduled to come
before the meeting. Routine matters at the 2007 annual meeting
are the election of directors and the ratification of
Deloitte & Touche LLPs appointment.
Pursuant to New York Stock Exchange (NYSE) rules,
your broker may not vote on the amendment
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of the Fannie Mae Stock Compensation Plan of 2003 without your
specific instructions. In addition, your broker will not be able
to vote on any shareholder proposal because this type of
proposal is not considered a routine matter.
If your broker does not have discretion to vote your shares held
in street name on a particular proposal because it is not
considered to be a routine matter and you do not give your
broker instructions on how to vote your shares, the votes will
be broker non-votes. We count broker non-votes for
quorum purposes, but we do not count broker non-votes as votes
cast as it relates to a particular proposal and, therefore, they
will not have any effect on the outcome of a vote on such
proposal.
Could other matters be decided at the 2007 annual
meeting?
We do not know of any other matters that will be considered at
the annual meeting. If any other matter is brought before the
meeting, the proxies will be voted at the discretion of the
proxy holders.
What happens if the 2007 annual meeting is postponed or
adjourned?
Your proxy will still be valid and may be voted at the postponed
or adjourned meeting. You will still be able to change or revoke
your proxy until it is voted.
Who can attend the 2007 annual meeting?
You must be a shareholder to attend the annual meeting. See
How do I vote? for requirements for meeting
attendance.
In addition, if you represent an entity that is a beneficial
owner of Fannie Mae common stock on the Record Date, you must
present evidence of your authority to act as the legal
representative of that entity.
If I cannot attend the 2007 annual meeting in person, will
it be Web cast?
Yes, there will be a live audio Web cast of the annual meeting
at www.fanniemae.com. Note that you must be present in
person at the annual meeting to ask questions. The Web cast of
the annual meeting will be available for 30 days after the
meeting.
7
Corporate
Governance Progress
We have made a great deal of progress in improving our corporate
governance policies and practices. The Board and management of
Fannie Mae continually monitor the latest developments in
corporate governance, as well as the most recent laws, rules,
and regulations, and have proactively adopted numerous new or
revised policies and procedures to ensure that the Company
adopts the latest and best corporate governance practices. Some
examples of our progress include:
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separating the positions of Chief Executive Officer and Chairman
and, as a result of the Boards emphasis on the
independence of our directors, structuring the Board so that all
but one of our directors are independent;
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recruiting eight new members of our Board of Directors to fill
vacancies caused by normal turnover, with an emphasis on
constituting the Board with directors having the combination of
skills, backgrounds, and expertise needed to oversee and guide
the company most effectively;
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the establishment of stock ownership requirements for our senior
executives and stock ownership guidelines for our non-management
directors; and
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the adoption of majority vote standards for elections of
directors.
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We continue to evaluate legal and regulatory requirements and
emerging best practices and will adopt them as appropriate.
Our corporate governance materials, including our Corporate
Governance Guidelines, Codes of Conduct, and Board committee
charters are available on our Web site at
www.fanniemae.com, under Corporate
Governance. These materials are also available in print to
any shareholder upon request. The Board regularly reviews
corporate governance developments and modifies its Corporate
Governance Guidelines, committee charters, and key practices as
warranted.
Corporate
Governance Guidelines
Our Corporate Governance Guidelines (Guidelines), as
adopted by our Board of Directors, include guidelines for
determining director independence and qualifications for
directors. The Board regularly reviews corporate governance
developments and modifies our Guidelines and the charters of our
Board committees as appropriate.
We have a Code of Conduct for employees, and all of our
employees, including our officers, are required to read and
certify their compliance with the Code of Conduct annually. The
code of ethics for our Chief Executive Officer and senior
financial officers that is described in the Sarbanes-Oxley Act
of 2002 and provided for in the implementing regulations of the
SEC is included in our employee Code of Conduct. The Compliance
Committee is responsible under its charter for reviewing the
employee Code of Conduct.
We also have a Code of Conduct and Conflicts of Interest Policy
for Members of the Board of Directors. Directors are required to
read and certify their compliance with this code annually. The
Nominating and Corporate Governance Committee is responsible for
overseeing compliance with the Code of Conduct and Conflict of
Interests Policy for Members of the Board of Directors.
We will post on our web site any change to or waiver from the
employee Code of Conduct for any of our executive officers, and
any change to or waiver from the Code of Conduct and Conflict of
Interests Policy for Members of the Board of Directors for any
of our directors.
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We believe that a central component of good corporate governance
is having a Board that is composed of a substantial majority of
directors who are independent from management. The Board of
Directors has adopted standards for director independence that
meet, and in some respects exceed, those of the NYSE.
Even if no relationship or transaction exists that would
disqualify a director from being independent under
these standards, the Board does not consider any of our
directors to be independent unless the Board
affirmatively makes a determination that the director has no
material relationship with Fannie Mae, either directly or
through an organization that has a material relationship with
us. A relationship is material if, in the judgment
of the Board, it would interfere with the directors
independent judgment. In addition, under the NYSEs listing
requirements for audit committees, members of a companys
audit committee must meet additional, heightened independence
criteria. Our own independence standards require all of our
independent directors to meet these more rigorous criteria.
The independence standards for our directors, which are set
forth in the Guidelines, are set forth below.
Employment. A director will not be considered
independent if, within the preceding five years:
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the director was employed by us; or
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an immediate family member of the director was employed by us as
an executive officer;
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Auditor Affiliation. A director will not be
considered independent if:
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the director is a current partner or employee of our outside
auditor, or within the preceding five years, was (but is no
longer) a partner or employee of our outside auditor and
personally worked on our audit within that time; or
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an immediate family member of the director is a current partner
of our outside auditor, or is a current employee of our outside
auditor participating in the firms audit, assurance or tax
compliance (but not tax planning) practice, or within the
preceding five years, was (but is no longer) a partner or
employee of our outside auditor and personally worked on our
audit within that time.
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Compensation Committee Interlocks. A director
will not be considered independent if, within the preceding five
years:
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the director was employed by a company other than Fannie Mae at
a time when any of our current executive officers was a member
of that companys compensation committee; or
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an immediate family member of the director was employed as an
officer by a company other than Fannie Mae at a time when any of
our current executive officers was a member of that
companys compensation committee.
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Compensation. A director will not be
considered independent if, within the preceding five years:
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the director received any compensation from us, directly or
indirectly, other than fees for service as a director; or
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an immediate family member of the director received any
compensation from us, directly or indirectly, other than
compensation received for service as a non-executive employee of
our company.
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Business Relationships. A director will not be
considered independent if:
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the director is a current executive officer, employee,
controlling shareholder or partner of an entity that does or did
business with us if, within the preceding five years, we made
payments to, or received payments from, that entity, and, in any
single fiscal year, those payments exceeded $1,000,000 or 2% of
the entitys consolidated gross annual revenues, whichever
is greater; or
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an immediate family member of the director is a current
executive officer of a corporation or other entity that does or
did business with us if, within the preceding five years, we
made payments to, or received
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payments from, the entity that, in any single fiscal year were
in excess of $1,000,000 or 2% of the entitys consolidated
gross annual revenues, whichever is greater.
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Charitable Contributions. A director will not
be considered independent if the director or the directors
spouse is an executive officer, employee, director or trustee of
a nonprofit organization to which we or the Fannie Mae
Foundation makes or has made contributions within the preceding
three years that, in a single year, were in excess of 5% of the
organizations consolidated gross annual revenues, or
$100,000, whichever is less. Amounts contributed under our
matching gifts program are not included in the contributions
calculated for purposes of this standard.
Our independence standards, which in some respects exceed those
established by the NYSE, also provide that, after considering
the relevant facts and circumstances, our Board may determine in
its judgment that a director is independent (in other words, the
director has no relationship with us that would interfere with
the directors independent judgment), even though the
director does not meet the standards listed above as long, as
the determination of independence is consistent with the NYSE
definition of independence. If neither our
guidelines nor the NYSE independence requirements address a
particular relationship, the determination of whether the
relationship is material, and whether a director is independent,
will be made by our Board, based upon the recommendation of the
Nominating and Corporate Governance Committee.
Our Board of Directors, with the assistance of the Nominating
and Corporate Governance Committee, has reviewed the
independence of all current Board members under the listing
standards of the NYSE, and the standards of independence adopted
by the Board contained in our Guidelines, as outlined above.
Based on its review, the Board has affirmatively determined that
all of our independent directors meet the director independence
standards of our Guidelines and the NYSE, and that each of the
following 12 directors is independent: Stephen B. Ashley,
the non-executive Chairman, Dennis R. Beresford, Louis J. Freeh,
Brenda J. Gaines, Karen N. Horn, Bridget A. Macaskill, Joe K.
Pickett, Leslie Rahl, John C. Sites, Jr., Greg C. Smith, H.
Patrick Swygert, and John K. Wulff.
In determining the independence of each of our Board members,
the Board of Directors considered the following relationships in
addition to those addressed by the standards contained in our
Guidelines as set forth above:
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Ms. Gaines past service as an independent director of
a corporation that provides insurance services to the Fannie Mae
Foundation, for which an immaterial amount of premiums is paid;
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Our payments of substantially less than $1,000,000, pursuant to
our bylaws and indemnification obligations, of legal fees to a
law firm with which Ms. Rahls husband is a partner,
as a result of the law firms representation of
Ms. Rahl in connection with various lawsuits and regulatory
investigations arising from Ms. Rahls service on our
Board;
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Contributions by the Fannie Mae Foundation of over $100,000 in
2004 and 2006 (before Mr. Sites became a Fannie Mae
director) to an affiliate of Covenant House where Mr. Sites
served as a director through 2006, and Mr. Sites role
as a consultant to a financial institution that could in the
future invest in mortgage businesses or mortgages;
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Contributions totaling less than $100,000 in 2006 by us
and/or the
Fannie Mae Foundation to Howard University, where
Mr. Swygert serves as President; and
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Mr. Wulffs service as an independent director of
Moodys Corporation, which provides specific research and
investor services to us, and for which we make payments of
substantially less than 2% of Moodys and our consolidated
gross annual revenues.
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Mr. Mudd is not considered an independent director under
the Guidelines because of his position as our Chief Executive
Officer.
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Our non-management directors meet regularly in executive session
without management present. Time for an executive session is
reserved at every regularly scheduled Board meeting. Stephen B.
Ashley, in his capacity as Chairman of the Board, presides over
these sessions. During 2006, our non-management directors met
13 times in executive session.
Certain
Transactions and Relationships
Policies and Procedures Relating to Transactions with Related
Persons. We review relationships and transactions
in which we are a participant and in which any of our directors
or executive officers, or the immediate family members of
either, has an interest to determine whether any of those
persons has a material interest in the relationship or
transaction. Our current written policies and procedures for
review, approval or ratification of relationships or
transactions with related persons are set forth in our:
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Code of Conduct and Conflicts of Interest Policy for Members of
the Board of Directors;
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Board of Directors delegation of authorities and
reservation of powers;
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Code of Conduct for employees;
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Conflict of Interest Policy and Conflict of Interest Procedure
for employees; and
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Employment of Relatives Practice.
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Our Code of Conduct and Conflicts of Interest Policy for Members
of the Board of Directors prohibits our directors from engaging
in any conduct or activity that is inconsistent with our best
interests. It requires each of our directors to excuse himself
or herself from voting on any issue before the Board that could
result in a conflict, self-dealing or other circumstance if the
directors position as a director would be detrimental to
us or result in a non-competitive, favored or unfair advantage
to either the director or the directors associates. In
addition, our directors must disclose to the Chair of the
Nominating and Corporate Governance Committee, or another member
of the committee, any situation that involves or appears to
involve a conflict of interest. This includes, for example, any
financial interest of a director, an immediate family member of
a director, or a business associate of a director in any
transaction being considered by the Board, as well as any
financial interest a director may have in an organization doing
business with us.
Our Boards delegation of authorities and reservation of
powers requires our Board of Directors or the Nominating and
Corporate Governance Committee to review and approve any
investment, acquisition, financing or other transaction that we
engage in directly with any current director or executive
officer or any immediate family member or affiliate of a current
director or executive officer.
Our Code of Conduct for employees requires that we and our
employees seek to avoid any actual or apparent conflict between
our business interests and the personal interests of our
employees or their relatives or associates. An employee who
knows or suspects a violation of our Code of Conduct must raise
the issue with the employees manager, another appropriate
member of management, a member of our Human Resources division
or our Compliance and Ethics division.
Under our Conflict of Interest Policy and Conflict of Interest
Procedure for employees, an employee who has a potential
conflict of interest must request review and approval of the
conflict. Conflicts requiring review and approval include
situations where the employee or a close relative of the
employee has (1) a financial interest worth more than
$100,000 in an entity that does business with or seeks to do
business with us or (2) a financial interest worth more
than $10,000 in such an entity combined with the ability to
control or influence our relationship with the entity. In
accordance with its charter, our Nominating and Corporate
Governance Committee, in the case of potential conflicts
involving our Chief Executive Officer, Chief Business Officer,
Chief Operating Officer, Chief Financial Officer, Chief Risk
Officer, General Counsel, Chief Audit Executive, or Chief
Compliance Officer, must determine whether a conflict exists,
any required steps to address the conflict, and whether or not
to grant a waiver of the conflict under our Conflict of Interest
Policy. In the case of conflicts involving other executive
officers, our Chief Executive Officer makes the determination.
11
Our Employment of Relatives Practice prohibits, among other
things, situations where an employee would exercise influence,
control, or authority over the employees relatives
areas of responsibility or terms of employment, including but
not limited to job responsibilities, performance ratings or
compensation. Employees have an obligation to disclose the
existence of any relation to another current employee prior to
applying for any position or engaging in any other work
situation that may give rise to prohibited influence, control or
authority. We require our directors and executive officers, not
less than annually, to describe to us any situation involving a
transaction with us in which a director or executive officer
could potentially have a personal interest that would require
SEC disclosure.
Transactions with 5% Shareholders. Citigroup
Inc. (Citigroup) beneficially owned more than 5% of
the outstanding shares of our common stock as of
December 29, 2006. Since January 1, 2006, we have
engaged in securities and other financial instrument
transactions in the ordinary course of business with Citigroup
and its affiliates. We have extensive, multi-billion dollar
relationships with Citigroup. Citigroup
and/or its
affiliates have at times engaged in the following types of
transactions and activities: distributing our debt securities as
a dealer; committing to sell or buy mortgage-related securities
or mortgage loans as a dealer; delivering mortgage loans to us
for purchase by our mortgage portfolio or for securitization
into Fannie Mae mortgage-backed securities; issuing investments
held in our liquid investment portfolio; and acting as a
derivatives counterparty or a counterparty involved in other
financial instrument or investment transactions with us.
A majority of the assets in the Fannie Mae Retirement Plan are
managed by Alliance Capital Management L.P. and
AllianceBernstein L.P. Alliance Capital. AllianceBernstein
beneficially owned more than 5% of the outstanding shares of our
common stock as of December 31, 2006, through their
management of shares beneficially owned by AXA and its related
entities. In addition, an affiliate of AXA has engaged in
financial instrument transactions with us.
These transactions with our 5% shareholders did not require
review, approval or ratification under any of our policies and
procedures relating to transactions with related persons. All of
these transactions were on substantially the same terms as those
prevailing at the time for comparable transactions with
unrelated third parties.
Transactions with The Duberstein
Group. Kenneth Duberstein, a former director of
Fannie Mae, is Chairman and Chief Executive Officer of The
Duberstein Group, Inc., an independent strategic planning and
consulting firm that has provided services to us since 1991. The
Duberstein Group previously provided us consulting services
related to legislative and regulatory issues, and associated
matters. We entered into a new agreement with the Duberstein
Group in June 2007 under which the firm provides us consulting
services related to industry and trade issues. During 2006 the
firm provided services on an annual fixed-fee basis of $375,000.
The fees we paid to The Duberstein Group in 2006 are included in
the 2006 Non-Employee Director Compensation Table
under Proposal 1: Election of
DirectorsDirectors Compensation. Under our new
agreement, we pay an annual fixed fee of $400,000.
Our entry into a new agreement with The Duberstein Group in 2007
was not considered by the Chair of our Nominating and Corporate
Governance Committee, nor did it require approval by our
Nominating and Corporate Governance Committee under our
Boards delegation of authorities and reservation of powers
because, at the time we entered into the new agreement,
Mr. Duberstein was no longer a Fannie Mae director. During
2006, our relationship with Mr. Dubersteins firm was
disclosed to the Chair of our Nominating and Corporate
Governance Committee but did not require approval by our
Nominating and Corporate Governance Committee under our
Boards delegation of authorities and reservation of powers
because they had not yet been implemented.
Employment Relationships. Barbara Spector, the
sister of Robert J. Levin, who is our Chief Business Officer, is
a non-officer employee in our Enterprise Systems Operations
division. The Enterprise Systems Operations division does not
report, nor has it ever reported, to Mr. Levin. From
January 1, 2006 through September 30, 2007, we paid or
awarded Ms. Spector for her services in 2006 and 2007
approximately $264,000 in salary and cash bonuses. For 2006, she
also received an aggregate of 171 shares of our common
stock in the form of restricted stock that vest over four years.
Dividends are paid on restricted common stock at the same rate
as dividends on unrestricted common stock. She also receives
benefits under our compensation and benefit plans
12
that are generally available to our employees, including our
retirement plan and employee stock ownership plan.
Rebecca Senhauser, the wife of William Senhauser, our Chief
Compliance Officer, served as a Senior Vice President in our
Housing and Community Development division until July 31,
2007. The Housing and Community Development division never
reported to Mr. Senhauser. Mr. and Ms. Senhauser
recused themselves from any matters that might have directly and
significantly affected the other, including compensation and
performance evaluation matters. From January 1, 2006
through July 31, 2007, we paid or awarded
Ms. Senhauser for her services in 2006 and 2007
approximately $924,000 in salary and cash bonuses and an
aggregate of 7,397 shares of our common stock in the form
of restricted stock that vest over four years. In 2007,
Ms. Senhauser was determined to be entitled to receive an
aggregate of 3,965 shares under our performance share
program, or PSP, for the unpaid three-year cycles that ended on
December 31, 2005 and December 31, 2006, which amount
will be paid in the future. Ms. Senhauser received benefits
under our compensation and benefit plans that are generally
available to our employees, including our retirement plan. As a
member of senior management, she also received benefits under
our compensation and benefit plans available to senior officers,
including payment for tax and financial planning services,
participation in the Supplemental Pension Plan and 2003
Supplemental Pension Plan and participation in our elective
deferred compensation plan. In July 2007, Ms. Senhauser
entered into a separation agreement with us under our management
severance program. Under the terms of her separation agreement,
Ms. Senhauser received early payment of approximately
$154,000 in previously awarded but unpaid cash bonuses and gave
up approximately $158,000 in previously awarded but unpaid cash
bonuses as a result of her termination of employment. In
addition, she became entitled to early vesting of
8,125 shares of restricted stock and payment of
1,439 shares of common stock under our PSP; she forfeited
8,439 shares of restricted stock. Ms. Senhausers
separation agreement provides that she will be entitled to
receive a cash bonus for 2007 if cash bonuses are paid for 2007
under our annual incentive plan, based on corporate performance
and prorated for her seven months of service during 2007. Under
her separation agreement, Ms. Senhauser also received a
severance payment of approximately $396,000, accelerated vesting
of options to purchase 4,770 shares of our common stock,
medical coverage worth up to an estimated $21,000 and up to
$18,000 in outplacement services.
Other than the terms of Ms. Senhausers separation
agreement, which were approved by the Boards Nominating
and Corporate Governance Committee, our employment relationship
with and compensation of Mr. Levins sister and
Mr. Senhausers wife did not require review or
approval under any of our policies and procedures relating to
transactions with related persons.
Communications
with Directors
Interested parties wishing to communicate any concerns or
questions about the company to the non- executive Chairman of
the Board or to our non-management directors as a group may do
so by electronic mail addressed to
board@fanniemae.com, or by U.S. mail addressed
to Fannie Mae Directors,
c/o Office
of the Corporate Secretary, Fannie Mae, Mail Stop 1H 2S/05, 3900
Wisconsin Avenue NW, Washington, DC
20016-2892.
Communications may be addressed to a specific director or
directors, or to our independent directors as a group.
The Office of the Corporate Secretary is responsible for
processing all communications to a director or directors.
Communications that are commercial solicitations, ordinary
course customer inquiries or complaints, incoherent, or obscene,
will not be forwarded to the Board.
13
Beneficial
Ownership Table
The following table shows the beneficial ownership of our common
stock by each of our current directors, director nominees and
certain executive officers, and all current directors, director
nominees and executive officers as a group, as of
October 22, 2007, unless otherwise indicated. As of that
date, neither any director, director nominee, or executive
officer, nor all directors, director nominees, and executive
officers as a group, owned as much as 1% of our outstanding
common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of Beneficial
Ownership(1)
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
Exercisable and
|
|
|
|
|
|
|
Other Shares
|
|
|
|
|
Common Stock
|
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Obtainable
|
|
Total
|
|
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Beneficially
|
|
Within 60 Days
|
|
Common Stock
|
|
|
Owned Excluding
|
|
of October 22,
|
|
Beneficially
|
Name and Position
|
|
Stock Options
|
|
2007(2)
|
|
Owned
|
|
Stephen B.
Ashley(3)
|
|
|
20,747
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|
|
|
25,000
|
|
|
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45,747
|
|
Chairman of the Board of Directors
|
|
|
|
|
|
|
|
|
|
|
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Dennis R.
Beresford(4)
|
|
|
719
|
|
|
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0
|
|
|
|
719
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert T.
Blakely(5)
|
|
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12,421
|
|
|
|
0
|
|
|
|
12,421
|
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Executive Vice President
|
|
|
|
|
|
|
|
|
|
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Louis J. Freeh
|
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0
|
|
|
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0
|
|
|
|
0
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
Brenda J.
Gaines(6)
|
|
|
487
|
|
|
|
0
|
|
|
|
487
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
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Karen N.
Horn(7)
|
|
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487
|
|
|
|
0
|
|
|
|
487
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
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Robert J.
Levin(8)
|
|
|
453,439
|
|
|
|
401,177
|
|
|
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854,616
|
|
Executive Vice President and Chief Business Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
Bridget A.
Macaskill(9)
|
|
|
1,062
|
|
|
|
0
|
|
|
|
1,062
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel H.
Mudd(10)
|
|
|
411,157
|
|
|
|
590,136
|
|
|
|
1,001,293
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter S.
Niculescu(11)
|
|
|
146,949
|
|
|
|
188,209
|
|
|
|
335,158
|
|
Executive Vice PresidentCapital Markets
|
|
|
|
|
|
|
|
|
|
|
|
|
Joe K.
Pickett(12)
|
|
|
12,882
|
|
|
|
27,000
|
|
|
|
39,882
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
Leslie
Rahl(13)
|
|
|
3,281
|
|
|
|
4,333
|
|
|
|
7,614
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
John C. Sites, Jr.
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
Greg C.
Smith(14)
|
|
|
1,612
|
|
|
|
332
|
|
|
|
1,944
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
Julie St.
John(15)
|
|
|
45,033
|
|
|
|
269,964
|
|
|
|
314,997
|
|
Former Executive Vice President and Chief Information Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
H. Patrick
Swygert(16)
|
|
|
3,550
|
|
|
|
10,833
|
|
|
|
14,383
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
Beth A.
Wilkinson(17)
|
|
|
70,135
|
|
|
|
0
|
|
|
|
70,135
|
|
Executive Vice President, General Counsel and Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of Beneficial
Ownership(1)
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
Exercisable and
|
|
|
|
|
|
|
Other Shares
|
|
|
|
|
Common Stock
|
|
Obtainable
|
|
Total
|
|
|
Beneficially
|
|
Within 60 Days
|
|
Common Stock
|
|
|
Owned Excluding
|
|
of October 22,
|
|
Beneficially
|
Name and Position
|
|
Stock Options
|
|
2007(2)
|
|
Owned
|
|
Michael J.
Williams(18)
|
|
|
230,287
|
|
|
|
272,074
|
|
|
|
502,361
|
|
Executive Vice President and Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
John K.
Wulff(19)
|
|
|
1,887
|
|
|
|
1,000
|
|
|
|
2,887
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group
(26 persons)(20)
|
|
|
1,863,310
|
|
|
|
2,228,611
|
|
|
|
4,091,921
|
|
|
|
|
(1)
|
|
Beneficial ownership is determined
in accordance with the rules of the SEC for computing the number
of shares of common stock beneficially owned by each person and
the percentage owned. Holders of restricted stock have no
investment power but have sole voting power over the shares and,
accordingly, these shares are included in this table. Because
holders of shares through our Employee Stock Ownership Plan, or
ESOP, have sole voting power over the shares, these shares are
also included in this table. Additionally, although holders of
shares through our ESOP have sole voting power through the power
to direct the trustee of the plan to vote their shares, to the
extent some holders do not provide any direction as to how to
vote their shares, the plan trustee may vote those shares in the
same proportion as the trustee votes the shares for which the
trustee has received direction. Holders of shares through our
ESOP have no investment power unless they are at least
55 years of age and have at least 10 years of
participation in the ESOP. Holders of stock options have no
investment or voting power over the shares issuable upon the
exercise of the options until the options are exercised. Shares
issuable upon the vesting of restricted stock units are not
considered to be beneficially owned under applicable SEC rules
and, accordingly, restricted stock units are not included in the
amounts shown.
|
|
(2)
|
|
The shares included in this column
are not currently outstanding but are issuable within
60 days of the Record Date, and consist of shares issuable
upon the exercise of outstanding stock options held by our
executive officers and other shares issuable within
60 days. These other shares consist of 70,797 shares
issuable upon the exercise of outstanding stock options held by
the spouse of one of our executive officers; 1,308 shares
of deferred stock held by Mr. Williams, which he could
obtain within 60 days in certain circumstances; and shares
expected to be paid out to certain of our executive officers
within 60 days in connection with our PSP in the following
amounts: Mr. Levin17,586 shares,
Mr. Mudd19,418 shares,
Mr. Niculescu10,722 shares,
Mr. Williams14,381 shares, all directors and
officers as a group80,939 shares, including
2,526 shares we expect to pay to an executive
officers spouse.
|
|
(3)
|
|
Mr. Ashleys shares
include 1,200 shares held by his spouse and 650 shares
of restricted stock.
|
|
(4)
|
|
Mr. Beresfords shares
include 650 shares of restricted stock.
|
|
(5)
|
|
The reported amount does not
include 111,111 restricted stock units held by Mr. Blakely.
|
|
(6)
|
|
Ms. Gaines shares
consist of restricted stock.
|
|
(7)
|
|
Ms. Horns shares consist
of restricted stock.
|
|
(8)
|
|
Mr. Levins shares
consist of 258,287 shares held jointly with his spouse and
195,152 shares of restricted stock.
|
|
(9)
|
|
Ms. Macaskills shares
include 650 shares of restricted stock.
|
|
(10) |
|
Mr. Mudds shares include
297,026 shares of restricted stock. Mr. Mudd must
continue to hold 35,301 of these shares after vesting, net of
any shares withheld to pay withholding tax liability upon
vesting, until his employment with Fannie Mae is terminated. The
reported amount does not include 31,903 restricted stock units
held by Mr. Mudd.
|
|
(11) |
|
Mr. Niculescus shares
include 47,541 shares held jointly with his spouse,
234 shares held through our ESOP, and 86,354 shares of
restricted stock.
|
|
(12) |
|
Mr. Picketts shares
include 650 shares of restricted stock.
|
|
(13) |
|
Ms. Rahls shares include
200 shares held by her spouse and 650 shares of
restricted stock.
|
|
(14) |
|
Mr. Smiths shares
include 650 shares of restricted stock.
|
|
(15) |
|
Ms. St. John left Fannie Mae
in December 2006. Information about Ms. St. Johns
holdings is based on an amended Form 4 filed by
Ms. St. John on July 20, 2007 regarding her shares
held as of December 15, 2006. Ms. St. Johns
holdings include 869 shares held through our ESOP.
|
|
(16) |
|
Mr. Swygerts shares
include 650 shares of restricted stock.
|
|
(17) |
|
Ms. Wilkinsons shares
include 65,564 shares of restricted stock.
|
15
|
|
|
(18) |
|
Mr. Williams shares
include 77,061 shares held jointly with his spouse,
700 shares held by his daughter, 869 shares held
through our ESOP and 151,501 shares of restricted stock.
|
|
(19) |
|
Mr. Wulffs shares
include 650 shares of restricted stock.
|
|
(20) |
|
The amount of shares held by all
directors and executive officers as a group includes
1,169,532 shares of restricted stock held by our directors
and executive officers; 386,949 shares they hold jointly
with others; 15,519 shares held by family members of our
directors and executive officers; 5,364 shares held by our
executive officers through our ESOP; and 711 shares held
through our ESOP by an executive officers spouse. The
shares in this table do not include 176,701 shares of
restricted stock units over which the holders will not obtain
voting rights or investment power until the restrictions lapse.
|
The following table shows the beneficial ownership of our common
stock by each holder of more than 5% of our common stock as of
the respective dates noted in the footnotes to the table, which
is the most recent information provided.
