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Asset Trust I Custodian holds the notes, mortgages and other legal documents related

t
o the HELs
(collectively, the Asset Trust I Loan Documents)
f
o
r
the benefit
o
f
the Asset Trust I Trustee. The
Asset Trust I Custodian maintains the Asset Trust I Loan Documents
i
n secure and fire resistant
facilities. The mortgage files held
b
y
the Asset Trust I Servicer have not been physically segregated
from Asset Trust I Loan Documents
i
n the Asset Trust I Custodians custody but are kept
i
n shared
facilities. The Asset Trust I Custodian has reviewed the Asset Trust I Loan Documents related
t
o each
HEL and delivered
t
o the Asset Trust I Trustee a certification
t
o the effect that, except
a
s
noted
i
n
such certification,
a
l
l
required documents have been executed and received.
I
n the event
o
f
the termination
o
f
the Asset Trust I Custody Agreement, the Asset Trust I
Custodian will
b
e
required
t
o deliver the Asset Trust I Loan Documents
i
n the Asset Trust I Custodians
custody
t
o the Asset Trust I Trustee
o
r
any successor Asset Trust I Custodian appointed
b
y
the
Company.
The Asset Trust I Servicer may, but does not currently, pay the Asset Trust I Custodian a fee for
i
t
s services under the Asset Trust I Custody Agreement from time
t
o time. Payment
o
f
this fee will not
affect dividends
t
o the Company.
56
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00069
Return
ASSET TRUST
I
I
General
WAMU 2006- OA1
(

Asset Trust
I
I

)
i
s a statutory trust formed under the laws
o
f
the State
o
f
Delaware pursuant
t
o a trust agreement between the Company,
a
s
depositor, and Deutsche Bank
Trust Company Delaware,
a
s
Delaware trustee. The Asset Trust
I
I
Pooling and Servicing Agreement,
dated
a
s
o
f
December 13, 2006 (the Asset Trust
I
I
Pooling and Servicing Agreement), among the
Company,
a
s
depositor, WMB,
a
s
servicer ( the Asset Trust
I
I
Servicer), Deutsche Bank Trust
Company Delaware,
a
s
Delaware trustee (the Asset Trust
I
I
Delaware Trustee) and Deutsche Bank
National Trust Company,
a
s
trustee (the Asset Trust
I
I
Trustee), restates the initial trust agreement
and
i
s the governing instrument
o
f
Asset Trust
I
I
.
Asset Trust
I
I does not own any assets other than the Option ARMs and a
d
e
minimis number
o
f
other mortgage assets. Asset Trust
I
I does not have any liabilities other than those incurred
i
n
connection with the Asset Trust
I
I Pooling and Servicing Agreement and any related agreement. Asset
Trust
I
I does not have any directors, officers
o
r
other employees. No equity contribution has been
made
t
o Asset Trust
I
I
b
y
WMB, the Company
o
r
any other party, except for a
d
e
minimis contribution
made
b
y
the Company,
a
s
depositor, pursuant
t
o the initial trust agreement, and Asset Trust
I
I does
not have any other capital. The fiscal year end
o
f
Asset Trust
I
I
i
s December 31. Asset Trust
I
I acts
through the Asset Trust
I
I Trustee and the Asset Trust
I
I Delaware Trustee, whose fees and reasonable
expenses are paid
o
r
reimbursed
b
y
the Asset Trust
I
I Servicer.
For purposes
o
f
this offering circular with respect
t
o the underwriting, origination and servicing
o
f
the Option ARMs
i
n Asset Trust
I
I
,
references
t
o WMB include WMB, originators acquired
b
y
WMB
and WMBs subsidiaries.
General Description
o
f
Assets
The assets
o
f
Asset Trust
I
I are substantially
a
l
l
Option ARMs that had, as
o
f
November 14,
2006, a value and aggregate unpaid principal balance
o
f
approximately $2,899,877,211, together with
payments received thereon and certain other investments. The Option ARMs were originated
b
y
WMB. A portion
o
f
the Option ARMs were contributed
t
o the Company by University Street, the owner
o
f
a
l
l
the Companys common interests. As
o
f
April
1
,
2007, the Option ARMs transferred into Asset
Trust
I
I had an aggregate unpaid principal balance
o
f
approximately $2,204,305,471.
The interest rate for each Option ARM
i
s fixed for a specified initial period, and
i
s then adjusted
on a monthly basis based on
i
t
s
index. The index for the Option ARMs
i
s a per annum rate equal
t
o
the twelve- month moving average monthly yield on United States Treasury Securities adjusted
t
o a
constant maturity
o
f
one year
(

One- Year MTA


o
r
the Index), as published by the Board
o
f
Governors
o
f
the Federal Reserve System
i
n the Federal Reserve Statistical Release Selected
Interest Rates (
H
.
15), determined by averaging the monthly yields for the most recently available
twelve months. The One- Year MTA figure used for each interest rate adjustment date
i
s the most
recent One- Year MTA figure available as
o
f
fifteen days before that date.
I
f One- Year MTA
i
s no longer available, the Asset Trust
I
I Servicer will choose a new index that
i
s based on comparable information. When the Asset Trust
I
I Servicer chooses a new index,
i
t will
increase
o
r
decrease the margin on each Option ARM
b
y
the difference between the average
o
f
One-
Year MTA for the final three years
i
t was
i
n effect and the average
o
f
the replacement index for the
most recent three years. The margin will
b
e
increased
b
y
that difference
i
f the average
o
f
One- Year
MTA
i
s greater than the average
o
f
the replacement index, and the margin will
b
e
decreased
b
y
that
difference
i
f the average
o
f
the replacement index
i
s greater than the average
o
f
One- Year MTA. The
new margin will be rounded up as provided
i
n the related mortgage note.
After an initial fixed-rate period
o
f
one, three
o
r
twelve months, the mortgage interest rate on
each Option ARM
i
s adjusted monthly
t
o equal the sum
o
f
the applicable index and the per annum
57
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00070
Return
rate (the Margin) specified
i
n the applicable mortgage note. As
o
f
April
1
,
2007, the Margin rates
applicable
t
o the mortgage loans
i
n the Asset Trust
I
I had a weighted average
o
f
approximately 2.67%
and range from 1.80%
t
o 4.50% per annum. The mortgage loans
i
n the Asset Trust
I
I are subject
t
o
Lifetime Rate Caps, with a weighted average
o
f
approximately 10.02% and ranging from 8.95%
t
o
14.35% per annum. During the initial fixed rate period
o
f
a
n
Option ARM, mortgagors are required
t
o
pay a minimum monthly payment that,
i
n some cases, will not fully amortize the mortgage loan. Each
month thereafter, mortgagors are given one
o
r
more payment options, which may include a payment
amount less than, equal
t
o
o
r
greater than a fully amortizing monthly payment. Whether an Option
ARM
i
s repaid
o
n
a fully- amortizing basis depends
o
n
the payment option selected
b
y
the mortgagor
o
n
each monthly payment date.
I
f the minimum monthly payment
i
n a given month
i
s less than the
amount
o
f
accrued and unpaid interest
o
n
the mortgage loan, the excess interest will
b
e
added
t
o the
outstanding principal balance
o
f
the mortgage loan
i
n the form
o
f
negative amortization
(
Negative
Amortization). The maximum Negative Amortization ( the Negative Amortization Cap)
o
f
the Option
ARMs
i
n Asset Trust
I
I ranges from 110%
t
o 125%
o
f
the original principal balance. On the earlier
o
f
the sixty- first month
o
r
the month
i
n which the Negative Amortization Cap
i
s reached, mortgagors are
required
t
o make fully amortizing payments.
As
o
f
April
1
,
2007, the average current, unpaid principal balance
o
f
the Option ARMs was
approximately $448,485, with a minimum current, unpaid principal balance
o
f
approximately $4,582
and a maximum current, unpaid principal balance
o
f
approximately $9,195,089. The Option ARMs
have various original maturities ranging from
1
5
years
t
o 40 years and were, on average, originated
within the last 29 months. The majority
o
f
the Option ARMs were underwritten under WMBs reduced
documentation program (described below);
a
s
o
f
April
1
,
2007, approximately 28.34%
o
f
the Option
ARMs were underwritten under WMBs full documentation program (described below). As
o
f
April
1
,
2007, the current weighted average loan- to-value ratio was approximately 68.65% and the weighted
average loan- to-value ratio
a
t
origination was approximately 68.79%. The mortgage loans
i
n the Asset
Trust
I
I have a weighted average Credit Score
o
f
approximately 746. The majority
o
f
the properties
underlying the Option ARMs are owner occupied with approximately 27.98%
o
f
the properties non-
owner occupied. Of the Option ARMs
i
n Asset Trust
I
I
,
approximately 45.63% are cash- out refinances,
approximately 40.37% are purchase loans and approximately 14.00% are rate/ term refinances. The
Option ARMs are geographically concentrated
i
n California (approximately 74.94%).
Acquisition
o
f
the Option ARMs and Related Transactions
Contemporaneously with the issuance
o
f
the Series 2006- C Company Preferred Securities,
WMB contributed a pool
o
f
Option ARMs
t
o the Company
i
n exchange for the Series 2006-C
Company Preferred Securities.
I
n addition, University Street contributed a pool
o
f
Option ARMs
t
o the
Company
a
s
a capital contribution. The aggregate value
o
f
these contributions was $2,899,877,211,
calculated as
o
f
November 14, 2006.
The Company contributed
t
o Asset Trust
I
I
a
l
l
o
f
the Option ARMs
i
t received from WMB and
University Street. This contribution was made
i
n exchange for the Class
A
-
1 2006- OA1 Certificate (the
Asset Trust
I
I Class A Trust Certificate

) and the Class R 2006- OA1 Certificate (the Asset Trust


I
I
Class R Trust Certificate). For United States federal income tax purposes, the Asset Trust
I
I Class A
Trust Certificate represented the sole class
o
f
regular interests
i
n Asset Trust
I
I
,
and the Asset Trust
I
I
Class R Trust Certificate represented the sole class
o
f
residual interests
i
n Asset Trust
I
I
.
The
Company retained the Asset Trust
I
I Class A Trust Certificate and transferred the Asset Trust
I
I Class R
Trust Certificate
t
o WMB.
Asset Trust
I
I
owns the right
t
o receive
a
l
l
payments
o
f
principal and interest
o
n
the Option ARMs
due after November 30, 2006. A schedule
t
o the Asset Trust
I
I
Pooling and Servicing Agreement
included information about each
o
f
the Option ARMs, including:
the outstanding principal balance
a
s
o
f
the close
o
f
business on November 30, 2006;
58
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00071
Return
the term
o
f
the Option ARM; and
the applicable interest rate
a
s
o
f
the close
o
f
business on November 30, 2006.
The notes relating
t
o the Option ARMs have not been endorsed
t
o Asset Trust
I
I
and
n
o
assignments
t
o Asset Trust
I
I
o
f
the mortgages securing the Option ARMs were prepared. WMB,
i
n
i
t
s
capacity
a
s
initial Asset Trust
I
I
Custodian, has possession
o
f
and reviews such notes and the Option
ARMs
a
s
custodian
f
o
r
Asset Trust
I
I
and financing statements were filed evidencing Asset Trust IIs
interest
i
n the Option ARMs.
I
n exchange
f
o
r
the Option ARMs and the other assets described above, the Asset Trust
I
I
Trustee authenticated and delivered the Asset Trust
I
I
Class A Trust Certificate and the Asset Trust
I
I
Class R Trust Certificate pursuant
t
o the Companys order.
Description
o
f
the Portfolio
General
The Option ARMs
i
n the portfolio
o
f
Asset Trust
I
I consist
o
f
payment-option adjustable rate
mortgage loans with a negative amortization feature secured
b
y
a first lien, fee simple
o
r
leasehold
interest
i
n a one- to-four-family residential property
o
r
shares
o
f
stock relating
t
o cooperative apart-
ments. Such residences include detached homes, duplexes, triplexes, fourplexes, townhomes, individ-
ual condominium units, individual units
i
n planned unit developments and other attached dwelling units
that are part
o
f
buildings consisting
o
f
n
o
more than four units. As
o
f
April
1
,
2007, 53
o
f
the Option
ARMs were delinquent
i
n payments for a period
o
f
30 days
o
r
more; however, there can be no
assurance that Option ARMs held
i
n the portfolio
o
f
Asset Trust
I
I will not become delinquent
i
n the
future.
The tables
i
n Appendix C
t
o this offering circular represent information
a
s
o
f
April
1
,
2007 with
respect
t
o the Option ARMs included
i
n the portfolio
o
f
Asset Trust
I
I
.
Underwriting
General
The Option ARMs owned
b
y
Asset Trust
I
I were,
i
n
a
l
l
material respects, originated
i
n
accordance with the underwriting guidelines
o
f
WMB
a
s
described herein. The Option ARMs were
underwritten
b
y
WMB.
WMBs underwriting guidelines generally are intended
t
o evaluate the prospective borrowers
credit standing and repayment ability and the value and adequacy
o
f
the mortgaged property
a
s
collateral. Some Option ARMs are manually underwritten,
i
n which case an underwriter reviews
information submitted
b
y
the borrower and supporting documentation,
i
f required, and a credit report
o
f
the borrower, and based on that review determines whether
t
o originate a loan
i
n the amount and
with the terms requested
b
y
the borrower. Some Option ARMs are underwritten through WMBs
automated underwriting system, described below.
Evaluation
o
f
the Borrowers Credit Standing
To evaluate a prospective borrowers credit history, the loan underwriter obtains a credit report
relating
t
o the borrower from one
o
r
more credit reporting agencies. The credit report typically contains
information relating
t
o such matters
a
s
credit history with local and national merchants and lenders,
installment debt payments and any record
o
f
defaults, bankruptcy, repossession, suits
o
r
judgments.
I
n most cases the credit report provides a Credit Score for the borrower. Credit Scores are designed
t
o assess a borrowers creditworthiness and likelihood
t
o default on an obligation over a defined period
(usually two
t
o three years) based on a borrowers credit history. Credit Scores do not necessarily
correspond
t
o the probability
o
f
default over the life
o
f
an Option ARM because they reflect past credit
history, rather than
a
n
assessment
o
f
future payment performance. Credit Scores range from
59
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00072
Return
approximately 350
t
o approximately 850, with higher scores indicating more favorable credit history.
I
f
the loan underwriter obtains credit scores from three credit reporting companies, the middle score
generally
i
s used, and
i
f two credit scores are obtained, the lower score generally
i
s used.
I
n the case
o
f
co- borrowers, the credit score
f
o
r
the borrower with the lowest credit score generally
i
s used
(determined
f
o
r
each borrower
a
s
described
i
n the immediately preceding sentence). Minimum credit
scores are required
f
o
r
some loan products and loan programs. For borrowers
f
o
r
which credit scores
are not available, the loan underwriter will require alternative documentation indicating the borrowers
creditworthiness, such
a
s
rental
o
r
utility payment history
o
r
payment history on other debt.
Evaluation
o
f
the Borrowers Repayment Ability
I
n evaluating a prospective borrowers ability
t
o repay an Option ARM, the loan underwriter
considers the ratio
o
f
the borrowers total monthly debt (including non- housing expenses)
t
o the
borrowers gross income (referred
t
o
a
s
the debt- to-income ratio
o
r
back- end ratio). The maximum
acceptable ratios may vary depending on other loan factors, such as loan amount and loan purpose,
loan- to-value ratio, credit score and the availability
o
f
other liquid assets. Exceptions
t
o the ratio
guidelines may be made when compensating factors are present.
For purposes
o
f
calculating the front end and back end ratios
f
o
r
certain Option ARMs, the
borrowers monthly mortgage debt
i
s determined based
o
n
the fully indexed rate and a predetermined
factor
a
s
set
b
y
WMBs credit department from time
t
o time (which rate may
b
e
greater than the rate
i
n effect for the Option ARM during the initial fixed- rate period).
I
n addition, for purposes
o
f
calculating
these ratios for
a
n
Option ARM with a 40- year term, the borrowers monthly mortgage debt
i
s
determined based on 30- year term.
Evaluation
o
f
the Adequacy
o
f
the Collateral
The adequacy
o
f
the Option ARM
a
s
collateral generally was determined
b
y
a
n
appraisal made
i
n accordance with pre-established appraisal guidelines.
A
t
origination,
a
l
l
appraisals are required
t
o
conform
t
o the Uniform Standards
o
f
Professional Appraisal Practice adopted
b
y
the Appraisal
Standards Board
o
f
the Appraisal Foundation, and are made
o
n
forms acceptable
t
o Fannie Mae
and/
o
r
Freddie Mac. Appraisers may
b
e
staff appraisers employed
b
y
WMB
o
r
independent appraisers
selected
i
n accordance with the pre- established appraisal guidelines. Such guidelines generally
require that the appraiser,
o
r
a
n
agent
o
n
i
t
s behalf, personally inspect the property and verify whether
the property
i
s
i
n adequate condition and,
i
f the property
i
s new construction, whether
i
t
i
s
substantially completed. However,
i
n the case
o
f
Option ARMs underwritten through WMBs auto-
mated underwriting system,
a
n
automated valuation method may
b
e
used, under which the appraiser
does not personally inspect the property but instead relies on public records regarding the mortgaged
property and/
o
r
neighboring properties.
I
n either case, the appraisal normally
i
s based upon a market
data analysis
o
f
recent sales
o
f
comparable properties and, when deemed applicable, a replacement
cost analysis based
o
n
the current cost
o
f
constructing
o
r
purchasing a similar property. For Option
ARMs underwritten under WMBs streamline documentation programs, the appraisal guidelines
i
n
some cases permit the appraisal obtained
f
o
r
a
n
existing Option ARM
t
o
b
e
used. Title insurance
i
s
required
f
o
r
a
l
l
Option ARMs, except that for Option ARMs secured
b
y
shares
o
f
cooperative
apartments, title insurance
i
s not required for the cooperative apartment building (but a lien search
i
s
provided
b
y
the title company). Specific additional title insurance coverage
i
s required
f
o
r
some types
o
f
Option ARMs.
Documentation Programs
Each Option ARM owned by Asset Trust
I
I was underwritten under one
o
f
WMBs documentation
guidelines for verification
o
f
the borrowers stated income and assets. Under WMBs full/ alternative
documentation program, the prospective borrowers stated income
i
s verified through receipt
o
f
the
borrowers most recent pay stub and most recent W- 2 form, or,
i
n the case
o
f
self- employed borrowers
o
r
borrowers with more than 25%
o
f
their income from commissions, two years
o
f
personal (and,
i
f
60
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00073
Return
applicable, business) tax returns. For self- employed borrowers, profit and loss statements may also
b
e
required. Under the full/ alternative documentation program, the borrowers stated assets are verified
through receipt
o
f
the borrowers two most recent bank
o
r
brokerage statements.
I
n addition, the
borrowers employment may
b
e
verified with the employer
b
y
telephone
o
r
b
y
other independent
means.
The WMB low documentation program places increased reliance on the value and adequacy
o
f
the mortgaged property as collateral, the borrowers credit standing and (
i
n some cases) the
borrowers assets.
I
t
i
s available
t
o borrowers with certain loan- to-value ratios, loan amounts and credit
scores. Under this program, the income as stated
i
n the borrowers loan application
i
s not verified,
although the borrowers employment may be verified
b
y
telephone. The borrowers stated income must
be reasonable for the borrowers occupation and assets (as determined
i
n the underwriters discre-
tion). Assets may be verified for higher risk transactions and when exceptions are approved, such as
when specific loan-to-value ratios
o
r
loan amount limits are exceeded.
A credit report for the borrower generally
i
s required
f
o
r
a
l
l
mortgage loans underwritten under
WMBs full/ alternative and low documentation programs.
Exceptions
t
o Program Parameters
Exceptions
t
o WMBs loan program parameters may
b
e
made
o
n
a case- by-case basis
i
f
compensating factors are present.
I
n those cases, the basis
f
o
r
the exception
i
s documented, and
i
n
some cases the approval
o
f
a senior underwriter (who
i
s
a
n
employee
o
f
WMB)
i
s required.
Compensating factors may include, but are not limited
t
o
,
low loan- to-value ratio, low debt-
t
o
-
income
ratio, good credit standing, the availability
o
f
other liquid assets, stable employment and time
i
n
residence
a
t
the prospective borrowers current address.
Automated Underwriting System
Some mortgage loans originated through WMB have been underwritten
i
n whole
o
r
i
n part
through WMBs proprietary automated underwriting system, known
a
s
Enterprise Decision Engine
o
r
EDE. Based
o
n
the borrowers credit report and the information
i
n the borrowers loan application,
the system either (
a
)
approves the loan subject
t
o the satisfaction
o
f
specified conditions, which may
include the receipt
o
f
additional documentation,
o
r
(
b
)
refers the loan application
t
o an underwriter
f
o
r
manual underwriting.
I
n making the underwriting decision, EDE distinguishes between ten different
levels
o
f
credit standing, based
o
n
both the credit score and characteristics
o
f
the loan. WMB has
developed these ten levels
o
f
credit standing based
o
n
a statistical analysis
o
f
the past performance
o
f
approximately 193,000 mortgage loans originated
b
y
the sponsor for
i
t
s
own portfolio between 1998
and 2001. WMB has been using EDE
f
o
r
underwriting
o
f
mortgage loans since January 2005. WMB
has also used
i
n the past, and currently uses, other automated underwriting systems.
A
l
l
o
r
some
o
f
the mortgage loans owed
b
y
Asset Trust
I
I
may have been underwritten through EDE
o
r
other
automated underwriting systems.
Quality Control Review
WMBs credit risk oversight department conducts quality control reviews
o
f
statistical samplings
o
f
previously originated Option ARMs on a regular basis.
Credit Risk Management Policies
Credit risk within the WMI Group
i
s managed by means
o
f
a broad set
o
f
policies and principles
contained
i
n
i
t
s
credit policy. The Chief Credit Officer
i
s responsible for overseeing the work
o
f
a credit
policy committee, monitoring the quality
o
f
the WMI Groups credit portfolio, determining the reason-
ableness
o
f
the WMI Groups allowance for loan losses, reviewing and approving large credit
exposures and setting underwriting criteria for credit- related products and programs. Credit risk
management
i
s based on analyzing the creditworthiness
o
f
the borrower, the adequacy
o
f
the
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underlying collateral given current events and conditions and the existence and strength
o
f
any
guarantor support.
Credit risk assessment
i
s a process that requires the evaluation
o
f
numerous factors, many
o
f
which are qualitative. Process integrity relies
o
n
the ability
o
f
the WMI Groups lending personnel
t
o
analyze
a
l
l
risk elements.
I
t also depends on maintaining risk rating accuracy
b
y
recognizing changing
elements
o
f
credit risk and promptly initiating risk rating changes.
Conflicts
o
f
Interest Policies
Pursuant
t
o WMBs code
o
f
ethics ( the Code
o
f
Ethics), WMB extends credit
t
o borrowers only
when the extension
o
f
credit
i
s financially reasonable for both WMB and the borrower
i
n question.
Pursuant
t
o the Code
o
f
Ethics, lending personnel cannot permit personal relationships
o
r
other
considerations
t
o influence lending decisions, and cannot approve extensions
o
f
credit
t
o
,
o
r
b
e
involved
i
n the funding
o
r
auditing
o
f
any loans made
t
o family
o
r
friends.
Servicing and the Asset Trust
I
I
Servicer
General
All
o
f
the Option ARMs owned by Asset Trust
I
I are serviced
b
y
WMB,
a
s
the Asset Trust
I
I
Servicer, pursuant
t
o the Asset Trust
I
I Pooling and Servicing Agreement. WMB has possession
o
f
the
mortgage files (
i
.
e
.
,
the credit reports, servicing documents, etc.)
i
n
i
t
s
capacity
a
s
Asset Trust
I
I
Servicer and the Asset Trust
I
I Loan Documents (as defined below)
i
n
i
t
s
capacity
a
s
Asset Trust
I
I
Custodian.
The Asset Trust
I
I
Pooling and Servicing Agreement provides that WMB may not resign from
i
t
s
obligations and duties thereunder
a
s
Asset Trust
I
I
Servicer except upon a determination that
i
t
s
duties
thereunder are
n
o
longer permissible under applicable law. No such resignation will become effective
until a successor Asset Trust
I
I
Servicer has assumed WMBs servicing obligations and duties under
the Asset Trust
I
I
Pooling and Servicing Agreement.
I
f
the Asset Trust
I
I
Servicer resigns, the
Company, subject
t
o the terms
o
f
the Asset Trust
I
I
Pooling and Servicing Agreement, will appoint a
successor Asset Trust
I
I
Servicer.
The Asset Trust
I
I Servicer receives a fee for
i
t
s
services
a
s
Asset Trust
I
I Servicer under the
Asset Trust
I
I Pooling and Servicing Agreement. The servicing fee
i
s calculated as a per annum
percentage for each Option ARM based on the principal balance for such Option ARM. The servicing
fee with respect
t
o each Option ARM equals 0.375%per annum and
i
s paid monthly. The Asset Trust
I
I
Servicer
i
s entitled
t
o retain certain ancillary fees and charges, including, but not limited
t
o
,
any
prepayment fees, insufficient funds fees, modification fees, payoff statement fees and late charges
with respect
t
o the Option ARMs as additional servicing compensation and
i
s also entitled
t
o certain
income generated by permitted investments made with collections
o
n
the Option ARMs. The Asset
Trust
I
I Servicer generally pays
a
l
l
expenses incurred
i
n connection with
i
t
s
responsibilities
a
s
Asset
Trust
I
I Servicer under the Asset Trust
I
I Pooling and Servicing Agreement (subject
t
o reimbursement
for certain expenses and advances, including those incurred
b
y
i
t
i
n connection with the liquidation
o
f
defaulted Option ARMs, the restoration
o
f
damaged mortgaged properties, and payments by the Asset
Trust
I
I Servicer for taxes and insurance premiums with respect
t
o mortgaged properties).
Any person into which the Asset Trust
I
I Servicer may
b
e
merged, converted
o
r
consolidated,
o
r
any person resulting from any merger, conversion
o
r
consolidation
t
o which the Asset Trust
I
I Servicer
i
s a party will
b
e
the successor Asset Trust
I
I Servicer under the Asset Trust
I
I Pooling and Servicing
Agreement.
The Asset Trust
I
I Servicer may outsource
t
o third party vendors some servicing functions,
a
s
described under The Asset Trust
I
I ServicerServicing ProceduresThe Asset Trust
I
I
Servicers Third Party Vendors and Service Providers below.
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The Asset Trust
I
I Servicer
The Asset Trust
I
I
Servicers Servicing Experience
WMB has been servicing loans secured by real estate
o
r
other property for over 100 years. The
Option ARMs
i
n WMBs portfolio were originated
b
y
WMB.
The following table shows the number and aggregate principal balance
o
f
prime single-family
residential mortgage loans, including conforming and nonconforming mortgage loans and fixed rate
and adjustable rate mortgage loans, serviced by the Asset Trust
I
I Servicer as
o
f
the specified date.
Single- Family Residential Prime Mortgage Loans Serviced by the Asset Trust
I
I
Servicer
December 31,
2006
December 31,
2005
December 31,
2004
(Dollar Amounts
i
n Millions)
Number
o
f
Mortgage Loans Serviced
for WMB
o
r
Its Affiliates (
o
r
Their
Securitization Trusts) . . . . . . . . . . . . 707,497 766,384 798,269
Aggregate Principal Balance . . . . . . . . $ 232,607 266,334 213,525
Number
o
f
Mortgage Loans Serviced
for Unaffiliated Third Parties . . . . . . 2,800,162 3,527,670 3,820,696
Aggregate Principal Balance . . . . . . . . $ 373,679 429,944 444,595
Servicing Procedures
Servicing Functions. The functions performed
b
y
the Asset Trust
I
I
Servicer under the Asset
Trust
I
I
Pooling and Servicing Agreement include, among other servicing functions, payment collection,
payment application, investor reporting and other investor services, default management and escrow
administration. The Asset Trust
I
I
Servicer performs
i
t
s
servicing functions
a
t
loan servicing centers
located
i
n Florence, South Carolina; Milwaukee, Wisconsin; Northridge/ Chatsworth, California; and
Jacksonville, Florida.
Servicing Standard; Waivers and Modifications. Pursuant
t
o the Asset Trust
I
I Pooling and
Servicing Agreement, the Asset Trust
I
I Servicer
i
s required
t
o service the Option ARMs owned by
Asset Trust
I
I consistent with prudent mortgage loan servicing practices and (unless inconsistent with
those servicing practices)
i
n the same manner
i
n which, and with the same care, skill, prudence and
diligence with which,
i
t services and administers similar mortgage loans for other portfolios. The Asset
Trust
I
I Servicer
i
s required
t
o make reasonable efforts
t
o collect
o
r
cause
t
o be collected
a
l
l
payments
under the mortgage loans and,
t
o the extent consistent with the Asset Trust
I
I Pooling and Servicing
Agreement and applicable insurance policies, follow such collection procedures as are followed with
respect
t
o comparable mortgage loans that are held
i
n portfolios
o
f
responsible mortgage lenders
i
n
the local areas where each mortgaged property
i
s located. Under the terms
o
f
the Asset Trust
I
I
Pooling and Servicing Agreement, the servicing standard applicable
t
o the Asset Trust
I
I Servicer may
only be modified with the consent
o
f
the Company.
Under the terms
o
f
the Asset Trust
I
I Pooling and Servicing Agreement, the Asset Trust
I
I
Servicer (subject
t
o certain conditions) may waive, modify
o
r
vary any term
o
f
any mortgage loan
o
r
consent
t
o the postponement
o
f
strict compliance with any such term
o
r
i
n any manner grant
indulgence
t
o the applicable obligor
i
f
i
t has determined, exercising
i
t
s
good faith business judgment
i
n
the same manner
a
s
i
t would
i
f
i
t were the owner
o
f
the related Option ARM, that the security for, and
the timely and full collectability of, such Option ARM would not be adversely affected by such waiver,
modification, postponement
o
r
indulgence, and may make certain other modifications with respect
t
o
the Option ARMs and the related property
i
n accordance with the terms
o
f
the Asset Trust
I
I Pooling
and Servicing Agreement.
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Mortgage Loan Servicing System.
I
n performing
i
t
s servicing functions, the Asset Trust
I
I
Servicer generally uses computerized mortgage loan servicing systems that
i
t leases from Fidelity
Information Services, a division
o
f
Fidelity National Financial
(
Fidelity), a third party vendor (collec-
tively, the Fidelity System). The Fidelity System produces detailed information about the financial
status
o
f
each mortgage loan, including outstanding principal balance, current interest rate and the
amount
o
f
any advances, unapplied payments, outstanding fees, escrow deposits
o
r
escrow account
overdrafts, and about transactions that affect the mortgage loan, including the amount and due date
o
f
each payment, the date
o
f
receipt
o
f
each payment (including scheduled payments and prepayments),
and how the payment was applied. The Fidelity System also produces additional information about
mortgage loans that are
i
n default, including the amount
o
f
any insurance and liquidation proceeds
received. The Asset Trust
I
I Servicer began using the Fidelity System
i
n 1996. Prior
t
o July 2004, the
Asset Trust
I
I Servicer serviced some mortgage loans using a proprietary mortgage loan servicing
system;
i
n July 2004, the Asset Trust
I
I Servicer consolidated servicing into a single servicing platform
b
y
converting approximately 1.2 million loan records from the proprietary mortgage loan servicing
system
t
o the Fidelity System.
Collections and Distributions. Under the terms
o
f
the Asset Trust
I
I Pooling and Servicing
Agreement, collections with respect
t
o the Option ARMs are collected
b
y
the Asset Trust
I
I Servicer
and aggregated into a Payment Clearing Account controlled by the Asset Trust
I
I Servicer; such
collections are deposited into accounts controlled by the Asset Trust
I
I Servicer and may be
commingled with funds with respect
t
o other Option ARMs
o
r
mortgage loans serviced
o
r
owned by
the Asset Trust
I
I Servicer. The Asset Trust
I
I Servicer
i
s required
t
o deposit collections received with
respect
t
o the Option ARMs owned
b
y
Asset Trust
I
I into a certificate account controlled by the Asset
Trust
I
I Trustee under the Asset Trust
I
I Pooling and Servicing Agreement on a monthly basis. The
amount
o
f
collections required
t
o be remitted
t
o the Asset Trust
I
I Trustee
i
n any given monthly deposit
i
s determined
b
y
the timing
o
f
the Asset Trust
I
I Servicers receipt
o
f
collections and the type
o
f
collections they represent.
I
n accordance with the terms
o
f
the Asset Trust
I
I Pooling and Servicing
Agreement, the Asset Trust
I
I Servicer
i
s allowed
t
o retain certain amounts with respect
t
o expenses
and advances from collections
o
r
apply them towards the costs
o
f
certain costs and permitted
expenses connected with the servicing
o
f
the Option ARMs. The Asset Trust
I
I Servicer
i
s neither be
permitted nor required
t
o make servicer advances
t
o cover any gap between scheduled payments on
the Option ARMs and the actual collections thereon
i
n any given period.
Subject
t
o the terms and conditions set forth
i
n the Asset Trust
I
I Pooling and Servicing
Agreement, on a monthly basis the Asset Trust
I
I Trustee distributes collections deposited
i
n the
certificate account
t
o the Company, as holder
o
f
the Asset Trust
I
I Class A Trust Certificate, less
(
a
)
fees, expenses and indemnities payable
t
o the Asset Trust
I
I Trustee and the Asset Trust
I
I
Delaware Trustee and (
b
)
fees and certain other amounts payable
t
o the Asset Trust
I
I Servicer. No
amounts are payable from collections with respect
t
o the Asset Trust
I
I Class R Trust Certificate.
Under the terms
o
f
the Asset Trust
I
I
Pooling and Servicing Agreement, collections with respect
t
o the Option ARMs may be invested
i
n certain permitted investments prior
t
o their distribution
t
o the
Company,
a
s
holder
o
f
the Asset Trust
I
I
Class A Trust Certificate. The Asset Trust
I
I
Servicer shall
b
e
entitled
t
o retain any investment income produced
b
y
such investment
a
s
additional servicing
compensation.
Servicing
o
f
Delinquent Option ARMs; Foreclosure. The Asset Trust
I
I
Servicer
i
s required
under the terms
o
f
the Asset Trust
I
I
Pooling and Servicing Agreement
t
o make reasonable efforts
t
o
collect
o
r
cause
t
o
b
e
collected
a
l
l
payments
o
n
the Option ARMs owned
b
y
Asset Trust
I
I
that are
3
0
o
r
more days delinquent. Such efforts may include payment reminder telephone calls
t
o the
mortgagor, letter campaigns, drive-
b
y
property inspections and other collection activities permissible
under the Asset Trust
I
I
Loan Documents and applicable law.
The Asset Trust
I
I Servicer
i
s required under the Asset Trust
I
I Pooling and Servicing Agreement
t
o foreclose upon the mortgaged property related
t
o each defaulted Option ARM as
t
o which no
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satisfactory arrangements can
b
e
made
f
o
r
collection
o
f
delinquent payments. Under the Asset Trust
I
I
Pooling and Servicing Agreement, the Asset Trust
I
I Servicer
i
s permitted,
i
n lieu
o
f
foreclosure,
i
f
prudent
t
o
d
o
s
o
and taking into account the desirability
o
f
maximizing net liquidation proceeds,
t
o
accept a payment
o
f
less than the outstanding principal balance
o
f
the defaulted Option ARM. The
Asset Trust
I
I Servicer
i
s not permitted
t
o foreclose upon a mortgaged property
i
f
i
t
i
s aware
o
f
evidence
o
f
toxic waste
o
r
other environmental contamination
o
n
the mortgaged property and
i
t
determines that
i
t would
b
e
imprudent
t
o foreclose.
Insurance. For each Option ARM with
a
n
original loan-
t
o
-
value ratio greater than 80%, the
Asset Trust
I
I
Pooling and Servicing Agreement generally requires the Asset Trust
I
I
Servicer
t
o keep
i
n full force and effect a primary mortgage insurance policy. The Asset Trust
I
I
Servicer generally
i
s
not required
t
o maintain such policy
i
f the outstanding principal balance
o
f
the Option ARM
i
s 80%
o
r
less
o
f
the original appraised value
o
f
the related mortgaged property, unless required
b
y
applicable
law.
Limitations on the Asset Trust
I
I
Servicers Liability
The Asset Trust
I
I Pooling and Servicing Agreement provides that neither the Asset Trust
I
I
Servicer nor any director, officer, employee
o
r
agent
o
f
the Asset Trust
I
I Servicer (the Asset Trust
I
I
Servicer Indemnified Parties)
i
s under any liability
t
o Asset Trust
I
I
,
the Company
o
r
the holders
o
f
the Asset Trust
I
I Class A Trust Certificate and the Asset Trust
I
I Class R Trust Certificate
o
r
others for
any action taken (
o
r
not taken)
b
y
any Asset Trust
I
I Servicer Indemnified Party
i
n good faith pursuant
t
o the Asset Trust
I
I Pooling and Servicing Agreement,
o
r
for errors
i
n judgment; provided, however,
that the Asset Trust
I
I Servicer
i
s not protected against any liability that would otherwise be imposed
by reason
o
f
willful misfeasance, bad faith
o
r
gross negligence
i
n the performance
o
f
duties
o
r
b
y
reason
o
f
reckless disregard
o
f
obligations and duties thereunder. The Asset Trust
I
I Pooling and
Servicing Agreement further provides that any Asset Trust
I
I Servicer Indemnified Party
i
s entitled
t
o
indemnification
b
y
Asset Trust
I
I and will be held harmless against any loss, liability
o
r
expense
incurred
i
n connection with any legal action relating
t
o the Asset Trust
I
I Pooling and Servicing
Agreement
o
r
the certificates issued thereunder (except any such loss, liability,
o
r
expense otherwise
reimbursable pursuant
t
o the Asset Trust
I
I Pooling and Servicing Agreement) and any loss, liability
o
r
expense incurred
b
y
reason
o
f
willful misfeasance, bad faith
o
r
gross negligence
i
n the performance
o
f
duties thereunder
o
r
b
y
reason
o
f
reckless disregard
o
f
obligations and duties thereunder.
I
n addition,
the Asset Trust
I
I Pooling and Servicing Agreement provides that the Asset Trust
I
I Servicer
i
s not
under any obligation
t
o appear in, prosecute
o
r
defend any legal action that
i
s not incidental
t
o
i
t
s
responsibilities under the Asset Trust
I
I Pooling and Servicing Agreement and that
i
n
i
t
s
opinion may
involve
i
t
i
n any expense
o
r
liability. The Asset Trust
I
I Servicer may, however,
i
n
i
t
s
discretion
undertake any such action that
i
t may deem necessary
o
r
desirable with respect
t
o the Asset Trust
I
I
Pooling and Servicing Agreement and the rights and duties
o
f
the parties thereto and the interests
o
f
the holders
o
f
the Asset Trust
I
I Class A Trust Certificate and the Asset Trust
I
I Class R Trust Certifi-
cate.
I
n such event, the legal expenses and costs
o
f
such action and any liability resulting therefrom
will be expenses, costs and liabilities
o
f
Asset Trust
I
I
,
and the Asset Trust
I
I Servicer will
b
e
entitled
t
o be reimbursed therefor and
t
o charge the certificate account.
Asset Trust
I
I Servicer Termination and Replacement. Under the terms
o
f
the Asset Trust
I
I
Pooling and Servicing Agreement, after the occurrence
o
f
any one
o
f
several typical Asset Trust
I
I
Servicer termination events, including but not limited
t
o a receivership with respect
t
o the Asset Trust
I
I
Servicer
o
r
(subject
t
o the expiration
o
f
typical grace periods and materiality requirements) the failure
by the Asset Trust
I
I Servicer
t
o make required deposits
t
o the certificate account, the Company may
remove the Asset Trust
I
I Servicer.
I
f the Asset Trust
I
I Servicer
i
s removed
b
y
the Company, the
Company shall have the sole power
t
o appoint a replacement Asset Trust
I
I Servicer.
The Asset Trust
I
I Servicers Third Party Vendors and Service Providers. Under the Asset
Trust
I
I Pooling and Servicing Agreement, the Asset Trust
I
I Servicer may perform
i
t
s
servicing
responsibilities through agents
o
r
independent contractors, but will not thereby
b
e
released from any
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o
f
i
t
s responsibilities thereunder. The Asset Trust
I
I Servicer currently outsources certain
o
f
i
t
s
responsibilities and may
i
n the future outsource other
o
f
i
t
s responsibilities pursuant
t
o these
provisions, which services may include some
o
r
a
l
l
o
f
the following: (
i
) collections
o
n
early stage
delinquent loans, (
i
i
) processing and monitoring
o
f
foreclosure actions, (
i
i
i
) processing and monitoring
o
f
mortgagors bankruptcy proceedings, (
i
v
)
preservation
o
f
properties related
t
o delinquent loans,
(
v
)
maintenance, marketing and sale
o
f
real-estate-owned properties, (
v
i
)
assuring that hazard
insurance coverage
i
s maintained, (vii) determining whether flood insurance coverage
i
s required and
assuring that any required coverage
i
s maintained, (viii) tax bill procurement and tracking
o
f
delinquent
tax payments, (
i
x
)
printing and mailing billing statements, Option ARM notices and default notices and
(
x
)
depositing mortgagor payments into a lockbox account. From time
t
o time, the Asset Trust
I
I
Servicer may cease
t
o outsource one
o
r
more
o
f
the foregoing servicing functions
o
r
may choose
t
o
outsource additional servicing functions. Some vendors may perform more than one function, and
some functions may
b
e
performed
b
y
more than one vendor.
The Asset Trust
I
I Servicer has entered into service level agreements with some
o
f
i
t
s
vendors,
which set forth detailed performance criteria, including
i
n some cases minimum time requirements for
completing specified tasks and maximum error rates, and which
i
n some cases impose penalties for
non- compliance with such criteria. The Asset Trust
I
I Servicer monitors vendor compliance with
applicable servicing criteria through procedures that may include reviews
o
f
statistical samplings
o
f
Option ARMs and reviews
o
f
reports on vendor performance prepared by the vendor
o
r
the Asset
Trust
I
I Servicer.
The Asset Trust
I
I
Servicers Quality Control Procedures
The Asset Trust
I
I
Servicer uses a combination
o
f
management controls and technology controls
t
o ensure the accuracy and integrity
o
f
servicing records. Management controls include the use
o
f
approval levels, the segregation
o
f
duties, and reconciliations
o
f
servicing data and accounts, among
others. Technology controls include the use
o
f
data security controls and interface controls
t
o ensure
that only authorized persons have the ability
t
o access and change system data
o
r
t
o submit data
t
o
o
r
receive data from vendors and investors. Specific security profiles
f
o
r
each job function include a
predetermined set
o
f
data security controls that are appropriate for that job function. The regional data
center
f
o
r
the Fidelity System, which
i
s located
i
n Jacksonville, Florida,
i
s kept
i
n a fire resistant
environment, and commercial electrical power
i
s backed
u
p
b
y
generators.
I
n addition, the Asset Trust
I
I
Servicer conducts periodic internal audits
o
f
critical servicing and
technology functions. External audits
b
y
entities such
a
s
the Fannie Mae, Freddie Mac and Ginnie
Mae and the annual examination
b
y
WMIs independent accountants
i
n connection with their audit
o
f
WMI and
i
t
s
subsidiaries may provide independent verification
o
f
the adequacy
o
f
such functions.
Periodic examination
b
y
the Asset Trust
I
I
Servicers regulatory authorities may provide additional
independent review
o
f
the Asset Trust
I
I
Servicers management controls.
Both the Asset Trust
I
I
Servicer and Fidelity maintain detailed business continuity plans
s
o
that
each entity can resume critical business functions
i
n the event
o
f
a disaster
o
r
other serious system
outage, which plans are reviewed and updated periodically. Fidelity
i
s contractually obligated
t
o return
the Asset Trust
I
I Servicer
t
o full functionality within
4
8
hours
o
f
a reported system outage. The Asset
Trust
I
I Servicer and Fidelity perform annual disaster recovery tests
i
n which they reroute data and
servicing system operations
t
o Fidelitys back- up site, and then process sample transactions from
a
l
l
servicing locations
t
o ensure the functionality
o
f
such back- up site.
I
t
i
s the Asset Trust
I
I Servicers policy
t
o require
i
t
s other third party vendors
t
o implement
measures similar
t
o those described above
t
o ensure the accuracy and integrity
o
f
servicing records.
The Asset Trust
I
I Custodian
Washington Mutual Bank acts as custodian (the Asset Trust
I
I Custodian) for Asset Trust
I
I
pursuant
t
o a Custody Agreement, dated
a
s
o
f
December 13, 2006 (the Asset Trust
I
I Custody
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Agreement), among the Asset Trust
I
I Trustee, the Asset Trust
I
I Servicer and the Asset Trust
I
I
Custodian. The Asset Trust
I
I Custodian holds the notes, mortgages and other legal documents
related
t
o the Option ARMs (collectively, the Asset Trust
I
I Loan Documents) for the benefit
o
f
the
Asset Trust
I
I Trustee. The Asset Trust
I
I Custodian
i
s required
t
o maintain the Asset Trust
I
I Loan
Documents
i
n secure and fire resistant facilities. The mortgage files held
b
y
the Asset Trust
I
I Servicer
are not required
t
o
b
e
physically segregated from Asset Trust
I
I Loan Documents
i
n the Asset Trust
I
I
Custodians custody but are kept
i
n shared facilities. The Asset Trust
I
I Custodian
i
s required
t
o review
the Asset Trust
I
I Loan Documents related
t
o each Option ARM and deliver
t
o the Asset Trust
I
I
Trustee a certification
t
o the effect that, except
a
s
noted
i
n the certification,
a
l
l
required documents
have been executed and received.
I
n the event
o
f
the termination
o
f
the Asset Trust
I
I Custody Agreement, the Asset Trust
I
I
Custodian will
b
e
required
t
o deliver the Asset Trust
I
I Loan Documents
i
n the Asset Trust
I
I
Custodians custody
t
o the Asset Trust
I
I Trustee
o
r
any successor Asset Trust
I
I Custodian appointed
b
y
the Company.
The Asset Trust
I
I Servicer may, but does not currently, pay the Asset Trust
I
I Custodian a fee for
i
t
s services under the Asset Trust
I
I Custody Agreement from time
t
o time. Payment
o
f
this fee will not
affect dividends
t
o the Company.
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WMI
General
WMI
i
s a Washington corporation.
I
t owns two federal savings associations
a
s
well
a
s
numerous
nonbank subsidiaries. WMI
i
s a multiple savings and loan holding company. As a savings and loan
holding company, WMI
i
s subject
t
o regulation
b
y
the OTS.
WMIs federal savings associations are subject
t
o extensive regulation and examination
b
y
the
OTS, their primary federal regulator,
a
s
well
a
s
the Federal Deposit Insurance Corporation
(
FDIC).
WMIs nonbank financial subsidiaries are also subject
t
o various federal and state laws and
regulations.
A
l
l
o
f
WMIs banking subsidiaries are under the common control
o
f
WMI and are insured
b
y
the
FDIC.
I
f
a
n
insured institution fails, claims
f
o
r
administrative expenses
o
f
the receiver and for deposits
i
n
U
.
S
.
branches (including claims
o
f
the FDIC
a
s
subrogee
o
f
the failed institution) have priority over
the claims
o
f
general unsecured creditors.
I
n addition, the FDIC has authority
t
o require any
o
f
WMIs
banking subsidiaries
t
o reimburse
i
t
f
o
r
losses
i
t incurs
i
n connection either with the failure
o
f
another
o
f
WMIs banking subsidiaries
o
r
with the FDICs provision
o
f
assistance
t
o one
o
f
WMIs banking
subsidiaries that
i
s
i
n danger
o
f
failure.
Holding Company Status and Acquisitions
WMI
i
s a multiple savings and loan holding company,
a
s
defined
b
y
federal law, because
i
t owns
more than one savings association. WMI
i
s regulated
a
s
a unitary savings and loan holding company,
however, because the OTS deems WMIs federal savings associations
t
o have been acquired
i
n
supervisory transactions. Therefore, WMI
i
s exempt from certain restrictions that would otherwise
apply under federal law
t
o the activities and investments
o
f
a multiple savings and loan holding
company. These restrictions will apply
t
o WMI
i
f any
o
f
WMIs banking institutions fails
t
o meet a
qualified thrift lender test established
b
y
federal law. As
o
f
December 31, 2006, WMIs banking
subsidiaries were
i
n compliance with qualified thrift lender standards.
WMI may not acquire control
o
f
another savings association without the prior approval
o
f
the
OTS. WMI may not
b
e
acquired
b
y
a company, other than a bank holding company, unless the OTS
approves such
a
n
acquisition,
o
r
b
y
a
n
individual unless the OTS does not object after receiving
notice. WMI may not
b
e
acquired
b
y
a bank holding company unless the Board
o
f
Governors
o
f
the
Federal Reserve System (the Federal Reserve) approves.
I
n any case, the public must have
a
n
opportunity
t
o comment
o
n
the proposed acquisition, and the OTS
o
r
Federal Reserve must complete
a
n
application review. Without prior approval from the OTS, WMI may not acquire more than 5%
o
f
the voting stock
o
f
any savings institution that
i
s not one
o
f
WMIs subsidiaries.
The Gramm-Leach- Bliley Act generally restricts any non- financial entity from acquiring WMI
unless such non- financial entity was,
o
r
had submitted
a
n
application
t
o become, a savings and loan
holding company
a
s
o
f
May
4
,
1999. Because WMI was treated
a
s
a unitary savings and loan holding
company prior
t
o that date, WMI may engage
i
n non- financial activities and acquire non- financial
subsidiaries.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
WMB
i
s the Asset Trust I Servicer, the Asset Trust
I
I Servicer and the originator
o
f
the HELs
held
b
y
the Company through Asset Trust I and the Option ARMs held
b
y
the Company through Asset
Trust
I
I
.
WMB
i
s expected
t
o
b
e
the servicer and may
b
e
the originator with respect
t
o any Additional
Assets. University Street
i
s
a
n
indirect subsidiary
o
f
WMB. The Company
i
s a subsidiary
o
f
University
Street.
There
i
s not currently, and there was not during the past two years, any material business
relationship, agreement, arrangement, transaction
o
r
understanding that
i
s
o
r
was entered into outside
the ordinary course
o
f
business
o
r
i
s
o
r
was
o
n
terms other than would be obtained
i
n
a
n
arms-length
transaction with
a
n
unrelated third party, between (
i
) any
o
f
WMB
o
r
University Street
o
n
the one hand
and (
i
i
) any
o
f
the Company, Asset Trust
I
, Asset Trust
I
I
o
r
the Trust
o
n
the other hand.
The Company will periodically reimburse WMB for general overhead expenses incurred
b
y
WMB
o
n
behalf
o
f
the Company . The Company expects that the amount
o
f
such reimbursements will be
d
e
minimis.
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DESCRIPTION OF THE TRUST SECURITIES
The following summary describes the material terms and provisions
o
f
the Trust Securities, which
will represent undivided beneficial ownership interests
i
n a like amount
o
f
Series 2007- A Company
Preferred Securities held
b
y
the Trust. This description
i
s qualified
i
n
i
t
s
entirety
b
y
reference
t
o the
terms and provisions
o
f
the Trust Agreement. A copy
o
f
the Trust Agreement may be obtained upon
request
t
o WMI.
General
The Fixed-to-Floating Rate Perpetual Non- cumulative Trust Securities, liquidation preference
$100,000 per security (the Trust Securities),
o
f
the Trust are beneficial ownership interests
i
n the
Trust, the terms
o
f
which are set forth
i
n the Trust Agreement. The aggregate liquidation preference
o
f
the Trust Securities
i
s $500,000,000.
The funds
o
f
the Trust available for distribution
t
o the holders
o
f
the Trust Securities will be
limited solely
t
o payments received
b
y
the Trust from the Company as dividends on,
o
r
upon
redemption of, the Series 2007- A Company Preferred Securities, which payments will be passed
through upon receipt by the Trust
t
o the holders
o
f
the Trust Securities. Consequently,
i
f the Company
does not pay any dividend
o
r
make any redemption payment on the Series 2007- A Company
Preferred Securities, the Trust will not have funds
t
o make the related distribution
o
r
redemption
payment on the Trust Securities. Distributions on and the redemption price
o
f
each Trust Security will
be passed through
t
o the holders
o
f
the Trust Securities on the same dates and
i
n the same amounts
as the corresponding dividends and redemption price,
a
s
applicable, that are paid by the Company
t
o
the Trust on a like amount
o
f
Series 2007- A Company Preferred Securities; provided that
i
f any such
payment
o
f
dividends
o
r
redemption price
i
s received
b
y
the Trust after
2
:
00
P
.
M. New York time, such
payment will instead be passed through
t
o the holders
o
f
the Trust Securities on the next day that
i
s a
Business Day. The Dividend Payment Dates and related Dividend Periods are the same for the
Trust Securities and the Series 2007-A Company Preferred Securities, and, accordingly, the terms
Dividend Payment Date, Dividend Period and Business Day have the same meanings as applied
t
o each
o
f
those securities.
The Trust Securities are automatically exchangeable under certain circumstances into a like
amount
o
f
Depositary Shares. See Conditional Exchange.
Under the Trust Agreement, the Trust
i
s prohibited from issuing any securities other than the
Trust Securities.
The Trust Securities are not obligations of,
o
r
guaranteed by, WMI, WMB, Marion, the Company,
University Street,
o
r
any
o
f
their respective affiliates
o
r
any other entity. The Trust Securities represent
equity interests solely
i
n the Trust and do not represent
a
n
interest
i
n any
o
f
the foregoing entities.
Distributions
Distributions
o
n
the Trust Securities will
b
e
passed through
o
n
each date
o
n
which the Company
pays
t
o the Trust dividends
o
n
the Series 2007- A Company Preferred Securities owned
b
y
the Trust,
i
n
a
n
amount per Trust Security equal
t
o the amount
o
f
dividends received
b
y
the Trust
o
n
such date
o
n
a like amount
o
f
Series 2007- A Company Preferred Securities (including Additional Amounts,
i
f
any); provided that
i
f any such payment
o
f
dividends
i
s received
b
y
the Trust after
2
:
0
0
P
.
M
.
New York
time, such payment will instead be passed through
t
o the holders
o
f
the Trust Securities
o
n
the next
day that
i
s a Business Day. Accordingly:

i
f the Company pays full dividends
o
n
a Dividend Payment Date for the Series 2007- A
Company Preferred Securities, the Trust will pass through corresponding full distributions on
the Trust Securities on such Dividend Payment Date;
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i
f the Company pays partial dividends
o
n
a Dividend Payment Date for the Series 2007-A
Company Preferred Securities, the Trust will pass through partial distributions
i
n the same
proportionate amount
o
n
the Trust Securities on such Dividend Payment Date; and

i
f the Company pays
n
o
dividends
o
n
a Dividend Payment Date for the Series 2007- A
Company Preferred Securities, the Trust will not pass through any distributions
o
n
the
Trust Securities
o
n
such Dividend Payment Date.
See Description
o
f
the Series 2007- A Company Preferred SecuritiesDividends.
The record date for distributions on the Trust Securities will be the first day
o
f
the month
i
n which
the relevant Dividend Payment Date occurs or,
i
f any such day
i
s not a Business Day, the next day
that
i
s a Business Day.
Dividends on the Series 2007- A Company Preferred Securities are non- cumulative. Accordingly,
distributions on the Trust Securities are non- cumulative.
I
f the Trust passes through no distributions
o
r
less than full distributions on the Trust Securities
o
n
a Dividend Payment Date because
i
t received no
dividend
o
r
less than full dividends on the Series 2007- A Company Preferred Securities, holders
o
f
Trust Securities will have no right
t
o receive, and the Trust will have
n
o
obligation
t
o pass through,
such unpaid distributions
a
t
a future date, whether
o
r
not dividends
o
r
distributions are paid on a
future Dividend Payment Date on the Company Common Securities
o
r
the Trust Securities.
Restrictions on Dividends
Under certain circumstances,
i
f the OTS determines that WMB
i
s operating with
a
n
insufficient
level
o
f
capital
o
r
i
s engaged
i
n
,
o
r
i
t
s
relationship with the Company results
i
n
,
a
n
unsafe and
unsound banking practice, the OTS could restrict payment
o
f
dividends
b
y
the Company
o
n
the
Series 2007- A Company Preferred Securities, resulting
i
n a corresponding restriction
i
n the distribu-
tions passed through
b
y
the Trust
t
o the holders
o
f
the Trust Securities.
Restrictions on Dividends by WMI
WMI will covenant
i
n the Exchange Agreement for the benefit
o
f
the holders
o
f
the Trust Securi-
ties that
i
f
f
o
r
any Dividend Period full dividends
o
n
(
i
) the Series 2007-A Company Preferred
Securities
o
r
(
i
i
)
the Trust Securities have not been declared and paid, then,
a
s
described under
Description
o
f
the Series 2007- A Company Preferred SecuritiesRestrictions
o
n
Dividends
b
y
WMI, WMI will not declare
o
r
pay dividends with respect
t
o
,
o
r
redeem, purchase
o
r
acquire, any
o
f
i
t
s
equity capital securities during the next succeeding Dividend Period, except dividends
i
n connection
with a shareholders rights plan,
i
f any,
o
r
dividends
i
n connection with benefits plans.
Redemption
The Trust Securities will not be redeemable
a
t
the option
o
f
the holders thereof. On each day on
which the Company redeems Series 2007- A Company Preferred Securities, the Trust will redeem a
like amount
o
f
Trust Securities for a redemption price
i
n the same amount as the corresponding
redemption price paid
t
o the Trust on a like amount
o
f
Series 2007- A Company Preferred Securities;
provided that
i
f any such payment
o
f
the redemption price
i
s received by the Trust after
2
:
00
P
.
M. New
York time, the Trust will redeem the like amount
o
f
Trust Securities on the next day that
i
s a Business
Day. See Description
o
f
the Series 2007- A Company Preferred SecuritiesRedemption.
I
f the redemption
o
f
the Series 2007-A Company Preferred Securities
i
s
i
n part instead
o
f
i
n
whole on any redemption date, then the particular Trust Securities
t
o be redeemed will be selected
not more than 60 days prior
t
o the redemption date
b
y
the Property Trustee from the outstanding
Trust Securities not previously called for redemption, by such method
a
s
the Property Trustee deems
fair and appropriate.
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A notice
o
f
redemption
o
f
the Trust Securities will
b
e
mailed
b
y
first class mail, postage prepaid,
addressed
t
o the holders
o
f
record
o
f
the securities
t
o
b
e
redeemed
a
t
their respective last addresses
appearing
o
n
the books and records
o
f
the Trust. Such mailing will
b
e
a
t
least
3
0
days but not more
than
6
0
days before the date fixed
f
o
r
redemption.
Restriction on Redemption
o
r
Purchases
A
t
o
r
prior
t
o the initial issuance
o
f
the Trust Securities, WMI will enter into a Replacement
Capital Covenant relating
t
o the Trust Securities, the Series 2007- A Company Preferred Securities,
the Depository Shares and the Series M WMI Preferred Stock that may
b
e
issued upon a Conditional
Exchange (collectively the Replacement Covenant Covered Securities). The Replacement Capital
Covenant will only benefit holders
o
f
Covered Debt (as defined below) and will not be enforceable by
holders
o
f
Trust Securities
o
r
any other Replacement Covenant Covered Securities. However, the
Replacement Capital Covenant could preclude WMI from redeeming
o
r
purchasing Replacement
Covenant Covered Securities
a
t
a time WMI might otherwise wish
t
o do so.
I
n the Replacement Capital Covenant, WMI will covenant
t
o redeem
o
r
purchase Replacement
Covenant Covered Securities only
i
f and
t
o the extent that the total redemption
o
r
purchase price
i
s
equal
t
o
o
r
less than designated percentages
o
f
the net cash proceeds that WMI
o
r
i
t
s
subsidiaries
have received during the 180 days prior
t
o the redemption
o
r
purchase from the issuance
o
f
WMI
common stock, non- cumulative perpetual preferred stock
o
r
certain other securities
o
r
combinations
o
f
securities satisfying the requirements
o
f
the Replacement Capital Covenant.
WMIs ability
t
o raise proceeds from qualifying securities during the 180 days prior
t
o a proposed
redemption
o
r
purchase will depend on, among other things, market conditions
a
t
such times as well
as the acceptability
t
o prospective investors
o
f
the terms
o
f
such qualifying securities.
WMIs covenants
i
n the Replacement Capital Covenant will run
i
n favor
o
f
persons that buy, hold
o
r
sell WMIs indebtedness during the period that such indebtedness
i
s Covered Debt, which
i
s
currently comprised
o
f
WMIs 4.625% Subordinated Notes due 2014, bearing CUSIP No. 939322AN3.
Other debt will replace WMIs Covered Debt under the Replacement Capital Covenant
o
n
the earlier
t
o occur
o
f
(
i
) the date two years prior
t
o the maturity
o
f
the existing Covered Debt, (
i
i
)
the date
o
f
a
redemption
o
r
purchase
o
f
the existing Covered Debt
i
n an amount such that the outstanding principal
amount
o
f
the existing Covered Debt
i
s
o
r
will become less than $100 million.
The Replacement Capital Covenant will
b
e
subject
t
o various additional terms and conditions
and this description
i
s qualified
i
n
i
t
s
entirety
b
y
reference
t
o the Replacement Capital Covenant, a
copy
o
f
the form
o
f
which
i
s available upon request from WMI. The Replacement Capital Covenant
may
b
e
terminated
i
f the holders
o
f
a
t
least 51%
o
f
the principal amount
o
f
the Covered Debt
s
o
agree,
o
r
i
f WMI
n
o
longer has outstanding any long- term indebtedness that qualifies
a
s
Covered
Debt, without regard
t
o whether such indebtedness
i
s rated
b
y
a nationally recognized statistical rating
organization. The Replacement Capital Covenant will terminate
o
n
May 24, 2017 without any action
b
y
WMI
o
r
any other person.
Subject
t
o the limitations described above and the terms
o
f
any preferred stock ranking senior
t
o
the Trust Securities
o
r
o
f
any outstanding debt instruments, WMI
o
r
i
t
s
affiliates may from time
t
o time
purchase any outstanding shares
o
f
Series M WMI Preferred Stock
b
y
tender,
i
n the open market
o
r
by private agreement.
Voting Rights
Except
a
s
set forth below, the holders
o
f
Trust Securities will have
n
o
voting rights.
I
n the event that the Trust
i
s entitled
t
o exercise
i
t
s
voting rights with respect
t
o the Series 2007- A
Company Preferred Securities, each holder
o
f
Trust Securities will have the right
t
o direct the manner
i
n which the Property Trustee on behalf
o
f
the Trust exercises such voting rights with respect
t
o a like
amount
o
f
Series 2007- A Company Preferred Securities on a proportionate basis.
I
f the Property
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Trustee receives notice from the Company that the Trust
a
s
holder
o
f
Series 2007- A Company
Preferred Securities
i
s entitled
t
o vote
o
n
any matter, promptly after learning
o
f
such entitlement, the
Property Trustee shall cause
t
o
b
e
mailed
t
o each holder
o
f
Trust Securities, notice
o
f
such vote
(including a description
o
f
the subject matter
o
f
the vote and related circumstances
t
o the extent
known
t
o the Property Trustee), along with a copy
o
f
any notice
o
r
other written communication
received
b
y
the Property Trustee from the Company with respect
t
o such vote and related matters.
I
n
each such notice, the Property Trustee shall request direction from each holder
o
f
Trust Securities
a
s
t
o how the Trust
a
s
a holder
o
f
Series 2007- A Company Preferred Securities shall vote
o
n
the matter
a
t
issue. Each holder
o
f
Trust Securities shall have the right
t
o direct the manner
i
n which the Property
Trustee
o
n
behalf
o
f
the Trust exercises such voting rights with respect
t
o a like amount
o
f
Series 2007- A Company Preferred Securities.
Notwithstanding the description above
o
f
the voting rights available
t
o holders
o
f
the Trust Secu-
rities under the Trust Agreement, such voting rights may be exercised only
b
y
a beneficial owner
o
f
a
Trust Security that
i
s a
U
.
S
.
Person
o
r
b
y
a
U
.
S
.
Person acting
a
s
irrevocable agent with discretionary
powers for the beneficial owner
o
f
a Trust Security that
i
s not a
U
.
S
.
Person. Beneficial owners
o
f
Trust Securities that are not
U
.
S
.
Persons must irrevocably appoint a
U
.
S
.
Person with discretionary
powers
t
o act
a
s
their agent with respect
t
o such voting rights. As used
i
n this paragraph, the term

