Business: Fannie Mae (Federal National Mortgage Assoc.), Variable Rate Non-Cumulative Preferred Stock, Series O, liquidation preference $50 per share, redeemable at the issuer's option on or after 12/31/2007 at $52.50 per share which declines to $50 per share after 12/31/2018 (see the schedule in section 3 of the prospectus) plus declared and unpaid dividends, with no stated maturity, and with variable rate noncumulative distributions paid quarterly on 3/31, 6/30, 9/30 & 12/31 to holders of record on the date fixed by the board, not more than 45 days or less than 10 days prior to the payment date (NOTE: the ex-dividend date is one business day prior to the record date). Dividends paid by this preferred security are eligible for the preferential income tax rate of 15% to a maximum of 20% depending on the holder's tax bracket (and under IRS specified holding restrictions) and are also eligible for the dividends received deduction for corporate holders. The initial dividend rate is 7.00% ($3.50) per year. The dividend rate will reset on the second business day prior to the beginning of a new dividend period and shall be the greater of 7.00% or the sum of the Ten-year CMT Rate plus 2.375%. See the Fannie Mae news releases on their website for information on the periodic resetting of the dividend rates. In regards to payment of dividends and upon liquidation, the preferred shares rank equally with other preferreds and senior to the common shares of the company. See the IPO prospectus for further information on the preferred stock by clicking on the ‘Link to IPO Prospectus’ provided below.