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
5% Holders
|
|
Beneficially Owned
|
|
Percent of Class
|
|
Capital Research and Management
Company(1)
|
|
|
167,555,250
|
|
|
|
17.2
|
%
|
333 South Hope Street
Los Angeles, CA 90071
|
|
|
|
|
|
|
|
|
Citigroup
Inc.(2)
|
|
|
62,341,565
|
|
|
|
6.3
|
%
|
399 Park Avenue
New York, NY 10043
|
|
|
|
|
|
|
|
|
AXA(3)
|
|
|
52,669,044
|
|
|
|
5.4
|
%
|
25 Avenue Matignon
75008 Paris, France
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This information is based solely on
information contained on a Schedule 13G/A filed with the SEC on
February 12, 2007 by Capital Research and Management
Company. According to the Schedule 13G/A, Capital Research
and Management Company beneficially owned
167,555,250 shares of our common stock as of
December 29, 2006, with sole voting power for
49,477,500 shares and sole dispositive power for all
shares. Capital Research and Management Companys shares
include 3,674,050 shares from the assumed conversion of
3,470 shares of our convertible preferred stock.
|
|
(2) |
|
This information is based solely on
information contained in a Schedule 13G/A filed with the SEC on
February 9, 2007 by Citigroup Inc. According to the
Schedule 13G/A, Citigroup Inc. beneficially owns
62,341,565 shares of our common stock, with shared voting
and dispositive power for all such shares.
|
|
(3) |
|
This information is based solely on
information contained in a Schedule 13G/A filed with the SEC on
February 13, 2007 by AXA, its subsidiary AXA Financial,
Inc., and a group of entities that together as a group control
AXA: AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie
Mutuelle, and AXA Courtage Assurance Mutuelle. According to the
Schedule 13G/A, Alliance Capital Management L.P. and
AllianceBernstein L.P., subsidiaries of AXA Financial, Inc.,
manage a majority of these shares as investment advisors.
According to the Schedule 13G/A, (i) each of these
entities other than AXA Financial, Inc. beneficially owns
52,669,044 shares of our common stock, with sole voting
power for 38,027,229 shares, shared voting power for
4,288,975 shares, sole dispositive power for
52,643,476 shares and shared dispositive power for
25,568 shares; and (ii) AXA Financial, Inc.
beneficially owns 52,550,491 shares of our common stock,
with sole voting power for 37,959,484 shares, shared voting
power for 4,279,707 shares, sole dispositive power for
52,524,923 shares and shared dispositive power for
25,568 shares.
|
Section 16(a)
Beneficial Ownership Reporting Compliance
Our directors and officers file with the SEC reports on their
ownership of our stock and on changes in their stock ownership.
Based on a review of forms filed during 2006 or with respect to
2006 and on written representations from our directors and
officers, we believe that all of our directors and officers
filed all required reports and reported all transactions
reportable during 2006, except that Ms. St. John, our
former Chief Information Officer, reported one transaction late.
16
PROPOSAL 1:
ELECTION OF DIRECTORS
Composition
of the Board of Directors
Under the Charter Act, our Board of Directors consists of
18 directors, five of whom are appointed by the President
of the United States, with the remainder elected by
shareholders. The terms of office of the most recent
Presidential appointees to Fannie Maes Board expired on
May 25, 2004, and the President has not reappointed or
replaced any of them. Pursuant to the Charter Act, those five
Board positions will remain open unless and until the President
names new appointees.
We engage a third-party executive search firm to identify
potential director nominees. In addition, members of our Board
of Directors and members of our executive management from time
to time recommend a person for consideration as a potential
director nominee. All potential director nominees are then
evaluated by the third-party executive search firm, and we also
engage outside counsel to help evaluate the independence of
potential director nominees. All of the director nominees who
joined the Board since the last annual meeting of shareholders
were recommended to the Nominating and Corporate Governance
Committee by the third-party executive search firm, except that
(1) Dennis R. Beresford also was recommended by our Chief
Financial Officer at the time and by a non-management member of
the Audit Committee and (2) John C. Sites, Jr., was
recommended by our Chief Business Officer.
The Nominating and Corporate Governance Committee recommends
nominees for election as Fannie Mae directors to the Board for
consideration. Guidelines for the consideration of all director
candidates are contained in the Nominating and Corporate
Governance Committee charter and in our Guidelines, and there is
no separate policy governing the consideration of director
candidates recommended by shareholders.
It is the policy of the Board that a substantial majority of the
seated Fannie Mae directors will be independent, in accordance
with the standards adopted by the Board. In addition, the Board,
as a group, must be knowledgeable in business, finance, capital
markets, accounting, risk management, public policy, mortgage
lending, real estate, low-income housing, homebuilding,
regulation of financial institutions, and any other areas that
may be relevant to the safe and sound operation of Fannie Mae.
The Nominating and Corporate Governance Committee seeks out
Board members who possess:
|
|
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|
|
the highest personal values, judgment, and integrity;
|
|
|
|
an understanding of the regulatory and policy environment in
which Fannie Mae does its business; and
|
|
|
|
diverse experience in the key business, financial, and other
challenges that face a major American enterprise.
|
The Nominating and Corporate Governance Committee also considers
whether a prospective candidate for the Board has the ability to
attend meetings and fully participate in the activities of the
Board, including whether the candidates service on outside
boards will permit the candidate sufficient time to devote to
responsibilities associated with being a Fannie Mae director.
In considering members of the Board for re-nomination, the
Nominating and Corporate Governance Committee takes into
consideration:
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|
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|
|
a directors previous contribution to the effective
functioning of Fannie Mae;
|
|
|
|
any change during the past year in the directors principal
area of responsibility with his or her company or in his or her
employment;
|
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|
the directors retirement during the past year from his or
her principal area of responsibility with his or her company;
|
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|
whether the director continues to bring relevant experience to
the Board;
|
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|
whether the director has the ability to attend meetings and
fully participate in the activities of the Board;
|
17
|
|
|
|
|
whether the director has developed any relationships with Fannie
Mae or another organization, or other circumstances have arisen,
that might make it inappropriate for the director to continue
serving on the Board; and
|
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|
|
the directors age and length of service on the Board.
|
Upon the recommendation of the Nominating and Corporate
Governance Committee, the Board of Directors has nominated the
12 persons identified below to stand for election at the
2007 annual meeting. You may not vote for more than the number
of nominees for election as directors. Under the Charter Act,
each director is elected or appointed for a term ending on the
date of our next shareholders meeting. In accordance with
the Charter Act and our bylaws, each nominee for director who is
elected will serve a term ending on the date of the annual
meeting of shareholders in 2008 and until the directors
successor is chosen and qualified or, if earlier, until the
director dies, resigns, retires or is removed from office in
accordance with the law.
Mr. Pickett has elected not to stand for re-election when
his term expires at the annual meeting. As a result, there will
be six vacancies on the Board of Directors after the meeting.
There are no nominees for five of these vacancies because, as
described above, only the U.S. President can fill these
vacancies. There is one fewer nominee for director than the
number of directors to be elected by shareholders under the
Charter Act because we are still engaged in the process of
identifying an appropriate and qualified candidate. If we find a
qualified individual with appropriate skills to fill the
vacancy, then we anticipate that, following the Nominating and
Corporate Governance Committees recommendation of the
candidate to serve as a director, the Board will appoint the
person to fill the vacancy. The shareholders will not elect the
candidate because, under the Charter Act, a vacancy on the Board
may be filled by the affirmative vote of the majority of the
directors then serving as directors. A director who is elected
by the Board to fill a vacancy on the Board will serve as a
director until the next annual meeting of shareholders and until
the directors successor is chosen and qualified or, if
earlier until the director dies, resigns, retires or is removed
from office in accordance with the law. Any shareholder who
wishes to submit a candidate for consideration by the Nominating
and Corporate Governance Committee should submit written notice
as described below under Shareholder Proposals and
Director Nominations for 2008.
Because the number of director nominees does not exceed the
number of directors to be elected, each nominee for director
will be elected if the votes cast FOR the director exceed
the votes cast AGAINST the director. In addition,
although our Board consists of 18 directors under the
Charter Act, proxies cannot be voted for a greater number of
persons than the 12 nominees named below under Nominees
for Election.
Each director nominee has consented to being named in this proxy
statement and to serve if elected. If any nominee should become
unwilling or unable to serve as a director, the proxy holders,
in the absence of contrary instruction, will vote the proxies
for the election of such persons as the Board of Directors
designates. In addition, each director nominee has submitted a
contingent irrevocable resignation that will become effective if
the nominee does not receive a majority of the votes cast and,
based on the recommendation of the Nominating and Corporate
Governance Committee of the Board, the Board decides to accept
the nominees resignation.
The following section presents information provided by the
nominees about their principal occupation, business experience,
directorships, and other matters.
The Board
of Directors recommends
that shareholders vote FOR each of the
nominees.
18
|
|
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Name and Age |
|
Position, Principal Occupation, Business Experience and
Directorships |
|
|
|
Stephen B. Ashley, 67 |
|
Chairman and Chief Executive Officer
The Ashley Group |
|
|
|
Chairman and Chief Executive Officer of The Ashley
Group, a group of commercial and multifamily real estate,
brokerage and investment companies1995 to present
|
|
|
|
Chairman and Chief Executive Officer of Sibley
Mortgage Corporation, a commercial, multifamily and
single-family mortgage banking firm, and Sibley Real Estate
Services, Inc.1991 to 1995
|
|
|
|
Director of Fannie Mae since May 1995 and Chairman
of Board since December 2004
|
|
|
|
Other Directorships: Manning & Napier
Fund, Inc.
|
|
|
|
Other Activities: Mortgage Bankers Association of
America (past president)
|
|
Dennis R. Beresford, 68 |
|
Ernst & Young Executive Professor of Accounting
J.M. Tull School of Accounting, Terry College of Business,
University of Georgia |
|
|
|
Ernst & Young Executive Professor of
Accounting, J.M. Tull School of Accounting, Terry College of
Business, University of Georgia1997 to present
|
|
|
|
Chairman of the Financial Accounting Standards
Board, or FASB, the designated organization in the private
sector for establishing standards of financial accounting and
reporting in the U.S.1987 to 1997
|
|
|
|
Ernst & Young LLP (including ten years as
a Senior Partner and National Director of Accounting)1961
to 1986
|
|
|
|
Director of Fannie Mae since May 2006
|
|
|
|
Other Directorships: Kimberly-Clark Corporation
(Chair, Audit Committee) and Legg Mason, Inc. (Chair, Audit
Committee)
|
|
|
|
Other Activities: Member, SEC Advisory Committee on
Improvements to Financial Reporting; certified public accountant
|
|
Louis J. Freeh, 57 |
|
President
Freeh Group International, LLC |
|
|
|
President of Freeh Group International, LLC, a
practice of former federal judges and former senior FBI leaders
who provide legal, governance, investigative, litigation, and
risk management servicesJanuary 2006 to present
|
|
|
|
General Counsel, Corporate Secretary and Ethics
Officer of MBNA Corporation, as well as Vice Chairman of MBNA
America Bank N.A.2001 to January 2006
|
|
|
|
Director of the Federal Bureau of Investigation
(FBI)1993 to 2001
|
|
|
|
U.S. District JudgeSouthern District of New
York1991 to 1993
|
|
|
|
Director of Fannie Mae since May 2007
|
|
|
|
Other Directorships: Bristol-Myers Squibb Company
(Member, Audit Committee, and Member, Directors and Corporate
Governance Committee)
|
19
|
|
|
Brenda J. Gaines, 58 |
|
Retired |
|
|
|
Diners Club North America, a subsidiary of Citigroup
(President and Chief Executive OfficerOctober 2002 until
her retirement in April 2004), (PresidentFebruary 1999 to
September 2002), and (Various other positions1988 to
February 1999)
|
|
|
|
Deputy Chief of Staff for the Mayor of the City of
Chicago1985 to 1987
|
|
|
|
Chicago Commissioner of Housing1983 to 1985
|
|
|
|
Director of Fannie Mae since September 2006
|
|
|
|
Other Directorships: Office Depot (Chair, Audit
Committee, and Member, Corporate Governance and Nominating
Committee); NICOR, Inc. (Member, Corporate Governance
Committee); and Tenet Healthcare Corporation (Member, Audit
Committee, and Member, Compensation Committee)
|
|
Karen N. Horn, Ph.D., 64 |
|
Senior Managing Director
Brock Capital Group LLC |
|
|
|
Senior Managing Director of Brock Capital Group LLC,
an advisory and investment firm2003 to present
|
|
|
|
Managing Director, Private Client Services of Marsh
Inc., a subsidiary of Marsh & McLennan
Companies1999 until retirement in 2003
|
|
|
|
Senior Managing Director and Head of International
Private Banking of Bankers Trust Company1996 to 1999
|
|
|
|
Chairman and Chief Executive Officer of BankOne,
Cleveland1987 to 1996
|
|
|
|
President of Federal Reserve Bank of
Cleveland1982 to 1987
|
|
|
|
Director of Fannie Mae since September 2006
|
|
|
|
Other Directorships: Eli Lilly and Company (Chair,
Compensation Committee, and Member, Directors and Corporate
Governance Committee); Simon Property Group, Inc. (Chair,
Governance Committee, and Member, Compensation Committee); and
all T. Rowe Price funds and trusts
|
|
|
|
Other Activities: Vice President of U.S. Russia
Investment Fund (a presidential appointment)
|
|
Bridget A. Macaskill, 59 |
|
Principal
BAM Consulting LLC |
|
|
|
Principal of BAM Consulting LLC, an independent
financial services consulting firm, which she founded2003
to present
|
|
|
|
Oppenheimer Funds, Inc. (Chairman of the
Board2000 to 2001), (Chief Executive Officer1995 to
2001), and (President1991 to 2000)
|
|
|
|
Director of Fannie Mae since December 2005
|
|
|
|
Other Directorships: Prudential plc (Chair,
Remuneration Committee and Member, Nomination Committee) and
Scottish & Newcastle plc.
|
|
|
|
Trusteeships: College Retirement Equities Fund
(CREF) and the TIAA-CREF Funds
|
20
|
|
|
Daniel H. Mudd, 49 |
|
President and Chief Executive Officer
Fannie Mae |
|
|
|
Fannie Mae (President and Chief Executive
OfficerJune 2005 to present), (Vice Chairman of Board of
Directors and interim Chief Executive OfficerDecember 2004
to June 2005), (Vice Chairman and Chief Operating
OfficerFebruary 2000 to December 2004)
|
|
|
|
Fannie Mae Foundation (Chairman of the Board since
June 2005), (Interim Chairman of the BoardDecember 2004 to
June 2005), (Vice ChairmanSeptember 2003 to December 2004)
|
|
|
|
President and Chief Executive Officer of GE Capital,
Japan, a diversified financial services company and a wholly
owned subsidiary of the General Electric CompanyApril 1999
to February 2000
|
|
|
|
President of GE Capital, Asia PacificMay 1996
to June 1999
|
|
|
|
Director of Fannie Mae since February 2000
|
|
|
|
Other Directorships: Fortress Investment Group LLC
|
|
Leslie Rahl, 57 |
|
President
Capital Market Risk Advisors, Inc. |
|
|
|
President and Founder of Capital Market Risk
Advisors, Inc., a financial advisory firm specializing in risk
management, hedge funds and capital market strategy1994 to
present
|
|
|
|
Citibank (Various positions1972 to 1991,
including nine years as Vice President and Division Head,
Derivatives GroupNorth America)
|
|
|
|
Director of Fannie Mae since February 2004
|
|
|
|
Other Directorships: Canadian Imperial Bank of
Commerce (CIBC) (Member, Risk Management Committee); the
International Association of Financial Engineers; and the
Fischer Black Memorial Foundation
|
|
|
|
Other Activities: International Swaps Dealers
Association (former director)
|
|
John C. Sites, Jr., 55 |
|
Consultant
Wexford Capital, LLC
General Partner
Rock Creek Partners II, Ltd |
|
|
|
Consultant to Wexford Capital, LLC, an SEC
registered investment advisorSeptember 2006 to present.
|
|
|
|
General Partner of Rock Creek Partners II, Ltd, a
private equity fund of Rock Creek Capital Advisors, an
investment and advisory firmOctober 1997 to present
|
|
|
|
General Partner of Daystar Special Situations Fund,
a private equity fundJanuary 1996 to August 2006
|
|
|
|
Bear, Stearns and Co., Inc. (Various
positions1981 to 1995, including Executive Vice
President & Member of the Board of Directors)
|
|
|
|
Director of Fannie Mae since October 2007
|
21
|
|
|
Greg C. Smith, 56 |
|
Retired |
|
|
|
Ford Motor Company (Vice ChairmanOctober 2005
until retirement in March 2006), (Executive Vice President and
President, The Americas,2004 to 2005), and (Group Vice
President2002 to 2004)
|
|
|
|
Ford Motor Credit Company: Chairman and Chief
Executive Officer2002 to 2004; Chief Operating
Officer2001 to 2002; President, Ford Credit North
America1997 to 2001
|
|
|
|
Director of Fannie Mae since April 2005
|
|
|
|
Other Directorships: Penske Corp
|
|
|
|
Other Activities: American Financial Services
Association (former Chairman)
|
|
H. Patrick Swygert, 64 |
|
President
Howard University |
|
|
|
President of Howard University1995 to present.
Mr. Swygert has announced that he will retire as President
of Howard University in June 2008
|
|
|
|
Director of Fannie Mae since January 2000
|
|
|
|
Other Directorships: Hartford Financial Services
Group, Inc. (Chairman, Nominating and Corporate Governance
Committee; Member, Compensation and Personnel Committee; Member,
Executive Committee) and United Technologies Corporation
(Member, Audit Committee, and Member, Committee on
Nominations & Governance)
|
|
|
|
Other Activities: Central Intelligence Agency
External Advisory Board (member)
|
|
John K. Wulff, 59 |
|
Chairman of the Board
Hercules Incorporated |
|
|
|
Hercules Incorporated, a manufacturer and supplier
of specialty chemical products (Chairman of the
BoardDecember 2003 to present), (DirectorJuly 2003
to December 2003), and (Interim ChairmanOctober 2003 to
December 2003)
|
|
|
|
Financial Accounting Standards Board (FASB) (member)
from July 2001 until June 2003
|
|
|
|
Chief Financial Officer of Union Carbide
Corporation, a chemicals and polymers company from 1996 until
2001
|
|
|
|
Director of Fannie Mae since December 2004
|
|
|
|
Other Directorships: Hercules Incorporated (Chairman
of the Board); Sunoco, Inc. (Member, Audit Committee, and
Member, Public Affairs Committee); Celanese Corporation (Chair,
Compensation Committee); and Moodys Corporation (Chair,
Audit Committee and Member, Governance and Compensation
Committee)
|
Meetings
of the Board of Directors
The Board of Directors met 22 times during 2006. During 2006,
all of our current directors attended at least 75% of the total
number of meetings of the Board of Directors and Board
committees on which he or she served.
We did not hold an annual meeting of shareholders in 2005 or
2006. Following our last annual meeting of shareholders in 2004,
we adopted a policy stating that all directors are expected to
attend the annual meeting of shareholders in person.
22
Committees
of the Board of Directors
The standing committees of the Board are:
|
|
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|
|
Audit Committee;
|
|
|
|
Compensation Committee;
|
|
|
|
Compliance Committee;
|
|
|
|
Executive Committee;
|
|
|
|
Housing and Community Finance Committee;
|
|
|
|
Nominating and Corporate Governance Committee;
|
|
|
|
Risk Policy and Capital Committee; and
|
|
|
|
Technology and Operations Committee.
|
All of the committees (other than the Executive Committee)
consist entirely of independent directors. In addition, these
committees are governed by written charters, copies of which are
posted on our Web site, www.fanniemae.com, under
Corporate Governance, and are available in print
free of charge to any shareholder upon request.
The Audit Committee oversees:
|
|
|
|
|
our accounting, reporting, and financial practices, including
the integrity of our financial statements and internal control
over financial reporting;
|
|
|
|
our compliance with legal and regulatory requirements (in
coordination with the Compliance Committee);
|
|
|
|
the qualifications and independence of the our outside
auditors; and
|
|
|
|
the performance of our internal audit function and our outside
auditor.
|
The Audit Committee met 19 times in 2006.
The Compensation Committee discharges the
responsibilities of the Board relating to compensation of our
executives and among other things:
|
|
|
|
|
oversees compensation policies and plans for officers and other
management group employees and general compensation plans
applicable to all employees, to maintain adherence to our
philosophy, competitive position, and obligations under the
Charter Act;
|
|
|
|
makes recommendations to the Board with respect to our
incentive-compensation plans and stock-based plans that are
subject to Board approval;
|
|
|
|
reviews and approves corporate goals and objectives relevant to
CEO compensation, evaluates the CEOs performance in light
of those goals and objectives, and recommends to the independent
members of the Board the CEOs compensation level based on
this evaluation, consistent with our compensation philosophy;
|
|
|
|
recommends to the Board corporate goals for measurement of
performance and approving achievement against those goals;
|
|
|
|
recommends to the Board the compensation of executive vice
presidents, consistent with the corporations compensation
philosophy; and
|
|
|
|
approves the compensation of senior vice presidents, consistent
with the corporations compensation philosophy, including
senior vice presidents who may be executive officers
as defined in
Rule 3b-7
under the Securities Exchange Act of 1934. With respect to the
compensation of the Chief Audit Executive and Chief Compliance
Officer, the Compensation Committee takes into account the
recommendation of the Audit Committee and the Compliance
Committee, respectively.
|
23
The Compensation Committee met 16 times in 2006.
The Compliance Committee both monitors and coordinates
our compliance with the provisions of the Consent Order entered
into between the Office of Federal Housing Enterprise Oversight
(OFHEO) and us on May 23, 2006 (the OFHEO
Consent Order), and oversees our compliance with legal and
regulatory requirements. The Compliance Committee met 7 times in
2006.
The Executive Committee has all the authority of the
Board during the periods between Board meetings, except for
certain specified powers listed in our bylaws. The Executive
Committee did not meet in 2006.
The Housing and Community Finance Committee oversees our
single-family mortgage, capital markets and housing and
community development divisions, as well as the companys
contribution to affordable housing and community development. In
addition, the Housing and Community Finance Committee monitors
public policy surrounding housing issues. The Housing and
Community Finance Committee met 15 times in 2006.
The Nominating and Corporate Governance Committee
proposes to the board lists of names for consideration as
nominees for election by the shareholders as Fannie Mae
directors and develops and recommends to the Board corporate
governance guidelines and plays a leadership role in shaping the
corporations corporate governance. The Nominating and
Corporate Governance Committee oversees the evaluation of the
Board and its committees, including evaluating the adequacy and
appropriateness of the content, format and distribution of the
written information, and evaluating reports and other material
provided to the Board. The Nominating and Corporate Governance
Committee is also responsible for recommending compensation for
non-management directors on the Board to the Board of Directors
and reviews non-management director compensation once a year.
The Nominating and Corporate Governance Committee met 9 times in
2006.
The Risk Policy and Capital Committee assists the Board
in overseeing our capital management and risk management,
including overseeing the management of credit risk, market risk,
liquidity risk, and operational risk. The Risk Policy and
Capital Committee met 10 times in 2006.
The Technology and Operations Committee provides
oversight of Fannie Maes technology and operations
environment, including our infrastructure, organization, and key
controls. The Technology and Operations Committee met 5 times in
2006.
The following table shows the current membership of each
committee:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Board Committee
|
|
|
|
|
|
|
|
|
|
|
|
|
Housing
|
|
Nominating
|
|
Risk
|
|
Technology
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
and
|
|
Policy and
|
|
and
|
Board
|
|
Independent
|
|
|
|
|
|
|
|
|
|
Community
|
|
Corporate
|
|
Capital
|
|
Operations
|
Member
|
|
Director
|
|
Audit
|
|
Compensation
|
|
Compliance
|
|
Executive
|
|
Finance
|
|
Governance
|
|
Committee
|
|
Committee
|
|
Stephen B. Ashley
|
|
X
|
|
X
|
|
X
|
|
X
|
|
Chair
|
|
X
|
|
X
|
|
X
|
|
X
|
Dennis R. Beresford*
|
|
X
|
|
Chair
|
|
|
|
|
|
X
|
|
|
|
|
|
X
|
|
|
Louis J. Freeh
|
|
X
|
|
|
|
X
|
|
X
|
|
|
|
|
|
|
|
|
|
|
Brenda J. Gaines
|
|
X
|
|
|
|
X
|
|
Chair
|
|
X
|
|
X
|
|
|
|
|
|
|
Karen N. Horn*
|
|
X
|
|
X
|
|
|
|
|
|
|
|
|
|
X
|
|
X
|
|
|
Bridget A. Macaskill
|
|
X
|
|
|
|
Chair
|
|
|
|
X
|
|
|
|
X
|
|
|
|
|
Daniel H. Mudd
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
Joe K. Pickett
|
|
X
|
|
|
|
|
|
X
|
|
|
|
X
|
|
|
|
X
|
|
X
|
Leslie Rahl
|
|
X
|
|
|
|
|
|
X
|
|
X
|
|
X
|
|
|
|
Chair
|
|
|
John C. Sites, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
X
|
|
|
Greg C. Smith*
|
|
X
|
|
X
|
|
X
|
|
|
|
X
|
|
|
|
|
|
|
|
Chair
|
H. Patrick Swygert
|
|
X
|
|
|
|
|
|
|
|
X
|
|
Chair
|
|
X
|
|
X
|
|
|
John K. Wulff*
|
|
X
|
|
X
|
|
|
|
|
|
X
|
|
|
|
Chair
|
|
|
|
X
|
|
|
|
* |
|
The Board has determined that
Mr. Beresford, Ms. Horn, Mr. Smith and
Mr. Wulff have the requisite experience to qualify as
audit committee financial experts under the rules
and regulations of the SEC and has designated them as such, and
they are independent as independence for audit committee members
is defined under the NYSE listing standards.
|
24
Annual compensation for our non-management directors for 2006
consisted of cash compensation and equity compensation, in the
form of restricted stock awards. Each of these components is
described in more detail below. The total 2006 compensation for
our non-management directors is shown in the table below.
Mr. Mudd, who is our only director who is an employee of
Fannie Mae, does not receive the benefits provided to our
non-management directors other than those provided under the
Matching Gifts Program, which is available to every Fannie Mae
employee, and those available under the Directors
Charitable Award Program.
2006
Non-Employee Director Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
Stock
|
|
Option
|
|
All Other
|
|
|
Name
|
|
Paid in Cash ($)
|
|
Awards
($)(1)
|
|
Awards
($)(2)
|
|
Compensation
($)(3)
|
|
Total ($)
|
|
Stephen B. Ashley
|
|
$
|
500,000
|
|
|
$
|
64,770
|
|
|
$
|
17,516
|
|
|
$
|
16,689
|
|
|
$
|
598,975
|
|
Dennis R. Beresford
|
|
|
99,950
|
|
|
|
22,053
|
|
|
|
N/A
|
|
|
|
35,691
|
|
|
|
157,694
|
|
Kenneth M.