U
.
S
.
Person means, for United States federal income tax purposes, a citizen
o
r
resident
o
f
the
United States, a corporation created
o
r
organized
i
n
o
r
under the laws
o
f
the United States
o
r
any
state,
a
n
estate the income
o
f
which
i
s includible
i
n gross income for United States federal income tax
purposes regardless
o
f
i
t
s
source,
o
r
a trust
i
f a court within the United States
i
s able
t
o exercise
primary supervision over
i
t
s
administration and one
o
r
more United States persons have authority
t
o
control
a
l
l
substantial decisions
o
f
the trust.
I
n the case where the Company, the Property Trustee and the Delaware Trustee wish
t
o enter
into one
o
r
more agreements supplemental
t
o the Trust Agreement, they may do
s
o
without the
consent
o
f
the holders
o
f
the Trust Securities for the following purposes: (
i
)
t
o evidence the succession
o
f
another entity
t
o the Company and the assumption by any such successor
o
f
the covenants
o
f
the
Company contained
i
n the Trust Agreement; (
i
i
)
t
o add
t
o the covenants
o
f
the Company for the
benefit
o
f
the holders
o
f
the Trust Securities,
o
r
t
o surrender any right
o
r
power conferred upon the
Company; (iii)(
A
)
t
o correct
o
r
supplement any provision
o
f
the Trust Agreement which may be
defective
o
r
inconsistent with any other provision therein
o
r
(
B
)
t
o make any other provisions with
respect
t
o matters
o
r
questions arising under the Trust Agreement, provided that any such action
taken under this clause (
i
i
i
)
shall not materially adversely affect the interests
o
f
the holders
o
f
the
Trust Securities;
o
r
(iv)
t
o cure any ambiguity
o
r
correct any manifest error. Any other amendment
o
r
agreement supplemental
t
o the Trust Agreement must be
i
n writing and approved
b
y
a majority
o
f
the
holders (
b
y
aggregate liquidation preference)
o
f
the Trust Securities then outstanding, provided that,
for the purpose
o
f
such approval, any Series 2007- A Company Preferred Securities that are directly
o
r
indirectly held
o
r
beneficially owned by any member
o
f
the WMI Group will be treated as
i
f they were
not outstanding.
Conditional Exchange
Each Trust Security will be exchanged automatically for a like amount
o
f
newly issued
Fixed-to-Floating Rate Depositary Shares, each representing a
1
/
1000th interest
i
n one share
o
f
Series M WMI Preferred Stock,
i
f the OTS so directs
i
n writing upon
o
r
after the occurrence
o
f
an
Exchange Event. An Exchange Event will occur when:
WMB becomes undercapitalized under the OTSs prompt corrective action regulations;
WMB
i
s placed into conservatorship
o
r
receivership;
o
r
the OTS,
i
n
i
t
s
sole discretion, anticipates WMB becoming undercapitalized
i
n the near term
o
r
takes a supervisory action that limits the payment
o
f
dividends
b
y
WMB and
i
n connection
therewith, directs an exchange.
73
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00086
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For purposes
o
f
this offering circular, this exchange
i
s referred
t
o
a
s
the Conditional Exchange.
I
f the OTS so directs following the occurrence
o
f
an Exchange Event, each holder
o
f
Trust Secu-
rities will be unconditionally obligated
t
o surrender
t
o WMI
o
r
i
t
s
agent any certificates representing
the Trust Securities owned by such holder, and WMI will be unconditionally obligated
t
o issue
t
o such
holder,
i
n exchange for each such Trust Security, a depositary receipt representing a like amount
o
f
Depositary Shares. Any Trust Securities purchased
o
r
redeemed
b
y
WMI
o
r
any
o
f
i
t
s
affiliates prior
t
o
the time
o
f
exchange will not be deemed outstanding and will not be subject
t
o the Conditional
Exchange.
The Conditional Exchange will occur
a
s
o
f
8
:
00
A
.
M. New York time, on the date for such
exchange set forth
i
n the applicable OTS directive,
o
r
i
f such date
i
s not set forth
i
n the directive, as
o
f
8
:
00
A
.
M., New York time, on the earliest possible date such exchange could occur consistent with
the directive,
a
s
evidenced
b
y
the issuance
b
y
WMI
o
f
a press release prior
t
o such time. As
o
f
the
time
o
f
exchange,
a
l
l
o
f
the Trust Securities will
b
e
transferred
t
o WMI without any further action
b
y
the Trust,
a
l
l
rights
o
f
the holders
o
f
Trust Securities
a
s
holders
o
f
beneficial interests
i
n the Trust will
cease, and such persons will be, for
a
l
l
purposes, the holders
o
f
Depositary Shares.
WMI will mail notice
o
f
the issuance
o
f
a
n
OTS directive after the occurrence
o
f
a
n
Exchange
Event
t
o each holder
o
f
Trust Securities within
3
0
days, and WMI will deliver (
o
r
cause
t
o
b
e
delivered)
t
o each such holder depositary receipts
f
o
r
Depositary Shares upon surrender
o
f
the Trust Securities.
Until such depositary receipts are delivered
o
r
i
n the event such depositary receipts are not delivered,
any certificates previously representing Trust Securities will be deemed
f
o
r
a
l
l
purposes
t
o represent
Depositary Shares. All corporate authorization necessary for WMI
t
o issue the Depositary Shares and
the Series M WMI Preferred Stock
a
s
o
f
the time
o
f
exchange will
b
e
completed prior
t
o
o
r
upon
completion
o
f
this Offering. Accordingly, once the OTS directs a Conditional Exchange after the
occurrence
o
f
a
n
Exchange Event, no action will
b
e
required
t
o
b
e
taken
b
y
holders
o
f
Trust Securities,
b
y
WMI,
b
y
WMB (other than
t
o inform the OTS),
b
y
the Company
o
r
b
y
the Trust
i
n order
t
o effect
the automatic exchange
a
s
o
f
the time
o
f
exchange. After the occurrence
o
f
the Conditional Exchange,
the Trust Securities will
b
e
owned
b
y
WMI.
Holders
o
f
Trust Securities,
b
y
purchasing such securities, whether
i
n this Offering
o
r
i
n the
secondary market after this Offering, will be deemed
t
o have agreed
t
o be bound
b
y
the unconditional
obligation
t
o exchange such Trust Securities for Depositary Shares
i
f the OTS
s
o
directs following the
occurrence
o
f
an Exchange Event. The Trust Agreement provides that the holders
o
f
Trust Securities
will be unconditionally obligated
t
o surrender such Trust Securities. Prior
t
o issuance
o
f
the Trust Secu-
rities, WMI will enter into an Exchange Agreement ( the Exchange Agreement) among WMI, the Trust
and Mellon Investor Services LLC, as depositary ( the Depositary),
t
o implement the Conditional
Exchange.
Holders
o
f
Trust Securities cannot exchange their Trust Securities
f
o
r
Depositary Shares
voluntarily. Absent
a
n
OTS directive after the occurrence
o
f
a
n
Exchange Event,
n
o
exchange
o
f
the
Trust Securities for Depositary Shares will occur. Upon the issuance
o
f
a
n
OTS directive
o
n
o
r
following the occurrence
o
f
an Exchange Event, the Series M WMI Preferred Stock and the related
Depositary Shares
t
o
b
e
issued
i
n the Conditional Exchange will constitute a newly issued series
o
f
preferred stock
o
f
WMI and will have substantially similar terms and provisions with respect
t
o
dividends, liquidation, and redemption
a
s
the Series 2007- A Company Preferred Securities, except
that the Depositary Shares:
will not have the benefit
o
f
the covenants, including with respect
t
o any additional taxes,
described under Description
o
f
the Series 2007-A Company Preferred SecuritiesVoting
Rights and Covenants;
will be redeemable prior
t
o the Dividend Payment Date occurring
i
n June 2012 only upon the
occurrence
o
f
a Regulatory Capital Event
o
r
a Rating Agency Event
o
r
payment
o
f
a
U
.
S
.
Treasury- based make- whole amount; and
74
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00087
Return
Additional Amounts will not
b
e
payable with respect
t
o the Series M WMI Preferred Stock
a
s
described under Description
o
f
the Series 2007-A Company Preferred SecuritiesAdditional
Amounts.
I
n addition,
i
f WMI fails
t
o pay,
o
r
declare and set aside
f
o
r
payment, full dividends
o
n
the
Series M WMI Preferred Stock
o
r
other Voting Parity Stock for six Dividend Periods, the authorized
number
o
f
WMIs directors will increase by two, and the holders
o
f
Series M WMI Preferred Stock,
voting together with the holders
o
f
any other Voting Parity Stock, will have the right
t
o elect two
directors
i
n addition
t
o the directors then
i
n office
a
t
the next annual meeting
o
f
shareholders.
WMI will covenant
i
n the Exchange Agreement
i
n favor
o
f
the holders
o
f
the Trust Securities that,
prior
t
o the issuance
o
f
the Series M WMI Preferred Stock upon a Conditional Exchange, WMI will not
issue any preferred stock that would rank senior
t
o the Series M WMI Preferred Stock upon
i
t
s
issuance. Each share
o
f
Series M WMI Preferred Stock will upon issuance rank
a
t
least pari passu
with the most senior preferred stock
o
f
WMI,
i
f any, then outstanding. The Initial Purchasers are under
n
o
obligation
t
o and
d
o
not intend
t
o make a market
i
n the Depositary Shares. Absent the occurrence
o
f
a Conditional Exchange, holders
o
f
Trust Securities will have
n
o
dividend, liquidation preference,
redemption
o
r
other rights with respect
t
o any security
o
f
WMI, WMB
o
r
University Street.
Form, Transfer and Book- Entry Procedures
The Trust Securities will be issued only
i
n book- entry form. See Book-Entry Issuance.
Payments and Paying Agent
Payments
i
n respect
o
f
the Trust Securities
i
n the form
o
f
Global Securities will be made
t
o the
address
o
f
the holder entitled thereto
a
s
such address will appear on the register. The DTC nominee
(the Nominee) will be the registered holder
o
f
the Trust Securities
i
n the form
o
f
Global Securities.
Payments made
t
o the order
o
f
the Nominee will
b
e
made
b
y
wire transfer
t
o DTC and DTC will credit
the relevant accounts
o
f
the DTC Participants.
I
n the event that the circumstances described under
Book- Entry IssuanceForm, Denomination, Transfer and Book- Entry ProceduresSpecial Situa-
tions When the Global Security Will Be Terminated apply and the Trust Securities are not
i
n the form
o
f
Global Securities, payments
i
n respect
o
f
the Trust Securities will be made
b
y
wire transfer, direct
deposit
o
r
check mailed
t
o the address
o
f
the holder entitled thereto as such address will appear on
the securities register. The paying agent (the Paying Agent) for the Trust Securities initially will be
Wilmington Trust Company (
i
n
i
t
s
individual capacity, WTC) and any co- paying agent will be
appointed
b
y
the Trust. The Paying Agent and any co- paying agent (collectively, the Paying Agents)
will be permitted
t
o resign as Paying Agents upon 30 days written notice
t
o the Company.
I
n the event
that WTC will
n
o
longer be the Paying Agent, the Company will appoint a successor
t
o act
a
s
Paying
Agent.
Registrar and Transfer Agent
WTC will act
a
s
Registrar (the Registrar) and Transfer Agent (the Transfer Agent)
f
o
r
the
Trust Securities.
Registration
o
f
transfers
o
f
Trust Securities will be effected without charge by
o
r
o
n
behalf
o
f
the
Trust, but the Property Trustee
o
r
the Registrar and Transfer Agent will require, prior
t
o registration,
payment (
o
r
the giving
o
f
such indemnity
a
s
the Registrar and Transfer Agent may require)
o
f
a sum
sufficient
t
o cover any tax
o
r
other governmental charges that may be imposed
i
n connection with any
transfer
o
f
definitive Trust Securities. The Trust will not be required
t
o register
o
r
cause
t
o be
registered the transfer
o
f
definitive Trust Securities during the period
o
f
15 days before the day
o
f
selection for redemption
o
f
such Trust Securities and ending
a
t
the close
o
f
business on the day
o
f
mailing
o
f
the notice
o
f
redemption for the Trust Securities that have been called for redemption.
75
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00088
Return
Expenses
o
f
the Paying Agent, Transfer Agent and Registrar
I
f the Paying Agent, Transfer Agent
o
r
Registrar incurs fees, charges
o
r
expenses, for which
i
t
i
s
not otherwise liable under the Agency Agreement,
t
o
b
e
entered into
o
n
o
r
before the closing date,
among WTC,
a
s
Registrar, Transfer Agent and Paying Agent, and the Trust acting through the
Property Trustee
a
t
the request
o
f
a holder
o
f
Trust Securities
o
r
other person, such holder
o
r
other
person will
b
e
liable for such fees, charges
o
r
expenses.
Notices
Notices
t
o the holders
o
f
the Trust Securities will
b
e
given
b
y
delivery
o
f
the relevant notice
t
o
DTC and any other relevant securities clearing system identified
i
n writing
b
y
the Trust
f
o
r
communi-
cation
b
y
each
o
f
them
t
o entitled participants.
Listing
The Trust Securities will not
b
e
listed
o
n
any securities exchange
o
r
automated dealer quotation
system.
Governing Law
The Trust Agreement and the Trust Securities will
b
e
governed
b
y
and construed
i
n accordance
with the laws
o
f
the State
o
f
Delaware.
Restrictions on Transfer
For information regarding restrictions
o
n
ownership and transfer
o
f
the Trust Securities, see
Notice
t
o Investors.
76
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00089
Return
DESCRIPTION OF THE SERIES 2007- A COMPANY PREFERRED SECURITIES
The following summary describes the material terms and provisions
o
f
the Series 2007- A
Company Preferred Securities. This description
i
s qualified
i
n
i
t
s
entirety
b
y
reference
t
o the terms
and provisions
o
f
the LLC Agreement. A copy
o
f
the LLC Agreement may
b
e
obtained upon request
t
o
WMI.
General
The Fixed-to-Floating Rate Perpetual Non- cumulative Preferred Securities, Series 2007-
A
,
liqui-
dation preference $1,000 per security and $500,000,000
i
n the aggregate (the Series 2007- A
Company Preferred Securities), are limited liability company interests
i
n the Company, the terms
o
f
which are set forth
i
n the LLC Agreement. When issued, the Series 2007- A Company Preferred
Securities will
b
e
validly issued, and
n
o
additional payments will
b
e
required pursuant
t
o the LLC Act
f
o
r
such securities
t
o represent limited liability company interests
i
n the Company. The holders
o
f
the
Series 2007- A Company Preferred Securities will have
n
o
pre-emptive rights with respect
t
o any
limited liability company interests
i
n the Company
o
r
any other securities
o
f
the Company convertible
into
o
r
carrying rights
o
r
options
t
o purchase any such securities. The Series 2007-A Company
Preferred Securities are perpetual and will not
b
e
convertible into Company Common Securities
o
r
any other class
o
r
series
o
f
limited liability company interests
i
n the Company and will not
b
e
subject
t
o any sinking fund
o
r
other obligation
o
f
the Company for their repurchase
o
r
retirement.
The Series 2007- A Company Preferred Securities will
b
e
issued
i
n certificated form only.
The Series 2007- A Company Preferred Securities are not obligations
o
f
,
o
r
guaranteed by, WMI,
WMB, Marion, University Street
o
r
any
o
f
their respective affiliates
o
r
any other entity. The
Series 2007- A Company Preferred Securities solely represent an interest
i
n the Company and do not
represent an interest
i
n any
o
f
the foregoing entities.
The Series 2007- A Company Preferred Securities are not insured
o
r
guaranteed by the FDIC
o
r
any other insurer
o
r
governmental agency
o
r
instrumentality.
Ranking
The Series 2007- A Company Preferred Securities will rank senior
t
o the Company Common
Securities and will rank pari passu with any other series
o
f
Company Preferred Securities, including
the Outstanding Company Preferred Securities,
i
n terms
o
f
payment
o
f
dividends and on liquidation.
The Companys Board
o
f
Managers has the power
t
o create and issue Junior Equity Securities
and additional equity securities ranking pari passu with the Series 2007- A Company Preferred
Securities
i
n terms
o
f
payment
o
f
dividends
o
r
on liquidation
o
r
redemption (any such securities, the
Parity Equity Securities) without the consent
o
f
the holders
o
f
the Series 2007- A Company Preferred
Securities, provided that (
i
) after giving effect
t
o the issuance
o
f
any Parity Equity Securities, the pro
forma net book value
o
f
the Companys assets (after giving effect
t
o any assets acquired
b
y
the
Company
i
n connection with the issuance
o
f
such Parity Equity Securities
(

New Assets)) will equal


o
r
exceed 1.5 times the sum
o
f
the aggregate liquidation preference
o
f
the preferred securities
o
f
the
Company then outstanding and any such Parity Equity Securities that the Company proposes
t
o issue,
(
i
i
) after giving effect
t
o such issuance, the Companys pro forma FFO for the four fiscal quarters
beginning with the fiscal quarter
i
n which such Parity Equity Securities are proposed
t
o be issued
(calculated (
A
)
assuming that such proposed Parity Equity Securities are issued and that,
i
f outstand-
ing
o
r
proposed new Parity Equity Securities bear dividends based on a floating rate, the applicable
dividend rate will not change during such four fiscal quarters from the rate
i
n effect on the applicable
date
o
f
determination, (
B
)
assuming for each Option ARM directly
o
r
indirectly owned
b
y
the Company
that the interest rate
i
n the applicable mortgage note and the then effective minimum monthly payment
determined
i
n accordance with such mortgage note will not change during such four quarters from the
rate and minimum monthly payment
i
n effect on the applicable date
o
f
determination, and (C) as
77
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00090
Return
adjusted
t
o reflect any New Assets) equals
o
r
exceeds 150%
o
f
the amount that would
b
e
required
t
o
pay full annual dividends
o
n
a
l
l
preferred securities
o
f
the Company then outstanding and any such
Parity Equity Securities that the Company proposes
t
o issue and (
i
i
i
) the Company
i
s not otherwise
i
n
breach
o
f
any
o
f
i
t
s covenants set forth
i
n the LLC Agreement. Funds from operations,
o
r
FFO,
means net income (excluding gains (
o
r
losses) from sales
o
f
property and taking into account with
respect
t
o each Option ARM directly
o
r
indirectly owned
b
y
the Company only the cash payment
o
f
interest
o
n
the related mortgage note, but otherwise computed
i
n accordance with GAAP), plus
depreciation and amortization, and after adjustments
f
o
r
unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures will
b
e
calculated
t
o reflect
funds from operations on the same basis.
The Series 2007- A Company Preferred Securities are Parity Equity Securities with respect
t
o the
Outstanding Company Preferred Securities, and are being offered without the consent
o
f
the holders
o
f
the Outstanding Company Preferred Securities because the Company will comply with the tests
outlined above. After giving effect
t
o the issuance
o
f
the Series 2007- A Company Preferred Securities:
the pro forma net book value
o
f
the Companys assets will be $7,279,380,658, less dividends
declared, but unpaid,
i
f any, the aggregate liquidation preference
o
f
the Series 2007- A
Company Preferred Securities and the Outstanding Company Preferred Securities, taken
together, will be $3,000,000,000, and the ratio
o
f
the pro forma net book value
o
f
the
Companys assets
t
o such aggregate liquidation preference will be 2.43; and
(
i
) the Companys pro forma FFO
f
o
r
the four fiscal quarters beginning
o
n
April
1
,
2007,
calculated
i
n the manner above,
i
s $361,534,073.29
(

X), (
i
i
)
the amount required
t
o pay full
dividends
f
o
r
one year
o
n
the Series 2007- A Company Preferred Securities and the Outstand-
ing Company Preferred Securities calculated
i
n the manner set forth above
i
s
$203,830,000 and 150%
o
f
that amount
i
s $305,775,000
(

Y), and (
i
i
i
)

X

exceeds
Y

b
y
$55,759,073.29.
The LLC Agreement provides that,
s
o
long
a
s
any Company Preferred Securities
o
f
any series
remain outstanding, the Company may not, except with the consent
o
f
a
t
least two- thirds
o
f
a
l
l
series
o
f
Company Preferred Securities, voting together
a
s
a single class, issue Senior Equity Securities.
Dividends
For purposes
o
f
this offering circular, we refer
t
o distributions payable
b
y
the Company
o
n
i
t
s
securities
a
s
dividends. Dividends
o
n
the Series 2007-A Company Preferred Securities will
b
e
payable
i
f
, when and
a
s
declared
b
y
the Companys Board
o
f
Managers out
o
f
i
t
s legally available
funds,
o
n
a non- cumulative basis
a
t
a
n
annual rate
o
f
6.895%
t
o
,
but not including, June 15, 2012,
and
3
-
month USD LIBOR plus 1.755% for the period starting
o
n
June 15, 2012 and each Dividend
Period thereafter,
i
n each case,
o
n
the liquidation preference thereof, which
i
s $1,000 per security.
Dividends on the Series 2007- A Company Preferred Securities,
i
f
,
when and as declared by the
Companys Board
o
f
Managers, will be payable quarterly
i
n arrears on March 15, June 15, Septem-
ber 15, and December 15
o
f
each year, commencing on September 15, 2007, or,
i
f any such day
i
s
not a Business Day, the next Business Day ( each such date, a Dividend Payment Date). Each
period from and including a Dividend Payment Date (
o
r
the date
o
f
issuance
o
f
the Series 2007- A
Company Preferred Securities)
t
o but excluding the following Dividend Payment Date
i
s referred
t
o
herein
a
s
a Dividend Period. Dividends on the Series 2007-A Company Preferred Securities will
accrue from May 24, 2007. The record date for the payment
o
f
dividends,
i
f declared, will be the first
day
o
f
the month
i
n which the relevant dividend payment occurs or,
i
f any such day
i
s not a Business
Day, the next day that
i
s a Business Day. Dividends payable on the Series 2007- A Company Preferred
Securities for any period greater
o
r
less than a full Dividend Period will be computed on the basis
o
f
(
x
)
f
o
r
any Dividend Period ending prior
t
o the Dividend Payment Date
i
n June 2012, twelve 30-day
months, a 360- day year, and the actual number
o
f
days elapsed
i
n the period, and (
y
)
for any Dividend
Period thereafter, the actual number
o
f
days
i
n the relevant period divided by 360. No interest will be
78
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00091
Return
paid
o
n
any dividend payment made
o
n
the Series 2007- A Company Preferred Securities, Trust Secu-
rities
o
r
Depositary Shares.
Business Day means any day other than a Saturday, Sunday
o
r
any other day on which banks
i
n New York, New York, London, England, Seattle, Washington
o
r
Wilmington, Delaware are generally
required
o
r
authorized by law
t
o be closed.

3
-
Month USD LIBOR means, with respect
t
o any Dividend Period, a rate determined
o
n
the
basis
o
f
the offered rates for three-month
U
.
S
.
dollar deposits
o
f
not less than a principal amount
equal
t
o that which
i
s representative for a single transaction
i
n such market
a
t
such time, commencing
on the first day
o
f
such Dividend Period, which appears on Reuters Screen LIBOR01 Page
a
s
o
f
approximately 11: 00
A
.
M., London time, on the LIBOR Determination Date for such Dividend Period.
I
f
on any LIBOR Determination Date no rate appears on Reuters Screen LIBOR01 Page
a
s
o
f
approximately 11: 00
A
.
M., London time, the Company
o
r
another affiliate
o
f
WMI
o
n
behalf
o
f
the
Company will
o
n
such LIBOR Determination Date request four major reference banks
i
n the London
interbank market selected by the Company
t
o provide the Company with a quotation
o
f
the rate
a
t
which three- month deposits
i
n
U
.
S
.
dollars, commencing on the first day
o
f
such Dividend Period, are
offered
b
y
them
t
o prime banks
i
n the London interbank market
a
s
o
f
approximately 11: 00
A
.
M.,
London time, on such LIBOR Determination Date and
i
n a principal amount equal
t
o that which
i
s
representative for a single transaction
i
n such market
a
t
such time.
I
f
a
t
least two such quotations are
provided,
3
-
Month USD LIBOR for such Dividend Period will be the arithmetic mean (rounded upward
i
f necessary
t
o the nearest .00001
o
f
1%)
o
f
such quotations
a
s
calculated
b
y
the Company.
I
f fewer
than two quotations are provided,
3
-
Month USD LIBOR for such Dividend Period will be the arithmetic
mean (rounded upward
i
f necessary
t
o the nearest .00001
o
f
1%)
o
f
the rates quoted as
o
f
approximately 11: 00
A
.
M., New York time, on the first day
o
f
such Dividend Period
b
y
three major
banks
i
n New York, New York selected
b
y
the Company for loans
i
n
U
.
S
.
dollars
t
o leading European
banks, for a three-month period commencing on the first day
o
f
such Dividend Period and
i
n a
principal amount
o
f
not less than $1,000,000.
LIBOR Business Day means any day on which commercial banks are open for general
business (including dealings
i
n deposits
i
n
U
.
S
.
dollars)
i
n London.
LIBOR Determination Date means,
a
s
t
o each Dividend Period, the date that
i
s two LIBOR
Business Days prior
t
o the first day
o
f
such Dividend Period.
Reuters Screen LIBOR01 Page means the display so designated on the Reuters 3000 Xtra (
o
r
such other page as may replace that page on that service,
o
r
such other service as may be nominated
as the information vendor, for the purpose
o
f
displaying rates
o
r
prices comparable
t
o the London
Interbank Offered rate for
U
.
S
.
dollar deposits).
Dividends on the Series 2007- A Company Preferred Securities are non- cumulative.
I
f the
Companys Board
o
f
Managers does not declare a dividend on the Series 2007- A Company Preferred
Securities
o
r
declares less than a full dividend
i
n respect
o
f
any Dividend Period, holders
o
f
the
Series 2007- A Company Preferred Securities will have no right
t
o receive any dividend
o
r
a full
dividend, as the case may be, for that Dividend Period, and the Company will have no obligation
t
o
pay any dividends
o
r
full dividends on the Series 2007- A Company Preferred Securities for that
Dividend Period, whether
o
r
not dividends are declared and paid for any future Dividend Period with
respect
t
o any series
o
f
the Company Preferred Securities, the Company Common Securities
o
r
any
other Junior Equity Securities.
Restrictions on Dividends
During a Dividend Period,
n
o
dividends will be declared
o
r
paid on any securities
o
f
the Company
ranking junior
t
o the Company Preferred Securities
i
n respect
o
f
payments
o
f
dividends
o
r
on
liquidation
(

Junior Equity Securities), other than dividends payable


i
n Junior Equity Securities
o
f
the
same class
o
r
series,
o
r
Junior Equity Securities ranking junior
t
o that class
o
r
series, and no Junior
79
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00092
Return
Equity Securities will
b
e
purchased, redeemed
o
r
otherwise acquired
f
o
r
consideration, directly
o
r
indirectly (other than
a
s
a result
o
f
reclassification
o
f
Junior Equity Securities for
o
r
into other Junior
Equity Securities,
o
r
the exchange
o
r
conversion
o
f
Junior Equity Securities
f
o
r
o
r
into other Junior
Equity Securities), unless dividends for such Dividend Period
o
n
a
l
l
series
o
f
Company Preferred
Securities have been declared and paid
i
n full,
o
r
declared and set aside for payment,
a
s
the case
may be.
When dividends are not paid
i
n full on,
o
r
a sum sufficient for such full payment
i
s not set apart
for,
a
l
l
series
o
f
the Company Preferred Securities,
a
l
l
dividends declared upon
a
l
l
series
o
f
the
Company Preferred Securities will be declared pro rata. Thus, the amount
o
f
dividends declared per
Company Preferred Security
o
f
each series will
i
n
a
l
l
cases bear
t
o each other the same ratio that
(
i
) full dividends per Company Preferred Security
o
f
such series for the then- current Dividend Period,
which will not include any accumulation
i
n respect
o
f
unpaid dividends for prior Dividend Periods, and
(
i
i
) full dividends, which will not include any accumulation
i
n respect
o
f
unpaid dividends for prior
Dividend Periods, on
a
l
l
other series
o
f
Company Preferred Securities, bear
t
o each other.
Under certain circumstances,
i
f the OTS determines that WMB
i
s operating with
a
n
insufficient
level
o
f
capital
o
r
i
s engaged
i
n
,
o
r
i
t
s
relationship with the Company results
i
n
,
a
n
unsafe and
unsound banking practice, the OTS could restrict the Companys ability
t
o pay dividends, including
dividends
t
o the holders
o
f
the Series 2007- A Company Preferred Securities. See The Company
Business
o
f
the Company.
Restrictions on Dividends by WMI
WMI will covenant
i
n the Exchange Agreement for the benefit
o
f
the holders
o
f
the Trust Securi-
ties that
i
f full dividends on (
i
) any series
o
f
Company Preferred Securities,
o
r
(
i
i
) the Trust Securities,
Trust I Securities
o
r
WaMu Cayman Securities for any Dividend Period have not been declared and
paid, WMI will not declare
o
r
pay dividends with respect
t
o
,
o
r
redeem, purchase
o
r
acquire any
o
f
i
t
s
equity capital securities during the next succeeding Dividend Period, except dividends
i
n connection
with a shareholders rights plan,
i
f any,
o
r
dividends
i
n connection with benefits plans.
Redemption
The Series 2007- A Company Preferred Securities will not be redeemable
a
t
the option
o
f
the
holders, prior
t
o May 24, 2017, thereof. Subject
t
o the Replacement Capital Covenant
i
n favor
o
f
certain
o
f
WMIs debtholders limiting WMIs and
i
t
s
subsidiaries right
t
o purchase
o
r
redeem the
Series 2007- A Company Preferred Securities
o
r
the Trust Securities (among others)
a
s
described
under Description
o
f
the Trust SecuritiesRestriction on Redemption
o
r
Purchases, and subject
t
o
the Company having received the prior approval
o
f
the OTS for any proposed redemption
o
f
Series 2007- A Company Preferred Securities, the Company may,
a
t
i
t
s
option, redeem the
Series 2007- A Company Preferred Securities:

i
n whole but not
i
n part,
o
n
any Dividend Payment Date prior
t
o the Dividend Payment Date
i
n
June 2012 upon the occurrence
o
f
a Tax Event, an Investment Company Act Event, a Rating
Agency Event
o
r
a Regulatory Capital Event,
a
t
a cash redemption price equal
t
o
:
the greater of:
(
i
) $1,000 per Series 2007- A Company Preferred Security,
o
r
(
i
i
) the sum
o
f
the present value
o
f
$1,000 per Series 2007- A Company Preferred Security,
discounted from the Dividend Payment Date
i
n June 2012
t
o the redemption date, and
the present values
o
f
a
l
l
undeclared dividends for each Dividend Period from the
redemption date
t
o and including the Dividend Payment Date
i
n June 2012, discounted
from their applicable Dividend Payment Dates
t
o the redemption date,
i
n each case on a
quarterly basis (assuming a 360- day year consisting
o
f
twelve 30-day months)
a
t
the
Treasury Rate,
a
s
calculated by an Independent Investment Banker, plus 0.50%, plus
80
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00093
Return
any declared but unpaid dividends
t
o the redemption date;

i
n whole but not
i
n part, on any Dividend Payment Date prior
t
o the Dividend Payment Date
i
n
June 2012 for any reason other than the occurrence
o
f
a Tax Event, an Investment Company
Act Event, a Rating Agency Event
o
r
a Regulatory Capital Event,
a
t
a cash redemption price
equal to:
the greater of:
(
i
) $1,000 per Series 2007- A Company Preferred Security,
o
r
(
i
i
) the sum
o
f
the present value
o
f
$1,000 per Series 2007- A Company Preferred Security,
discounted from the Dividend Payment Date
i
n June 2012
t
o the redemption date, and
the present values
o
f
a
l
l
undeclared dividends for each Dividend Period from the
redemption date
t
o and including the Dividend Payment Date
i
n June 2012, discounted
from their applicable Dividend Payment Dates
t
o the redemption date,
i
n each case on a
quarterly basis (assuming a 360- day year consisting
o
f
twelve 30-day months)
a
t
the
Treasury Rate,
a
s
calculated by an Independent Investment Banker, plus 0.35%; plus
any declared but unpaid dividends
t
o the redemption date;

i
n whole but not
i
n part,
o
n
any Dividend Payment Date after the Dividend Payment Date
i
n
June 2012 that
i
s not a Five- Year Date, upon the occurrence
o
f
a Tax Event,
a
n
Investment
Company Act Event, a Rating Agency Event
o
r
a Regulatory Capital Event,
a
t
a cash
redemption price equal
t
o $1,000 per Series 2007- A Company Preferred Securities, plus any
declared and unpaid dividends
t
o the redemption date;

i
n whole
o
r
i
n part,
o
n
each Dividend Payment Date that
i
s a Five- Year Date
a
t
a cash
redemption price
o
f
$1,000 per Series 2007- A Company Preferred Security, plus any declared
and unpaid dividends
t
o the redemption date; and

i
n whole but not
i
n part,
o
n
any Dividend Payment Date after the Dividend Payment Date
i
n
June 2012 that
i
s not a Five- Year Date
f
o
r
any reason other than the occurrence
o
f
a Tax
Event,
a
n
Investment Company Act Event, a Rating Agency Event
o
r
a Regulatory Capital
Event,
a
t
a cash redemption price equal
t
o
:
the greater of:
(
i
) $1,000 per Series 2007- A Company Preferred Security,
o
r
(
i
i
) the sum
o
f
the present value
o
f
$1,000 per Series 2007- A Company Preferred Security,
discounted from the next succeeding Five- Year Date
t
o the redemption date, and the
present values
o
f
a
l
l
undeclared dividends for each Dividend Period from the redemption
date
t
o and including the next succeeding Five- Year Date, discounted from their applica-
ble Dividend Payment Dates
t
o the redemption date,
i
n each case on a quarterly basis
(assuming a 360- day year consisting
o
f
twelve 30- day months)
a
t
the
3
-
month USD
LIBOR Rate applicable
t
o the Dividend Period immediately preceding such redemption
date (which
3
-
month USD LIBOR Rate will also, for purposes
o
f
calculating such
redemption price,
b
e
the rate used
i
n calculating the amount for each such undeclared
dividend), as calculated by an Independent Investment Banker; plus
any declared but unpaid dividends
t
o the redemption date;
i
n each case, without accumulation
o
f
any undeclared dividends with respect
t
o Dividend Payment
Dates prior
t
o the redemption date.
Comparable Treasury Issue means the United States Treasury security selected
b
y
the
Independent Investment Banker as having a maturity comparable
t
o the term remaining
t
o the
Dividend Payment Date
i
n June 2012 that would be utilized,
a
t
the time
o
f
selection and
i
n accordance
with customary financial practice,
i
n pricing new issues
o
f
perpetual preferred securities having terms
81
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00094
Return
similar
t
o those
o
f
the Series 2007- A Company Preferred Securities with respect
t
o the payment
o
f
dividends and distributions
o
f
assets upon liquidation, dissolution
o
r
winding
u
p
o
f
the issuer
o
f
such
preferred stock.
Comparable Treasury Price means, with respect
t
o any redemption date for the Series 2007- A
Company Preferred Securities, the average
o
f
the Reference Treasury Dealer Quotations
f
o
r
such
redemption date, after excluding the highest and lowest
o
f
such Reference Treasury Dealer Quota-
tions,
o
r
i
f the Independent Investment Banker obtains fewer than five such Reference Treasury
Dealer Quotations, the average
o
f
a
l
l
such quotations.
Independent Investment Banker means an independent investment banking institution
o
f
national standing appointed
b
y
the Company.
An Investment Company Act Event occurs with respect
t
o the Series 2007- A Company
Preferred Securities when the Company determines, based upon receipt
o
f
an opinion
o
f
counsel, that
there
i
s a significant risk that the Company, the Trust, Asset Trust
I
, Asset Trust
I
I
o
r
any other Asset
Subsidiary will be considered an investment company that
i
s required
t
o be registered under the
Investment Company Act, as a result
o
f
a change
i
n applicable laws, regulations
o
r
related
interpretations.
A Rating Agency Event occurs when the Company reasonably determines that
a
n
amendment,
clarification
o
r
change has occurred
i
n the equity criteria for securities such
a
s
the Series 2007- A
Company Preferred Securities
o
f
any Rating Agency that then publishes a rating for WMI which
amendment, clarification
o
r
change results
i
n a lower equity credit
f
o
r
WMI than the respective equity
credit assigned
b
y
such Rating Agency
t
o the Company Preferred Securities
o
n
the closing date
o
f
this Offering.
Reference Treasury Dealer means each
o
f
three primary
U
.
S
.
government securities dealers
(each a Primary Treasury Dealer),
a
s
specified
b
y
the Company; provided that
i
f any Primary
Treasury Dealer specified
b
y
the Company ceases
t
o
b
e
a Primary Treasury Dealer, the Company will
substitute
f
o
r
such Primary Treasury Dealer another Primary Treasury Dealer and
i
f the Company fails
t
o select a substitute within a reasonable period
o
f
time, then the substitute will
b
e
a Primary Treasury
Dealer selected
b
y
the Independent Investment Banker after consultation with the Company.
Reference Treasury Dealer Quotations means, with respect
t
o each Reference Treasury Dealer
and any redemption date, the average,
a
s
determined
b
y
the Independent Investment Banker,
o
f
the
bid and asked prices
f
o
r
the Comparable Treasury Issue (expressed,
i
n each case,
a
s
a percentage
o
f
i
t
s
principal amount) quoted
i
n writing
t
o the Independent Investment Banker
b
y
such Reference
Treasury Dealer
a
t
5
:
0
0
P
.
M., New York City time,
o
n
the third Business Day preceding such
redemption date.
A Regulatory Capital Event occurs with respect
t
o the Series 2007- A Company Preferred
Securities when the Company determines, based upon receipt
o
f
an opinion
o
f
counsel, that there
i
s a
significant risk that the Series 2007- A Company Preferred Securities will
n
o
longer constitute core
capital
o
f
WMB for purposes
o
f
the capital adequacy regulations issued
b
y
the OTS
a
s
a result
o
f
a
change
i
n applicable laws, regulations
o
r
related interpretations after issuance
o
f
the Series 2007-A
Company Preferred Securities.
A Tax Event occurs with respect
t
o the Series 2007- A Company Preferred Securities when the
Company determines, based upon receipt
o
f
a
n
opinion
o
f
counsel, that there
i
s a significant risk that
(
i
) the Company will be required
b
y
a relevant jurisdiction
t
o withhold amounts from payments
t
o the
holders
o
f
any Series 2007- A Company Preferred Securities for taxes
o
r
any other governmental
charges, (
i
i
) the Trust will be required by a relevant jurisdiction
t
o withhold amounts from payments
t
o
the holders
o
f
the Trust Securities for taxes
o
r
any other governmental charges
o
r
(
i
i
i
)
the Company
i
s
o
r
will be treated as a publicly traded partnership taxable
a
s
a corporation
o
r
as
a
n
association taxable
as a corporation for United States federal income tax purposes, as a result
o
f
any change
i
n law
o
r
82
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00095
Return
regulation,
o
r
any judicial
o
r
regulatory action, that
i
s effective
o
r
announced after the issuance
o
f
the
Series 2007- A Company Preferred Securities.
Treasury Rate means the rate per year equal
t
o the quarterly equivalent yield
t
o maturity
o
f
the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed
as a percentage
o
f
i
t
s
principal amount) equal
t
o the Comparable Treasury Price for such redemption
date. The Treasury Rate will be calculated on the third Business Day preceding the redemption date.
A notice
o
f
redemption
o
f
the Series 2007-A Company Preferred Securities will be mailed
b
y
first- class mail, postage prepaid, addressed
t
o the holders
o
f
record
o
f
the securities
t
o
b
e
redeemed
a
t
their respective last addresses appearing
o
n
the books and records
o
f
the Company. Such mailing
will
b
e
a
t
least
3
5
days but not more than
6
5
days before the date fixed
f
o
r
redemption.
The Companys ability
t
o redeem any Company Preferred Security
i
s subject
t
o compliance with
applicable regulatory requirements, including the prior approval
o
f
the OTS, relating
t
o the redemption
o
f
capital instruments. Under current policies
o
f
the OTS, such approval would
b
e
granted only
i
f the
redemption were
t
o
b
e
made out
o
f
the proceeds
o
f
the issuance
o
f
another capital instrument
o
r
i
f
the OTS were
t
o determine that the conditions and circumstances
o
f
WMB warrant the reduction
o
f
a
source
o
f
permanent capital.
Restrictions on Redemption
o
r
Purchases
A
t
o
r
prior
t
o issuance
o
f
the Series 2007- A Company Preferred Securities and the Trust Securi-
ties, WMI will enter into the Replacement Capital Covenant described under Description
o
f
the
Trust SecuritiesRestriction on Redemption
o
r
Purchases, limiting WMIs and
i
t
s
subsidiaries,
including the Companys, ability
t
o redeem
o
r
purchase prior
t
o May 24, 2017 certain securities,
including the Series 2007- A Company Preferred Securities
o
r
the Trust Preferred Securities, among
others.
Rights upon Liquidation
I
n the event the Company voluntarily
o
r
involuntarily dissolves and winds up, the holders
o
f
Series 2007- A Company Preferred Securities
a
t
the time outstanding will be entitled
t
o receive
liquidating dividends
i
n the amount
o
f
$1,000 per security, plus any authorized, declared, but unpaid
dividends
t
o the date
o
f
liquidation, out
o
f
the Companys assets legally available for distribution,
before any distribution
o
f
assets
i
s made
t
o holders
o
f
Junior Equity Securities and subject
t
o the
rights
o
f
general creditors.
After payment
o
f
the full amount
o
f
the liquidating distributions
t
o which they are entitled, the
holders
o
f
Series 2007- A Company Preferred Securities will have no right
o
r
claim
t
o any
o
f
the
Companys remaining assets.
I
n the event that, upon any such voluntary
o
r
involuntary dissolution and
winding up, the available assets are insufficient
t
o pay the amount
o
f
the liquidation distributions
o
n
a
l
l
series
o
f
Company Preferred Securities, then the holders
o
f
a
l
l
the series
o
f
Company Preferred
Securities will share ratably
i
n any such distribution
o
f
assets
i
n proportion
t
o the full liquidating
distributions
t
o which they would otherwise
b
e
respectively entitled.
For such purposes, the Companys consolidation
o
r
merger with
o
r
into any other entity, the
consolidation
o
r
merger
o
f
any other entity with
o
r
into the Company,
o
r
the sale
o
f
a
l
l
o
r
substantially
a
l
l
o
f
the Companys property
o
r
business, will not
b
e
deemed
t
o constitute the Companys dissolution
and winding up.
Voting Rights and Covenants
Except
a
s
set forth below, holders
o
f
Series 2007- A Company Preferred Securities will not have
voting rights. The LLC Agreement provides that, so long
a
s
any Company Preferred Securities
o
f
any
series are outstanding, the Company will not, except with the consent
o
r
affirmative vote
o
f
the holders
o
f
a
t
least two- thirds
o
f
a
l
l
series
o
f
the Company Preferred Securities, voting together
a
s
a single
83
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Return
class (provided that for the purpose
o
f
such approval, a like amount
o
f
Company Preferred Securities
a
s
any Trust Securities, Trust I Securities
o
r
WaMu Cayman Securities that are directly
o
r
indirectly
held
o
r
beneficially owned
b
y
any member
o
f
WMI Group will
b
e
treated
a
s
i
f they were not
outstanding):
effect a consolidation, merger
o
r
share exchange with
o
r
into another entity provided that the
Company may consolidate
o
r
merge with
o
r
into,
o
r
enter into a share exchange with, another
entity without the consent
o
f
the holders
o
f
the Company Preferred Securities
i
f (
A
)
the other
entity
i
s controlled by,
o
r
under common control with, WMI, (
B
)
the other entity elects
t
o
b
e
treated
a
s
a partnership
f
o
r
U
.
S
.
federal income tax purposes and
i
s not required
t
o register
a
s
a
n
investment company under the 1940 Act, (
C
)
the other entity expressly assumes
a
l
l
o
f
the
Companys obligations and commitments pursuant
t
o the consolidation, merger,
o
r
share
exchange, (
D
)
the outstanding Company Preferred Securities are exchanged
f
o
r
o
r
converted
into shares
o
f
the surviving entity having preferences, limitations, and relative voting and other
rights substantially identical
t
o those
o
f
the Company Preferred Securities, including limitations
o
n
personal liability
o
f
the Company Preferred Securityholders, (
E
)
after giving effect
t
o the
merger, consolidation,
o
r
share exchange,
n
o
breach,
o
r
event which, with the giving
o
f
notice
o
r
passage
o
f
time
o
r
both, could become a breach,
b
y
the Company
o
f
obligations under the
LLC Agreement shall have occurred and
b
e
continuing, and (
F
)
the Company has received
written confirmation that the Rating Agency Condition has been satisfied;
issue any Senior Equity Securities;
incur any indebtedness for borrowed money;
pay dividends on the Companys Junior Equity Securities unless the Companys FFO for the
four prior fiscal quarters, equals
o
r
exceeds 150%
o
f
the amount that would be required
t
o pay
full annual dividends on
a
l
l
series
o
f
Company Preferred Securities;
fail
t
o invest the proceeds
o
f
the Companys assets such that the Companys FFO over any
period
o
f
four fiscal quarters will equal
o
r
exceed 150%
o
f
the amount that would
b
e
required
t
o pay full annual dividends
o
n
a
l
l
series
o
f
Company Preferred Securities;
issue any additional Company Common Securities
t
o any person, other than University Street
o
r
another affiliate
o
f
WMI;
amend
o
r
otherwise change the terms
o
f
any Asset Documentation
i
n a manner which
i
s
materially adverse
o
f
the Trust,
o
r
t
o any other Trust Holder
o
r
t
o the holders
o
f
that Trust
Holders securities;
remove
o
r
cause
t
o be removed,
a
s
applicable, Washington Mutual from the Companys
o
r
the Trusts name unless the name
o
f
WMI changes and the Company makes a change
t
o the
Companys
o
r
the name
o
f
any other Trust Holder, the Trusts
o
r
such other Trust Holders
name
t
o be consistent with the new group name;
take
o
r
fail
t
o take any action that would cause the Company
t
o fail
t
o
b
e
treated
a
s
a
partnership (other than a publicly traded partnership taxable as a corporation) for United States
federal income tax purposes;
engage
i
n a
U
.
S
.
trade
o
r
business for United States federal income tax purposes;
fail
t
o hold only assets that qualify
f
o
r
the portfolio interest exemption under the Code
o
r
are
otherwise exempt from United States federal withholding taxes;
fail
t
o manage
i
t
s affairs such that
i
t
s income does not constitute unrelated business taxable
income for United States federal income tax purposes;
take any action that could reasonably be expected
t
o cause a Tax Event, an Investment
Company Act Event, a Rating Agency Event
o
r
a Regulatory Capital Event;
o
r
amend
i
t
s
Certificate
o
f
Formation
o
r
LLC Agreement
i
n a manner that materially and
adversely affects the terms
o
f
any series
o
f
Company Preferred Securities; provided, however,
that,
i
f such amendment affects fewer than
a
l
l
classes
o
f
preferred securities issued
b
y
the
84
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00097
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Company, such amendment will require only a vote
o
f
the holders
o
f
such affected class
o
r
classes
o
f
Company Preferred Securities, voting together
a
s
a separate class.
I
n addition, the LLC Agreement provides that, except with the consent
o
f
a
l
l
o
f
the Companys
Managers, including
i
t
s
Independent Manager, the Company will not:
terminate, amend
o
r
otherwise change any Asset Documentation;
o
r
effect a consolidation, merger
o
r
share exchange (excluding the Conditional Exchange) that
i
s
not tax- free
t
o the holders
o
f
any series
o
f
the Company Preferred Securities and the related
Trust Securities, Trust I Securities
o
r
WaMu Cayman Securities, as applicable, unless such
transaction was approved
b
y
the consent
o
r
affirmative vote
o
f
the holders
o
f
a
t
least two- thirds
o
f
a
l
l
series
o
f
the Company Preferred Securities, voting together
a
s
a single class.
I
n addition, the LLC Agreement will provide that
i
f (
i
) the Company fails
t
o pay full dividends
o
n
any series
o
f
the Company Preferred Securities
o
n
any Dividend Payment Date, (
i
i
) the Trust fails
t
o
pass through full dividends paid
b
y
the Company
o
n
the Series 2007-A Company Preferred Securities
t
o the holders
o
f
the Trust Securities,
o
r
any other Trust Holder fails
t
o pass through full dividends paid
b
y
the Company
o
n
the series
o
f
Company Preferred Securities held
b
y
that Trust Holder,
o
n
any
Dividend Payment Date
o
r
(
i
i
i
) a Bankruptcy Event occurs, the holders
o
f
a
l
l
the series
o
f
Company
Preferred Securities, voting together
a
s
a single class,
b
y
majority vote, are entitled
t
o remove the
initial
o
r
any succeeding Independent Manager and
t
o
f
i
l
l the vacancy created
b
y
such removal
o
r
any
other vacancy existing
i
n the office
o
f
the Independent Manager.
The LLC Agreement requires that,
i
n assessing the benefits
t
o the Company
o
f
any proposed
action requiring his
o
r
her consent, the Companys Independent Manager take into account the
interests
o
f
holders
o
f
both Company Common Securities and
a
l
l
series
o
f
the Company Preferred
Securities. The LLC Agreement provides that
i
n considering the interests
o
f
the holders
o
f
the
Company Preferred Securities, the Companys Independent Manager owes the same duties
t
o such
holders which the Independent Manager owes
t
o the holders
o
f
Company Common Securities.
As a condition
t
o effecting any consolidation, merger
o
r
share exchange described above, the
Company will mail
t
o the holders
o
f
record
o
f
the Company Preferred Securities a notice
o
f
such
consolidation, merger
o
r
share exchange. The notice will
b
e
mailed
a
t
least
1
5
days prior
t
o such
transaction becoming effective and will contain a description
o
f
such transaction together with a
certificate
o
f
one
o
f
the Companys officers stating that such transaction complies with the require-
ments set forth
i
n the LLC Agreement and that
a
l
l
conditions precedent provided therein relating
t
o
such transaction have been fulfilled.
As described under Description
o
f
the Trust SecuritiesVoting Rights, each holder
o
f
Trust Securities will have the right
t
o direct the manner
i
n which Property Trustee
o
n
behalf
o
f
the
Trust exercises
i
t
s
voting rights
a
s
t
o a like amount
o
f
Series 2007- A Company Preferred Securities
held
b
y
the Trust with respect
t
o any
o
f
the matters
o
n
which a holder
o
f
Series 2007- A Company
Preferred Securities
i
s entitled
t
o vote.
WMIs articles
o
f
incorporation do not contain similar covenants regarding the Series M WMI
Preferred Stock following an exchange
o
f
the Trust Securities. Therefore, following a Conditional
Exchange, holders
o
f
the Depositary Shares would no longer have any voting rights, except as
provided by Washington law
o
r
i
n connection with the right
t
o elect directors
i
f dividends are skipped
o
r
not paid
i
n full. See below under Description
o
f
the Series M WMI Preferred Stock Voting
Rights.
Additional Amounts
I
f the Company
o
r
the Trust
i
s required
t
o pay any Additional Taxes as a result
o
f
a
n
Additional
Tax Event, the Company will pay
a
s
additional amounts on the Series 2007- A Company Preferred
Securities such amounts
a
s
will be required so that dividends on the Series 2007- A Company
Preferred Securities
o
r
the Trust Securities,
a
s
applicable, will not be reduced as a result
o
f
any such
Additional Taxes
(

