Fannie Mae-No Politics (FNMA)

[Brooge warrants cancelled]

horses mouth

In recent months, we purchased preferred stock of both companies. Our preferred stock represents approximately
21% of our total investment in Fannie and Freddie, or about 1% of net assets. While the substantial majority of our
investment historically has been in Fannie/Freddie common stock, we acquired preferred stock recently because (1)
we believe that the timing of a favorable outcome for the two companies is more proximate (timing is an important
consideration for the preferred shares as they are noncumulative and perpetual), (2) it hedges our risk of a
restructuring that disproportionately benefits the preferred versus the common shares, and (3) we found the trading
prices of the preferred securities attractive at current levels. We still prefer our investment in the common shares
because the government and taxpayers’ interests, as owners of 79.9% of the common stock of both companies, are
aligned with the interests of common shareholders. If housing reform is successful, we believe that both FNMA and
FMCC common and preferred stock will likely be worth multiples of their current share prices.