Duberstein(4)
|
|
|
102,600
|
|
|
|
64,770
|
|
|
|
17,516
|
|
|
|
410,335
|
|
|
|
595,221
|
|
Brenda J. Gaines
|
|
|
35,667
|
|
|
|
5,845
|
|
|
|
N/A
|
|
|
|
17,818
|
|
|
|
59,330
|
|
Thomas P. Gerrity
|
|
|
110,533
|
|
|
|
64,770
|
|
|
|
17,516
|
|
|
|
15,821
|
|
|
|
208,640
|
|
Karen N. Horn
|
|
|
38,667
|
|
|
|
5,845
|
|
|
|
N/A
|
|
|
|
24,553
|
|
|
|
69,065
|
|
Ann M. Korologos
|
|
|
51,350
|
|
|
|
|
|
|
|
42,278
|
|
|
|
14,217
|
|
|
|
107,846
|
|
Bridget A. Macaskill
|
|
|
139,733
|
|
|
|
37,347
|
|
|
|
N/A
|
|
|
|
18,797
|
|
|
|
195,877
|
|
Donald B. Marron
|
|
|
45,917
|
|
|
|
|
|
|
|
42,278
|
|
|
|
53,396
|
|
|
|
141,591
|
|
Joe K. Pickett
|
|
|
122,533
|
|
|
|
64,770
|
|
|
|
17,516
|
|
|
|
36,052
|
|
|
|
240,871
|
|
Leslie Rahl
|
|
|
113,700
|
|
|
|
65,945
|
|
|
|
17,516
|
|
|
|
17,770
|
|
|
|
214,931
|
|
Greg C. Smith
|
|
|
166,467
|
|
|
|
33,058
|
|
|
|
2,483
|
|
|
|
17,818
|
|
|
|
219,826
|
|
H. Patrick Swygert
|
|
|
113,900
|
|
|
|
64,770
|
|
|
|
17,516
|
|
|
|
34,432
|
|
|
|
230,617
|
|
John K. Wulff
|
|
|
170,600
|
|
|
|
53,364
|
|
|
|
9,038
|
|
|
|
22,005
|
|
|
|
255,006
|
|
|
|
|
(1) |
|
These amounts represent the dollar
amounts we recognized for financial statement reporting purposes
with respect to 2006 for the fair value of restricted stock
granted during 2006 and in prior years in accordance with
SFAS 123R. As required by SEC rules, the amounts shown
exclude the impact of estimated forfeitures related to
service-based vesting conditions. The value of the restricted
stock awards is calculated as the average of the high and low
trading price of our common stock on the date of grant. During
2006, three directors received restricted stock grants with the
SFAS 123R grant date fair values shown upon joining our
Board: Mr. Beresford, $36,033; Ms. Gaines, $26,162;
and Ms. Horn, $26,162.
|
|
|
|
Ms. Korologos and
Mr. Marron each retired from our Board during 2006 and, as
a result, forfeited shares of unvested restricted common stock.
The amounts shown do not reflect the reversal of previously
recognized compensation cost for the forfeited shares. The
amounts shown also do not reflect the impact of
Mr. Gerritys forfeiture of 650 shares of
restricted stock upon his resignation from our Board of
Directors in December 2006.
|
|
|
|
As of December 31, 2006, our
directors held the following number of shares of restricted
stock: Mr. Ashley, Mr. Beresford, Mr. Duberstein,
Ms. Macaskill, Mr. Pickett, Ms. Rahl,
Mr. Smith, Mr. Swygert, and Mr. Wulff,
650 shares each; Ms. Gaines and Ms. Horn,
487 shares each; and Mr. Gerrity, Ms. Korologos,
and Mr. Marron, 0 shares.
|
|
(2) |
|
These amounts represent the dollar
amounts we recognized for financial statement reporting purposes
with respect to 2006 for the fair value of stock option awards
granted during 2005 and in prior years in accordance with
SFAS 123R. No director has received a stock option award
since 2005. For the assumptions used in calculating the value of
these awards, see Notes to Consolidated Financial
StatementsNote 1, Summary of Significant Accounting
PoliciesStock-Based Compensation, in our annual
report on
Form 10-K
for the year ended December 31, 2006. Mr. Beresford,
Ms. Gaines, Ms. Horn, and Ms. Macaskill have
never been awarded Fannie Mae stock options.
|
|
|
|
As of December 31, 2006, each
of our directors held options to purchase the following number
of shares of common stock, with exercise prices ranging from
$42.69 to $79.22 per share and expiration dates ranging from
2007 to 2015: Mr. Ashley, 26,000 shares;
Mr. Beresford, Ms. Gaines, Ms. Horn, and
Ms. Macaskill, 0 shares; Mr. Duberstein and
Mr. Gerrity, 28,000 shares; Mr. Marron,
4,000 shares; Mr. Pickett and Ms. Korologos,
32,000 shares; Ms. Rahl, 5,333 shares;
Mr. Smith, 666 shares; Mr. Swygert,
11,833 shares; and Mr. Wulff, 2,000 shares.
|
|
(3) |
|
All Other Compensation
consists of our estimated incremental cost of providing Board
members benefits under our Directors Charitable Award
Program, which is discussed in greater detail below. We estimate
our incremental cost of providing this benefit for each director
based on (1) the present value of our expected future
payment of the benefit that became vested during 2006 and
(2) the time value during 2006 of amounts vested for that
director in prior years.
|
25
|
|
|
|
|
We estimated the present values of
our expected future payment based on the age and gender of our
directors, the RP 2000 white collar mortality table projected to
2010, and a discount rate of approximately 5.5%. For
Mr. Duberstein, our estimated cost for providing this
benefit is $35,335, and we have also included in All Other
Compensation $375,000 we paid to The Duberstein Group for
consulting services. This amount was paid to The Duberstein
Group, not to Mr. Duberstein. Our transactions with The
Duberstein Group are discussed more in Corporate
GovernanceCertain Transactions and
RelationshipsTransactions with the Duberstein Group.
Amounts shown under All Other Compensation do not
include gifts made by the Fannie Mae Foundation under its
matching gifts program, under which gifts made by our employees
and directors to 501(c)(3) charities are matched, up to an
aggregate total of $10,500 in any calendar year. No amounts are
included for this program because the matching gifts are made by
the Fannie Mae Foundation, not Fannie Mae. In addition, no
amounts are included for a furnished apartment we lease near our
corporate offices in Washington, DC for use by Mr. Ashley,
the non-executive Chairman of our Board, when he is in town on
company business. Provided that he reimburses us,
Mr. Ashley is permitted to use the apartment up to twelve
nights per year when he is in town but not on company business.
|
|
(4) |
|
Mr. Duberstein resigned from
our Board in February 2007. Mr. Gerrity, Ms. Korologos
and Mr. Marron each left our Board in 2006.
|
Cash Compensation. Effective January 1,
2008, our directors will be paid a retainer at an annual rate of
$100,000. Committee chairs will receive an additional retainer
at an annual rate of $25,000 for the Audit Committee chair and
$15,000 for all other committee chairs. Our Board has the
authority to change or otherwise vary the amount of cash
compensation to non-management directors. During 2006, our
non-management directors, with the exception of the
non-executive Chairman of our Board, were paid a retainer at an
annual rate of $35,000, plus $1,500 for attending each Board or
Board committee meeting in person or by telephone. Committee
chairs received an additional retainer at an annual rate of
$10,000, plus an additional $500 for each committee meeting
chaired in person and $300 for each telephonic committee meeting
chaired. In recognition of the substantial amount of time and
effort necessary to fulfill the duties of non-executive Chairman
of the Board during 2006, Mr. Ashley received an annual fee
of $500,000.
Restricted Stock Awards. We currently have a
restricted stock award program for non-management directors.
This program provides for the periodic awards of restricted
common stock vesting in annual installments provided the
director continues to serve on the Board of Directors. If the
proposed amendment to the Fannie Mae Stock Compensation Plan of
2003, which we refer to as the 2003 Plan or the
Plan, described in Proposal 3 is approved, this
program and the option program for directors (see Stock
Option Awards below) will be replaced with the program
described under Non-Management Director Restricted
Stock in Proposal 3: Approval of Amendment to
Fannie Mae Stock Compensation Plan of 2003.
As part of the current program for periodic awards of restricted
stock, we granted 871 shares of restricted common stock to
each non-management director in May 2001, under the Fannie Mae
Stock Compensation Plan of 1993, which we refer to as the
1993 Plan. These shares vest on the day before each
annual meeting at the rate of 20% each year. Each director who
joined the Board through May 2006 received a pro rata grant,
based on the time remaining in five-year cycle.
Under the 2003 Plan the first award of restricted stock was
scheduled to be made at the 2006 annual meeting. This award was
not made and will not be made if the proposed amendment to the
2003 Plan described in Proposal 3 is approved. The award
was to have a fair market value of $75,000, and the shares were
to vest on the day before each annual meeting at the rate of 25%
each year. Directors who joined the Board before the next grant
in 2010 were to receive a pro rata grant.
Under both the 1993 Plan and the 2003 Plan, vesting of shares
accelerates upon departure from the Board due to death,
disability, or, for elected directors, not being renominated
after reaching age 70. Otherwise, directors forfeit
unvested shares upon leaving the Board.
In addition, in October 2003 we granted 2,600 shares of
restricted common stock to each non-management director who was
a member of the Board at that time, scheduled to vest in four
equal annual installments beginning with the May 2004 annual
meeting. We subsequently made pro rata grants to non-management
directors who joined the Board after October 2003 and prior to
the scheduled time of the last vesting in May 2007.
In December 2006, the Board approved the vesting of restricted
stock that would have vested at the 2005 and 2006 annual
meetings if such meetings had been held.
26
Stock Option Awards. Under the terms of the
2003 Plan, each non-management director is granted an annual
nonqualified stock option to purchase 4,000 shares of
common stock immediately following the annual meeting of
shareholders at the fair market value on the date of grant. A
non-management director elected between annual meetings receives
a nonqualified stock option to purchase at the fair market value
on the date of grant a pro rata number of shares based on the
time remaining until the next annual meeting. Each option will
expire ten years after the date of grant and vests in four equal
annual installments beginning on the first anniversary of the
grant, subject to accelerated vesting upon the directors
departure from the Board of Directors. Non-management directors
generally have one year to exercise the options granted under
the 2003 Plan when they leave the Board. Options granted on or
prior to May 20, 2003 under the 1993 Plan must generally be
exercised within three months after a director leaves the Board.
If the proposed amendment to the 2003 Plan described in
Proposal 3 is approved, no annual stock option awards will
be made to the non-management directors with respect to annual
meetings that would have been held in 2005 or 2006. In addition,
if the amendment to the 2003 Plan is approved, automatic option
grants for 2007 and future years will be discontinued.
Stock Ownership Guidelines for
Directors. Under our Guidelines, each
non-management director is expected to own shares of our common
stock (including restricted stock, restricted stock units, or
deferred shares) that have a total value equal to at least five
times the annual cash retainer for service as a member of our
Board (currently, five times $35,000, or $175,000). Directors
have five years from the time of election or appointment to
reach the expected ownership level, excluding trading blackout
periods we impose. Effective January 1, 2008, the cash
retainer for each non-management director will increase to an
annual rate of $100,000. The directors will have five years to
increase the value of their common stock ownership from the
current level of $175,000 to $500,000.
In addition, under our Guidelines, a non-management director may
not sell or otherwise transfer shares of our common stock
received pursuant to his or her service as a Board member (other
than shares received in lieu of the directors annual cash
retainer) until the director has served on the Board for a
period of five years or until he or she leaves the Board.
Fannie Mae Directors Charitable Award
Program. In 1992, we established our
Directors Charitable Award Program. The purpose of the
program is to acknowledge the service of our directors,
recognize our own interest and that of our directors in
supporting worthy institutions, and enhance our director benefit
program to enable us to continue to attract and retain directors
of the highest caliber. Under the program, we make donations
upon the death of a director to up to five charitable
organizations or educational institutions of the directors
choice. We donate $100,000 for every year of service by a
director up to a maximum of $1,000,000. To be eligible to
receive a donation, a recommended organization must be an
educational institution or charitable organization and must
qualify to receive tax-deductible donations under the Internal
Revenue Code of 1986. The program is generally funded by life
insurance contracts on the lives of participating directors. The
Board of Directors may elect to amend, suspend, or terminate the
program at any time.
Matching Gifts. To further our support for
charitable giving, non-employee directors are able to
participate in the Matching Gifts Program of the Fannie Mae
Foundation on the same terms as our employees.
Under this program, gifts made by employees and directors to
501(c)(3) charities are matched, up to an aggregate total of
$10,500 in any calendar year, including up to $500 that may be
matched on a
2-for-1
basis.
Deferred Compensation. We have deferred
compensation plans in which non-management directors can
participate. Non-management directors may irrevocably elect to
defer up to 100% of their annual retainer and all fees payable
to them in their capacity as a member of the Board in any
calendar year into the deferred compensation plan. Plan
participants receive an investment return on the deferred funds
as if the funds were invested in a hypothetical portfolio chosen
by the participant from among the available investment options,
which are described in more detail below under
Nonqualified Deferred CompensationElective Deferred
Compensation Plans. Prior to the deferral, plan
participants must elect to receive the deferred funds either
(1) in a lump sum, (2) in approximately equal annual
installments, or (3) in an initial payment followed by
approximately equal annual installments, with a maximum of 15
installments. Deferral elections generally
27
must be made prior to the year in which the compensation
otherwise would have been paid, and payments will be made as
specified in the deferral election. Participants in the plan are
unsecured creditors of Fannie Mae and are paid from our general
assets.
If the proposed amendment to the 2003 Plan described in
Proposal 3 is approved, non-management directors also will
be able to elect to defer receipt of any awards of restricted
stock units. In addition, non-management directors will be able
to elect to convert their annual retainer to deferred shares.
Additional information about these deferral rights is included
in Proposal 3: Approval of Amendment to Fannie Mae
Stock Compensation Plan of 2003Description of
PlanDeferred Compensation.
Other Expenses. We also pay for or reimburse
directors for out-of-pocket expenses incurred in connection with
their service on the Board, including travel to and from our
meetings, accommodations, meals, and training.
28
Our executive officers, other than Daniel H. Mudd, who is a
nominee for election to the Board of Directors and whose
background is described above, have provided the following
information about their principal occupation, business
experience, and other matters.
|
|
|
Kenneth J. Bacon, 53 |
|
Executive Vice PresidentHousing and Community
Development |
|
|
|
Fannie Mae
|
|
|
|
Executive Vice PresidentHousing
and Community Development since July 2005
|
|
|
|
Interim Head of Housing and Community
DevelopmentJanuary 2005 to July 2005
|
|
|
|
Senior Vice PresidentMultifamily
Lending and InvestmentMay 2000 to January 2005
|
|
|
|
Senior Vice PresidentAmerican
Communities FundOctober 1999 to May 2000
|
|
|
|
Senior Vice President of the Community
Development Capital CorporationAugust 1998 to October 1999
|
|
|
|
Senior Vice President of Fannie
Maes Northeastern Regional Office in PhiladelphiaMay
1993 to August 1998
|
|
|
|
Directorships: Fannie Mae Foundation since January
1995 (Vice Chairman since January 2005), Comcast Corporation,
Corporation for Supportive Housing, and Maret School
|
|
|
|
Other Activities: Member of the Executive Leadership
Council and the Real Estate Round Table
|
|
Robert T. Blakely, 65 |
|
Executive Vice President |
|
|
|
Fannie Mae
|
|
|
|
Executive Vice President since January
2006
|
|
|
|
Executive Vice President and Chief
Financial OfficerJanuary 2006 to August 2007
|
|
|
|
MCI, Inc. (Executive Vice President, Chief Financial
Officer and Chief Accounting OfficerApril 2005 to January
2006) and (Executive Vice President and Chief Financial
OfficerApril 2003 to April 2005)
|
|
|
|
President of Performance Enhancement Group, Inc., a
business development services firmJuly 2002 to April 2003
|
|
|
|
Executive Vice President and Chief Financial Officer
of Lyondell Chemical CompanyNovember 1999 to June 2002
|
|
|
|
Tenneco, Inc. (Executive Vice President from 1996 to
November 1999) and (Chief Financial Officer from 1981 to
November 1999)
|
|
|
|
Directorships: Financial Accounting Foundation
(Trustee); Natural Resources Partners L.P.; and Westlake
Chemicals Corporation
|
29
|
|
|
Enrico Dallavecchia, 45 |
|
Executive Vice President and Chief Risk Officer |
|
|
|
Executive Vice President and Chief Risk Officer
since June 2006
|
|
|
|
JP Morgan Chase (Head of Market Risk for Retail
Financial Services, Chief Investment Office and Asset Wealth
ManagementApril 2005 to May 2006) and (Market Risk
Officer for Global Treasury, Retail Financial Services, Credit
Cards and Proprietary Positioning Division and Co-head of Market
Risk TechnologyDecember 1998 to March 2005)
|
|
Linda K. Knight, 57 |
|
Executive Vice PresidentEnterprise Operations |
|
|
|
Fannie Mae
|
|
|
|
Executive Vice PresidentEnterprise
Operations since April 2007
|
|
|
|
Executive Vice PresidentCapital
MarketsMarch 2006 to April 2007
|
|
|
|
Senior Vice President and
TreasurerFebruary 1993 to March 2006
|
|
|
|
Vice President and Assistant
TreasurerNovember 1986 to February 1993
|
|
|
|
Director, Treasurers
OfficeNovember 1984 to November 1986
|
|
|
|
Assistant Director, Treasurers
OfficeFebruary 1984 to November 1984
|
|
|
|
Senior Market AnalystAugust 1982
to February 1984
|
|
Robert J. Levin, 52 |
|
Executive Vice President and Chief Business Officer |
|
|
|
Fannie Mae
|
|
|
|
Executive Vice President and Chief
Business Officer since November 2005
|
|
|
|
Interim Chief Financial
OfficerDecember 2004 to January 2006
|
|
|
|
Executive Vice President of Housing and
Community DevelopmentJune 1998 to December 2004
|
|
|
|
Executive Vice
PresidentMarketingJune 1990 to June 1998
|
|
|
|
Fannie Mae Foundation (previously served as director
and treasurer).
|
30
|
|
|
Thomas A. Lund, 48 |
|
Executive Vice PresidentSingle-Family Mortgage
Business |
|
|
|
Fannie Mae
|
|
|
|
Executive Vice
PresidentSingle-Family Mortgage Business since July 2005
|
|
|
|
Interim head of Single-Family Mortgage
BusinessJanuary 2005 to July 2005
|
|
|
|
Senior Vice PresidentChief
Acquisitions OfficeJanuary 2004 to January 2005
|
|
|
|
Senior Vice PresidentInvestor
ChannelAugust 2000 to January 2004
|
|
|
|
Senior Vice PresidentSouthwestern
Regional Office, Dallas, TexasJuly 1996 to July 2000
|
|
|
|
Vice President for
MarketingJanuary 1995 to July 1996
|
|
Rahul N. Merchant, 51 |
|
Executive Vice President and Chief Information Officer |
|
|
|
Executive Vice President and Chief Information
Officer since November 2006
|
|
|
|
Merrill Lynch & Co. (Head of
Technology2004 to 2006) and (Head of Global Business
Technology, Global Markets and Investment Banking
division2000 to 2004)
|
|
|
|
Executive Vice President of Dresdner, Kleinwort and
Benson1998 to 2000
|
|
|
|
Previously served as Senior Vice President of Sanwa
Financial Products and First Vice President of Lehman Brothers,
Inc.
|
|
|
|
Other Activities: Board of Advisors of the American
India Foundation
|
|
Peter S. Niculescu, 48 |
|
Executive Vice PresidentCapital Markets |
|
|
|
Fannie Mae
|
|
|
|
Executive Vice PresidentCapital
Markets (previously Mortgage Portfolio) since November 2002
|
|
|
|
Senior Vice PresidentPortfolio
StrategyMarch 1999 to November 2002
|
|
William B. Senhauser, 44 |
|
Senior Vice President and Chief Compliance Officer |
|
|
|
Fannie Mae
|
|
|
|
Senior Vice President and Chief
Compliance Officer since December 2005
|
|
|
|
Vice President for Regulatory Agreements
and RestatementOctober 2004 to December 2005
|
|
|
|
Vice President for Operating
InitiativesJanuary 2003 to September 2004
|
|
|
|
Vice President, Deputy General
CounselNovember 2000 to January 2003
|
31
|
|
|
Stephen M. Swad, 46 |
|
Executive Vice President and Chief Financial Officer |
|
|
|
Fannie Mae
|
|
|
|
Executive Vice President and Chief
Financial Officer since August 18, 2007
|
|
|
|
Executive Vice President and Chief
Financial Officer DesignateMay 2007 to August 17, 2007
|
|
|
|
Executive Vice President and Chief Financial Officer
of AOL, LLCFebruary 2003 to February 2007
|
|
|
|
Executive Vice President of Finance and
Administration of Turner Broadcasting System Inc.s Turner
Entertainment GroupApril 2002 to February 2003
|
|
|
|
Various corporate finance roles at Time
Warner1998 through 2002
|
|
|
|
Previously served as a Partner of KPMGs
national office and Deputy Chief Accountant at the U.S.
Securities and Exchange Commission
|
|
Beth A. Wilkinson, 45 |
|
Executive Vice PresidentGeneral Counsel and Corporate
Secretary |
|
|
|
Executive Vice PresidentGeneral Counsel and
Corporate Secretary since February 2006
|
|
|
|
Partner and Co-Chair, White Collar Practice Group at
Latham & Watkins LLP1998 to 2006
|
|
|
|
Department of Justice (prosecutor and special
counsel for U.S. v. McVeigh and Nichols1996 to
1998), (principal deputy of the Terrorism & Violent
Crime Section1995), and (Special Counsel to the Deputy
Attorney General1995 to 1996)
|
|
|
|
Assistant U.S. Attorney in the Eastern District of
New York1991 to 1995
|
|
|
|
Captain, U.S. Army (serving as an assistant to the
general counsel of the Army for Intelligence & Special
Operations)1987 to 1991
|
|
|
|
Other Activities: Board of Directors of Equal
Justice Works
|
|
Michael J. Williams, 50 |
|
Executive Vice President and Chief Operating Officer |
|
|
|
Fannie Mae
|
|
|
|
Executive Vice President and Chief
Operating Officer since November 2005
|
|
|
|
Executive Vice President for Regulatory
Agreements and RestatementFebruary 2005 to November 2005
|
|
|
|
PresidentFannie Mae
eBusinessJuly 2000 to February 2005
|
|
|
|
Senior Vice
Presidente-commerceJuly
1999 to July 2000
|
|
|
|
Various positions in Single-Family and
Corporate Information Systems divisions1991 to July 1999
|
Under our bylaws, each officer holds office until his or her
successor is chosen and qualified or, if earlier, until he or
she dies, resigns, retires or is removed from office by the
Board of Directors.
32
Compensation
Discussion and Analysis
This section discusses the principles underlying our
compensation policies and decisions relating to our named
executives for 2006 identified below.
|
|
|
Daniel Mudd, President and Chief Executive Officer
|
|
|
Robert Blakely, Executive Vice President (Chief Financial
OfficerJanuary 2006 to August 2007)
|
|
|
Robert Levin, Executive Vice President and Chief Business
Officer (Interim Chief Financial OfficerDecember 2004 to
January 2006)
|
|
|
Peter Niculescu, Executive Vice PresidentCapital Markets
|
|
|
Beth Wilkinson, Executive Vice President, General Counsel and
Corporate Secretary
|
|
|
Michael Williams, Executive Vice President and Chief Operating
Officer
|
|
|
Julie St. John, former Executive Vice President and Chief
Information Officer
|
What are the goals of our compensation program?
Our compensation philosophy provides that our compensation
program should attract, retain, and reward the skilled talent
needed to successfully manage a leading financial services
company.
Compensation must also be consistent with the Charter Act, which
requires that compensation be reasonable and comparable with the
compensation of executives performing similar duties in similar
businesses.
Consistent with our compensation philosophy and the Charter Act,
our compensation program is designed to:
|
|
|
drive a pay for performance perspective that rewards
company and individual performance, while supporting our mission
to help more families achieve homeownership;
|
|
|
promote a long-term focus and align managements and
shareholders interests by providing a greater portion of
compensation that is stock-based for more senior members of
management;
|
|
|
foster compliance with legal and regulatory
requirements; and
|
|
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provide compensation that is straightforward and easy to
understand.
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Our company goals for our cash bonuses under our annual
incentive plan for 2006 are set forth below under How
did we determine the amount of each element of 2006 cash and
stock compensation?
How does comparability factor into our executive
compensation decisions?
Both the Charter Act and our compensation philosophy require
that we consider comparability in setting executive
compensation. We determine comparability by reviewing executive
compensation practices of a group of high-quality, diversified
financial services companies, which we refer to as our
comparator group. Among this group, our earning assets are
substantially larger than the median, but in many cases our
operations are less diverse. These companies have pay practices
similar to ours and we compete with them for executive talent.
The members of the comparator group are initially identified by
management with the assistance of its outside executive
compensation consultant, Johnson Associates, Inc. The
composition of the comparator group is then reviewed and
approved by the Compensation Committee. In 2006, we used the
same comparator group as we did in 2005.
33
The members of our comparator group for 2006 are identified in
the table below.
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Allstate
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Countrywide
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SunTrust Banks
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American Express
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Freddie Mac
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U.S. Bancorp
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American International Group
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JP Morgan Chase
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Wachovia
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Bank of America
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MetLife
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Washington Mutual
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Capital One
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National City
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Wells Fargo
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Citigroup
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Prudential
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For 2006 compensation, we used as a guideline the median, or
50th percentile, of the total of salary, bonus, and equity
compensation paid at companies in our comparator group.
In determining an executives compensation, the
Compensation Committee and Board were free to vary above or
below the median if they determined it was appropriate as a
result of factors such as the experience and expertise of the
executive, our need for specific skill sets, and the
executives performance. For particular positions, data
from companies outside our comparator group were used to provide
a broader perspective and ensure that we had a comprehensive
view of the market for executives with certain specific skills
or experience.
How do we use outside executive compensation
consultants?
Management receives advice on executive compensation matters
from the executive compensation consulting firm of Johnson
Associates, Inc. Johnson Associates provides no other services
to Fannie Mae.
The Board of Directors retains the executive compensation
consulting firm of Semler Brossy Consulting Group to provide
independent executive and board compensation information and
advice. Semler Brossy provides no other services to Fannie Mae.
What were the elements of compensation for our named
executives for 2006, and why did we pay those elements?
Compensation for our named executives for 2006 consisted of
salaries, cash incentive bonuses, long-term incentive awards,
employee benefits, and perquisites. We provided this
compensation mix in order to maintain a competitive compensation
program and to reinforce our corporate objectives. Salary was
paid on a bi-weekly basis throughout the year, while annual
bonuses and long-term incentive awards relating to 2006
performance were paid or granted in January 2007.
Salary, Bonuses, and Long-Term Incentive Awards.
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Salary is the basic cash compensation for the executives
performance of his or her job responsibilities. It is intended
to reflect the executives level of responsibility and
individual performance over time.
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Annual cash incentive bonuses reward executives based on a
combination of corporate and individual performance during the
year measured against pre-established corporate goals and
individual goals designed to align with the corporate goals. We
also use sign-on bonuses or guaranteed first-year bonus minimums
from time to time to recruit executives with critical skills.
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Long-term incentive awards are stock-based awards that vest over
a period of years. For 2006 performance, these awards were
delivered in the form of restricted stock or restricted stock
units with a four-year vesting schedule. We believe that
providing a significant portion of senior management
compensation through long-term incentive awards based on our
common stock and with a multi-year vesting schedule aligns the
long-term interests of our senior management with those of our
other shareholders, reinforcing a shared interest in company
performance. Long-term incentive awards may also be used as
sign-on bonuses to recruit executives.
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Employee Benefits. Our employee benefits are a
fundamental part of our compensation program, and serve as an
important tool in recruiting and retaining executives.
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Pension Benefits. Our named executives
participate in our Executive Pension Plan. This plan is a
nonqualified, defined benefit plan that supplements the pension
benefits payable to the named executive
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34
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under our tax-qualified pension plan, which is the
Retirement Plan, discussed below under
Compensation TablesPension BenefitsFannie Mae
Retirement Plan. The annual pension benefit (when combined
with our Retirement Plan) for our Executive Vice Presidents
equals 40%, and for our Chief Executive Officer equals 50%, of
the executives highest average covered compensation earned
during any 36 consecutive months within the last 120 months
of employment. Covered compensation under the plan is limited to
150% of base salary for our Executive Vice Presidents and 200%
of base salary for our Chief Executive Officer.
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A named executive is not entitled to receive a pension benefit
under the Executive Pension Plan until the executive has
completed five years of service as a plan participant, at which
point the pension benefit becomes 50% vested and continues
vesting at the rate of 10% per year during the next five years.
We consider the Executive Pension Plan an important component of
our executives total compensation and believe requiring
ten years of service as a participant before full vesting serves
as a significant retention tool. Our Executive Pension Plan is
discussed in more detail below under Compensation
TablesPension Benefits.
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Other Employee Benefits and Plans. In general,
named executives are eligible for the employee benefits
available to our employee population as a whole, including our
medical insurance plans, our 401(k) plan, and our matching gifts
program. Named executives also are eligible to participate in
programs we make available only to management employees at
varying levels, including our elective deferred compensation
plan.
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Severance benefits. Our Chief Executive
Officer and our Chief Business Officer are entitled to receive
severance benefits under agreements we entered into with them,
dated November 15, 2005 and June 19, 1990,
respectively. During 2006, our named executives other than
Mr. Mudd were eligible to receive severance benefits under
certain circumstances pursuant to a severance program no longer
available to them. See Compensation Tables-Potential
Payments Upon Termination or
Change-in-Control.