Additional Amounts).
85
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00098
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Additional Taxes means the sum
o
f
any additional taxes, duties and other governmental
charges
t
o which the Company
o
r
the Trust has become subject from time
t
o time
a
s
a result
o
f
a
n
Additional Tax Event.
An Additional Tax Event means the determination
b
y
the Company, based upon receipt
o
f
a
n
opinion
o
f
counsel, rendered
b
y
a law firmexperienced
i
n such matters,
i
n form and substance
reasonably satisfactory
t
o the Company and WMI,
t
o the effect that,
a
s
a result
o
f
any amendment
t
o
,
o
r
change (including any announced proposed change)
i
n
,
the laws (
o
r
any regulations thereunder)
o
f
the United States
o
r
o
f
any political subdivision
o
r
taxing authority thereof
o
r
therein,
o
r
a
s
a result
o
f
any official administrative pronouncement
o
r
judicial decision interpreting
o
r
applying such laws
o
r
regulations, which amendment
o
r
change
i
s effective
o
r
which proposed change, pronouncement
o
r
decision
i
s announced on
o
r
after the date
o
f
issuance
o
f
the Trust Securities, there
i
s a significant
risk that (
i
) the Company
o
r
the Trust
i
s
,
o
r
will
b
e
within
9
0
days
o
f
the date
o
f
such opinion
o
f
counsel, required
b
y
a relevant jurisdiction
t
o withhold amounts from payments
t
o the holders
o
f
the
Series 2007- A Company Preferred Securities
o
r
Trust Securities, respectively, for any taxes, duties
and other governmental charges, (
i
i
)
the Trust
i
s
,
o
r
will
b
e
within
9
0
days
o
f
the date
o
f
such opinion
o
f
counsel, subject
t
o United States federal income tax with respect
t
o income received
o
r
accrued
o
n
the like amount
o
f
Series 2007- A Company Preferred Securities held
b
y
i
t
o
r
(
i
i
i
)
the Trust
i
s
,
o
r
will
b
e
within
9
0
days
o
f
the date
o
f
such opinion
o
f
counsel, subject
t
o more than a
d
e
minimis amount
o
f
other taxes, duties
o
r
other governmental charges.
Amendments and Termination
o
f
the LLC Agreement
University Street may,
a
t
any time and from time
t
o time, without the consent
o
f
the holders
o
f
the Company Preferred Securities
o
f
any series, amend the LLC Agreement: (
i
)
t
o correct
o
r
supplement any provision
i
n the LLC Agreement that may
b
e
defective
o
r
inconsistent with any other
provision therein,
o
r
t
o make any other provisions with respect
t
o matters
o
r
questions arising under
the LLC Agreement, provided that any such action taken under this clause will not materially adversely
affect the interests
o
f
the holders
o
f
any series
o
f
the Company Preferred Securities and provided
further that any such amendment shall not cause the Company, the Trust
o
r
any other Trust Holder
t
o
b
e
required
t
o be registered under the 1940 Act,
b
e
taxable
a
s
a corporation
f
o
r
United States Federal
income tax purposes,
o
r
b
e
treated
a
s
engaged
i
n a trade
o
r
business within the United States,
a
s
determined for United States Federal income tax purposes; (
i
i
)
t
o cure any ambiguity
o
r
inconsistency
o
r
correct any manifest error;
o
r
(
i
i
i
)
t
o give effect
t
o the future issuance
o
f
Parity Equity Securities
o
r
Junior Equity Securities and
t
o set the designations, preferences, and rights
o
f
any such Parity Equity
Security
o
r
Junior Equity Security. Any other amendment
o
f
the LLC Agreement must
b
e
approved
b
y
vote
o
f
holders
o
f
two- thirds (
b
y
aggregate liquidation preference)
o
f
any series
o
f
the Company
Preferred Securities, voting together
a
s
a single class (see Voting Rights and Covenants);
provided that for the purpose
o
f
such approval,
i
f any member
o
f
WMI Group directly
o
r
indirectly
holds
o
r
beneficially owns any Trust Securities
o
r
securities
o
f
any other Trust Holder, then a like
amount
o
f
the applicable series
o
f
Company Preferred Securities will
b
e
treated
a
s
i
f they were not
outstanding. The Company will notify the Paying Agents and the holders
o
f
the Trust Securities
o
f
any
such amendment
o
f
the LLC Agreement within a reasonable period
o
f
time.
The LLC Agreement will terminate upon the termination
o
f
the Company under the LLC Act.
Governing Law
The LLC Agreement and the Series 2007- A Company Preferred Securities will
b
e
governed by,
and construed
i
n accordance with, the laws
o
f
the State
o
f
Delaware.
86
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Return
DESCRIPTION OF OTHER COMPANY SECURITIES
The following summary
o
f
the terms
o
f
the other Company securities does not purport
t
o
b
e
complete and
i
s subject
i
n
a
l
l
respects
t
o the applicable provisions
o
f
the LLC Act and the LLC
Agreement. A copy
o
f
the LLC Agreement may be obtained upon request
t
o WMI.
Common Securities
General
The Company has outstanding, and will continue
t
o have outstanding upon consummation
o
f
this
offering, 1,000 Company Common Securities,
a
l
l
o
f
which will be held
b
y
University Street.
The Company Common Securities may be sold, assigned
o
r
otherwise transferred by University
Street
t
o another entity, subject
t
o WMI maintaining direct
o
r
indirect ownership
o
f
100%
o
f
the
outstanding Company Common Securities and receipt
b
y
University Street
o
f
an opinion
o
f
counsel
t
o
the effect that as a result
o
f
any such sale, transfer
o
r
assignment the Company will not be taxable
a
s
a corporation for United States federal income tax purposes.
Pursuant
t
o the LLC Agreement, except with the consent
o
r
the affirmative vote
o
f
the holders
o
f
a
t
least two- thirds
o
f
a
l
l
series
o
f
the Company Preferred Securities, voting together
a
s
a single class,
the Company will not issue any additional Company Common Securities
o
r
other Junior Equity
Securities
t
o any person, other than University Street
o
r
another affiliate
o
f
WMI.
No additional payments will
b
e
required pursuant
t
o the LLC Act for Company Common
Securities
t
o represent limited liability company interests
i
n the Company upon issuance against full
payment
o
f
the purchase price therefor.
Voting
Subject
t
o the limited rights
o
f
the holders
o
f
the Series 2007- A Company Preferred Securities,
a
s
described under Description
o
f
the Series 2007-A Company Preferred SecuritiesVoting Rights
and Covenants, and any voting rights granted
t
o holders
o
f
the Outstanding Company Preferred
Securities and any other Parity Equity Securities,
a
l
l
voting rights
o
f
the Companys security holders
are vested
i
n the Company Common Securities.
Dividends
The Company Common Securities rank junior
t
o
a
l
l
the Company Preferred Securities as
t
o
payment
o
f
dividends. No dividends will be declared
o
r
paid
i
n any Dividend Period on the Company
Common Securities, other than dividends payable
i
n Company Common Securities, and no Company
Common Securities will be purchased, redeemed
o
r
otherwise acquired for consideration, directly
o
r
indirectly (other than
a
s
a result
o
f
reclassification
o
f
Company Common Securities for
o
r
into
Company Common Securities,
o
r
the exchange
o
r
conversion
o
f
Company Common Securities for
o
r
into Company Common Securities), unless dividends
i
n such Dividend Period on
a
l
l
series
o
f
the
Company Preferred Securities have been declared and paid
i
n full,
o
r
set aside for payment, as the
case may be. Pursuant
t
o the LLC Agreement, except with the consent
o
r
the affirmative vote
o
f
the
holders
o
f
a
t
least two- thirds
o
f
a
l
l
series
o
f
the Company Preferred Securities, voting together
a
s
a
single class, the Company will not pay any dividends on the Company Common Securities
o
r
other
Junior Equity Securities unless the Companys FFO for the four prior fiscal quarters equals
o
r
exceeds
150%
o
f
the amount that would be required
t
o pay full annual dividends
o
n
a
l
l
series
o
f
the Company
Preferred Securities; provided that for the purpose
o
f
such approval, a like amount
o
f
the applicable
series
o
f
Company Preferred Securities
a
s
any Trust Securities, Trust I Securities, Trust
I
I Securities
o
r
WaMu Cayman Securities that are directly
o
r
indirectly held
o
r
beneficially owned by any member
o
f
WMI Group will be treated
a
s
i
f they were not outstanding.
87
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00100
Return
Liquidation Rights
The Company Common Securities will rank junior
t
o
a
l
l
series
o
f
the Company Preferred
Securities upon liquidation.
I
n the event
o
f
any voluntary
o
r
involuntary dissolution
o
f
the Company,
after
a
l
l
o
f
the Companys debts and liabilities have been satisfied and there have been paid
o
r
set
aside
f
o
r
the holders
o
f
a
l
l
series
o
f
the Company Preferred Securities the full preferential amounts
t
o
which such holders are entitled, the holders
o
f
Company Common Securities will
b
e
entitled
t
o share
equally and ratably
i
n any assets remaining.
Outstanding Company Preferred Securities
The Outstanding Company Preferred Securities will rank pari passu with the Series 2007-A
Company Preferred Securities
a
s
t
o dividends and upon liquidation
o
f
the Company. The terms
o
f
the
Series 2007- A Company Preferred Securities will
b
e
substantially identical
t
o the Outstanding
Company Preferred Securities except
f
o
r
the dividend rates and redemption dates and prices. The
Series 2006- A Company Preferred Securities will,
i
f
, when and
a
s
declared
b
y
the Companys Board
o
f
Managers, pay dividends
a
t
an annual rate
o
f
6.534% until March 15, 2011, and
3
-
month USD
LIBOR plus 1.4825% thereafter. The Series 2006- A Company Preferred Securities are held
b
y
Trust
I
,
which issued a like amount
o
f
Trust I Securities
t
o investors
o
n
March
7
,
2006. The Series 2006-B
Company Preferred Securities will,
i
f
, when and
a
s
declared
b
y
the Companys Board
o
f
Managers,
pay dividends
a
t
a
n
annual rate
o
f
7.25%. The Series 2006-B Company Preferred Securities are held
b
y
WaMu Cayman, which issued a like amount
o
f
WaMu Cayman Securities
t
o investors
o
n
March
7
,
2006. The Series 2006-C Company Preferred Securities will,
i
f
, when and
a
s
declared
b
y
the
Companys Board
o
f
Managers, pay dividends
a
t
a
n
annual rate
o
f
6.665% until December 15, 2016,
and
3
-
month USD LIBOR plus 1.7925% thereafter. The Series 2006- A Company Preferred Securities
are held
b
y
Trust
I
I
,
which issued a like amount
o
f
Trust
I
I Securities
t
o investors
o
n
December 13,
2006. The Outstanding Company Preferred Securities are not listed
o
n
any securities exchange
o
r
automated dealer quotation system.
Ability
t
o Issue Additional Preferred Securities
Pursuant
t
o the LLC Agreement, the Company may not issue any Senior Equity Securities
o
r
incur any indebtedness except with the consent
o
r
affirmative vote
o
f
holders
o
f
a
t
least two- thirds
o
f
a
l
l
series
o
f
the Company Preferred Securities, voting together
a
s
a single class,
a
s
described under
Description
o
f
the Series 2007- A Company Preferred SecuritiesVoting Rights and Covenants.
The Company may issue additional Parity Equity Securities without the consent
o
f
the holders
o
f
Company Preferred Securities only
i
f the tests described under Description
o
f
the Series 2007- A
Company Preferred SecuritiesRanking are satisfied.
88
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00101
Return
DESCRIPTION OF THE SERIES M WMI PREFERRED STOCK
The following summary describes the material terms and provisions
o
f
the Series M WMI
Preferred Stock. The description
i
s qualified
i
n
i
t
s
entirety
b
y
reference
t
o the terms and provisions
o
f
WMIs articles
o
f
incorporation and the articles
o
f
amendment establishing the Series M WMI
Preferred Stock. A copy
o
f
WMIs articles
o
f
incorporation and such articles
o
f
amendment can be
obtained upon request
t
o WMI.
General
WMI has authorized and reserved for issuance upon a Conditional Exchange,
a
s
described
under Description
o
f
the Trust SecuritiesConditional Exchange, 500 shares
o
f
i
t
s
Series M
Perpetual Non- cumulative Fixed- to-Floating Rate Preferred Stock,
n
o
par value and liquidation prefer-
ence $1,000,000 per share ( the Series M WMI Preferred Stock). The shares
o
f
Series M WMI
Preferred Stock,
i
f and when issued upon a Conditional Exchange, will
b
e
represented
b
y
depositary
shares (the Depositary Shares), each representing
1
/
1000th
o
f
a share
o
f
Series M WMI Preferred
Stock. The holders
o
f
the Series M WMI Preferred Stock will have
n
o
pre-emptive rights with respect
t
o any shares
o
f
WMIs capital stock
o
r
any
o
f
i
t
s
other securities convertible into
o
r
carrying rights
o
r
options
t
o purchase any such capital stock. The Series M WMI Preferred Stock
i
s perpetual and will
not
b
e
convertible into shares
o
f
WMI common stock
o
r
any other class
o
r
series
o
f
i
t
s
capital stock,
and will not
b
e
subject
t
o any sinking fund
o
r
other obligation
f
o
r
i
t
s
purchase
o
r
retirement.
The Series M WMI Preferred Stock, upon issuance, will have substantially equivalent terms
a
s
t
o
dividends, redemption, liquidation preference and redemption preference
a
s
the Series 2007- A Com-
pany Preferred Securities and Trust Securities for which they may
b
e
exchanged, except that the
Series M WMI Preferred Stock: (
i
) will not have the benefit
o
f
the covenants described under
Description
o
f
Series 2007- A Company Preferred SecuritiesVoting Rights and Covenants
o
r
Additional Amounts and (
i
i
) will
b
e
redeemable prior
t
o the Dividend Payment Date occurring
i
n
June 2012 and
o
n
any Dividend Payment Date thereafter that
i
s not a Five-Year Date only upon the
occurrence
o
f
a Regulatory Capital Event
o
r
a Rating Agency Event
o
r
payment
o
f
the applicable
make- whole amount
a
s
described under Redemption below.
I
n addition,
i
f WMI fails
t
o pay,
o
r
declare and set aside
f
o
r
payment, full dividends
o
n
the
Series M WMI Preferred Stock after
i
t
s
issuance
o
r
any other class
o
r
series
o
f
WMI Parity Stock (
a
s
defined below) having similar voting rights
(

Voting Parity Securities)


f
o
r
six Dividend Periods
o
r
their
equivalent, the authorized number
o
f
directors
o
n
WMIs board will
b
e
increased
b
y
two. Subject
t
o
compliance with any requirement
f
o
r
regulatory approval
o
f
,
o
r
non- objection
t
o
,
persons serving
a
s
directors, the holders
o
f
Series M WMI Preferred Stock, voting together
a
s
a single and separate class
with the holders
o
f
any outstanding Voting Parity Securities, will have the right
t
o elect two directors
i
n
addition
t
o the directors then
i
n office
a
t
WMIs next annual meeting
o
f
shareholders.
The Dividend Payment Dates and related Dividend Periods for the Series M WMI Preferred
Stock, once issued, will be the same
a
s
the Dividend Payment Dates and related Dividend Periods for
the Trust Securities and Company Preferred Stock, and the terms Dividend Payment Date and
Dividend Period will have the same meanings
a
s
applied
t
o the Series M WMI Preferred Stock
a
s
applied
t
o those securities,
i
t being understood that
i
f the Series M WMI Preferred Stock
i
s not issued
prior
t
o the Dividend Payment Date occurring
i
n June 2012, a Dividend Payment Date will
b
e
deemed
t
o occur
o
n
such date with respect
t
o the Series M WMI Preferred Stock for the purposes
o
f
determining the interest rate and the terms
o
f
redemption thereof. The term Business Day, when
used with reference
t
o the Series M WMI Preferred Stock, means any day other than a Saturday,
Sunday
o
r
any other day
o
n
which banks
i
n New York, New York
o
r
Seattle, Washington are generally
required
o
r
authorized by law
t
o be closed.
The Series M WMI Preferred Stock will
b
e
subject
t
o the Replacement Capital Covenant
described under Description
o
f
the Trust SecuritiesRestriction on Redemption
o
r
Purchases.
89
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00102
Return
Ranking
WMI will covenant
i
n the Exchange Agreement
i
n favor
o
f
the holders
o
f
the Trust Securities that,
prior
t
o the issuance
o
f
the Series M WMI Preferred Stock upon a Conditional Exchange, WMI will not
issue any preferred stock that would rank senior
t
o the Series M WMI Preferred Stock upon
i
t
s
issuance.
The Series M WMI Preferred Stock will, upon issuance, rank
a
t
least pari passu with the most
senior preferred stock
o
f
WMI,
i
f any, then outstanding, and
t
o any other preferred stock that WMI
may issue
i
n the future. The Series M WMI Preferred Stock will, with respect
t
o dividend rights and
rights
o
n
liquidation, winding-
u
p
and dissolution, rank (
i
)
o
n
a parity with WMIs Series I WMI Preferred
Stock, Series J WMI Preferred Stock, Series K WMI Preferred Stock, Series L WMI Preferred Stock
(each
a
s
defined below) and each other class
o
r
series
o
f
preferred stock WMI may issue
i
n the
future, the terms
o
f
which expressly provide that such class
o
r
series will rank
o
n
a parity with the
Series M WMI Preferred Stock
a
s
t
o dividend rights and rights on WMIs liquidation, winding- up and
dissolution (collectively referred
t
o as WMI Parity Stock) and (
i
i
) senior
t
o WMIs common stock,
i
t
s
Series RP Preferred Stock and each other class
o
f
capital stock WMI may issue
i
n the future, the
terms
o
f
which
d
o
not expressly provide that
i
t ranks
o
n
a parity with
o
r
senior
t
o the Series M WMI
Preferred Stock
a
s
t
o dividend rights and rights
o
n
WMIs liquidation, winding-
u
p
and dissolution
(collectively referred
t
o
a
s
Junior Securities). WMI may authorize and issue additional shares
o
f
preferred stock that may rank junior
t
o
o
r
pari passu with the Series M WMI Preferred Stock
a
s
t
o
dividends and upon liquidation, winding up
o
r
dissolution without the consent
o
f
the holders
o
f
the
Series M WMI Preferred Stock. See Description
o
f
the Other WMI Capital Stock below.
Dividends
Dividends on the Series M WMI Preferred Stock will be payable
i
f
,
when and as declared
b
y
WMIs Board
o
f
Directors out
o
f
i
t
s
legally available funds, on a non- cumulative basis
a
t
an annual
rate
o
f
6.895%
t
o
,
but not including, June 15, 2012 (whether
o
r
not a Business Day) and
3
-
Month
USD LIBOR plus 1.755% thereafter
o
n
the liquidation preference thereof, which
i
s $1,000,000 per
share, from and including the Dividend Payment Date on
o
r
prior
t
o their date
o
f
issuance. Dividends
o
n
the Series M WMI Preferred Stock,
i
f
,
when and
a
s
declared
b
y
WMIs Board
o
f
Directors, will be
payable quarterly
i
n arrears
o
n
each Dividend Payment Date, commencing
o
n
the first such day after
issuance
o
f
the Series M WMI Preferred Stock. The record date for the payment
o
f
dividends,
i
f
declared, will be the first day
o
f
the month
i
n which the relevant Dividend Payment Date occurs or,
i
f
any such day
i
s not a Business Day, the next day that
i
s a Business Day. Dividends payable on the
Series M WMI Preferred Stock
f
o
r
any period greater
o
r
less than a full Dividend Period will
b
e
computed
o
n
the basis
o
f
(
i
) for any Dividend Periods ending prior
t
o
o
r
i
n June 2012, twelve 30- day
months, a 360- day year, and the actual number
o
f
days elapsed
i
n the period and (
i
i
) for any Dividend
Periods thereafter, the actual number
o
f
days elapsed
i
n the relevant dividend period divided
b
y
360.
No interest will
b
e
paid
o
n
any dividend payment made on the Series M WMI Preferred Stock
o
r
Depositary Shares. Holders
o
f
Depositary Shares will receive for each Depositary Share
1
/
1000th
o
f
any such dividend payment made
o
n
a single share
o
f
the Series M WMI Preferred Stock.
Dividends on the Series M WMI Preferred Stock will be non- cumulative.
I
f WMIs Board
o
f
Directors does not declare a dividend on the Series M WMI Preferred Stock
o
r
declares less than a
full dividend
i
n respect
o
f
any Dividend Period, the holders
o
f
the Series M WMI Preferred Stock will
have no right
t
o receive any dividend
o
r
a full dividend,
a
s
the case may be,
f
o
r
the Dividend Period,
and WMI will have
n
o
obligation
t
o pay a dividend
o
r
t
o pay full dividends for that Dividend Period,
whether
o
r
not dividends are declared and paid
f
o
r
any future Dividend Period with respect
t
o the
Series M WMI Preferred Stock, WMIs common stock
o
r
any other class
o
r
series
o
f
WMIs preferred
stock.
90
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00103
Return
Redemption
The Series M WMI Preferred Stock will not
b
e
redeemable
a
t
the option
o
f
the holders thereof.
Subject
t
o a covenant
i
n favor
o
f
certain
o
f
WMIs debtholders limiting WMIs and
i
t
s
subsidiaries right
t
o purchase
o
r
redeem the Series M WMI Preferred Stock ( among others)
a
s
described under
Description
o
f
the Trust SecuritiesRestriction
o
n
Redemption
o
r
Purchases, WMI may,
a
t
i
t
s
option redeem the Series M WMI Preferred Stock:

i
n whole but not
i
n part, prior
t
o the Dividend Payment Date
i
n June 2012, upon the occurrence
o
f
a Regulatory Capital Event
o
r
a Rating Agency Event,
a
t
a cash redemption price equal
t
o
the sum
o
f
:
the greater of:
(
i
) $1,000,000 per share
o
f
Series M WMI Preferred Stock, and
(
i
i
) the sum
o
f
the present value
o
f
$1,000,000 per share
o
f
Series M WMI Preferred Stock,
discounted from the Dividend Payment Date
i
n June 2012
t
o the redemption date, and
the present values
o
f
a
l
l
undeclared dividends for each Dividend Period from the
redemption date
t
o and including the Dividend Payment Date
i
n June 2012, discounted
from their applicable Dividend Payment Dates
t
o the redemption date,
i
n each case on a
quarterly basis (assuming a 360- day year consisting
o
f
twelve 30-day months)
a
t
the
Treasury Rate,
a
s
calculated by an Independent Investment Banker, plus 0.50%,
plus any declared but unpaid dividends
t
o the redemption date;

i
n whole but not
i
n part,
o
n
any Dividend Payment Date prior
t
o the Dividend Payment Date
i
n
June 2012 for any reason other than the occurrence
o
f
a Rating Agency Event
o
r
a Regulatory
Capital Event,
a
t
a cash redemption price equal to:
the greater of:
(
i
) $1,000,000 per share
o
f
Series M WMI Preferred Stock,
o
r
(
i
i
) the sum
o
f
the present value
o
f
$1,000,000 per share
o
f
Series M WMI Preferred Stock,
discounted from the Dividend Payment Date
i
n June 2012
t
o the redemption date, and
the present values
o
f
a
l
l
undeclared dividends for the Dividend Periods from the
redemption date
t
o and including the Dividend Payment Date
i
n June 2012, discounted
from their applicable Dividend Payment Dates
t
o the redemption date,
i
n each case
o
n
a
quarterly basis (assuming a 360- day year consisting
o
f
twelve 30-day months)
a
t
the
Treasury Rate,
a
s
calculated
b
y
a
n
Independent Investment Banker, plus 0.35%; plus
any declared but unpaid dividends
t
o the redemption date;

i
n whole but not
i
n part,
o
n
any Dividend Payment Date after the Dividend Payment Date
i
n
June 2012 that
i
s not a Five- Year Date, upon the occurrence
o
f
a Regulatory Capital Event
o
r
a Rating Agency Event,
a
t
a cash redemption price equal
t
o $1,000,000 per share
o
f
Series M
WMI Preferred Stock, plus any declared and unpaid dividends
t
o the redemption date;

i
n whole
o
r
i
n part,
o
n
each Dividend Payment Date that
i
s a Five- Year Date,
a
t
a cash
redemption price
o
f
$1,000,000 per share
o
f
Series M WMI Preferred Stock, plus any declared
and unpaid dividends
t
o the redemption date; and

i
n whole but not
i
n part,
o
n
any Dividend Payment Date after the Dividend Payment Date
i
n
June 2012 that
i
s not a Five- Year Date
f
o
r
any reason other than the occurrence
o
f
a Rating
Agency Event
o
r
a Regulatory Capital Event,
a
t
a cash redemption price equal to:
the greater of:
(
i
) $1,000,000 per share
o
f
Series M WMI Preferred Stock,
o
r
91
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00104
Return
(
i
i
) the sum
o
f
the present value
o
f
$1,000,000 per share
o
f
Series M WMI Preferred Stock,
discounted from the next succeeding Five- Year Date
t
o the redemption date, and the
present values
o
f
a
l
l
undeclared dividends for each Dividend Period from the redemption
date
t
o and including the next succeeding Five- Year Date, discounted from their applica-
ble Dividend Payment Dates
t
o the redemption date,
i
n each case
o
n
a quarterly basis
(assuming a 360- day year consisting
o
f
twelve 30- day months)
a
t
the
3
-
month USD
LIBOR Rate applicable
t
o the Dividend Period immediately preceding such redemption
date (which
3
-
month USD LIBOR Rate will also,
f
o
r
purposes
o
f
calculating such
redemption price,
b
e
the rate used
i
n calculating the amount
f
o
r
each undeclared
dividend),
a
s
calculated
b
y
a
n
Independent Investment Banker; plus
any declared but unpaid dividends
t
o the redemption date;
i
n each case, without accumulation
o
f
any undeclared dividends with respect
t
o Dividend Payment
Dates prior
t
o the redemption date.
Dividends will cease
t
o accrue
o
n
the Series M WMI Preferred Stock called for redemption
o
n
and
a
s
o
f
the date fixed for redemption and such Series M WMI Preferred Stock will be deemed
t
o
cease
t
o be outstanding, provided that the redemption price, including any authorized and declared
but unpaid dividends for the current Dividend Period,
i
f any,
t
o the date fixed
f
o
r
redemption, has been
duly paid
o
r
provision has been made for such payment.
Notice
o
f
any redemption will
b
e
mailed
a
t
least
3
0
days, but not more than
6
0
days, prior
t
o any
redemption date
t
o each holder
o
f
the Series M WMI Preferred Stock
t
o
b
e
redeemed,
a
t
such
holders registered address.
Replacement
A
t
o
r
prior
t
o issuance
o
f
the Series 2007- A Company Preferred Securities and the Trust Securi-
ties, WMI will enter into the Replacement Capital Covenant described under Description
o
f
the
Trust SecuritiesRestriction on Redemption
o
r
Purchases, limiting WMIs ability
t
o redeem
o
r
purchase prior
t
o May 24, 2017 certain securities, including the Series M WMI Preferred Stock,
among others.
Rights upon Liquidation
I
f
WMI voluntarily
o
r
involuntarily liquidates, dissolves
o
r
winds up, the holders
o
f
Series M WMI
Preferred Stock
a
t
the time outstanding will
b
e
entitled
t
o receive liquidating distributions
i
n the amount
o
f
$1,000,000 per share,
o
r
$1,000 per Depositary Share representing a
1
/
1000th interest
i
n the
Series M WMI Preferred Stock, plus
a
n
amount equal
t
o declared but unpaid dividends
f
o
r
the current
Dividend Period
t
o the date
o
f
liquidation, out
o
f
WMIs assets legally available for distribution
t
o
i
t
s
shareholders, before any distribution
o
f
assets
i
s made
t
o holders
o
f
WMIs common stock
o
r
any
securities ranking junior
t
o the Series M WMI Preferred Stock, subject
t
o the rights
o
f
the holders
o
f
any class
o
r
series
o
f
securities ranking
o
n
a parity upon liquidation with the Series M WMI Preferred
Stock upon liquidation and the rights
o
f
i
t
s
depositors and creditors.
After payment
o
f
the full amount
o
f
the liquidating distributions
t
o which they are entitled, the
holders
o
f
the Series M WMI Preferred Stock will have no right
o
r
claim
t
o any
o
f
WMIs remaining
assets.
I
n the event that, upon any such voluntary
o
r
involuntary liquidation, dissolution,
o
r
winding up,
WMIs available assets are insufficient
t
o pay the amount
o
f
the liquidation distributions on
a
l
l
outstanding Series M WMI Preferred Stock and the corresponding amounts payable on any other
securities
o
f
equal ranking, then the holders
o
f
the Series M WMI Preferred Stock and any other
securities
o
f
equal ranking will share ratably
i
n any such distribution
o
f
assets
i
n proportion
t
o the full
liquidating distributions
t
o which they would otherwise be respectively entitled.
92
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For such purposes, WMIs consolidation
o
r
merger with
o
r
into any other entity, the consolidation
o
r
merger
o
f
any other entity with
o
r
into
i
t
,
o
r
the sale
o
f
a
l
l
o
r
substantially
a
l
l
o
f
WMIs property
o
r
business, will not
b
e
deemed
t
o constitute
i
t
s liquidation, dissolution,
o
r
winding up.
Voting Rights
Holders
o
f
Series M WMI Preferred Stock will not have any voting rights, including the right
t
o
elect any directors, except upon issuance
a
s
required by law,
o
r
as set forth below.
Washington law attaches mandatory voting rights
t
o classes
o
r
series
o
f
shares that are affected
by certain amendments
t
o the articles
o
f
incorporation. The holders
o
f
the outstanding shares
o
f
a
class
o
r
series are entitled
t
o vote as a separate voting group
i
f shareholder voting
i
s otherwise
required
b
y
Washington law and
i
f the amendment would:
increase the aggregate number
o
f
authorized shares
o
f
the class
o
r
series;
effect an exchange
o
r
reclassification
o
f
a
l
l
o
r
part
o
f
the issued and outstanding shares
o
f
the
class
o
r
series into shares
o
f
another class
o
r
series, thereby adversely affecting the holders
o
f
the shares
s
o
exchanged
o
r
reclassified;
change the rights, preferences,
o
r
limitations
o
f
a
l
l
o
r
part
o
f
the issued and outstanding shares
o
f
the class
o
r
series, thereby adversely affecting the holders
o
f
shares
o
f
the class
o
r
series;
change
a
l
l
o
r
part
o
f
the issued and outstanding shares
o
f
the class
o
r
series into a different
number
o
f
shares
o
f
the same class
o
r
series, thereby adversely affecting the holders
o
f
shares
o
f
the class
o
r
series;
create a new class
o
r
series
o
f
shares having rights
o
r
preferences with respect
t
o dividends
o
r
other distributions
o
r
t
o dissolution that are,
o
r
upon designation
b
y
the board
o
f
directors
may be, prior, superior,
o
r
substantially equal
t
o the shares
o
f
the class
o
r
series;
increase the rights
o
r
preferences with respect
t
o distributions,
o
r
o
n
liquidations
o
r
dissolution,
o
r
the number
o
f
authorized shares
o
f
any class
o
r
series that, after giving effect
t
o the
amendment, has rights
o
r
preferences with respect
t
o distributions,
o
r
o
n
liquidations
o
r
dissolution that are,
o
r
upon designation
b
y
the board
o
f
directors may be, prior, superior,
o
r
substantially equal
t
o the shares
o
f
the class
o
r
series;
limit
o
r
deny
a
n
existing pre-emptive right
o
f
a
l
l
o
r
part
o
f
the shares
o
f
the class
o
r
series;
cancel
o
r
otherwise adversely affect rights
t
o distributions that have accumulated but not yet
been declared
o
n
a
l
l
o
r
part
o
f
the shares
o
f
the class
o
r
series;
o
r
effect a redemption
o
r
cancellation
o
f
a
l
l
o
r
part
o
f
the shares
o
f
the class
o
r
series
i
n
exchange
f
o
r
cash
o
r
any other form
o
f
consideration other than shares
o
f
the corporation.
Holders
o
f
the outstanding shares
o
f
a class
o
r
series
o
f
stock are entitled under Washington law
t
o vote
a
s
a separate voting group with respect
t
o a merger
o
r
share exchange
i
f shareholder voting
i
s
otherwise required
b
y
Washington law and
i
f
,
a
s
a result
o
f
the merger
o
r
share exchange, holders
o
f
a part
o
r
a
l
l
o
f
the class
o
r
series would hold
o
r
receive:
shares
o
f
any class
o
r
series
o
f
the surviving
o
r
acquiring corporation,
o
r
o
f
any parent
corporation
o
f
the surviving corporation, and either (
i
) that class
o
r
series has a greater
number
o
f
authorized shares than the class
o
r
series held
b
y
the holders,
o
r
(
i
i
) there
i
s a
change
i
n the number
o
f
shares held
b
y
the holders
o
r
i
n the rights, preferences
o
r
limitations
o
f
the shares
o
r
the class
o
r
series and the change adversely affects the holders;
shares
o
f
any class
o
r
series
o
f
the surviving
o
r
acquiring corporation,
o
r
o
f
any parent
corporation
o
f
the surviving corporation, and such holders would be,
a
s
compared
t
o their
circumstances prior
t
o the merger
o
r
exchange, adversely affected by the creation, existence,
93
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00106
Return
number
o
f
authorized shares
o
r
rights
o
r
preferences
o
f
another series that may
b
e
prior,
superior
o
r
substantially equal
t
o the shares
t
o be received
b
y
such holders;
o
r
cash
o
r
any other property other than shares
o
f
the surviving
o
r
acquiring corporation
o
r
o
f
any
parent corporation
o
f
the surviving corporation.
Under Washington law,
i
f any class
o
r
series
o
f
shares
i
s entitled
t
o vote
a
s
a group
i
n
connection with an amendment
o
f
the articles, a merger
o
r
a share exchange, such class
o
r
series
and any other classes
o
r
series affected
i
n a substantially similar way will vote together as a single
voting group unless otherwise provided
b
y
the articles
o
r
b
y
the board
o
f
directors.
Washington law permits these statutory voting rights
t
o
b
e
expanded
o
r
,
i
n certain circum-
stances, limited
i
n the designation
o
f
the terms
o
f
a class
o
r
series. The statutory voting rights
o
f
the
holders
o
f
Series M WMI Preferred Stock will
b
e
expanded and,
i
n certain circumstances, limited
a
s
described below.
I
f
after issuance
o
f
the Series M WMI Preferred Stock WMI fails
t
o pay,
o
r
declare and set aside
f
o
r
payment, full dividends
o
n
the Series M WMI Preferred Stock
o
r
any other class
o
r
series
o
f
Voting
Parity Securities
f
o
r
six Dividend Periods
o
r
their equivalent, the authorized number
o
f
WMIs directors
will
b
e
increased
b
y
two. Subject
t
o compliance with any requirement for regulatory approval
o
f
,
o
r
non- objection
t
o
,
persons serving
a
s
directors, the holders
o
f
Series M WMI Preferred Stock, voting
together
a
s
a single and separate class with the holders
o
f
any outstanding Voting Parity Securities,
will have the right
t
o elect two directors
i
n addition
t
o the directors then
i
n office
a
t
WMIs next annual
meeting
o
f
shareholders. This right will continue
a
t
each subsequent annual meeting until WMI pays
dividends
i
n full
o
n
the Series M WMI Preferred Stock and any Voting Parity Securities for three
consecutive Dividend Periods
o
r
their equivalent and pays
o
r
declares and sets aside for payment
dividends
i
n full
f
o
r
the fourth consecutive Dividend Period
o
r
i
t
s
equivalent.
The term
o
f
such additional directors will terminate, and the total number
o
f
directors will be
decreased
b
y
two after WMI pays dividends
i
n full for three consecutive Dividend Periods
o
r
their
equivalent and declares and pays
o
r
sets aside for payment dividends
i
n full on the Series M WMI
Preferred Stock and any Voting Parity Securities for the fourth consecutive Dividend Period
o
r
i
t
s
equivalent or,
i
f earlier, upon the redemption
o
f
a
l
l
Series M WMI Preferred Stock. After the term
o
f
such additional directors terminates, the holders
o
f
the Series M WMI Preferred Stock will not be
entitled
t
o elect additional directors unless full dividends on the Series M WMI Preferred Stock have
again not been paid
o
r
declared and set aside for payment for six future Dividend Periods.
Any additional director elected
b
y
the holders
o
f
the Series M WMI Preferred Stock and the
Voting Parity Securities may
b
e
removed only
b
y
the vote
o
f
the holders
o
f
record
o
f
the outstanding
Series M WMI Preferred Stock and Voting Parity Securities, voting together
a
s
a single and separate
class,
a
t
a meeting
o
f
WMIs shareholders called
f
o
r
that purpose. Any vacancy created
b
y
the
removal
o
f
any such director may
b
e
filled only
b
y
the vote
o
f
the holders
o
f
the outstanding Series M
WMI Preferred Stock and Voting Parity Securities, voting together
a
s
a single and separate class.
So long
a
s
any shares
o
f
Series M WMI Preferred Stock are outstanding, the vote
o
r
consent
o
f
the holders
o
f
a
t
least 662/ 3%
o
f
the shares
o
f
Series M WMI Preferred Stock
a
t
the time outstanding,
voting
a
s
a class with
a
l
l
other series
o
f
preferred stock ranking equal with the Series M WMI
Preferred Stock and entitled
t
o vote thereon, given
i
n person
o
r
b
y
proxy, either
i
n writing without a
meeting
o
r
b
y
vote
a
t
any meeting called
f
o
r
the purpose, will
b
e
necessary
f
o
r
effecting
o
r
validating
any
o
f
the following actions, whether
o
r
not such approval
i
s required
b
y
Washington law:
any amendment, alteration
o
r
repeal
o
f
any provision
o
f
WMIs amended and restated Articles
o
f
Incorporation (including the Articles
o
f
Amendment creating the Series M WMI Preferred
Stock)
o
r
WMIs bylaws that would alter
o
r
change the voting powers, preferences
o
r
special
rights
o
f
the Series M WMI Preferred Stock so as
t
o affect them adversely;
94
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00107
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any amendment
o
r
alteration
o
f
WMIs amended and restated Articles
o
f
Incorporation
t
o
authorize
o
r
create,
o
r
increase the authorized amount
o
f
,
any shares
o
f
,
o
r
any securities
convertible into shares
o
f
,
any class
o
r
series
o
f
WMIs capital stock ranking prior
t
o the
Series M WMI Preferred Stock
i
n the payment
o
f
dividends
o
r
i
n the distribution
o
f
assets
o
n
any liquidation, dissolution
o
r
WMIs winding- up;
o
r
the consummation
o
f
a binding share exchange
o
r
reclassification involving the Series M WMI
Preferred Stock
o
r
a merger
o
r
consolidation
o
f
WMI with another entity, except holders
o
f
Series M WMI Preferred Stock will have no right
t
o vote under this provision
o
r
otherwise
under Washington law
i
f
i
n each case (
i
) the Series M WMI Preferred Stock remains
outstanding
o
r
,
i
n the case
o
f
any such merger
o
r
consolidation with respect
t
o which WMI
i
s
not the surviving
o
r
resulting entity,
i
s converted into
o
r
exchanged for preference securities
o
f
the surviving
o
r
resulting entity
o
r
i
t
s ultimate parent, and (
i
i
) such Series M WMI Preferred
Stock remaining outstanding
o
r
such preference securities,
a
s
the case may be, have such
rights, preferences, privileges and voting powers, taken
a
s
a whole,
a
s
are not materially less
favorable
t
o the holders thereof than the rights, preferences, privileges and voting powers
o
f
the Series M WMI Preferred Stock, taken
a
s
a whole;
provided, however, that any increase
i
n the amount
o
f
the authorized
o
r
issued Series M WMI
Preferred Stock
o
r
authorized preferred stock
o
r
any securities convertible into preferred stock
o
r
the
creation and issuance,
o
r
an increase
i
n the authorized
o
r
issued amount,
o
f
other series
o
f
preferred
stock
o
r
any securities convertible into preferred stock ranking equally with and/
o
r
junior
t
o the
Series M WMI Preferred Stock with respect
t
o the payment
o
f
dividends (whether such dividends are
cumulative
o
r
non- cumulative) and/
o
r
the distribution
o
f
assets upon WMIs liquidation, dissolution
o
r
winding- up will not be deemed
t
o adversely affect the voting powers, preferences
o
r
special rights
o
f
the Series M WMI Preferred Stock and, notwithstanding any provision
o
f
Washington law, holders
o
f
Series M WMI Preferred Stock will have no right
t
o vote on such an increase.
I
f
a
n
amendment, alteration, repeal, share exchange, reclassification, merger
o
r
consolidation
described above would adversely affect one
o
r
more but not
a
l
l
series
o
f
Voting Parity Securities
(including the Series M WMI Preferred Stock for this purpose), then only those series affected and
entitled
t
o vote shall vote
a
s
a class
i
n lieu
o
f
a
l
l
such series
o
f
preferred stock.
The foregoing voting provisions will not apply
i
f
,
a
t
o
r
prior
t
o the time when the act with respect
t
o which such vote would otherwise
b
e
required
i
s effected,
a
l
l
outstanding shares
o
f
Series M WMI
Preferred Stock have been redeemed
o
r
called
f
o
r
redemption upon proper notice and sufficient funds
have been set aside
b
y
WMI
f
o
r
the benefit
o
f
the holders
o
f
the Series M WMI Preferred Stock
t
o
effect such redemption.
WMI will covenant
i
n the Exchange Agreement that
i
n the event WMI, prior
t
o the Conditional
Exchange, effects,
o
r
i
s
,
the subject
o
f
a merger, consolidation, statutory share exchange, sale
o
f
a
l
l
o
r
substantially
a
l
l
o
f
i
t
s
assets
o
r
other form
o
f
business combination, (
i
)
i
n which WMI
i
s not the
surviving, resulting
o
r
receiving corporation thereof
o
r
(
i
i
)
i
f WMI
i
s the surviving
o
r
resulting
corporation, shares representing a majority
o
f
WMIs total voting power are either converted
o
r
exchanged into securities
o
f
another person
o
r
into cash
o
r
other property (any such transaction
i
n
either (
i
)
o
r
(
i
i
) being a Business Combination), then WMI (
i
) will not enter into such Business
Combination unless the Successor Entity agrees, effective upon the consummation
o
f
such Business
Combination,
t
o abide
b
y
a
l
l
o
f
WMIs obligations under the provisions
o
f
the Exchange Agreement
restricting the payment
o
f
dividends
b
y
WMI
i
n the event dividends are not paid with respect
t
o the
Company Preferred Securities and (
i
i
) may,
a
t
the election
o
f
the Board
o
f
Directors
o
f
WMI prior
t
o
the effectiveness
o
f
such Business Combination, assign, effective upon the consummation
o
f
such
Business Combination,
a
l
l
o
f
i
t
s
other obligations under the Exchange Agreement
t
o a Successor
Entity that has Fixed-to-Floating Rate Substitute Preferred Stock and, as a result
o
f
such assignment,
a
l
l
references
t
o WMI, Series M WMI Preferred Stock and Depositary Shares shall become and be
95
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00108
Return
deemed
t
o
b
e
references
t
o such Successor Entity,
t
o such Fixed-to-Floating Rate Substitute
Preferred Stock and
t
o a Fixed- to-Floating Rate Successor Depositary Share, respectively.
Successor Entity means a corporation designated
b
y
the Board
o
f
Directors
o
f
WMI (
i
) that
i
s
the surviving, resulting
o
r
receiving corporation,
a
s
applicable,
i
n any Business Combination, (
i
i
) the
securities
o
f
which are received
i
n a Business Combination
b
y
some
o
r
a
l
l
holders
o
f
WMI voting
shares
o
r
(
i
i
i
) that the Board
o
f
Directors
o
f
WMI determines
t
o be
a
n
acquirer
o
f
WMI
i
n a Business
Combination.
Fixed-to-Floating Rate Substitute Preferred Stock means a class
o
r
series
o
f
equity securities
o
f
a Successor Entity having the preferences, limitations and relative rights
i
n
i
t
s articles
o
r
certificate
o
f
incorporation
o
r
other constituent documents that are substantially similar
t
o those set forth
i
n the
articles
o
f
amendment establishing the Series M WMI Preferred Stock.
Fixed-to-Floating Rate Successor Depositary Share means a depositary share substantially
similar
t
o a Depositary Share representing
a
n
interest
i
n the Fixed-to-Floating Rate Substitute
Preferred Stock.
Conditional Exchange
For a description
o
f
how
a
n
exchange
o
f
the Trust Securities into Depositary Shares may occur
upon
a
n
Exchange Event, purchasers should read Description
o
f
the Trust SecuritiesConditional
Exchange.
96
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Return
DESCRIPTION OF THE DEPOSITARY SHARES
The following summary describes the material terms and provisions
o
f
the Depositary Shares.
This description
i
s qualified
i
n
i
t
s
entirety by reference
t
o the terms and provisions
o
f
the Deposit
Agreement, the form
o
f
depositary receipts, which contain the terms and provisions
o
f
the Depositary
Shares, and WMIs articles
o
f
incorporation and articles
o
f
amendment. Copies
o
f
each
o
f
the
foregoing documents may be obtained upon request
t
o WMI.
General
Each depositary share will represent a
1
/
1000th interest
i
n one share
o
f
Series M WMI Preferred
Stock (the Depositary Shares). The Depositary Shares will be evidenced
b
y
depositary receipts
issued
i
n definitive registered form. The shares
o
f
Series M WMI Preferred Stock underlying the
Depositary Shares will, upon an exchange
a
s
a result
o
f
an Exchange Event,
b
e
deposited with Mellon
Investor Series LLC, as depositary (the Depositary), under a Deposit Agreement,
t
o be entered into
on
o
r
before the closing date (the Deposit Agreement), among WMI, the Depositary, the registrar
appointed thereunder and
a
l
l
holders from time
t
o time
o
f
depositary receipts issued
b
y
the Depositary
thereunder. WMI does not intend
t
o list
o
r
quote the Depositary Shares
o
r
the Series M WMI Preferred
Stock on any securities exchange
o
r
automated dealer quotation system. Accordingly, there will be
n
o
public trading market for the Depositary Shares
o
r
the Series M WMI Preferred Stock. The Initial
Purchasers are under no obligation
t
o and do not intend
t
o make a market
i
n the Depositary Shares.
Subject
t
o the terms
o
f
the Deposit Agreement, each owner
o
f
a Depositary Share will
b
e
entitled, through the Depositary,
t
o
a
l
l
the rights, preferences and privileges
o
f
1
/
1000th
o
f
a share
o
f
Series M WMI Preferred Stock. Owners
o
f
a single Depositary Share, representing a
1
/
1000th interest
i
n one share
o
f
Series M WMI Preferred Stock, will
b
e
subject
t
o
a
l
l
o
f
the limitations
o
f
the fractional
share represented thereby, which are summarized above under Description
o
f
the Series M WMI
Preferred Stock.
The Depositary will act
a
s
transfer agent, registrar and paying agent with respect
t
o the
Depositary Shares.
The Depositarys office
a
t
which the depositary receipts will
b
e
administered
i
s located
a
t
480 Washington Boulevard, Jersey City, New Jersey 07310.
Purchasers may hold Depositary Shares either directly
o
r
indirectly through their broker
o
r
other
financial institution.
I
f
purchasers hold Depositary Shares directly,
b
y
having Depositary Shares
registered
i
n their name
o
n
the books
o
f
the Depositary, the purchaser
i
s a depositary receipt holder.
I
f
purchasers hold the Depositary Shares through their broker
o
r
financial institution nominee, the
purchasers must rely on the procedures
o
f
such broker
o
r
financial institution
t
o assert the rights
o
f
a
depositary receipt holder described
i
n this section. Purchasers should consult with their broker
o
r
financial institution
t
o find out what those procedures are.
Issuance
o
f
Depositary Receipts
Automatically upon a Conditional Exchange, WMI will issue the shares
o
f
Series M WMI
Preferred Stock, and deposit those shares with the Depositary, which will then issue and deliver the
depositary receipts
t
o WMI. WMI will,
i
n turn, deliver the depositary receipts
t
o the holders
o
f
Trust Securities as
o
f
the date
o
f
the Conditional Exchange. Depositary receipts will be issued
evidencing only whole Depositary Shares. Each Trust Security will then be exchanged for a like
amount
o
f
depositary receipts
a
s
described under Description
o
f
the Trust SecuritiesConditional
Exchange.
Dividends and Other Distributions
The Depositary will distribute
a
l
l
cash dividends, dividends paid
i
n Depositary Shares represent-
ing paid-
u
p
and nonassessable shares
o
f
Series M WMI Preferred Stock
o
r
other cash distributions
97
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received
i
n respect
o
f
the Series M WMI Preferred Stock
t
o the record holders
o
f
Depositary Shares
i
n proportion
t
o the numbers
o
f
such Depositary Shares owned
b
y
such holders
o
n
the relevant record
date.
I
n the event
o
f
a distribution other than
i
n cash, the Depositary will distribute property received
b
y
i
t
t
o the record holders
o
f
Depositary Shares entitled thereto, unless the Depositary determines
that
i
t
i
s not feasible
t
o make such a distribution,
i
n which case the Depositary may, after consultation
with WMI, sell such property and distribute the net proceeds from such sale
t
o such holders.
Redemption
o
f
Depositary Shares
I
f
the shares
o
f
Series M WMI Preferred Stock underlying the Depositary Shares are redeemed,
i
n whole
o
r
i
n part, Depositary Shares will
b
e
redeemed with the proceeds received
b
y
the Depositary
resulting from the redemption
o
f
the Series M WMI Preferred Stock held
b
y
the Depositary. The
redemption price per Depositary Share will
b
e
equal
t
o
1
/
1000th
o
f
the redemption price per share
payable with respect
t
o such Series M WMI Preferred Stock.
I
f
less than
a
l
l
the shares
o
f
Series M
WMI Preferred Stock are
t
o
b
e
redeemed, a corresponding proportion
o
f
the Depositary Shares will
b
e
redeemed and the Depositary Shares
t
o
b
e
redeemed will
b
e
selected
b
y
l
o
t
o
r
pro rata,
i
n WMIs
sole discretion.
After the date fixed for redemption (which will be the same date as the redemption date
f
o
r
the
Series M WMI Preferred Stock), the Depositary Shares
s
o
called for redemption will no longer be
deemed
t
o
b
e
outstanding and
a
l
l
rights
o
f
the holders
o
f
the Depositary Shares will cease, except the
right
t
o receive the moneys payable upon such redemption and any money
o
r
other property
t
o which
the holders
o
f
such Depositary Shares were entitled upon such redemption upon surrender
t
o the
Depositary
o
f
the depositary receipts evidencing such Depositary Shares.
Amendment
o
f
Deposit Agreement
The form
o
f
depositary receipt evidencing the Depositary Shares and any provision
o
f
the
Deposit Agreement may
a
t
any time
b
e
amended
b
y
agreement between WMI and the Depositary.
However, any amendment that materially and adversely alters the rights
o
f
the holders
o
f
depositary
receipts will not
b
e
effective unless such amendment has been approved
b
y
the holders
o
f
a
t
least a
majority
o
f
the Depositary Shares then outstanding. Every holder
o
f
an outstanding depositary receipt
a
t
the time any amendment becomes effective will
b
e
deemed,
b
y
continuing
t
o hold such depositary
receipt,
t
o consent and agree
t
o such amendment and
t
o
b
e
bound
b
y
the Deposit Agreement
a
s
amended thereby.
Charges
o
f
Depositary
WMI will pay the charges
o
f
the Depositary
i
n connection with the initial deposit
o
f
the Series M
WMI Preferred Stock and the initial issuance
o
f
the Depositary Shares upon a Conditional Exchange,
and any redemption
o
f
the Series M WMI Preferred Stock. Holders
o
f
Depositary Shares will pay
a
l
l
other transfer and other taxes and governmental charges and,
i
n addition, such other charges
a
s
are
expressly provided
i
n the Deposit Agreement
t
o
b
e
f
o
r
their accounts.
A
l
l
other charges and expenses
o
f
the Depositary and
o
f
any registrar incident
t
o the performance
o
f
their respective obligations
arising from the depositary arrangements will be paid
b
y
WMI only after prior consultation and
agreement between the Depositary and WMI and consent
b
y
WMI
t
o the incurrence
o
f
such
expenses, which consent will not
b
e
unreasonably withheld.
Miscellaneous
The Depositary will forward
t
o the holders
o
f
the Depositary Shares
a
l
l
reports and communica-
tions from WMI that WMI would
b
e
required
t
o furnish
t
o the holders
o
f
the Series M WMI Preferred
Stock.
Neither the Depositary nor WMI will be liable
i
f
i
t
i
s prevented
o
r
delayed by law
o
r
any
circumstances beyond
i
t
s
control
i
n performing
i
t
s
obligations under the Deposit Agreement. The
98
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obligations
o
f
WMI and the Depositary under the Deposit Agreement will
b
e
limited
t
o performance
i
n
good faith
o
f
their duties thereunder, and they will not be obligated
t
o prosecute
o
r
defend any legal
proceedings
i
n respect
o
f
any Depositary Shares
o
r
the Series M WMI Preferred Stock unless
satisfactory indemnity
i
s furnished. They may rely upon written advice
o
f
counsel
o
r
independent
accountants,
o
r
information provided
b
y
persons presenting Series M WMI Preferred Stock for deposit,
holders
o
f
Depositary Shares
o
r
other persons believed
t
o
b
e
competent and
o
n
documents believed
t
o
b
e
genuine.
Resignation and Removal
o
f
Depositary; Termination
o
f
Deposit Agreement
The Depositary may resign
a
t
any time
b
y
delivering
t
o WMI notice
o
f
i
t
s election
t
o
d
o
so, and
WMI may
a
t
any time remove the Depositary, with any such resignation
o
r
removal taking effect upon
the appointment
o
f
a successor depositary and
i
t
s acceptance
o
f
such appointment. Such successor
depositary will
b
e
appointed
b
y
WMI within 60 days after delivery
o
f
the notice
o
f
resignation
o
r
removal. Upon termination
o
f
the Deposit Agreement, the Depositary will discontinue the transfer
o
f
depositary receipts, will suspend the distribution
o
f
dividends
t
o the holders thereof and will not give
any further notices (other than notice
o
f
such termination)
o
r
perform any further acts under the
Deposit Agreement, except that the Depositary will continue
t
o collect dividends and other distributions
pertaining
t
o Series M WMI Preferred Stock and will continue
t
o deliver Series M WMI Preferred Stock
certificates together with such dividends and distributions and the net proceeds
o
f
any sales
o
f
rights,
preferences, privileges,
o
r
other property
i
n exchange
f
o
r
depositary receipts surrendered.
A
t
any time
after the expiration
o
f
three years from the date
o
f
termination, the Depositary may sell the Series M
WMI Preferred Stock and hold the proceeds
o
f
such sale, without interest,
f
o
r
the benefit
o
f
the
holders
o
f
depositary receipts who have not then surrendered their depositary receipts. After making
such sale, the Depositary will be discharged from
a
l
l
obligations under the Deposit Agreement except
t
o account
f
o
r
such proceeds.
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DESCRIPTION OF THE OTHER WMI CAPITAL STOCK
As
o
f
the date hereof, the authorized capital stock
o
f
WMI consists
o
f
1,600,000,000 shares
o
f
WMI common stock and 10,000,000 shares
o
f
preferred stock, no par value. As
o
f
the close
o
f
business on May 18, 2007, there were 888,383,743 shares
o
f
WMI common stock outstanding and
500 shares
o
f
WMIs Series K Perpetual Non- Cumulative Floating Rate Preferred Stock outstanding.
As
o
f
the close
o
f
business on May 18, 2007, 700,000 shares
o
f
preferred stock
o
f
WMI were
authorized, but unissued,
a
s
contemplated
b
y
WMIs Rights Agreement, dated
a
s
o
f
December 20,
2000, entered into by and between WMI and Mellon Investor Services LLC.
I
n addition, 2,500 shares
o
f
WMI preferred stock were authorized
f
o
r
issuance
i
n connection with the issuance
o
f
the Trust I
Securities, WaMu Cayman Securities and Trust
I
I
Securities
a
s
described below. The shares
o
f
WMI
preferred stock
t
o be issued upon the occurrence
o
f
a Conditional Exchange have been duly
authorized and when and
i
f issued will
b
e
validly issued, fully paid, nonassessable and free
o
f
preemptive rights, with no personal liability attaching
t
o the ownership thereof.
WMI authorized and reserved for issuance
i
n connection with the offering
o
f
the Trust I Securities
and the related issuance by the Company
o
f
the Series 2006- A Company Preferred Securities up
t
o
1,250 shares
o
f
i
t
s Series I Perpetual Non- cumulative Fixed-
t
o
-
Floating Rate Preferred Stock,
n
o
par
value, and liquidation preference
o
f
$1,000,000 per share (the Series I WMI Preferred Stock). WMI
also authorized for issuance
i
n connection with the offering
o
f
the WaMu Cayman Securities and the
related issuance
b
y
the Company
o
f
the Series 2006- B Company Preferred Securities up
t
o 750 shares
o
f
i
t
s
Series J Perpetual Non- cumulative Fixed Rate Preferred Stock, no par value, and liquidation
preference
o
f
$1,000,000 per share (the Series J WMI Preferred Stock). WMI authorized and
reserved for issuance
i
n connection with the offering
o
f
the Trust
I
I Securities and the related issuance
b
y
the Company
o
f
the Series 2007- A Company Preferred Securities
u
p
t
o 500 shares
o
f
i
t
s
Series L
Perpetual Non- cumulative Fixed- to-Floating Rate Preferred Stock,
n
o
par value, and liquidation
preference
o
f
$1,000,000 per share (the Series L WMI Preferred Stock). The shares
o
f
Series I WMI
Preferred Stock, Series J WMI Preferred Stock and the Series L WMI Preferred Stock will
b
e
issued
by WMI solely upon the occurrence
o
f
a Conditional Exchange with respect
t
o the Trust I Securities
and WaMu Cayman Securities, respectively.
I
f and when the shares
o
f
Series I WMI Preferred Stock,
Series J WMI Preferred Stock and the Series L WMI Preferred Stock are issued upon the occurrence
o
f
a Conditional Exchange, they will be represented
b
y
depositary shares
o
f
WMI, each
o
f
which will
represent
1
/
1000th
o
f
a share
o
f
such preferred stock. The Series I WMI Preferred Stock, Series J
WMI Preferred Stock, Series L WMI Preferred Stock rank, and the Series M WMI Preferred Stock
when issued will rank, pari passu with one another
a
s
t
o dividends and upon liquidation
o
f
WMI. None
o
f
these series
o
f
WMI preferred stock will
b
e
listed
o
n
any securities exchange
o
r
automated dealer
quotation system.
I
n September 2006, WMI issued 20,000,000 depositary shares, each
o
f
which represented a
1
/
40,000th interest
i
n a share
o
f
WMIs Series K Perpetual Non- Cumulative Floating Rate Preferred
Stock (the Series K WMI Preferred Stock). 500 shares
o
f
Series K WMI Preferred Stock were
issued. The Series K WMI Preferred Stock has a liquidation preference
o
f
$1,000,000 per share.
Dividends
o
n
the Series K WMI Preferred Stock are non- cumulative and,
i
f declared
b
y
the board
o
f
directors, are paid quarterly
a
t
a per annum rate equal
t
o the greater
o
f
(
i
)
3
-
month USD LIBOR for
the related dividend period, plus 0.70%,
o
r
(
i
i
)
4.00%. The Series K WMI Preferred Stock has
n
o
stated maturity. Beginning
i
n September 2011, WMI may
a
t
i
t
s
option redeem the Series K WMI
Preferred Stock
i
n whole
o
r
i
n part
a
t
any time
o
r
from time
t
o time
a
t
a price equal
t
o $1,000,000 per
share plus any declared and unpaid dividends. The Series K WMI Preferred Stock has
n
o
voting rights
except
i
n certain specific circumstances. The Series I WMI Preferred Stock, the Series J WMI
Preferred Stock and the Series L WMI Preferred Stock rank, and the Series M WMI Preferred Stock
will rank,
o
n
a parity with Series K WMI Preferred Stock
a
s
t
o dividends rights and rights
o
n
liquidation, winding up and dissolution
o
f
WMI.
100
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BOOK- ENTRY ISSUANCE
Form, Denomination, Transfer and Book- Entry Procedures
General
The Trust Securities will be issued only
i
n fully registered form. Each purchaser
i
n this Offering
and each account for which
i
t
i
s purchasing will hold
a
t
least $300,000 liquidation preference
o
f
Trust Securities (
i
. e.,
a
t
least three Trust Securities) and,
i
f
i
t transfers any interest
i
n any Trust Security,
will transfer
a
t
least $100,000 liquidation preference
o
f
Trust Securities (
i
. e.,
a
t
least one Trust Security)
and each subsequent purchaser and each account for which
i
t
i
s purchasing will hold and transfer
a
t
least $100,000 liquidation preference
o
f
Trust Securities (
i
. e.,
a
t
least one Trust Security). Any transfer,
sale
o
r
other disposition
o
f
Trust Securities having a liquidation preference
o
f
less than $100,000
o
r
that results
i
n a beneficial owner holding Trust Securities having an aggregate liquidation preference
o
f
less than $100,000, will be deemed
t
o be null and void ab initio and
o
f
no legal effect whatsoever.
Any such transferee will be deemed not
t
o be the beneficial owner
o
f
such Trust Securities for any
purpose, including, but not limited
t
o
,
the receipt
o
f
dividends on such Trust Securities, and such
transferee will be deemed
t
o have no interest whatsoever
i
n such Trust Securities.
Global Security
The Trust Securities initially will be represented
b
y
one
o
r
more securities
i
n registered, global
form (collectively, the Global Security). The Global Security will be deposited upon issuance with the
Registrar
a
s
custodian for The Depository Trust Company
(
DTC)
i
n New York, New York, and
registered
i
n the name
o
f
DTC
o
r
i
t
s nominee (the Nominee),
i
n each case
f
o
r
credit
t
o an account
o
f
a DTC Participant,
a
s
described below.
Special Considerations for Global Securities
As
a
n
indirect holder, a purchasers rights relating
t
o a Global Security will
b
e
governed
b
y
the
account rules
o
f
the purchasers financial institution and
o
f
DTC,
a
s
well
a
s
the general laws relating
t
o securities transfers. The Trust will not recognize the purchaser
a
s
a holder
o
f
Trust Securities and
instead will deal only with DTC
o
r
i
t
s nominee. See The DTC System.
Purchasers should be aware that because Trust Securities are issued only
i
n the form
o
f
a
Global Security:
they cannot get Trust Securities registered
i
n their name;
they cannot receive physical certificates
f
o
r
their interest
i
n the Trust Securities;
they will be Street Name holders and must look
t
o their own bank
o
r
broker for payments on
the Trust Securities and the protection
o
f
their legal rights relating
t
o the Trust Securities;
they may not be able
t
o sell interests
i
n the Trust Securities
t
o some insurance companies and
other institutions that are required
b
y
law
t
o own securities
i
n the form
o
f
physical
certificates; and
DTCs policies will govern payments, transfers, exchanges and other matters relating
t
o the
purchasers interest
i
n the Global Security. See The DTC System. The Trust, the Company
and the Registrar have no responsibility for any aspect
o
f
DTCs actions
o
r
for
i
t
s
records
o
f
ownership interests
i
n the Global Security. The Trust, the Company and the Registrar also do
not supervise DTC
i
n any way.
Special Situations When the Global Security Will Be Terminated
I
n a few special situations, interests
i
n the Global Security will be exchanged for definitive
physical certificates representing Trust Securities. After that exchange, the choice
o
f
whether
t
o hold
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00114
Return
Trust Securities directly
o
r
i
n Street Name will
b
e
u
p
t
o the beneficial owner. Purchasers must
consult their own bank
o
r
broker
t
o find out how
t
o have their interests
i
n Trust Securities transferred
t
o their own name,
s
o
that they will
b
e
direct holders.
The special situations
f
o
r
exchange
o
f
the Global Security
f
o
r
definitive physical certificates are:
DTC notifies the Trust that
i
t
i
s unwilling, unable
o
r
n
o
longer qualified
t
o continue as the
depositary for the Trust Securities;
o
r
the Trust
i
n
i
t
s
sole discretion determines that the Global Security will be exchangeable for
certificated Trust Securities.
When the Global Security
i
s exchanged, DTC (and not the Trust, the Company
o
r
the Registrar)
will be responsible for deciding the names
o
f
the institutions that will be the initial direct holders.
I
f Trust Securities are issued
i
n certificated form, dividends,
i
f any, will
b
e
payable, and
Trust Securities may be transferred
o
r
exchanged,
a
t
the corporate trust office
o
f
the Registrar
i
n New
York, New York, provided that payment
o
f
interest on certificated Trust Securities may be made
a
t
the
option
o
f
the Trust
b
y
check mailed
t
o the address
o
f
the persons entitled thereto.
The DTC System
DTC
i
s a limited-purpose trust company created
t
o hold securities
f
o
r
i
t
s participating organiza-
tions (the DTC Participants). DTC also facilitates the clearance and settlement between DTC
Participants
o
f
transactions
i
n securities deposited with DTC through changes
i
n the account records
o
f
DTC Participants. DTC Participants include securities brokers and dealers (including the Initial
Purchasers), banks, trust companies, clearing corporations and certain other organizations. Access
t
o
DTCs system
i
s also available
t
o other entities such
a
s
securities brokers and dealers, banks and
trust companies that work through a DTC Participant (the Indirect DTC Participants).
When the Trust Securities are purchased through the DTC system, the purchase must
b
e
made
b
y
o
r
through a DTC Participant, who will receive credit for the Trust Securities
o
n
DTCs records. The
purchasers ownership interest will only
b
e
recorded
o
n
the DTC Participants (
o
r
Indirect DTC
Participants) records. DTC has
n
o
knowledge
o
f
a purchasers individual ownership
o
f
the Trust Secu-
rities. DTCs records show only the identity
o
f
the DTC Participants and the amount
o
f
the Trust Secu-
rities held
b
y
o
r
through them. A purchaser will not receive a written confirmation
o
f
i
t
s
purchase
o
r
sale
o
r
any periodic statement directly from DTC;
i
t will receive these from the DTC Participant
o
r
Indirect DTC Participant
a
t
which
i
t maintains
i
t
s
account. Thus, the DTC Participants (
o
r
Indirect DTC
Participants) are responsible for keeping
a
n
accurate account
o
f
the holdings
o
f
their customers.
Any redemption notices with respect
t
o the Trust Securities will be sent by the Company and the
Trust directly
t
o DTC, who will
i
n turn inform the DTC Participants, who will then contact the beneficial
owners.
I
f less than
a
l
l
o
f
the Trust Securities are being redeemed, DTCs current practice
i
s
t
o choose
by
l
o
t
the amount
o
f
the interest
o
f
each DTC Participant
t
o
b
e
redeemed. Each DTC Participant will
then use an appropriate method
t
o allocate the redemption among
i
t
s
beneficial holders.
I
t
i
s DTCs current practice, upon receipt
o
f
any payment
i
n respect
o
f
the Global Security
t
o
credit DTC Participants accounts on the payment date based on their holdings
o
f
beneficial interests
i
n the Global Security
a
s
shown on DTCs records.
I
n addition,
i
t
i
s DTCs current practice
t
o assign
any consenting
o
r
voting rights
t
o DTC Participants whose accounts are credited beneficial interests
i
n
the Global Security on a record date,
b
y
using an omnibus proxy. Payments
b
y
DTC Participants
t
o
owners
o
f
beneficial interests
i
n the Global Security, and voting by DTC Participants, will be based on
the customary practices between the DTC Participants and owners
o
f
beneficial interests,
a
s
i
s the
case with securities held for the account
o
f
customers registered
i
n Street Name. However,
payments will
b
e
the responsibility
o
f
the DTC Participants and not
o
f
DTC, the Registrar, the Trust
o
r
the Company.
102
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Interests
i
n the Trust Securities will trade
i
n DTCs same- day funds settlement system, and
secondary market trading activity
i
n such interests will therefore settle
i
n immediately available funds,
subject
i
n
a
l
l
cases
t
o the rules and procedures
o
f
DTC and
i
t
s participants.
DTC has advised the Trust that
i
t will take any action permitted
t
o be taken by a holder
o
f
the
Trust Securities only
a
t
the direction
o
f
one
o
r
more DTC Participants
t
o whose account with DTC
interests
i
n the Global Security are credited and only
i
n respect
o
f
such portion
o
f
the aggregate
principal amount
o
f
the Trust Securities
a
s
t
o which such participant
o
r
participants has
o
r
have given
such direction.
Although DTC has agreed
t
o the foregoing procedures
i
n order
t
o facilitate transfers
o
f
beneficial
ownership interests
i
n the Global Security among participants
o
f
DTC
i
t
i
s under no obligation
t
o
perform
o
r
continue
t
o perform such procedures, and such procedures may be discontinued
a
t
any
time. Neither the Company, the Trust, the Registrar
o
r
any
o
f
their representative agents will have any
responsibility for the performance
b
y
DTC, the DTC Participants
o
r
the Indirect DTC Participants
o
f
i
t
s
obligations under the rules and procedures governing their operations, including maintaining, supervis-
ing
o
r
reviewing the records relating
t
o
,
o
r
payments made on account of, beneficial ownership
interests
i
n the Global Security.
Euroclear and Clearstream
Clearstream Banking, socit anonyme, 42 Avenue JF Kennedy,
L
-
1855, Luxembourg
(