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Perquisites. In 2006, we provided our named
executives relatively limited perquisites not available to our
general employee population, based primarily on business needs.
We also provided perquisites to the extent appropriate and
reasonable for retaining and attracting executives. These
perquisites, and recent changes we have made to eliminate or
require reimbursement of certain perquisites, are discussed
below under How and why have we changed our policy on
perquisites?
How do we look at salary, bonuses, and long-term incentive
awards for 2006?
The following chart shows information about the salary, bonuses,
and long-term incentive awards that were paid or granted to the
named executives for 2006.
Compensation
Paid or Granted for
2006(1)
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2006 Long-Term
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Total of Base Salary,
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Base Salary as
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2006 Bonus
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Incentive Award
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Bonus, and Long-Term
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Named
executive(2)
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of 12/31/06
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(Paid in 2007)
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(Granted in
2007)(3)
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Incentive Award
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Daniel Mudd
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$
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950,000
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$
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3,500,000
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$
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9,999,947
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$
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14,449,947
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Robert Blakely
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650,000
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1,290,575
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3,299,361
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5,239,936
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Robert Levin
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750,000
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2,087,250
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6,667,104
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9,504,354
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Peter Niculescu
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539,977
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1,029,060
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2,839,945
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4,408,982
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Beth Wilkinson
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575,000
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1,947,988
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(4)
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2,770,316
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5,293,304
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Michael Williams
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650,000
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1,630,200
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5,247,443
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7,527,643
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(1) |
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This table is not intended to
replace the summary compensation table, required under
applicable SEC rules, that is included below under
Compensation TablesSummary Compensation Table for
2006.
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(2) |
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This table reflects compensation
decisions made for our named executives who were still employed
by Fannie Mae in January 2007. Ms. St. John entered into a
separation agreement with us in July 2006, and she retired from
Fannie Mae in December 2006. Information regarding Ms. St.
Johns 2006 compensation appears below in the
Compensation TablesSummary Compensation Table for
2006.
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35
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(3) |
|
These awards consist of restricted
stock or restricted stock units. The dollar amounts are based on
the average of the high and low trading prices of our common
stock of $56.66 on January 25, 2007, the date of grant.
Mr. Mudd is required to hold one-fifth of his grant (net of
shares withheld to pay withholding taxes) until his employment
with Fannie Mae is terminated. This is in addition to
Mr. Mudds obligation to hold shares under Fannie
Maes stock ownership guidelines.
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(4) |
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Includes a sign-on bonus of
$800,000 paid in 2006 to Ms. Wilkinson when she joined us.
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How did we determine the amount of each element of 2006
cash and stock compensation?
Overview of the Process for Determining
Compensation. The Board (or, in the case of
Mr. Mudd, the independent members of the Board), based on
the recommendations of the Compensation Committee, determines
compensation for our named executives. In making recommendations
to the Board for 2006 compensation, the Compensation Committee
considered our Chief Executive Officers assessment of our
other named executives performance and his compensation
recommendation for these executives. In making a recommendation
to the Board for Mr. Mudd, the Compensation Committee
considered an assessment of his performance by the Chairman of
our Board, Mr. Mudds self-evaluation, and the results
of a
360-degree
survey of his leadership qualities. In making decisions and
recommendations, the Compensation Committee also considered the
market data provided by the compensation consultants for
management and the Board, the importance of each
executives role in the company, competition for
individuals with the experience and skill sets of each executive
and related market factors, retention considerations, and the
executives experience and contributions to the company as
a whole during the preceding year.
In addition, the Compensation Committee considered the entire
compensation package for each named executive, taking into
accountthrough review of a summary sheetthe named
executives outstanding stock options, restricted shares,
and performance share balances; existing severance arrangements
with the executive, if any; and other benefits (such as life
insurance, pension plan participation, and health benefits)
available to the executive.
Determination
of Salaries, Bonus, and Long-Term Incentive Awards
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Salaries. The Board established salaries for
Mr. Mudd, Mr. Williams, and Mr. Levin in November
2005 in connection with their appointments to their current
positions. None of these three named executives received any
increase in salary for 2006. Salaries for Mr. Blakely and
Ms. Wilkinson were determined by the Board in connection
with their hires. Mr. Niculescus and Ms. St.
Johns salaries were increased in 2006 based on their
performance, our company-wide budget for salary increases, and
market-based information regarding compensation paid for
executives with similar roles and responsibilities.
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Annual Incentive Plan Cash Bonuses. The amount
of an annual incentive plan cash bonus paid to a named executive
depends on the companys and the named executives
performance measured against pre-established corporate and
individual performance goals. During 2006, we engaged in a
significant restatement of prior period financial statements and
made an extensive effort to comply with the terms of the OFHEO
Consent Order and to address a number of operational, policy,
and infrastructure issues. As a result of the need to restate
prior period financial statements, we had no reliable
GAAP-compliant financial statements for recent periods. In light
of these circumstances, our Board established the following set
of performance goals, which focused on successfully operating
the business while undertaking significant initiatives to
address our financial reporting and compliance issues:
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Regulation and Restatement. Stabilize the
company by (a) building strong and productive relationships
with regulators; (b) restating prior period financial
statements; (c) managing capital surplus; and
(d) building relationships with investors;
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Business Results. Optimize the companys
business model and generate shareholder value through key
initiatives;
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Mission Results. Fulfill our affordable
housing mission goals by increasing liquidity to make
U.S. housing more affordable and making an impact in highly
disadvantaged communities;
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36
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Operations and Controls. Instill operational
discipline into all functions, resulting in stronger processes,
reduced risk, and compliance with Sarbanes-Oxley
requirements; and
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Customers and Employees. Renew the
companys culture to achieve the companys objectives
by (a) demonstrating service, engagement, accountability,
and good management; (b) reenergizing diversity programs;
and (c) renewing our people strategy.
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Achievement of these corporate performance goals affected cash
bonuses for management-level employees throughout Fannie Mae,
except for employees in our internal audit and compliance and
ethics departments. These employees bonuses were subject
to the achievement of goals tailored to their departments
unique roles.
In conjunction with the establishment of corporate performance
goals, in April 2006 the Compensation Committee approved
individual bonus award targets for each named executive. Award
targets for Mr. Mudd, Mr. Williams, and Mr. Levin
were unchanged from those set in November 2005. The potential
bonus that could have been paid to each named executive at the
target level of achievement against the corporate and individual
goals for 2006 is shown in the Grants of Plan-Based
Awards table under Compensation Tables below.
Payment significantly above target would occur only in a year in
which both the company and the individual performed
exceptionally well against goals.
In 2006, management provided the Compensation Committee with a
mid-year update on progress against the corporate performance
goals. In January 2007, the Compensation Committee, with input
from other Board committees, evaluated corporate performance
against the corporate performance goals and determined that
corporate performance for 2006 was at 110% of target.
For 2006, the Compensation Committee considered that Fannie Mae,
among other achievements:
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made progress toward our stability goal by resolving outstanding
investigations by governmental agencies;
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achieved our restatement goal by filing our 2004
Form 10-K
and restating prior period financials;
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successfully launched several major strategic business
initiatives;
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restructured several business functions, including technology
and operations, to improve efficiency and generate cost savings;
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made progress on building out controls and instilling
operational discipline; and
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met our housing goals in a difficult environment.
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While the Compensation Committee assesses each goal separately,
it does not follow a pre-established formula for assigning a
weight to the corporate performance goals.
The Board (and, in the case of Mr. Mudd, the independent
members of the Board) then determined, based on the
recommendation of the Compensation Committee, the individual
bonus amounts for each named executive based on the
officers individual performance. These amounts are shown
in the Summary Compensation Table under
Compensation Tables below.
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Long-Term Incentive Awards. Our compensation
philosophy generally results in a greater portion of our named
executives compensation being stock-based than at
companies in our comparator group. For 2006 performance, the
Board and the Compensation Committee determined that, in light
of Fannie Maes not being a current SEC filer, long-term
incentive awards would be in the form of restricted shares of
Fannie Mae common stock or restricted stock units. In January
2007, the Board and the Compensation Committee approved awards
with the values shown above in the table titled
Compensation Paid or Granted for 2006. These awards
vest in four equal annual installments beginning in January 2008.
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Is there any regulatory oversight of our compensation
process?
Yes, our regulator, OFHEO, has a role in the compensation of our
named executives and certain other officers identified by OFHEO.
As long as the Fannie Mae Capital Restoration Plan is in effect,
we must obtain OFHEO approval for non-salary compensation
actions that relate to this group of executives. In addition,
37
OFHEO must approve any termination benefits we wish to offer to
this group of executives. We also notify OFHEO of all
compensation programs intended primarily for executives.
What are our practices for determining when we grant
equity awards?
All restricted stock or restricted stock unit awards to senior
executives, including the named executives, are granted on the
date of approval by the Board or Compensation Committee or, if
later, on the date the executive commences employment with us.
We made one exception to this practice, and that exception was
designed to assure that the number of shares of restricted stock
or units of restricted stock our executives received as an
equity award in 2006 would be the smaller of two possible
amounts. Specifically, in February 2006, the Board was aware
that the report by Paul, Weiss, Rifkind, Wharton &
Garrison LLP on the results of its review of Fannie Mae would be
released in the near future. The Board also was aware that,
depending on the content of the report, its release could result
in a change in the market value of Fannie Maes stock. The
Board therefore structured the annual awards of restricted stock
and restricted stock units to senior executives in a manner that
would ensure that senior executives would receive the
appropriate value in shares. To accomplish this, each equity
award was made in a dollar-denominated amount, with the number
of shares or units granted equal to the smaller of two amounts:
(1) the dollar amount of the award divided by the trading
price of Fannie Maes common stock at the time the award
was approved and (2) the dollar amount of the award divided
by the average trading price during the five trading days
following the filing of our next
Form 12b-25.
Because the
Form 12b-25
filing included a summary of the results of the report of Paul,
Weiss report, our Boards decision to defer the
determination of the number of shares or units granted to our
executives ensured that the results of the Paul, Weiss report
would be publicly available prior to the date on which the
applicable trading price of our common stock was determined.
Stock awards to employees below the level of Senior Vice
President are allocated by the Chief Executive Officer pursuant
to a delegation from the Compensation Committee. We are not
currently granting stock options to employees and do not expect
to grant options before we become a current SEC filer.
What are our stock ownership requirements?
We encourage our directors, officers, and other employees to own
our common stock in order to align their interests with the
interests of shareholders. We also require our officers above
the level of vice president to own our common stock.
Our Chief Executive Officer is required to hold shares of our
common stock with a value equal to five times his base salary.
In addition, our Chief Executive Officers long-term
incentive award for 2006 included a separate stock ownership
requirement described above in footnote 2 to the
Compensation Paid or Granted for 2006 table. Our
other named executives are required to hold our common stock
with a value equal to three times base salary. Common stock held
to meet the ownership requirements may be in the form of
restricted stock, restricted stock units, or deferred shares.
Our Chief Executive Officer and other named executives have five
years from the time of appointment to reach the required
ownership level. In addition to our stock ownership
requirements, our officers are prohibited from purchasing and
selling derivative securities related to our equity securities,
including warrants, puts, and calls, or from dealing in any
derivative securities other than pursuant to our stock-based
benefit plans.
How and why have we changed our policy on
perquisites?
Historically, we have provided a limited number of perquisites
to our named executives, and in February 2007, we further
limited the perquisites we provide. During 2006, Fannie Mae
provided the named executives with perquisites that included a
financial counseling benefit, personal use of certain of Fannie
Maes cars and drivers, excess personal liability
insurance, annual physical exams, executive life insurance,
airline club memberships, and dining services, as well as tax
gross-ups
related to the excess personal liability and life insurance
benefit. In addition, all members of our Board of Directors,
including Mr. Mudd, participated in the Directors
Charitable Award program. We have also agreed to reimburse
Mr. Mudds legal expenses incurred in connection with
any subsequent negotiation, amendment, and discussion of his
employment agreement.
38
In February 2007, we evaluated these perquisites and eliminated
the following:
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reimbursement for financial counselingeffective
July 1, 2007;
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use of company transportation for any non-business purpose
without reimbursementeffective January 1, 2007;
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personal use of company-owned memberships at country
clubseffective January 1, 2008;
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excess liability insuranceeffective January 1, 2008
for all officers and March 1, 2007 for any person who
became an officer on or after that date; and
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the tax
gross-up
to cover taxes due on any excess liability insurance or life
insurance that we provided to officerseffective
January 1, 2008.
|
Our policy provides that perquisites should be based on business
needs, and that existing perquisites should be evaluated from
time to time and eliminated if no longer appropriate.
What decisions have we made with regard to our Performance
Share Program?
Prior to 2005, we had a practice of granting awards under our
performance share program, or PSP. These awards entitled
executives to receive shares of common stock based upon our
meeting corporate financial and qualitative performance
objectives over three-year periods, or performance
cycles. In early 2005, in light of our need to restate our
financial results and our lack of current financial statements,
our Board determined that it was not appropriate at that time to
begin a new performance cycle under the PSP. For similar
reasons, the Board did not begin a new performance cycle in 2006
and has not begun a new performance cycle in 2007.
Under our PSP, in January of each year the Compensation
Committee generally determined our achievement of corporate
performance objectives measured against the goals for the
three-year performance cycle that ended in the prior year. The
level of achievement determined the payout of the performance
shares and the shares were paid out to executives in two annual
installments. As of early 2005, we had paid the first
installment, but not the second installment, of PSP awards for
the
2001-2003
performance cycle. For the reasons stated above, the Board
determined in early 2005 to defer the payout of the second
installment of the
2001-2003
performance cycle and to defer the determination of the
2002-2004
performance cycle.
After we restated our prior period financial statements and
completed our 2004 financial statements, on February 15,
2007, our Board reviewed qualitative and quantitative analyses
of our performance from 2001 to 2004. Based on these
assessments, our Board determined that:
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the first installment of shares that was paid in January 2004
exceeded the amount due for the 2001- 2003 performance cycle,
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the unpaid second installment of the award for the
2001-2003
performance cycle should not be paid, and
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no payouts would be made under the
2002-2004
performance cycle.
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On June 15, 2007, our Board reviewed available quantitative
and qualitative analyses of our performance from 2003 to 2006.
Based on its review, the Board made a decision to pay awards for
the
2003-2005
performance cycle at 40% of the original target award and
decided to pay awards for the
2004-2006
performance cycle at 47.5% of the original target award. The
highest level at which awards for these two cycles could have
been paid if performance met or exceeded the maximum objectives
was 150% of the original target award. These payouts reflect the
Boards determination that our performance during these
cycles with respect to the financial goals did not meet
threshold performance levels and our performance during these
cycles with respect to the qualitative goals was between the
threshold and target performance levels.
The table below shows the number of shares of common stock to
which each named executive who was employed by Fannie Mae as of
December 31, 2006 is entitled based upon the Boards
final determination on September 18, 2007. The shares will
be paid in the future.
39
Performance
Share Program Payouts
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2003 to 2005
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2004 to 2006
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Performance Cycle
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Performance Cycle
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Named
Executive(1)
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Shares (#)
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|
Value
($)(2)
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Shares (#)
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|
Value
($)(2)
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|
Daniel Mudd
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11,438
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$
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786,363
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15,960
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$
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1,097,250
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Robert
Blakely(3)
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Robert Levin
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9,994
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687,088
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15,184
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1,043,900
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Peter Niculescu
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6,238
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428,863
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8,968
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616,550
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|
Beth
Wilkinson(3)
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Michael Williams
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8,806
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605,413
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11,150
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766,563
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|
(1) |
|
Information regarding PSP awards
held by Ms. St. John is set forth in the Outstanding
Equity Awards at Fiscal Year-End table under
Compensation Tables below.
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|
(2) |
|
The value of the shares is based on
the closing price of our common stock of $68.75 on June 15,
2007, the date of the Boards determination.
|
|
(3) |
|
Mr. Blakely and
Ms. Wilkinson did not receive awards under the PSP because
they joined Fannie Mae in 2006.
|
What is our compensation recoupment policy?
Under the OFHEO Consent Order, we have agreed that any new
employment contracts with named executives will include an
escrow of certain payments if OFHEO or any other agency has
communicated allegations of misconduct concerning the named
executives official duties at Fannie Mae and OFHEO has
directed us to escrow such funds. In addition, we have agreed to
include appropriate provisions in new employment agreements to
address terminations for cause and recovery of compensation paid
to executives where there are proven allegations of misconduct.
All future employment agreements with named executives will
contain these provisions.
What written agreements do we have with our named
executives that provide for continued employment?
On November 15, 2005, we entered into an employment
agreement with Mr. Mudd, effective June 1, 2005 when
he was appointed our President and Chief Executive Officer. We
entered into a letter agreement with Mr. Levin, dated
June 19, 1990, that provides for severance in connection
with a termination without cause. The severance
benefits provided under these agreements are described below
under Compensation TablesPotential Payments Upon
Termination or
Change-in-Control.
40
Report
of the Compensation Committee of the Board of
Directors
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis with management and, based
on the review and discussions, the Compensation Committee has
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in Fannie Maes proxy
statement for the 2007 annual meeting of shareholders, as filed
with the Securities and Exchange Commission on Schedule 14A.
The
Compensation Committee
Bridget A. Macaskill, Chair
Stephen B. Ashley
Dennis R. Beresford (committee member from May 2006 to July
2007)
Louis J. Freeh (committee member since May 2007)
Brenda J. Gaines
Greg C. Smith
41
Summary
Compensation Table for 2006
The following table shows summary compensation information for
the named executives for 2006.
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Change in
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Pension Value
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and
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Non-Equity
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Nonqualified
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Stock
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Option
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Incentive Plan
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Deferred
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All Other
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Name and Principal
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Compensation
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Compensation
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Total
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Position
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Year
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($)(1)
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($)(2)
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($)(3)
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($)(4)
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($)(2)
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Earnings
($)(5)
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($)(6)
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($)
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Daniel Mudd
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2006
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$
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950,000
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$
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4,799,057
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$
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962,112
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$
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3,500,000
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|
$
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932,958
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$
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136,072
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$
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11,280,199
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President and Chief Executive Officer
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Robert Blakely
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2006
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587,500
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$
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926,250
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3,898,589
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364,325
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209,087
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140,480
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6,126,231
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Executive Vice President and Chief Financial Officer
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|
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|
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Robert Levin
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2006
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750,000
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2,477,097
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883,442
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2,087,250
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307,078
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70,710
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6,575,577
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Executive Vice President, Chief Business Officer and former
Chief Financial Officer
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Peter Niculescu
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2006
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538,188
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1,388,328
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533,816
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1,029,060
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232,562
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39,906
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3,761,860
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Executive Vice PresidentCapital Markets
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Beth Wilkinson
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2006
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490,961
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1,748,750
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396,712
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199,238
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198,413
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35,578
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3,069,652
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Executive Vice President, General Counsel and Corporate Secretary
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Michael Williams
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2006
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650,000
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1,808,182
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701,446
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1,630,200
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371,753
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69,482
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5,231,063
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Executive Vice President and Chief Operating Officer
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Julie St.
John(7)
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2006
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536,618
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1,514,019
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744,008
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936,773
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1,841,777
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5,573,195
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Former Executive Vice President and Chief Information Officer
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(1) |
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Mr. Mudd is entitled to a
minimum base salary of $950,000 under his employment agreement.
Salary for Mr. Blakely includes $275,000 he
elected to defer to later years.
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(2) |
|
Except as otherwise noted, amounts
reported in the Bonus column do not include amounts
earned under our annual incentive plan, which are shown in the
Non-Equity Incentive Plan Compensation column. In
2007, Mr. Blakely was awarded a total bonus of $1,290,575
under our annual incentive plan, which he deferred to later
years. Of this amount, we guaranteed him in connection with his
joining Fannie Mae a minimum bonus of $926,250 for 2006, which
we have reported in the Bonus column.
Ms. Wilkinson was awarded a total bonus of $1,147,988 under
our annual incentive plan for 2007. Of this amount,
Ms. Wilkinson was guaranteed to receive $948,750 in
connection with her joining Fannie Mae. We have reported the
guaranteed amount, along with an $800,000 sign-on bonus
Ms. Wilkinson received, in the Bonus column.
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(3) |
|
These amounts represent the dollar
amounts we recognized for financial statement reporting purposes
with respect to 2006 for the fair value of restricted stock,
restricted stock units, and performance shares granted during
2006 and in prior years in accordance with SFAS 123R. As
required by SEC rules, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting
conditions and do not reflect the impact of Ms. St.
Johns actual forfeiture of 27,931 shares of
restricted stock and performance shares upon her departure from
Fannie Mae in December 2006. As a result of the Boards
decision to pay out awards at 40% for the 2003-2005 performance
cycle and at 47.5% for the 2004-2006 performance cycle, we
reversed expenses we previously recorded based on our estimate
that awards would be paid out at 50%. To the extent these
expenses were recorded prior to 2006, the amounts above do not
reflect the reversal of these expenses.
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The SFAS 123R grant date fair
value of restricted stock and restricted stock units is
calculated as the average of the high and low trading price of
our common stock on the date of grant. Because performance
shares do not participate in dividends during the three-year
performance cycle and include a cap on the market value to be
paid equal to three times the grant date market value, the
SFAS 123R grant date fair value of performance shares is
calculated as the market value on date of grant, less the
present value of expected dividends over the three-year
performance period discounted at the risk-free rate, less the
value of the three-times cap based on a Black-Scholes option
pricing model.
|
42
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(4) |
|
These amounts represent the dollar
amounts we recognized for financial statement reporting purposes
with respect to 2006 for the fair value of stock option awards
granted during 2004 and in prior years in accordance with
SFAS 123R. No named executive has received a stock option
award since January 2004. As required by SEC rules, the amounts
shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. For the assumptions used in
calculating the value of these awards, see Notes to
Consolidated Financial StatementsNote 1, Summary of
Significant Accounting PoliciesStock-Based
Compensation, of our Annual Report on Form 10-K for the
year ended December 31, 2006.
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(5) |
|
The reported amounts represent
change in pension value.
|
|
(6) |
|
The table below shows more
information about the components of the All Other
Compensation column. The Charitable Award Program amounts
reflect a matching contribution program under which an employee
who contributes at certain levels to the Fannie Mae Political
Action Committee may direct that an equal amount, up to $5,000,
be donated by Fannie Mae to charities chosen by the employee in
the employees name. Mr. Mudds Charitable
Award Program amount consists of $5,000 under this
matching program plus $15,447 for our incremental cost of his
participation in our charitable award program for directors,
which is described below under Director Compensation
Information. We calculated our incremental cost of each
directors participation in our charitable award program
for directors based on (1) the present value of our
expected future payment of the benefit that became vested during
2006, and (2) the time value during 2006 of amounts vested
for that director in prior years. We estimated the present
values of our expected future payment based on the age and
gender of our directors, the RP 2000 white collar mortality
table projected to 2010, and a discount rate of approximately
5.5%. Ms. St. Johns Payments in Connection
with Termination of Employment shown in the table below
consist of: $794,463 in severance payments, $943,035 in a 2006
annual incentive plan cash bonus award, and $18,000 for
outplacement services. Under the terms of her separation
agreement, Ms. St. John received a bonus equal to a
prorated share of her target bonus adjusted for corporate
performance. In addition to the amounts shown in the
Certain Components of All Other Compensation table
below, Mr. Williams All Other
Compensation includes our incremental cost of providing
tax counseling, financial planning services, and dining
services. Amounts shown under All Other Compensation
do not include gifts made by the Fannie Mae Foundation under its
matching gifts program, under which gifts made by our employees
and directors to 501(c)(3) charities are matched, up to an
aggregate total of $10,500 in any calendar year. No amounts are
included for this program because the matching gifts are made by
the Fannie Mae Foundation, not Fannie Mae.
|
Certain
Components of All Other Compensation for
2006
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|
|
|
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|
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Universal
|
|
Universal
|
|
Excess
|
|
Excess
|
|
|
|
Payments in
|
|
|
401(k)
|
|
Life
|
|
Life
|
|
Liability
|
|
Liability
|
|
|
|
Connection
|
|
|
Plan
|
|
Insurance
|
|
Insurance
|
|
Insurance
|
|
Insurance
|
|
Charitable
|
|
with
|
|
|
Matching
|
|
Coverage
|
|
Tax
|
|
Coverage
|
|
Tax
|
|
Award
|
|
Termination
|
Executive
|
|
Contributions
|
|
Premiums
|
|
Gross-up
|
|
Premiums
|
|
Gross-up
|
|
Programs
|
|
of Employment
|
|
Daniel Mudd
|
|
$
|
6,600
|
|
|
$
|
58,650
|
|
|
$
|
48,278
|
|
|
$
|
1,150
|
|
|
$
|
947
|
|
|
$
|
20,447
|
|
|
|
|
|
Robert Blakely
|
|
|
|
|
|
|
86,709
|
|
|
|
46,998
|
|
|
|
1,150
|
|
|
|
623
|
|
|
|
5,000
|
|
|
|
|
|
Robert Levin
|
|
|
6,600
|
|
|
|
31,715
|
|
|
|
25,326
|
|
|
|
1,150
|
|
|
|
918
|
|
|
|
5,000
|
|
|
|
|
|
Peter Niculescu
|
|
|
6,600
|
|
|
|
18,101
|
|
|
|
13,216
|
|
|
|
1,150
|
|
|
|
840
|
|
|
|
|
|
|
|
|
|
Beth Wilkinson
|
|
|
6,600
|
|
|
|
14,400
|
|
|
|
7,805
|
|
|
|
1,150
|
|
|
|
623
|
|
|
|
5,000
|
|
|
|
|
|
Michael Williams
|
|
|
6,600
|
|
|
|
23,304
|
|
|
|
18,610
|
|
|
|
1,150
|
|
|
|
918
|
|
|
|
5,000
|
|
|
|
|
|
Julie St. John
|
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|
6,600
|
|
|
|
39,921
|
|
|
|
32,861
|
|
|
|
1,150
|
|
|
|
947
|
|
|
|
4,800
|
|
|
|
1,755,498
|
|
|
|
|
(7) |
|
Ms. St. John entered into
a separation agreement with us in July 2006, and she retired
from Fannie Mae in December 2006. Her separation benefits were
provided pursuant to the Board-approved management severance
program and were approved by OFHEO.
|
43
Grants of
Plan-Based Awards in 2006
The following table shows grants of awards made under our Annual
Incentive Plan and the 2003 Plan to the named executives during
2006.
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts
|
|
All Other Stock
|
|
|
|
|
|
|
|
|
Under Non-Equity
|
|
Awards:
|
|
Grant Date Fair
|
|
|
|
|
|
|
Incentive Plan
|
|
Number of
|
|
Value of Stock
|
|
|
|
|
Award Approval
|
|
Awards(2)
|
|
Shares of Stock
|
|
and Option
|
Name
|
|
Grant
Date(1)
|
|
Date(1)
|
|
Target ($)
|
|
or Units
(#)(3)
|
|
Awards
($)(4)
|
|
Daniel Mudd
|
|
|
3/22/2006
|
|
|
|
2/8/2006
|
|
|
|
|
|
|
|
146,574
|
|
|
$
|
7,905,469
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,612,500
|
|
|
|
|
|
|
|
|
|
Robert Blakely
|
|
|
1/30/2006
|
|
|
|
11/8/2005
|
|
|
|
|
|
|
|
10,000
|
|
|
|
575,600
|
|
|
|
|
3/22/2006
|
|
|
|
2/8/2006
|
|
|
|
|
|
|
|
61,611
|
|
|
|
3,322,989
|
|
|
|
|
|
|
|
|
|
|
|
|
1,235,000
|
|
|
|
|
|
|
|
|
|
Robert Levin
|
|
|
3/22/2006
|
|
|
|
2/8/2006
|
|
|
|
|
|
|
|
78,257
|
|
|
|
4,220,791
|
|
|
|
|
|
|
|
|
|
|
|
|
1,650,000
|
|
|
|
|
|
|
|
|
|
Peter Niculescu
|
|
|
3/22/2006
|
|
|
|
2/8/2006
|
|
|
|
|
|
|
|
32,948
|
|
|
|
1,777,050
|
|
|
|
|
|
|
|
|
|
|
|
|
890,961
|
|
|
|
|
|
|
|
|
|
Beth Wilkinson
|
|
|
2/16/2006
|
|
|
|
12/19/2005
|
|
|
|
|
|
|
|
25,000
|
|
|
|
1,365,375
|
|
|
|
|
|
|
|
|
|
|
|
|
948,750
|
|
|
|
|
|
|
|
|
|
Michael Williams
|
|
|
3/22/2006
|
|
|
|
2/8/2006
|
|
|
|
|
|
|
|
61,611
|
|
|
|
3,322,989
|
|
|
|
|
|
|
|
|
|
|
|
|
1,235,000
|
|
|
|
|
|
|
|
|
|
Julie St. John
|
|
|
3/22/2006
|
|
|
|
2/8/2006
|
|
|
|
|
|
|
|
21,679
|
|
|
|
1,169,257
|
|
|
|
|
|
|
|
|
|
|
|
|
873,909
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Grant Date column
shows the grant date for equity awards determined for financial
statement reporting purposes pursuant to SFAS 123R. The
Award Approval Date column shows the date our Board
approved the equity awards. On February 8, 2006, our Board
approved restricted stock and restricted stock unit awards for
which the final number of shares could not be determined until
March 22, 2006, which is the grant date for these awards.
These grants are discussed in more detail above in
Compensation Discussion and AnalysisWhat are our
practices for determining when we grant equity awards? The
other equity awards listed in the table above reflect a grant
date equal to the executives starting date with Fannie Mae.
|
|
(2) |
|
The amounts shown are the target
amounts established by our Board for 2006 performance under our
Annual Incentive Plan. The amount paid to a named executive is
based on Fannie Maes and the individuals performance
against corporate and individual pre-established goals. Our
Board and Compensation Committee also retain discretion to pay
bonuses in amounts below or above the amount derived from
measuring performance against corporate and individual goals. It
is expected that performance against corporate goals will
normally be in the range of 75% to 125% of target. For 2006, the
Board determined that corporate performance was 110% of the
corporate target. Based on a combination of 2006 corporate and
individual performance, Mr. Mudd received a bonus of 134%
of his target, Mr. Blakely a bonus of 105% of his target,
Mr. Levin a bonus of 127% of his target, Mr. Niculescu
a bonus of 116% of his target, Ms. Wilkinson a bonus of
121% of her target, and Mr. Williams a bonus of 132% of his
target. Ms. St. John received a prorated bonus based on
110% of her target under the terms of her separation agreement
based solely on corporate performance. The amounts actually
awarded are reported as Bonus and Non-Equity
Incentive Plan Compensation in the Summary Compensation
Table, as explained in footnote 2 to that table.
|
|
(3) |
|
Consists of restricted stock or
restricted stock units awarded under the 2003 Plan. The amounts
shown for Messrs. Mudd, Levin, Niculescu, and Williams
represent stock that vests in four equal annual installments
beginning in March 2007. Similarly, Ms. St. John
received restricted stock that would have vested in the same
manner. However, upon her retirement, Ms. St. John
received accelerated vesting of the first installment of these
shares, and forfeited the balance of these shares. The amount
shown for Ms. Wilkinson represents stock that vests in
three equal annual installments beginning in February 2007. As
the holder of restricted stock the named executive has the
rights and privileges of a shareholder as to the restricted
common stock, other than the ability to sell or otherwise
transfer it, including the right to receive any dividends
declared with respect to the stock and the right to provide
instructions on how to vote.
|
|
|
|
For Mr. Blakely, the amounts
shown are restricted stock units, which represent the right to
receive a share of unrestricted common stock for each unit upon
vesting. The grant of 10,000 units vests in three equal
annual installments beginning in January 2007 and the grant of
61,611 units vests in four equal annual installments
beginning in March 2007. Because he is already 65,
Mr. Blakelys restricted stock units will vest fully
upon his retirement from Fannie Mae. As the holder of restricted
stock units, Mr. Blakely receives dividend equivalents on
the units, but does not have the right to vote, sell or
otherwise transfer the stock represented by the units until the
restrictions lapse and shares are issued.
|
44
|
|
|
(4) |
|
The SFAS 123R grant date fair
value of restricted stock and restricted stock unit awards is
calculated as the average of the high and low trading price of
our common stock on the date of grant.
|
Outstanding
Equity Awards at 2006 Fiscal Year-End
The following table shows outstanding stock option awards,
unvested restricted stock, restricted stock unit awards and
performance share program awards held by the named executives as
of December 31, 2006. The market value of option and stock
awards shown in the table below is based on a per share price of
$59.39, which was the closing market price of our common stock
on December 29, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Awards(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
Value of
|
|
|
|
|
|
|
Option
Awards(2)
|
|
Number of
|
|
Value of
|
|
Shares,
|
|
Unearned
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Units or
|
|
Shares,
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Units of
|
|
Units of
|
|
Other
|
|
Units or Other
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
Stock That
|
|
Stock That
|
|
Rights That
|
|
Rights That
|
|
|
|
|
Grant Date or
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
|
|
Award
|
|
Performance
|
|
Options (#)
|
|
Options (#)
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
Vested
|
|
Vested
|
Name
|
|
Type(1)
|
|
Period
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
(#)
|
|
($)
|
|
(#)(3)
|
|
($)(3)
|
|
Daniel Mudd
|
|
|
O
|
|
|
|
2/23/2000
|
|
|
|
114,855
|
|
|
|
|
|
|
|
52.78
|
|
|
|
2/23/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
2/23/2000
|
|
|
|
116,710
|
(4)
|
|
|
|
|
|
|
52.78
|
|
|
|
1/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/21/2000
|
|
|
|
89,730
|
|
|
|
|
|
|
|
77.10
|
|
|
|
11/21/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/20/2001
|
|
|
|
87,194
|
|
|
|
|
|
|
|
80.95
|
|
|
|
11/20/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/21/2003
|
|
|
|
62,188
|
|
|
|
20,730
|
|
|
|
69.43
|
|
|
|
1/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/23/2004
|
|
|
|
52,874
|
|
|
|
52,875
|
|
|
|
78.32
|
|
|
|
1/23/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU
|
|
|
|
3/10/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,806(5)
|
|
|
|
3,789,438
|
|
|
|
|
|
|
|
|
|
|
|
|
RS
|
|
|
|
11/15/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,178(6)
|
|
|
|
1,257,761
|
|
|
|
|
|
|
|
|
|
|
|
|
RS
|
|
|
|
3/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146,574(7)
|
|
|
|
8,705,030
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2001 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,045(8)
|
|
|
|
$1,784,373(8)
|
|
|
|
|
|
|
|
|
12/31/2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2002 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,149(9)
|
|
|
|
899,699(9)
|
|
|
|
|
|
|
|
|
12/31/2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2003 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,438(10)
|
|
|
|
679,303(10)
|
|
|
|
|
|
|
|
|
12/31/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2004 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,599(11)
|
|
|
|
1,995,445(11)
|
|
|
|
|
|
|
|
|
12/31/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Blakely
|
|
|
RSU
|
|
|
|
1/30/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000(5)
|
|
|
|
593,900
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU
|
|
|
|
3/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,611(7)
|
|
|
|
3,659,077
|
|
|
|
|
|
|
|
|
|
|
|
Robert Levin
|
|
|
O
|
|
|
|
11/18/1997
|
|
|
|
46,110
|
|
|
|
|
|
|
|
51.72
|
|
|
|
11/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/17/1998
|
|
|
|
43,650
|
|
|
|
|
|
|
|
69.31
|
|
|
|
11/17/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/16/1999
|
|
|
|
47,300
|
|
|
|
|
|
|
|
71.50
|
|
|
|
11/16/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/18/2000
|
|
|
|
56,572
|
(4)
|
|
|
|
|
|
|
62.50
|
|
|
|
1/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/21/2000
|
|
|
|
43,430
|
|
|
|
|
|
|
|
77.10
|
|
|
|
11/21/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/20/2001
|
|
|
|
44,735
|
|
|
|
|
|
|
|
80.95
|
|
|
|
11/20/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/21/2003
|
|
|
|
54,333
|
|
|
|
18,112
|
|
|
|
69.43
|
|
|
|
1/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/23/2004
|
|
|
|
50,306
|
|
|
|
50,307
|
|
|
|
78.32
|
|
|
|
1/23/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RS
|
|
|
|
1/23/2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,460
|
|
|
|
86,709
|
|
|
|
|
|
|
|
|
|
|
|
|
RS
|
|
|
|
3/10/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,099(5)
|
|
|
|
2,143,920
|
|
|
|
|
|
|
|
|
|
|
|
|
RS
|
|
|
|
3/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,257(7)
|
|
|
|
4,647,683
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2001 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,543(8)
|
|
|
|
863,709(8)
|
|
|
|
|
|
|
|
|
12/31/2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2002 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,772(9)
|
|
|
|
461,579(9)
|
|
|
|
|
|
|
|
|
12/31/2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2003 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,994(10)
|
|
|
|
593,544(10)
|
|
|
|
|
|
|
|
|
12/31/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2004 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,967(11)
|
|
|
|
1,898,520(11)
|
|
|
|
|
|
|
|
|
12/31/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Awards(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
Value of
|
|
|
|
|
|
|
Option
Awards(2)
|
|
Number of
|
|
Value of
|
|
Shares,
|
|
Unearned
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Units or
|
|
Shares,
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Units of
|
|
Units of
|
|
Other
|
|
Units or Other
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
Stock That
|
|
Stock That
|
|
Rights That
|
|
Rights That
|
|
|
|
|
Grant Date or
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
|
|
Award
|
|
Performance
|
|
Options (#)
|
|
Options (#)
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
Vested
|
|
Vested
|
Name
|
|
Type(1)
|
|
Period
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
(#)
|
|
($)
|
|
(#)(3)
|
|
($)(3)
|
|
Peter Niculescu
|
|
|
O
|
|
|
|
3/8/1999
|
|
|
|
16,000
|
|
|
|
|
|
|
|
70.72
|
|
|
|
3/6/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/16/1999
|
|
|
|
14,340
|
|
|
|
|
|
|
|
71.50
|
|
|
|
11/16/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/18/2000
|
|
|
|
24,804
|
(4)
|
|
|
|
|
|
|
62.50
|
|
|
|
1/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/21/2000
|
|
|
|
12,120
|
|
|
|
|
|
|
|
77.10
|
|
|
|
11/21/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/20/2001
|
|
|
|
13,150
|
|
|
|
|
|
|
|
80.95
|
|
|
|
11/20/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/21/2003
|
|
|
|
33,912
|
|
|
|
11,305
|
|
|
|
69.43
|
|
|
|
1/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/21/2003
|
|
|
|
7,288
|
(4)
|
|
|
|
|
|
|
69.43
|
|
|
|
1/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/23/2004
|
|
|
|
29,712
|
|
|
|
29,713
|
|
|
|
78.32
|
|
|
|
1/23/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RS
|
|
|
|
3/10/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,032(5)
|
|
|
|
1,367,870
|
|
|
|
|
|
|
|
|
|
|
|
|
RS
|
|
|
|
3/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,948(7)
|
|
|
|
1,956,782
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2001 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,298(8)
|
|
|
|
255,258(8)
|
|
|
|
|
|
|
|
|
12/31/2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2002 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,272(9)
|
|
|
|
134,934(9)
|
|
|
|
|
|
|
|
|
12/31/2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2003 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,238(10)
|
|
|
|
370,475(10)
|
|
|
|
|
|
|
|
|
12/31/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2004 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,881(11)
|
|
|
|
1,121,343(11)
|
|
|
|
|
|
|
|
|
12/31/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beth Wilkinson
|
|
|
RS
|
|
|
|
2/16/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000(5)
|
|
|
|
1,484,750
|
|
|
|
|
|
|
|
|
|
|
|
Michael Williams
|
|
|
O
|
|
|
|
11/18/1997
|
|
|
|
11,920
|
|
|
|
|
|
|
|
51.72
|
|
|
|
11/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/17/1998
|
|
|
|
11,390
|
|
|
|
|
|
|
|
69.31
|
|
|
|
11/17/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/16/1999
|
|
|
|
12,290
|
|
|
|
|
|
|
|
71.50
|
|
|
|
11/16/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/18/2000
|
|
|
|
20,027
|
(4)
|
|
|
|
|
|
|
62.50
|
|
|
|
1/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/21/2000
|
|
|
|
35,610
|
|
|
|
|
|
|
|
77.10
|
|
|
|
11/21/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/16/2001
|
|
|
|
13,087
|
(4)
|
|
|
|
|
|
|
78.56
|
|
|
|
1/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/20/2001
|
|
|
|
44,735
|
|
|
|
|
|
|
|
80.95
|
|
|
|
11/20/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/21/2003
|
|
|
|
47,877
|
|
|
|
15,959
|
|
|
|
69.43
|
|
|
|
1/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/23/2004
|
|
|
|
36,940
|
|
|
|
36,940
|
|
|
|
78.32
|
|
|
|
1/23/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RS
|
|
|
|
3/10/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,342(5)
|
|
|
|
1,505,061
|
|
|
|
|
|
|
|
|
|
|
|
|
RS
|
|
|
|
3/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,611(7)
|
|
|
|
3,659,077
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2001 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,925(8)
|
|
|
|
708,226(8)
|
|
|
|
|
|
|
|
|
12/31/2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2002 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,772(9)
|
|
|
|
461,579(9)
|
|
|
|
|
|
|
|
|
12/31/2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2003 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,806(10)
|
|
|
|
522,988(10)
|
|
|
|
|
|
|
|
|
12/31/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2004 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,473(11)
|
|
|
|
1,394,061(11)
|
|
|
|
|
|
|
|
|
12/31/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Awards(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
Value of
|
|
|
|
|
|
|
Option
Awards(2)
|
|
Number of
|
|
Value of
|
|
Shares,
|
|
Unearned
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Units or
|
|
Shares,
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Units of
|
|
Units of
|
|
Other
|
|
Units or Other
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
Stock That
|
|
Stock That
|
|
Rights That
|
|
Rights That
|
|
|
|
|
Grant Date or
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
|
|
Award
|
|
Performance
|
|
Options (#)
|
|
Options (#)
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
Vested
|
|
Vested
|
Name
|
|
Type(1)
|
|
Period
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
(#)
|
|
($)
|
|
(#)(3)
|
|
($)(3)
|
|
Julie St. John
|
|
|
O
|
|
|
|
11/18/1997
|
|
|
|
11,610
|
|
|
|
|
|
|
|
51.72
|
|
|
|
11/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/17/1998
|
|
|
|
11,390
|
|
|
|
|
|
|
|
69.31
|
|
|
|
11/17/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/16/1999
|
|
|
|
11,680
|
|
|
|
|
|
|
|
71.50
|
|
|
|
11/16/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/18/2000
|
|
|
|
18,373
|
(4)
|
|
|
|
|
|
|
62.50
|
|
|
|
1/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/21/2000
|
|
|
|
35,610
|
|
|
|
|
|
|
|
77.10
|
|
|
|
11/21/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/16/2001
|
|
|
|
17,320
|
(4)
|
|
|
|
|
|
|
78.56
|
|
|
|
1/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
11/20/2001
|
|
|
|
44,735
|
|
|
|
|
|
|
|
80.95
|
|
|
|
11/20/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/21/2003
|
|
|
|
63,836
|
|
|
|
|
|
|
|
69.43
|
|
|
|
1/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O
|
|
|
|
1/23/2004
|
|
|
|
55,410
|
|
|
|
|
|
|
|
78.32
|
|
|
|
1/23/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2001 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,925(8)
|
|
|
|
708,226(8)
|
|
|
|
|
|
|
|
|
12/31/2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2002 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,772(9)
|
|
|
|
461,579(9)
|
|
|
|
|
|
|
|
|
12/31/2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2003 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,806(10)
|
|
|
|
522,988(10)
|
|
|
|
|
|
|
|
|
12/31/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
|
|
|
1/1/2004 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,147(11)
|
|
|
|
1,374,700(11)
|
|
|
|
|
|
|
|
|
12/31/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
O indicates stock options; RS
indicates restricted stock; RSU indicates restricted stock
units; and PSP indicates performance share program awards.
|
|
(2) |
|
Except as otherwise indicated, all
awards of options, restricted stock, and restricted stock units
listed in this table vest in four equal annual installments
beginning on the first anniversary of the date of grant. Amounts
reported in this table for restricted stock and restricted stock
units represent only the unvested portion of awards. Amounts
reported in this table for options represent only the
unexercised portions of awards.
|
|
(3) |
|
As described in Compensation
Discussion and Analysis, beginning in early 2005 the Board
deferred the determination of whether outstanding awards under
our performance share program were earned, because we did not
have reliable financial data for the relevant performance cycles.
|
|
(4) |
|
The stock options vested 100% on
January 23, 2004.
|
|
(5) |
|
The initial award amount vests in
three equal annual installments beginning on the first
anniversary of the date of grant.
|
|
(6) |
|
The initial award amount vests in
three equal annual installments beginning on March 10, 2006.
|
|
(7) |
|
The initial award amount vests in
four equal annual installments beginning on January 24,
2007. In connection with the stock awards with a grant date of
March 22, 2006, each of our named executives other than
Mr. Mudd also received a cash award payable in four equal
annual installments beginning on January 24, 2007. As of
December 31, 2006, the unpaid portion of our named
executives cash awards were as follows: Mr. Blakely
and Mr. Williams, $1,656,270; Mr. Levin, $2,103,750;
and Mr. Niculescu, $885,720.
|
|
(8) |
|
The amounts shown represent the
maximum amount of common stock that the Board could have awarded
as of the end of 2006 for the
2001-2003
performance cycle, which equals the second installment of the
awards the Compensation Committee determined performance for in
January 2004. As described in Compensation Discussion and
Analysis, the Board determined in February 2007 not to pay
any of these shares.
|
|
(9) |
|
The amounts shown represent the
amount of common stock that would have been paid if the
Compensation Committee had determined that we met threshold
performance levels with respect to financial and qualitative
goals for this performance cycle. As described in
Compensation Discussion and Analysis, the Board
determined in February 2007 not to pay any of these shares.
|
|
(10) |
|
As described in Compensation
Discussion and Analysis, the Board determined in June 2007
that our performance during this cycle did not meet the
threshold performance level for the financial goal and was
between the threshold and target performance levels for the
qualitative goals. In accordance with SEC rules, because the
payment amounts determined by the Board are the amounts that
would have been paid if our performance had met threshold goals,
we have shown these amounts in the table.
|
47
|
|
|
(11) |
|
As described in Compensation
Discussion and Analysis, the Board determined in June 2007
that our performance during this cycle did not meet the
threshold performance level for the financial goal and was
between the threshold and target performance levels for the
qualitative goals. In accordance with SEC rules, because the
payment amounts determined by the Board exceed the amounts that
would have been paid if our performance had met threshold goals,
we have shown in this table the amount of common stock that
would have been paid if our performance had met target levels.
|
Option
Exercises and Stock Vested in 2006
The following table shows information regarding stock option
exercises by and vesting of restricted stock and restricted
stock unit awards held by the named executives during 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
Shares Acquired on
|
|
Value Realized on
|
|
Shares Acquired on
|
|
Value Realized on
|
Name
|
|
Exercise (#)
|
|
Exercise
($)(1)
|
|
Vesting (#)
|
|
Vesting
($)(2)
|
|
Daniel Mudd
|
|
|
|
|
|
|
|
|
|
|
31,904
|
|
|
$
|
1,717,392
|
|
|
|
|
|
|
|
|
|
|
|
|
10,588
|
|
|
|
569,952
|
|
Robert Blakely
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Levin
|
|
|
|
|
|
|
|
|
|
|
730
|
|
|
|
38,734
|
|
|
|
|
|
|
|
|
|
|
|
|
18,050
|
|
|
|
971,632
|
|
|
|
|
30,680
|
|
|
$
|
566,736
|
|
|
|
|
|
|
|
|
|
Peter Niculescu
|
|
|
|
|
|
|
|
|
|
|
11,516
|
|
|
|
619,906
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
57,900
|
|
Beth Wilkinson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Williams
|
|
|
|
|
|
|
|
|
|
|
12,671
|
|
|
|
682,080
|
|
|
|
|
13,310
|
|
|
|
245,869
|
|
|
|
|
|
|
|
|
|
Julie St. John
|
|
|
12,430
|
|
|
|
234,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,516
|
|
|
|
619,906
|
|
|
|
|
|
|
|
|
|
|
|
|
11,516
|
|
|
|
692,342
|
|
|
|
|
|
|
|
|
|
|
|
|
5,419
|
|
|
|
325,790
|
|
|
|
|
(1) |
|
The value realized on exercise has
been determined by multiplying the number of shares exercised by
the difference between the fair market value of our common stock
at the time of exercise and the per share exercise price of the
options.
|
|
(2) |
|
The value realized on vesting has
been determined by multiplying the number of shares of stock or
units by the fair market value of our common stock on the
vesting date.
|
Pension
Benefits
The table below sets forth information on the pension benefits
for the named executives under each of the pension plans
described below.
Retirement Plan. The Federal National Mortgage
Association Retirement Plan for Employees Not Covered Under
Civil Service Retirement Law, which we refer to as the
Retirement Plan, provides benefits for those eligible employees,
including the named executives, who are not covered by the
federal Civil Service retirement law. Normal retirement benefits
are computed on a single life basis using a formula based on
final average annual earnings and years of credited service.
Participants are fully vested when they complete five years of
credited service. Since 1989, provisions of the Internal Revenue
Code of 1986, as amended, have limited the amount of annual
compensation that may be used for calculating pension benefits
and the annual benefit that may be paid. For 2006, the statutory
compensation and benefit caps were $220,000 and $175,000,
respectively. Before 1989, some employees accrued benefits based
on higher income levels. For employees who retire before
age 65, benefits are reduced by stated percentages for each
year that they are younger than 65.
48
Executive Pension Plan. We adopted the
Executive Pension Plan to supplement the benefits payable to key
officers under the Retirement Plan. The Compensation Committee
approves the participants in the Executive Pension Plan, who
include the named executives. The Board of Directors approves
each participants pension goal, which is part of the
formula that determines pension benefits. Payments under the
Executive Pension Plan are reduced by any amounts payable under
the Retirement Plan.
The annual pension benefit (when combined with the Retirement
Plan benefit) for Mr. Mudd equals 50% and for our other
named executives equals 40% of the named executives
highest average covered compensation earned during any 36
consecutive months within the last 120 months of
employment. Covered compensation generally is a
participants average annual base salary, including
deferred compensation, plus the participants other taxable
compensation (excluding income or gain in connection with the
exercise of stock options) earned for the relevant year, in an
amount up to 150% of base salary for our Executive Vice
Presidents and 200% of base salary for Mr. Mudd. As a
result, Mr. Mudds maximum annual benefit under the
Executive Pension Plan is 100% of his salary. The other named
executives could receive a maximum annual benefit equal to 60%
of salary. Effective for benefits earned on and after
March 1, 2007, the only taxable compensation other than
base salary considered for the purpose of calculating covered
compensation is a participants annual incentive plan cash
bonus.
Participants who retire before age 60 generally receive a
reduced benefit. The benefit is reduced by 2% for each year
between the year in which benefit payments begin and the year in
which the participant turns 60. However, Mr. Mudds
employment agreement provides that his benefit will be reduced
by 3% for each year. A participant is not entitled to receive a
pension benefit under the Executive Pension Plan until the
participant has completed five years of service as a plan
participant, at which point the pension benefit becomes 50%
vested and continues vesting at the rate of 10% per year during
the next five years. The benefit payment typically is a monthly
amount equal to 1/12th of the participants annual
retirement benefit payable during the lives of the participant
and the participants surviving spouse. If a participant
dies before receiving benefits under the Executive Pension Plan,
generally his or her surviving spouse will be entitled to a
death benefit that begins when the spouse reaches age 55,
based on the participants pension benefit at the date of
death.
Supplemental Pension Plans. We adopted the
Supplemental Pension Plan to provide supplemental retirement
benefits to employees whose salary exceeds the statutory
compensation cap applicable to the Retirement Plan or whose
benefit under the Retirement Plan is limited by the statutory
benefit cap applicable to the Retirement Plan. Separately, we
adopted the 2003 Supplemental Pension Plan to provide additional
benefits to our officers based on their annual cash bonuses,
which are not taken into account under the Supplemental Pension
Plan. Benefits under the supplemental pension plans vest at the
same time as benefits under the Retirement Plan. For purposes of
determining benefits under the 2003 Supplemental Pension Plan,
the amount of an officers annual cash bonus taken into
account is limited to 50% of the officers base salary.
Benefits under the supplemental pension plans typically commence
at the same time as benefits under the Retirement Plan. Officers
who are eligible for the Executive Pension Plan will receive the
greater of their Executive Pension Plan or combined Supplemental
Pension Plan and 2003 Supplemental Pension Plan benefits.
49
The table below shows information about years of credited
service and the present value of accumulated benefits for each
named executive under each of our pension plans. The Executive
Pension Plan supplements the benefits payable to named
executives under the Retirement Plan; amounts are shown for both
these plans in the table. Amounts are not shown for our
supplemental pension plans, except for Mr. Blakely, because
no benefits would be paid under these plans if a named
executives benefit under the Executive Pension Plan,
together with the named executives benefit under the
Retirement Plan, exceeded his or her combined benefits under the
supplemental plans and the Retirement Plan. At the time that
most of our executives retire, the Executive Pension Plan will
pay a greater benefit. As a result, we included only the values
that would be payable under the Retirement Plan and the
Executive Pension Plan. Because Mr. Blakely has advised us
of his intention to retire from Fannie Mae before 2011, when he
first becomes entitled to receive benefits under the Executive
Pension Plan, his benefits will be greater under our
supplemental plans and, as a result, we have included values for
Mr. Blakely under those plans rather than under our
Executive Pension Plan.
Pension
Benefits for 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years Credited
|
|
Present Value of Accumulated
|
|
|
|
|
Service
|
|
Benefit
|
Name of Executive
|
|
Plan Name
|
|
(#)(1)
|
|
($)(2)
|
|
Daniel
Mudd(3)
|
|
Fannie Mae Retirement Plan
|
|
|
7
|
|
|
$
|
101,102
|
|
|
|
Supplemental Pension Plan
|
|
|
|
|
|
|
|
|
|
|
2003 Supplemental Pension Plan
|
|
|
|
|
|
|
|
|
|
|
Executive Pension Plan
|
|
|
7
|
|
|
|
4,066,367
|
|
Robert
Blakely(4)
|
|
Fannie Mae Retirement Plan
|
|
|
1
|
|
|
|
45,022
|
|
|
|
Supplemental Pension Plan
|
|
|
1
|
|
|
|
93,441
|
|
|
|
2003 Supplemental Pension Plan
|
|
|
1
|
|
|
|
70,624
|
|
|
|
Executive Pension Plan
|
|
|
|
|
|
|
|
|
Robert Levin
|
|
Fannie Mae Retirement Plan
|
|
|
26
|
|
|
|
461,776
|
|
|
|
Supplemental Pension Plan
|
|
|
|
|
|
|
|
|
|
|
2003 Supplemental Pension Plan
|
|
|
|
|
|
|
|
|
|
|
Executive Pension Plan
|
|
|
17
|
|
|
|
2,758,908
|
|
Peter Niculescu
|
|
Fannie Mae Retirement Plan
|
|
|
8
|
|
|
|
108,689
|
|
|
|
Supplemental Pension Plan
|
|
|
|
|
|
|
|
|
|
|
2003 Supplemental Pension Plan
|
|
|
|
|
|
|
|
|
|
|
Executive Pension Plan
|
|
|
4
|
|
|
|
631,129
|
|
Beth Wilkinson
|
|
Fannie Mae Retirement Plan
|
|
|
1
|
|
|
|
11,818
|
|
|
|
Supplemental Pension Plan
|
|
|
|
|
|
|
|
|
|
|
2003 Supplemental Pension Plan
|
|
|
|
|
|
|
|
|
|
|
Executive Pension Plan
|
|
|
1
|
|
|
|
186,595
|
|
Michael Williams
|
|
Fannie Mae Retirement Plan
|
|
|
16
|
|
|
|
245,231
|
|
|
|
Supplemental Pension Plan
|
|
|
|
|
|
|
|
|
|
|
2003 Supplemental Pension Plan
|
|
|
|
|
|
|
|
|
|
|
Executive Pension Plan
|
|
|
6
|
|
|
|
1,151,288
|
|
Julie St.