Clearstream),
i
s a subsidiary
o
f
Clearstream International
(

Clearstream International), a Luxem-


bourg limited liability company formed
i
n January 2000 through the merger
o
f
Cedel International and
Deutsche Boerse Clearing, a subsidiary
o
f
Deutsche Boerse AG.
I
n July 2002, Deutsche Boerse AG
acquired Cedel International and
i
t
s
50% ownership
o
f
Clearstream International.
Clearstream
i
s registered as a bank
i
n Luxembourg, and as such
i
s subject
t
o supervision
b
y
the
Luxembourg Financial Sector Supervisory Commission, which supervises Luxembourg banks.
Clearstream holds securities
f
o
r
i
t
s
customers
(

Clearstream Participants) and facilitates the


clearance and settlement
o
f
securities transactions
b
y
electronic book- entry transfers between their
accounts. Clearstream provides various services, including safekeeping, administration, clearance and
settlement
o
f
internationally traded securities and securities lending and borrowing. Clearstream also
deals with domestic securities markets
i
n several countries through established depository and
custodial relationships. Clearstream has established
a
n
electronic bridge with Euroclear Bank
S
.
A./
N
.
V
.
a
s
the Euroclear Operator
i
n Brussels
t
o facilitate settlement
o
f
trades between systems.
Clearstream currently accepts over 200,000 securities for clearance.
Clearstream Internationals customers are worldwide financial institutions including underwriters,
securities brokers and dealers, banks, trust companies and clearing corporations. Clearstream
Internationals United States customers are limited
t
o securities brokers and dealers and banks.
Currently, Clearstream International has over 2,500 customers located
i
n over 94 countries, including
a
l
l
major European countries, Canada and the United States. Indirect access
t
o Clearstream
i
s
available
t
o other institutions which clear through
o
r
maintain a custodial relationship with an account
holder
o
f
Clearstream.
The Euroclear System
(

Euroclear) was created


i
n 1968
t
o hold securities for
i
t
s
participants
(

Euroclear Participants) and


t
o clear and settle transactions between Euroclear Participants through
simultaneous electronic book- entry delivery against payment, thereby eliminating the need for physical
movement
o
f
certificates and any risk from lack
o
f
simultaneous transfers
o
f
securities and cash.
Transactions may
b
e
settled
i
n a variety
o
f
currencies, including United States dollars. Euroclear
includes various other securities, including securities lending and borrowing and interfaces with
domestic markets
i
n several countries generally similar
t
o the arrangements for cross-market transfers
with DTC described above. Euroclear
i
s operated by Euroclear Bank
S
.
A./
N
.
V
.
(the Euroclear
Operator). All operations are conducted
b
y
the Euroclear Operator, and
a
l
l
Euroclear securities
103
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Return
clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator. Euroclear
plc establishes policy for Euroclear
o
n
behalf
o
f
Euroclear Participants. Euroclear Participants include
banks (including central banks), securities brokers and dealers and other professional financial
intermediaries. Indirect access
t
o Euroclear
i
s also available
t
o other firms that clear through
o
r
maintain a custodial relationship with a Euroclear Participant, either directly
o
r
indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator are governed
b
y
the Terms and Conditions Governing Use
o
f
Euroclear and the related Operating Procedures
o
f
the
Euroclear System and applicable Belgian law (collectively, the Euroclear Terms and Conditions). The
Euroclear Terms and Conditions govern transfers
o
f
securities and cash within Euroclear, withdrawals
o
f
securities and cash from Euroclear, and receipts
o
f
payments with respect
t
o securities
i
n Euroclear.
A
l
l
securities
i
n Euroclear are held
o
n
a fungible basis without attribution
o
f
specific certificates
t
o
specific securities clearance accounts. The Euroclear Operator acts under the Euroclear Terms and
Conditions only
o
n
behalf
o
f
Euroclear Participants, and has
n
o
record
o
f
,
o
r
relationship with, persons
holding through Euroclear Participants.
104
CONFIDENTIAL
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Return
CERTAIN
U
.
S
.
FEDERAL INCOME TAX CONSIDERATIONS
United States Internal Revenue Service Circular 230 Notice:
T
o
ensure compliance with
Internal Revenue Service Circular 230, prospective investors are hereby notified that: (
i
) any
discussion
o
f
U
.
S
.
federal tax issues contained
o
r
referred
t
o
i
n this offering circular
o
r
any
document referred
t
o herein
i
s not intended
o
r
written
t
o be used, and cannot be used, by
prospective investors for the purpose
o
f
avoiding penalties that may
b
e
imposed on them
under the
U
.
S
.
Internal Revenue Code; (
i
i
) such discussion
i
s written for use
i
n connection
with the promotion
o
r
marketing
o
f
the transactions
o
r
matters addressed herein; and (iii) pro-
spective investors should seek advice based on their particular circumstances from an
independent tax advisor.
General
The following discussion summarizes the principal United States federal income tax treatment
o
f
the Trust and the Company, and the principal United States federal income tax consequences
t
o
holders
o
f
the Trust Securities. This discussion
i
s
o
f
a general nature and
i
s not intended
t
o be, nor
should
i
t be construed as, tax advice
t
o any holder. Purchasers should consult their own tax advisors
regarding the tax consequences
o
f
acquiring, owning and disposing
o
f
Trust Securities.
The discussion
i
s addressed only
t
o holders that beneficially own Trust Securities
a
s
capital
assets and does not purport
t
o be a comprehensive description
o
f
a
l
l
the tax considerations that may
b
e
relevant
t
o particular holders
i
n light
o
f
their personal circumstances. The discussion also does not
describe
a
l
l
aspects
o
f
taxation that may
b
e
relevant
t
o certain types
o
f
holders
t
o which special
provisions
o
f
United States federal income tax law may apply, including:
dealers
i
n securities and currencies;
regulated investment companies;
traders
i
n securities;
tax- exempt organizations;
banks and insurance companies;
persons that hold Trust Securities
a
s
part
o
f
a hedge, straddle
o
r
conversion transaction;
persons whose functional currency
i
s not the United States dollar; and

U
.
S
.
expatriates.
The summary
i
s based
o
n
United States federal income tax law, including the Code, existing and
proposed
U
.
S
.
Treasury regulations, administrative rulings and judicial decisions
a
l
l
a
s
currently
i
n
effect. These legal sources are subject
t
o change
o
r
differing interpretations
a
t
any time, which change
o
r
interpretation could apply retroactively and could affect the validity
o
f
the discussion below. There
can
b
e
n
o
assurance that the Internal Revenue Service
(
IRS) will take the same view
o
f
the United
States federal income tax consequences
o
f
an investment
i
n the Trust Securities
a
s
described herein.
Each purchaser
i
s urged
t
o consult its own tax advisor
a
s
t
o the tax consequences
o
f
acquiring, owning and disposing
o
f
Trust Securities, including the United States federal, state,
local and any other tax consequences
o
f
acquiring, owning and disposing
o
f
Depositary
Shares.
As used
i
n this discussion, the term
U
.
S
.
Holder means a beneficial owner
o
f
a Trust Security
that
i
s
,
f
o
r
United States federal income tax purposes, a citizen
o
r
resident
o
f
the United States, a
corporation
o
r
partnership created
o
r
organized
i
n
o
r
under the laws
o
f
the United States
o
r
any state,
an estate the income
o
f
which
i
s includible
i
n gross income for United States federal income tax
purposes regardless
o
f
i
t
s
source,
o
r
a trust
i
f a court within the United States
i
s able
t
o exercise
primary supervision over
i
t
s
administration and one
o
r
more United States persons have authority
t
o
105
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00118
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control
a
l
l
substantial decisions
o
f
the trust. The term Foreign Holder means a beneficial owner
o
f
Trust Securities that
i
s not a
U
.
S
.
Holder.
United States Federal Income Tax Consequences
Tax Treatment
o
f
the Trust and
i
t
s Investment
i
n Series 2007-A Company Preferred Securities
Classification
o
f
the Trust and the Company. The Trust intends
t
o take the position that
i
t
will be treated for United States federal income tax purposes
a
s
a grantor trust. Informal guidance
recently issued by the IRS has created some uncertainty as
t
o whether certain arrangements such as
those involving the Trust and
i
t
s
investment
i
n Company Preferred Securities will be treated
a
s
a
grantor trust for United States federal income tax purposes.
I
n the absence
o
f
further guidance,
however, the Trust intends
t
o take the position that
i
t will be treated
a
s
a grantor trust.
I
f the Trust
were not treated as a grantor trust for United States federal income tax purposes,
i
t would most likely
be treated
a
s
a partnership which, among other things, would change the nature
o
f
and the manner
i
n
which the Trust would be required
t
o comply with
i
t
s
United States federal tax reporting obligations,
including
i
t
s
tax reporting obligations
t
o holders
o
f
Trust Securities. By purchasing a Trust Security, a
holder agrees that
i
t will treat the Trust
a
s
a grantor trust
f
o
r
U
.
S
.
Federal income tax purposes and
will treat the Trust Securities
a
s
an undivided beneficial ownership interest
i
n the Company Preferred
Securities, and that
i
t will report income from
i
t
s
investment
i
n the Trust Securities
i
n a manner
consistent with the information provided
t
o
i
t on behalf
o
f
o
r
with respect
t
o the Trust.
Provided that the Trust
i
s treated
a
s
a grantor trust, each holder
o
f
a Trust Security will
b
e
treated
a
s
i
f
i
t owns directly the Series 2007- A Company Preferred Securities allocable
t
o such
Trust Security.
A
l
l
o
f
the Trusts assets are expected
t
o consist
o
f
Series 2007- A Company Preferred
Securities. The Company intends
t
o
b
e
classified
a
s
a
U
.
S
.
domestic partnership for United States
federal income tax purposes, and the Series 2007- A Company Preferred Securities acquired
b
y
the
Trust are intended
t
o constitute equity interests
i
n such partnership.
An entity that
i
s classified
a
s
a partnership
f
o
r
United States federal income tax purposes
generally
i
s not a taxable entity and incurs no United States federal income tax liability. Instead, each
partner
i
s required
t
o take into account
i
t
s
allocable share
o
f
income, gains, losses, deductions and
credits
o
f
the partnership
i
n computing
i
t
s
United States federal income tax liability,
i
f any, even
i
f
n
o
cash distributions are made
b
y
the partnership
t
o the partner. An entity that
i
s classified
a
s
a
partnership for United States federal income tax purposes nevertheless will
b
e
taxable
a
s
a corpora-
tion
i
f
i
t
i
s a publicly traded partnership and fails
t
o satisfy a 90% qualifying income test, within the
meaning
o
f
Code Section 7704.
On the date
o
f
the initial issuance
o
f
the Trust Securities, the Company will receive an opinion
from Mayer, Brown, Rowe &Maw LLP
t
o the effect that, for United States federal income tax
purposes, although no activities closely comparable
t
o those contemplated
b
y
the Company have
been the subject
o
f
any
U
.
S
.
Treasury regulation, revenue ruling
o
r
judicial decision, the Company will
not be treated
a
s
an association
o
r
publicly traded partnership taxable
a
s
a corporation. The opinions
are based on certain assumptions and on certain representations and agreements regarding restric-
tions on the future conduct
o
f
the activities
o
f
the Company. Although the Company intends
t
o conduct
i
t
s
activities
i
n accordance with such assumptions, representations and agreements,
i
f
i
t were
nonetheless determined that the Company was taxable
a
s
a corporation for United States federal
income tax purposes, then cash available for distribution
i
n respect
o
f
the Series 2007- A Company
Preferred Securities would be reduced on account
o
f
taxes payable by the Company. A determination
by the Company, based on receipt
o
f
an opinion
o
f
counsel, that there
i
s a significant risk that the
Company
i
s
o
r
will be treated
a
s
a
n
association
o
r
publicly traded partnership taxable as a corporation
as a result
o
f
a change
i
n law would constitute a Tax Event. See Description
o
f
the Series 2007- A
Company Preferred SecuritiesRedemption. The remainder
o
f
this discussion assumes that the
Company
i
s treated as a partnership, and not as
a
n
association
o
r
publicly traded partnership taxable
106
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a
s
a corporation, for
U
.
S
.
federal income tax purposes, and that the Series 2007- A Company
Preferred Securities will constitute equity interests
i
n such partnership.
Tax Consequences
t
o
U
.
S
.
Holders
o
f
Trust Securities
Income and Deductions
i
n General. Each
U
.
S
.
Holder
o
f
Trust Securities will
b
e
required
t
o
report
o
n
i
t
s United States federal income tax return
i
t
s share
o
f
income, gains, losses, deductions
and credits
o
f
the Company that are allocable
t
o the Trust, even
i
f such holder has not received any
cash distributions from the Trust.
Distributions on Trust Securities. Distributions
o
f
money
b
y
the Trust
t
o a
U
.
S
.
Holder
o
f
Trust Securities generally will not result
i
n taxable gain
t
o the
U
.
S
.
Holder. A
U
.
S
.
Holder
o
f
Trust Securities will recognize taxable gain upon a distribution
o
f
money by the Company
t
o the Trust
with respect
t
o the Series 2007- A Company Preferred Securities
i
f and
t
o the extent that the
U
.
S
.
Holders share
o
f
such distribution exceeds the
U
.
S
.
Holders adjusted tax basis
i
n the
Series 2007- A Company Preferred Securities allocable
t
o such
U
.
S
.
Holders Trust Securities immedi-
ately before the distribution.
I
n general, each
U
.
S
.
Holder
o
f
Trust Securities will have an initial tax
basis
i
n the Series 2007-A Company Preferred Securities allocable
t
o such
U
.
S
.
Holders Trust Secu-
rities equal
t
o the amount paid
b
y
the Trust
t
o purchase such Series 2007- A Company Preferred
Securities. A
U
.
S
.
Holders tax basis
i
n such Series 2007-A Company Preferred Securities generally
will be increased
b
y
the
U
.
S
.
Holders proportionate share
o
f
the Companys income and gain
allocated
t
o the holder and decreased, but not below zero,
b
y
the holders proportionate share
o
f
any
cash and the tax basis
o
f
any property distributed
b
y
the Company and Company losses, deductions
and nondeductible expenditures that are not chargeable
t
o capital.
Allocations
o
f
Company Income, Gain, Loss and Deductions. Each holder
o
f
Trust Securi-
ties must report
i
t
s
proportionate share
o
f
the Companys income, gain, loss and deduction allocated
t
o the Trust
f
o
r
each year. Under Section 704(
b
)
o
f
the Code, a partnerships allocation
o
f
any item
o
f
income, gain, loss
o
r
deduction
t
o a partner will
b
e
given effect
f
o
r
United States federal income tax
purposes
s
o
long
a
s
i
t has substantial economic effect,
o
r
i
s otherwise
i
n accordance with the
partners interest
i
n the partnership.
I
f
a
n
allocation
o
f
a
n
item does not satisfy this standard,
i
t will
b
e
reallocated among the partners
o
n
the basis
o
f
their respective interests
i
n the partnership, taking
into account
a
l
l
facts and circumstances. The Company believes that the allocations
o
f
items
o
f
income, gain, loss and deduction under the LLC Agreement will
b
e
considered
t
o have substantial
economic effect under the applicable Treasury regulations.
U
.
S
.
Holders are not expected
t
o
b
e
allocated any losses
f
o
r
United States federal income tax purposes with respect
t
o their indirect
interests
i
n the Company. The deductibility
o
f
expenses and other losses arising from a partnership
such
a
s
the Company
i
s subject
t
o certain limitations under the Code.
I
n the event expenses
o
r
losses
are allocated
t
o
U
.
S
.
Holders
o
f
the Trust Securities, such
U
.
S
.
Holders should consult their tax
advisors
t
o determine the deductibility
o
f
such losses.
Sale, Exchange
o
r
Other Disposition
o
f
Trust Securities.
I
n general, a
U
.
S
.
Holder will
recognize gain
o
r
loss upon the sale
o
r
exchange
o
f
such
U
.
S
.
Holders Trust Securities equal
t
o the
difference between the amount realized and such
U
.
S
.
Holders adjusted tax basis
i
n the Series 2007- A
Company Preferred Securities allocable
t
o such
U
.
S
.
Holders Trust Securities. Initially, the tax basis
o
f
a
U
.
S
.
Holder should equal the amount paid
f
o
r
i
t
s Trust Securities. Such basis will
b
e
increased
o
r
decreased
a
s
described above and,
a
s
a general matter,
a
t
a
l
l
times
i
s expected
t
o equal the face
value
o
f
the
U
.
S
.
Holders Trust Securities.
I
f a holders Trust Securities are exchanged
f
o
r
Depositary
Shares
f
o
r
Series M WMI Preferred Stock, the transaction would most likely
b
e
a taxable event
t
o the
holder. The holder would recognize gain
o
r
loss measured
b
y
the difference between the fair market
value
o
f
the Depositary Shares received and the holders adjusted tax basis
i
n
i
t
s relinquished
Trust Securities.
Company Audits. The tax treatment
o
f
Company-related items
i
s determined
a
t
the Company
level. University Street will be appointed
a
s
tax matters partner with the authority
t
o determine the
107
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Companys response
t
o
a
n
audit. The limitations period
f
o
r
assessment
o
f
deficiencies and claims
f
o
r
refunds with respect
t
o items related
t
o the Company
i
s three years after the Companys return
f
o
r
the
taxable year
i
n question
i
s filed, and the tax matters partner has the authority
t
o
,
and may, extend
such period with respect
t
o
a
l
l
members
o
f
the Company.
I
f
a
n
audit results
i
n
a
n
adjustment, the
holders
o
f
the Trust Securities,
a
s
the deemed owners
o
f
the Series 2007- A Company Preferred
Securities, may
b
e
required
t
o restate their taxable income, which could cause holders
o
f
Trust Secu-
rities
t
o pay additional taxes, interest and possibly penalties and such holders may themselves also
b
e
subject
t
o audits. There can
b
e
no assurance that the Companys
o
r
a
U
.
S
.
Holders tax return will not
b
e
audited
b
y
the IRS
o
r
that
n
o
adjustments
t
o their returns will
b
e
made
a
s
a result
o
f
such an
audit.
Series M WMI Preferred Stock Received
i
n a Conditional Exchange.
I
f
,
a
s
a result
o
f
a
Conditional Exchange, a
U
.
S
.
Holder receives Depositary Shares for Series M WMI Preferred Stock,
any distributions made
o
n
the Depositary Shares generally will
b
e
included
i
n the holders income
a
s
ordinary dividend income
t
o the extent
o
f
WMIs current and accumulated earnings and profits.
Distributions
i
n excess
o
f
WMIs current and accumulated earnings and profits will
b
e
treated
a
s
a
return
o
f
capital
t
o the extent
o
f
the
U
.
S
.
Holders adjusted tax basis
i
n the Depositary Shares and
thereafter
a
s
capital gain from the sale
o
r
exchange
o
f
the Depositary Shares. Dividends received
b
y
a corporate
U
.
S
.
Holder may
b
e
eligible for a dividends received deduction, subject
t
o applicable
limitations. The sale, exchange
o
r
redemption
o
f
any Depositary Shares for Series M WMI Preferred
Stock will
b
e
subject
t
o tax under the rules described above under Sale, Exchange
o
r
Other
Disposition
o
f
Trust Securities.
Tax Treatment
o
f
Tax- Exempt
U
.
S
.
Holders
o
f
Trust Securities
For purposes
o
f
this discussion, a Tax- Exempt
U
.
S
.
Holder means any United States domestic
organization qualified under Code Section 501(
c
)
(
3), any trust
o
r
governmental plan qualified under
Code Section 401( a), any individual retirement account and any other non- governmental
U
.
S
.
Holder
generally exempt from United States federal income taxation. A Tax- Exempt
U
.
S
.
Holder
i
s not
expected
t
o
b
e
subject
t
o the tax
o
n
unrelated business taxable income
(

UBTI) with respect


t
o
i
t
s
share
o
f
Company income and gain allocable
t
o the Trust
o
r
any capital gains derived from
a
n
investment
i
n the Trust Securities. However, notwithstanding the foregoing, a Tax- Exempt
U
.
S
.
Holder
that incurs acquisition indebtedness (
a
s
defined
i
n Code Section 514( c)) with respect
t
o
i
t
s
Trust Securities may
b
e
subject
t
o the tax
o
n
UBTI
i
n respect
o
f
any income
o
r
gains derived
i
n
respect
o
f
the Trust Securities
t
o the extent that such Trust Securities constitute debt- financed
property
o
f
the Tax- Exempt
U
.
S
.
Holder within the meaning
o
f
Code Section 514( b).
Tax- Exempt
U
.
S
.
Holders should consult their own tax advisors regarding the tax consequences
t
o them
o
f
an investment
i
n the Trust Securities.
Tax Treatment
o
f
Foreign Holders
o
f
Trust Securities
U
.
S
.
Trade
o
r
Business Status. The Company intends
t
o conduct
i
t
s
affairs
s
o
as
t
o not be
engaged
i
n a trade
o
r
business
i
n the United States. On the date
o
f
the initial issuance
o
f
the
Trust Securities, the Company will receive an opinion from Mayer, Brown, Rowe & Maw LLP
t
o the
effect that, for United States federal income tax purposes, although no activities closely comparable
t
o
those contemplated
b
y
the Company have been the subject
o
f
any
U
.
S
.
Treasury regulation, revenue
ruling
o
r
judicial decision,
i
t will not be treated as engaged
i
n the conduct
o
f
a trade
o
r
business within
the United States. Mayer, Brown, Rowe &Maw LLPs opinion
i
s not binding on the IRS
o
r
the courts,
and no ruling will be sought from the IRS regarding this,
o
r
any other, aspect
o
f
the Companys United
States federal income tax treatment. Accordingly, no assurance can be given that the IRS will not
assert positions contrary
t
o those stated
i
n Mayer, Brown, Rowe & Maw LLPs opinion
o
r
that a court
would not entertain any such assertions.
108
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Mayer, Brown, Rowe & Maw LLPs opinion
i
s based
o
n
certain assumptions and
o
n
certain
representations and agreements regarding restrictions
o
n
the future conduct
o
f
the Companys
activities. Although the Company intends
t
o conduct
i
t
s activities
i
n accordance with such assump-
tions, representations and agreements,
i
f
i
t were nonetheless determined
t
o
b
e
engaged
i
n a trade
o
r
business
i
n the United States and had taxable income that was effectively connected with such United
States trade
o
r
business, then each Foreign Holder would
b
e
subject
t
o United States federal income
tax
o
n
such Foreign Holders share
o
f
the Companys effectively connected taxable income allocable
t
o the Trust
a
t
regular United States corporate income tax rates and possibly
t
o a 30% United States
branch profits tax
a
s
well. Moreover,
i
n the event a Foreign Holder were
t
o derive effectively connected
income
i
n respect
o
f
i
t
s ownership
o
f
Trust Securities the United States, corporate income tax imposed
thereon would
b
e
required
t
o
b
e
collected
i
n the first instance through a withholding
b
y
the Company
o
f
such tax
a
t
a rate
o
f
35%
o
n
such Foreign Holders distributive share
o
f
the income. A determination
b
y
the Company, based
o
n
receipt
o
f
a
n
opinion
o
f
counsel, that there
i
s a significant risk that
i
t
i
s
o
r
will
b
e
treated
a
s
engaged
i
n a trade
o
r
business within the United States would constitute a Tax
Event. See Description
o
f
the Series 2007- A Company Preferred SecuritiesRedemption. The
remainder
o
f
this discussion assumes that the Company will not
b
e
considered
t
o
b
e
engaged
i
n a
trade
o
r
business
i
n the United States.
United States Withholding Tax. Interest that constitutes portfolio interest within the meaning
o
f
the Code
i
s generally exempt from United States withholding tax. A Foreign Holder will be treated
a
s
earning directly
i
t
s
share
o
f
the income earned
b
y
the Company. Immediately following the completion
o
f
this Offering, the Companys material assets will consist
o
f
the regular interests issued
i
n registered
form
b
y
the Asset Trusts (
i
. e., the Asset Trust I Class A Trust Certificate and the Asset Trust
I
I Class A
Trust Certificate), each
o
f
which will be treated
a
s
a real estate mortgage investment conduit under the
Code (a REMIC)
a
s
well
a
s
cash and permitted investments. REMIC regular interests are generally
treated
a
s
indebtedness for United States federal income tax purposes that qualifies for the portfolio
interest exemption.
I
n addition, during the term
o
f
the transaction, the Company expects, pursuant
t
o
i
t
s
investment guidelines,
t
o invest cash proceeds from the offering
o
f
the Series 2007- A Company
Preferred Securities
i
n short term debt instruments and other debt securities that qualify
f
o
r
the portfolio
interest exemption.
Accordingly,
i
t
i
s expected that a Foreign Holders share
o
f
the Trusts distributive share
o
f
the
Companys interest income will constitute portfolio interest, and thus, will not
b
e
subject
t
o
U
.
S
.
with-
holding tax,
s
o
long
a
s
the Foreign Holder has certified
i
t
s
status
a
s
a Foreign Holder under penalties
o
f
perjury
o
n
a
n
appropriate IRS Form W-
8
.
I
n addition, gain realized
o
n
the sale, exchange
o
r
redemption
o
f
the Trust Securities held
b
y
a Foreign Holder generally will not
b
e
subject
t
o United
States federal income
o
r
withholding tax,
a
s
the case may be, unless such Foreign Holder
i
s a
nonresident alien individual who holds the Trust Securities
a
s
a capital asset and who
i
s present
i
n the
United States more than 182 days
i
n the taxable year
o
f
the sale and certain other conditions are met.
Series M WMI Preferred Stock Received
i
n a Conditional Exchange.
I
f a Conditional
Exchange
o
f
the Trust Securities were
t
o occur, any dividends paid
t
o a Foreign Holder
o
f
the
Depositary Shares
f
o
r
Series M WMI Preferred Stock received upon such Conditional Exchange
generally would be subject
t
o a 30%
U
.
S
.
withholding tax unless the holder qualifies for an exemption
o
r
a reduced rate under the
U
.
S
.
Internal Revenue Code
o
r
applicable
U
.
S
.
tax treaty.
Information Reporting and Backup Withholding
Under regulations applicable starting with calendar year 2007, a widely held fixed investment
trust such as the Trust must report
t
o the IRS on IRS Form 1099 for each calendar year any interest
allocable
t
o an investor
i
n the trust that
i
s a partnership
o
r
that otherwise generally receives Form 1099s.
I
n addition, the regulations provide that such investors
i
n a trust will receive a written statement that
includes the information provided
o
n
the Form 1099, as well as information relating
t
o any expenses
o
r
deductions allocable
t
o the investor and any other information necessary for the investor
t
o accurately
prepare
i
t
s
tax return. This written statement must be provided
t
o an investor not later than the March 15
109
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00122
Return
following the end
o
f
the year. These rules
d
o
not specifically address how
t
o report income derived
b
y
a
trust from
a
n
investment
i
n a partnership such
a
s
the Company, and
i
t
i
s possible that the IRS would
take a different view
a
s
t
o how the Trust and the Company should provide tax reporting than that
described herein. Unless
i
t
i
s advised
t
o use a different method
o
f
tax reporting, the Trust intends
t
o
report such information under the trust reporting rules. Accordingly, the Trust will comply with
i
t
s
obligations under these regulations, including
b
y
timely providing any broker through which a holder
holds
i
t
s Trust Securities with the information necessary for the holder
t
o receive the written statement
described above. The Trust will prepare
i
t
s reports using the accrual method
o
f
tax accounting. A Holder
may obtain a copy
o
f
such information directly from the Trust
a
t
Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890 upon reasonable request.
Payments
t
o non- corporate holders
o
f
Trust Securities may be subject
i
n certain circumstances
t
o backup withholding
i
f such holders do not furnish their correct taxpayer identification number and
certain certifications,
o
r
are otherwise subject
t
o backup withholding. Backup withholding
i
s not an
additional tax. Any amounts withheld from payments made
t
o investors may be refunded
o
r
credited
against your
U
.
S
.
Federal income tax liability,
i
f any, provided, that the required information
i
s timely
furnished
t
o the IRS.
The payment
o
f
the proceeds from the disposition
o
f
a Trust Security
b
y
a Foreign Holder
generally will not
b
e
subject
t
o information reporting and backup withholding
i
f the Foreign Holder
certifies
i
t
s
status
a
s
a Foreign Holder (and,
i
f applicable,
i
t
s
beneficial owners also certify their status
a
s
non- United States persons) under penalties
o
f
perjury
o
n
the appropriate IRS Form W-
8
,
satisfies
certain documentary evidence requirements for establishing that
i
t
i
s a Foreign Holder
o
r
otherwise
establishes
a
n
exemption.
Tax Return Disclosure Requirements
Recently issued Treasury Regulations and other administrative guidance promulgated by the IRS
prescribe certain circumstances under which holders
o
f
the Trust Securities could be required
t
o file
information returns with the IRS (the New Reporting Rules).
The New Reporting Rules could apply
t
o a
U
.
S
.
Holder (and
t
o certain Foreign Holders who hold
their Trust Securities
i
n connection with a United States trade
o
r
business)
i
f the Trust
o
r
the Company
were
t
o enter into one
o
r
more reportable transactions. The definition
o
f
reportable transaction
i
s
highly technical.
I
t
i
s not expected that the Trust
o
r
the Company will engage
i
n activities that would
give rise
t
o any reportable transactions.
I
f the Trust
o
r
the Company were
t
o engage
i
n any reportable
transaction, then, subject
t
o certain exceptions and threshold limitations, a
U
.
S
.
Holder
o
r
Foreign
Holder may
b
e
required
t
o file IRS Form 8886 with such holders United States federal income tax
return for each taxable year
i
n which such reportable transaction affects such holders taxable
income, and
t
o file a copy
o
f
such form with the IRSs Office
o
f
Tax Shelter Analysis. The Trust intends
t
o provide
t
o the holders
o
f
Trust Securities any information necessary
t
o complete such form.
I
n addition, subject
t
o certain significant exceptions, any holder
o
f
Trust Securities that recognizes
a loss on a sale
o
r
exchange
o
f
such holders Trust Securities may be required
t
o file IRS Form 8886
i
n
the manner described above
i
f the loss exceeds certain thresholds and no exception applies.
Prospective purchasers
o
f
Trust Securities are urged
t
o consult their own tax advisors
regarding the application
t
o them
o
f
the New Reporting Rules with respect
t
o an investment
i
n
the Trust Securities.
Foreign, State, and Local Taxes
Holders may be liable for foreign, state, and local taxes
i
n the country, state,
o
r
locality
i
n which
they are resident
o
r
doing business
o
r
i
n a state
o
r
locality
i
n which the Trust
o
r
the Company
conducts
o
r
i
s deemed
t
o conduct business. Because the tax laws
o
f
each country, state, and locality
may differ, each prospective purchaser should consult
i
t
s
own tax advisors with respect
t
o any taxes
that may be payable
a
s
a result
o
f
an investment
i
n the Trust Securities.
110
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00123
Return
ERISA CONSIDERATIONS
Section 406
o
f
the Employee Retirement Income Security Act
o
f
1974,
a
s
amended
(

ERISA)
and Section 4975
o
f
the Code prohibit pension, profit- sharing
o
r
other retirement plans and accounts
subject
t
o ERISA
o
r
Section 4975
o
f
the Code and entities that are deemed
t
o hold plan assets
o
f
any
o
f
the foregoing (each, a Plan) from engaging
i
n certain transactions with persons that are
parties
i
n interest under ERISA
o
r
disqualified persons under the Code with respect
t
o such Plan.
A violation
o
f
these prohibited transaction rules may result
i
n
a
n
excise tax
o
r
other penalties and
liabilities under ERISA and the Code for such persons
o
r
the fiduciaries
o
f
the Plan.
I
n addition, Title I
o
f
ERISA also requires fiduciaries
o
f
a Plan subject
t
o ERISA
t
o make investments that are prudent,
diversified and
i
n accordance with the governing plan documents.
Certain transactions involving the Trust might
b
e
deemed
t
o constitute prohibited transactions
under ERISA and the Code with respect
t
o a Plan that purchased Trust Securities
o
r
Series 2007- A
Company Preferred Securities
i
f assets
o
f
the Trust were deemed
t
o
b
e
assets
o
f
the Plan. Under a
regulation issued
b
y
the United States Department
o
f
Labor (the Regulation), the assets
o
f
the Trust
would
b
e
treated
a
s
plan assets
o
f
a Plan for the purposes
o
f
ERISA and the Code only
i
f the Plan
acquired
a
n
equity interest
i
n the Trust and none
o
f
the exceptions
t
o plan assets contained
i
n the
Regulation was applicable. An equity interest
i
s defined under the Regulation
a
s
a
n
interest other than
a
n
instrument that
i
s treated
a
s
indebtedness under applicable local law and that has
n
o
substantial
equity features. The Series 2007- A Company Preferred Securities are not likely
t
o
b
e
treated
a
s
indebtedness for purposes
o
f
the Regulation.
A
s
such, the Trust intends
t
o prohibit the acquisition and
holding
o
f
any Trust Security
o
r
Company Preferred Security
o
r
any interest
i
n a Trust Security
o
r
Company Preferred Security
b
y
o
r
o
n
behalf
o
f
a Benefit Plan Investor (
a
s
defined below).
The term Benefit Plan Investor
i
s defined
i
n Section
3
(
42)
o
f
ERISA
t
o include
a
l
l
employee
benefit plans that are subject
t
o Title I
o
f
ERISA, individual retirement accounts, Keogh Plans and
other plans subject
t
o Section 4975
o
f
the Code, and entities whose underlying assets are deemed
t
o
include plan assets
b
y
reason
o
f
the investment
i
n that entity
b
y
Benefit Plan Investors, such
a
s
group
trusts, bank collective investment trusts, insurance company separate accounts, and certain insurance
company general accounts.
By acquiring a Trust Security
o
r
Company Preferred Security (
o
r
any interest therein), each
purchaser and transferee will be deemed
t
o represent, warrant and covenant that, from the date
o
f
acquisition throughout the period
o
f
holding such Trust Security
o
r
Company Preferred Security (
o
r
interest therein),
i
t
i
s not, and
i
t
i
s not acquiring such Trust Security
o
r
Company Preferred Security (
o
r
interest therein) with the assets
o
f
a Benefit Plan Investor, except for an insurance company general
account that represents, warrants and covenants that,
a
t
the time
o
f
acquisition and throughout the
period
i
t holds the securities, (
i
)
i
t
i
s eligible for and meets the requirements
o
f
Department
o
f
Labor
Prohibited Transaction Class Exemption 95-60, (
i
i
) less than 25%
o
f
the assets
o
f
such general
account are (
o
r
represent) assets
o
f
a Benefit Plan Investor and (
i
i
i
)
i
t
i
s not a person who has
discretionary authority
o
r
control with respect
t
o the assets
o
f
the Trust
o
r
any person who provides
investment advice for a fee ( direct
o
r
indirect) with respect
t
o such assets,
o
r
any affiliate
o
f
such a
person and would not otherwise be excluded under
2
9
C
.
F
.
R
.
2510.3- 101(
f
)
(
1).
Government sponsored plans are not subject
t
o the fiduciary provisions
o
f
ERISA, and are also
not subject
t
o the prohibited transaction provisions under Section 4975
o
f
the Code. However, federal,
state
o
r
local laws
o
r
regulations governing the investment and management
o
f
the assets
o
f
such
plans may contain fiduciary and prohibited transaction requirements similar
t
o those under ERISA and
the Code discussed above and may include other limitations on permissible investments. Accordingly,
fiduciaries
o
f
governmental plans,
i
n consultation with their advisors, should consider the requirements
o
f
their respective pension codes with respect
t
o purchase
o
f
a Trust Security
o
r
Company Preferred
Security, as well
a
s
general fiduciary considerations.
Each purchaser and transferee
o
f
a Trust Security
o
r
Company Preferred Security will be
required
t
o represent and warrant (or,
i
n certain circumstances, will be deemed
t
o represent and
111
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00124
Return
warrant) that, from the date
o
f
acquisition throughout the period
o
f
holding such Trust Security
o
r
Company Preferred Security (
o
r
interest therein), either (
a
)
i
t
i
s not a governmental plan, foreign plan,
church plan
o
r
other plan subject
t
o law that
i
s substantially similar
t
o the Section 406
o
f
ERISA
o
r
Section 4975
o
f
the Code
(
Similar Law)
o
r
(
b
)
i
t
s purchase and holding
o
f
the Trust Security
o
r
Company Preferred Security will not constitute
o
r
result
i
n a non- exempt violation
o
f
Similar Law.
RATINGS
I
t
i
s expected that the Trust Securities will
b
e
rated Baa1
b
y
Moodys Investors Service, Inc.
(
Moodys), BBB
b
y
Standard &Poors Rating Services, a Division
o
f
The McGraw- Hill Companies,
Inc.
(
S&P) and A
b
y
Fitch, Inc.
(
Fitch). The ratings
o
f
the Trust Securities are not recommen-
dations
t
o purchase, hold
o
r
sell the Trust Securities, inasmuch
a
s
the ratings
d
o
not comment
a
s
t
o
the market price
o
r
suitability
f
o
r
a particular purchaser. Nor
d
o
the ratings described above address
the likelihood that a holder
o
f
Trust Securities will
b
e
able
t
o sell such securities. The ratings are
based
o
n
current information furnished
t
o Moodys, S&P and Fitch
b
y
WMI, WMB, the Company and
the Trust and information obtained from other sources. The ratings may
b
e
changed, suspended
o
r
withdrawn
a
t
any time
a
s
a result
o
f
changes
i
n
,
o
r
the unavailability
o
f
,
such information. See Risk
FactorsRisks Relating
t
o the Terms
o
f
the Trust Securities and the Series 2007-A Company
Preferred SecuritiesRating agencies may change rating methodologies.
112
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Return
PLAN OF DISTRIBUTION
The Company, the Trust, WMI and the initial purchasers listed
i
n the table below (the Initial
Purchasers) have entered into a purchase agreement with respect
t
o the Trust Securities. Subject
t
o
certain conditions, each Initial Purchaser has severally agreed
t
o purchase the amount (
b
y
liquidation
preference)
o
f
Trust Securities indicated
i
n the following table.
Initial Purchasers
Liquidation Preference
o
f
Trust Securities
Goldman, Sachs &Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000,000
Lehman Brothers Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,000,000
UBS Securities LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,000,000
Credit Suisse Securities (USA) LLC . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Keefe, Bruyette &Woods Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
J
.
P
.
Morgan Securities Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Morgan Stanley &Co. Incorporated. . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Wachovia Capital Markets, LLC. . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500,000,000
The Initial Purchasers are committed
t
o take and pay
f
o
r
a
l
l
o
f
the securities being offered
hereby,
i
f any are taken. The initial offering price
i
s set forth
o
n
the cover page
o
f
this offering circular.
After the securities are released for sale, the Initial Purchasers may change the offering price and
other selling terms.
The securities offered hereby have not been and will not be registered under the Securities Act.
The Initial Purchasers have agreed that they will offer
o
r
sell the Trust Securities only
t
o persons who
are both qualified institutional buyers within the meaning
o
f
Rule 144A under the Securities Act and
qualified purchasers within the meaning
o
f
Section
2
(
a)(51) under the Investment Company Act
i
n
transactions meeting the requirements
o
f
Rule 144A.
I
n connection with this Offering, the Initial Purchasers may purchase and sell securities
i
n the
open market. These transactions may include short sales, stabilizing transactions and purchases
t
o
cover positions created
b
y
short sales. Short sales involve the sale
b
y
the Initial Purchasers
o
f
a
greater number
o
f
securities than they are required
t
o purchase
i
n this Offering. Stabilizing transac-
tions consist
o
f
certain bids
o
r
purchases made for the purpose
o
f
preventing
o
r
retarding a decline
i
n
the market price
o
f
the securities while this Offering
i
s
i
n progress.
These activities by the Initial Purchasers may stabilize, maintain
o
r
otherwise affect the market
price
o
f
the securities. As a result, the price
o
f
the securities may be higher than the price that
otherwise might exist
i
n the open market.
I
f these activities are commenced, they may be discontinued
by the Initial Purchasers
a
t
any time. These transactions may be effected
i
n the over- the- counter
market
o
r
otherwise.
Each
o
f
the Initial Purchasers has represented and agreed that:

I
t
has only communicated
o
r
caused
t
o
b
e
communicated and will only communicate
o
r
cause
t
o
b
e
communicated
a
n
invitation
o
r
inducement
t
o engage
i
n investment activity ( within the
meaning
o
f
section
2
1
o
f
the Financial Services and Markets Act 2000 (
a
s
amended) (the
FSMA)
t
o persons who have professional experience
i
n matters relating
t
o investments falling
within Article 19(
5
)
o
f
the Financial Services and Markets Act 2000 (Financial Promotion)
Order 2005
o
r
i
n circumstances
i
n which section
2
1
o
f
FSMA does not apply
t
o the Trust; and

I
t has complied, and will comply, with
a
l
l
applicable provisions
o
f
FSMA with respect
t
o
anything done
b
y
i
t
i
n relation
t
o the Trust Securities
i
n
,
from
o
r
otherwise involving the United
Kingdom.
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I
n relation
t
o each Member State
o
f
the European Economic Area which has implemented the
Prospectus Directive (each, a Relevant Member State), each Initial Purchaser has represented and
agreed that with effect from and including the date on which the Prospectus Directive
i
s implemented
i
n that Relevant Member State (the Relevant Implementation Date)
i
t has not made and will not
make an offer
o
f
the securities being offered hereby
t
o the public
i
n that Relevant Member State prior
t
o the publication
o
f
a prospectus
i
n relation
t
o the Trust Securities which has been approved
b
y
the
competent authority
i
n that Relevant Member State or, where appropriate, approved
i
n another
Relevant Member State and notified
t
o the competent authority
i
n that Relevant Member State,
a
l
l
i
n
accordance with the Prospectus Directive, except that
i
t may, with effect from and including the
Relevant Implementation Date, make
a
n
offer
o
f
securities
t
o the public
i
n that Relevant Member State
a
t
any time:

t
o legal entities which are authorized
o
r
regulated
t
o operate
i
n the financial markets
o
r
,
i
f not
s
o
authorized
o
r
regulated, whose corporate purpose
i
s solely
t
o invest
i
n securities;

t
o any legal entity which has two
o
r
more
o
f
(
i
)
a
n
average
o
f
a
t
least 250 employees during
the last financial year; (
i
i
) a total balance sheet
o
f
more than e 43,000,000; and (
i
i
i
)
a
n
annual
net turnover
o
f
more than e 50,000,000,
a
s
shown
i
n
i
t
s last annual
o
r
consolidated
accounts;
o
r

i
n any other circumstances which
d
o
not require the publication
b
y
the Trust
o
f
a prospectus
pursuant
t
o Article 3
o
f
the Prospectus Directive.
For the purposes
o
f
this provision, the expression an offer
o
f
securities
t
o the public
i
n relation
t
o any securities
i
n any Relevant Member State means the communication
i
n any form and
b
y
any
means
o
f
sufficient information on the terms
o
f
the offer and the securities
t
o
b
e
offered
s
o
a
s
t
o
enable
a
n
investor
t
o decide
t
o purchase
o
r
subscribe the securities, as the same may be varied
i
n
that Relevant Member State by any measure implementing the Prospectus Directive
i
n that Relevant
Member State and the expression Prospectus Directive means Directive 2003/ 71/ EC and includes any
relevant implementing measure
i
n each Relevant Member State.
The Trust Securities offered hereby may not be offered
o
r
sold
b
y
means
o
f
any document other
than (
i
)
i
n circumstances which do not constitute an offer
t
o the public within the meaning
o
f
the
Companies Ordinance (Cap 32, Laws
o
f
Hong Kong),
o
r
(
i
i
)
t
o professional investors within the
meaning
o
f
the Securities and Futures Ordinance (Cap. 571, Laws
o
f
Hong Kong) and any rules made
thereunder,
o
r
(
i
i
i
)
i
n other circumstances which do not result
i
n the document being a prospectus
within the meaning
o
f
the Companies Ordinance (Cap 32, Laws
o
f
Hong Kong), and no advertisement,
invitation
o
r
document relating
t
o the Trust Securities may be issued
o
r
may be
i
n the possession
o
f
any person for the purpose
o
f
issue (
i
n each case whether
i
n Hong Kong
o
r
elsewhere), which
i
s
directed at,
o
r
the contents
o
f
which are likely
t
o be accessed
o
r
read by, the public
i
n Hong Kong
(except
i
f permitted
t
o do
s
o
under the laws
o
f
Hong Kong) other than with respect
t
o securities which
are
o
r
are intended
t
o be disposed
o
f
only
t
o persons outside Hong Kong
o
r
only
t
o professional
investors within the meaning
o
f
the Securities and Futures Ordinance (Cap. 571, Laws
o
f
Hong Kong)
and any rules made thereunder.
This offering circular has not been registered
a
s
a prospectus with the Monetary Authority
o
f
Singapore. Accordingly, this offering circular and any other document
o
r
material
i
n connection with
the offer
o
r
sale,
o
r
invitation for subscription
o
r
purchase,
o
f
the Trust Securities may not
b
e
circulated
o
r
distributed, nor may the Trust Securities be offered
o
r
sold,
o
r
be made the subject
o
f
an invitation
for subscription
o
r
purchase, whether directly
o
r
indirectly,
t
o persons
i
n Singapore other than (
i
)
t
o an
institutional investor under Section 274
o
f
the Securities and Futures Act, Chapter 289
o
f
Singapore
(the SFA), (
i
i
)
t
o a relevant person,
o
r
any person pursuant
t
o Section 275( 1A), and
i
n accordance
with the conditions, specified
i
n Section 275
o
f
the SFA
o
r
(
i
i
i
)
otherwise pursuant to, and
i
n
accordance with the conditions
o
f
,
any other applicable provision
o
f
the SFA.
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Where the Trust Securities are subscribed
o
r
purchased under Section 275
b
y
a relevant person
which
i
s
:
(
a
)
a corporation (which
i
s not
a
n
accredited investor) the sole business
o
f
which
i
s
t
o hold
investments and the entire share capital
o
f
which
i
s owned
b
y
one
o
r
more individuals, each
o
f
whom
i
s an accredited investor;
o
r
(
b
)
a trust (where the trustee
i
s not an accredited investor) whose sole
purpose
i
s
t
o hold investments and each beneficiary
i
s
a
n
accredited investor, shares, debentures and
units
o
f
shares and debentures
o
f
that corporation
o
r
the beneficiaries rights and interest
i
n that trust
shall not
b
e
transferable for 6 months after that corporation
o
r
that trust has acquired the shares
under Section 275 except: (
1
)
t
o
a
n
institutional investor under Section 274
o
f
the SFA
o
r
t
o a relevant
person,
o
r
any person pursuant
t
o Section 275( 1A), and
i
n accordance with the conditions, specified
i
n Section 275
o
f
the SFA; (
2
)
where
n
o
consideration
i
s given
f
o
r
the transfer;
o
r
(
3
)
b
y
operation
o
f
law.
The Trust Securities offered hereby have not been and will not be registered under the Securities
and Exchange Law
o
f
Japan ( the Japan Securities and Exchange Law) and each Initial Purchaser
has agreed that
i
t will not offer
o
r
sell any Trust Securities, directly
o
r
indirectly,
i
n Japan
o
r
t
o
,
o
r
for
the benefit
o
f
,
any resident
o
f
Japan (which term
a
s
used herein means any person resident
i
n Japan,
including any corporation
o
r
other entity organized under the laws
o
f
Japan),
o
r
t
o others for re-
offering
o
r
resale, directly
o
r
indirectly,
i
n Japan
o
r
t
o a resident
o
f
Japan, except pursuant
t
o
a
n
exemption from the registration requirements
o
f
,
and otherwise
i
n compliance with, the Japan
Securities and Exchange Law and any other applicable laws, regulations and ministerial guidelines
o
f
Japan.
WMI, the Company and the Trust have agreed
i
n the purchase agreement, subject
t
o certain
exceptions, that for a period
o
f
180 days after the date
o
f
this offering circular, neither they, nor any
o
f
their subsidiaries
o
r
other affiliates over which they exercise management
o
r
voting control, nor any
person acting
o
n
their behalf will, without the prior written consent
o
f
Goldman, Sachs &Co., offer,
sell, contract
t
o sell
o
r
otherwise dispose
o
f
any securities that are substantially similar
t
o the
Trust Securities.
WMI and the Company have agreed
t
o indemnify the Initial Purchasers against certain liabilities,
including liabilities under the Securities Act.
Certain
o
f
the Initial Purchasers and their respective affiliates have, from time
t
o time, performed,
and may
i
n the future perform, various financial advisory and investment banking services
f
o
r
the
Company,
f
o
r
which they received
o
r
will receive customary fees and expenses.
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NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution
o
f
the Trust Securities
i
n Canada
i
s being made only
o
n
a private placement
basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory
authorities
i
n each province where trades
o
f
Trust Securities are made. Any resale
o
f
the Trust Secu-
rities
i
n Canada must
b
e
made under applicable securities laws which will vary depending
o
n
the
relevant jurisdiction, and which may require resales
t
o
b
e
made under available statutory exemptions
o
r
under a discretionary exemption granted
b
y
the applicable Canadian securities regulatory authority.
Purchasers are advised
t
o seek legal advice prior
t
o any resale
o
f
the Trust Securities.
Representations
o
f
Purchasers
By purchasing Trust Securities
i
n Canada and accepting a purchase confirmation a purchaser
i
s
representing
t
o
u
s
and the dealer from whom the purchase confirmation
i
s received that:
the purchaser
i
s entitled under applicable provincial securities laws
t
o purchase the Trust Secu-
rities without the benefit
o
f
a prospectus qualified under those securities laws,
where required by law, that the purchaser
i
s purchasing as principal and not
a
s
agent,
the purchaser has reviewed the text above under Resale Restrictions, and
the purchaser acknowledges and consents
t
o the provision
o
f
specified information concerning
i
t
s
purchase
o
f
the Trust Securities
t
o the regulatory authority that
b
y
law
i
s entitled
t
o collect
the information.
Further details concerning the legal authority for this information
i
s available on request.
Rights
o
f
Action Ontario Purchasers Only
Under Ontario securities legislation, certain purchasers who purchase a security offered
b
y
this
Offering Circular during the period
o
f
distribution will have a statutory right
o
f
action for damages,
o
r
while still the owner
o
f
the Trust Securities, for rescission against
u
s
i
n the event that this Offering
Circular contains a misrepresentation without regard
t
o whether the purchaser relied on the misrepre-
sentation. The right
o
f
action for damages
i
s exercisable not later than the earlier
o
f
180 days from the
date the purchaser first had knowledge
o
f
the facts giving rise
t
o the cause
o
f
action and three years
from the date
o
n
which payment
i
s made for the Trust Securities. The right
o
f
action for rescission
i
s
exercisable not later than 180 days from the date on which payment
i
s made
f
o
r
the Trust Securities.
I
f a purchaser elects
t
o exercise the right
o
f
action for rescission, the purchaser will have no right
o
f
action for damages against us.
I
n no case will the amount recoverable
i
n any action exceed the price
a
t
which the Trust Securities were offered
t
o the purchaser and
i
f the purchaser
i
s shown
t
o have
purchased the securities with knowledge
o
f
the misrepresentation, we will have no liability.
I
n the case
o
f
an action for damages, we will not be liable for
a
l
l
o
r
any portion
o
f
the damages that are proven
t
o
not represent the depreciation
i
n value
o
f
the Trust Securities
a
s
a result
o
f
the misrepresentation
relied upon. These rights are
i
n addition
t
o
,
and without derogation from, any other rights
o
r
remedies
available
a
t
law
t
o an Ontario purchaser. The foregoing
i
s a summary
o
f
the rights available
t
o an
Ontario purchaser. Ontario purchasers should refer
t
o the complete text
o
f
the relevant statutory
provisions.
Enforcement
o
f
Legal Rights
All
o
f
our directors and officers
a
s
well
a
s
the experts named herein may
b
e
located outside
o
f
Canada and,
a
s
a result,
i
t may not be possible for Canadian purchasers
t
o effect service
o
f
process
within Canada upon
u
s
o
r
those persons. All
o
r
a substantial portion
o
f
our assets and the assets
o
f
those persons may be located outside
o
f
Canada and, as a result,
i
t may not
b
e
possible
t
o satisfy a
116
CONFIDENTIAL
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judgment against
u
s
o
r
those persons
i
n Canada
o
r
t
o enforce a judgment obtained
i
n Canadian
courts against
u
s
o
r
those persons outside
o
f
Canada.
Taxation and Eligibility for Investment
Canadian purchasers
o
f
Trust Securities should consult their own legal and tax advisors with
respect
t
o the tax consequences
o
f
a
n
investment
i
n the Trust Securities
i
n their particular circum-
stances and about the eligibility
o
f
the Trust Securities
f
o
r
investment
b
y
the purchaser under relevant
Canadian legislation.
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VALIDITY OF SECURITIES
The validity
o
f
the Trust Securities will
b
e
passed upon
f
o
r
WMI and the Initial Purchasers
b
y
Richards, Layton &Finger,
P
.
A., Wilmington, Delaware. The validity
o
f
the Series 2007- A Company
Preferred Securities will be passed upon for the Company
b
y
Richards, Layton & Finger,
P
.
A., special
Delaware counsel for the Company, for WMI
b
y
Mayer, Brown, Rowe & Maw LLP, New York, New
York, and for the Initial Purchasers
b
y
Sullivan & Cromwell LLP, New York, New York. The validity
o
f
the Depositary Shares and
o
f
the Series M WMI Preferred Stock will
b
e
passed upon for WMI
b
y
Mayer, Brown, Rowe & Maw LLP and
b
y
Heller Ehrman LLP, Seattle, Washington, and for the Initial
Purchasers
b
y
Sullivan &Cromwell LLP. Mayer, Brown, Rowe &Maw LLP and Sullivan &Cromwell
LLP will rely upon the opinion
o
f
Richards, Layton &Finger,
P
.
A.,
a
s
t
o matters
o
f
Delaware law, and
upon the opinion
o
f
Heller Ehrman LLP
a
s
t
o matters
o
f
Washington law.
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ADDITIONAL INFORMATION
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements
o
f
WMI and WMB
a
s
o
f
and
f
o
r
the years ended December 31, 2006
and 2005, and managements reports
o
n
the effectiveness
o
f
internal control over financial reporting
a
s
o
f
December 31, 2006
f
o
r
both WMI and WMB, incorporated
b
y
reference
i
n this offering circular
have been audited
b
y
Deloitte &Touche LLP,
a
n
independent registered public accounting firm,
a
s
stated
i
n their reports appearing therein.
INDEPENDENT AUDITORS
The financial statements
o
f
the Company as
o
f
and for the year ended December 31, 2006,
included
i
n this offering circular have been audited by Deloitte &Touche LLP, independent auditors,
a
s
stated
i
n their reports appearing herein.
No Material Adverse Change
Except
a
s
disclosed
i
n this offering circular, there has been
n
o
adverse change
i
n the financial
position
o
f
the Company, the Trust, WMB
o
r
WMI since December 31, 2006
o
r
their respective dates
o
f
establishment (which was December
4
,
2006
i
n the case
o
f
the Trust), that would
b
e
deemed
material
i
n the context
o
f
the issue and sale
o
f
the Trust Securities
i
n this Offering.
Legal Proceedings
The following litigation
i
s
i
n relation
t
o WMI. WMB, the Company, Asset Trust
I
,
Asset Trust
I
I
and the Trust have not been named
a
s
defendants
i
n any
o
f
the following lawsuits and,
o
n
that basis,
they
d
o
not expect such lawsuits materially affect their respective operations
o
r
financial results.
I
n the ordinary course
o
f
business, WMI and
i
t
s
subsidiaries are routinely defendants
i
n
o
r
parties
t
o a number
o
f
pending and threatened legal actions and proceedings, including actions
brought on behalf
o
f
various classes
o
f
claimants.
I
n certain
o
f
these actions and proceedings, claims
for substantial monetary damages are asserted against WMI and
i
t
s
subsidiaries. Certain
o
f
these
actions and proceedings are based on alleged violations
o
f
consumer protection, banking and other
laws.
I
n July 2004, WMI and a number
o
f
i
t
s officers were named
a
s
defendants
i
n a series
o
f
cases
alleging violations
o
f
Section 10(
b
)
o
f
the Securities Exchange Act
o
f
1934 (the Exchange Act),
Rule 10b- 5 thereunder and Section 20(
a
)
o
f
the Exchange Act.
B
y
stipulation, those cases were
consolidated into a single case currently pending
i
n the
U
.
S
.
District Court for the Western Division
o
f
Washington South Ferry
L
.
P
.
#2
v
.
Killinger
e
t
al., No. CV04-1599C (W.
D
.
Wa., Filed Jul. 19, 2004)
(the Securities Action).
I
n brief, the plaintiffs
i
n the Securities Action allege,
o
n
behalf
o
f
a putative
class
o
f
purchasers
o
f
Washington Mutual, Inc., securities from April 15, 2003, through June 28, 2004,
that,
i
n various public statements, the defendants purportedly made misrepresentations and failed
t
o
disclose material facts concerning, among other things, alleged internal systems problems and
hedging issues.
The defendants moved
t
o dismiss the Securities Action on May 17, 2005. After briefing, but
without oral argument, the Court on November 17, 2005, denied the motion
i
n principal part; however,
the Court dismissed the claims against certain
o
f
the individual defendants, dismissed claims pleaded
on behalf
o
f
sellers
o
f
put options on Washington Mutual stock, and concluded that the plaintiffs could
not rely on supposed violations
o
f
accounting standards
t
o support their claims. The remaining
defendants subsequently moved
f
o
r
reconsideration or,
i
n the alternative, certification
o
f
the opinion
for interlocutory appeal
t
o the United States Court
o
f
Appeals for the Ninth Circuit. The District Court
denied the motion for reconsideration, but
o
n
March
6
,
2006, granted the motion for certification.
119
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The defendants thereafter moved
t
o have the Ninth Circuit Court
o
f
Appeals accept the case
f
o
r
interlocutory review
o
f
the District Courts original order denying the motion
t
o dismiss. On June
9
,
2006, the Ninth Circuit granted the defendants motion, indicating that
i
t will hear the merits
o
f
the
defendants appeal. The defendants filed their initial brief
o
n
September 25, 2006. Pursuant
t
o
a
n
updated, stipulated briefing schedule, the plaintiffs filed their responsive brief
o
n
January 10, 2007,
and the defendants reply
i
s set
t
o
b
e
filed
o
n
March 12, 2007.
On November 29, 2005,
1
2
days after the Court denied the motion
t
o dismiss the Securities
Action, a separate plaintiff filed
i
n Washington State Superior Court a derivative shareholder lawsuit
purportedly asserting claims
f
o
r
the benefit
o
f
WMI. The case was removed
t
o federal court, where
i
t
i
s now pending. Lee Family Investments,
b
y
and through
i
t
s Trustee
W
.
B
.
Lee, Derivatively and
o
n
behalf
o
f
Nominal Defendant Washington Mutual, Inc.
v
.
Killinger
e
t
al., No. CV05-2121C (W.
D
.
Wa.,
Filed Nov. 29, 2005) ( the Derivative Action). The defendants
i
n the Derivative Action include those
individuals remaining
a
s
defendants
i
n the Securities Action,
a
s
well
a
s
those
o
f
WMIs current
independent directors who were directors
a
t
any time from April 15, 2003, through June 2004. The
allegations
i
n the Derivative Action mirror those
i
n the Securities Action, but seek relief based
o
n
claims that the independent director defendants failed properly
t
o respond
t
o the misrepresentations
alleged
i
n the Securities Action and that the filing
o
f
that action has caused WMI
t
o expend sums
t
o
defend itself and the individual defendants and
t
o conduct internal investigations related
t
o the
underlying claims.
A
t
the end
o
f
February 2006, the parties submitted a stipulation
t
o the Court that
the matter
b
e
stayed pending the outcome
o
f
the Securities Action. On March
2
,
2006, the Court
entered
a
n
Order pursuant
t
o that stipulation, staying the Derivative Action
i
n
i
t
s entirety.
Governing Law
The LLC Agreement, the Trust Agreement, the Trust Securities and the Series 2007- A Company
Preferred Securities will be governed by, and construed
i
n accordance with, the laws
o
f
the State
o
f
Delaware. The Series M WMI Preferred Stock will
b
e
governed by, and construed
i
n accordance with,
the laws
o
f
the State
o
f
Washington. The Depositary Shares will
b
e
governed by, and construed
i
n
accordance with, the laws
o
f
the State
o
f
New York.
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Deloitte & Touche LLP