John(4)
|
|
Fannie Mae Retirement Plan
|
|
|
16
|
|
|
|
379,149
|
|
|
|
Supplemental Pension Plan
|
|
|
|
|
|
|
|
|
|
|
2003 Supplemental Pension Plan
|
|
|
|
|
|
|
|
|
|
|
Executive Pension Plan
|
|
|
7
|
|
|
|
2,259,133
|
|
|
|
|
(1) |
|
Mr. Levin, Mr. Niculescu,
Mr. Williams, and Ms. St. John each have fewer years
of credited service under the Executive Pension Plan than under
the Retirement Plan because they worked at Fannie Mae prior to
becoming participants in the Executive Pension Plan.
|
|
(2) |
|
The present value has been
calculated for the Executive Pension Plan assuming the named
executives will remain in service until age 60, the normal
retirement age under the Executive Pension Plan, and assuming
the named executives will remain in service until age 65,
the normal retirement age under the Retirement Plan. The values
also assume that benefits under the Executive Pension Plan will
be paid in the form of a monthly annuity for the life of the
named executive and the named executives surviving spouse
and benefits under the Retirement Plan will be paid in the form
of a single life monthly annuity for the life of the named
executive. The post-retirement mortality assumption is based on
the RP 2000 white collar mortality table projected to 2010. For
additional information regarding the calculation of present
value and the assumptions underlying these amounts, see
Notes to Consolidated Financial
StatementsNote 14, Employee Retirement
Benefits, of our Annual Report on Form
10-K for the
year ended December 31, 2006.
|
50
|
|
|
(3) |
|
Mr. Mudds employment
agreement provides that if Mr. Mudds benefit payments
are in the form of a joint and 100% survivor annuity, the
payments will be actuarially reduced to reflect the joint life
expectancy of Mr. Mudd and his spouse.
|
|
(4) |
|
Mr. Blakely is eligible for
retirement under our supplemental pension plans and the
Retirement Plan. Ms. St. John was eligible for early
retirement under the Executive Pension Plan and the Retirement
Plan.
|
Nonqualified
Deferred Compensation
The table below provides information on the nonqualified
deferred compensation of the named executives in 2006, including
compensation deferred under our Elective Deferred Compensation
Plan II, our Career Deferred Compensation Plan and our
Performance Share Program.
Elective Deferred Compensation Plans. Our
Elective Deferred Compensation Plan II allows eligible
employees, including our named executives, to defer up to 50% of
their salary and up to 100% of their bonus to future years, as
determined by the named executive. Deferred amounts are deemed
to be invested in mutual funds or in an investment option with
earnings benchmarked to our long-term borrowing rate, as
designated by the participants. The deferred compensation plan
is an unfunded plan. The Elective Deferred Compensation
Plan II applies to compensation that is deferred after
December 31, 2004.
The prior deferred compensation plan, the Elective Deferred
Compensation Plan I, continues to operate for compensation
deferred under that plan on or prior to December 31, 2004.
Similar to the Elective Deferred Compensation Plan II, the
Elective Deferred Compensation Plan I provides that deferred
amounts are deemed to be invested in mutual funds or in an
investment option with earnings benchmarked to our long-term
borrowing rate, as designated by the participants, and is an
unfunded plan.
Career Deferred Compensation Plan. Our Career
Deferred Compensation Plan allowed participants to defer
compensation until their retirement. The plan is frozen to new
participants and, while accounts continue to be credited with
rates of return, no further contributions can be made to the
plan. The Career Deferred Compensation Plan is funded by a rabbi
trust, a special type of trust the assets of which are subject
to the claims of our creditors.
Deferred Payments under PSP. We have adopted
guidelines under the 1993 Plan that permit participants in the
PSP to defer payment of their awards until a later date or a
specified event such as retirement. Under these guidelines,
participants can choose to have their deferred PSP payments
converted into a hypothetical investment portfolio.
51
Nonqualified
Deferred Compensation for 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions in
|
|
Contributions in
|
|
Earnings in Last
|
|
Withdrawals/
|
|
Balance at Last
|
|
|
Last Fiscal Year
|
|
Last Fiscal Year
|
|
Fiscal Year
|
|
Distributions
|
|
Fiscal Year-End
|
Name of Executive
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Daniel Mudd
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Blakely
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elective Deferred Compensation Plan II
|
|
$
|
275,000
|
(1)
|
|
|
|
|
|
$
|
24,872
|
|
|
|
|
|
|
$
|
299,872
|
|
Robert Levin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Performance Share Program Payments
|
|
|
|
|
|
|
|
|
|
|
205,511
|
|
|
|
|
|
|
|
3,399,842
|
|
Peter Niculescu
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beth Wilkinson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Williams
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Career Deferred Compensation Plan
|
|
|
|
|
|
|
|
|
|
|
23,499
|
|
|
|
|
|
|
|
506,905
|
|
2001 Special Stock
award(2)
|
|
|
|
|
|
|
|
|
|
|
14,878
|
|
|
|
|
|
|
|
75,979
|
|
Julie St. John
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Performance Share Program Payments
|
|
|
|
|
|
|
|
|
|
|
53,763
|
|
|
|
|
|
|
|
440,254
|
|
Career Deferred Compensation Plan
|
|
|
|
|
|
|
|
|
|
|
187,620
|
|
|
|
|
|
|
|
1,374,791
|
|
Elective Deferred Compensation Plan
|
|
|
|
|
|
|
|
|
|
|
360,416
|
|
|
|
|
|
|
|
2,640,958
|
|
|
|
|
(1) |
|
Consists of salary reported in the
Summary Compensation Table. This amount does not
include Mr. Blakelys bonus of $1,290,575 reported in
the Summary Compensation Table, which was
contributed to the Elective Deferred Compensation Plan II in
2007.
|
|
(2) |
|
The Board approved a special stock
award to officers for 2001 performance. On January 15,
2002, Mr. Williams deferred until retirement
1,142 shares he received in connection with this award.
Aggregate earnings on these shares reflect dividends and stock
price appreciation. Mr. Williams share balance has
grown through the reinvestment of dividends to 1,279 shares
as of December 31, 2006.
|
52
Potential
Payments Upon Termination or
Change-in-Control
The information below describes and quantifies certain
compensation and benefits that would become payable under our
existing employment agreements, plans, and arrangements if our
named executives employment had terminated on
December 29, 2006, taking into account each named
executives compensation and service levels as of that date
and based on the closing price of our common stock on
December 29, 2006. We are not obligated to provide any
additional compensation in connection with a
change-in-control.
The information below does not generally reflect compensation
and benefits available to all salaried employees upon
termination of employment with us under similar circumstances.
Employment Agreement with Daniel
Mudd. Mr. Mudds employment agreement
provides for certain benefits upon the termination of his
employment with us depending on the reason for his termination.
These benefits are described in the following table.
|
|
|
|
|
Type of
Termination
|
|
|
Payments
|
|
Without Cause, By Mr. Mudd For Good Reason, Serious Illness or Disability, or Failure to Extend the Employment Agreement
Cause means Mr. Mudd has: (a) materially harmed the company by, in connection with his service under his employment agreement, engaging in dishonest or fraudulent actions or willful misconduct, or performing his duties in a grossly negligent manner, or (b) been convicted of, or pleaded no lo contendere with respect to, a felony.
Good Reason means (a) a material reduction by the company of Mr. Mudds authority or a material change in Mr. Mudds functions, duties or responsibilities that in any material way would cause Mr. Mudds position to become less important, (b) a reduction in Mr. Mudds base salary, (c) a requirement that Mr. Mudd
report to anyone other than the Chairman of the Board of Directors, (d) a requirement by Fannie Mae that Mr. Mudd relocate his office outside of the Washington, DC area, or (e) a breach by the company of any material obligation under the employment agreement.
Failure to Extend means notification by the company that it does not desire to extend the term of the employment agreement (which expires December 31, 2009) or that it desires to do so only on terms in the aggregate that are materially less favorable to Mr. Mudd than those currently applicable.
|
|
|
Accrued, but unpaid base salary.
Base salary for two years (subject to offset for other employment or employer-provided disability payments in the event of termination due to serious illness or disability).
Prorated annual bonus for the year of termination and all amounts payable (but unpaid) under the annual bonus plan with respect to any year ended on or prior to the termination date.
Prorated PSP payment for any cycle in which at least 18 months have elapsed as of the date of termination and payment of all amounts payable (but unpaid) for completed cycles.
Vesting of all shares of restricted stock, to the extent not already vested.
Vesting of all options; options granted after the date of the employment agreement remain exercisable through the earlier of the remainder of the original exercise period and the third anniversary of the date of the termination.
Upon a termination by Fannie Mae without Cause or by Mr. Mudd for Good Reason, continued medical and dental coverage for Mr. Mudd and his spouse and dependents (but in the case of Mr. Mudds dependents only for so long as they remain dependents or until age 21 if later), without premium payments by Mr. Mudd, for two years or if earlier, the date Mr. Mudd
obtains comparable coverage through another employer.
|
|
|
Death or by Reason of Mr. Mudds Acceptance of an Appointment to a Senior Position in the U.S. Federal Government
|
|
|
Same payments as above except (a) no salary
severance, (b) no continued medical and dental coverage,
and (c) in the case of termination due to acceptance of a
governmental position, no accelerated vesting of options.
|
|
|
53
|
|
|
|
|
Type of
Termination
|
|
|
Payments
|
|
Retirement or Early Retirement
Retirement means termination at or after age 65, under conditions entitling an eligible employee to an immediate annuity under the Fannie Mae Retirement Plan.
Early Retirement means termination at or after age 60, but before age 65, with five or more years of service, or at an earlier age only if permitted by the Compensation Committee in its sole discretion.
|
|
|
Accrued, but unpaid base salary.
Prorated PSP payment for any cycle in which at least 18 months have elapsed as of the date of termination and payment of all amounts payable (but unpaid) for completed cycles.
In the case of Retirement, but not Early Retirement, vesting of all shares of restricted stock, to the extent not already vested. In the event of Early Retirement, Fannie Mae may in its discretion accelerate the vesting of shares of restricted stock.
Vesting of all options and options granted after the date of the employment agreement will remain exercisable through the earlier of the remainder of the original exercise period and the third anniversary of the date of the termination.
|
|
|
For Cause or Voluntary Termination (other than for Good Reason or to Accept a Senior Position in the U.S. Federal Government)
|
|
|
Accrued, but unpaid base salary.
If termination is for Cause, Mr. Mudd would not be entitled to any amounts payable (but unpaid) of any bonus or under any PSP award with respect to a performance cycle if the reason for such termination for Cause is substantially related to the earning of such bonus or to the performance over the performance cycle upon which the payment was based.
|
|
|
Mr. Mudds employment agreement also obligates him not
to compete with us in the U.S., solicit any officer or employee
of ours or our affiliates to terminate his or her relationship
with us or to engage in prohibited competition, or to assist
others to engage in activities in which Mr. Mudd would be
prohibited from engaging, in each case for two years following
termination. Mr. Mudd may request a waiver from these
non-competition obligations, which the Board may grant if it
determines in good faith that an activity proposed by
Mr. Mudd would not prejudice our interests.
Mr. Mudds employment agreement provides us with the
right to seek and obtain injunctive relief from a court of
competent jurisdiction to restrain Mr. Mudd from any actual
or threatened breach of these obligations. Disputes arising
under the employment agreement are to be resolved through
arbitration, and we bear Mr. Mudds legal expenses
unless he does not prevail. We also agreed to reimburse
Mr. Mudds legal expenses incurred in connection with
any subsequent negotiation, amendment, or discussion of his
employment agreement and to reimburse him for a complete
physical examination annually.
The following table quantifies the compensation that would have
become payable to Mr. Mudd if his employment had terminated
on December 29, 2006, given his compensation as of that
date and based on the closing price of our common stock on that
date. In the case of retirement, the table shows benefits that
would have become payable if Mr. Mudd had reached
age 60 with 5 years of service or age 65 with no
service requirement; Mr. Mudd is currently 48.
Potential
Payments to Mr. Mudd as of December 29, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without Cause,
|
|
|
|
|
|
|
|
|
|
|
for Good Reason
|
|
|
|
Acceptance of
|
|
|
|
|
|
|
or upon Non-
|
|
|
|
Senior Position in
|
|
|
|
|
|
|
Extension of the
|
|
Serious Illness
|
|
U.S. Federal
|
|
|
|
|
Payment Type
|
|
Agreement
|
|
or Disability
|
|
Government
|
|
Death
|
|
Retirement
|
|
Cash Severance
|
|
$
|
1,900,000
|
|
|
$
|
1,900,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Cash
Bonus(1)
|
|
|
3,500,000
|
|
|
|
3,500,000
|
|
|
$
|
3,500,000
|
|
|
$
|
3,500,000
|
|
|
$
|
3,500,000
|
|
Accelerated Stock
Awards(2)
|
|
|
13,752,230
|
|
|
|
13,752,230
|
|
|
|
13,752,230
|
|
|
|
13,752,230
|
|
|
|
13,752,230
|
|
Performance Share Program
Awards(3)
|
|
|
1,287,499
|
|
|
|
1,287,499
|
|
|
|
1,287,499
|
|
|
|
1,287,499
|
|
|
|
1,287,499
|
|
Medical
Benefits(4)
|
|
|
37,502
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
54
|
|
|
(1) |
|
The amounts of cash bonus shown
assume that the Board would have determined to grant
Mr. Mudd a cash bonus award under our annual incentive plan
in the amount he actually received for 2006. In the case of
retirement, Mr. Mudds employment agreement does not
explicitly provide for a bonus, but he would have been entitled
to a bonus under the terms of our annual incentive plan as in
effect on December 29, 2006. The plan also gives our
Compensation Committee discretion to award prorated bonuses to
retirees who depart at other times of the year.
|
|
(2) |
|
No value is shown for
Mr. Mudds options subject to accelerated vesting
because the exercise price of the options exceeded the closing
price of our common stock on December 29, 2006.
|
|
(3) |
|
The reported amounts are for
payments under our PSP that normally would have been paid
subsequent to December 29, 2006 and to which Mr. Mudd
would not have been entitled if he left in the absence of his
agreement. For more information regarding our PSP, see
Compensation Discussion and AnalysisWhat decisions
have we made with regard to our Performance Share Program?
|
|
(4) |
|
These benefits would not be
available to Mr. Mudd if his agreement was not extended.
The amount shown assumes that Mr. Mudd will receive medical
and dental coverage for two years after his termination of
employment and is calculated using the assumptions used for
financial reporting purposes under generally accepted accounting
principles.
|
Agreement with Robert Levin. We have a letter
agreement with Mr. Levin, dated June 19, 1990. The
agreement provides that if he is terminated for reasons other
than for cause, he will continue to receive his base
salary for a period of 12 months from the date of
termination and will continue to be covered by our life,
medical, and long-term disability insurance plans for a
12-month
period, or until re-employment that provides certain coverage
for benefits, whichever occurs first. For the purpose of this
agreement, cause means a termination based upon
reasonable evidence that Mr. Levin has breached his duties
as an officer by engaging in dishonest or fraudulent actions or
willful misconduct. Any disability benefits that he receives
during the
12-month
period will reduce the amount otherwise payable by us, but only
to the extent the benefits are attributable to payments made by
us. If Mr. Levin had been terminated for reasons other than
for cause as of December 29, 2006, he would
have been entitled to receive an aggregate cash severance
payment of $750,000 and medical, long-term disability, and life
insurance coverage with premiums and a related
gross-up
payment we estimate would have cost us an aggregate of
approximately $71,500.
Severance Program. On March 10, 2005, our
Board of Directors approved a severance program that provided
guidelines regarding the severance benefits that
management-level employees, including all of the named
executives except for Mr. Mudd, were entitled to receive if
their employment with us was terminated as a result of corporate
restructuring, reorganization, consolidation, staff reduction,
or other similar circumstances, where there were no
performance-related issues, and where termination was not for
cause. Ms. St. John participated in the severance program.
The severance program expired on December 31, 2006 and was
replaced with a program that does not apply to our named
executives or other executive officers. As effective for 2006,
the severance program provided for the following benefits,
subject to OFHEO approval, for named executives (other than
Mr. Mudd):
|
|
|
|
|
a severance payment of one years salary plus four
weeks salary for each year of service with us up to a
maximum of one and a half years salary;
|
|
|
|
for participants terminated after the first quarter of the
fiscal year, a pro rata payout of the participants annual
cash incentive award target for the year in which termination
occurred, adjusted for corporate performance;
|
|
|
|
consistent with the terms of our applicable stock compensation
plan, accelerated vesting of options that were scheduled to vest
within 12 months of termination and the extension of option
exercise periods to the earlier of the option expiration date or
12 months following the termination of employment;
|
|
|
|
accelerated vesting of restricted stock and restricted stock
unit awards granted under the 2003 Plan that would have
otherwise vested within 12 months of termination;
|
|
|
|
for the cash portion of long-term incentive awards for the 2005
performance year, which are payable in four equal annual
installments beginning in 2007, accelerated payment of the
amount that would have otherwise become payable within
12 months of termination; and
|
|
|
|
payment of unpaid performance shares for completed performance
cycles.
|
55
The program was available only to employees who had served at
least 13 weeks. Participants were required to execute a
separation agreement to receive these benefits containing, where
permitted, a one-year non-compete clause and also containing a
waiver of claims against us.
Participants found violating the competition restriction would
be required to return any severance payments that they received.
The program also provided for outplacement services and
continued access to our medical and dental plans for up to five
years, with the first 18 months premiums to remain at
a level no higher than they would be if the participant were
still an active employee.
The following table quantifies the compensation that would have
become payable to the named executives under the severance
program if their employment had terminated on December 29,
2006, given their compensation as of that date and the closing
price of our common stock on December 29, 2006 and assuming
we had received OFHEOs approval. In the case of
Ms. St. John, the table shows the benefits to which she
became entitled in connection with her retirement in December
2006. The amounts of cash severance shown assume, where
applicable, that the Board would have determined we achieved
performance of our corporate annual incentive plan goals at 110%
of our target level, which was the level actually determined for
2006.
Potential
Payments under 2005 to 2006 Severance Program as of
December 29, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive
|
|
Cash
Payment(1)
|
|
Equity
Award(2)(3)
|
|
Medical and Dental
|
|
Outplacement(4)
|
|
Robert
Blakely(5)
|
|
$
|
2,058,500
|
|
|
|
|
|
|
$
|
15,158
|
|
|
$
|
18,000
|
|
Robert Levin
|
|
|
3,465,937
|
|
|
$
|
3,475,748
|
|
|
|
20,590
|
|
|
|
18,000
|
|
Peter Niculescu
|
|
|
2,011,452
|
|
|
|
1,890,994
|
|
|
|
20,590
|
|
|
|
18,000
|
|
Beth Wilkinson
|
|
|
1,662,856
|
|
|
|
494,956
|
|
|
|
20,968
|
|
|
|
18,000
|
|
Michael Williams
|
|
|
2,747,567
|
|
|
|
2,590,929
|
|
|
|
20,590
|
|
|
|
18,000
|
|
Julie St.
John(6)
|
|
|
1,883,193
|
|
|
|
1,920,246
|
|
|
|
1,743
|
|
|
|
18,000
|
|
|
|
|
(1) |
|
Cash payments include severance
payments, pro rata payments of annual cash incentive awards, and
accelerated payments of the cash portion of the long-term
incentive awards for 2005 that would have otherwise been payable
within 12 months of an executives termination.
|
|
(2) |
|
Reflects accelerated vesting of
restricted stock and restricted stock units and performance
shares under our PSP. No value is shown for options subject to
accelerated vesting because the exercise price of the options
exceeded the closing price of our common stock on
December 29, 2006.
|
|
(3) |
|
The reported amounts include
payments under our PSP that normally would have been paid
subsequent to December 29, 2006 and to which the named
executives would not have been entitled if they had left in the
absence of the severance program. For more information regarding
our PSP, see Compensation Discussion and
AnalysisWhat decisions have we made with regard to our
Performance Share Program?
|
|
(4) |
|
The amounts shown assume the
executive will find new employment within 6 months.
|
|
(5) |
|
If Mr. Blakely had left Fannie
Mae on December 29, 2006 under the severance program, he
would also have been eligible as a retiree to receive an
additional cash payment of $1,656,270 under a long-term
incentive award and accelerated vesting of restricted stock
units worth $4,252,977. These amounts are not shown in this
table, but are set forth in the Potential Payments under
our Stock Compensation Plans and 2005 Performance Year Cash
Awards table below.
|
|
(6) |
|
Based on her age and years of
service, upon her departure from Fannie Mae
Ms. St. John received an extension of the exercise
period of her options to the option expiration date under our
stock compensation plans. She also was eligible for our retiree
medical benefits. Because these benefits are available to all
full-time, salaried employees, our costs for these benefits have
not been included in the table above. The amount shown for
Ms. St. John reflects our estimated cost of
subsidizing her dental plan premiums for 18 months.
|
56
Stock Compensation Plans, 2005 Performance Year Cash Awards,
and Annual Incentive Plan
|
|
|
Death, Disability, and Retirement. Under the
1993 Plan and the 2003 Plan, stock options, restricted stock,
and restricted stock units held by our employees, including our
named executives, fully vest upon the employees death,
disability or retirement. On these terminations, or if an option
holder leaves after age 55 with at least 5 years of
service, the option holder, or the holders estate in the
case of death, can exercise any stock options until the initial
expiration date of the stock option, which is generally
10 years after the date of grant. For these purposes,
retirement generally means that the executive
retires at or after age 60 with 5 years of service or
age 65 (with no service requirement).
|
|
|
In early 2006, our named executives, other than Mr. Mudd,
received a portion of their long-term incentive awards for the
2005 performance year in the form of cash awards payable in four
equal annual installments beginning in 2007. Under the terms of
the awards, these cash awards are subject to accelerated payment
at the same rate as restricted stock or restricted stock units
and, accordingly, named executives would receive accelerated
payment of the unpaid portions of this cash in the event of
termination of employment by reason of death, disability, or
retirement.
|
|
|
Performance Share Program. As described above,
performance shares are contingent grants of our common stock
that are paid out based on performance over three-year
performance periods. Actual payouts are generally made in two
installments. Participants whose employment terminates at least
18 months after the beginning of the cycle but prior to the
end of a performance cycle, due to death, disability, or, after
age 55, at least five years of service, receive a pro rata
payment of the performance shares at the end of the cycle,
except in the case of death, in which case the payment is made
as soon as practicable after the participants death.
|
For each named executive who remained with Fannie Mae, other
than Mr. Mudd, the following table provides the value of
the awards that would have vested or become payable if, as of
December 29, 2006, the named executive had died, become
disabled, or retired either (1) at or after age 60 if
the named executive had at least five years of service or
(2) at or after age 65 regardless of the
executives length of service. Information about what
Mr. Mudd would have been entitled to receive if he had
died, become disabled, or retired as of December 29, 2006
appears in the Potential Payments to Mr. Mudd as of
December 29, 2006 table above.
Potential
Payments under our Stock Compensation Plans and 2005 Performance
Year Cash
Awards(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock and
|
|
|
|
Performance
|
Name of Executive
|
|
Restricted Stock Units
|
|
Cash
Award(2)
|
|
Shares(3)
|
|
Robert Blakely
|
|
$
|
4,252,977
|
|
|
$
|
1,656,270
|
|
|
|
N/A
|
|
Robert Levin
|
|
|
6,878,312
|
|
|
|
2,103,750
|
|
|
|
1,198,557
|
|
Peter Niculescu
|
|
|
3,324,652
|
|
|
|
885,720
|
|
|
|
717,863
|
|
Beth Wilkinson
|
|
|
1,484,750
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Michael Williams
|
|
|
5,164,139
|
|
|
|
1,656,270
|
|
|
|
923,673
|
|
|
|
|
(1) |
|
The values reported in this table,
except for the cash, are based on the closing price of our
common stock on December 29, 2006. No amounts are shown in
the table for stock options because the exercise prices for
options held by Mr. Levin, Mr. Niculescu and
Mr. Williams that would have vested exceed the closing
price of our common stock on December 29, 2006.
Mr. Blakely and Ms. Wilkinson have never been awarded
Fannie Mae stock options.
|
|
(2) |
|
The reported amounts represent
accelerated payment of cash awards made in early 2006 in
connection with long-term incentive awards for the 2005
performance year.
|
|
(3) |
|
The reported amounts in the
Performance Shares column consist of payments under
our PSP that normally would have been paid subsequent to
December 29, 2006 and to which the named executives would
not have been entitled if they left in the absence of the
severance program. For more information regarding our PSP, see
Compensation Discussion and AnalysisWhat decisions
have we made with regard to our Performance Share Program?
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Life Insurance Benefits. We currently have a
practice of arranging for our officers, including our named
executives, to purchase universal life insurance coverage at our
expense, with death benefits of $5,000,000 for Mr. Mudd and
$2,000,000 for our other named executives. The death benefit is
reduced by 50% at the
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later of retirement, age 60, or 5 years from the date
of enrollment. We provide the executives with an amount
sufficient to pay the premiums for this coverage until but not
beyond termination of employment, except in cases of retirement
or disability, in which case we continue to make scheduled
payments. Historically we also have paid our named executives a
tax
gross-up
to cover any related taxes, but these payments will be
eliminated as of January 1, 2008.
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Retiree Medical Benefits. We currently make
certain retiree medical benefits available to our full-time
salaried employees who retire and meet certain age and service
requirements. We agreed that Mr. Blakely may participate in
our retiree medical program as long as he remained employed
until age 65.
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Pension and Deferred Compensation
Benefits. Our named executives are also entitled
to the benefits described above in Pension Benefits
and Nonqualified Deferred Compensation.
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58
REPORT
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of Fannie Maes Board of Directors is
composed of five directors. In the business judgment of the
Board of Directors, each Committee member meets the
independence, qualification, and expertise requirements of the
NYSE listing standards and Fannie Maes Corporate
Governance Guidelines. The Board has determined that
Mr. Beresford, Ms. Horn, Mr. Smith, and
Mr. Wulff have the requisite experience to qualify as
audit committee financial experts under the rules
and regulations of the SEC and has designated them as such.
The Audit Committee operates under a written charter that is
reviewed annually and was last revised by the Board of Directors
in January 2007. A copy of the charter is available on our Web
site at www.fanniemae.com. In addition to preparing this Audit
Committee report, the purpose of the Audit Committee under its
charter is to oversee:
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the accounting, reporting, and financial practices of the
Corporation and its subsidiaries, including the integrity of the
Corporations financial statements and internal control
over financial reporting;
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the Corporations compliance with legal and regulatory
requirements (in coordination with the Compliance Committee of
the Board);
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the independent auditors qualifications and
independence; and
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the performance of the Corporations internal audit
function and the Corporations independent auditor.
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In accordance with this purpose, the independent auditor reports
directly to the Audit Committee and the Audit Committee has the
sole authority to appoint and retain the independent auditor.
The Audit Committee pre-approves the fees for and the terms of
all audit and non-audit services to be provided by Fannie
Maes independent auditor. The Committee meets separately
on a periodic basis with each of management, the head of the
internal audit department, and the independent auditor. The
Committee has the authority to retain independent counsel,
accountants, experts, and other advisors to assist the members
in carrying out their duties.
For the year ended December 31, 2006, the Audit Committee
met 19 times, and as of October 22, 2007, has met 14 times
during the year ended December 31, 2007. During 2006 and
2007, the Committee met with members of senior management
(including the Chief Executive Officer, the Chief Operating
Officer, the Chief Financial Officer, the Controller, the Chief
Audit Executive, the Chief Risk Officer, the Chief Compliance
Officer, the Senior Vice President for Accounting Policy, the
Senior Vice President for Sarbanes-Oxley, and the General
Counsel) and internal tax, finance, legal, and internal audit
personnel, as well as representatives from Fannie Maes
independent auditor, to discuss and review the audit scope and
plans, the results of internal and external audit examinations,
evaluations by the Corporation and by the independent auditor of
Fannie Maes internal controls over financial reporting,
the quality of Fannie Maes financial reporting, Fannie
Maes compliance with legal and regulatory requirements,
the accounting policies and procedures, the earnings press
releases, financial information and earnings guidance, the
engagement, independence and quality-control procedures of the
independent auditor, and other matters. Specifically, during the
years ended December 31, 2006 and 2007, the Committee,
among other things:
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reviewed, and discussed with management, the audited financial
statements included in Fannie Maes Annual Report on
Form 10-K
for the year ended December 31, 2006;
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discussed with the independent auditor the matters required to
be discussed by Statement on Auditing Standards No. 61, as
amended;
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received the written disclosures and the letter from the
independent auditor, Deloitte & Touche LLP, required
by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and
discussed with the independent auditor its independence from
Fannie Mae;
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conducted due diligence regarding the independent auditors
independence from Fannie Mae and its management;
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reviewed and discussed the scope and resources for the internal
audit function; and
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reviewed and oversaw the process by which Fannie Maes
Chief Executive Officer and Chief Financial Officer certified
Fannie Maes periodic disclosures.
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In reliance on the reviews, reports, and discussions referred to
above, the Audit Committee recommended to the Board of
Directors, and the Board of Directors approved, the inclusion of
the audited financial statements, for the years ended
December 31, 2004, December 31, 2005, and
December 31, 2006, in Fannie Maes Annual Report on
Form 10-K
for the year ended December 31, 2006.
In addition, the Audit Committee has approved the appointment of
Fannie Maes independent auditor, Deloitte &
Touche LLP, for 2007, and the Board of Directors has submitted
the appointment to shareholders for ratification at the 2007
annual meeting.
Interested parties may contact the Audit Committee by electronic
mail, sent to auditcommittee@fanniemae.com, or by
U.S. mail, sent to Audit Committee,
c/o Office
of the Secretary, Fannie Mae, Mail Stop: 1H-2S/05, 3900
Wisconsin Avenue NW, Washington DC
20016-2802.
The Audit
Committee
Dennis R. Beresford, Chair
Stephen B. Ashley
Karen N. Horn
Greg C. Smith
John K. Wulff
60
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PROPOSAL 2:
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RATIFICATION
OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
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After evaluating the performance of Deloitte & Touche
LLP in 2006, the Audit Committee has appointed
Deloitte & Touche LLP as our independent registered
public accounting firm for 2007. In accordance with established
policy, the Board of Directors has ratified that appointment.
Representatives of Deloitte & Touche LLP will be
present at the annual meeting and will be given the opportunity
to make a statement, if they desire to do so, and to respond to
appropriate questions. Unless shareholders specify otherwise in
their voting instructions, proxies solicited by the Board of
Directors will be voted FOR ratification of the selection of
Deloitte & Touche LLP as Fannie Maes independent
registered public accounting firm for 2007. A majority of the
votes cast on this proposal is required for ratification.
Fees
Paid
The following is a description of the fees paid by us to
Deloitte & Touche LLP during 2006 and 2005:
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Fees For The Year Ended
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Fees For The Year Ended
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Description of Fees
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December 31, 2006
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December 31, 2005
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Audit Fees
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$
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42,000,000
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$
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59,966,000
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Audit-Related
Fees(1)
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192,000
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Tax Fees
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All Other Fees
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Total Fees
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$
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42,192,000
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$
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59,966,000
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(1) |
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For 2006, consists of fees billed
for attest-related services on securitizations. For 2005,
excludes $100,000 paid to Deloitte & Touche LLP for an
engagement with one of our counterparties to provide a comfort
letter on a REMIC transaction.
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Pre-Approval
Policy
The Audit Committees policy is to pre-approve all audit
and permissible non-audit services to be provided by the
independent registered public accounting firm for the upcoming
year. The independent registered public accounting firm and
management are required to present reports on the nature of the
services provided by the independent registered public
accounting firm for the past year and the fees for such
services, categorized into audit services, audit-related
services, tax services, and other services. In addition,
management and the independent registered public accounting firm
are required to submit a list of proposed audit and permissible
non-audit services and the estimated fees for such services for
the upcoming year. The Audit Committee approves the audit and
permissible non-audit services for the upcoming year.
Pre-approval for services is generally provided for up to one
year, and any pre-approval is detailed as to the particular
service or category of services and authorized fees. In the
event that the fees for pre-approved services during the year
exceed the authorized fees by 20%, then the increased fees must
be pre-approved by the Audit Committee.
The Audit Committee has delegated the authority to pre-approve
any audit and permissible non-audit services and fee increases
that arise during the year to its current Chair,
Mr. Beresford, who is required to report any such
pre-approvals at the next scheduled meeting of the Audit
Committee.
In 2006, no fees were paid to the independent registered public
accounting firm pursuant to the de minimis exception established
by the SEC, and all services were pre-approved.
The Board
of Directors recommends that shareholders
vote FOR the ratification of the selection of
Deloitte & Touche LLP as Fannie Maes
independent
registered public accounting firm for 2007.
61
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PROPOSAL 3:
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APPROVAL
OF AMENDMENT TO FANNIE MAE STOCK COMPENSATION PLAN OF
2003
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At the 2007 annual meeting, our shareholders will be asked to
consider and vote upon a proposal to amend the 2003 Plan, which
we refer to as the Plan, to change the form and
amount of equity compensation for our non-management directors.
The effect of the proposed amendment to the Plan, together with
the changes to the cash component of director compensation
described above under Proposal 1: Election of
DirectorsDirector Compensation, is to target total
director compensation at the median of our comparator group.
Proposed
Amendment to the Plan
If approved, the proposed amendment to the Plan, which we refer
to as the Plan Amendment, would:
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discontinue automatic stock option grants to non-management
directors at each annual meeting;
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eliminate the current Plan provision requiring automatic awards
to non-management directors of restricted stock in 2006 (with
the 2006 award to have a fair market value of $75,000) and in
2010 (with the 2010 award to have a fair market value of
$90,000), as described in more detail below under
Non-Management Director Restricted Stock Awards;
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provide for automatic awards of restricted stock or restricted
stock units (collectively referred to as restricted
stock) to non-management directors, after each annual
meeting, with a fair market value to be determined annually by
the Board (which, for the annual meeting in 2008, will be
$135,000), and that will vest in full no later than one year
after the date of grant, as described in more detail below under
Non-Management Director Restricted Stock
Awards; and
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permit non-management directors to elect to defer awards of
restricted stock and convert their annual cash retainer into
deferred shares, as described below under Deferred
Compensation.
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The Plan Amendment does not increase the total number of shares
of stock that may be issued under the Plan.
In 2003, our Board adopted the Plan, which became effective when
our shareholders approved the Plan in May 2003. Our Board
adopted the Plan Amendment in September 2007 to implement our
new non-management director compensation structure. The new
compensation structure is based on recommendations from the
Boards outside compensation consultant, Semler Brossy
Consulting Group. Prior to making its recommendations to our
Board regarding compensation of our non-management directors,
Semler Brossy prepared and presented to our Board a
comprehensive study of the compensation of the non-management
directors relative to contemporary practices for directors,
including practices among the companies that comprise our
comparator group. Our comparator group is identified and
discussed above under Executive
CompensationCompensation Discussion and
AnalysisHow does comparability factor into our
executive compensation decisions?
Semler Brossys recommendations included recommendations to:
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simplify our current program,
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curtail the use of options for directors,
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eliminate meeting fees for our non-management directors, and
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rely, in the future, on cash retainers and an annual restricted
stock grant.
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The Board believes that the Plan Amendment is in the interest of
the company and necessary to (1) provide stock compensation
to directors that is comparable to that provided by similar
companies, and (2) to continue to attract, motivate, and
retain experienced and knowledgeable independent directors.
If our shareholders approve the Plan Amendment, no annual stock
option awards will be made with respect to the annual meeting
that would have been held in 2005 or 2006. Additionally, our
non-management directors will no longer automatically receive
annual stock option grants at the 2007 annual meeting and future
annual
62
meetings. The Plan Amendment will not affect stock options that
are outstanding under the Plan, which will continue in
accordance with their terms.
In addition, if our shareholders approve the Plan Amendment, our
non-management directors will not receive the restricted stock
award that was scheduled to be granted immediately following our
2006 annual meeting. Instead, immediately after the annual
meeting of shareholders in 2008, our non-management directors
will receive the restricted stock unit awards described below.
If the Plan Amendment is not approved, the Plan will continue
without amendment and our non-management directors will continue
to be eligible for automatic annual grants of stock options and
certain restricted stock grants under the current terms of the
Plan.
Our non-management directors have not received option awards
scheduled to be granted immediately following our 2005 and 2006
annual meetings nor have they received the restricted stock
award that was scheduled to be granted immediately following our
2006 annual meeting.
Our non-management directors have a financial interest in this
proposal because it would increase the amount of the automatic
restricted stock award for non-management directors under the
Plan, and would provide the Board with greater flexibility in
determining the amount of this annual award in future years.
Unless shareholders specify otherwise in the proxy, proxies
solicited by the Board of Directors will be voted by the proxy
holders at the annual meeting to approve the Plan Amendment. A
majority of the votes cast on this proposal is required to
approve this proposal.
The Board
of Directors recommends that shareholders vote
FOR the approval of the Amendment to the Fannie
Mae Stock Compensation Plan of 2003.
Summary
Description of the Plan
The complete text of the Plan, marked to show the effect of
the proposed Plan Amendment, is attached to this proxy statement
as Appendix A. The following summary of the Plan, as
proposed to be amended, is qualified in its entirety by
reference to Appendix A.
Grants
The Plan provides for grants to Fannie Mae employees of stock
options, stock appreciation rights (SARs),
restricted shares or units of common stock (restricted
stock), performance share awards, and stock bonuses.
Options may be either incentive stock options
(ISOs), which are intended to satisfy the
requirements of Section 422 of the Internal Revenue Code of
1986, as amended (the Code), or nonqualified stock
options. SARs entitle the grantee to receive the difference in
value between the underlying common stock on the date of
exercise and the date of grant. SARs may be awarded by
themselves or granted in tandem with another award. Restricted
stock may be subject to forfeiture conditions. As of
October 22, 2007, Fannie Mae had 6,073 employees.
The Plan also provides for grants of nonqualified stock options,
and awards of restricted stock or units, and deferred shares to
non-management directors. As of November 2, 2007, Fannie
Mae had 12 non-management members on its Board of Directors.
As of October 22, 2007, the fair market value of Fannie Mae
common stock underlying stock options and SARs was $58.15 based
on the closing price of the common stock on the NYSE on that
date.
In general, share awards under the Plan are based on the fair
market value of the common shares on the date of the award. For
awards of options, the exercise price of the options may not be
less than the fair market value on the date of the grant of the
option award. Under the Plan, the fair market value
generally is the mean between the high and low selling prices of
the common stock on the date of determination, as reported on
the NYSE.
63
Securities
Available
The shares of common stock that may be delivered under the Plan
are (1) shares of Fannie Maes authorized but unissued
common stock, (2) treasury shares, or (3) shares of
common stock purchased by Fannie Mae in the open market. The
maximum number of shares of common stock that may be delivered
under the Plan is 40,000,000 shares. Of these shares, no
more than 2,000,000 shares may be used for
(1) restricted stock grants that vest in less than three
years, (2) performance share awards with performance cycles
of less than one year, or (3) stock bonuses that vest 100%
immediately. As of October 22, 2007, there were
30,025,567 shares of common stock available for delivery
under the Plan, 1,433,784 of which were available under the
2,000,000 share limit.
If any award expires or is canceled or terminated without having
been exercised in full, or does not vest or is not delivered,
the unpurchased, nonvested, or undelivered shares of common
stock subject to the award will again become available under the
Plan. Shares used to satisfy a tax withholding obligation,
however, are not available for additional awards under the Plan.
Administration
of the Plan
The Plan is administered by the Compensation Committee (the
Committee), which is composed entirely of
independent directors. The Committee has full authority to
determine the employees eligible to receive awards and the terms
and conditions of any award consistent with the express limits
of the Plan. Subject to limitations specified in the Plan, the
Committee may authorize any adjustment in the vesting schedule,
restrictions upon, or term of an award.
The Committee may make administrative amendments to the Plan,
and the Board generally may make non-administrative amendments.
If, however, any amendment of the Plan would either materially
increase benefits accruing under the Plan or materially increase
the aggregate number of shares of common stock that may be
issued under the Plan, then, to the extent deemed necessary or
advisable by the Board or as required by law or the rules of the
NYSE, the amendment will be subject to shareholder approval.
Employee
Stock Options
The Plan authorizes the grant to employees of ISOs or
nonqualified stock options, both of which are exercisable for
shares of common stock. The exercise price of an option may not
be less than the fair market value of a share of common stock on
the award date. An option may not be modified so as to reduce
the exercise price of the option.
The period during which an ISO may be exercised may not extend
more than ten years from the date of grant. An option that is
not exercised before expiration of the option period will
terminate. No grants may be made to employees under the Plan
after the termination of the Plan.
The Committee determines an options exercise and vesting
schedule. The Committee may grant options that will become
exercisable and fully vested upon a change in control of Fannie
Mae.
No option grants have been made to employees since May 2005.
Stock
Appreciation Rights
Under the Plan, SARs may be granted in three ways:
(1) concurrently with the grant of another award,
(2) as an additional element of an outstanding award, or
(3) separately as a stand-alone SAR. Each stand-alone SAR
will specify the period in which it can be exercised, and the
Committee may extend the period.
A SAR related to another award generally will be exercisable at
the same time as the related award. The Committee, in its
discretion, may grant stand-alone SARs that will become
immediately exercisable and fully vested upon a change in
control of Fannie Mae.
64
Restricted
Stock Awards to Employees
The Committee may grant shares or units of restricted stock to
employees and impose restrictions on the restricted stock.
Promptly after the lapse of restrictions on restricted stock,
shares of common stock will be delivered or credited to the
employee or other person entitled under the Plan to receive the
shares.
Restricted stock generally may not be sold, transferred or
encumbered until the restrictions have lapsed. Holders of
restricted stock may be entitled to dividends on the restricted
stock even though the award has not vested at the time the
dividend is paid. Holders of shares of restricted stock (but not
units) also may be entitled to voting rights even though the
award has not vested at the time of the vote. Restricted stock
as to which the restrictions have not lapsed generally will be
forfeited upon an employees termination of employment.
Restrictions on restricted stock may lapse after the termination
of employment under certain circumstances or, if specified in
the award, upon a change in control of Fannie Mae.
Performance
Share Awards and Stock Bonuses
The Committee may grant performance share awards to employees.
Any award will specify the terms and conditions of the award,
the period for the performance share award, and the measure of
the performance of Fannie Mae or the employee. The Committee may
make adjustments to the measures of performance to compensate
for any significant changes in accounting practices, tax laws,
or other laws or regulations that alter or affect the
computation of the measures. The award may provide for payments
upon a change of control or termination of employment in some
circumstances.
The Committee in its discretion also may grant stock bonuses to
any employee.
Non-Management
Director Stock Option Awards
Effect of Plan Amendment on Stock Option Awards to
Non-Management Directors
If the Plan Amendment is approved, no annual stock option awards
will be made with respect to the annual meetings that would have
been held in 2005 or 2006. Further, under the Plan Amendment,
the Plans current provision for automatic grants of stock
options to the non-management directors in 2007 and future years
will be discontinued. Accordingly, these automatic option grants
will not be made under the Plan if the Plan Amendment is
approved.
Current Plan Provision Relating to Stock Option Awards to
Non-Management Directors
Under the current provision of the Plan, each non-management
director is entitled to receive, immediately following each
annual meeting of shareholders, a nonqualified stock option
award to purchase 4,000 shares of common stock. If a
director holds office only for a portion of a year, the grant is
prorated for that year. The exercise price is the fair market
value of the common stock on the award date. Each option vests
25% per year over four years beginning on the first anniversary
of the date of the grant. Vesting accelerates upon a
directors departure from the Board for any reason.
The Committee also may grant additional option awards to
non-management directors as appropriate, based on market
compensation data or other information or circumstances. This
provision will continue to apply following the Plan Amendment.
There have been no grants of option awards to non-management
directors since the grants relating to the annual meeting of
shareholders held in 2004.
Non-Management
Director Restricted Stock Awards
Effect of Plan Amendment on Restricted Stock Awards to
Non-Management Directors
If the Plan Amendment is approved, the current provision of the
Plan relating to annual restricted stock awards to be made to
non-management directors will be eliminated, and neither of the
restricted stock awards described under Current Plan
Provisions Relating to Restricted Stock Awards to Non-Management
Directors will be made.
65
Under the Plan Amendment, each non-management director will
receive an annual grant of restricted stock units immediately
following the annual meeting of shareholders, beginning with the
annual meeting of shareholders in 2008. The aggregate fair
market value on the date of grant for the annual meeting of
shareholders in 2008 will equal $135,000. The value of the grant
for future years will continue to be $135,000, unless the Board
determines, prior to the annual meeting of the shareholders for
that year, that it will use a different value. A non-management
director who is newly appointed or elected after an annual
meeting of shareholders will receive a grant of restricted stock
units prorated based on the number of full calendar months
between the annual meeting of shareholders that took place
immediately prior to the directors appointment or election
and the date of the directors appointment or election.
Restricted stock granted under this provision of the Plan
Amendment generally may not be sold, transferred, or encumbered.
The restricted stock will vest in full, or 100%, on the day
before the next annual meeting of shareholders, but in no event
later than one year after the grant. Unvested restricted stock
is subject to forfeiture if a director ceases to be a director
for any reason other than death or total disability.
Current Plan Provision Relating to Restricted Stock Awards to
Non-Management Directors
Under the current provision of the Plan, each non-management
director who was a director immediately following the annual
meeting of shareholders in 2006 was entitled to receive, on the
date of the annual meeting, an award of restricted stock with an
aggregate fair market value on the date of grant equal to
$75,000. At this time, no awards have been made under this
provision. In addition, each non-management director who is a
director immediately following the annual meeting of
shareholders in 2010 will be entitled to receive, on the date of
the annual meeting, an award of restricted stock with an
aggregate fair market value on the date of grant equal to
$90,000. Awards to non-management directors who are newly
appointed or elected after the annual meeting of shareholders in
2006 or 2010 are prorated based on the number of partial or full
calendar months remaining in the four-year award cycle after the
date of the directors appointment.
If the Plan Amendment is approved, the restricted stock awards
relating to 2006 and 2010 will not be granted. Instead, the
awards of restricted stock described above under Effect of
Plan Amendment on Restricted Stock Awards to Non-Management
Directors will be made annually beginning immediately
following the annual meeting of shareholders in 2008.
The restricted stock vests at the rate of 25% per year on the
day before each annual meeting of shareholders (or by the
appropriate pro rata percentage for directors who are appointed
or elected after the annual meeting in 2006 or 2010). Unvested
restricted stock is subject to forfeiture if a director ceases
to be a director for any reason other than death, total
disability, or not being renominated after age 70.
The Committee also may grant additional restricted stock awards
to non-management directors based on market compensation data or
other information or circumstances. This provision will continue
to apply following the Plan Amendment.
Deferred
Compensation
Effect of Plan Amendment
Under the Plan Amendment, each non-management director will have
the right to elect to defer receipt of the restricted stock
units. Each non-management director also will have the right to
elect to convert the directors annual retainer into
deferred shares of common stock. In either case, dividend
equivalents for the deferred shares will be credited to the
directors account and reinvested in additional deferred
shares. The deferred shares of common stock will be paid to the
director six months after the director ceases to be a director
and separates from service with us.
Current Plan
Under the current provisions of the Plan, non-management
directors do not have the right to defer receipt of awards of
shares of restricted stock, nor do they have the right to
convert their annual retainers or other directors fees
into deferred shares.
66
Certain
Federal Income Tax Consequences
The following summary generally describes the principal federal
income tax consequences of certain events under the Plan. The
summary is general in nature and is not intended to cover all
tax consequences that may apply to a particular employee or
director, or to Fannie Mae. The provisions of the Code and
regulations thereunder relating to these matters are complicated
and subject to change.
Stock Options and SARs. A grantee is not
subject to any federal income tax upon the grant of an option or
SAR pursuant to the Plan.
A grantee does not recognize income for federal income tax
purposes (and Fannie Mae is not be entitled to any federal
income tax deduction) as a result of the exercise of an ISO and
the related transfer of shares to the employee. However, the
excess of the fair market value of the shares transferred upon
the exercise of an ISO over the exercise price for such shares
generally constitutes an item of alternative minimum tax
adjustment to the employee for the year in which the option is
exercised. Thus, certain employees may have an increase in their
federal income tax liability as a result of the exercise of an
ISO under the alternative minimum tax rules of the Code.
If the shares received pursuant to the exercise of an ISO are
disposed of within two years from the date the ISO is granted or
within one year from the date the ISO is exercised (the
ISO holding periods), the employee recognizes
ordinary income equal to the excess of the amount realized on
the dispositions over the price paid for the shares. In such
case, Fannie Mae ordinarily is entitled to a tax deduction for
the same amount, provided that certain income tax reporting
requirements are satisfied.
If the shares received upon the exercise of an ISO are disposed
of after the ISO holding periods have been satisfied, long-term
capital gain or long-term capital loss is realized on the
disposition. Fannie Mae is not entitled to a federal income tax
deduction as a result of the disposition.
Ordinary income is recognized by the employee upon exercise of a
nonqualified stock option. Generally, the ordinary income
realized is the excess, if any, of the fair market value of the
shares of common stock received upon the exercise of the
nonqualified stock option over the exercise price. An employee
will also recognize ordinary income upon exercising a SAR equal
to the total of any cash received and the fair market value of
any shares of the common stock received.
Income tax withholding from the employee is required on the
income recognized by the employee upon exercise of a
nonqualified stock option or SAR. Fannie Mae ordinarily is be
entitled to a deduction for federal income tax purposes equal to
the ordinary income recognized by the employee upon the exercise
of a nonqualified stock option or SAR, or the ordinary income
recognized by the employee on the disposition of common stock
acquired pursuant to the exercise of an ISO, provided that
certain income tax reporting requirements are satisfied.
Restricted Stock. An employee generally will
recognize ordinary income in an amount equal to the excess, if
any, of the fair market value of the shares subject to the
restricted stock grant at the time of vesting over the amount,
if any, paid for such shares. (Different rules not discussed
herein would apply in the event an employee makes an election
under Section 83(b) of the Code.) Income tax withholding
from employees is required on income recognized by the employee
upon vesting of restricted stock. Dividends paid to an employee
on shares of restricted stock are treated as ordinary income of
the employee in the year received. Fannie Mae ordinarily will be
entitled to a deduction for federal income tax purposes equal to
the ordinary income recognized by the employee, provided that
certain income tax reporting requirements are satisfied.
Performance Share Awards and Stock Bonuses. An
employee generally is not required to recognize income upon the
grant of a performance share award or the award of a stock
bonus. Instead, ordinary income is required to be recognized
upon the issuance of shares pursuant to the terms of the award
in an amount equal to the fair market value of the shares of
common stock received. Income tax withholding from employees is
required on income recognized upon the issuance of shares
pursuant to a performance share award or a stock bonus award.
Fannie Mae ordinarily will be entitled to a deduction for
federal income tax purposes equal to
67
the ordinary income recognized by the employee, provided that
certain income tax reporting requirements are satisfied.
Gain or Loss on Sale or Exchange of Shares. In
general, gain or loss from the sale or exchange of shares of
common stock granted or awarded under the Plan will be treated
as capital gain or loss, provided that the shares are held as
capital assets at the time of the sale or exchange. However, as
discussed above, if the ISO holding periods are not satisfied at
the time of the sale or exchange of shares received pursuant to
the exercise of an ISO, the employee generally will be required
to recognize ordinary income upon such disposition.
Section 409A
Section 409A of the Internal Revenue Code, which was added
by the American Jobs Creation Act of 2004, provides certain new
requirements for nonqualified deferred compensation
arrangements. These include new requirements with respect to an
individuals election to defer compensation and the
individuals selection of the timing and form of
distribution of the deferred compensation. Section 409A
also generally provides that distributions must be made upon the
occurrence of certain events (e.g., the individuals
separation from service, a predetermined date, or the
individuals death). Section 409A imposes restrictions
on an individuals ability to change his or her timing or
form of distribution after the compensation has been deferred.
For certain officers, Section 409A requires that
distributions that are the result of the officers
separation from service with the employer must be delayed for
six months after the officers separation from service.
Awards granted under the Plan with a deferral feature are
subject to the requirements of Section 409A. If an award is
subject to and fails to satisfy the requirements of
Section 409A, the recipient of that award may recognize
ordinary income on the amounts deferred under the award, to the
extent vested, which may be prior to when the compensation is
actually or constructively received. Also, if an award that is
subject to Section 409A fails to comply with
Section 409As provisions, Section 409A imposes
an additional 20% federal income tax on compensation recognized
as ordinary income, as well as interest on such deferred
compensation.
68
New Plan
Benefits
Fannie Mae Stock Compensation Plan of 2003
The following table shows the amount of benefits that will be
received by our named executives, directors, and other employees
under the Plan as proposed to be amended, to the extent that
those benefits are determinable. Although discretionary grants
to our named executives, directors, and other employees are
permitted under the Plan, the amounts of any discretionary grant
are not determinable at this time. Accordingly, the amount
presented in the following table reflects only the automatic
annual grant of restricted stock units to non-management
directors following each annual meeting of shareholders until
the termination date of the Plan in 2013, assuming (1) a
fair market value for the grants of $135,000 and (2) the
number of our non-management directors continues to total 12.
The amount presented in the table may be higher or lower if the
Board determines to change the fair market value of this
automatic grant, or if the number of non-management directors on
our Board increases or decreases.
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Dollar Value ($)
|
|
Number of Units
|
|
Non-Executive Director Group
|
|
$
|
9,720,000
|
|
|
|
Not determinable
|
|
Options
Received Under Fannie Mae Stock Compensation Plan of
2003
The following table shows the total amount of options granted to
our named executives, directors, other employees and the
identified groups under the Plan to date.
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Stock Options Granted
|
|
|
|
|
|
Daniel Mudd, President and Chief Executive Officer and Director
Nominee
|
|
|
105,749
|
|
|
|
|
|
Robert Blakely, Executive Vice President
|
|
|
0
|
|
|
|
|
|
Robert Levin, Executive Vice President and Chief Business
Officer and a former Chief Financial Officer
|
|
|
100,613
|
|
|
|
|
|
Peter Niculescu, Executive Vice President Capital
Markets
|
|
|
59,425
|
|
|
|
|
|
Beth Wilkinson, Executive Vice President, General Counsel and
Corporate Secretary
|
|
|
0
|
|
|
|
|
|
Michael Williams, Executive Vice President and Chief Operating
Officer
|
|
|
73,880
|
|
|
|
|
|
Julie St. John, Former Executive Vice President and Chief
Information Officer
|
|
|
73,880
|
|
|
|
|
|
Stephen B. Ashley, Director Nominee
|
|
|
4,000
|
|
|
|
|
|
Dennis R. Beresford, Director Nominee
|
|
|
0
|
|
|
|
|
|
Louis J. Freeh, Director Nominee
|
|
|
0
|
|
|
|
|
|
Brenda J. Gaines, Director Nominee
|
|
|
0
|
|
|
|
|
|
Karen N. Horn, Director Nominee
|
|
|
0
|
|
|
|
|
|
Bridget A. Macaskill, Director Nominee
|
|
|
0
|
|
|
|
|
|
Leslie Rahl, Director Nominee
|
|
|
5,333
|
|
|
|
|
|
John C. Sites, Jr., Director Nominee
|
|
|
0
|
|
|
|
|
|
Greg C. Smith, Director Nominee
|
|
|
666
|
|
|
|
|
|
H. Patrick Swygert, Director Nominee
|
|
|
4,000
|
|
|
|
|
|
John K. Wulff, Director Nominee
|
|
|
2,000
|
|
|
|
|
|
Rebecca Senhauser (former employee)
|
|
|
19,080
|
|
|
|
|
|
Barbara Spector (employee)
|
|
|
0
|
|
|
|
|
|
Recipients of 5% of options
|
|
|
0
|
|
|
|
|
|
Executive Group (all current executive officers)
|
|
|
426,846
|
|
|
|
|
|
Non-Executive Director Group (all current non-management
directors)
|
|
|
19,999
|
|
|
|
|
|
Non-Executive Officer Employee Group
|
|
|
876,692
|
|
69
Equity
Compensation Plan Information
The following table provides information as of December 31,
2006 with respect to shares of common stock that may be issued
under our existing equity compensation plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
Remaining
|
|
|
Number of
|
|
|
|
Available
|
|
|
Securities to
|
|
|
|
for Future Issuance
|
|
|
be Issued upon
|
|
Weighted-Average
|
|
under Equity
|
|
|
Exercise
|
|
Exercise Price of
|
|
Compensation
|
|
|
of Outstanding
|
|
Outstanding
|
|
Plans (Excluding
|
|
|
Options,
|
|
Options,
|
|
Securities
|
|
|
Warrants and
|
|
Warrants and
|
|
Reflected in First
|
Plan Category
|
|
Rights (#)
|
|
Rights ($)
|
|
Column) (#)
|
|
Equity compensation plans approved by stockholders
|
|
|
22,234,887
|
(1)
|
|
$
|
70.44
|
(2)
|
|
|
44,075,454
|
(3)
|
Equity compensation plans not approved by stockholders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
22,234,887
|
|
|
$
|
70.44
|
|
|
|
44,075,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This amount includes outstanding stock options; restricted stock
units; the maximum number of shares issuable to eligible
employees pursuant to our stock-based performance award; shares
issuable upon the payout of deferred stock balances; the maximum
number of shares that may be issued pursuant to performance
share program awards made to members of senior management for
which no determination had yet been made regarding the final
number of shares payable; and the maximum number of shares that
may be issued pursuant to performance share program awards that
have been made to members of senior management for which a
payout determination has been made but for which the shares were
not paid out as of December 31, 2006. Outstanding awards,
options, and rights include grants under the 1993 Plan, the 2003
Plan, and the payout of shares deferred upon the settlement of
awards made under the 1993 Plan and a prior plan. |
|
(2) |
|
The weighted average exercise price is calculated for the
outstanding options and does not take into account restricted
stock units, stock-based performance awards, deferred shares or
the performance shares described in footnote (1). |
|
(3) |
|
This number of shares consists of 11,960,258 shares
available under the 1985 Employee Stock Purchase Plan and
32,115,196 shares available under the Stock Compensation
Plan of 2003 that may be issued as restricted stock, stock
bonuses, stock options, or in settlement of restricted stock
units, performance share program awards, stock appreciation
rights, or other stock-based awards. No more than 1,432,902 of
the shares issuable under the Stock Compensation Plan of
2003 may be issued as restricted stock or restricted stock
units vesting in full in fewer than three years, performance
shares with a performance period of less than one year, or bonus
shares subject to similar vesting provisions or performance
periods. |
70
Proposal 4:
Proposal to Require Shareholder Advisory Vote on Executive
Compensation
American Federation of State, County and Municipal Employees,
1625 L Street, N.W., Washington, DC 20036, beneficial
owner of 37,213 shares has submitted the following proposal
for consideration at the annual meeting:
RESOLVED, that shareholders of Fannie Mae urge the board of
directors to adopt a policy that Company shareholders be given
the opportunity at each annual meeting of shareholders to vote
on an advisory resolution, to be proposed by Fannie Maes
management, to ratify the compensation of the named executive
officers (NEOs) set forth in the proxy
statements Summary Compensation Table (the
SCT) and the accompanying narrative disclosure of
material factors provided to understand the SCT (but not the
Compensation Discussion and Analysis). The proposal submitted to
shareholders should make clear that the vote is non-binding and
would not affect any compensation paid or awarded to any NEO.