Suite 3300
925 Fourth Avenue
Seattle, WA 98104- 1126
USA
Tel: +1 206 716 7000
Fax: +1 206 965 7000
www. deloitte. com
INDEPENDENT AUDITORS REPORT
T
o
the Board
o
f
Managers
o
f
Washington Mutual Preferred Funding
LLC Seattle, Washington
We have audited the accompanying statement
o
f
financial condition
o
f
Washington Mutual
Preferred Funding LLC (the Company)
a
s
o
f
December 31, 2006, and the related statements
o
f
income, member interests, and cash flows for the period February
3
,
2006 ( date
o
f
inception)
t
o
December 31, 2006. These financial statements are the responsibility
o
f
the Companys management.
Our responsibility
i
s
t
o express an opinion
o
n
these financial statements based
o
n
our audit.
We conducted our audit
i
n accordance with generally accepted auditing standards
a
s
established
by the Auditing Standards Board (United States) and
i
n accordance with the auditing standards
o
f
the
Public Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit
t
o obtain reasonable assurance about whether the financial statements are free
o
f
material misstatement. The Company
i
s not required
t
o have, nor were we engaged
t
o perform, an
audit
o
f
i
t
s
internal control over financial reporting. Our audit included consideration
o
f
internal control
over financial reporting
a
s
a basis for designing audit procedures that are appropriate
i
n the
circumstances, but not for the purpose
o
f
expressing
a
n
opinion on the effectiveness
o
f
the Companys
internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures
i
n the financial
statements, assessing the accounting principles used and significant estimates made
b
y
management,
as well
a
s
evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
I
n our opinion, such financial statements present fairly,
i
n
a
l
l
material respects, the financial
position
o
f
Washington Mutual Preferred Funding LLC
a
t
December 31, 2006, and the results
o
f
i
t
s
operations and
i
t
s
cash flows for the above- stated period,
i
n conformity with accounting principles
generally accepted
i
n the United States
o
f
America.
Seattle, Washington
March 21, 2007
Member
o
f
Deloitte Touche Tohmatsu
A
-
1
APPENDIXA
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Washington Mutual Preferred Funding LLC
Statement
o
f
Income
From Inception
(February
3
,
2006) through
December 31,
2006
Interest Income
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $250,796,200
Recovery
o
f
reserve for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,460,790)
Interest income after recovery
o
f
reserve for loan losses . . . . . . . . . . . . . 260,256,990
Expense
Loan servicing fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,625,659
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,889
Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,740,548
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $253,516,442
See Notes
t
o Financial Statements
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Washington Mutual Preferred Funding LLC
Statement
o
f
Financial Condition
December 31,
2006
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,165,776
Loans held
i
n portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,281,604,640
Allowance for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,994,354)
Total loans held
i
n portfolio, net
o
f
o
f
reserve
f
o
r
loan losses . . . . . . . . . . . . 7,256,610,286
Receivable from affiliates for collections related
t
o the servicing
o
f
loans . . . . . . . . 218,575,543
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,217,293
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,545,568,898
LIABILITIES
Payable
t
o affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,545,756
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205,242
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,750,998
Member Interests
Common securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,049,306,234
Preferred securities
n
o
par value: 2,500,000 securities authorized, issued and
outstanding
(
$ 1,000 per security liquidation preference) . . . . . . . . . . . . . . . . . . . 2,446,240,411
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,271,255
Total member interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,521,817,900
Total Liabilities and Member Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,545,568,898
See Notes
t
o Financial Statements
A
-
3
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Washington Mutual Preferred Funding LLC
Statement
o
f
Member Interests
Common
Securities
Preferred
Securities
Retained
Earnings Total
BALANCE, February
3
,
2006 . . .$ $ $ $
Net income . . . . . . . . . . . . . . . . 253,516,442 253,516,442
Common securities issued . . . . 5,695,621,428 5,695,621,428
Preferred securities issued net
o
f
capitalized costs . . . . . . . . 2,446,240,411 2,446,240,411
Cash dividends paid
o
n
common securities . . . . . . . . . (122,184,355) (122,184,355)
Cash dividends paid
o
n
preferred securities . . . . . . . . (105,060,832) (105,060,832)
Common securities redeemed . . ( 646,315,194) (646,315,194)
BALANCE, December 31, 2006. . $5,049,306,234 $2,446,240,411 $ 26,271,255 $7,521,817,900
See Notes
t
o Financial Statements
A
-
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Washington Mutual Preferred Funding LLC
Statement
o
f
Cash Flows
FromInception
(February
3
,
2006)
through
December 31,
2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 253,516,442
Adjustments
t
o reconcile net income
t
o net cash provided
b
y
operating activities:
Recovery
o
f
reserve for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,460,790)
Increase
i
n receivable from affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (218,575,543)
Increase
i
n other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,224,332)
Increase
i
n payable
t
o affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,545,756
Increase
i
n other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205,242
Net cash provided
b
y
operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,006,775
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase
o
f
loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ( 33,021,548)
Principal payments
o
n
loans held
i
n portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . 798,467,624
Net cash provided
b
y
investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 765,446,076
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance
o
f
common securities . . . . . . . . . . . . . . . . . . . . . . 113,283,332
Proceeds from the issuance
o
f
preferred securities . . . . . . . . . . . . . . . . . . . . . 46,749,564
Payment
o
f
capitalized costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ( 53,759,590)
Redemption
o
f
common securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (646,315,194)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (227,245,187)
Net cash used
i
n financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (767,287,075)
Increase
i
n cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,165,776
CASH, beginning
o
f
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH, end
o
f
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,165,776
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
The Company issued common and preferred securities
i
n exchange for cash,
loans and other assets
a
s
follows:
Loans received
i
n exchange
f
o
r
common and preferred securities . . . . . . . . . . $8,012,774,740
Other assets received
i
n exchange
f
o
r
common and preferred securities . . . . . 22,813,792
See Notes
t
o Financial Statements
A
-
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WASHINGTON MUTUAL PREFERRED FUNDING LLC
NOTES TO FINANCIAL STATEMENTS
PERIOD ENDED DECEMBER 31, 2006
NOTE
1
:
DESCRIPTION OF THE COMPANY
Washington Mutual Preferred Funding LLC (the Company)
i
s a Delaware limited liability
company formed
o
n
February
3
,
2006 for the purpose
o
f
(
i
) issuing preferred and common securities,
(
i
i
) acquiring and holding eligible assets, and (
i
i
i
) performing functions necessary
o
r
incidental
t
o the
foregoing. The Company
i
s classified
a
s
a partnership
f
o
r
U
.
S
.
federal income tax purposes. No
provision
f
o
r
income taxes
i
s recognized
i
n the accompanying financial statements.
The assets owned
b
y
the Company provide cash flows for payment by the Company
t
o holders
o
f
the securities.
On March
6
,
2006, a pool
o
f
closed end, first lien home equity loans
(

HELs) was contributed


b
y
Washington Mutual Bank
(

WMB) and University Street Inc.


(

University Street),
a
n
indirect subsid-
iary
o
f
WMB,
t
o the Company
i
n exchange
f
o
r
the Companys common securities and the
Series 2006- A and Series 2006- B Preferred Securities. Subsequently, and
o
n
the same day, the
Company transferred the HELs
t
o Washington Mutual Home Equity Trust I ( the Asset Trust I), a
statutory trust formed under the laws
o
f
the State
o
f
Delaware,
i
n exchange for Class
A
-
1 Washington
Mutual Home Equity Trust I Certificates.
On December 12, 2006, a pool
o
f
payment option adjustable rate mortgages
(

Option ARMs)
was contributed by WMB and University Street
t
o the Company
i
n exchange for the additional
common securities and the Series 2006- C Preferred Securities. Subsequently, and on the same day,
the Company transferred the Option ARMs
t
o WAMU 2006 OA-1 (the Asset Trust II), a statutory
trust formed under the laws
o
f
the State
o
f
Delaware,
i
n exchange for Class
A
-
1 WAMU 2006 OA- 1
Certificates.
Asset Trust I and Asset Trust
I
I hold only HEL and Option ARM assets, respectively. The trusts
d
o
not have any liabilities other than those incurred
i
n connection with the Pooling and Servicing
Agreements (PSAs) and any related agreements. The trusts
d
o
not have any directors, officers
o
r
other employees.
A
t
December 31, 2006, Asset Trust I and Asset Trust
I
I had total assets
o
f
$4.7 billion and $2.8 billion, respectively.
As the transfers
o
f
assets from the Company
t
o the Asset Trust I and Asset Trust
I
I did not meet
the definition
o
f
a sale within the scope
o
f
Statement
o
f
Financial Accounting Standards 140,
Accounting for Transfers and Servicing
o
f
Financial Assets and Extinguishments
o
f
Liabilities, the
assets continue
t
o be recorded as loans on the Statement
o
f
Financial Condition.
NOTE
2
:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash
Cash includes amounts due from banks.
Use
o
f
Estimates
The Companys reporting and accounting policies conform
t
o accounting principles generally
accepted
i
n the United States
o
f
America
(

GAAP). The preparation


o
f
financial statements
i
n
conformity with GAAP requires management
t
o make estimates and assumptions that affect the
reported amounts
o
f
assets and liabilities and disclosure
o
f
contingent assets and liabilities
a
t
the date
o
f
the financial statements and the reported amounts
o
f
revenues and expenses during the reporting
period. Management has made significant estimates
i
n certain areas, including the allowance for loan
losses. Actual results could differ from those estimates.
A
-
6
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Loans Held
i
n Portfolio
Loans held
i
n portfolio are recorded
a
t
the principal amount outstanding, net
o
f
deferred loan
costs
o
r
fees and any discounts received
o
r
premiums paid on purchased loans. Deferred costs
o
r
fees, discounts and premiums are amortized over the contractual term
o
f
the loan, adjusted for actual
prepayments, using the interest method. The Company uses contractual payment terms
t
o determine
the constant yield needed
t
o apply the interest method.
Allowance for Loan Losses
The allowance for loan losses represents managements estimate
o
f
incurred credit losses
inherent
i
n
i
t
s
loan portfolio
a
s
o
f
the reporting date. The Companys estimate
o
f
the allowance
i
s
based on a variety
o
f
factors, including past loan loss experience, the current credit profile
o
f
i
t
s
borrowers, adverse situations that have occurred that may affect the borrowers ability
t
o repay, the
estimated value
o
f
underlying collateral, the impact that changes
i
n interest rates has on a borrowers
ability
t
o repay adjustable-rate loans and general economic conditions.
The Company accounts for the allowance for loan losses on portfolios
o
f
loans that are evaluated
for collective impairment
i
n accordance with Financial Accounting Standards Board
(

FASB) State-
ment No.
5
,
Accounting for Contingencies
(

Statement No. 5) when available information indicates


that
i
t
i
s probable that a loss has been incurred and the amount
o
f
the loss can be reasonably
estimated. The allowance comprises both an allocated and an unallocated component.
The Company determines the allocated portion
o
f
the allowance based
o
n
analyses
o
f
pools
o
f
loans with similar attributes. The allocated allowance
i
s determined using statistical forecasting models
that estimate default and loss outcomes based
o
n
a
n
evaluation
o
f
past performance
o
f
similar pools
o
f
loans
i
n our portfolio, and other factors affecting default and loss factors,
a
s
well
a
s
industry
historical loan loss data.
The unallocated portion
o
f
the allowance reflects managements assessment
o
f
various risk
factors that are not fully reflected
i
n the models used
t
o determine the allocated component
o
f
the
allowance. These factors include general economic and business conditions specific
t
o the Companys
key lending products and markets, credit quality and collateral value trends, loan concentrations,
specific industry conditions within portfolio segments, recent loss experience
i
n particular segments
o
f
the portfolio, duration
o
f
the current business cycle and the impact
o
f
other such variables for which
recent historical data
d
o
not provide a high level
o
f
precision for risk evaluation.
Nonaccrual Loans
When a loan
i
s placed
o
n
Nonaccrual status,
a
l
l
interest accrued, but not collected,
i
s reversed
against interest income. Loans are placed
i
n nonaccrual status when they are 90 days past due. The
Company accounts
f
o
r
these loans
o
n
the cash
o
r
cost recovery method, until they qualify for return
t
o
accrual status. Loans are returned
t
o accrual status when the borrower brings the loans
t
o less than
3
0
days past due. Loans are generally written down
t
o the fair value
o
f
the underlying collateral (less
estimated costs
t
o sell) when those loans are 180 days past due.
Other Assets
Other assets include foreclosed assets and interest receivable on loans. Foreclosed assets are
accounted for
a
t
the lower
o
f
cost
o
r
fair value (less estimated costs
t
o sell). The amount the
Company ultimately recovers from foreclosed assets may differ substantially from the net carrying
value
o
f
these assets because
o
f
future market factors beyond
i
t
s
control
o
r
because
o
f
changes
i
n
i
t
s
A
-
7
WASHINGTON MUTUAL PREFERRED FUNDING LLC
NOTES TO FINANCIAL STATEMENTS Continued
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strategy for sale
o
f
the property.
A
t
December 31, 2006, the Company had foreclosed assets
o
f
$179,168.
Recently Issued Accounting Standards Not Yet Adopted
I
n September 2006, the FASB issued Statement No. 157, Fair Value Measurements
(

Statement
No. 157). Statement No. 157 prescribes a definition
o
f
the term fair value, establishes a framework
f
o
r
measuring fair value and expands disclosure about fair value measurements. Statement No. 157
i
s
effective
f
o
r
fiscal years beginning after November 15, 2007, with early adoption permitted
a
s
o
f
January
1
,
2007. The Company does not expect the application
o
f
Statement No. 157
t
o have a
material effect
o
n
the Statement
o
f
Income and the Statement
o
f
Financial Condition.
I
n February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities
(

Statement No. 159). Statement No. 159 permits


a
n
instrument
b
y
instrument election
t
o account for selected financial assets and liabilities
a
t
fair value. Statement
No. 159
i
s effective
f
o
r
fiscal years beginning after November 15, 2007, with early adoption permitted
a
s
o
f
January
1
,
2007. The Company
i
s currently evaluating the impact Statement No. 159 will have
o
n
i
t
s
Statement
o
f
Income and Statement
o
f
Financial Condition.
NOTE
3
:
LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans held
i
n portfolio consisted
o
f
the following:
December 31,
2006
Loans held
i
n portfolio:
Option ARMs home loans(
1
)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,638,560,716
Home equity loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,643,043,924
Total loans held
i
n portfolio(
2
)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,281,604,640
(
1
)
The total amount
b
y
which the unpaid principal balance
o
f
Option ARM loans exceeded their origi-
nal principal amount was $6.2 million
a
t
December 31, 2006.
(
2
)
Includes net unamortized deferred loan origination costs
o
f
$67.7 million
a
t
December 31, 2006.
Features
o
f
residential loans
Certain residential loans have features that may result
i
n increased credit risk when compared
with residential loans without those features. Categories
o
f
loans within the Companys portfolio that
have such features include loans with
a
n
option
t
o defer the payment
o
f
interest (
i
.
e
.
,
Option ARM
home loans). The portfolio
o
f
Option ARM loans largely consisted
o
f
loans with properties residing
i
n
the state
o
f
California.
A
t
December 31, 2006
a
l
l
loans held
i
n portfolio were pledged
a
s
collateral
f
o
r
issued securities.
Fair value
o
f
loans held
i
n portfolio
The following estimated fair value amount has been determined by the Company using quoted
market prices, internal estimates and the pricing
o
f
similar instruments. These estimates do not reflect
any premium
o
r
discount that could result from offering for sale
a
t
one time the Companys entire
holdings
o
f
loans held
i
n portfolio. Fair value estimates were based on managements judgment
concerning current economic conditions, risk characteristic
o
f
the loans held
i
n portfolio and other
A
-
8
WASHINGTON MUTUAL PREFERRED FUNDING LLC
NOTES TO FINANCIAL STATEMENTS Continued
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00141
Return
factors.
I
n addition, considerable judgment was required
t
o interpret market data
t
o develop the
estimates
o
f
fair value. Accordingly, the estimates presented herein are not necessarily indicative
o
f
the amounts the Company could realize
i
n a current market exchange. The use
o
f
different market
assumptions and/
o
r
estimation methodologies may have a material effect on the estimated fair value
amount.
The net carrying amount and the fair value
o
f
the loans held
i
n portfolio
a
t
December 31, 2006
was $7,256,610,286 and $6,962,489,000, respectively.
Changes
i
n the allowance for loan losses were
a
s
follows:
FromInception
through
December 31,
2006
Balance, February
3
,
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Allowance acquired from loans transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,573,575
Recovery
o
f
reserve for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,460,790)
25,112,785
Loans charged off:
Home equity loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (118,450)
Total loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (118,450)
Recoveries
o
f
loans previously charged off:
Home equity loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Total recoveries
o
f
loans previously charged off . . . . . . . . . . . . . . . . . . . . 19
Net chargeoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (118,431)
Balance, end
o
f
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,994,354
The amount
o
f
Nonaccrual loans held
i
n portfolio
a
t
December 31, 2006 was $3,996,795.
Note
4
:
Common Securities
A
t
December 31, 2006, the Company had $5,049,306,234
o
f
common securities issued and
outstanding. The Company,
a
t
i
t
s
discretion, may pay distributions on the Companys common
securities out
o
f
legally available funds.
During the year, the Company declared and paid dividends
i
n the amount
o
f
$122,184,355
t
o
University Street after paying dividends on the Companys preferred securities. The Company also
redeemed common securities
i
n the amount
o
f
$646,315,194 from University Street during the year.
Note
5
:
Preferred Securities
A
t
December 31, 2006, the Company had (
i
) 1,250,000
o
f
Series 2006- A Company Preferred
Securities, (
i
i
) 750,000
o
f
Series 2006-B Company Preferred Securities, and (
i
i
i
)
500,000
o
f
Series 2006- C Company Preferred Securities issued and outstanding. The preferred securities
d
o
not
have any voting rights.
When and
i
f declared, dividends
o
n
the Series 2006- A Company Preferred Securities will
b
e
payable on a non- cumulative basis
a
t
a fixed rate per annum equal
t
o 6.534% (calculated on a 30/ 360
Basis), and on and after March 15, 2011
a
t
a variable rate per annum equal
t
o three-month LIBOR for
the related dividends period plus 1.485% (calculated
o
n
an Actual/ 360 Basis),
i
n each case, on the
A
-
9
WASHINGTON MUTUAL PREFERRED FUNDING LLC
NOTES TO FINANCIAL STATEMENTS Continued
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00142
Return
liquidation preference
o
f
$1,000 per security.
I
f declared, dividends on the Series 2006- A Company
Preferred Securities will be payable quarterly
i
n arrears on March 15, June 15, September 15 and
December 15
o
f
each year commencing June 15, 2006.
A
t
i
t
s
discretion, the Company may redeem
the Series 2006- A Company Preferred Securities on March 15, 2011
o
r
thereafter.
When and
i
f declared, dividends
o
n
the Series 2006- B Company Preferred Securities will
b
e
payable
o
n
a non- cumulative basis
a
t
a fixed rate per annum equal
t
o 7.25% (calculated
o
n
a 30/ 360
basis)
o
n
the liquidation preference
o
f
$1,000 per security.
I
f
declared, dividends
o
n
the Series 2006- B
Company Preferred Securities will
b
e
payable quarterly
i
n arrears
o
n
March 15, June 15, September
1
5
and December
1
5
o
f
each year commencing June 15, 2006.
A
t
i
t
s
discretion, the Company may
redeem the Series 2006- B Company Preferred Securities
o
n
March 15, 2011
o
r
thereafter.
When and
i
f declared, dividends
o
n
the Series 2006- C Company Preferred Securities will
b
e
payable on a non- cumulative basis
a
t
a fixed rate per annum equal
t
o 6.665% (calculated on a 30/ 360
Basis), and on and after December 15, 2016
a
t
a variable rate per annum equal
t
o three- month
LIBOR for the related dividends period plus 1.7925% (calculated on an Actual/ 360 Basis),
i
n each
case,
o
n
the liquidation preference
o
f
$1,000 per security.
I
f declared, dividends
o
n
the Series 2006- C
Company Preferred Securities will be payable quarterly
i
n arrears on March 15, June 15, September
15 and December 15
o
f
each year commencing March 15, 2007.
A
t
i
t
s
discretion, the Company may
redeem the Series 2006- C Company Preferred Securities on December 15, 2016
o
r
thereafter.
During the year, the Company declared and paid dividends
i
n the amounts
o
f
$63,071,250 and
$41,989,582
t
o holders
o
f
the Series 2006- A Company Preferred Securities and Series 2006- B
Company Preferred Securities, respectively.
During the year, the Company incurred and capitalized costs associated with the issuance
o
f
preferred securities. These costs, totaling $53,759,590, related
t
o legal, underwriting and other
professional fees.
Note
6
:
Certain Relationships And Related Party Transactions
WMB
i
s the servicer
o
f
the HELs and Option ARMs that were conveyed
t
o the Company
i
n
exchange for Companys common securities and the Companys preferred securities. WMB
i
s entitled
t
o a servicing fee from the Company equal
t
o the beginning balance
o
f
the HELs loan portfolio and
Option ARMs loan portfolio
f
o
r
any given period multiplied
b
y
a
n
annualized rate equal
t
o 0.125% and
0.375%, respectively. Since
i
t
s inception, the Company has paid $6,625,659
t
o WMB
a
s
part
o
f
the
servicing agreement.
A
t
December 31, 2006, the Company had a payable
t
o WMB
i
n the amount
o
f
$23,545,756,
which represented costs paid by WMB on behalf
o
f
the Company as well
a
s
excess asset
contributions made
b
y
WMB
t
o the Company.
A
t
December 31, 2006, the Company had a receivable from WMB
i
n the amount
o
f
$218,575,543, which represented principal and interest collections
b
y
WMB
a
s
the servicer
o
f
the
HELs and Option ARMs.
The Second Amended and Restated Limited Liability Company Agreement
o
f
Washington Mutual
Preferred Funding LLC (the LLC Agreement) provides that the Company be managed by a Board
o
f
Managers consisting
o
f
three members (Managers), one
o
f
whom
i
s not and has not been during the
preceding five years
a
n
officer
o
r
employee
o
f
Washington Mutual Inc.
(

WMI)
o
r
any affiliate
o
f
WMI,
other than a financing subsidiary (the Independent Manager). The Independent Manager
i
s paid a
nominal fee for his services which
i
s recorded
i
n other expenses. The remaining two managers are
employees
o
f
Washington Mutual Inc. and are not directly paid compensation
b
y
the Company for
services rendered.
A
-
10
WASHINGTON MUTUAL PREFERRED FUNDING LLC
NOTES TO FINANCIAL STATEMENTS Continued
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00143
Return
WMI and
i
t
s
affiliates do not allocate overhead expenses
t
o the Company. Such expenses are
considered de minimis
t
o the Companys financial statements taken as a whole. The Company
reimburses WMB for costs paid on the Companys behalf.
There
i
s no material business relationship, agreement, arrangement, transaction
o
r
understand-
ing that
i
s
o
r
was entered into outside the ordinary course
o
f
business
o
r
i
s
o
r
was on terms other
than would be obtained
i
n an arms-length transaction with an unrelated third party, between WMB
o
r
University Street and the Company.
A
-
11
WASHINGTON MUTUAL PREFERRED FUNDING LLC
NOTES TO FINANCIAL STATEMENTS Continued
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00144
Return
APPENDIX B
Portfolio Data for Asset Trust
I
*
Distribution by Principal Balance
Distribution by Current
Principal Balance
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the HELs
Information Cut-Off Date
$ 0.00$49,999 . . . . . . 11,619 $ 422,905,803 9.56%
50,000 74,999. . . . . . . 12,116 759,717,752 17.17
75,000 99,999. . . . . . . 9,377 813,828,432 18.39
100,000 199,999 . . . . . . 13,574 1,824,672,354 41.23
200,000 299,999 . . . . . . 1,686 391,662,661 8.85
300,000 499,999 . . . . . . 505 184,040,974 4.16
Greater than $500,000 . . . . . .
4
7
28,644,586 0.65
Total: . . . . . . . . . . . . . . . . . . 48,924 $4,425,472,561 100.00%
Distribution by Gross Rate
Distribution by Current
Gross Rate
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the HELs
Information Cut-Off Date
4.00%4.99%. . . . . . . . . . .
1
5
$ 1,846,604 0.04%
5.00 5.99 . . . . . . . . . . . . 22,975 2,187,243,685 49.42
6.00 6.99 . . . . . . . . . . . . 23,638 2,075,075,362 46.89
7.00 7.99 . . . . . . . . . . . . 2,050 145,577,247 3.29
Greater than 7.99% . . . . . . . . 246 15,729,662 0.36
Total: . . . . . . . . . . . . . . . . . . 48,924 $4,425,472,561 100.00%
Distribution by Remaining Months
t
o Maturity
Distribution
b
y
Remaining
Months
t
o Maturity
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the HELs
Information Cut-Off Date
Less than
6
1
. . . . . . . . . . . . . 1,084 $ 34,255,585 0.77%
61120 . . . . . . . . . . . . . . . 5,082 266,347,879 6.02
121180 . . . . . . . . . . . . . . . 11,737 872,517,367 19.72
181240 . . . . . . . . . . . . . . . 24,003 2,413,098,915 54.53
241300 . . . . . . . . . . . . . . . 302 32,158,062 0.73
301360 . . . . . . . . . . . . . . . 6,716 807,094,753 18.24
Total: . . . . . . . . . . . . . . . . . . 48,924 $4,425,472,561 100.00%
* All information
i
n this Appendix B
i
s as
o
f
April
1
,
2007 (the HELs Information Cut-off Date). Due
t
o rounding, the percent-
ages shown may not precisely total 100.00%.
B
-
1
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00145
Return
Distribution by Year
o
f
Origination
Distribution by
Year
o
f
Origination
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the HELs
Information Cut-Off Date
19982001 . . . . . . . . . . . . . 248 $ 17,982,467 0.41%
2002 . . . . . . . . . . . . . . . . . . . 4,776 434,468,182 9.82
2003 . . . . . . . . . . . . . . . . . . . 23,444 2,177,283,818 49.20
2004 . . . . . . . . . . . . . . . . . . . 14,024 1,287,121,767 29.08
2005 . . . . . . . . . . . . . . . . . . . 6,369 504,341,235 11.40
2006 . . . . . . . . . . . . . . . . . . .
6
3
4,275,092 0.10
Total: . . . . . . . . . . . . . . . . . . 48,924 $4,425,472,561 100.00%
Distribution by FICO Score( 1
)
Distribution by
Credit Score
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the HELs
Information Cut-Off Date
Not Available . . . . . . . . . . . . . 1 $ 100,564 0.00%
Less Than 600. . . . . . . . . . . . 1,006 85,580,043 1.93
600649 . . . . . . . . . . . . . . . 1,498 128,319,808 2.90
650699 . . . . . . . . . . . . . . . 4,959 452,931,024 10.23
700749 . . . . . . . . . . . . . . . 9,617 906,229,686 20.48
750799 . . . . . . . . . . . . . . . 18,517 1,727,747,836 39.04
800849 . . . . . . . . . . . . . . . 13,326 1,124,563,600 25.41
Total: . . . . . . . . . . . . . . . . . . 48,924 $4,425,472,561 100.00%
(
1
)
FICO Score means a statistical credit score obtained
b
y
WMB and many other mortgage lenders
i
n connection with a loan
application
t
o help assess a borrowers creditworthiness. A FICO Score
i
s generated
b
y
models developed
b
y
a third party,
Fair, Isaac &Co., and made available
t
o WMB through three national consumer reporting agencies. The FICO Score
i
s
based on a borrowers historical credit data, including, among other things, payment history, delinquencies on accounts, lev-
els
o
f
outstanding indebtedness, length
o
f
credit history, types
o
f
credit and bankruptcy experience. A higher FICO Score
indicates a more favorable credit rating.
Distribution by Property Type
Distribution by
Property Type
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the HELs
Information Cut-Off Date
Single Family . . . . . . . . . . . . . 45,101 $4,073,677,770 92.05%
Townhouse . . . . . . . . . . . . . . 1,789 206,797,731 4.67
Manufactured Housing . . . . . .
7
6
5,796,671 0.13
Condominium . . . . . . . . . . . . 1,958 139,200,389 3.15
Total: . . . . . . . . . . . . . . . . . . 48,924 $4,425,472,561 100.00%
B
-
2
CONFIDENTIAL
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Return
Distribution by State
Distribution by State
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the HELs
Information Cut-Off Date
Texas. . . . . . . . . . . . . . . . . . . 25,585 $2,230,840,507 50.41%
California . . . . . . . . . . . . . . . . 12,850 1,298,771,347 29.35
Florida . . . . . . . . . . . . . . . . . . 4,215 312,331,366 7.06
New York . . . . . . . . . . . . . . . . 2,198 225,744,016 5.10
Washington . . . . . . . . . . . . . . 1,008 89,111,028 2.01
New Jersey . . . . . . . . . . . . . . 617 63,549,753 1.44
Oregon . . . . . . . . . . . . . . . . . 669 59,538,552 1.35
Georgia . . . . . . . . . . . . . . . . . 396 32,545,771 0.74
Idaho . . . . . . . . . . . . . . . . . . . 292 22,475,693 0.51
Arizona . . . . . . . . . . . . . . . . . 263 21,426,810 0.48
Other . . . . . . . . . . . . . . . . . . . 831 69,137,717 1.56
Total: . . . . . . . . . . . . . . . . . . 48,924 $4,425,472,561 100.00%
Distribution by Current Loan- to-Value Ratio( 1
)
Distribution by
Current LTV
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the HELs
Information Cut-Off Date
Not available . . . . . . . . . . . . . 3 $ 575,567 0.01%
Less than 10.01% . . . . . . . . . 1,268 40,570,713 0.92
10.01 20.00 . . . . . . . . . . . 4,060 204,363,511 4.62
20.01 30.00 . . . . . . . . . . . 5,640 381,260,693 8.62
30.01 40.00 . . . . . . . . . . . 7,323 589,124,742 13.31
40.01 50.00 . . . . . . . . . . . 7,824 710,580,491 16.06
50.01 60.00 . . . . . . . . . . . 8,313 853,811,248 19.29
60.01 70.00 . . . . . . . . . . . 8,008 868,179,385 19.62
70.01 80.00 . . . . . . . . . . . 6,122 735,390,113 16.62
80.01 90.00 . . . . . . . . . . . 361 41,396,606 0.94
90.01100.00% . . . . . . . . . 2 219,492 0.00
Total: . . . . . . . . . . . . . . . . . . 48,924 $4,425,472,561 100.00%
(
1
)
The Current Loan-To-Value Ratio
o
f
a mortgage loan
i
s a fraction, the numerator
o
f
which
i
s the outstanding principal bal-
ance
o
f
the mortgage loan and the denominator
o
f
which
i
s the collateral value, generally
a
t
a time
o
f
origination
o
f
the
related mortgage property, expressed
a
s
a percentage.
B
-
3
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00147
Return
APPENDIX C
Portfolio Data for Asset Trust
I
I
*
Distribution by Principal Balance
Distribution by Current
Principal Balance
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal Balance
a
s
o
f
the Option
ARMs Information
Cut- Off Date
$ 0$49,999 . . . . . . . . . . . . 8 $ 233,006 0.01%
50,000 74,999 . . . . . . . . . . . . 3 174,840 0.01
75,000 99,999 . . . . . . . . . . . .
1
8
1,658,085 0.08
100,000 199,999 . . . . . . . . . . . . 1,194 178,812,994 8.11
200,000 299,999 . . . . . . . . . . . . 890 220,618,730 10.01
300,000 499,999 . . . . . . . . . . . . 1,352 541,090,459 24.55
500,000 999,999 . . . . . . . . . . . . 1,122 743,502,016 33.73
Greater than $1,000,000 . . . . . . . . . 328 518,215,341 23.51
Total: . . . . . . . . . . . . . . . . . . . . . . . . 4,915 $2,204,305,471 100.00%
Distribution by Gross Rate
Distribution by Current
Gross Rate
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal Balance
a
s
o
f
the Option
ARMs Information
Cut- Off Date
6.00%6.99% . . . . . . . . . . . . . . . . 190 $ 102,203,509 4.64%
7.00 7.99 . . . . . . . . . . . . . . . . . 3,723 1,682,391,316 76.32
8.00 8.99 . . . . . . . . . . . . . . . . . 997 417,272,077 18.93
Greater than 8.99 . . . . . . . . . . . . . . . 5 2,438,570 0.11
Total: . . . . . . . . . . . . . . . . . . . . . . . . 4,915 $2,204,305,471 100.00%
Distribution by Remaining Months
t
o Maturity
Distribution by Remaining
Months
t
o Maturity
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal Balance
a
s
o
f
the Option
ARMs Information
Cut- Off Date
121180 . . . . . . . . . . . . . . . . . . . . 2 $ 397,906 0.02%
241300 . . . . . . . . . . . . . . . . . . . . 275 83,246,572 3.78
301360 . . . . . . . . . . . . . . . . . . . . 4,009 1,776,586,067 80.60
Greater than 360 . . . . . . . . . . . . . . . 629 344,074,927 15.61
Total: . . . . . . . . . . . . . . . . . . . . . . . . 4,915 $2,204,305,471 100.00%
* All information
i
n this Appendix C
i
s as April
1
,
2007 (the Option ARMs Information Cut-off Date). Due
t
o rounding, the per-
centages shown may not precisely total 100.00%.
C-1
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00148
Return
Distribution by Year
o
f
Origination
Distribution
b
y
Year
o
f
Origination
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal Balance
a
s
o
f
the Option
ARMs Information
Cut- Off Date
19972001 . . . . . . . . . . . . . . . . . . 273 $ 81,511,904 3.70%
2002. . . . . . . . . . . . . . . . . . . . . . . . .
7
3
31,676,242 1.44
2003. . . . . . . . . . . . . . . . . . . . . . . . . 1,219 409,380,197 18.57
2004. . . . . . . . . . . . . . . . . . . . . . . . . 880 398,123,959 18.06
2005. . . . . . . . . . . . . . . . . . . . . . . . . 2,167 1,101,876,155 49.99
2006. . . . . . . . . . . . . . . . . . . . . . . . . 303 181,737,014 8.24
Total: . . . . . . . . . . . . . . . . . . . . . . . . 4,915 $2,204,305,471 100.00%
Distribution by FICO Score( 1
)
Distribution by Credit Score
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal Balance
a
s
o
f
the Option
ARMs Information
Cut- Off Date
Not Available . . . . . . . . . . . . . . . . . .
1
8
$ 10,591,210 0.48%
Less than 600 . . . . . . . . . . . . . . . . .
6
8
28,876,767 1.31
600649 . . . . . . . . . . . . . . . . . . . . 157 88,063,026 4.00
650699 . . . . . . . . . . . . . . . . . . . . 558 266,926,776 12.11
700749 . . . . . . . . . . . . . . . . . . . . 1,303 612,740,517 27.80
750799 . . . . . . . . . . . . . . . . . . . . 2,014 891,993,198 40.47
800849 . . . . . . . . . . . . . . . . . . . . 797 305,113,978 13.84
Total: . . . . . . . . . . . . . . . . . . . . . . . . 4,915 $2,204,305,471 100.00%
(
1
)
FICO Score means a statistical credit score obtained by WMB and many other mortgage lenders
i
n connection with a loan
application
t
o help assess a borrowers creditworthiness. A FICO Score
i
s generated
b
y
models developed
b
y
a third party,
Fair, Isaac &Co., and made available
t
o WMB through three national consumer reporting agencies. The FICO Score
i
s
based on a borrowers historical credit data, including, among other things, payment history, delinquencies
o
n accounts, lev-
els
o
f
outstanding indebtedness, length
o
f
credit history, types
o
f
credit and bankruptcy experience. A higher FICO Score
indicates a more favorable credit rating.
Distribution by Property Type
Distribution by Property Type
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal Balance
a
s
o
f
the Option
ARMs Information
Cut- Off Date
Single Family . . . . . . . . . . . . . . . . . . 2,834 $1,359,629,795 61.68%
Planned Unit Development . . . . . . . . 746 366,854,212 16.64
Condo . . . . . . . . . . . . . . . . . . . . . . . 670 235,665,032 10.69
2
-
Unit Multifamily . . . . . . . . . . . . . . . 379 124,056,534 5.63
3
-
4 Unit Multifamily . . . . . . . . . . . . . . 254 105,767,249 4.80
Co-Op . . . . . . . . . . . . . . . . . . . . . . . 23 8,688,458 0.39
Townhouse . . . . . . . . . . . . . . . . . . . . 9 3,644,191 0.17
Total: . . . . . . . . . . . . . . . . . . . . . . . . 4,915 $2,204,305,471 100.00%
C-2
CONFIDENTIAL
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Return
Distribution by State
Distribution
b
y
State
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal Balance
a
s
o
f
the Option
ARMs Information
Cut- Off Date
California . . . . . . . . . . . . . . . . . . . . . 3,119 $1,652,001,347 74.94%
Florida . . . . . . . . . . . . . . . . . . . . . . . 284 87,663,069 3.98
New York . . . . . . . . . . . . . . . . . . . . . 153 82,037,824 3.72
Colorado . . . . . . . . . . . . . . . . . . . . . 222 49,209,967 2.23
Massachusetts . . . . . . . . . . . . . . . . . 114 37,940,437 1.72
New Jersey. . . . . . . . . . . . . . . . . . . .
8
6
31,936,711 1.45
Virginia. . . . . . . . . . . . . . . . . . . . . . .
7
4
28,996,807 1.32
Michigan. . . . . . . . . . . . . . . . . . . . . . 109 24,534,416 1.11
Illinois . . . . . . . . . . . . . . . . . . . . . . . .
9
5
22,263,295 1.01
Washington . . . . . . . . . . . . . . . . . . .
7
2
20,514,600 0.93
Other . . . . . . . . . . . . . . . . . . . . . . . . 587 167,206,999 7.59
Total: . . . . . . . . . . . . . . . . . . . . . . . . 4,915 $2,204,305,471 100.00%
Distribution by Current Loan- to-Value Ratio( 1
)
Distribution by Current LTV
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal Balance
a
s
o
f
the Option
ARMs Information
Cut- Off Date
0.01%10.00% . . . . . . . . . . . . . . .
1
0
$ 516,158 0.02%
10.0120.00 . . . . . . . . . . . . . . . . .
2
6
8,970,957 0.41
20.0130.00 . . . . . . . . . . . . . . . . .
5
5
13,863,869 0.63
30.0140.00 . . . . . . . . . . . . . . . . . 131 49,434,987 2.24
40.0150.00 . . . . . . . . . . . . . . . . . 269 97,064,554 4.40
50.0160.00 . . . . . . . . . . . . . . . . . 467 223,801,637 10.15
60.0170.00 . . . . . . . . . . . . . . . . . 1,083 523,452,763 23.75
70.0180.00 . . . . . . . . . . . . . . . . . 2,677 1,211,577,510 54.96
80.0190.00 . . . . . . . . . . . . . . . . . 197 75,623,037 3.43
Total: . . . . . . . . . . . . . . . . . . . . . . . . 4,915 $2,204,305,471 100.00%
(
1
)
The Current Loan-To-Value Ratio
o
f
a mortgage loan
i
s a fraction, the numerator
o
f
which
i
s the outstanding principal bal-
ance
o
f
the mortgage loan and the denominator
o
f
which
i
s the collateral value, generally
a
t
a time
o
f
origination
o
f
the
related mortgage property, expressed
a
s
a percentage.
C-3
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00150
Return
APPENDIX D
Portfolio Data for Asset Trust I And Asset Trust
I
I
,
Combined*
Distribution by Principal Balance
Distribution by Current
Principal Balance
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance as
o
f
the Combined
Information Cut- Off Date
$ 0$49,999 . . . . . 11,627 $ 423,138,809 6.38%
50,000 74,999 . . . . . 12,119 759,892,591 11.46
75,000 99,999 . . . . . 9,395 815,486,517 12.30
100,000 199,999 . . . . . 14,768 2,003,485,348 30.22
200,000 299,999 . . . . . 2,576 612,281,391 9.24
300,000 499,999 . . . . . 1,857 725,131,433 10.94
500,000 999,999 . . . . . 1,169 772,146,602 11.65
Greater than $1,000,000 . . . 328 518,215,341 7.82
Total: . . . . . . . . . . . . . . . . . 53,839 $6,629,778,032 100.00%
Distribution by Gross Rate
Distribution by Current
Gross Rate
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the Combined
Information Cut- Off Date
4.00%4.99% . . . . . . 15 $ 1,846,604 0.03%
5.00 5.99 . . . . . . . 22,975 2,187,243,685 32.99
6.00 6.99 . . . . . . . 23,828 2,177,278,871 32.84
7.00 7.99 . . . . . . . 5,773 1,827,968,563 27.57
8.00 8.99 . . . . . . . 1,197 429,971,629 6.49
9.00 9.99 . . . . . . . 31 4,379,733 0.07
10.00 10.99 . . . . . . . 16 886,751 0.01
11.00 11.99 . . . . . . . 4 202,197 0.00
Total: . . . . . . . . . . . . . . . 53,839 $6,629,778,032 100.00%
Distribution by Remaining Months
t
o Maturity
Distribution by
Remaining
Months
t
o Maturity
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the Combined
Information Cut- Off Date
Less than
6
1
. . . . . . . . . . 1,084 $ 34,255,585 0.52%
61120 . . . . . . . . . . . . 5,082 266,347,879 4.02
121180. . . . . . . . . . . . 11,739 872,915,273 13.17
181240. . . . . . . . . . . . 24,003 2,413,098,915 36.40
241300. . . . . . . . . . . . 577 115,404,634 1.74
301360. . . . . . . . . . . . 10,725 2,583,680,820 38.97
Greater than 360 . . . . . . . 629 344,074,927 5.19
Total: . . . . . . . . . . . . . . . 53,839 $6,629,778,032 100.00%
* All information
i
n this Appendix D
i
s
a
s
o
f
April
1
,
2007 (the Combined Information Cut-off Date). Due
t
o rounding, the per-
centages shown may not precisely total 100.00%.
D-1
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00151
Return
Distribution by Year
o
f
Origination
Distribution by
Year
o
f
Origination
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the Combined
Information Cut- Off Date
19972001 . . . . . . . . . . 521 $ 99,494,371 1.50%
2002 . . . . . . . . . . . . . . . . 4,849 466,144,424 7.03
2003 . . . . . . . . . . . . . . . . 24,663 2,586,664,014 39.02
2004 . . . . . . . . . . . . . . . . 14,904 1,685,245,726 25.42
2005 . . . . . . . . . . . . . . . . 8,536 1,606,217,391 24.23
2006 . . . . . . . . . . . . . . . . 366 186,012,106 2.81
Total: . . . . . . . . . . . . . . . 53,839 $6,629,778,032 100.00%
Distribution by FICO Score( 1
)
Distribution by
Credit Score
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the Combined
Information Cut- Off Date
Not Available . . . . . . . . . .
1
9
$ 10,691,774 0.16%
Less than 600 . . . . . . . . . 1,074 114,456,810 1.73
600649. . . . . . . . . . . . 1,655 216,382,834 3.26
650699. . . . . . . . . . . . 5,517 719,857,800 10.86
700749. . . . . . . . . . . . 10,920 1,518,970,202 22.91
750799. . . . . . . . . . . . 20,531 2,619,741,034 39.51
800849. . . . . . . . . . . . 14,123 1,429,677,578 21.56
Total: . . . . . . . . . . . . . . . 53,839 $6,629,778,032 100.00%
(
1
)
FICO Score means a statistical credit score obtained by WMB and many other mortgage lenders
i
n connection with a loan
application
t
o help assess a borrowers creditworthiness. A FICO Score
i
s generated
b
y
models developed
b
y
a third party,
Fair, Isaac &Co., and made available
t
o WMB through three national consumer reporting agencies. The FICO Score
i
s
based on a borrowers historical credit data, including, among other things, payment history, delinquencies on accounts, lev-
els
o
f
outstanding indebtedness, length
o
f
credit history, types
o
f
credit and bankruptcy experience. A higher FICO Score
indicates a more favorable credit rating.
Distribution by Property Type
Distribution by Property
Type
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the Combined
Information Cut- Off Date
Single Family . . . . . . . . . . 47,935 $5,433,307,565 81.95%
Condominium . . . . . . . . . 2,628 374,865,421 5.65
Planned Unit
Development . . . . . . . . 746 366,854,212 5.53
Townhouse . . . . . . . . . . . 1,798 210,441,922 3.17
2
-
Unit Multifamily . . . . . . . 379 124,056,534 1.87
3
-
4
-
Unit Multifamily . . . . . 254 105,767,249 1.60
Co-
o
p
. . . . . . . . . . . . . . .
2
3
8,688,458 0.13
Manufactured Housing. . .
7
6
5,796,671 0.09
Total: . . . . . . . . . . . . . . . 53,839 $6,629,778,032 100.00%
D-2
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00152
Return
Distribution by State
Distribution by State
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the Combined
Information Cut- Off Date
California . . . . . . . . . . . . . 15,969 $2,950,772,694 44.51%
Texas . . . . . . . . . . . . . . . 25,626 2,242,172,559 33.82
Florida. . . . . . . . . . . . . . . 4,499 399,994,436 6.03
New York . . . . . . . . . . . . . 2,351 307,781,840 4.64
Washington . . . . . . . . . . . 1,080 109,625,628 1.65
New Jersey . . . . . . . . . . . 703 95,486,464 1.44
Oregon . . . . . . . . . . . . . . 698 64,633,143 0.97
Colorado . . . . . . . . . . . . . 298 56,086,481 0.85
Illinois . . . . . . . . . . . . . . . 306 42,054,560 0.63
Georgia . . . . . . . . . . . . . . 420 41,534,978 0.63
Other . . . . . . . . . . . . . . . . 1,889 319,635,251 4.82
Total: . . . . . . . . . . . . . . . 53,839 $6,629,778,032 100.00%
Distribution by Current Loan- to-Value Ratio( 1
)
Distribution by
Current LTV
Number
o
f
Mortgage Loans
Aggregate Unpaid
Principal Balance
Percentage
o
f
Principal
Balance
a
s
o
f
the Combined
Information Cut- Off Date
Not Available . . . . . . . . . . 3 $ 575,567 0.01%
Less than 10.01% . . . . . . 1,278 41,086,870 0.62
10.0120.00 . . . . . . . . . 4,086 213,334,469 3.22
20.0130.00 . . . . . . . . . 5,695 395,124,562 5.96
30.0140.00 . . . . . . . . . 7,454 638,559,729 9.63
40.0150.00 . . . . . . . . . 8,093 807,645,045 12.18
50.0160.00 . . . . . . . . . 8,780 1,077,612,885 16.25
60.0170.00 . . . . . . . . . 9,091 1,391,632,148 20.99
70.0180.00 . . . . . . . . . 8,799 1,946,967,623 29.37
80.0190.00 . . . . . . . . . 558 117,019,643 1.77
90.01100.00% . . . . . . 2 219,492 0.00
Total: . . . . . . . . . . . . . . . 53,839 $6,629,778,032 100.00%
(
1
)
The Current Loan-To-Value Ratio
o
f
a mortgage loan
i
s a fraction, the numerator
o
f
which
i
s the outstanding principal bal-
ance
o
f
the mortgage loan and the denominator
o
f
which
i
s the collateral value, generally
a
t
a time
o
f
origination
o
f
the
related mortgage property, expressed
a
s
a percentage.
D-3
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00153
Return
APPENDIX E
Index
o
f
Terms
3
(
c)(
7
)
Representations . . . . . . . . . . . .
v
i
i
3
-
Month USD LIBOR . . . . . . . . . . . . . . 79
ACLS . . . . . . . . . . . . . . . . . . . . . . . . . 53
Additional Amounts . . . . . . . . . . . . . . . 85
Additional Assets. . . . . . . . . . . . . . . . . 41
Additional Tax Event . . . . . . . . . . . . . . 86
Additional Taxes . . . . . . . . . . . . . . . . . 86
Administrative Services Agreement . . . 44
Advanced Consumer Lending
System . . . . . . . . . . . . . . . . . . . . . . 53
alternative services . . . . . . . . . . . . . . . 49
Asset Documentation . . . . . . . . . . . . . 41
Asset Subsidiary . . . . . . . . . . . . . . . . . 42
Asset Tax Opinion . . . . . . . . . . . . . . . . 42
Asset Trust I . . . . . . . . . . . . . . . . . . . . 5
Asset Trust I Class A Trust Certificate. . 48
Asset Trust I Class R Trust Certificate. . 39
Asset Trust I Custodian . . . . . . . . . . . . 55
Asset Trust I Custody Agreement . . . . 55
Asset Trust I Delaware Trustee . . . . . . 47
Asset Trust I Loan Documents . . . . . . . 56
Asset Trust I Pooling and Servicing
Agreement . . . . . . . . . . . . . . . . . . . . 5
Asset Trust I Servicer . . . . . . . . . . . . . 47
Asset Trust I Servicer Indemnified
Parties . . . . . . . . . . . . . . . . . . . . . . . 54
Asset Trust I Trustee . . . . . . . . . . . . . . 47
Asset Trust
I
I . . . . . . . . . . . . . . . . . . . .
A
-
6
Asset Trust
I
I Class A
Trust Certificate . . . . . . . . . . . . . . . . 5
Asset Trust
I
I Class R
Trust Certificate . . . . . . . . . . . . . . . . 58
Asset Trust
I
I Custodian. . . . . . . . . . . . 66
Asset Trust
I
I Custody Agreement . . . . 66
Asset Trust
I
I Delaware Trustee . . . . . . 6
Asset Trust
I
I Loan Documents . . . . . . 67
Asset Trust
I
I Pooling and Servicing
Agreement . . . . . . . . . . . . . . . . . . . . 6
Asset Trust
I
I Servicer . . . . . . . . . . . . . 57
Asset Trust
I
I Servicer Indemnified
Parties . . . . . . . . . . . . . . . . . . . . . . . 65
Asset Trust
I
I Trustee. . . . . . . . . . . . . . 57
Asset Trusts . . . . . . . . . . . . . . . . . . . . i
AVM . . . . . . . . . . . . . . . . . . . . . . . . . . 49
back- end ratio . . . . . . . . . . . . . . . . . . . 49
Bankruptcy Event . . . . . . . . . . . . . . . . 45
Benefit Plan Investor . . . . . . . . . . . . . . 111
Business Combination . . . . . . . . . . . . . 95
Business Day. . . . . . . . . . . . . . . . . . . . 70
CACS . . . . . . . . . . . . . . . . . . . . . . . . . 53
Clearstream. . . . . . . . . . . . . . . . . . . . . viii
Clearstream International. . . . . . . . . . . 103
Clearstream Participants . . . . . . . . . . . 103
Code . . . . . . . . . . . . . . . . . . . . . . . . . .
i
i
i
Code
o
f
Ethics. . . . . . . . . . . . . . . . . . . 51
Combined Information Cut-off Date . . . D-1
Company. . . . . . . . . . . . . . . . . . . . . . . 1
Company Common Securities . . . . . . . 4
Company Preferred Securities . . . . . . . 2
Companys Portfolio. . . . . . . . . . . . . . . 26
Comparable Treasury Issue . . . . . . . . . 81
Comparable Treasury Price . . . . . . . . . 82
Conditional Exchange . . . . . . . . . . . . . 2
core capital . . . . . . . . . . . . . . . . . . . . . 33
Covered Debt . . . . . . . . . . . . . . . . . . . 72
Credit Score . . . . . . . . . . . . . . . . . . . . 49
debt- to-income ratio . . . . . . . . . . . . . . . 49
Delaware Trustee. . . . . . . . . . . . . . . . . 37
Deposit Agreement . . . . . . . . . . . . . . . 97
Depositary . . . . . . . . . . . . . . . . . . . . . . 74
Depositary Shares. . . . . . . . . . . . . . . . 2
Dividend Payment Date . . . . . . . . . . . . 70
Dividend Period . . . . . . . . . . . . . . . . . . 70
dividends . . . . . . . . . . . . . . . . . . . . . . . 7
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . 101
DTC Participants . . . . . . . . . . . . . . . . . vii, 102
Eligible Assets . . . . . . . . . . . . . . . . . . . 41
Eligible Investments . . . . . . . . . . . . . . . 42
ERISA . . . . . . . . . . . . . . . . . . . . . . . . .
i
i
i
Euroclear. . . . . . . . . . . . . . . . . . . . . . . vii, 103
Euroclear Operator . . . . . . . . . . . . . . . 103
Euroclear Participants . . . . . . . . . . . . . 103
Euroclear Terms and Conditions . . . . . 104
Exchange Act . . . . . . . . . . . . . . . . . . . x
Exchange Agreement . . . . . . . . . . . . . 74
Exchange Event . . . . . . . . . . . . . . . . . 12
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . .
x
i
i
E
-
1
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00154
Return
Federal Reserve . . . . . . . . . . . . . . . . . 68
FFO . . . . . . . . . . . . . . . . . . . . . . . . . . 11
FFO Test . . . . . . . . . . . . . . . . . . . . . . . 2
FICO Score . . . . . . . . . . . . . . . . . . . . .
B
-
2
Fidelity. . . . . . . . . . . . . . . . . . . . . . . . . 64
Fidelity System . . . . . . . . . . . . . . . . . . 64
Fitch . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Five- Year Date. . . . . . . . . . . . . . . . . . . 10
Fixed-to-Floating Rate Substitute
Preferred Stock . . . . . . . . . . . . . . . . 96
Fixed-to-Floating Rate Successor
Depositary Share . . . . . . . . . . . . . . . 96
Foreign Holder. . . . . . . . . . . . . . . . . . . 106
FSMA . . . . . . . . . . . . . . . . . . . . . . . . . 113
GAAP . . . . . . . . . . . . . . . . . . . . . . . . .
x
i
i
Global Security . . . . . . . . . . . . . . . . . . 101
HELs . . . . . . . . . . . . . . . . . . . . . . . . . . 5
HELs Information Cut-off Date . . . . . . .
B
-
1
independent . . . . . . . . . . . . . . . . . . . . 44
Independent Investment Banker. . . . . . 82
Independent Manager . . . . . . . . . . . . . 4
Index . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Indirect DTC Participants . . . . . . . . . . . 102
Initial Purchasers. . . . . . . . . . . . . . . . . 113
Investment Company Act. . . . . . . . . . .
i
x
Investment Company Act Event . . . . . . 82
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Japan Securities and Exchange Law . . 115
Junior Equity Securities . . . . . . . . . . . . 79
Junior Securities . . . . . . . . . . . . . . . . . 90
LIBOR Business Day . . . . . . . . . . . . . . 79
LIBOR Determination Date . . . . . . . . . 79
like amount . . . . . . . . . . . . . . . . . . . . . 2
LLC Act . . . . . . . . . . . . . . . . . . . . . . . . 38
LLC Agreement . . . . . . . . . . . . . . . . . . 38
Manager . . . . . . . . . . . . . . . . . . . . . . . 44
Margin. . . . . . . . . . . . . . . . . . . . . . . . . 58
Marion. . . . . . . . . . . . . . . . . . . . . . . . . 22
Moodys. . . . . . . . . . . . . . . . . . . . . . . . 16
Mortgage Loans . . . . . . . . . . . . . . . . . 16
negative amortization . . . . . . . . . . . . . 29
Negative Amortization . . . . . . . . . . . . . 58
Negative Amortization Cap . . . . . . . . . 58
New Assets . . . . . . . . . . . . . . . . . . . . . 77
New Reporting Rules. . . . . . . . . . . . . . 1
Nominee . . . . . . . . . . . . . . . . . . . . . . . 75
Offering. . . . . . . . . . . . . . . . . . . . . . . . 3
One- Year MTA. . . . . . . . . . . . . . . . . . . 57
Option ARMs. . . . . . . . . . . . . . . . . . . . 5
Option ARMs Information Cut-
o
f
f
Date. . . . . . . . . . . . . . . . . . . . . . . . . C-1
OTS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Outstanding Company Preferred
Securities . . . . . . . . . . . . . . . . . . . . . 2
Parity Equity Securities . . . . . . . . . . . . 2
Paying Agent . . . . . . . . . . . . . . . . . . . . 75
Paying Agents . . . . . . . . . . . . . . . . . . . 75
Permitted Investments . . . . . . . . . . . . . 42
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Pooling and Servicing Agreements . . . 6
Primary Treasury Dealer . . . . . . . . . . . 82
Property Trustee . . . . . . . . . . . . . . . . . 37
Qualified Institutional Buyer . . . . . . . . .
i
i
i
Qualified Purchaser . . . . . . . . . . . . . . .
i
i
i
Qualifying Interests . . . . . . . . . . . . . . . 24
Rating Agencies . . . . . . . . . . . . . . . . . 43
Rating Agency Condition . . . . . . . . . . . 43
Rating Agency Event . . . . . . . . . . . . . . 82
Reference Treasury Dealer . . . . . . . . . 82
Reference Treasury Dealer
Quotations . . . . . . . . . . . . . . . . . . . . 82
Registrar . . . . . . . . . . . . . . . . . . . . . . . 75
Regulation . . . . . . . . . . . . . . . . . . . . . . 111
Regulatory Capital Event . . . . . . . . . . . 82
Relevant Implementation Date . . . . . . . 113
Relevant Member State . . . . . . . . . . . . 114
REMIC . . . . . . . . . . . . . . . . . . . . . . . . 6
Reminder Notice . . . . . . . . . . . . . . . . .
v
i
i
Replacement Capital Covenant . . . . . . 10
Replacement Covenant Covered
Securities . . . . . . . . . . . . . . . . . . . . . 72
Reuters Screen LIBOR01 Page . . . . . . 79
S&P. . . . . . . . . . . . . . . . . . . . . . . .
.
. . 16
SEC . . . . . . . . . . . . . . . . . . . . . . . . . .
x
i
Section
3
(
c)(7). . . . . . . . . . . . . . . . . . .
v
i
Securities Act . . . . . . . . . . . . . . . . . . . viii
Senior Equity Securities. . . . . . . . . . . . 12
Series 2006- A Company Preferred
Securities . . . . . . . . . . . . . . . . . . . . . 1
Series 2006- B Company Preferred
Securities . . . . . . . . . . . . . . . . . . . . . 1
Series 2006- C Company Preferred
Securities . . . . . . . . . . . . . . . . . . . . . 1
E
-
2
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00155
Return
Series 2007- A Company Preferred
Securities . . . . . . . . . . . . . . . . . . . . . 1
Series I WMI Preferred Stock . . . . . . . 100
Series J WMI Preferred Stock . . . . . . . 100
Series K WMI Preferred Stock . . . . . . . 100
Series L WMI Preferred Stock . . . . . . . 100
Series M WMI Preferred Stock . . . . . . 2
SFA. . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Similar Law . . . . . . . . . . . . . . . . . . . . .
i
i
i
Successor Entity . . . . . . . . . . . . . . . . . 96
supplementary capital . . . . . . . . . . . . . 33
tangible capital . . . . . . . . . . . . . . . . . . 33
Tax Event . . . . . . . . . . . . . . . . . . . . . . 82
Tax- Exempt
U
.
S
.
Holder . . . . . . . . . . . 108
Thrift Financial Report . . . . . . . . . . . . .
x
i
i
total capital . . . . . . . . . . . . . . . . . . . . . 33
Transfer Agent . . . . . . . . . . . . . . . . . . . 75
Treasury Rate . . . . . . . . . . . . . . . . . . . 83
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trust Act . . . . . . . . . . . . . . . . . . . . . . . 37
Trust Agreement . . . . . . . . . . . . . . . . .
v
i
Trust Holder. . . . . . . . . . . . . . . . . . . . . 13
Trust I . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trust I Securities . . . . . . . . . . . . . . . . . 1
Trust
I
I
.
. . . . . . . . . . . . . . . . . . . . . . . . 2
Trust
I
I Securities. . . . . . . . . . . . . . . . . 2
Trust Securities . . . . . . . . . . . . . . . . . . 1
U
.
S
.
Holder . . . . . . . . . . . . . . . . . . . . . 105
U
.
S
.
Person. . . . . . . . . . . . . . . . . . . . . 73
UBTI . . . . . . . . . . . . . . . . . . . . . . . . . . 108
University Street . . . . . . . . . . . . . . . . . 4
Voting Parity Securities . . . . . . . . . . . . 89
WaMu Cayman . . . . . . . . . . . . . . . . . . 1
WaMu Cayman Securities . . . . . . . . . . 1
WMB. . . . . . . . . . . . . . . . . . . . . . . . . . 1
WMI . . . . . . . . . . . . . . . . . . . . . . . . . . 1
WMI Group . . . . . . . . . . . . . . . . . . . . . 1
WMI Parity Stock. . . . . . . . . . . . . . . . . 90
WMIs Board
o
f
Directors . . . . . . . . . . . 29
WTC . . . . . . . . . . . . . . . . . . . . . . . . . . 75
E
-
3
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00156
Return
No dealer, salesperson
o
r
other person
i
s authorized
t
o give any information
o
r
t
o
represent anything not contained
i
n this
offering circular. You must not rely on any
unauthorized information
o
r
representations.
This offering circular
i
s an offer
t
o sell only
the Trust Securities offered hereby, but only
under circumstances and
i
n jurisdictions
where
i
t
i
s lawful
t
o do so. The information
contained
i
n this offering circular
i
s current
only
a
s
o
f
its date.
TABLE OF CONTENTS
Page
Index
o
f
Terms . . . . . . . . . . . . . . . . . . . . . .
i
i
Notice
t
o Investors . . . . . . . . . . . . . . . . . . . .
i
i
i
Special Note Regarding Forward-Looking
Statements . . . . . . . . . . . . . . . . . . . . . . . x
Where You Can Find More Information . . . . .
x
i
Offering Circular Summary . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . .
1
8
Certain Information Concerning WMB . . . . . .
3
2
Use
o
f
Proceeds . . . . . . . . . . . . . . . . . . . . .
3
6
The Trust . . . . . . . . . . . . . . . . . . . . . . . . . .
3
7
The Company . . . . . . . . . . . . . . . . . . . . . . .
3
8
Asset Trust I . . . . . . . . . . . . . . . . . . . . . . . .
4
7
Asset Trust
I
I . . . . . . . . . . . . . . . . . . . . . . . .
5
7
WMI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
8
Certain Relationships and Related Party
Transactions. . . . . . . . . . . . . . . . . . . . . . .
6
9
Description
o
f
the Trust Securities . . . . . . . . .
7
0
Description
o
f
the Series 2007- A Company
Preferred Securities . . . . . . . . . . . . . . . . .
7
7
Description
o
f
Other Company Securities. . . .
8
7
Description
o
f
the Series M WMI Preferred
Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
9
Description
o
f
the Depositary Shares. . . . . . .
9
7
Description
o
f
the Other WMI Capital Stock . . 100
Book- Entry Issuance . . . . . . . . . . . . . . . . . . 101
Certain
U
.
S
.
Federal Income Tax
Considerations . . . . . . . . . . . . . . . . . . . . . 105
ERISA Considerations . . . . . . . . . . . . . . . . . 111
Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Plan
o
f
Distribution . . . . . . . . . . . . . . . . . . . 113
Notice
t
o Canadian Residents. . . . . . . . . . . . 116
Validity
o
f
Securities . . . . . . . . . . . . . . . . . . . 118
Additional Information . . . . . . . . . . . . . . . . . 119
APPENDIX A Washington Mutual Preferred
Funding LLC, Financials . . . . . . . . . . . . . .
A
-
1
APPENDIX B Portfolio Data
f
o
r
Asset Trust
I
. .
B
-
1
APPENDIX C Portfolio Data
f
o
r
Asset
Trust
I
I
.
. . . . . . . . . . . . . . . . . . . . . . . . . .
C
-
1
APPENDIX D Portfolio Data
f
o
r
Asset Trust I
And Asset Trust
I
I
,
Combined . . . . . . . . . .
D
-
1
APPENDIX E Index
o
f
Terms . . . . . . . . . . . .
E
-
1
$500,000,000
Washington Mutual
Preferred Funding Trust
I
I
I
Fixed-to-Floating Rate
Perpetual Non- cumulative
Trust Securities
Automatically Exchangeable
i
n
Specified Circumstances into
Depositary Shares Representing
Preferred Stock
o
f
Washington Mutual, Inc.
Sole Structuring Coordinator and Joint
Bookrunner
Goldman, Sachs &Co.
Joint Bookrunners
Lehman Brothers
UBS Investment Bank
Co-Managers
Credit Suisse
Keefe, Bruyette & Woods
JPMorgan
Morgan Stanley
Wachovia Securities
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002168.00157
Return
STATES
~
4
STATp~ I
~
1
~
j
j
t
~