SUPPORTING
STATEMENT
In our view, senior executive compensation at Fannie Mae has not
always been structured in ways that best serve
stockholders interests. Previous compensation arrangements
richly rewarded executives for reporting higher earnings with no
requirement to return the compensation in the event of
restatement. Inflated earnings allowed Fannie Mae executives to
maximize their bonuses but proved harmful to shareholders. The
restatement at Fannie Mae reduced earnings by more than
$6 billion and resulted in Fannie Mae being out of
compliance with Section 404 of Sarbanes-Oxley for more than
two years.
We believe that existing U.S. corporate governance
arrangements, including SEC rules and stock exchange listing
standards, do not provide shareholders with enough mechanisms
for providing input to boards on senior executive compensation.
In contrast to U.S. practices, in the United Kingdom,
public companies allow shareholders to cast an advisory vote on
the directors remuneration report, which
discloses executive compensation. Such a vote isnt
binding, but gives shareholders a clear voice that could help
shape senior executive compensation.
Currently U.S. stock exchange listing standards require
shareholder approval of equity-based compensation plans; those
plans, however, set general parameters and accord the
compensation committee substantial discretion in making awards
and establishing performance thresholds for a particular year.
Shareholders do not have any mechanism for providing ongoing
feedback on the application of those general standards to
individual pay packages. (See Lucian Bebchuk &
Jesse Fried, Pay Without Performance 49 (2004))
Similarly, performance criteria submitted for shareholder
approval to allow a company to deduct compensation in excess of
$1 million are broad and do not constrain compensation
committees in setting performance targets for particular senior
executives. Withholding votes from compensation committee
members who are standing for reelection is a blunt and
insufficient instrument for registering dissatisfaction with the
way in which the committee has administered compensation plans
and policies in the previous year.
Accordingly, we urge Fannie Maes board to allow
shareholders to express their opinion about senior executive
compensation at Fannie Mae by establishing an annual referendum
process. The results of such a vote would, we think, provide
Fannie Mae with useful information about whether shareholders
view the companys senior executive compensation, as
reported each year, to be in shareholders best interests.
We urge shareholders to vote for this proposal.
FANNIE
MAES COMMENT
After careful consideration, and recognizing the appropriate
interest that our shareholders have in providing input to the
Board about our executive compensation practices, the Board
recommends voting against the proposal providing an advisory
vote on executive compensation.
71
Summary: Consistent with Fannie Maes
federal charter, the Compensation Committee and the Board
exercise oversight of compensation on an ongoing basis, taking
into consideration the competitive demands of the marketplace,
the overall corporate strategy and the performance of executives
against corporate goals. Currently our regulator also reviews
the proposed levels of non-salary compensation for certain
executives. We believe effective mechanisms to communicate with
the Board about compensation-related concerns are available to
shareholders, including direct communication via addresses
available in this proxy, approval of equity plans, and election
of directors by a majority standard. We also believe that
adopting an advisory vote without it being adopted on a uniform
basis by other public companies would place Fannie Mae at a
competitive disadvantage and could be premature as unique
U.S. legal and regulatory considerations have not been
fully examined. For the foregoing reasons, the Board recommends
that shareholders vote against the current proposal providing
for an advisory vote on executive compensation.
Fannie
Maes Federal Charter Vests Executive Compensation
Responsibility in the Board
The Fannie Mae Charter Act states that the board of
directors of the corporation shall have the power to select and
appoint or employ...officers...and to cause the corporation to
pay such compensation to them for their service as the board of
directors determines reasonable and comparable with compensation
for employment in other similar businesses..., except that a
significant portion of potential compensation for all executive
officers shall be based on the performance of the
corporation.
The Board has delegated power to the Compensation Committee,
which is composed entirely of independent members of the Board,
to review and make recommendations to the Board concerning the
compensation of officers and the compensation policy for
employees. In fulfilling the obligation of our federal charter,
the Compensation Committee considers the following when
determining executive compensation: corporate as well as
individual performance, a range of competitive market data,
including, with respect to the Chief Executive Officer, data
provided by an independent compensation consultant for the
Board, the importance of each executives role in the
company, competition for individuals with the experience and
skill set of each executive, and related market forces, among
other factors. Under our Charter, our regulator, the Office of
Federal Housing Enterprise Oversight (OFHEO), must approve
termination payments to our executives. In addition, pursuant to
the terms of an agreement with OFHEO, non-salary compensation
actions are provided for OFHEOs review prior to award.
We believe the continuous oversight of executive compensation
provided by our Compensation Committee, as well as the review by
our regulator of certain executive compensation arrangements
provides an effective governance model over executive
compensation.
Shareholders
Are Able to Provide Targeted, Continuous Feedback to the
Board
The Compensation Discussion and Analysis required under the new
SEC rules regarding executive compensation disclosure provides
increased transparency of our approach to compensating
executives and provides shareholders with more information to
evaluate compensation decisions. If a shareholder has a concern
with respect to an aspect of the executive compensation as
disclosed in our Compensation Discussion and Analysis or summary
compensation table, we believe effective mechanisms currently
exist for the shareholder to provide feedback to identify the
specific compensation-related concerns.
As opposed to the general nature of a proposed,
once-a-year,
for or against advisory vote, which may
not clearly communicate the shareholder views on the type,
amounts, or preferred improvements to our executive
compensation, shareholder feedback on compensation-related
concerns may be sent directly to the Board at
board@fanniemae.com or by sending correspondence to:
Board of Directors,
c/o the
Office of the Secretary of the Corporation, Mailstop: 1H 2S 05,
3900 Wisconsin Avenue, NW, Washington, DC
20016-2892.
In addition, our shareholders have the ability to influence the
aggregate amount and types of equity compensation available to
be awarded to our executives through their review and approval
of our stock compensation plans. Moreover, our Board recently
approved amendments to our bylaws to adopt majority voting in
the election of directors. By allowing shareholders to vote
for or against each director,
shareholders can hold directors accountable with respect to
executive compensation.
72
We believe that, combined, the ability to provide direct
feedback to the Board, votes on equity compensation plans, and
ability to vote against a director are more
effective mechanisms for shareholders to provide the Board with
feedback about executive compensation than the proposed
once-a-year
advisory vote.
Advisory
Voting Should be Adopted Within a Uniform Legal and Regulatory
Framework
While well-intentioned, the practice suggested by the proponent,
if adopted on a
case-by-case
basis as proposed and not by all public companies, would create
inequities and a competitive disadvantage for us. The advisory
vote process is mandated by law in the United Kingdom, or U.K.,
and applies to all public companies. If we adopted an advisory
vote on executive compensation, there is no assurance that other
companies would follow. This could put us at a competitive
disadvantage by giving the impression that compensation
opportunities are more restricted at Fannie Mae than at our
competitors.
In addition, further examination to determine the consequences
of implementing an advisory vote process in the U.S. should
be conducted, given certain aspects of the U.S. legal and
regulatory structure as compared with the U.K. For example, the
ability for U.S. public companies to discuss compensation
information with individual shareholders before the information
is publicly available may be hindered by current legal
requirements. Additionally, shareholding is more dispersed in
the U.S. than in the U.K. Currently, various task forces
made up of investor groups and corporations are examining these
issues in connection with the implementation of an advisory vote
process in the U.S.
We believe a better time to consider this proposal would be
after a consensus has been formed on the best way to implement
an advisory vote process in the U.S. regulatory and legal
system. In the meantime, the Board believes that implementation
of this proposal is premature as the legal and regulatory
considerations have not been fully examined and advisory voting
on executive compensation would not be applied uniformly.
The Board
of Directors recommends that shareholders
vote AGAINST this proposal.
73
|
|
Proposal 5:
|
Proposal
to Authorize Cumulative Voting
|
Evelyn Y. Davis, Editor, Highlights and Lowlights, Watergate
Office Building, 2600 Virginia Ave., N.W., Suite 215,
Washington, DC 20037, owner of 600 shares, has advised
Fannie Mae that the following resolution will be presented for
approval of the shareholders at the annual meeting:
RESOLVED: That the stockholders of FNMA, assembled in
Annual Meeting in person and by proxy, hereby request the Board
of Directors to take the necessary steps to provide for
cumulative voting in the election of directors, which means each
stockholder shall be entitled to as many votes as shall equal
the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all of such
votes for a single candidate, or any two or more of them as he
or she may see fit. The many problems FNMA has been
having make cumulative voting of the UTMOST importance!!!
REASONS: Many states have mandatory cumulative voting, so
do National Banks.
In addition many corporations have adopted cumulative
voting.
During 2004 the owners of ........* shares,
representing approximately forty.3%-40.3% of shares voting voted
FOR this proposal.
If you AGREE, please mark your proxy FOR this resolution.
FANNIE
MAES COMMENT
Our Board has considered carefully the possible impacts of the
proposal to reinstate cumulative voting, and has determined that
the proposal is not in the best interests of all of our
stockholders. Therefore, the Board recommends a vote against the
proposal.
Summary: The purpose of cumulative voting is
to permit a minority of shareholders to elect one or more
directors. Directors elected by minority shareholders might
adopt positions that are in the best interests of minority,
special interest shareholders, as opposed to all shareholders.
As a result, we believe the proposal could impair the
functioning of the Board in the interests of the shareholders as
a whole.
Directors elected by minority shareholders using cumulative
voting could adopt positions that are in the best interests of
minority, special interest shareholders, as opposed to all
shareholders. Like most other
U.S. corporations, each share of our common stock permits
the holder to cast one vote in the election of each candidate.
Under cumulative voting, if a shareholder wished, he or she
could cast 12 votes for each owned share for one candidate. This
could allow a well-organized minority shareholder group to elect
a director who advocates the groups positions, as opposed
to positions that are in the best interests of all shareholders.
The election of special interest directors could weaken the
Boards ability to work effectively together for the best
interests of the shareholders. Allowing each holder of shares of
common stock to have one vote per share for each director
nominee makes the election process more fair by allowing the
vote of a majority of the outstanding shares to control the
outcome, resulting in a more effective Board.
We have recently adopted majority voting. To
ensure director accountability to all of our shareholders, our
Board recently adopted a majority voting standard for the
election of directors. Except in an election in which the number
of nominees for director exceeds the number of directors to be
elected, each director who fails to receive more votes for
election than against must offer to resign.
74
Shareholders eliminated cumulative voting at the Company in
1988 and since then have consistently rejected proposals to
reinstate cumulative voting. Our shareholders
voted overwhelmingly at our 1988 annual meeting to eliminate
cumulative voting. In each of the 16 annual meetings since that
time, our shareholders have rejected proposals similar to this
one to reinstate cumulative voting.
The Board
of Directors recommends that shareholders
Vote AGAINST this proposal.
75
As of the date of this proxy statement, the Board of Directors
knows of no business that will come before the 2007 annual
meeting other than that described in this proxy statement. If
other business is properly brought before the 2007 annual
meeting, the Board intends that the proxy holders will vote
proxies on such matters according to the judgment of the proxy
holders.
SHAREHOLDER
PROPOSALS AND DIRECTOR NOMINATIONS FOR 2008
Because we expect to hold our 2008 annual meeting of
shareholders in the spring of 2008, a shareholder who intends to
submit a proposal for consideration at the 2008 annual meeting
must submit the proposal so that we receive it by no later than
November 30, 2007, in order for the proposal to be
considered for inclusion in the proxy statement and form of
proxy that the Board of Directors will distribute in connection
with that meeting. The shareholder proposal must be delivered
to, or mailed and received by, Fannie Mae Shareholder Proposal,
c/o Office
of the Secretary, Fannie Mae, Mail Stop 1H-2S/05, 3900 Wisconsin
Avenue, NW, Washington, DC
20016-2892.
If a shareholder does not wish to have the proposal included in
the proxy statement but still wishes to present a proposal at
the 2008 annual meeting, other than a director nomination, the
shareholder must give written notice to us in accordance with
Section 3.12 of our bylaws. The written notice should be
sent via U.S. mail addressed to Fannie Mae Shareholder
Proposal,
c/o Office
of the Secretary, Fannie Mae, Mail Stop 1H-2S/05, 3900 Wisconsin
Avenue, NW, Washington, DC
20016-2892.
In the case of proposals for the 2008 annual meeting of
shareholders, the Secretary must receive written notice of the
proposal not earlier than the close of business on
January 21, 2008, and not later than the close of business
on March 21, 2008. The written notice must include or be
accompanied by a brief description of the proposal, the reasons
for bringing the proposal before the annual meeting, the
shareholders name and address, the class and number of
shares beneficially owned by the shareholder, and any material
interest of the shareholder in the proposal. If a shareholder
does not comply with Section 3.12 of our bylaws, the chair
of the 2008 annual meeting may declare the proposal not properly
brought before the meeting.
Any shareholder who wishes to nominate a director at the 2008
annual meeting must submit written notice in accordance with
Section 4.20 of our bylaws and also must comply with the
other provisions and requirements of Section 4.20. Written
notice of a proposal for the nomination of a person to serve as
a director must be received by the Office of the Secretary not
earlier than the close of business on January 21, 2008 and
not later than the close of business on March 21, 2008. The
written notice should be directed to Fannie Mae Director
Nominees,
c/o Office
of the Secretary, Fannie Mae, Mail Stop 1H-2S/05, 3900 Wisconsin
Avenue NW, Washington, DC
20016-2892.
Alternatively, any shareholder who wishes to submit a candidate
for consideration by the Nominating and Corporate Governance
Committee should submit a written recommendation to the Chairman
of the Nominating Corporate Governance Committee,
c/o Office
of the Secretary, Fannie Mae, Mail Stop 1H-2S/05, 3900 Wisconsin
Avenue NW, Washington, DC
20016-2892.
In the case of a director nomination or recommendation, the
written notice shall set forth:
|
|
|
|
|
the name, age, business address and residence address of each
nominee proposed in the notice,
|
|
|
|
the principal occupation or employment of each nominee,
|
|
|
|
the class of securities and the number of shares of Fannie Mae
capital stock which are beneficially owned by each nominee,
|
|
|
|
any other information concerning each nominee that would be
required under SEC rules in a proxy statement soliciting proxies
for the election of that nominee as a director, and
|
|
|
|
a statement whether the nominee, if elected, intends to tender,
promptly following the nominees election or re-election,
an irrevocable resignation effective upon the nominees
failure to receive the required vote
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76
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for re-election at the next meeting of shareholders at which the
nominee faces re-election and upon acceptance of such
resignation by the Board of Directors.
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In the case of a director nomination, the notice shall be
accompanied by a signed consent of each nominee to serve as a
director if the nominee is elected.
We also may require any proposed nominee to furnish such other
information as may be reasonably required to determine whether
the proposed nominee is eligible to serve as an independent
director or that could be material to a reasonable
shareholders understanding of the nominees
independence or lack thereof.
A copy of our bylaws is on file with the SEC and may be obtained
from the Secretary of Fannie Mae upon request. Our bylaws also
are available in the Corporate Governance section of our website
at www.fanniemae.com.
COST
OF ANNUAL MEETING AND PROXY SOLICITATION
We pay the cost of the annual meeting and the cost of soliciting
proxies. In addition to soliciting proxies by mail, our officers
and regular employees may solicit proxies by personal interview,
telephone, facsimile, and similar means. None of our officers or
employees will receive any additional compensation for these
activities. We also intend to request that brokers, banks,
nominees and other fiduciaries solicit proxies from their
principals and will reimburse them for postage and other
reasonable expenses they incur for these activities. We have
retained Morrow & Co. Inc., a proxy solicitation firm,
to assist in soliciting proxies, for an estimated fee of
$15,000, plus reimbursement of certain out-of-pocket expenses.
This amount excludes costs normally expended for a solicitation
for an uncontested election of directors, and salaries and wages
of regular employees and officers.
Our Annual Report to Shareholders for the fiscal year ended
December 31, 2006, including consolidated financial
statements, is being mailed to shareholders entitled to vote at
the annual meeting with this Proxy Statement. We also have
posted our Annual Report to Shareholders to our website at
www.fanniemae.com. The Annual Report does not constitute
a part of the proxy solicitation material. The Annual Report
tells you how to get additional information about us.
77
APPENDIX A
FANNIE
MAE
STOCK COMPENSATION PLAN OF 2003
as proposed to be amended
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1.1
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Purpose. The purpose of the Fannie Mae Stock
Compensation Plan of 2003 is to promote the success of Fannie
Mae by providing stock compensation to employees and directors
that is comparable to that provided by similar companies; to
attract, motivate, retain and reward employees of Fannie Mae; to
provide incentives for high levels of individual performance and
improved financial performance of Fannie Mae; to attract,
motivate and retain experienced and knowledgeable independent
directors; and to promote a close identity of interests between
directors, officers, employees and shareholders.
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1.2
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Definitions. The following terms shall have
the meanings set forth below:
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(1)
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Award shall mean an award of any Option,
Stock Appreciation Right, Restricted Stock, Performance Share
Award, Stock Bonus or any other award authorized under
Section 1.6, or any combination thereof, whether
alternative or cumulative, or an award of any Options or
Restricted Stock authorized under Articles VI and VII.
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(2)
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Award Date shall mean the date upon which the
Committee takes the action granting an Award or a later date
designated by the Committee as the Award Date at the time it
grants the Award, or, in the case of Awards under
Sections 6.2 or 7.2, the applicable dates set forth therein.
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(3)
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Award Document shall mean any writing
(including in electronic or other form approved by the
Committee), which may be an agreement, setting forth the terms
of an Award that has been granted by the Committee.
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(4)
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Award Period shall mean the period beginning
on an Award Date and ending on the expiration date of such Award.
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(5)
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Beneficiary shall mean the person or persons
designated by a Participant or Permitted Transferee in writing
to the senior-ranking officer in the Human Resources department
of Fannie Mae to receive the benefits specified in an Award
Document and under the Plan in the event of the death of the
Participant or Permitted Transferee.
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(6)
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Benefit Plans Committee shall mean the
Benefit Plans Committee established by the Board, consisting of
employees of Fannie Mae.
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(7)
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Board shall mean the Board of Directors of
Fannie Mae.
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(8)
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Cause shall mean significant harm to Fannie
Mae in connection with a Participants employment by Fannie
Mae, by the Participants engaging in dishonest or
fraudulent actions or willful misconduct or performing the
Participants duties in a negligent manner, as determined
by the Committee for a member of the Board who is an officer or
employee of Fannie Mae and for the General Counsel of Fannie
Mae, and by the General Counsel of Fannie Mae for all other
employees; provided that no act or failure to act will be
considered willful unless it is done, or omitted to
be done, by the Participant in bad faith or without reasonable
belief that the act or failure to act was in the interest of
Fannie Mae.
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(9)
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Change in Control Event shall mean a change
in the composition of a majority of the Board elected by
shareholders within 12 months after any person
(as such term is used in Sections 3(a)(9), 13(d)(3) and
14(d)(2) of the Securities Exchange Act of 1934) is or
becomes the beneficial owner, directly or indirectly, of
securities of Fannie Mae representing more than
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A-1
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25 percent of the combined voting power of the
then-outstanding securities of Fannie Mae entitled to then vote
generally in the election of directors of Fannie Mae.
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(10)
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Code shall mean the Internal Revenue Code of
1986, as amended from time to time.
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(11)
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Committee shall mean the Compensation
Committee of the Board.
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(12)
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Common Stock shall mean the common stock of
Fannie Mae and, in the event such common stock is converted to
another security or property pursuant to Section 8.2, such
other security or property.
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(13)
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Director Term shall mean the period starting
immediately following the annual meeting of the shareholders at
which directors are elected to serve on the Board and ending at
the close of the next annual meeting at which directors are
elected.
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(14)
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Early Retirement means separation from
service with Fannie Mae at or after the attainment of
age 60 (but before attainment of age 65) with
five years of service with Fannie Mae, or at an earlier age only
if permitted by the Committee in its sole discretion. For
purposes of this Section 1.2(14), a year of service shall be
determined in accordance with the Federal National Mortgage
Association Retirement Plan for Employees Not Covered Under
Civil Service Retirement Law.
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(15)
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Eligible Employee shall mean any employee of
Fannie Mae.
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(16)
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ERISA shall mean the Employee Retirement
Income Security Act of 1974, as amended.
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(17)
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Fair Market Value shall mean the per share
value of Common Stock as determined by using the mean between
the high and low selling prices of such Common Stock, on the
date of determination, as reported on the NYSE. If such prices
are not available the Fair Market Value shall be the mean of
(1) the mean between the high and low selling prices of the
common stock, as reported on the NYSE, for the first trading day
immediately preceding the date of determination and (2) the
mean between the high and low selling prices of the common
stock, as reported on the NYSE, for the first trading day
immediately following the date of determination. If the Common
Stock is no longer traded on the NYSE, or if for any other
reason using the foregoing methods to determine Fair Market
Value is not possible or logical under the circumstances, the
Committee may determine the Fair Market Value, in good faith,
using any reasonable method.
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(18)
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Fannie Mae shall mean Fannie Mae and its
successors and, where the context requires, its Subsidiaries.
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(19)
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Immediate Family Member shall mean, with
respect to a Participant, (i) the Participants child,
stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, half-sibling, stepsibling,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law
or
sister-in-law
(including adoptive relations where the adopted individual shall
not have attained the age of 18 years prior to such
adoption); (ii) the Participants Domestic Partner (as
defined in Section 2.18 of the Federal National Mortgage
Association Retirement Plan for Employees Not Covered Under
Civil Service Retirement Law and determined pursuant to the
guidelines and procedures established thereunder);
(iii) any lineal ascendant or descendant of any individual
described in (i) or (ii) above; (iv) any
partnership, limited liability company, association, corporation
or other entity all of whose beneficial interests (including
without limitation all pecuniary interests, voting rights and
investment power) are held by and for the benefit of the
Participant
and/or one
or more individuals described in (i), (ii) or
(iii) above; or (v) any trust for the sole benefit of
the Participant
and/or one
or more individuals described in (i), (ii) or
(iii) above.
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(20)
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Incentive Stock Option shall mean an Option
that is designated as an incentive stock option within the
meaning of Section 422 of the Code, or any successor
provision, and that otherwise satisfies the requirements of that
section.
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(21)
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NMD Participant shall mean a Nonmanagement
Director who has been granted an Award under Article VI or
Article VII.
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(22)
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Nonmanagement Director shall mean a member of
the Board who is not an officer or employee of Fannie Mae.
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(23)
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Nonqualified Stock Option shall mean an
Option that is not an Incentive Stock Option
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(24)
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NYSE shall mean the New York Stock Exchange.
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(25)
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Option shall mean an option to purchase
shares of Common Stock pursuant to an Award.
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(26)
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Participant shall mean a Nonmanagement
Director who has been granted an Award under the Plan or an
Eligible Employee who has been granted an Award under the Plan.
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(27)
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Performance Share Award shall mean an Award
granted under Section 5.1.
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(28)
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Permitted Transferee shall mean (i) any
Immediate Family Member with respect to the Participant, and
(ii) in the case of an Eligible Employee, any organization
described in Section 170(c) of the Code that is eligible to
receive tax-deductible, charitable contributions or any
intermediary designated to exercise an Option for the benefit of
such organization.
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(29)
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Personal Representative shall mean the person
or persons who, upon the incompetence of a Participant or
Permitted Transferee, shall have acquired, by legal proceeding
or power of attorney, the power to exercise the rights under the
Plan, and who shall have become the legal representative of the
Participant or Permitted Transferee, or, in the event of the
death of the Participant or the Permitted Transferee, the
executor or administrator of the estate of the Participant or
Permitted Transferee.
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(30)
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Plan shall mean this Fannie Mae Stock
Compensation Plan of 2003.
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(31)
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Plan Termination Date shall mean the tenth
anniversary of the date of the meeting at which shareholders of
Fannie Mae approve the Plan.
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(32)
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QDRO shall mean a qualified domestic
relations order as defined in Section 414(p) of the Code or
Section 206(d)(3) of ERISA (to the same extent as if this
Plan were subject thereto) and the applicable rules thereunder.
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(33)
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Restricted Stock shall mean shares or
bookkeeping units of Common Stock awarded to a Participant
subject to payment of the consideration, if any, and the
conditions on vesting and transfer and other restrictions as are
established under the Plan, for so long as such shares or units
remain nonvested under the terms of the applicable Award
Document.
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(34)
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Retirement shall mean, in the case of an
Eligible Employee, separation from service with Fannie Mae under
conditions entitling such Eligible Employee to an immediate
annuity under the Federal National Mortgage Association
Retirement Plan for Employees Not Covered Under Civil Service
Retirement Law or under the Civil Service retirement law,
whichever is applicable to such Eligible Employee, at or after
the attainment of age 65.
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(35)
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Stand-Alone SAR shall mean a Stock
Appreciation Right granted independently of any other Award.
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(36)
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Stock Appreciation Right shall mean a right
pursuant to an Award to receive a number of shares of Common
Stock or an amount of cash, or a combination of shares of Common
Stock and cash, the aggregate amount or value of which is
determined by reference to a change in the Fair Market Value of
the Common Stock.
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A-3
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(37)
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Stock Bonus shall mean an Award of shares of
Common Stock under Section 5.2.
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(38)
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STSP shall mean the Fannie Mae Securities
Transactions Supervision Program and the guidelines thereunder.
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(39)
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Subsidiary shall mean an organization whose
employees are identified by the Board as eligible to participate
in benefit plans of Fannie Mae.
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(40)
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Total Disability shall mean complete and
permanent inability by reason of illness or accident to perform
the duties of the occupation at which the Participant was
employed when the illness commenced or accident occurred, as
determined by Fannie Maes independent medical consultant.
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(41)
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Without Consideration shall mean, with
respect to a transfer of an Option, that the transfer is being
made purely as a gift or donation, with no promise or receipt of
payment, goods, services or other thing of value in exchange for
the Option; provided, however, if the terms of a transfer of
Options to an otherwise Permitted Transferee require that, upon
proper notice of exercise of such Options, (i) Fannie Mae
may reduce the number of shares of Common Stock or sell such
number of shares of Common Stock otherwise deliverable
thereunder to the extent required to fund any additional
withholding tax on behalf of the Eligible Employee necessitated
by the exercise, delivering only the balance of the shares of
Common Stock due upon exercise of the Option to the Permitted
Transferee,
and/or
(ii) the Permitted Transferee sell the shares of Common
Stock so received upon exercise of the Option, apply a portion
of the net proceeds of the exercise to the payment of any
additional taxes, fees or other costs or expenses incurred by
the donor Eligible Employee in connection with or as a result of
such transfer and then deliver (if an intermediary) or retain
(if an organization described in Section 170(c) of the
Code) the remaining net proceeds from such sales of shares of
Common Stock, the transfer shall nevertheless continue to be
Without Consideration for the |