tate
o
f
Secretary
0
f
State
I
, Sam Reed, Secretary
of State of the State of
Washington
and custodian of its
seal,
hereby
issue this .
.
. .
.
.
. .
.
certificate that the attached
i
s
a true and correct copy
of
...
ARTICLES OF AMENDMENT
of
WASHINGTON MUTUAL, INC.
as filed in this office on
May 23, 2007.
Date:
May 23,
2007
Givenundermy
hand and the Seal of the State
of
Washington a
t
Olympia,
the State
Capital
Sam Reed, Secretary of State
______
I
San flAt
-
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002181.00001
Return
ARTICLES OF AMENDMENT
OF
WASHINGTON MUTUAL, INC.
(Series M Perpetual Non- cumulative
Fixed-to-Floating Rate Preferred Stock)
Pursuant
t
o the provisions of Chapter 23B. 10 and Section 23B. 06.020
o
f
the Revised

Code
o
f
Washington,
the
undersigned officer of Washington Mutual, Inc. (the Company), a
corporation organized and existing under the laws of the State of
Washington, does hereby
submit for filing these Articles of Amendment to the Companys Amended and Restated Articles
o
f
Incorporation:
FIRST: The name of the Company i
s
Washington Mutual, Inc.
SECOND: 500 shares of the authorized preferred stock of the Company are hereby
designated Series M Perpetual Non- cumulative
Fixed- to-Floating Rate Preferred Stock.
The preferences, limitations, voting powers
and relative rights of the Series M Perpetual
Non-cumulative
Fixed-to-Floating
Rate Preferred Stock are as follows:
DESIGNATION
Section
1
.
Designation There
i
s
hereby created out of the authorized and unissued
shares
o
f
preferred stock
o
f
the Company a series of
preferred
stock
designated as the Series
M
Perpetual
Non- cumulative
Fixed-to-Floating
Rate Preferred Stock (the Series M Preferred
Stock). The number of shares
constituting
such series shall be 500. The Series M Preferred
Stock shall have no par
value
per
share and the
liquidation preference of the Series M Preferred
Stock shall be
$1,000,000.00 per share. Shares of the Series M Preferred Stock shall be issued
i
f and only i
f
a Conditional Exchange occurs.
Section 2. Ranking
The Series M Preferred Stock will, with
respect
to dividend
rights and rights on
liquidation, winding-
u
p and dissolution, rank
(
i
) on a parity with the Companys Series I
Perpetual
Non-cumulative
Fixed-to-Floating
Rate Preferred Stock ( the Series I Preferred
Stock),
the
Companys
Series J
Perpetual Non- cumulative Fixed Rate Preferred Stock
(the
Series J Preferred Stock),
the
Companys Series K Perpetual Non- Cumulative
Floating
Rate
Preferred Stock ( the Series K Preferred Stock), the
Companys
Series L
Perpetual
Non-
cumulative Fixed-to-Floating Rate Preferred Stock
( the Series L Preferred
Stock)
and with
each other class or series of preferred stock established after the
Designation
Date
b
y
the
Company the terms of which
expressly provide
that such class or series will rank on a parity
with the Series M Preferred Stock as to dividend
rights
and
rights on liquidation, winding- up
and
dissolution of the
Company ( collectively
referred to as Parity Securities)
and
(
i
i
) senior to the
Companys
common stock
(the
uCommon
Stock),
the
Companys
Series RP Preferred Stock
and each other class of
capital
stock
outstanding or established after the
Designation
Date
by
the
Company
the terms of which do not
expressly provide that
i
t ranks on a parity
with or senior
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002181.00002
Return
t
o the Series M Preferred Stock as t
o
dividend rights
and
rights on liquidation, winding-
u
p and
dissolution
o
f
the Company (collectively referred
t
o
as Junior Securities).
The
Company
has
the right to authorize and/ or issue additional shares or series of Junior Securities and Parity
Securities without the consent of the hblders of the Series M Preferred Stock.
Section
3
.
Definitions Unless the context or use indicates another meaning or
intent,
the
following
terms shall have the
following meanings,
whether used
i
n the singular or the
plural:
(
a
)
3-Month USD LIBOR means, with
respect
to
any
Dividend Period, a rate
determined on the basis of the offered rates for three- month U. S. dollar deposits of not less than
a principal amount equal to that which
i
s
representative for a single
transaction
i
n such market
at such time, commencing on the first day o
f
such Dividend Period, which
appears
on Reuters
Screen LIBORO1 Page as o
f
approximately 11: 00 a.m., London time, on the LIBOR
Determination Date for such Dividend Period.
I
f on
any
LIBOR Determination Date no rate
appears on Reuters Screen LIBOROI Page as o
f
approximately 11: 00 a.m., London time, the
Company
or an affiliate of the
Company on behalf of the
Company
will on such LIBOR
Determination Date
request
four
major
reference banks
i
n the London interbank market selected
b
y the
Company
to
provide
the
Company
with a quotation
of the rate at which three- month
deposits i
n U. S. dollars, commencing
on the first
day of such Dividend Period, are offered
b
y
them
t
o
prime
banks
i
n the London interbank market as of
approximately
11:00
a.m.,
London
time, on such LIBOR Determination Date and i
n
a
principal
amount equal
to that which
i
s
representative
for a
single
transaction i
n
such market at such time.
I
f at least two such
quotations are provided,
3-Month USD LIBOR for such Dividend Period will be the arithmetic
mean (rounded upward i
f
necessary
to the nearest .00001 of
1%) o
f
such
quotations
as
calculated
by
the
Company. I
f fewer than two
quotations are provided,
3-Month USD LIBOR for
such Dividend Period will be the arithmetic mean (rounded upward i
f
necessary t
o the nearest
.00001 of
1%)
of the rates
quoted as o
f
approximately
11: 00
am.,
New York time, on the first
day of such Dividend Period
b
y
three major banks
i
n New York City, New York selected by the
Company for loans
i
n U. S. dollars to leading European banks, for a three- month period
commencing on the first
day
of such Dividend Period and
i
n
a principal amount of not less than
$1,000,000.
(
b
)
Day means any day
other than a Saturday, Sunday or any
other day on which banks i
n New York City, New York, or Seattle, Washington are generally
required or authorized
b
y
law to be closed.
(
c
)
Stock has the
meaning set forth
i
n Section
2
.
(
d
)
means Washington Mutual, Inc., a Washington corporation.
(
e
)
Treasury Issue means the United States Treasury security
selected
by
the
Independent
Investment Banker as having a maturity comparable
to the term
remaining to the Dividend Payment
Date
i
n June 2012 that would be utihzed, a
t
the time of
selection and
i
n accordance with
customary
financial practice, i
n
pricing new issues of
perpetual
preferred securities having similar terms as the Series M Preferred Stock with respect to the
payment
of dividends and distributions of assets
upon liquidation,
dissolution or winding- up
of
the issuer of such
preferred
stock.
-2-
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002181.00003
Return
(
f
) Treasury Price means with
respect
to
any Redemption
Date the
average
of the Reference
Treasury
Dealer Quotations for such
Redemption Date, after
excluding
the
highest
and lowest
o
f
such Reference
Treasury
Dealer Quotations, or
i
f the
Independent
Investment Banker obtains fewer than five such Reference
Treasury
Dealer
Quotations,
the
average
of all such
quotations.
(
g
)
Exchange means the automatic
exchange
of the Trust
Securities into
depositary
shares
representing
an interest
i
n the Series M Preferred Stock which
occurs upon
the written direction of the OTS
upon or after the occurrence of an Exchange
Event.
(
h
)
Preferred Securities means the
Fixed-to-Floating
Rate
Perpetual
Non- cumulative Preferred
Securities,
Series
2007-A, liquidation preference $1,000
per security,
issued or to be issued
by Washington
Mutual Preferred
Funding LLC, a Delaware
limited
liability company.
(
i
) Date means
May 24,
2007.
U
)
Payment Date has the
meaning
set forth
i
n Section
4
(
b).
(
k
) Period has the
meaning
set forth
i
n Section
4
(
b).
(
I
) Event means the occurrence of
any
one of the
following at a
time as the Trust Securities are issued and
outstanding:
(
I
)
WMB becomes
undercapitalized
under the
Prompt
Corrective
Action
Regulations;
(
i
i
)
WMB
i
s
placed
into
conservatorship or receivership; or
(
i
i
i
) the
OTS, i
n its sole discretion, directs an exchange
of the Trust
Securities into
depositary
shares
representing an interest
i
n the Series M Preferred Stock
i
n
anticipation
of WMB
becoming undercapitalized
under the
Prompt
Corrective Action
Regulations
or of the OTS
taking any supervisory
action that limits the
payment
of dividends
b
y WMB.
(m)
Date means the Dividend
Payment
Date
i
n June 2012, and
the Dividend
Payment
Date
o
f
each fifth
succeeding year (
i
.
e
.
,
June 2017, June 2022, etc.)
assuming i
n each case that the Series M Preferred Stock has been issued.
(
n
)
Investment Banker means an independent
investment
banking
institution of national
standing appointed
b
y the
Company.
(
o
)
Securities has the
meaning
set forth
i
n Section
2
.
(
p
)
Business Day means any day on which commercial banks are
open
for
general
business
( including dealings i
n
deposits i
n U. S.
dollars) i
n London.
(
q
)
Determination Date
means, as to each Dividend Period, the date
that
i
s two LIBOR Business
Days prior
to the first
day
of such Dividend Period.
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(
r
)
Q]~ means the Office
o
f
Thrift Supervision or any successor regulatory
entity.
(
s
)
Securitie~ s has the meaning set forth
i
n Section
2
.
(
t
) Treasury Dealer has the meaning set forth
i
n Section
3
(
y).
(
u
)
Corrective Action Regulation means 12 C.F.R. Part 565 as i
n
effect from time
t
o time, or any successor regulation.
(
v
)
Agencies means, at
any time, Standard & Poors Rating
Services, a Division
o
f
the McGraw- Hill Companies, Inc., Moodys Investors Service, Inc. and
Fitch, Inc., but only i
n the case
o
f
each such agency i
f
i
t
i
s
rating the relevant security, including
the Delaware Preferred Securities
a
t
the relevant time or, i
f none of them
i
s
providing a rating for
the relevant security, including the Delaware Preferred Securities at such time, then
any
nationally recognized
statistical
rating organization as that
phrase i
s defined for
purposes
of
Rule 436( g)(
2
)
under the Securities Act of 1933, as amended, which
i
s
rating such relevant
security.
(
w
)
AAgency Event occurs when the
Company reasonably
determines that an amendment, clarification or change
has occurred
i
n the
equity
criteria for
securities such as the Delaware Preferred Securities of
any Rating Agency
that then
publishes a
rating
for the
Company
which amendment, clarification or change
results
i
n
a lower
equity
credit
for the
Company
than the
respective equity
credit
assigned by
such
Rating Agency
to the
Delaware Preferred Securities on the
Designation
Date.
(
x
)
Date means any
date that
i
s
designated by
the
Company
in
a notice of
redemption
delivered
pursuant
to Section
7
.
(
y
)
Treasury Dealer means each of the three
primary
U. S.
government
securities dealers
( each, aTreasury Deater) as specified
b
y
the
Company; provided
that
i
f
any Primary Treasury
Dealer as specified by
the
Company ceases to
be a Primary Treasury Dealer, the
Company
will substitute for such
Primary Treasury
Dealer
another
Primary Treasury
Dealer and
i
f the
Company
fails
t
o select a substitute within a
reasonable
period
of
time,
then the substitute will be a PrimaryTreasury
Dealer selected
by
the
Independent
Investment Banker after consultation with the
Company.
(
z
)
Treasury Dealer Quotations means, with
respect
to the
Reference
Treasury
Dealer and
any Redemption Date, the
average, as determined
b
y
the
Independent investment Banker, o
f
the bid and asked
prices for the
Comparable Treasury
Issue
(expressed, i
n each case, as a percentage o
f
its
principal amount) quoted i
n
writing t
o the
Independent
Investment Banker
b
y
such Reference Treasury Dealer
a
t
5:00 p.m., New York
City time, on the third Business
Day preceding
such Redemption Date.
(aa) ACapital Event occurs when the
Company determines,
based
upon receipt
of an opinion o
f
counsel, that there
i
s
a significant risk that the Delaware
Preferred Securities will no longer constitute core capital of WMB for purposes of the
capital
adequacy regulations
issued
b
y the OTS as a result
o
f
a change i
n
applicable laws, regulations
or related
interpretations
after issuance
o
f
the Delaware Preferred Securities.
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(bb) Screen LIBOROI Page means the
display so designated on
the Reuters 3000 Xtra (
o
r
such other
page as may replace that
page
on that service, or such
other service as
may
be nominated as the information
vendor,
for the
purpose o
f
displaying
rates
comparable
to the London lnterbank Offered rate for U. S. dollar deposits).
( cc)
I Preferred Stock has the
meaning
set forth i
n
Section 2.
( dd)
J Preferred Stock has the
meaning
set forth in Section
2
.
( ee)
K Preferred Stock has the
meaning
set forth
i
n Section
2
.
(
i
f
) L Preferred Stock has the
meaning
set forth i
n Section 2.
(gg)
M Preferred Stock has the
meaning
set forth
i
n Section
1
.
(hh)
Rate means the rate
per year equal
to the
quarterly equivalent
yield
to
maturity
of the
Comparable Treasury Issue, calculated
using
a
price
for the
Comparable
Treasury
Issue
(expressed as a percentage
of its
principal amount) equal
to the
Comparable
Treasury
Price for the relevant
Redemption
Date. The
Treasury
Rate will be calculated on the
third Business
Day preceding
the relevant
Redemption Date.
(
i
i
) Securities means the
Fixed-to-Floating
Rate Perpetual
Non-
cumulative Trust Securities, liquidation preference $100,000 per security,
Issued
b
y
Washington
Mutual Preferred
Funding
Trust
I
l
l
,
a Delaware
statutory
trust.
(
j
j
) Parity Securities has the
meaning
set forth in Section
8
(
b).
(kk)
means
Washington
Mutual Bank, a federal
savings
association
and a subsidiary
of the
Company, or its successor.
Section
4
.
Dividends
(
a
)
Holders of shares of Series M Preferred Stock shall be entitled to receive,
when, as and
i
f declared
by
the Board of
Directors,
out of the funds
legally
available therefor,
non- cumulative cash dividends
i
n the amount determined as set forth
i
n Section
4
(
c),
and no
more.
(
b
)
Subject
to Section
4
(
a),
dividends shall be
payable
in arrears on
March 15, June 15, September
15 and December 15 of each
year commencing on the first such
day
after the issuance of the Series M Preferred Stock or, i
n each case, i
f
any
such
day i
s not a
Business
Day,
the next Business
Day (each, a Dividend
Payment Date).
Each dividend will be
payable
to holders of record as they appear on the stock books of the
Company
on the first
day
of the month in which the relevant Dividend
Payment
Date occurs or, i
f such date
i
s not a
Business
Day,
the first Business
Day
of such month. Each
period
from and
including a Dividend
Payment
Date
(
o
r
the date of the issuance of the Series M Preferred Stock)
to but
excluding
the
following
Dividend
Payment
Date (
o
r
the
Redemption Date) i
s
herein referred to as Dividend
Period, except that, i
f the Series M Preferred Stock
i
s
outstanding on June 15, 2012, the
Dividend Period
ending i
n June 2012 shall be
t
o but
excluding
June 15, 2012
(whether or not a
Business
Day)
and the Dividend Period
ending i
n
September 2012 shall commence on
June 15, 2012 (whether or not a Business Day).
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(
c
)
I
f the date of issuance of the Series M Preferred Stock
i
s
prior to the day
immediatelypreceding
June
15, 2012, or i
f June
15,
2012
i
s not a Business Day, the first
Business Day after June 15, 2012, then from such date of issuance to but not
including June 15,
2012 (whether or not a Business Day) dividends,
i
f
, when and as declared by
the Board of
Directors, will be, for each outstanding share of Series M Preferred Stock, at an annual rate of
6.895% on the
per
share liquidation preference of the Series M Preferred Stock. From the later
of the
(
I
) June
15,
2012 and (
i
i
) the date of issuance of the Series M Preferred Stock, dividends,
i
f
, when and as declared
b
y the Board
o
f
Directors, will be, for each
outstanding
share of Series
M Preferred Stock, at an annual rate on the
per
share
liquidation preference
of the Series M
Preferred Stock
equal
to 3-Month USD LIBOR for the related Dividend Period
plus 1.755%.
Dividends
payable
for
any
Dividend Period
greater
or less than a full Dividend Period will be
computed on the basis
o
f
twelve
30-day months, a 360-day year,
and the actual number of
days
elapsed i
n the
period i
f such Dividend Period ends
i
n
or prior
to June 2012; thereafter dividends
payable
for
any period greater or less than a full dividend
period
will be
computed on the basis
o
f
the actual number of
days
in the relevant
period
divided
by
360. No interest will be
paid on
any
dividend
payment o
f
the Series M Preferred Stock.
(
d
)
Dividends on the Series M Preferred Stock are non- cumulative.
I
f the
Board
o
f
Directors does not declare a dividend on
the Series M Preferred Stock
or declares less
than a full dividend
i
n
respect o
f
any
Dividend Period, the holders
o
f
the Series M Preferred
Stock will have no right t
o receive
any
dividend or a full dividend, as the case may be, for the
Dividend Period, and the
Company will have no obligation t
o
pay a dividend or to
pay
full
dividends for that Dividend Period, whether or not dividends are declared and
paid for any future
Dividend Period with respect to the Series M Preferred Stock or the Common Stock or
any
other
class or series
o
f
the Companys preferred stock.
(
e
)
I
f full dividends on
a
l
l
outstanding shares of the Series M Preferred Stock
for
any
Dividend Period have not been declared and paid, the Company shall not declare or
pay
dividends with
respect to, or redeem, purchase or acquire any of, its equity capital
securities
during the next
succeeding Dividend Period, except dividends i
n
connection with the Series RP
Preferred Stock or other shareholders
rights plan, i
f
any, or dividends
i
n connection with benefit
plans.
Section 5. Liquidation
(
a
)
In the event the Company voluntarily or involuntarily liquidates, dissolves
or winds
up,
the holders of Series M Preferred Stock at the time outstanding shall be entitled to
receive
liquidating
distributions
i
n the amount of $1,000,000 per
share of Series M Preferred
Stock, plus
an amount
equal
to
any
declared but
unpaid
dividends thereon for the current
Dividend Period to and
including
the date
o
f
such
liquidation,
out of assets
legally
available for
distribution to its shareholders, before
any
distribution of assets
i
s made to the holders of
Common Stock or any
securities
ranking junior
to the Series M Preferred Stock. After
payment
of the full amount of such
liquidating distributions,
the holders of Series M Preferred Stock will
not be entitled to
any
further
participation i
n
any
distribution of assets
by,
and shall have no
right
or claim to
any remaining
assets
of,
the
Company.
(
b
)
In the event the assets of the
Company
available for distribution to
shareholders
upon any liquidation, dissolution or
winding-
u
p of the affairs of the
Company,
whether
voluntary or involuntary, shall be insufficient to
pay i
n full the amounts
payable
with
respect
to all
outstanding
shares of the Series M Preferred Stock and the
corresponding
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amounts payable on any other Securities of equal ranking, the holders
o
f
Series M Preferred
Stock and the holders of such other securities
o
f
equal ranking shall share ratably i
n
any
distribution of assets of the Company i
n
proportion to the full respective liquidating
distributions
to which
they
would otherwise be respectively entitled.
Section 6. Maturity The Series M Preferred Stock shall be perpetual unless
redeemed
b
y the Company i
n accordance with Section 7.
Section 7. Redemptions
(
a
)
The Series M Preferred Stock shall not be redeemable at the
option
of the
holders at
any
time.
(
b
)
The Series M Preferred Stock shall be redeemable at the option of the
Company i
n
any
of the following circumstances:
(
i
) in whole but not
i
n
part, prior to the Dividend
Payment
Date
i
n
June, 2012
upon
the occurrence of a Regulatory Capital Event or a Rating Agency Event, at a
cash redemption price equal to the sum of:
(
A
)
the
greater
of:
(
1
)
$1,000,000 per
share of Series M Preferred Stock
and
(
2
)
The sum of the
present
value of $1,000,000 per
share of Series M Preferred
Stock,
discounted from the Dividend
Payment
Date in
June, 2012
to the redemption date, and the present values
o
f
all undeclared dividends for each Dividend
Period from the redemption date to and including the Dividend Payment Date
i
n
June, 2012
discounted from their applicable Dividend Payment Dates to the redemption date, i
n each case
on a quarterly
basis
(assuming
a 360.- day year consisting
of twelve
30-day months)
at the
Treasury Rate, as calculated
by
an
independent
Investment Banker, pIus 0.50%; pIus
(
B
)
any
declared but
unpaid dividends to the
redemption date;
(
i
i
) in whole but not
i
n
part, on any
Dividend Payment Date
prior
to
the Dividend
Payment Date i
n
June,
2012 for
any
reason other than the occurrence of a
Rating
Agency
Event or a
Regulatory Capital Event,
at a cash
redemption price equal
to:
(
A
)
the
greater
of:
(
1
)
$1,000,000 per
share of Series M Preferred Stock,
or
(
2
)
the sum of the
present
value of $1,000,000 per
share of Series M Preferred Stock discounted from the Dividend Payment Date
i
n
June, 2012 to
the redemption date, and the
present
values of all undeclared dividends for the Dividend
Periods from the
redemption
date to and
including
the Dividend
Payment
Date
i
n
June, 2012,
discounted from their
applicable
Dividend
Payment
Dates to the redemption date, i
n each case
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on a quarterly basis (assuming a 360- day year consisting
of twelve
30-day months)
at the
Treasury Rate, as calculated by an Independent Investment Banker, plus 0.35%; pIus
(
B
)
~
h
y
declared but unpaid dividends to the
redemption date;
(iii) i
n whole but not
i
n
part, on any
Dividend Payment
Date after the
Dividend Payment Date
i
n
June, 2012 that
i
s not a Five- Year Date, upon
the occurrence o
f
a
Regulatory Capital
Event or a Rating Agency Event, a
t
a cash redemption price equal to
$1,000,000 per
share of Series M Preferred Stock, plus any
declared and unpaid dividends to
the
redemption date;
(
i
v
)
i
n whole or i
n
part, on each Dividend Payment Date that
i
s
a Five-
Year
Date, a
t
a cash redemption price of $1,000,000 per
share of Series M Preferred
Stock,
plus any
declared and unpaid
dividends to the
redemption date; and
(
v
)
i
n
whole but not
i
n
part, on
any
Dividend Payment
Date after the
Dividend
Payment
Date
i
n
June, 2012 that
i
s not a Five-Year Date for
any reason other than the
occurrence of a Rating Agency
Event or a Regulatory Capital Event,
at a cash redemption price
equal
to:
(
A
)
the
greater
of:
(
1
)
$1,000,000
per
share of Series M Preferred
Stock,
or
(
2
)
the sum of the
present
value of $1,000,000 per
share of Series M Preferred Stock, discounted from the next succeeding
Five-Year Date to the
redemption date, and the
present
values of all undeclared dividends for the Dividend Periods
from the
redemption
date to and
including
the next
succeeding
Five-Year Date, discounted from
their
applicable
Dividend
Payment
Dates to the
redemption date, i
n
each case on a
quarterly
basis
(assuming a 360- day year consisting o
f
twelve
30-day months) a
t
the 3-month USD
LIBOR Rate
applicable
to the Dividend Period
immediately preceding
such
redemption
date
(which
3-month USD LIBOR Rate will also, for the
purposes
of
calculating
such
redemption
price,
be the rate used
i
n
calculating
the amount for each undeclared
dividend), as calculated
by
an Independent Investment Banker; plus
(
B
)
any
declared but
unpaid
dividends to the
redemption date;
in each
case, without accumulation of
any
undeclared dividends with
respect
to Dividend
Payment
Dates
prior t
o the
redemption
date.
(
C
)
Dividends will cease to accrue on the Series M Preferred Stock called for
redemption
on and as of the date fixed for
redemption
and such Series M Preferred Stock will
be deemed to cease to be
outstanding, provided
that the
redemption price, including any
authorized and declared but
unpaid
dividends for the current Dividend Period, i
f
any,
to the date
fixed for
redemption,
has been
duly paid or provision
has been made for such
payment.
(
d
)
I
n the case of
any redemption
under this Section
7
,
notice shall be mailed
to each holder of record of the Series M Preferred
Stock,
not less than 30 nor more than 60
days prior
to the
Redemption
Date
specified i
n such notice; provided, however, that a longer
minimum notice
may be agreed
to
by
the
Company, including i
n
a deposit agreement relating
to
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depositary shares representing interests
i
n the Series M Preferred Stock. The notice of
redemption shall include a statement of (
i
) the redemption date, (
i
i
) the
redemption price,
and
(iii)
the number of shares to be redeemed.
(
e
)
Any shares of Series M Preferred Stock redeemed pursuant t
o this
Section 7 or otherwise
acquired by
the
Company
in
any manner whatsoever shalt become
authorized but unissued
preferred
shares
o
f
the
Company
but such
preferred
shares shall not
under
any
circumstances be reissued as Series M Preferred Shares. The
Company
shall from
time-to-time take such
appropriate
action as
may
be
necessary
to reduce the authorized
number of shares of Series M Preferred Stock
accordingly.
Section
8
.
Voting Rights
(
a
)
Holders of the Series M Preferred Stock will not have
any voting rights,
including
the
right t
o elect
any directors, except (
i
) voting rights, i
f
any, required
b
y
law, and
(
i
i
)
voting rights, i
f
any,
described
i
n this Section
8
.
(
b
)
Holders of the Series M Preferred Stock will
i
n the circumstances to the
extent set forth
i
n this Section
8
(
b),
have the
right
to elect two directors.
(
i
)
I
f after the issuance of the Series M Preferred Stock the
Company
fails to
pay, or declare and set aside for
payment,
full dividends on the Series M Preferred Stock
or any
other class or series of
Parity Securities
having
similar
voting rights
(

Voting Parity
Securities)
for six Dividend Periods or their
equivalent,
the authorized number of the
Companys
directors will be increased
b
y two.
Subject
to
compliance
with
any requirement
for
regulatory approval of, or non- objection to, persons serving as directors, the holders of Series M
Preferred Stock, voting together as a single
and
separate
class with the holders of
any
outstanding Voting Parity Securities,
will have the
right
to elect two directors
i
n addition to the
directors then
i
n office at the
Companys
next annual
meeting
of shareholders. This
right
will
continue at each
subsequent
annual
meeting
until the
Company pays
dividends
i
n full on the
Series M Preferred Stock and
any Voting Parity Securities for three consecutive Dividend
Periods or their
equivalent
and
pays or declares and sets aside for
payment
dividends
i
n full for
the fourth consecutive Dividend Period or its
equivalent or, i
f earlier,
upon
the
redemption
of
a
l
l
Series M Preferred Stock.
(
i
i
)
The term of such additional directors will
terminate, and the total
number of directors will be decreased
b
y
two, at such time as the
Company pays
dividends
i
n
full on the Series M Preferred Stock and any Voting Parity
Securities for three consecutive
Dividend Periods or their equivalent and declares and pays or sets aside for
payment
dividends
i
n full for the fourth consecutIve DMdend Period or its
equivalent or, i
f earlier, upon
the
redemption o
f
all Series M Preferred Stock. After the term of such additional directors
terminates, the holders
o
f
the Series M Preferred Stock will not be entitled to elect additional
directors unless full dividends on the Series M Preferred Stock have again not been paid or
declared and set aside for payment for six future Dividend Periods.
(iii) Any additional director elected by the holders of the Series M
Preferred Stock and the
Voting Parity
Securities
may only
be removed
b
y the vote of the holders
of record
o
f
the
outstanding
Series M Preferred Stock and
Voting Parity Securities, voting
together as a single and separate class, at a meeting of the Company
shareholders called for
that purpose. Any vacancy created
b
y the removal of any such director may be filled only by the
-9-
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002181.00010
Return
vote of the holders of the outstanding Series M Preferred Stock and
Voting Parity Securities,
voting together as a single
and
separate
class.
(
c
)
So
long as
any
thares of Series M Preferred Stock are outstanding, the
vote or consent of the holders of at least 66 2/ 3% of the shares of Series M Preferred Stock at
the time outstanding, voting as a class with
a
l
l
other classes and series of Parity Securities
upon
which like voting rights have been conferred and are exercisable, given in
person or
b
y
proxy,
either
i
n
writing without a meeting or by
vote at
any meeting called for the
purpose,
will be
necessary
for
effecting or validating any
of the
following actions, whether or not such
approval i
s
required by Washington law:
(
i
)
any amendment, alteration or repeal of
any provision of the
Companys
Amended and Restated Articles of
Incorporation (including
the Articles
o
f
Amendment
creating
the Series M Preferred
Stock)
or the
Companys bylaws
that would alter or
change
the
voting powers, preferences
or
special rights
of the Series M Preferred Stock so as to
affect them
adversely;
(
i
i
)
any
amendment or alteration of the
Companys
Amended and
Restated Articles of
Incorporation t
o authorize or create, or increase the authorized amount of,
any
shares of, or
any
securities convertible into shares of, any
class or series of the
Companys
capital
stock
ranking prior
to the Series M Preferred Stock
i
n the
payment o
f
dividends or i
n the
distribution of assets on any liquidation,
dissolution or winding up
of the Company; or
(
i
i
i
) the consummation
o
f
a
binding
share
exchange
or reclassification
involving
the Series M Preferred Stock or a merger or consolidation of the
Company
with
another
entity, except
that holders of Series M Preferred Stock will have no right t
o vote under
this
provision or under 23B. 11.035 of the Revised Code
o
f
Washington or otherwise under
Washington
law
i
f
i
n each case (
x
)
the Series M Preferred Stock remains
outstanding or, i
n the
case of
any
such
merger or consolidation with
respect
to which the
Company i
s not the
surviving or resulting entity, i
s converted into or exchanged for preference securities
o
f
the
surviving or resulting entity or its ultimate
parent,
and (
y
)
such Series M Preferred Stock
remaining outstanding or such
preference securities, as the case
may be, have such rights,
preferences, privileges
and
voting powers,
taken as a whole, as are not materially less favorable
to the holders thereof than the rights, preferences, privileges and
voting powers
of the Series M
Preferred Stock, taken as a whole;
provided, however, that
any
increase
i
n the amount of the authorized or issued Series M
Preferred Stock or authorized
preferred
stock or the creation and issuance, or an increase
i
n
the authorized or issued amount, of other series
o
f
preferred stock
ranking equally
with and/ or
junior to the Series M Preferred Stock with
respect
to the
payment
of dividends (whether
such
dividends are cumulative or non- cumulative) and/ or the distribution
o
f
assets
upon
the
Companys liquidation, dissolution or winding up
will not be deemed to adversely affect the
voting powers, preferences or special rights
of the Series M Preferred stock and,
notwithstanding 23B. 10.040( 1
)
(
a
)
,
(
e
)
or
(
f
)
of the Revised Code of
Washington
or
any
other
provision
of
Washington law, holders of Series M Preferred Stock will have no right
to vote on
such an increase, creation or issuance.
(
d
)
I
f
an amendment, alteration, repeal,
share
exchange, reclassification,
merger or consolidation described above would
adversely
affect one or more but not all series
of
preferred
stock with like
voting rights (including
the Series M Preferred Stock for this
-10-
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002181.00011
Return
purpose),
then
only
the series affected and entitled to vote shall vote as a class
i
n lieu of all
such series of
preferred
stock.
Section
9
.
Certificates The
Company may
at its
option
issue the Series M Preferred
Stock without certificates.
THIRD: This amendment does not
provide
for an exchange,
reclassification or
cancellation of
any
issued shares.
FOURTH: The date of this amendments adoption i
s
May 23, 2007.
FIFTH: This amendment
t
o the Amended and Restated Articles of
Incorporation was
duly adopted by
the Board of Directors of the
Company.
SIXTH: No shareholder action was required.
11
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002181.00012
Return
EXECUTED this 23~
day
of
May,
2007.
By:
INC.
Title:
- 12 -
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002181.00013
Return
WaMu
~tm
4
~
$
1
,
ooo, ooo, ooo
Washington
Mutual Preferred
Funding
Trust IV
Fixed- to-Floating Rate Perpetual Non- cumulative Trust Securities
Automatically Exchangeable
in
Specified
Circumstances into
Depositary
Shares
representing
Preferred Stock
o
f
Washington Mutual, Inc.
The Fixed-to-Floating Rate Perpetual Non- cumulative Trust Securities, liquidation preference $100,000 per security (each, a Trust Security,
and collectively, the Trust Securities), o
f
Washington Mutual Preferred Funding Trust IV, a Delaware statutory trust (the Trust), offered hereby
represent undivided beneficial interests in a like amount o
f
Fixed-to-Floating Rate Perpetual Non- cumulative Preferred Securities, Series 2007- B,
liquidation preference $1,000 per security (the Series 2007- B Company Preferred Securities), o
f
Washington Mutual Preferred Funding LLC, a
Delaware limited liability company (the Company). The Trust will have no assets other than the Series 2007- B Company Preferred Securities. The
Trust wilt
pass through dividends paid and redemption and liquidation payments made
b
y the Company on the Series 2007- B Company Preferred
Securities as distributions and redemption and liquidation payments On the Trust Securities. The Companys material assets consist of indirect
interests i
n
mortgages, mortgage- related assets Originated or acquired by Washington Mutual Bank
(

WMB), cash and other permitted investments


as described herein.
Dividends on the Series 2007- B Company Preferred Securities will be payable i
f
,
when, and as declared by the Companys Board o
f
Managers out of legally available funds, at an annual rate of 9.75% tO, but not including December15, 2017, and 3-Month USD LIBOR plus 4.723%
thereafter, on the liquidation preference per security, quarterly i
n arrears on March 15, June 15, September 15 and December 15 of each year,
commencing on December 15, 2007, or, i
n each case, the next Business Day i
f
any
such
day i
not a Business Day (each, aDividend Payment
Date). Dividends are non- cumulative, which means that holders will not receive dividends i
f
they are not declared i
n the applicable quarter.
I
f the Office of Thrift Supervision ( together with any successor regulator, the OTS) so directs following the occurrence of an Exchange
Event as described herein, each Trust Security will be automatically exchanged for depositary shares representing a like amount of Washington
Mutual, Inc. s
(

WMI) Series N Perpetual Non- cumulative Fixed-to-Floating Rate Preferred Stock.


The Series 2007- B Company Preferred Securities will be redeemable, i
n whole or i
n
part,
at the option of the Company on the Dividend
layment Date occurring in December 2017 and each tenth anniversary thereafter (each a Ten-Year Datd) at a redemption price equal to the sum
of (
i
) $1,000per Series 2007- B Company Preferred Security plus (
i
i
)
any
declared and unpaid dividends to the redemption date. The Series 2007- B
Company Preferred Securities will be redeemable,
in whole but not i
n
part, at the option of the Company on any Dividend Payment
Date that i
s
not
a Ten-Year Date upon the occurrence of a Tax Event, an Investment Company Act Event, a Rating Agency Event or a Regulatory Capital Event
(each as described herein) at a redemption price equal t
o the sum of (
x
)
$1,000 per Series 2007- B Company Preferred Security plus (
y
)
any
declared and unpaid dividends to the redemption date plus (
z
)
i
f such event and related redemption occur prior to the Dividend Payment Date i
n
December 2017, a U. S. Treasury- based make- whole amount. The Company may also redeem the Series 2007- B Company Preferred Securities
on any Dividend Payment Date that i
s not a Ten-Year Date, whether before or after December 2017, at a redemption price equal to the sum o
f
(
i
) $1,000 per
2007- B Company Preferred Security plus (
i
i
) any declared and unpaid dividends to the redemption date plus ( iii) a make- whole
amount, which will be a U. S. Treasury- based make- whole amount for
any redemption prior to December 2017 or a 3-Month USD LIBOR- based
make- whole amount for
any redemption
after December 2017. I
n each case, the redemption price will be calculated without accumulation of
any
undeclared dividends with respect to Dividend Payment Dates prior t
o the redemption date. I
n addition, the Companys right to redeem the
Series 2007- B Company Preferred Securities prior to October 25, 2017 i
s also limited by its obligations set forth i
n the Replacement Capital
Covenant described i
n this offering circular. The proceeds o
f
any such redemption will be used to redeem a like amount of Trust Securities. Any
redemption of the Series 2007- B Company Preferred Securities will be subject to the prior approval of the OTS.
The Trust Securities will be issued only i
n book- entry form. Each individual purchaser or group of affiliated purchasers that acquires Trust
Securities i
n the initial offering must acquire at least three Trust Securities having an aggregate liquidation preference of $300,000.
The Trust Securities will not be listed on any
securities exchange or automated dealer quotation system.
The securities offered hereby are not insured or guaranteed by the U. S. Federal Deposit Insurance Corporation or any other insurer
or
government agency
or instrumentality.
See Risk Factors beginning on page 20 for a description of the risk factors you should consider before you invest i
n the securities offered hereby.
Offering
Price: $100,000.00 per
Trust
Security
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U
.
S. SECURITIES ACT OF 1933, AS AMENDED
(THE
SECURITIES
ACr),
AND ARE BEING OFFERED AND SOLD ONLY TO PERSONS THAT ARE BOTH QUALIFIED INSTITUTIONAL BUYERS
(WITHIN
ThE
MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND QUALIFIED PURCHASERS ( WITHIN THE MEANING OF SECTION
2
(
A)(51) OF THE
U. S. INVESTMENT COMPANY ACT OF 1940, AS AMENDED ( THE INVESTMENT COMPANVACT)), IN RELIANCE ON AN EXEMPTION FROM REGISTRATION
PURSUANT TO RULE 144A. PROSPECTIVE PURCHASERS OF TRUST SECURITIES ARE HEREBY NOTIFIED THAT THE SELLER OF THE TRUST SECURITIES
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A. THE SECURITIES ARE
NOT TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS DESCRIBED UNDER NOTICE TO INVESTORS.
The Initial Purchasers expect to deliver the Trust Securities through the facilities o
f
The Depository Trust Company and Euroclear Bank
S
.
A./ N. V., as operator o
f
the Euroclear System, and Clearstream Banking, socit anonyme, as participants i
n The Depository Trust Company, i
n
each case against payment
in New York, New York, on or about October 25, 2007.
Sole Structuring Coordinator and Bookrunner
Goldman,
Sachs & Co.
Co- Managers
Credit Suisse Lehman Brothers
Morgan Stanley
Offering Circular dated October 18, 2007.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00001
Return
This
offering
circular
i
s confidential. You are authorized to use this
offering
circular
solely
for the
purpose
of considering the
purchase
of the securities described
i
n this
offering
circular. WMI, WMB,
University Street, Inc.
(

University Street),
the
Company,
the
Trust, Washington Mutual Home Equity
Trust I
(

Asset
Trust
I);
WAMU 2006- QA 1
(

Asset Trust II), WAMU 2007- Flex 1 ( Asset Trust III and,
together with Asset Trust I and Asset Trust
I
I
,
collectively, the Asset Trusts), and other sources
identified herein have provided the information contained
i
n this offering circular. The Initial Purchasers
make no representation or warranty, express or implied, as to the accuracy or completeness of such
information, and nothing contained
i
n this offering circular
i
s
,
or shall be relied
upon as, a promise or
representation by the Initial Purchasers. You
may
not reproduce or distribute this offering circular, i
n
whole or i
n part, and you may not disclose any of the contents of this offering circular or use any
information herein for any purpose other than considering the purchase o
f
the Trust Securities. You
agree to the foregoing
b
y
accepting delivery of this offering circular.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY UNITED
STATES FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FUR
THERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR
DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CON
TRARY IS A CRIMINAL OFFENSE.
The distribution of this offering circular and the offering and sale of the securities
i
n certain
jurisdictions may be restricted by law. WMI, WMB, University Street, the
Company,
the Trust, the
Asset Trusts and the Initial Purchasers
require persons
into whose
possession
this
offering
circular
comes to inform themselves about and to observe
any
such restrictions. This
offering
circular does
not constitute an offer of, or an invitation to purchase, any
of the securities
i
n
any jurisdiction i
n which
such offer or invitation would be unlawful.
Notwithstanding anything herein to the contrary, investors may disclose
t
o
any and all persons,
without limitation
o
f
any kind, the United States federal or state income tax treatment and tax structure
o
f
the offering and all materials
o
f
any kind (including opinions or other tax analyses) that are provided
to the investors relating to such tax treatment and tax structure. However, any
information relating to
the United States federal income tax treatment or tax structure shall remain confidential (and the
foregoing sentence shall not apply) to the extent reasonably necessary
to enable
any person
to
comply with applicable securities laws. For this purpose, tax structure means any facts relevant t
o
the United States federal or state income tax treatment of the offering but does not include information
relating t
o the identity
o
f
the issuer
o
f
the securities, the issuer
o
f
any assets underlying the securities,
or any of their respective affiliates that are offering the securities.
No
person
has been authorized to give any
information or to make
any representations other
than those contained
i
n this offering circular, and, i
f given or made, such information or representa
tions must not be relied
upon as having been authorized
b
y
any o
f
WMI, WMB, University Street, the
Company, the Trust or any Asset Trust. Neither the delivery
o
f
this offering circular nor any sale
hereunder will create, under any circumstances, any implication that there has been no change i
n the
affairs
o
f
WMI, WMB, University Street, the Company, the Trust orany Asset Trust since the date
hereof or that the information contained herein
i
s correct as
o
f
any time subsequent t
o its date.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00002
Return
NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLI~
CATION FOR A LICENSE HAS~ BEEN FILED UNDER CHAPTER 421- B OF THE--
NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMP
SHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A
PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY
DOCUMENT FILED UNDER RSA 421- B IS TRUE, COMPLETE AND NOT MIS
LEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR
EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS
THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL
TO, ANY PERSON, SECURITY OR TRANSACTION. IT 1S UNLAWFUL TO MAKE,
OR CAUSE TO BE
MADE,
TO ANY PROSPECTIVE
PURCHASER,
CUSTOMER
OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS
OF THIS PARAGRAPH.
IN CONNECTION WITH THIS OFFERING, GOLDMAN, SACHS & CO., MAY OVER- ALLOT OR
EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE
SECURITIES OFFERED HEREBY AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE
PREVAIL FOR A LIMITED PERIOD OF TIME AFTER THE ISSUE DATE. HOWEVER, THERE MAY

BE NO OBLIGATION ON
GOLDMAN,
SACHS &
CO.,
TO DO THIS. SUCH STABILIZING,
IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME, AND MUST BE BROUGHT TO AN, END
AFTER A LIMITED PERIOD.
INDEX OF TERMS
An index of terms used
i
n this
offering
circular with
specific meanings appears on the inside back
cover of this
offering
circular.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00003
Return
NOTICE TO INVESTORS
Because of the
following restrictions, purchasers are advised to consult legal counsel prior to
making~ any offer, purchase~ resale,
p
/
edge or other transfer of the securities- offered
hereby.-
Representations of Purchasers
Each purchaser of Trust Securities
(including
the
registered holders and beneficial owners
o
f
the
Trust Securities as they
exist from time to~ time, including as a result
o
f
transfers) will be deemed to
have represented and agreed as follows,
i
n each case as of the time
o
f
purchase:
(
A
)
the
purchaser (
I
)
i
s a qualified institutional
buyer
within the meaning of Rule 1 44A
promulgated under the Securities Act (a
Qualified Institutional Buyer), (
i
i
)
i
s aware that the
Trust Securities have not been and will not be
registered
under the Securities Act and that the
sale of the Trust Securities to
i
t
i
s being made
i
n reliance on Rule 144A or another exemption
from the registration requirements o
f
the Securities Act and (
i
i
i
)
i
s acquiring such Trust Securities
for its own account or the account c4~ one
or more qualified institutional buyers;
(
B
)
the purchaser (
i
) i
s a qualified purchaser wit hin the meaning
of Section
2
(
a)(51) o
f
the
Investment Company
Act and the rules and
regulations
thereunder
(a
Qualified Purchaser),
(
i
i
)
i
s aware that the Trust will not be registered under the Investment Company
Act
i
n reliance
on the exemption set forth
i
n Section
3
(
c)(
7
)
thereof and
(
i
i
i
)
i
s
acquiring
such Trust Securities for
its own~ account or the account of one or more qualified purchasers as to which the
purchaser
exercises sole investment discretion, as the case may be;
(
C
)
(
i
)
either (
a
)
the purchaser i
s not (
x
)
a
n
employee benefit plan as defined
i
n
Section
3
(
3
)
o
f
the Employee Retirement Income
Security Act
o
f
1974, as amndOd
(

ERISA)
that
i
s subject to Title I
o
f
ERISA, (
y
)
a plan, account or other arrangement that
i
s
subject to
Section 4975
o
f
the Internal Revenue Code of 1986, as amended (the Code), or (
z
)
any entity
whose underlying assets include plan assets of
any o
f
the foregoing
b
y reason
o
f
investment
by an employee
benefit
plan or other. plan i
n such~
entity (each
o
f
the foregoing, a Benefit Plan
Investor), or (
b
)
the purchaser i
s an insurance
company general account that represents,
warrants and covenants that, at the time
o
f
acquisition
and
throughout
the
period i
t holds the
securities, (
x
)
i
t
i
s
eligible
for and meets the requirements of Department o
f
Labor Prohibited
Transaction Class
Exemption 95- 60, (
y
) less than 25% of the assets
o
f
such
general account are
(
o
r
represent) assets of, a Benefit Plan Investor and (
z
)
i
t
i
s not a person who has discretionary
authority or control with respect to the assets
o
f
the, Trust or any person
who
provides
investment
advice for a fee
( direct or indirect)
with respect to such assets, or any
affiliate of such a person
and would not otherwise be excluded under 29 C.F.
R
.
2510.3- 101( f)(
1
)
and (
i
i
) either (
a
)
the
purchaser i
s not a governmental plan, foreign plan, church plan or other plan subject t
o law that
i
s substantially similar to the Section 406
o
f
ERISA or Section 4975
o
f
the Code
(
Similar Law)
or (
b
)
its purchase and holding of the Trust Securities will not constitute or result
i
n a non- exempt
violation of Similar Law;
(
D
)
the purchaser
i
s not purchasing the Trust Securities with a view to the resale,
distribution or other disposition
thereof
i
n violation of the Securities Act;
(
E
)
neither the purchaser nor
any
account for which the purchaser i
s acquiring the
Trust Securities will hold such Trust Securities for the benefit
o
f
any other person
and the
purchaser
and each such account will be the sole beneficial owners thereof for all purposes and
will not sell participation interests
i
n the Trust Securities or enter into any other arrangement
pursuant t
o which any other person
will be entitled to an interest
i
n the distributions on the
Trust Securities;
I
I
I
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00004
Return
(
F
)
the certificates
evidencing the Trust Securities will bear a legend to the following
effect:
THIS SECURITY IS ONE OF THE FIXED-TO-FLOATING RATE PERPETUAL NON-
CUMULATIVE TRUST SECURITIES
( TRUST SECURITIES)
ISSUED BY WASHINGTON
MUTUAL PREFERRED FUNDING TRUST IV (THE TRUST).
THE ISSUER OF THIS
SECURITY HAS NOT BEEN REGISTERED AS AN INVESTMENT COMPANY UNDER
THE U. S. INVESTMENT COMPANY ACT OF 1940, AS AMENDED
(THE
iNVESTMENT
COMPANYAC7),
AND THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
U. S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES
ACT),
AND
NEITHER THIS SECURITY NOR ANY BENEFICIAL INTERESTS HEREIN MAY BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A PERSON
WHO
I
S BOTH A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT ( QUALIFIED INSTITUTIONAL BUYER)
AND A QUALIFIED PURCHASER WITHIN THE MEANING OF SECTION
2
(
a)(51) OF
THE INVESTMENT COMPANY ACT AND THE RULES AND REGULATIONS THEREUN
DER ( QUALIFIED PURCHASER) ACQUIRING FOR ITS OWN ACCOUNT OR THE
ACCOUNT OF A PERSON WHO
I
S BOTH A QUALIFIED INSTITUTIONAL BUYER AND A
QUALIFIED PURCHASER (AN ELIGIBLE
PURCHASER)
AND EACH SUCH PERSON
AND ACCOUNT FOR WHICH SUCH PERSON IS PURCHASING (
A
)
IS NOTA BROI< ER
DEALER THAT OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN $25
MILLION IN SECURITIES OF ISSUERS THAT ARE NOT ITS AFFILIATED PERSONS,
(
B
)
IS NOTA PLAN REFERRED TO IN PARAGRAPH
(a)(1)(i)(
D
)
OR
(a)(1)(i)(
E
)
OF
RULE 144A, OR A TRUST FUND REFERRED TO IN PARAGRAPH
(a)(1)(i)(
F
)
OF
RULE 144A THAT HOLDS THE ASSETS OF SUCH A PLAN, IF INVESTMENT DECI
SIONS WITH RESPECT TO THE PLAN ARE MADE BY THE BENEFICIARIES OF SUCH
PLAN, (
C
)
WAS NOT FORMED FOR THE PURPOSE OF INVESTING IN THE TRUST,
(
D
)
WILL HOLD AT LEAST $300,000 LIQUIDATION PREFERENCE OF TRUST SECURI
TIES (
i
.
e
.
,
AT LEAST THREE TRUST SECURITIES) AND, IF IT TRANSFERS ANY
INTEREST IN ANY TRUST SECURITY, WILL TRANSFER AT LEAST $100,000 LIQUIDA
TION PREFERENCE OF TRUST SECURITIES (
i
.
e
.
,
AT LEAST ONE TRUST SECURITY)
I
N THE CASE OF EACH INITIAL INVESTOR, AND WILL HOLD AND TRANSFER AT
LEAST $100,000 LIQUIDATION PREFERENCE OF TRUST SECURITIES (
i
.
e
.
,
AT LEAST
ONE TRUST
SECURITY) IN THE CASE OF EACH SUBSEQUENT INVESTOR AND
(
E
)
UNDERSTANDS THAT THE TRUST MAY RECEIVE A LIST OF PARTICIPANTS
HOLDING POSITIONS IN THIS SECURITY FROM ONE OR MORE BOOK- ENTRY
DEPOSITARIES. EACH PURCHASER OF THIS SECURITY OR ANY BENEFICIAL INTER
ESTS HEREIN WILL BE DEEMED TO REPRESENT THAT IT AGREES TO COMPLY
WITH THE TRANSFER RESTRICTIONS SET FORTH HEIREIN AND IN THE AMENDED
AND RESTATED TRUST AGREEMENT OF THE TRUST
(THE TRUSTAGREEMENT),
AND WILL NOT TRANSFER THIS SECURITY OR ANY BENEFICIAL INTERESTS
HEREIN EXCEPT TO AN ELIGIBLE PURCHASER WHO CAN MAKE THE SAME REPRE
SENTATIONS AND AGREEMENTS ON BEHALF OF ITSELF AND EACH ACCOUNT FOR
WHICH IT IS PURCHASING~ ANY PURPORTED TRANSFER OF THIS SECURITY OR
ANY BENEFICIAL INTERESTS HEREIN THAT IS IN BREACH, AT THE TIME MADE, OF
ANY TRANSFER RESTRICTIONS SET FORTH HEREIN OR IN THE TRUST AGREE
MENT WILL BE VOID AB INITIO.
I
F AT ANY
T! ME
THE TRUST DETERMINES
I
N GOOD
FAITH THAT A HOLDER OR BENEFICIAL OWNER OF THIS SECURITY OR BENEFICIAL
INTERESTS HEREIN
I
S IN BREACH, AT THE TIME GIVEN, OF ANY OF THE TRANS
FER RESTRICTIONS SET FORTH HEREIN, THE TRUST SHALL CONSIDER THE
ACQUISITION OF THIS SECURITY OR SUCH BENEFICIAL INTERESTS VOID, OF NO
FORCE AND EFFECT AND WILL NOT, AT THE DISCRETION OF THE TRUST, OPERATE
TO TRANSFER ANY RIGHTS TO THE TRANSFEREE NOTWITHSTANDING ANY
INSTRUCTIONS TO THE CONTRARY TO THE TRUST, ITS AGENT FOR REGISTRATION
i
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OF TRANSFER, EXCHANGE OR PAYMENT (THE TRANSFER AGENT), OR ANY
OTHER INTERMEDIARY. IN ADDITION~ THE TRUST OR THE TRANSFER AGENT MAY
REQUIRE SUCH ACQUIRER OR BENEFICIAL OWNER TO SELL THIS SECURITY OR
SUCH BENEFICIAL- INTERESTS TO AN ELIGIBLE PURCHASER:~
NO SECURITY MAY BE PURCHASED OR TRANSFERRED TO: (
I
) AN EMPLOYEE
BENEFIT PLAN AS DEFINED IN SECTION
3
(
3
)
OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED
(

ERISA), THAT
I
S SUBJECT TO
TITLE I OF ERISA
U
)
A PLAN, ACCOUNT OR OTHER ARRANGEMENT THAT
I
S
SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE CODE), OR ( III) ANY ENTITY WHOSE UNDERLYING ASSETS.
INCLUDE PLAN ASSETS OF ANY OF THE FOREGOING BY REASON OF INVEST
MENT BYAN EMPLOYEE BENEFIT PLAN OR OTHER PLAN IN SUCH ENTITY (EACH
OF THE FOREGOING, A BENEFIT PLAN
INVESTOR), EXCEPT FOR AN INSURANCE
COMPANY GENERAL ACCOUNT THAT REPRESENTS, WARRANTS AND COVENANTS
THAT, AT THE TIME OF ACQUISITION AND THROUGHOUT THE PERIOD IT HOLDS
THE SECURITIES, (
I
)
I
T
I
S ELIGIBLE FOR AND MEETS THE REQUIREMENTS OF
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 95- 60,
(
I
I
) LESS THAN 25% OF THE ASSETS OF SUCH GENERAL ACCOUNTARE
(OR
REPRESENT)
ASSETS OF A BENEFIT PLAN INVESTOR AND
(III)
IT
I
S NOTA PERSON
WHO HAS DISCRETIONARY AUTHORITY OR CONTROL WITH RESPECT TO THE
ASSETS OF THE TRUST OR ANY PERSON WHO PROVIDES INVESTMENT ADVICE
FOR A FEE (DIRECT OR INDIRECT) WITH RESPECT TO SUCH ASSETS, OR ANY
AFFILIATE OF SUCH A PERSON AND WOULD NOT OTHERWISE BE EXCLUDED
UNDER 29 C.ER. 251 0.3- 101 (F)(1).
I
N ADDITION, EACH PURCHASER ORTRANS
FEREE OF. THIS SECURITY WILL BE REQUIRED TO REPRESENT AND WARRANT
(OR, IN CERTAIN CIRCUMSTAFJCES, WILL BE DEEMED TO REPRESENT AND WAR
RANT) THAT, FROM THE DATE OFACQUISITION AND THROUGHOUT THE PERIOD
OF HOLDING THIS SECURITY, EITHER
(
A
)
IT IS NOT A GOVERNMENTAL PLAN,
FOREIGN PLAN, CHURCH PLAN OR OTHER PLAN SUBJECT TO LAW THAT IS
SUBSTANTIALLY SIMILAR TO THE SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE
( SIMILAR LAW)
OR
(
B
)
ITS PURCHASE AND HOLDING OF THIS SECU
RITY WILL NOT CONSTITUTE OR RESULT IN A NON- EXEMPT VIOLATION OF SIMILAR
LAW.
UNLESS THiS SECURITY IS PRESENTED BYAN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
(
DTC),
TO THE
TRUST OR THE TRANSFER AGENT, AND ANY CERTIFICATE ISSUED
I
S REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
I
S REQUESTED BYAN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BYAN AUTHORIZED REPRE
SENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON
I
S WRONGFUL ! NASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
(
G
)
the purchaser and each account for which
i
t
i
s purchasing:
(
i
) i
s not a broker- dealer that owns and invests on a
discretionary
basis less than
$25 million in securities of unaffiliated issuers;
(
i
i
)
i
s not a participant- directed employee plan, such as a 401(
k
)
plan, as referred to
in paragraph ( a)(1)(i)(
D
)
or (a)(1)(i)(
E
)
o
f
Rule 144A, or a trust fund referred to
i
n paragraph
(a)(
1
)
(
i)(
F
)
of Rule 144A that holds the assets of such a plan;
(
i
i
i
) was not formed for the purpose o
f
investing i
n the Trust;
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(iv) will hold at least $300,000 liquidation preference of Trust Securities
(
i
. e., at least
three Trust
Securities) and,
i
f
i
t transfers
any
interest
i
n
any
Trust
Security,
will transfer at
least $100,000 liquidation preference of Trust Securities (
i
. e., at least one Trust Security) i
n
the case
o
f
each initial investor, and will hold and transfer at least $1 00,000 liquidation
preference of Trust Securities (
i
. e., at least one Trust Security) i
n the case of each
subsequent investor;
(
v
) will provide notice of the transfer restrictions described
i
n this Notice to Investors
to any subsequent transferees;
(vi) acknowledges that the Trust
may
receive a list
o
f
participants holding positions i
n
the Trust Securities from one or more book- entry depositaries; and
(vii) may
not transfer the Trust Securities or beneficial interests therein except to a
transferee who can make the same representations and agreements as set forth in this
Notice
t
o Investors and the Amended and Restated Trust Agreement
o
f
the Trust (the
Trust Agreement) on behalf of itself and each account for Which
i
t
i
s
purchasing.
The purchaser acknowledges that the Trust Securities are being offered only i
n a transaction not
involving any public offering
within the
meaning
of the Securities Act. The Trust Securities have not
been and will not be registered under the Securities Act and the Trust has not been and will not be
registered
under the Investment
Company Act, and,
i
f
i
n the future the purchaser decides to offer,
resell, pledge or otherwise transfer the Trust Securities or
any
interest therein, such Trust Securities or
interest
may
be offered, resold, pledged
or otherwise transferred
only
in accordance with the
legend
on such Trust Securities described above. The purchaser acknowledges that no representation i
s
made by the Trust, the
Company or the initial Purchasers as to the
availability o
f
any exemption under
the Securities Act or any state securities laws for resale of the Trust Securities.
Forced Sale of Securities
Any
transfer of Trust Securities
i
n breach
o
f
the transfer restrictions set forth
i
n this Notice to
Investors and the Trust
Agreement
will be of no force and effect, will be void ab initio, and will not
operate to transfer any rights to the transferee, notwithstanding any instructions to the contrary to the
Trust, its Transfer Agent or any
other intermediary.
The purchaser agrees
that
i
n the event that the Trust or its Transfer
Agent
determines
i
n good
faith that a holder or beneficial owner of the Trust Securities
i
s in breach, at the time given, of any of
the representations or agreements set forth above, the Trust shall consider the acquisition of the
Trust Securities or beneficial interests therein void,
o
f
no force and effect and will not, at the discretion
of the Trust, operate to transfer
any rights to the transferee
notwithstanding any instructions to the
contrary to the Trust, the Transfer
Agent or
any
other intermediary. In addition, the Trust or the
Transfer
Agent may
require such acquirer or beneficial owner to transfer such Trust Securities or
beneficial interests therein to a transferee
acceptable to the Trust who
i
s able to and who does make
all of the
representations
and
agreements set forth
i
n this Notice to Investors.
Pending such transfer,
such holder will be deemed not to be the holder of such Trust Securities for
any purpose, including but
not limited to receipt
of dividend and redemption payments on such Trust Securities or distributions
upon
the
liquidation
of the Trust, and such holder will be deemed to have no interest whatsoever
i
n
such Trust Securities except as otherwise
required to redeem or sell its interest therein as described
i
n this
paragraph.
Investment
Company
Act
In reliance on Section
3
(
c)(
7
)
under the Investment Company Act
(
Section
3
(
c)(7)), the Trust
has not registered as an investment company pursuant to the Investment Company Act. To rely on
Section
3
(
c)(7),
the Trust must have a reasonable belief that all purchasers
o
f
the Trust Securities
( including the Initial Purchasers and subsequent transferees) are qualified purchasers at the time of

v
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their purchase
o
f
such securities. The Trust will establish a reasonable belief for purposes o
f
Section
3
(
c)(
7
)
based
upon
the
representations
deemed made
b
y the
purchasers o
f
the securities as
set forth under

Representations
of Purchasers above, the covenants and
undertakings
of the
Trust referred to below and the- agreements o
f
the Initial Purchasers
relating to the private placement
of the securities
pursuant to Rule 144A referred to under Plan of Distribution.
Reminder Notices
Whenever the Trust sends an annual report or other periodic report to holders of the Trust Secu
rities,
i
t will also send a reminder notice (each, a Reminder Notice) to the holders of the Trust Secu
rities. Each Reminder Notice will state that (
i
)
each holder of a Trust
Security (
o
r
an interest in a
Trust Security) must be able to make the
representations set forth above
i
n
paragraphs (
B
)
and
(
G
)
under

Representations
of Purchasers (the
3
(
c)(
7
)
Representations), (
i
i
) the Trust Securities
(
o
r
interests
i
n the Trust Securities) are transferable
only to purchasers deemed to have made the
3
(
c)(
7
)
Representations
and to have satisfied the other transfer restrictions
applicable
to the
Trust Securities, (
i
i
i
)
i
f
any prospective transfer9e of the Trust Securities (
o
r
an interest
i
n the
Trust Securities) i
s determined not to be a qualified purchaser, then the Trust will have the right
(exercisable
i
n its sole discretion) to refuse to honor such transaction and (iv) i
f
any security holder (
o
r
any
holder
o
f
an interest
i
n a security) i
s determined not
t
o be a qualified purchaser, then the Trust will
have the right (exercisable i
n its sole discretion)
t
o treat the transfer
t
o such purchaser as null and
void ab initio and require such purchaser to sell all of its securities (and all interests therein) to a
transferee designated by the Trust at the then current market
price
therefor. The Trust will send a
copy
o
f
each annual or other
periodic report (and each Reminder Notice) to DTC with a request that
participating organizations i
n DTC
( DTC Participants)
forward them to the
security
holders or holders
o
f
an interest
i
n Trust Securities.
DTC Actions with
respect
to the Trust Securities
The Trust will direct DTC to take the following steps i
n connection with the Trust Securities:
to include the 3c7 marker and, in lieu of the GABS marker or otherwise, the GRLS marker
i
n the DTC 20- character
security descriptor, and the 48- character additional descriptor
for the
Trust Securities
i
n order to indicate that sales are limited to Qualified Purchasers;
to cause (
i
)
each
physical
DTC delivery order ticket delivered by DTC
t
o purchasers to contain
the 20-character security descriptors and (
i
i
) each DTC delivery order ticket delivered
b
y DTC
to purchasers i
n electronic form to contain the 3c7 and GALS indicators and the related
user manual for participants, which will contain a description of relevant restrictions;

t
o
send, on or prior t
o the closing date
o
f
this Offering, an Important Notice to all DTC
Participants i
n connection with this Offering ofthe Trust Securities. The Trust
may
instruct DTC
from time to time (but not more frequently
than
every
six
months) to reissue the
Important
Notice;
to include the Trust
i
n DTCs Reference Directory o
f
Section
3
(
c)(
7
)
offerings;
to include
i
n all confirms of trades
o
f
the Trust Securities in DTC, CUSIP numbers with a
fixed field attached to the CUSIP number that has the 3c7 and GRLS markers; and
to deliver to the Trust from time to time a list
o
f
all DTC
Participants holding an interest
i
n the

securities.
Euroclear Actions with respect to the Trust Securities
The Trust will instruct Euroclear Bank
S
.
A./
N
.
V., as operator of the Euroclear
System ( Euro
clear), to take the
following steps i
n connection with the Trust Securities:
to reference 1 44N3( c)(7) as part of the security name
i
n the Euroclear securities database;
vii
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i
n each daily securities balances report and daily transactions report
t
o Euroclear Participants
holding positions in the Trust Securities, to include 1
44A/
3
(
c)(7), i
n the securities name for the
Trust Securities;

periodically ( and
a
t
least
annually) t
o send
t
o the Euroclear Participants holding positions
i
n
the Trust Securities an electronic Important Notice outlining the restrictions applicable to
3
(
c)(
7
)
securities;
to deliver to the Trust from time to time, upon its request, a list
o
f
all Euroclear Participants
holding an interest i
n the Trust Securities; and

t
o include the
3
(
c)(
7
)
marker i
n the name
o
f
the Trust Securities i
n lists distributed
b
y Euroclear
monthly to its participants showing all securities accepted within the Euroclear securities
database.
Clearstream Actions with respect to the Trust Securities
The Trust will instruct Clearstream Banking, socit anonyme
(

Clearstream), t
o take the
following steps in connection with the Trust Securities:
to reference 144A/
3
(
c)(7) as part of the security name
i
n the Clearstream securities
database;

i
n each
daily portfolio report
and daily settlement
report
to Clearstream Participants holding
positions i
n the Trust Securities, to include 144A/
3
(
c)(7) i
n the securities name for the Trust
Securities;

periodically (and at least annually) to send to the Clearstream Participants holding positions i
n
the Trust Securities an electronic
Important
Notice
outlining
the restrictions
applicable to
3
(
c)(
7
)
securities;
to deliver to the Trust from time to time, upon its request, a list of all Clearstream
Participants,
holding an interest
i
n the Trust Securities; and
to include the
3
(
c)(
7
)
marker
i
n the name of the Trust Securities
i
n the continuously updated
list made available
b
y Clearstrearn to its participants showing a
l
l
securities accepted within the
Clearstream securities database and
t
o include the
3
(
c)(
7
)
marker
i
n the name
o
f
the
Trust Securities.
Bloomberg Screens, etc.
The Trust will request, from time to time, all third- party vendors
t
o include appropriate legends
regarding
Rule 144A and Section
3
(
c)(
7
)
restrictions on the Trust Securities on screens maintained
b
y
such vendors. Without limiting the foregoing,
the Initial Purchasers will request that Bloomberg, L.R
include the
following on each
Bloomberg screen containing information about the securities as
applicable:
the bottom of the Security Display page describing the Trust Securities should state: lssd
under 144A/ 3c7 and GRLS;
the Security Display page
for the Trust Securities should have a flashing red indicator stating
Additional Note Pg;
such indicator should link to an Additional
Security
Information
page,
which should state that
the Trust Securities are being offered
i
n reliance on the exception from registration under
Rule 144A
o
f
the Securities Act
o
f
1933, as amended
(the
Securities
Act), to persons that
are (
i
) qualified institutional buyers as defined
i
n Rule 144A under the Securities Act, and
(
i
i
) qualified purchasers as defined under Section
2
(
a)(51) o
f
the Investment Company Act
o
f
1940, as amended; and
vflI
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the Disclaimer
pages
for the Trust Securities should state that the securities have not been
and will not be
registered
under the Securities Act of 1933, as amended, and
Washington
Mutual Preferred Funding Trust IV has not been registered under the Investment Company
Act
o
f
1940, as amended
(the
Investment
Company Act),
and the Trust
Securitiesmay
not be
offered or sold absent an applicable exemption
from
registration requirements
and
any
such
offer and sale
o
f
these securities must be
i
n accordance with Section
3
(
c)(
7
)
of the Investment
Company Act.
CUSIP
The Trust will cause each CUSIP obtained for a Global Security to have anattached fixed
field that contains 3c7, GALS and 144A indicators.
Legends
The Trust will not remove the legend set forth
i
n

Representations of Purchasers
a
t
any time.
i
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SPECIAL NOTE REGARDING FORWARD- LOOKING STATEMENTS
This offering circular and the documents incorporated herein by reference contain certain
forward- looking statements ~within the meaning o
f
the Private Securities Litigation Reform Act of
1995 with respect to financial condition, results
o
f
operations and other matters. Statements
i
n this
offering circular, including those incorporated herein by reference, that are not historical facts are
forward- looking
statements for the
purpose o
f
the safe harbor
provided
b
y Section 21 E
o
f
the
Securities
Exchange
Act
o
f
1934, as amended (the Exchange Act) and Section 27A of the Securities
Act.
Forward-looking statements can be identified
by the fact that they do not relate strictly to historical
or current facts.
They
often include words, such as expects, anticipates, intends, plans,
believes, seeks, estimates or words of similar meaning, or future or conditional verbs, such as
will, should, would, could or may.
Forward-looking
statements provide WMIs or WMBs (
a
s
applicable) expectations or
predictions
of future conditions, events or results. They may include projections of the Companys revenues,
income, earnings per share, capital expenditures, dividends, capital structure or other financial items,
descriptions of managements plans or objectives for future operations, products or services, or
descriptions of assumptions underlying or relating to the foregoing. They are not guarantees of future
performance. By their nature, forward- looking statements are subject to risks and uncertainties. These
statements speak only as
o
f
the date made and WMI and WMB do not undertake to update them to
reflect changes or events that occur after that date. There are a number of significant factors that
could cause actual conditions, events or results
t
o differ materially from those described
i
n the
forward- looking statements
many
of which are beyond
WMIs or WMBs
(
a
s
applicable)
control or
ability
to
accurately
forecast or predict. The factors are generally described
i
n WMIs or WMBs (
a
s
applicable) most recent Form 10- K under the Table of Contents
entry
Risk Factors and the
heading
Factors That May Affect Future Results and Form 1 0-Q under the caption Cautionary Statements.
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WHERE YOU CAN FIND MORE INFORMATION
WMI files annual, quarterly
and current reports, proxy statements and other information with the
Securities and
Exchange
Commission
( the SEC).
You
may
read and
copy any
document that WMI
files with the SEC at the SECs public reference room
i
n Washington, D. C. Please ca! l the SEC at
1-800- SEC- 0330 for further information on the public reference room. In addition, WMIs SEC filings
are available
t
o the public a
t
the SECs web site at http:// www. sec. gov You can also inspect reports,
proxy statements and other information about WMI
a
t
the offices of the New York Stock Exchange,
20 Broad Street, New York, New York.
This
offering
circular
incorporates
b
y reference certain information that WMI files with the SEC.
The information incorporated by reference
i
s considered to be a part of this offering circular and
should be read with the same care. When WMI updates the information contained
i
n documents that
have been incorporated by reference
b
y
making future
filings
with the SEC, the information incorpo
rated by reference in this offering circular
i
s considered to be automatically updated and superseded.
I
n other words, in the case
o
f
a confiict or inconsistency between information with respect to WMI
contained
i
n this offering circular and information incorporated by reference into this offering circular,
you
should rely on the information contained
i
n the document that was filed later. WMI incorporates
b
y
reference the documents listed below and
any
documents
i
t files with the SEC
i
n the future under
Sections
13(a), 13(c), 14, or 15(
d
)
of the Exchange
Act until this Offering i
s completed:
Annual Report on Form 10- K filed on March
1
,
2007 relating t
o the year ended December 31,
2006;

Quarterly report
on Form 10-Q filed
May 10, 2007
relating
to the
quarter
ended March 31,
2007;

Quarterly report on Form 10- Q filed on August


9
,
2007
relating to the
quarter
ended June 30,
2007; and
Current Reports on Form 8-K filed or furnished, as the case
may
be, on January 22, 2007,
February
7
,
2007, March 14, 2007, April 23, 2007, May 30, 2007, July 18, 2007 (other than
information furnished under Item 2.02 including Exhibits 99.1, 99.2 and
99.3), September 13,
2007 and October 17, 2007, and Current
Report on Form 8-K/ A furnished on October 18,
2007.
WMB files annual, quarterly
and current reports
and other information with the OTS. You
may
read and
copy
these reports and other non- confidential information that WMB files with the OTS at the
OTSs offices at 1700 G Street, N. W., Washington,
D. C. 20552.
I
n addition, WMBs most recent
periodic filings
with the OTS are available to the investors at WMIs website at
http:// www. wamu. com/
i
r
and then
clicking
the Fixed Income button.
This offering circular incorporates by reference certain information that WMB files with the OTS.
The information
incorporated
b
y reference
i
s considered to be a part
of this
offering
circular and
should be read with the same care. When WMB updates the information contained
i
n documents that
have been
incorporated
b
y reference
b
y
making
future
filings
with the OTS, the information
incorpo
rated
by
reference
i
n this
offering
circular
i
s considered to be
automatically updated
and
superseded.
I
n other words,
i
n the case of a conflict or inconsistency between information with respect to WMB
contained
i
n this offering circular and information incorporated
b
y reference into this offering circular,
you should rely
on the information contained i
n the document that was filed later. WMB
incorporates
b
y reference the documents listed below and any documents
i
t files with the OTS
i
n the future under
Sections 13( a), 13( ), 14, or 15(
d
)
o
f
the Exchange
Act or regulations o
f
the OTS to substantially
similar effect until this Offering i
s completed:
Annual Report on Form 10- K filed on April
2
,
2007 relating to the year ended December 31,
2006;
xi
CONFIDENTIAL
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Quarterly Report on Form 10-0 filed


May 15, 2007
relating
to the
quarter
ended March 31,
2007;
Quarterly report on Form 10- 0 filed on August 14, 2007
relating to the
quarter
ended~ June 30,
2007; and
Current
Reports on Form 8-K filed or furnished, as the case
may
be, with the OTS on April 23,
2007 and
September 17, 2007.
This
offering
circular also
incorporates
herein
b
y reference the
publicly available portions of
quarterly reports regarding
WMBs financial condition and
operations
that WMB submits to the OTS
on OTS Form 1313 entitled Thrift Financial
Report ( each,
a Thrift Financial
Report) as of and for
the annual
period
ended December 31, 2004 and all
periods thereafter. Each Thrift Financial
Report
consists
o
f
a Consolidated Statement
o
f
Condition, Consolidated Statement
o
f
Operations,
Consoli
dated Cash Flow
Information,
Consolidated
Capital Requirements
and other
supporting
schedules as
o
f
the end of the
period t
which the
report
relates. The Thrift Financial
Reports are prepared i
n
accordance with regulatory instructions issued by the OTS. These
regulatory
instructions i
n
most, but
not all, cases follow
generally accepted accounting principles in the United States
(

GAAP) or the
opinions and statements of the Accounting Principles Board or the Financial
Accounting
Standards
Board. While the Thrift Financial Reports are supervisory and regulatory documents, not primarily
accounting documents, and do not
provide a complete range o
f
financial disclosure about WMB, the
reports
nevertheless
provide important
information
concerning
WMBs financial condition and operat
ing results. In
addition, WMBs Thrift Financial Reports are not audited. The non- confidential
portions
o
f
Thrift Financial
Reports
filed
by
WMB are on file with, and are publicly
available
upon
written
request,
to the Office of Thrift
Supervision, FOIA, 1700 G Street, N. W., Washington,
D. C. 20552,
Attention: Dissemination Branch and are also available at the U. S. Federal
Deposit
Insurance
Corporations (the FDIC) web site at http: llwww. fdic. gov
You
may request a copy o
f
these
filings,
other than an exhibit to a filing
unless that exhibit
i
s
specifically incorporated by reference into that filing, at no cost, by writing to or telephoning WMI at:
1301 Second Avenue
Seattle, Washington
98101
(206)
461- 2000
The
Company was formed on February 3
,
2006 and has elected a calendar
year
fiscal
year.
The
Independent Auditors Report with
regard
to the audited financial statements
( and
related
notes) o
f
the
Company
for the fiscal
year
ended December 31, 2006 and the unaudited financial statements
(and
related
notes) o
f
the
Company
for the six months ended June 30, 2007 are included as Appendix
A to
this
offering
circular. The
Company
has
agreed i
n its LLC
Agreement
to
produce audited annual
financial statements and unaudited interim financial statements and to make such financial statements
available to investors or prospective
investors
upon request.
The financial statements as of and for the
year
ended December 31, 2006 are the
Companys
first annual audited financial statements.
XII
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00013
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OFFERING CIRCULAR SUMMARY
The
following summary i
s
qualified
in its entirety by the detailed information
appearing
elsewhere
i
~ i
this
off~ ring circular, in
particular,
the information under the
headings Description
of the Trust Secu
rities, Description
of the Series 2007- B Company Preferred Securities, Description o
f
the Series N
WMI Preferred Stock and Description of the Depositary Shares~ which describe the terms and
conditions o
f
tha securities offered
hereby.
Introduction
The
Fixed-to-Floating
Rate Perpetual
Non-cumulative Trust Securities, liquidation preference
$100,000 per security (each, a Trust
Security~
and
collectively
Trust
Securities), are being
issued
by Washington
Mutual Preferred
Funding
Trust IV
(the Trust) i
n
a financing
transaction that raises
capital
for
Washington
Mutual Bank ( WMB).
WMB
i
s an indirect subsidiary
of
Washington Mutual,
Inc.
(

WMI). WMI and its affiliates are referred to herein as the WMI
Group~
The Trust will invest the proceeds
of the Trust Securities in a like amount of
Fixed-to-Floating
Rate
Perpetual
Non-cumulative Preferred Securities, Series 2007- B, liquidation preference $1,000 per
security (the Series 2007- B Company Preferred Securities), of Washington
Mutual Preferred
Funding
LLC, a Delaware limited liability company (the Company).
The Trust will have no assets other than
the Series 2007- B
Company
Preferred Securities. Dividends
paid
and
redemption
and
liquidation
payments made by the Company on the Series 2007- B
Company
Preferred Securities will
pass
through
the Trust as distributions on and redemption
and
liquidation payments on the Trust Securities.
The
Companys
material assets consist of direct or indirect interests
i
n
mortgages or mortgage- related
assets
originated or acquired
b
y
WMB,
cash and other
permitted
investments as described more
specifically
under
~

The
Company
Business of the
Company
Assets
o
f
the
Company,
Asset
Trust
I

, Asset Trust II and Asset Trust III.


The Trust Securities are being
offered
i
n reliance
upon
Rule 144A under the U. S. Securities Act
of 1933, as amended
(the
Securities
Act), only
to persons
who are qualified
institutional
buyers
within the
meaning
of 144A under the Securities Act
( each, a Qualified Institutional Buyer) and
qualified purchasers (each, a Qualified Purchaser)
within the
meaning
of Section
2
(
a)(51)
of the
U. S. Investment Company
Act of 1940, as amended
( the
Investment
Company Act). Resales of the
Trust Securities are subject
to restrictions as described under Notice to Investors.
WMB established the Company as its indirect
subsidiary
to facilitate financing transactions that
raise core capital
for WMB. The Series 2007- B Company Preferred Securities are the fifth series
o
f
preferred securities
t
o be issued by the Company.
The
Company
has
previously
issued:

I
n March 2006, $1,250,000,000 aggregate liquidation preference o
f
its Fixed-to-Floating
Rate
Perpetual Non-cumulative Preferred Securities
having an initial annual dividend rate o
f
6.534%
(the Series 2006- A Company Preferred Securities),
which were sold t
o
Washington
Mutual
Preferred
Funding Trust
I
, a Delaware statutory
trust
(

Trust I),
which
i
n turn issued
$1,250,000,000 liquidation preference o
f
its
Fixed- to-Floating
Rate
Perpetual
Non- cumulative
Trust Securities
(the
Trust I
Securities)
to investors;
Also
i
n March 2006, $750,000,000 aggregate liquidation preference
of its 7.25%
Perpetual
Non- Cumulative Preferred Securities
( the
Series 2006- B
Company
Preferred
Securities),
which were sold to
Washington
Mutual Preferred
Funding (Cayman)
I
Ltd., a Cayman
Islands
exempted company
limited
b
y shares ( WaMu Cayman),
which
i
n turn issued $750,000,000
liquidation preference
of its 7.25%
Perpetual
Non- cumulative Preferred Securities,
in two series
(the
WaMu
Cayman Securities),
to investors; and

I
n December 2006, $500,000,000 aggregate liquidation preference o
f
its
Fixed-to-Floating
Rate
Perpetual
Non- cumulative Preferred Securities, Series 2006- C, having an initial annual dividend
rate
o
f
6.665%
(the
Series 2006- C
Company
Preferred
Securities),
which were sold to
CONFIDENTIAL
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Washington
Mutual Preferred
Funding
Trust
I
I
,
a Delaware
statutory trust
(

Trust II),
which
i
n
turn issued $500,000,000 liquidation preference of its
Fixed- to-Floating
Rate
Perpetual
Non-
cumulative Trust Securities
( the
Trust
I
I
Securities) to investors.
In May 2007, $500,000,000 aggregate liquidation preference of its Fixed-to-Floating Rate
Perpetual
Non-cumulative Preferred Securities, Series 2007-
A
,
having an initial annual dividend
rate of 6.895%
(the
Series 2007- A
Company
Preferred Securities and, together
with the
Series 2006- A
Company
Preferred Securities, the Series 2006- B
Company
Preferred Securi
ties and the Series 2006- C
Company
Preferred Securities, the
Outstanding Company
Pre
ferred Securities, and the
Outstanding Company
Preferred Securities
together
with the
Series 2007- B
Company
Preferred Securities and
any
other
Parity Equity
Securities that
may
be issued on a future date, the
Company
Preferred
Securities),
which were sold to
Washing
ton Mutual Preferred Funding Trust
I
l
l
,
a Delaware
statutory
trust
(

Trust III),
which
i
n turn
issued $500,000,000 liquidation preference
of its
Fixed- to-Floating
Rate
Perpetual Non- cumu
lative Trust Securities (the Trust Ill Securities) to investors.
Under the Companys LLC Agreement, the
Companys
Board
o
f
Managers
has the
power
to
create and issue additional equity securities ranking pan passu with the Outstanding Company
Preferred Securities i
n terms
o
f
payment o
f
dividends or on Iiquidatidn o
f
the
Company ( called Parity
Equity
Securities
i
n the LLC
Agreement) without the consent o
f
the holders of the Outstanding
Company
Preferred Securities; provided,
that after
giving
effect to the issuance of
any Parity Equity
Securities the
Company
satisfies an asset test and a funds from
operations
test
( the FF0 Test) and
the
Company i
s not otherwise
i
n breach of
any
of its covenants set forth in the LLC
Agreement.
The
Series 2007- B
Company
Preferred Securities will be
Parity Equity
Securities with
respect
to the
Outstanding Company
Preferred Securities.
Therefore, on the
closing
date for this
Offering,
the
Company
will be
required to satisfy
the tests for issuance of the Series 2007- B
Company
Preferred
Securities as Parity Equity
Securities with
respect
to the
Outstanding Company
Preferred Securities.
See Description
of the Series 2007- B
Company
Preferred Securities
Ranking for a description of
those tests and the calculation
o
f
the
Companys compliance
with those tests.
I
n addition to the
Parity
Equity Securities, the Company may from time to time issue Junior Equity Securities subject to certain
limitations described herein.
The Office
o
f
Thrift
Supervision (together
with
any successor regulator,
the
OTS)
has confirmed
t
o
WMB that the Series 2007- B Company Preferred Securities and the Outstanding Company
Preferred Securities will constitute core
capital
of WMB under the OTSs
applicable regulatory capital
regulations.
I
f the OTS so directs
following
the occurrence of an Exchange Event,
each Trust
Security
will be
automatically exchanged (a
Conditional
Exchange)
for a like amount
o
f
Fixed-to-Floating
Rate
Depositary
Shares
( the Depositaly Shares)
each
representing
1/ 1000th of a share of WMIs Series N
Perpetual
Non- cumulative
Fixed-to-Floating
Rate Preferred Stock, no par
value and
liquidation prefer
ence $1,000,000 per
share
( the
Series N WMI Preferred
Stock), as described below
i
n this
summary
under

The
Offering
Conditional
Exchange. Upon a Conditional
Exchange,
the Trust I Securities,
the Trust
I
I
Securities, the Trust
I
l
l Securities and the WaMu
Cayman Securities will also be
automatically exchanged,
but for
depositary
shares
representing
different series
o
f
WMIs
preferred
stock, having substantially equivalent terms (with certain exceptions) as to dividends, liquidation
preference
and
redemption preference as the Outstanding Company
Preferred Securities owned by
Trust
I
, Trust
I
I
, Trust
I
I
I
or WaMu
Cayman, as applicable.
This
offering
circular uses the term like amount
i
n
describing the number of Series 2007- B
Company
Preferred Securities
i
n which a holder
o
f
Trust Securities has a beneficial interest and
i
n
describing the number
o
f
Depositary
Shares for which the Trust Securities will be exchanged upon a
Conditional
Exchange.
The term like amount means:
when
describing
the number o
f
Series 2007- B
Company
Preferred Securities
i
n which a holder
o
f
Trust Securities has a beneficial interest, the number
o
f
Series 2007- B
Company
Preferred
2
CONFIDENTIAL
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Securities that has the same
aggregate liquidation preference as the Trust Securities
t
o which
the reference
i
s
being
made
(
e
.
g., 1,000 Series 2007- B
Company
Preferred Securities with an
aggregate liquidation preference
o
f
$1,000,000 are a like amount for 10 Trust Securities
having an aggregate liquidation preference o
f
$1,000,000); and
when describing the number
o
f
Depositary Shares for which Trust Securities will be exchanged
upon a Conditional Exchange, a number
o
f
Depositary Shares each representing 1/ 1000th of
an interest
i
n one share
o
f
Series N WMI Preferred Stock, having a liquidation preference equal
to the liquidation preference of the Trust Securities that are being exchanged (
e
.
g., 1,000
Depositary
Shares
representing
Series N WMI Preferred Stock with an aggregate liquidation
preference o
f
$1,000,000 are a like amount for 10 Trust Securities
having an aggregate
liquidation preference of $1,000,000).
The
offering
of the Trust Securities and the related issuance
o
f
the Series 2007- B
Company
Preferred Securities are referred to herein as the Offering
3
CONFIDENTIAL
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FIex- 5
ARMS
Transfer4
If~ I~
~
New American Capital, Inc., not shown here, i
s WMBs direct parent.
(
2
)
Intermediate subsidiaries of WMB not shown.
(
3
)
The Series 2006- A, 2006- B, 2006-C and 2007- A Company Preferred Securities are held by Trust
I
, WaMu Cayman, Trust II,
and Trust Ill, respectively.
(
4
)
Transfer of Flex-5 ARMs by WMB to the Company. I
n addition, a portion
of the Flex-5 ARMs will be contributed
b
y
University
Street to the Company.
(
5
)
The Series 2007- B Company Preferred Securities will be transferred to WMB
i
n exchange for a contribution
o
f
a portfolio of
Flex-5 ARMs. WMB will then sell the Series 2007- B Company Preferred Securities to the Trust.
The following diagram outlines the relationship
among
WMI, WMB, University Street, the
Company,
the Trust, Asset Trust
I
, Asset Trust
I
I
, Asset Trust
I
l
l
, the Outstanding Company Preferred
Securities and the holders of the Trust Securities:
4
WMB1
Proceeds of Sale of Trust
Securities
100% Common
Interest
C,
0
0.
0
DC
C)
5)
(0
CD
Company3
Series 2007- B
Company
Preferred
Securities5
Trust
Securities
The Trust
~
1
.
4
CONFIDENTIAL
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Return
The Trust
Washington Mutual Preferred Funding Trust IV
i
s a statutory trust created under the Delaware
Statutory
Trust Act on August
9
,
2007 for the
purposes set forth below- under The Trust. The
Series 2007- B
Company
Preferred Securities will be the
only assets of the Trust. Under the
Trust
Agreement,
the Trust
i
s
prohibited
from
issuing any
securities other than the Trust Securities.
Subject to the limitations and
assumptions
described under Certain U. S. Federal IncomeTax
Considerations, the Trust intends
t
o be treated as a grantor
trust for United States federal income tax
purposes,
with the result that holders of Trust Securities are expected to be treated as beneficial
owners
o
f
Series 2007- B
Company
Preferred Securities for United States federal income tax
purposes.
The
Company
Washington Mutual Preferred Funding LLC
i
s a Delaware limited liability company formed on
February
3
,
2006. The LLC Agreement generally limits the Companys activities to (
i
) issuing (
a
)
the
Series 2006- A Company Preferred Securities, which were sold
t
o Trust
I
, (
b
)
the Series 2006- B
Company
Preferred Securities, which were sold to WaMu
Cayman, (
c
)
the Series 2006- C
Company
Preferred Securities, which were sold to Trust
I
I
, (
d
)
the Series 2007- A
Company
Preferred Securities,
which were sold to Trust Ill, (
e
)
other Parity Equity Securities such as the Series 2007- B Company
Preferred Securities, subject to the limitations described
i
n this
offering circular, (
f
)
the common
securities of the
Company ( the Company
Common
Securities) t
o
University Street, Inc., an indirect
subsidiary
of WMB
(
University Street)
and
(
g
)
additional Junior Equity Securities, subject to certain
limitations described
i
n this
offering circular, (
i
i
) acquiring and holding Eligible Investments, including
the Asset Trust I Class A Trust Certificate, the Asset Trust
I
I Class A Trust Certificate, the Asset Trust
I
l
l
Class A Trust Certificate and the Asset Trust
I
I
I Class A Trust Certificate
(which,
other than Permitted
Investments, will be the sole
Eligible
Investments of the Company immediately
after the completion of
this Offering) i
n accordance with the investment policy as described
i
n

Business
o
f
the
Company
Assets of the Company and (
i
i
i
) performing functions
necessary
or incidental thereto.
The Series 2007- B Company Preferred Securities will rank pan passu with the Outstanding
Company
Preferred Securities as to dividends and
upon liquidation of the
Company.
The terms of the
Series 2007- B Company Preferred Securities will be substantially identical to the terms of the
Outstanding Company
Preferred Securities, other than with
respect t
o the rate
applicable
to dividends,
redemption dates and redemption prices.
University
Street owns all of the Company
Common Securities. The
Eligible
Investments owned
b
y the
Company
from time to time will
generate
net income for
payment
b
y the
Company
to the Trust
as dividends on the Series 2007- B Company Preferred Securities
(and consequently for pass through
b
y the Trust as distributions to the holders of the Trust Securities), to holders of other series of
preferred securities of the Company as distributions on such series (including to Trust
I
, Trust
I
I
,
Trust
H
I
and WaMu
Cayrnan as holders of the
Outstanding Company
Preferred Securities), and to
University Street to make distributions on, or to partially redeem, the Company Common Securities.
When used
i
n this offering circular with respect to the
Company
Common Securities or other Junior
Equity Securities, the term dividend refers
t
o
payments by the Company as a distribution on, or to
redeem a like amount of, the Company Common Securities or other Junior Equity Securities.
Subject to the limitations and assumptions described under Certain U. S. Federal Income Tax
Considerations, the Company intends to be treated as a partnership ( other than a publicly traded
partnership
taxable as a corporation) for United States federal income tax
purposes
and will receive
the opinion of Mayer Brown LLP to the effect that, for United States federal incme tax purposes, the
Company will not be treated as an association taxable as a
corporation or as a publicly traded
partnership taxable as a corporation.
5
CONFIDENTIAL
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The
Company i
s
managed
b
y a Board
o
f
Managers.
The
Companys
Board of
Managers
has
three members, one of whom
i
s not, and has not been during the preceding five
years,
an officer or
employee o
f
WMI or any
affiliate
o
f
WMI, other than a financing subsidiary
thereof
(the Independent
Manager).
- - -
Conveyances
of the Mortgage Loans
In connection with the
February
2006
offering o
f
the Series 2006- A
Company
Preferred Securi
ties and Series 2006- B
Company
Preferred Securities, WMB conveyed a portfolio
o
f
first lien, closed-
end, fixed rate home equity loans
(
HELs) to the Company i
n
exchange
for 100%
o
f
the Series 2006- A
Company
Preferred Securities and Series
2006- B Company
Preferred Securities.
Concurrently
with
this transfer
b
y WMB, University
Street conveyed a portfolio of HEL5 to the Company i
n exchange for
100%
o
f
the Company Common Securities. The portfolio conveyed
b
y WMB and University Street to
the Company and subsequently transferred to Asset Trust I consisted of
approximately
$5,389,459,150 o
f
HELs
i
n the aggregate, calculated as
o
f
January 31, 2006. The Company conveyed
100%
o
f
the HELs that i
t received to Asset Trust I
i
n exchange for the interests
i
n Asset Trust I
represented by the Class A Asset Trust Certificate of Asset Trust I (the Asset Trust / Class A
Trust Certificate)
and a residual certificate
( the
Asset Trust I Class R Trust
Certificate),
which the
Company
transferred to WMB. WMB then sold the Series 2006- A Company Preferred Securities and
Series 2006- B Company Preferred Securities for cash to Trust I and WaMu
Cayman, respectively.
I
n connection with the December 2006 offering of the Series 2006- C
Company Preferred
Securities, WMB
conveyed a portfolio o
f
payment option adjustable rate
mortgages
(

Option ARMs)
to the Company i
n exchange for 100% of the Series 2006- C
Company
Preferred Securities, and
University
Street contributed a pool
of Option ARMs to the Company as a capital contribution. The
aggregate outstanding principal balance of all Option
ARMs contributed to the
Company
b
y WMB and
University
Street and
subsequently
transferred to Asset Trust
I
I was
approximately $2,899,877,211 in
the aggregate, calculated as of November 14, 2006. The Company conveyed 100% of the Option
ARMs that
i
t received to Asset Trust
I
I
i
n
exchange for interests
i
n Asset Trust
I
I
represented
b
y the
Class A Asset Trust Certificate of Asset Trust
I
I
( the Asset Trust
I
I Class A Trust Certificate) and a
residual certificate (the Asset Trust
I
I Class R Trust Certificate), which the
Company transferred to
WMB. WMB then sold the Series 2006- C Company Preferred Securities for cash to Trust
I
I
.
As
o
f
September 30, 2007, the Companys assets consisted of approximately $4,083,661,672 of
HELs
i
n the aggregate, held through Asset Trust
I
; $1,664,792,954 of Option ARMs in the aggregate,
held through Asset Trust
I
I
; and $525 million of permitted investments held directly or held through
Asset Trust I or Asset Trust
I
I
, as the case
may
be. Since the March 2006 issuance
o
f
Company
Preferred Securities, the Company has paid to University
Street
approximately $272.4 million of cash
distributions and $2.217 billion
o
f
cash
redemption payments, i
n each case on the
Company
Common
Securities. The Companys source
o
f
funds for those dividends has been payments of interest and
principal received by the Company through
Asset Trust I on its HELs and Asset Trust
I
I on its
Option
ARMs.
Contemporaneously
with this
Offering,
WMB will
convey
a portfolio of
fixed/ floating
rate mort
gages ( Flex-5 ARMs) to the Company in exchange for 100%
o
f
the Series 2007- B Company
Preferred Securities and University Street will contribute a pool o
f
Flex-5 ARMs to the Company
as a
capital contribution. The portfolio o
f
Flex-5 ARMs
t
o be conveyed
b
y WMB to the Company will consist
o
f
approximately $1,000,000,000 outstanding principal amount of Flex- 5 ARMs
i
n the
aggregate,
as of
September 30, 2007, and the portfolio
of Flex-5 ARMs contributed
b
y
University
Street to the
Company
will consist of approximately $4,199,147,686 outstanding principal amount of Flex- 5 ARMs
i
n the
aggregate, as
o
f
September 30, 2007. The
aggregate outstanding principal balance
o
f
Flex-S
ARMs contributed to Asset Trust
I
I
I
by WMB and University Street will be approximately
$5,199,147,686, calculated as
o
f
September 30, 2007. The
Company will,
i
n turn, convey
100%
o
f
the
Flex- 5 ARMs that
i
t owns
t
o a newly formed Delaware Trust, WAMU 2007- FIexl ( Asset Trust Ill and,
together
with Asset Trust I and Asset Trust
I
I
, the Asset
Trusts) i
n
exchange
for interests
i
n Asset
6
CONFIDENTIAL
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Trust Ill represented
b
y the Class A-i 2007- Flexi Asset Trust Certificate of Asset Trust Ill (the Asset
Trust Ill Class A Trust Certificate) and a second certificate ( the Asset Trust Ill Class R Trust Certif
icate), which the Company expects to transfer to WMB. WMB will then sell the Series 2007- B
Company Preferred Securities for cash to the Trust.
After
giving
effect to the contribution of the Flex-5 ARMs to the
Company
and Asset Trust Ill, on
a pro forma basis, the Companys assets will consist of approximately $4,083,661,672
o
f
HEL5
i
n the
aggregate, as
o
f
September 30, 2007, held through Asset Trust
I
; $1,664,792,954
o
f
Option ARMs
i
n
the aggregate, as
o
f
September 30, 2007, held through Asset Trust
I
I
; and $5,199,147,686 of Flex- 5
ARMs
i
n the aggregate, as
o
f
September 30, 2007, to be held through Asset Trust Ill.
The HELs currently held
i
n Asset Trust
I
, the Option ARMs currently held
i
n Asset Trust I
I
and
the Flex- 5 ARMs to be held
i
n Asset Trust
I
l
l will together satisfy the coverage and FF0 tests
described under Descriptions o
f
the Series 2007- B Company Preferred Securities

Ranking for
issuance
o
f
the Series 2007- B Company Preferred Securities as Parity Equity Securities with respect
to the
Outstanding Company
Preferred Securities.
University Street
University Street, Inc.
i
s a Washington corporation. I
t has elected to be treated as a real estate
investment trust for United States federal income tax purposes. University Street holds 100% of the
Company Common Securities, which represent 100% of the voting rights i
n the Company (subject to
the limited
rights o
f
holders of the
Company
Preferred Securities described
below).
The Asset Trusts
Washington Mutual Home Equity Trust I ( Asset Trust
I

)
i
s a Delaware statutory trust existing
under the Pooling and Servicing Agreement, dated as
o
f
March
7
,
2006 ( the Asset Trust I Pooling
and Servicing Agreement), among WMB, as servicer, the Company, Deutsche Bank National
Trust Company, as Trustee, and Deutsche Bank Trust Company Delaware, as Delaware trustee (the
Asset Trust / Delaware
Trustee).
The Asset Trust I
Pooling
and
Servicing Agreement i
s the
governing
instrument of Asset Trust
I
. Asset Trust I has made an election to be treated as a real estate mortgage
investment conduit
( REM/ C)
for United States federal income tax
purposes.
The assets of Asset Trust I consist of the portfolio of HELs conveyed
b
y the Company to Asset
Trust I in connection with the issuance by the Company of the Series 2006- A Company
Preferred
Securities and 2006- B
Company
Preferred Securities and the related
offerings
b
y Trust I of the Trust I
Securities and by WaMu Cayman of the WaMu Cayman
Securities. The HEL5 were originated or
acquired
b
y WMB
primarilythrough
its branch network. As of September 30, 2007, the HELs held
b
y
the Company through Asset Trust I had an aggregate unpaid principal balance
o
f
approximately
$4,083,661,672.
WAMU 2006- OA1
(

Asset Trust II) i


s a Delaware statutory trust existing under the Pooling and
Servicing Agreement, dated as o
f
December 13, 2006 (the Asset Trust
I
I
Pooling and Servicing
Agreement) among the Company, WMB, as servicer, Deutsche Bank Trust Company Delaware, as
Delaware trustee (the Asset Trust
I
I Delaware Trustee), and Deutsche Bank National Trust Company,
as Trustee. The Asset Trust
I
I
Pooling
and
Servicing Agreement i
s the
governing
instrument
o
f
Asset
Trust
I
I
. Asset Trust
I
I has made an election to be treated as a REMIC for United States Federal
income tax
purposes.
The assets
o
f
Asset Trust
I
I consist substantially of the portfolio of Option ARMs conveyed by
the Company to Asset Trust
I
I
i
n connection with the issuance
b
y the
Company o
f
the Series 2006- C
Company
Preferred Securities and the related offering by Trust
I
I of the Trust
I
I Securities. The Option
ARMs were originated by WMB between July 31, 1997 and
April 21, 2006. As of
September 30, 2007,
the
Option
ARMs held by
the
Company through
Asset Trust
I
I had an
aggregate unpaid principal
balance of approximately $1,664,792,954.
7
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00020
Return
WAMU 2007- Flexi
(
Asset
Trust
lit) i
s a Delaware
statutory
trust formed
pursuant to a trust
agreement,
entered into on
August
9
,
2007, between the Company, as depositor, and Deutsche Bank
Trust Company Delaware, as Delaware trustee (the Asset Trust
I
l
l
Delaware Trustes). The Pooling
and Servicing Agreement, to be entered into on or- before the closing date
o
f
this Offering,--relating to
Asset Trust
I
l
l
among the
Company, WMB, as servicer, Deutsche Bank Trust
Company Delaware, as
Delaware trustee, and Deutsche Bank National Trust Company, as Trustee (the Asset Trust
I
l
l
Pooling
and Servicing Agreement, and together with the Asset Trust I
Pooling
and
Servicing Agreement and
the Asset Trust
I
I
Pooling and Servicing Agreement, collectively, the Pooling and Servicing Agree
ments),
will amend and restate the trust agreement o
f
Asset Trust Ill and will be the
governing
instrument of Asset Trust Ill. Asset Trust~ lll will also make an election to be treated as a REMIC for
United States Federal income tax
purposes.
The initial assets of Asset Trust
I
l
l will consist of the portfolio o
f
Flex- 5 ARMs to be conveyed by
the Company to Asset Trust
I
l
l
i
n connection with this
Offering.
The Flex- 5 ARMs were originated
b
y
WMB between 2000 and 2006. As of September 30, 2007, the Flex- 5 ARMs to be transferred into
Asset Trust
I
l
l had an aggregate unpaid principal
balance
o
f
approximately $5,199,147,686.
Unless the context requires otherwise, the HELs owned by Asset Trust
I
, the Option ARMs
owned
b
y Asset Trust
I
I and the FleX- 5 ARMs to be held
b
y Asset Trust I
l
l
are referred to
i
n this
offering circular collectively as the Mortgage Loans.
WMI
With a history dating back to 1889, Washington Mutual, Inc., a Washington corporation, i
s a
consumer and small business
banking company
with operations i
n major U. S. markets. Based on its
consolidated assets on June 30, 2007, WMI was the largest
thrift
holding company in the United
States and the seventh largest among
all U. S.-based bank and thrift holding companies. As of
September 30, 2007, WMI, together
with its subsidiaries, had total assets
o
f
approximately $330.1 bil
lion, total liabilities of
approximately $306.1 billion and total stockholders
equity
of
approximately
$24.0 billion. As of September 30, 2007, WMI and its subsidiaries also had total deposits o
f
approximately $194.3 billion. WMIs common stock
i
s listed on the New York Stock
Exchange
under
the symbol WM. The principal business offices
o
f
WM1 are located at 1301 Second Avenue, Seattle,
Washington 98101 and its
telephone number
i
s 206- 461- 2000.
See WMI Recent Developments
for a discussion
o
f
recent developments concerning WMI
and the WMI Group.
WMB
Washington
Mutual Bank
i
s a federally
chartered
savings association, chartered and operating
under the United States Home Owners Loan Act
o
f
1933, as amended. WMB accepts deposits from
the general public; originates, purchases, services and sells home loans; makes credit card, home
equity
and commercial real estate loans
(the
latter
being
loans secured
primarily
b
y
multi- family
properties); and offers cash management and deposit services. WMB purchases, sells and services
loans to subprime borrowers through its subprime mortgage channel. WMB also markets annuities
and other insurance products and offers securities brokerage services through its insurance and
broker- dealer subsidiaries. As a federal savings association, WMB
i
s
subject t
o
regulation and
examination
b
y the OTS, its primary regulator.
WMB
i
s an indirect, wholly- owned subsidiary o
f
WMI.
8
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00021
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The Offering
Issuer As
t
o the Trust Securities,
Washington
Mutual Preferred Fund
ing Trust
~
,
a Delaware statutory trust.
As to the Series 2007- B Company
Preferred Securities,
Washington
Mutual Preferred
Funding LLC, a Delaware lim
ited liability company.
As to the Series N WMI Preferred Stock
( which
will be repre
sented by Depositary Shares) for which the Trust Securities
will be exchanged upon the occurrence
o
f
a Conditional
Exchange, Washington Mutual, Inc., a Washington
corporation.
Offered Securities Fixed-to-Floating Rate Perpetual Non- cumulative Trust Securi
ties, liquidation preference $100,000 per security and
$1,000,000,000
i
n the aggregate, issued by the Trust.
Dividends . Dividends on the Series 2007- B Company Preferred Securi
ties will be passed through by the Trust as distributions on the
Trust Securities on each date on which the Company pays t
o
the Trust dividends on the Series 2007-B
Company
Preferred
Securities, i
n an amount
per
Trust
Security equal
t
o the
amount of dividends received by the Trust on a like amount
o
f
Series 2007- B
Company
Preferred Securities
(including
Addi
tional Amounts,
i
f any).
For
purposes
of this offering circular, we refer to distributions
( with respect to Company Preferred Securities) and distribu
tions and
redemption payments (with respect to the
Company
Common Securities or other Junior
Equity Securities) payable
b
y the Company on its securities as dividends~ Dividends on
the Series 2007- B Company Preferred Securities are payable
as follows:
Dividend Rate. Dividends on the Series 2007- B
Company
Preferred Securities will accrue at, an annual rate equal to
9.75% to, but not including December 15, 2017, and 3-Month
USD LIBOR plus 4.723% commencing December 15, 2017
and for each Dividend Period thereafter, applied t
o the liquida
tion preference o
f
$1,000 per Company Preferred Security.
Dividend Payment Dates.
I
f
, when and as declared
b
y the
Companys Board of Managers, the Dividend Payment Dates
for the Series 2007- B
Company
Preferred Securities will be
March 15, June 15, September 15 and December 15 of each
year commencing on December 15, 2007, or, i
n each case,
the next Business
Day i
f
any
such day i
s not a Business
Day.
Declaration of Dividends, etc. Dividends on the
Series 2007- B Company
Preferred Securities
i
f
, when and as
declared
b
y the
Companys
Board
o
f
Managers out
o
f
legally
available funds, will be payable at the dividend rate described
above
applied to the
liquidation preference per Company
Pre
ferred Security accruing on a non- cumulative basis from Octo
ber 25, 2007. Any
such dividends will be distributed to holders
9
~
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00022
Return
o
f
Series 2007- B
Company
Preferred Securities
i
n the manner
described under Description o
f
the Series 2007- B Company
Preferred Securities Dividends.
Non- cumulative Dividends. Dividends on the Series 2007- B
Company
Preferred Securities are non- cumulative. I
f the Com
panys
Board of
Managers
does not declare a dividend on the
Series 2007- B Cbmpany Preferred Securities or declares less
than a full dividend i
n
respect
of
any
Dividend Period, holders
o
f
the Series 2007- B Company Preferred Securities will have
no right to receive any dividend or a fufi dividend, as the case
may be, for that Dividend Period, and the
Company
will have
no obligation
to pay any dividends or full dividends on the
Series 2007- B Company Preferred Securities for that Dividend
Period,
whether or not dividends are declared and
paid
for
any
future Dividend Period with
respect
to
any
series
o
f
the
Company
Preferred Securities, the
Company
Common Securi
ties or any
other Junior Equity
Securities.
Redemption/ Replacement Capital
Covenant/ Intentions of WMI and the
Company
General. On each
day on which the
Company
redeems
Series 2007- B
Company
Preferred Securities, the Trust will
apply
the
redemption proceeds i
t receives on the
Series 2007- B Company Preferred Securities to redeem a like
amount of Trust Securities. The
redemption provisions o
f
the
Series 2007- B Company Preferred Securities are described
below. Subject to a covenant i
n effect until October 25, 2017,
in favor of certain of WMIs debtholders
limiting
WMIs and its
subsidiaries
right
to
purchase or redeem the Series 2007- B
Company
Preferred Securities or the Trust Securities (among
others), as described
i
n the next
paragraph,
and
subject
to
the
Company having
received the prior approval
of the OTS
for
any proposed redemption
of Series 2007- B Company
Pre
ferred
Securities,
the
Company may,
at its
option,
redeem the
Series 2007- B
Company
Preferred Securities:

i
n whole but not
i
n
part, on any
Dividend
Payment
Date
prior
to the Dividend
Payment
Date i
n December 2017 upon the
occurrence of a Tax Event, an Investment Company Act
Event, a Rating Agency
Event or a Regulatory Capital
Event, a
t
a cash redemption price equal t
o
the sum of: (
i
) the
greater
of:
(
A
)
$1,000 per
Series 2007- B
Company
Pre
ferred
Security,
or (
B
)
the sum of the
present
values of
$1,000
per
Series 2007- B
Company
Preferred
Security,
dis
counted from the Dividend
Payment
Date
i
n December 2017
to the redemption date, and the present values of all unde
clared dividends for each Dividend Period from the
redemp
tion date to and
including
the Dividend
Payment
Date
i
n
December 2017, discounted from their applicable Dividend
Payment
Dates to the
redemption
date on a quarterly basis,
i
n each case (assuming a 360- day year consisting o
f
twelve
30- day months)
at the
Treasury Rate, as calculated
by an
10
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00023
Return
Independent Investment Banker, pIus 1.00%; pIus (
i
i
) any
declared and unpaid dividends to the redemption date;
i
n whole but not
i
n
part, on any Dividend Payment Date prior
t
o the Dividend Payment
Date
i
n December 2017 for
any
reason other than the occurrence
o
f
a Tax Event, an Invest
ment Company Act Event, a Rating Agency Event or a Reg
ulatory Capital Event, at a cash redemption price equal to
the sum of
(
i
)
the greater
of:
(
A
)
$1,000
per
Series 2007- B
Company
Preferred
Security,
or
(
B
)
the sum of the present
value of $1,000
per
Series 2007- B Company
Preferred
Security,
discounted from the Dividend
Payment
Date in
December 2017 to the redemption date, and the
present
values of all undeclared dividends for each Dividend Period
from the
redemption
date
t
o and
including
the Dividend
Pay
ment Date
I
n December 2017, discounted from their applica
ble Dividend Payment
Dates to the redemption date,
i
n each
case on a quarterly
basis
(assuming a 360- day year
consist
ing of twelve 30- day months) at the Treasury Rate, as calcu
lated by an Independent Investment Banker, pIus 0.75%;
plus (
i
i
) any declared but unpaid dividends to the redemption
date;

i
n whole but not
i
n part, on any Dividend Payment Date after
the Dividend Payment Date
i
n December 2017 that
i
s not a
Ten- Year Date, upon the occurrence
o
f
a Tax Event, an
Investment Company Act Event, a Rating Agency Event or
a Regulatory Capital Event, at a cash redemption price
equal to $1,000
per
Series 2007- B
Company
Preferred
Security, plus any
declared and unpaid dividends to the
redemption date;

i
n whole or in part, on each Dividend Payment Date that
i
s
a Ten- Year Date at a cash
redemption price o
f
$1,000
per
Company
Preferred
Security, plus any
declared and unpaid
dividends to the redemption date; and
i
n whole but not
i
n
part, on
any
Dividend
Payment
Date after
the Dividend
Payment
Date in December 2017 that
i
s not a
Ten- Year Date for any reason other than the occurrence
o
f
a
Tax Event, an Investment Company Act Event, a Rating
Agency Event or a Regulatory Capital Event, at a cash
redemption price equal to the sum of (
I
) the greater o
f
(
A
)
$1,000 per Series 2007- B Company Preferred Security,
and (
B
)
the sum
o
f
the present value
o
f
$1,000 per
Series 2007- B Company Preferred Security, discounted from
the next succeeding Ten- Year Date to the redemption date,
and the
present
values of all undeclared dividends for each
Dividend Period from the redemption date to and including
the next succeeding
Ten- Year Date, discounted from their
applicable Dividend Payment Dates to the redemption date,
i
n each case on a quarterly basis (assuming a 360- day year
consisting o
f
twelve 30- day months)
a
t
the 3-Month USD
LIBOR Rate applicable to the Dividend Period
immediately
preceding
such
redemption
date
(which
3-Month USD
11
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00024
Return
LIBOR Rate will also, for purposes o
f
calculating such
redemption price,
be the rate used i
n
calculating theamount
for each such undeclared dividend), as calculated
b
y
an
Independent Investment Banker; plus (
i
i
)
any declared but
unpaid
dividends to the
redemption date, i
n
each case,
with
out accumulation of
any
undeclared dividends with
respect.
to Dividend
Payment
Dates
prior
to the
redemption
date.
Ten- Year Date means the Dividend
Payment
Date
i
n Decem
ber 2017 and the Dividend
Payment
Date in December of
each tenth
succeeding year (
i
.
e
.
,
December 2027, December
2037, etc.)
Restriction on Redemption or Purchases. At or prior to ini
tial issuance of the Trust Securities, WMI will enter into a
Replacement Capital
Covenant as described under
Descrip
tion of the Trust Securities Restriction on Redemption or
Purchases.
I
n the
Replacement Capital Covenant,
WMI will
covenant
i
n favor
o
f
certain
o
f
its debtholders that, i
f WMI or a
subsidiary purchases or redeems any Trust Securities or
Series 2007- B
Company
Preferred Securitis or, after a Con
ditional Exchange, Depositary Shares (
o
r
related Series N
WMI Preferred
Stock),
WMI or its subsidiaries will do so only
i
f and
t
o the extent that the total
redemption or purchase price
i
s
equal
to or less than
designated percentages
of the net
cash
proceeds
that WMI or its subsidiaries have received dur
ing
the 180
days prior
to such
redemption or purchase
from
the issuance of other securities or combinations of securities
having
the characteristics described under
Description
of the
Trust Securities Restriction on Redemption or Purchases.
The Replacement Capital Covenant will terminate on Octo
ber 25, 2017 without
any
action
b
y
WMI or any
other
person.
WMI entered into similar replacement capital covenants i
n
connection with the issuance
o
f
the
Outstanding Company
Preferred Securities in
May 2007, March 2006 and December
2006.
I
n
addition, upon the expiration of the Replacement Capital
Covenant on October 25, 2017, WMI and the Company intend
that, t
o
the extent the Series 2007- B Company Preferred
Securities and the related Trust Securities
provide WMI with
equity
credit from a nationally recognized rating agency at the
time of
redemption or repurchase
of such
securities,
WMI will
purchase
and/ or the
Company
will redeem or purchase ( but,
in the case of the
Company, only
to the extent such
redemp
tion or purchase i
s
funded, directly or indirectly,
b
y WMI and
its subsidiaries, other than WMB and its
subsidiaries)
the
Series 2007- B
Company
Preferred Securities and the related
Trust Securities, as applicable, only
to the extent that the
amount paid by WMI and its subsidiaries (other than WMB
and its subsidiaries), net o
f
fees and expenses, i
n connection
with such redemption or repurchase does not exceed the net
proceeds received
b
y
WMI (and, i
n the case of the Company,
made available
t
o the
Company i
n
connection with a
12
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00025
Return
redemption or purchase
b
y
i
t
) from the sale or issuance, dur
ing
the
180- day period prior
to the notice date for such
redemption or purchase,
b
y WMI or its subsidiaries, other
than WMBandits
subsidiaries,
to
third- party purchasers,
other than a subsidiary o
f
WMI, of securities for which WMI
will receive
equity credit, at the time of sale or issuance, that
is, i
n the
aggregate, equal
to or greater
than the
equity
credit
attributed to WMI from the 2007- B
Company
Preferred Securi
ties at the time of such
redemption or repurchase.
The deter
mination of the
equity
credit attributable to the 2007- B
Company
Preferred Securities and the related Trust Securities
that
may
be redeemed or purchased, as applicable, may
result i
n the issuance of an amount of new securities that may
be less than the
liquidation preference o
f
the 2007- B Com
pany
Preferred Securities and related Trust Securities
redeemed or
purchased, depending upon,
inter
a
/
ia, the
nature
o
f
the new securities issued and the equity credit attrib
uted
by a nationally recognized rating agency
to the
Series 2007- B
Company
Preferred Securities redeemed or
purchased
and the
new securities. Upon the occurrence
of an
Exchange Event, the
foregoing
shall
apply
to the Series N
WMI Preferred Stock mutatis mutandis. Unlike the
specifiC
agreements
set forth
i
n the
Replacement Capital Covenant,
the
foregoing represents
WMIs and the
Companys
intentions
with respect to the Series 2007- B Company Preferred
Securities.
See Description of the Series 2007- B Company Preferred
Securities Redemption.
Ranking Trust Securities. The Trust Securities will be the only secu
rities issued by the Trust. The Amended and Restated
Trust Agreement of the Trust ( the Trust Agreement) will pro
vide that the
Trust
will not issue
any
other securities.
Series 2007-B Company Preferred Securities. The
Series 2007- B
Company
Preferred Securities will rank
pan
passu
with the
Outstanding Company
Preferred Securities
and senior to the
Company
Common Securities and
any
other
Junior Equity Securities i
n terms
o
f
dividends and liquidation
payments.
During a Dividend Period, the
Company may
not declare or
pay any
dividends on any
of its Junior
Equity
Securities other
than dividends
payable i
n Junior
Equity
Securities of the same
class or series or Junior
Equity
Securities
ranking junior
to
that class or series, or purchase,
redeem or otherwise
acquire
for consideration, directly or indirectly, any
Junior
Equity
Secu
rities
(other
than as a result
o
f
reclassification of Junior
Equity.
Securities for or into other Junior Equity Securities, or the
exchange or conversion of Junior
Equity
Securities for or into
other Junior Equity Securities), unless dividends for such Divi
dend Period on all
Company
Preferred Securities then out
standing
have been declared and
paid i
n full, or declared and
set aside for
payment, as the case may
be.
13
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00026
Return
The
Company may
issue additional
Parity Equity
Securities
from time to time without the consent of the holders
o
f
the
Series 2007- B
Company
Preferred Securities; provided,
that
(iyafter giving
effect to such issuance, the
pro
forma net book
value
o
f
the
Companys
assets
(after giving
effect to the
acqui
sition
o
f
any
New Assets
i
n connection with the issuance of
such
Parity Equity Securities)
will
equal or exceed 1.5 times
the sum o
f
the
aggregate liquidation preference o
f
the Com
pany
Preferred Securities then
outstanding
and
any
such Par
i
t
y
Equity
Securities that the
Company proposes to issue,
(
i
i
) after
giving
effect to such issuance, the
Companys pro
forma funds from
operations, or FF0, for the four fiscal
quar
ters beginning with the fiscal quarter i
n which such Parity
Equity Securities are proposed to be issued
(calculated
(
a
)
assuming
that such
proposed Parity Equity
Securities are
issued and
that, i
f
any Parity Equity
Securities
(including
the
Parity Equity
Securities that the
Company proposes
to
issue)
bear dividends based on a floating rate, the
applicable
divi
dend rate will not
change during
such four fiscal
quarters
from
the rate
i
n effect on the
applicable
date of determination,
(
b
)
assuming,
to the extent
necessary,
for each
mortgage
loan,
which bears an adjustable or floating
interest rate and/ or
having adjustable periodic payments,
that
i
s
directly or indi
rectly
owned
b
y the Company that the interest rate and the
minimum
monthly payment i
n the
applicable mortgage
note
will not
change during
such four
quarters
from the interest rate
and minimum monthly payment i
n effect on the applicable
date o
f
determination, and
(
c
)
as adjusted to reflect
any
New
Assets) equals or exceeds 150%
o
f
the amount that would be
required t
o
pay
full annual dividends on all
preferred
securities
o
f
the Company then outstanding and any such Parity Equity
Securities that the
Company proposes to issue and
( iii)
the
Company i
s not otherwise
i
n breach of
any
of its covenants
set forth
i
n the LLC
Agreement.
The Series 2007- B
Company
Preferred Securities are Parity~ Equity
Securities with
respect
to the
Outstanding Company
Preferred Securities, and the
Company
satisfies the tests for the issuance
o
f
the
Series 2007- B
Company Preferred Securities as Parity Equity
Securities. See
Description
of the Series 2007- B
Company
Preferred Securities
Ranking.
WMI will covenant
i
n the
Exchange Agreement
for the benefit
o
f
the holders of the Trust Securities that i
f for
any
Dividend
Period full dividends on (
i
)
the Series 2007- B Company Pre
ferred Securities or (
i
i
) the Trust Securities have not been
declared and paid, then WMI will not declare or pay
dividends
with respect to, or redeem, purchase or acquire, any of its
equity capital
securities
during the next succeeding
Dividend
Period, except
dividends
i
n connection with a shareholders
rights plan, i
f
any, or dividends
i
n connection with benefits
plans. WMI entered into similar
exchange agreements
that
included
equivalent
covenants
i
n connection with the issuance
o
f
the
Outstanding Company
Preferred Securities.
14
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00027
Return
Conditional
Exchange I
f the OTS so directs
following
the
occurrence
of an Exchange.
Event, each. Trust
Security
will be
automatically exchanged
for
a like amount
o
f
Depositary Shares, with each
Depositary
Share
representing
1/ 1000th of a share of Series N WMI Pre
ferred Stock (the Depositaiy Shares).
An
Exchange
Event will occur when
(
i
)
WMB becomes.
undercapitalized under the OTSs prompt corrective action
regulations, (
i
i
) WMB
i
s
placed into conservatorship or receiv
ership or (
i
i
i
) the OTS, i
n
i
t
s
sole discretion, anticipates
WMB
becoming undercapitalized i
n the near term or takesa
supervisory
action that limits the
payment o
f
dividends
b
y
WMB,
and
i
n connection
therewith, directs such
exchange.
The Series N WMI Preferred Stock, upon. issuance,
will have
substantially equivalent terms as
to
dividends, redemption and
liquidation preferences as the Series 2007- B
Company
Pre
ferred Securities and the Trust Securities for which
they may
be
exchanged, except
that:
(
i
)
the Series N WMI Preferred
Stock will not have the benefit of the favorable covenants
described under
Description
of the Series 2007- B
Company
Preferred Securities
Voting Rights
and Covenants; (
i
i
) the
occurrence of an Investment
Company
Act Event or Tax Event
will not affect the
ability
of WMI to redeem the Series N WMI
Preferred Stock; ( iii) Additional Amounts will not be
payable
with respect to the Series N WMI Preferred Stock; and
(
i
v
)
i
f
WMI fails to pay, or declare and set aside for
payment,
whether or not consecutive, full dividends on the Series N
WMI Preferred Stock after its issuance or any
then outstand
ing Voting Parity Securities for six Dividend Periods, the
authorized number of WMIs directors will increase
by two,
and the holders of Series N WM1 Preferred Stock, voting
together
with the holders of
any
other
Voting Parity Securities,
such as the Series I WMI Preferred Stock, Series J WMI Pre
ferred
Stock,
Series L WMI Preferred Stock and Series M
WMI Preferred Stock issuable
upon an Exchange
Event
i
n
exchange
for the Trust I
Securities, the WaMu
Cayman
Secu
rities, the Trust
I
I Securities
or.
the Trust III Securities, as appli
cable, will have the
right
to elect two directors
i
n addition to
the directors then i
n office at the next annual meeting of
shareholders.
WMI will covenant i
n the Exchange Agreement i
n favor of the
holders
o
f
the Trust Securities that, prior to the issuance o
f
the Series N WMI Preferred Stock
upon a Conditional
Exchange,
WMI will not issue
any preferred
stock that would
rank senior to the Series N WMI Preferred Stock
upon
its
issuance
i
n terms
o
f
dividends or liquidation payments.
Each
share of Series N WMI Preferred Stock will, upon issuance,
rank at least
pan passu
with the most senior
preferred
stock
o
f
WMI, i
f
any,
then
outstanding,
and to
any
other
preferred
stock that WMI
may
have issued prior to the date of such
issuance of such Series N WMI Preferred Stock.
15 .
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00028
Return
Voting Rights and Certain Covenants Except as set forth below, the holders of the Series 2007- B
Company
Preferred Securities will not have voting rights.
The LLC Agreement will provide that, so longas any
Corn
pany
Preferred Securities
o
f
any series are outstanding the
Company
will not, except
with the consent or affirmative vote
of the holders of at least two- thirds of all the series of Com
pany
Preferred Securities, voting together as a single class:
effect a consolidation, conversion, merger or share
exchange
with or into another
entity
other than an entity
controlled by, or under common control with, WMI;
issue
any equity
securities
o
f
the
Company ranking senior
to the
Company
Preferred Securities
i
n
respect
of
payments
o
f
dividends or on liquidation to the Company Preferred
Securities
(
Senior Equity Securities);

incur any indebtedness for borrowed money;

pay dividends on the Companys Junior Equity Securities


unless the
Companys FF0 for the four prior fiscal quarters
equals or exceeds 150% of the amount that would be
required to
pay
full annual dividends on all series of Com
pany
Preferred Securities then outstanding;
fail to invest the proceeds of the Companys assets such
that the
Companys
FF0 over
any period o
f
four fiscal
quar
ters will equal or exceed 150% of the amount that would be
required to pay full annual dividends on all series of Corn
pany
Preferred Securities then outstanding;
issue any additional Company Common Securities
t
o
any
person,
other than
University
Street or another affiliate of
WMI;
amend or otherwise change the terms
o
f
any
Asset Docu
mentation
i
n a manner that
i
s
materially adverse to the Trust
or the holders of the Trust Securities or to
any
other
entity
holding a series
o
f
Company Preferred Securities ( including.
Trust
I
, WaMu Cayman, Trust
I
I
.
and Trust Ill, a
Trust Holder) or
t
o the holders of that Trust Holders
securities;
remove or cause to be removed, as applicable, Washington
Mutual from the
Companys
or the Trusts name or the
name
o
f
any
other Trust Holder unless the name of WMI
changes
and the
Company
makes a change to the Compa
nys, the Trusts, or such other Trust Holders name to be
consistent with the new
group name;
take
any
action or fail to take
any
action that would cause
the Company to fail to be treated as a partnership (other
than a publicly traded partnership taxable as a corporation)
for United States federal income tax
purposes;

engage i
n a U. S. trade or business for United States federal
income tax
purposes;
16
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00029
Return
fail
t
o hold only assets that qualify for the portfolio interest
exemption under the Code or are otherwise exempt from
gross basis United States withholding taxes;
fail
t
o
manage i
t
s
affairs such that income with respect t
o
the Trust Securities does not constitute unrelated business
taxable income for United States federal income tax
purposes;
take
any
action that could
reasonably
be
expected to cause
a Tax Event, an Investment
Company
Act Event, a Rating
Agency
Event or a Regulatory Capital
Event to occur; or
amend its certificate of formation or LLC
Agreement i
n a
manner that materially and
adversely
affeOts the terms of
any series of
Company Preferred Securities; provided, how
ever, that,
i
f
any
amendment affects fewer than all classes
of
Company
Preferred Securities, the amendment will
require only a vote of the holders of such affected class or
classes of
Company
Preferred Securities, voting together as
a separate class.
I
n addition, the LLC Agreement will provide that, for so long
as any Company Preferred Securities are outstanding, certain
actions by the Company will be subject to the prior approval
o
f
all Managers, including the Independent Manager. The
Company will not be able, without the approval
ofthe Inde
pendent Manager, to:
terminate, amend or otherwise
change any
Asset. Documen
tation; or
effect a consolidation,
merger
or share exchange (excluding
the Conditional
Exchange)
that
i
s not tax- free to the holders
of
any
series of Company Preferred Securities, and the.
related trust securities, unless the transaction was approved
by
the consent or affirmative vote of the holders of at least
two- thirds of all the series of Company
Preferred Securities,
voting together as a
single
class.
In addition, the LLC
Agreement
will
provide
that
i
f
(
i
)
the Com
pany
fails to
pay
full dividends on
any
series of Company Pre
ferred Securities on any Dividend Payment Date, (
i
i
) any
Trust Holder fails
t
o
pass through full dividends paid by the
Company on the Company Preferred Securities held
b
y that
Trust Holder to the holders of the Trust Holders securities on
any
Dividend
Payment Date, or (
i
i
i
) a Bankruptcy
Event
occurs,
the holders
o
f
all the series of
Company
Preferred
Securities, voting together as a single class, by majority vote
of the votes cast on such matter, are entitled
t
o remove the
initial or
any
succeeding Independent Manager
and to fill the
vacancy created by such removal or any other vacancy exist
ing i
n the office of the
Independent Manager.
Each holder
o
f
Trust Securities will have the
right to direct the
Property Trustee acting for the Trust, as holder of the
Series 2007- B
Company
Preferred Securities, as to the
17
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00030
Return
exercise
o
f
the
voting rights
described above
pertaining
to a
like amount of Series 2007- B
Company
Preferred Securities
represented
b
y its
respective
Trust Securities. See
Descrip
tion of the Trust Securities
Voting Rights.
Additional Amounts
I
f the
Company
or the Trust i
s
required to withhold or pay any
Additional Taxes as a result of an Additional Tax Event, the
Company
will
pay as additional amounts on the Series 2007- B
Company
Preferred Securities such amounts as will be
required so that dividends on the Series 2007- B Company
Preferred Securities and/ or the
amounts passed through
b
y
the Trust on the Trust Securities, as applicable,
will not be
reduced as a result
o
f
any
such Additional Taxes. See
Description
of the Series 2007- B
Company Preferred Securi
ties Additional Amounts.
I
f the Trust Securities are
exchanged
for Series N WMI Preferred Stock
upon a Condi
tional
Exchange,
WMI will not be
obligated
to
pay
Additional
Amounts on the Series N WMI Preferred Stock.
Listing
The Trust Securities will not be listed
on any
securities
exchange or automated dealer
quotation system.
Use of Proceeds The Trust will use the
proceeds o
f
the sale of the Trust Securi
ties i
n this
Offering
to purchase from WMB a like amount
o
f
Series 2007- B Company
Preferred Securities, which the Com
pany will issue to WMB i
n
exchange for the conveyance o
f
the
Flex-5 ARMs
t
o the
Company.
The WMI
Group
will use the
proceeds
from the sale of the Series 2007- B
Company
Pre
ferred Securities to the Trust for
general corporate purposes.
Ratings
The Trust Securities are expected to be
assigned upon
issu
ance ratings
of BBB
by
Standard & Poors
Rating Services,
a Division of The McGraw- Hill Companies, Inc.
(

S
&
P),
Baal
by Moodys
Investors Service, Inc.
( Moodys)
and
A
b
y
Fitch,
Inc.
(

Fitch).
A
rating i
s not a recommendation
to
buy,
sell or hold securities and
may
be
subject
to revision,
suspension or withdrawal at any time
b
y the
assigning rating
organization.
See Risk Factors Risks
Relating to the Terms
o
f
the Trust Securities and the Series 2007- B Company Pre
ferred Securities Rating agencies may change rating
methodologies.
Tax
Consequences I
t
i
s
anticipated
that the Trust will be treated as a grantor trust
for United States federal income tax
purposes. Accordingly,
each holder of a Trust
Security i
s
expected
to be treated as i
f
i
t owned
directly
the Series 2007- B
Company Preferred Secu
rities allocable to such Trust
Security.
The
Company
intends to
qualify as a partnership ( other
than
a publiOly
traded
partnership
taxable as a corporation)
for
United States federal income tax
purposes, and thus, the
Series 2007- B
Company
Preferred Securities held
by
the Trust
are intended to constitute
equity
interests
i
n
a partnership.
As
a partnership,
the
Company
intends that
i
t will not be
subject
to United States federal income tax. Instead, each holder
o
f
a
Trust Security will be required to report on its United States
18
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00031
Return
federal income tax return its share
o
f
the income, gains,
losses, deductions and credits
o
f
the
Company
that are alloca
ble
t
o

the Trust, even


i
f such holder has not received any cash
distributions.
See Certain
U
.
S. Federal Income Tax Considerations
United States Federal Income Tax Consequences.
ERISA Considerations No Trust
Security may
be purchased
b
y or transferred to
any
Benefit Plan Investor, except for an insurance
company gen
eral account that
represents, warrants and covenants that, at
the time of acquisition and
throughout
the
period i
t holds the
securities, (
i
) i
t
i
s eligible for and meets the requirements of
Department
of Labor Prohibited Transaction Class
Exemp
tion 95- 60, (
i
i
)
less than 25% of the assets of such
general
account are (
o
r
represent)
assets
o
f
a Benefit Plan Investor
and (
i
i
i
)
i
t
i
s not a person who has discretionary authority or
control with
respect to the assets of the Trust or any person
who provides investment advice for a fee ( direct or indirect)
with respect to such assets, or any affiliate
o
f
such a person
and would not otherwise be excluded under
29 C.ER. 2510.3- 101( f)( 1).
Governing Law The Trust Agreement, the Trust Securities, the LLC Agree
ment and the Series 2007- B Company Preferred Securities
will be
governed by,
and construed
i
n accordancewith, the
laws of the State of Delaware. The Series N WMI Preferred
Stock will be governed
b
y and construed
i
n accordance with
the laws of the State of
Washington.
The Depositary Shares
will be governed by,
and construed
i
n accordance with, the
laws of the State of New York.
CUSIP 93936TAA8
ISIN US93936TAA88
19
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Return
RISK FACTORS
Purchasers should
carefully
consider the
following
risk factors in
conjunction
with the other
information contained in this
offering circular, as well as information that
i
s
incorporated by
reference
i
n this
offering circular, before purchasing any Trust Securities, the financial entitlements of which will
be
substantially
similar to those of a like amount o
f
Series 2007- B
Company
Preferred Securities and
which are conditionally exchangeable into Depositary Shares
representing
interests
i
n Series N WMI
Preferred Stock. In addition, purchasers should also carefully
consider the risk factors included i
n
WMIs and WMBs Annual
Reports on Form 10- K for the
year
ended December 31, 2006, and their
respective Quarterly Reports on Form 1 0-Q for the
quarterly periods
ended March
31,
2007 and
June
30,
2007.
Risks Relating to the Terms of the Trust Securities and the Series
2007- B Company Preferred
Securities
Holders of Trust Securities will receive distributions only i
f the Company pays dividends on
the Series 2007-B Company Preferred Securities.
Amounts available to the Trust for
payment on the Trust Securities will be limited to dividends
received by the Trust as the holder
o
f
the Series 2007- B Company Preferred Securities.
I
f the
Company does not declare and
pay
dividends on the Series 2007- B
Company
Preferred Securities,
the Trust will not pass through any
dividends to holders
o
f
the Trust Securities.
Dividends on
the Series 2007- B Company Preferred Securities are not cumulative and
purchas
ers will not receive dividends on the Trust Securities for
any
Dividend Period unless dividends
are authorized and declared by the Companys Board of Managers for that Dividend Period on
the like amount of Series 2007- B
Company
Preferred Securities held
by
the Trust.
Dividends on the Series 2007- B Company Preferred Securities are not cumulative. Consequently,
i
f
the Board
o
f
Managers does not declare a dividend on the Series 2007- B
Company
Preferred
Securities for any
Dividend Period, the Trust, as holder o
f
the Series 2007- B CompanyPreferred
Securities,
and
consequently
the holders of Trust
Securities,
will not receive dividends for that
Dividend Period.
I
n
addition, the
Companys
Board
o
f
Managers may
determine that
i
t would be
i
n the
Companys
best interests to
pay
less than the full amount of the stated dividends on the Series 2007- B
Company
Preferred Securities or no dividends for
any
Dividend Period even i
f funds are available.
Factors that would
generally
be considered by
the
Companys
Board of
Managers i
n
making
this
determination are the amount
o
f
available funds, the
Companys
financial condition and
capital needs,
the
impact
of current and
pending legislation
and
regulations,
economic conditions and tax
considerations.
The level of the
Companys
assets relative to the
aggregate liquidation preference
of the Com
panys preferred
securities could shrink over time because of, among
other
things,
dividends
paid by the
Company on
the
Company
Common Securities or other Junior
Equity
Securities
i
f
any are issued at a future date.
The LLC
Agreement
includes
provisions
that limit the
Companys ability
to
pay
dividends on the
Companys
Junior
Equity
Securities but, subject
to satisfaction of those
limitations, does not prohibit
dividends that could cause the level
o
f
the
Companys
assets relative to the
aggregate liquidation
preference o
f
the Company Preferred Securities to shrink. These limitations are described under
Description o
f
the Series 2007- B
Company
Preferred Securities
Ranking,

Restcictions on
Dividends and

Voting Rights
and Covenants.
They
include the
following:

during a Dividend Period, the


Company may
not
pay
dividends on Junior
Equity Securities, or
purchase, redeem or otherwise acquire for consideration directly or indirectly ( with limited
exceptions)
Junior
Equity Securities, unless dividends for such Dividend Period on a
l
l
series of
20
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00033
Return
Company
Preferred Securities then outstanding
have been declared and
paid i
n full, or set
aside for
payment, as the case
may
be; and
without the consent or affirmative vote, of the holders of at least two- thirds. of all series of
Company
Preferred Securities, voting together as a single class, the
Company may
not:

pay
dividends on Junior Equity Securities unless the Companys FF0 for the four prior fiscal
quarters equals or exceeds 150%
o
f
the amount that would be required to pay full dividends
on all series
o
f
the Company Preferred Securities; or
amend or otherwise
change
the requirement that the Company make investments and
distributions with the proceeds o
f
the Companys assets such that the Companys FF0 for
any period o
f
four fiscal quarters will equal or exceed 150% of the amount that would be
required to
pay
full annual dividends on all series
o
f
Company Preferred Securities;
Additionally,
the
Companys
Board of Directors has the
power to create and issue
Parity Equity
Securities without the consent
o
f
the holders of the Company Preferred Securities so long as the
Company satisfies the FF0 Test on a pro forma basis and the pro forma net book value
o
f
the
Companys assets equals or exceeds 1.5 times the sum of the aggregate liquidation preference o
f
the
Company Preferred Securities then outstanding and the Parity Equity Securities proposed t
o be
issued.
As the Mortgage Loans held by the Asset Trusts prepay or repay principal and distributions with
respect to such principal payments are made
b
y each Asset Trust to the Company subject
to the
limitations referenced above, the Company may choose
t
o
apply such amounts and any retained
proceeds o
f
this offering to pay dividends on the Company Common Securities or other Junior Equity
Securities or reinvest such amounts i
n Permitted Investments or additional Eligible Assets~ Since
March
6
,
2006, the date on which Company
Preferred Securities were first issued, the
Company
has
paid
dividends
totaling approximately
$2.489 billion on the Company Common Securities from
principal and interest collections on the Mortgage Loans. Additionally, subject to the limitations
referenced above, the
Company
could distribute a portion of the Asset Trust I Class A Trust Certificate,
Asset Trust
I
I Class A Trust Certificate or the Asset Trust
I
l
l Class A Trust Certificate as a dividend on
the
Company
Common Securities. The Company has no current intention to
pay
an extraordinary
dividend, and WMI has no current intention to cause or permit
the
Company to pay an extraordinary
dividend. Nevertheless, dividends
paid by
the Company on the Company Common Securities could
result
i
n a reduction
i
n the Companys assets that could have the consequence, notwithstanding
its
compliance with the limitations referred to above, of the Company not having funds available to pay
full dividends on the Series 2007- B Company Preferred Securities
i
n future periods or loss
b
y
investors
o
f
some or all
o
f
the amount of their investment were the Company to be liquidated.
The Trust Securities and the Series 2007- B Company Preferred Securities are perpetual and
not redeemable at the option
of the holder, and holders of the Trust Securities can have no
assurance of
receiving
their initial investment back.
The Trust Securities
may not be redeemed at the
option o
f
their holder under
any circumstances,
are perpetual and have no maturity date.
I
f and when the Company redeems Series 2007- B Company
Preferred Securities, the Trust will redeem a like amount
o
f
Trust Securities. While the Series 2007- B
Company
Preferred Securities
may
be redeemed at the option of the
Company
under certain
circumstances described herein, any
such redemption i
s
subject to the approval o
f
the OTS and may
be constrained
b
y
operation o
f
the Replacement Capital Covenant. Investors
i
n the Trust Securities
will have no right t
o
reclaim their initial investment from the Trust and there can be no guarantee that
the Trust Securities will ever be redeemed.
I
f investors
i
n the Trust Securities choose to sell their
Trust Securities i
n order
t
o reclaim all or part of their initial investment
i
n the absence of
any
redemption, there can be no guarantee that such investors would be able to sell their securities
i
n the
secondary market, or that
i
f such a sale occurred the sale price would be at or above the initial price.
21,
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Return
A decline in WMBs capital levels or its placement
into
conservatorship or receivership may
result in a Conditional
Exchange. I
f a Conditional
Exchange occurs, i
t
i
s
likely
to occur at a
time when . WMBs and WMIs financial condition has deteriorated and may have other adverse
consequences.
The returns from an investment
i
n the Trust Securities will be dependent to a significant extent
on the performance and capital
of WMB due to the
potential
for a Conditional
Exchange.
A decline
i
n
the
performance
and
capital
levels
o
f
WMB or the placement by the OTS of WMB into conservatorship
or receivership could result
i
n the occurrence of an Exchange
Event and a Conditional
Exchange
of
the Trust Securities for
Depositary
Shares
representing
Series N WMI Preferred Stock. The Series N
WMI Preferred Stock would
represent
an investment in WMI and not
i
n the Company or the Trust.
Under these circumstances:
the Trust Securities would be exchanged
for a preferred equity interest
i
n WMI at a time when
WMBs and, ultimately,
WMIs financial condition has significantly deteriorated or when WMB
may have been placed into conservatorship or receivership and, accordingly, i
t
i
s
quite unlikely
that WMI would be
i
n a financial position to make
any
dividend payment on the Series N WMI
Preferred Stock;

i
n the event of a liquidation of WMI, the claims
o
f
creditors of WMI and of all its subsidiaries,
including WMB, would be entitled to
priority i
n payment over the claims of holders of equity
interests such as the Series N WMI Preferred Stock, and, therefore, the former holders of the
Trust Securities who would then hold the Depositary Shares
representing
Series N WMI
Preferred Stock
may
receive substantially less than such holders would receive had the
Trust Securities not been exchanged
for the Depositary Shares. See Risk Factors Applica
ble to Depositary Shares Issued
i
n a Conditional
Exchange
The Series N WMI Preferred
Stock will rank subordinate to the direct indebtedness of WMI;
for United States federal income tax
purposes,
a Conditional
Exchange would most likely be a
taxable event to holders of the Trust Securities, and
i
n that event the holders generally
would
incur a gain or loss, as the case may
be, measured by the difference between their adjusted
tax basis in the Trust Securities and the fair market value
o
f
the Depositary Shares; and

although the terms of Depositary Shares are substantially similar


t
o the terms
o
f
the
Series 2007- B Company Preferred Securities, there are differences that holders of Trust Secu
rities might deem to be important, such as the fact that holders of
Depositary
Shares will not
generally
have
voting rights, except as required
b
y law or
i
n connection with the right to elect
directors
i
f dividends are missed or as otherwise described
i
n this Offering
Circular
( see
Description
of the Series N WMI Preferred Stock
Voting Rights), and will not benefit from
the same favorable covenants as the Series 2007- B
Company
Preferred Securities.
The terms of the Trust Securities and the Series 2007- B Company Preferred Securities
provide
for limited
voting rights.
Except as specified i
n the Trust Agreement or i
n relation
t
o the right to direct the manner i
n
which the
Property Trustee acting
on behalf of the Trust exercises its voting rights with respect to the
Series 2007- B Company Preferred Securities, holders
o
f
Trust Securities are not entitled to voting
rights. Except as specified i
n the LLC
Agreement,
the Trust, as holder of Series 2007- B
Company
Preferred Securities,
i
s not entitled to voting rights. Nevertheless, the LLC
Agreement prohibits the
Company
from
taking
certain actions without the consent or vote of
a
t
least two- thirds
o
f
either the
Series 2007- B Company Preferred Securities, voting separately, or of all the series of
Company
Preferred Securities, voting together as a single class, as applicable.
For a description o
f
the matters
on which the holders
o
f
Series 2007- B Company Preferred Securities have a right
t
o vote, see
Description of the Series 2007- B Company
Preferred Securities
Voting Rights and Covenants.
22
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Holders of the Trust Securities and Series 2007- B
Company
Preferred Securities have no
redemption rights; however, the Company may ( but
is not required to) redeem the
Series 2007- B
Company
Preferred Securities on any
Dividend
Payment Date, and such
redemp
tion will cause a~ automatic
redemption
of the Trust Securities.
Subject to the Replacement Capital
Covenant and to the Company having received the
prior
approval o
f
the OTS for
any proposed redemption o
f
Series 2007- B
Company
Preferred Securities,
the
Company may
redeem the Series 2007-B Company Preferred Securities: (
i
) i
n whole but not i
n
part on any Dividend Payment Date upon the occurrence of a Tax Event, an Investment
Company
Act
Event, a Rating Agency
Event or a Regulatory Capital Event and
(
i
i
) i
n whole or in
part, on any
other
Dividend
Payment Date,
at a redemption price equal
to the
liquidation preference per
Series 2007- B
Company
Preferred
Security, plus
declared but
unpaid dividends, i
f
any, plus a U. S.
Treasury- based
make- whole amount i
f the
redemption
occurs prior
the Dividend
Payment
Date
occurring i
n Decem
ber 2017 or a LIBOR- based make- whole amount
i
f the
redemption occurs after December 2017 on a
Dividend
Payment
Date that
i
s not a Ten- Year Date. The
redemption by
the
Company of the of the
Series 2007- B Company
Preferred Securities will
automatically cause the
redemption o
f
the
Trust Securities for which the redemption price
will
bepaid from the proceeds
the Trust receives from
the
Company as a consequence
of the
redemption
of the Series 2007- B
Company
Preferred
Securities. The occurrence o
f
a Tax Event, an Investment
Company
Act Event, a Rating Agency
Event
or a
Regulatory Capital Event will not, however, give a holder
o
f
the Trust Securities
any right to
require that the Series 2007- B
Company
Preferred Securities or the Trust Securities be redeemed.
I
f
the Company
redeems the 2007- B
Company
Preferred Securities, the Trust Securities will be
automatically redeemed, and the former holders of the Trust Securities
may
not be able to invest their
redemption proceeds
in securities with a dividend
yield
and other terms
comparable
to that
o
f
the
Trust Securities. A
Treasury
based make whole amount will be
payable only i
n connection with a
redemption prior
to the Dividend
Payment
Date
i
n December 2017; after the Dividend Payment
Date
occurring i
n December 2017, a LIBOR- based make- whole amount will be
payable only i
f the
Series 2007- B
Company
Preferred Securities are redeemed on a Dividend Payment Date that
i
s not a
Ten- Year Date and no Tax Event, Investment
Company
Act Event, Rating Agency
Event or Regulatory
Capital
Event shall have occurred.
The Series 2007- B Company Preferred Securities will rank subordinate to claims of the
Compa
nys
creditors and on a parity
with other series of
preferred
securities issued
by
the Company,
whether
presently or
in the future.
The Series 2007- B
Company
Preferred Securities will rank subordinate to all claims of the
Companys creditors. The Series 2007- B Company
Preferred Securities will rank par! passu as to
dividends and upon liquidation with the Outstanding Company Preferred Securities and any other
Parity Equity Securities that the
Company may
issue. The
Company may
issue additional
Parity Equity
Securities at any
time
i
n the future, subject to satisfying certain conditions at the time of issuance,
without the consent or approval
of the holders of the Trust Securities.
Accordingly, i
f

the
Company
does not have funds legally
available
t
o
pay
full dividends on all series of the
Company
Preferred Securities; or

i
n the event
o
f
the
Companys liquidation,
dissolution or winding up, the Company does not
have funds legally
available to pay
the full
liquidation
value
o
f
all the series
o
f
Company
Preferred Securities,
any
funds that are legally
available to
pay
such amounts will be
paid pro
rata to the holders
o
f
the
Series 2007- B
Company
Preferred Securities, the
Outstanding Company
Preferred Securities and
any
other
Parity Equity
Securities. See Description
of Other
Company
Securities.
23
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Return
There has never been a market for the Trust Securities.
Prior
t
o this Offering, there was no market for the Trust Securities.
Although
the Initial Purchas
ers intend
t
o make. a market
i
n the Trust Securities, they are under no obligation t
o do so and, t
o the
extent that such market making i
s commenced, i
t
may
be discontinued at
any time. The Trust Securi
ties will not be listed on
any
securities exchange or automated dealer quotation system. There can be
no assurance that an active and
liquid trading
market for the Trust Securities will
develop or be
sustained.
I
f such a market were to develop, the prices at which the Trust Securities trade would
depend on
many
factors, including prevailing
interest rates, the
operating results
o
f
the Company,
WMB and WMI, and the market for similar securities. Holders of Trust Securities
may
not be able to
resell their Trust Securities at or above the initial
price. Furthermore,. the Trust Securities that are not
and will not be
registered
under the Securities Act and will be deemed to be restricted securities
within the meaning of Rule 144 under the Securities Act and are subject to significant transfer
restrictions as described
i
n Notice to Investors. These restrictions on transfer
may
inhibit the
development o
f
an active and liquid trading market for the Trust Securities and
may adversely impact
the market price
o
f
the Trust Securities.
The Trust Securities are not obligations of, or guaranteed by, any other entity.
The Trust Securities do not constitute obligations or equity securities
o
f
WMI, WMB, the
Company, WM Marion Holdings, LLC
(

Marion), Seneca Holdings, Inc.


(

Seneca) (Seneca and


Marion being intermediate holding companies between WMB and
University Street), University Street,
Trust
I
, Trust
I
I
, WaMu Cayman, any
of the Asset Trusts or
any entity other than the Trust, nor are the
Trusts obligations with respect to the Trust Securities
guaranteed
b
y
any entity. I
n
particular, none of
WMI, WMB, the Company, Marion, Seneca, University Street,
any
of the Asset Trusts or
any
other
entity guarantees that the Trust will
pass through any
dividends paid by the Company to the Trust as
the holder of the Trust Securities, nor are they obligated to provide
additional
capital or other support
to the Trust to enable the Trust to make distributions
i
n the event the Company. fails to
pay
dividends
on the Series 2007- B
Company
Preferred Securities and the Trust has no dividends tO pass through
to holders of the Trust Securities. The Trust Securities are not exchangeable for
Depositary
Shares or
Series N WMI Preferred Stock except upon a Conditional Exchange. No holder
o
f
Trust Securities will
have the right t
o
require the Trust to exchange
the Trust Securities for Depositary Shares.
The Series 2007-B Company Preferred Securities represent solely an interest
i
n the Company
and are not obligations of, or guaranteed by, any other entity.
The Series 2007- B Company Preferred Securities do not constitute obligations or equity securi
ties
o
f
any entity other than the Company, including WMI, WMB, Marion, Seneca~ University Street,
the Trust, Trust
I
, Trust
I
I
, WaMu Cayman or
any
of the Asset Trusts, nor are the
Companys
obligations
with
respect to the Series 2007- B
Company
Preferred Securities
guaranteed by any
other
entity. I
n
particular, none of WMI, WMB, Marion, Seneca, University. Street, the Trust, Trust
I
, Trust
I
I
,
WaMu
Cayman, any
of the Asset Trusts or any
other
entity guarantees that the Company will declare
or pay any
dividends to the Trust, nor are they obligated to provide additional
capital or other
support
to the Company to enable the Company to pay
dividends on the Series 2007- B
Company
Preferred
Securities
t
o the Trust
i
n the event the Companys assets and results from operations are insufficient
for this purpose or the Company otherwise fails to do so. Holders
o
f
Series 2007- B
Company
Preferred Securities do not have the right to require an exchange o
f
their securities for
any
securities
o
f
WMI or WMB.
Rating agencies may change rating methodologies.
The rating methodologies for securities with features similar to the Trust Securities are still
developing and the
rating agencies may change their methodologies i
n the future. This may include,
for example, the relationship between ratings assigned t
o WMIs senior securities and
ratings assigned
t
o securities with features similar to the Trust Securities, sometimes called notching. I
f the rating
24
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00037
Return
agencies were to change
their
practices
for
rating
such securities
i
n the future and the ratings of the
Trust Securities were to be
subsequently lowered, this
may
have a negative impact on the
trading
price of the Trust Securities.
Risks Associated with the Companys Business
The Company is effectively controlled by WMI and the Companys relationship with WMI and
WMB
may create potential
conflicts of interest.
All of the
Companys
officers and all but one of the
Companys Managers may
also be officers
o
f
WMI, WMB or their respective affiliates, as the case may
be. After this
Offering, WMI, WMB and
University
Street will continue to control all of the Companys outstanding voting securities. WMI,
WMB, and
University
Street will have the
right to elect all
o
f
the
Companys Managers, including
the
Independent Manager.
WMB and University Street may have interests that are not identical to the Companys interests.
WMI, through its
subsidiary
New American Capital, Inc., i
s the ultimate owner of WMBs and
University Streets common stock, and may have investment goals and strategies that differ from
those
o
f
the holders of the Trust Securities. Consequently, conflicts
o
f
interest between the Company,
on one hand, and WMB, University Street and/ or WMI, on the other hand, may
arise.
The Company is dependent on the officers and employees of WMI and WMB for the selection,
structuring and monitoring
of the Mortgage
Loans and the
Companys relationship
with WMI
and WMB
may
create potential conflicts of interest.
WMI and WMB are involved
i
n virtually every aspect of the Companys existence. WMB
administers the Companys day-to-day
activities under the terms of certain
agreements between WMB
and the Company. The Company
i
s dependent on the diligence and skill of the officers and employees
o
f
WMB for the selection, structuring and monitoring o
f
the Mortgage Loans and the Companys
other
Eligible
Investments.
This
dependency
and the
Companys
close
relationship
with WMI and WMB
may create potential
conflicts of interest. Specifically, such conflicts of interest may arise because the
employees
of WMI
and WMB
(
i
)
were directly
involved
i
n the decisions
regarding
the amount, type
and
price o
f
the
Mortgage
Loans and other assets
acquired indirectly
from
University
Street and WMB
prior
to this
Offering and (
i
i
) will make decisions on the amount, type and (
i
f applicable) price of any future
acquisitions
b
y the Company o
f
Additional Assets from University Street, WMI or other parties.
The Company i
s
dependent on the officers and employees of WMB for the
servicing
of the
Mortgage Loans in the Asset Trusts and the Companys relationship with WMB may create
potential
conflits of interest.
The Company i
s dependent on WMB and others for the servicing of the Mortgage Loans and
i
s
expected to be
dependent on WMB and others for the
servicing
of
any underlying
collateral with
respect
t
o Additional Assets. WMB administers the Companys day- to-day activities under the terms of
the Asset Documentation
relating to the Companys assets. These
agreements
contain and will
contain terms that the Company believes are consistent with those resulting from arms-length
negotiations.
With
respect to the Asset Trust I Pooling and Servicing Agreement
and Asset Trust
I
,
WMBs
servicing
fee
i
s an annual fee
o
f
0.125%, paid monthly,
for each HEL based on the
unpaid
principal balance of such HEL. With respect to the Asset Trust
I
I
Pooling and Servicing Agreement
and Asset Trust
I
I
, WMBs
servicing
fee
i
s an annual fee
o
f
0.375%, paid monthly, for each
Option
ARM based on the unpaid principal balance of such Option ARM. With respect to the Asset Trust
I
l
l
Pooling and Servicing Agreement and Asset Trust
I
l
l
, WMBs servicing fee
i
s an annual fee of 0.125%,
paid monthly, for each Flex- 5 ARM based on the unpaid principal balance
o
f
such Flex- 5 ARM. WMB,
as the servicer
o
f
the Mortgage Loans, will be entitled
t
o retain certain fees and ancillary charges,
including any prepayment fees, insufficient funds fees, modification fees, payoff statement fees and
25
CONFIDENTIAL
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Return
late charges with respect t
o the Mortgage Loans as additional servicing compensation and will alsO be
entitled to certain income generated
b
y permitted investments made with collections on the Mortgage
Loans.
Despite the Companys belief that the terms
o
f
the Asset Documentation between WMB and the
Company reflect and will reflect terms consistent with those negotiated
on an
arms- length basis, the
Companys dependency on WMBs officers and employees and the Companys close relationship with
WMB
may
create potential
conflicts
o
f
interest. Specifically,
such conflicts
o
f
interest
may
arise
because the employees of WMB have the
power
to modify the terms of or sell the Mortgage Loans
and other assets
i
n the Asset Trusts and
any
Additional Assets and make business decisions with
respect to the servicing of those underlying assets, particularly to the extent such underlying collateral
i
s defaulted or otherwise
non- performing.
Regulators may
limit the
Companys ability to implement the Companys business plan and
may
restrict the
Companys ability to pay
dividends.
Because the
Company i
s an indirect
subsidiary
of WMB, regulatory
authorities will have the
right
to examine the
Company
and its activities and, under certain circumstances, to impose restrictions on
WMB or the Company that could affect its
ability to conduct business
pursuant to the
Companys
business
plan
and that could
adversely
affect the Companys financial condition and results of
operations.
I
f the OTS, which
i
s WMBs primary regulator, determines that WMBs relationship with the
Company
results
i
n an unsafe or unsound practice, or
i
f
,
i
n certain instances, WMB
i
s no
longer
well-
capitalized, then the OTS has the authority to:
restrict the Companys ability t
o transfer assets;
restrict the Companys ability t
o
pay dividends
t
o its security holders;
restrict the Companys ability t
o redeem its preferred securities; or

require WMB to sever its relationship with the Company or divest its ownership of the
Company.
I
f the OTS determines that WMB
i
s operating with an insufficient level
o
f
capital, or that the
payment
of dividends by either WMB or its
subsidiaries, under the then- present circumstances, i
s an
unsafe and unsound practice, the OTS could restrict the Companys ability to
pay
dividends.
If
any
of the Company, the Asset Trusts Or the Trust loses its exemption under the Investment
Company Act,
i
t could have a material adverse effect on the Company and would
likely
result
in a redemption of the Series 2007- B Company Preferred Securities and the Trust Securities.
Each of the Company, Asset Trust
I
, Asset Trust
I
I
, Asset Trust
I
l
l and the Trust believes that
i
t
i
s
not, and intends to conduct its
operations so as not to be, required to register as an investment
company
under the Investment Company Act. Under the Investment Company Act, a non- exempt
entity that
i
s an investment
company i
s
required to register
with the SEC and
i
s
subject to extensive,
restrictive and potentially adverse regulation relating to, among other things, operating methods,
management, capital structure, dividends and transactions with affiliates. The Investment
Company
Act exempts entities that, directly or through majority- owned subsidiaries, are primarily engaged i
n
the business
o
f
purchasing or otherwise acquiring mortgages and other liens on and interests
i
n real
estate (which the
Company
refers
t
o as Qualifying Interests). Under current
interpretations o
f
the
staff
o
f
the SEC,
i
n order to qualify for this exemption, each of the Company and each Asset Trust,
among other things, must maintain
a
t
least 55%
o
f
the Companys assets
i
n
Qualifying Interests and
also
may
be required to maintain an additional 25%
i
n Qualifying Interests or other real estate related
assets. The assets that the
Company or the Asset Trusts
may
acquire therefore
may
be limited
b
y the
provisions
of the Investment Company Act. The Company and the Asset Trusts have each established
26
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00039
Return
a policy
of
limiting
authorized investments which are not
Qualifying
Interests to not more than 20%
o
f
the value of their
respective
total assets. The Investment Company Act does not treat cash and cash
equivalents as either Qualifying Interests or other real estate related assets.
Based on the criteria outlined
above,
the
Company
and the Asset Trusts each believe
that, as of
the time
o
f
this
Offering,
the
Companys
and the Asset Trusts
Qualifying
Interests
(excluding
cash
received
i
n connection with this
offering)
will
comprise
at least 90%
o
f
the estimated fair market value
of their respective
total assets. As a result, the
Company
and the Asset Trusts each believe that
they
are not
required
to
register as investment
companies
under the Investment
Company
Act. Neither the
Company nor the Asset Trusts intend, however, to seek an exemptive order, no-action letter or other
form
o
f
interpretive guidance from the SEC or its staff on this position. I
f
the SEC or its staff were to
take a different
position with respect to whether the Companys or an Asset Trusts assets constitute
Qualifying Interests, the
Company or the relevant Asset Trust could be required either (
I
) to change
the manner i
n which i
t conducts
i
t
s
operations t
o
avoid being required to register as an investment
company, or (
i
i
) to register as an investment
company,
either
o
f
which could have a material adverse
effect on the
Company or the Asset Trust, as the case may be,
the
Companys ability
to make
payments i
n
respect
of the Series 2007- B
Company
Preferred Securities and, accordingly,
the
trading
price o
f
the Trust Securities. Further, i
n order to ensure that the
Company
and Asset Trusts at all
times continue to
qualify
for the above
exemption
from the Investment
Company Act,
the
Company
and the Asset Trusts
may
be
required
at times to
adopt
less efficient methods of
financing
certain
o
f
the
Companys
and the Asset Trusts assets than would otherwise be the case and
may
be
precluded
from
acquiring
certain
types
of assets whose
yield i
s
higher
than the
yield on assets that could be
purchased i
n
a manner consistent with the
exemption.
The net effect
o
f
these factors
may
be to lower
at times the
Companys
net interest income.
Finally, i
f the
Company or an Asset Trust were an
unregistered
investment
company,
there would be a risk that the
Company or the Asset Trust, as the
case may
be, would be subject to monetary penalties and injunctive relief i
n an action brought by the
SEC, that the Company or the Asset Trust, as the case may be, would be unable to enforce contracts
with third parties and that third parties could seek to obtain rescission
o
f
transactions undertaken
during the periodthe Company Or the Asset Trust was determined to be an unregistered
investment
company. I
f the
Company, any o
f
the Asset Trusts or the Trust
i
s ever considered an investment
company
under the Investment
Company
Act as a result of an Investment
Company
Act Event, the
Company
would
likely
redeem the Series 2007- B
Company
Preferred Securities. See Description
of
the Series 2007- B
Company
Preferred Securities
Redemption.
Additionally,
the
Company may
from time
t
o time have Asset Subsidiaries other than the Asset
Trusts. The
Company may
not establish an Asset
Subsidiary
unless the establishment and
operation
of such Asset
Subsidiary
will not cause the
Company
to be an investment
company
that i
s
required
to
register
under the Investment Company
Act and such Asset
Subsidiary i
s not itself an investment
company
that
i
s
required
to
register
under the Investment
Company
Act.
I
f
any
such Asset
Subsidiary
were to be
required to register as an investment
company,
the results would be similar to those
described above in
respect to
any
Asset Trust
being required
to
register as an investment
company.
An adverse determination of the
Companys partnership status could
subject
the
Company
to
taxation.
Contemporaneously with the issuance
o
f
the Series 2007- B
Company
Preferred Securities, the
Company
will receive an opinion
from
Mayer
Brown LLP
t
o the effect that, for United States federal
income tax purposes, (
i
) the Company will not be treated as an association taxable as a corporation
and
(
i
i
)
although no activities
closely comparable to that
contemplated
b
y the
Company
have been the
subject
of
any
U. S.
Treasury regulation,
revenue ruling or judicial decision, the
Company
will not be
treated as a publicly
traded
partnership
taxable as a corporation.
The
opinions are based on certain
assumptions
and on certain
representations
and
agreements regarding
restrictions on the future
conduct of the activities of the
Company. Although
the
Company
intends to conduct its activities
i
n
accordance with such
assumptions, representations
and
agreements, i
f
i
t were nonetheless
27
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00040
Return
determined that the Company was taxable as a
corporation
for United States federal income tax
purposes,
then the
Company would be subject
under the Code to the
regular corporate income tax.
Such taxes would reduce the amounts available to make
payments on the Series 2007- B
Company
Preferred Securities.
The
Company cannot assure purchasers
that
i
t
paid
WMB and
University
Street fair market
value for all of the
Companys
assets because the Company has not obtained
any
third
party
valuations of all such assets. Nor can the Company assure purchasers that the Company will
acquire or dispose
of Its assets i
n the future at their fair market value.
The
Company
has
adopted policies
with a view to ensuring that all financial dealings between
WMB, University
Street and the
Company
will be fair to each
party
and consistent with market terms.
However, there has been no third- party
valuation of aU
o
f
the
Companys
assets.
I
n
addition, i
t
i
s not
anticipated
that
third- party
valuations will beobtained
i
n connection with the
acquisition
of the Flex- 5
ARMs or with other future
acquisitions or dispositions
of assets even i
n circumstances where an
affiliate of the Company i
s
selling
the assets to the Company or purchasing
the assets from the
Company. Accordingly, the Company
cannot assure purchasers
that the purchase price the Company
paid
for all
o
f
the
Companys
assets was equal to the fair market value
o
f
those assets. Nor can the
Company assure purchasers
that the consideration to be
paid by
the
Company to, or received
by
the
Company from, WMB, University
Street or any
of the
Companys
other affiliates
i
n connection with
future
acquisitions or dispositions o
f
assets will be
equal
to the fair market value
o
f
such assets.
The Asset Trusts or any
other Asset Subsidiary, and- therefore the
Company,
could incur
losses as a result of environmental liabilities
relating to properties underlying the Companys
assets in the Companys Porffolio through foreclosure action.
Any Asset Trust or any other Asset Subsidiary may be forced t
o
foreclose on an underlying
Mortgage
Loan or other
assets
where the borrower has defaulted on its
obligation t
o
repay
the
applicable Mortgage
Loans.
I
t
i
s
possible
that an Asset Trust or any
other Asset
Subsidiary,
and
therefore, the
Company, may
be
subject to environmental liabilities with
respect to foreclosed
property.
The
discovery o
f
these liabilities and
any
associated costs for removal
o
f
hazardous substances,
wastes, contaminants or pollutants,
could have a material adverse effect on the fair value of such
assets.
-
Delays
in
liquidating
defaulted loans could occur and could cause the
Companys
business to
suffer.
-
-
Substantial
delays
could be encountered
i
n connection with the
liquidation
of the collateral
securing
defaulted loans
i
n the
Companys Portfolio, with
corresponding delays i
n the
Companys
receipt of related proceeds. An action to foreclose on a
mortgaged property or repossess and sell
other collateral
securing a loan
i
s
regulated
b
y
state statutes and rules.
Any
such action
i
s
subject to
many of the delays and expenses o
f
lawsuits, which may impede the Companys ability t
o
foreclose
on or sell the collateral or to
obtain
proceeds
sufficient to repay
all amounts due on the related loan i
n
the
Companys
Portfolio.
The
Company may
invest
i
n assets that involve new risks and need not maintain the current
asset
coverage.
Although
the
Companys Portfolio, immediately
after the
completion
of this
Offering,
will consist
primarily
of
Mortgage Loans, to the extent
i
t
acquires
Additional Assets i
n the future, the
Company i
s
not
required
to limit its investments to assets
o
f
the
types currently i
n the
Companys
Portfolio. See
The Company
Business
o
f
the Company
Assets
o
f
the
Company.
Assets such as second lien
closed end home
equity loans, first or second lien home
equity
lines
o
f
credit, mortgage
loans on
single family or multi- family residences, commercial
mortgage
loans or other real estate assets
may
involve different risks not described i
n this offering circular. Moreover, while the LLC Agreement will
28
-
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Return
call for maintaining specified levels
o
f
FF0 coverage as
t
o expected dividends, the Company i
s not
required to maintain the levels
o
f
asset
coverage
that currently exist.
The
Company
is
dependent on WMI, WMB and
University
Street with
respect to its
aquisition
of Additional Assets and may be subject to conflicts of interest with respect to its
acquisition
of new assets.
The
dependency
of the
Company on WM1, University
Street and WMB and the Companys close
relationship with WMI, University Street and WMB
may
create potential conflicts
o
f
interest
i
n
connection with the
Companys acquisition o
f
Additional Assets. The
Company will be dependent on
WMI, University
Street and WMB
t
o
identify
Additional Assets that
i
t
may acquire,
but WMI, University
Street and WMB are not required to contribute or sell Additional Assets to the Company. I
f WMI,
University
Street and WMB are unable to identify, or are unwilling to contribute or sell, suitable
Additional Assets, then over time the
Companys
level of FF0
coverage
as to expected dividends will.
decline. Moreover, conflicts of interest may arise because the employees of WMI, University Street
and WMB will, subject to certain restrictions, make decisions on the amount, type and (
t
o
the extent
the Company purchases Additional Assets) price o
f
future acquisitions
b
y the Company of Additional
Assets from
University Street, WMB or other members
o
f
the WMI Group as well as future
dispositions o
f
assets to WMB, University Street or third parties.
Risk Factors Applicable to Depositary Shares Issued
i
n a Conditional
Exchange.
Adverse developments i
n the mortgage lending business have recently affected WMIs
business.
WMIs results for the third quarter of 2007 reflect adverse developments i
n the
mortgage lending
business
(and i
n the
housing
market more generally)
and related
volatility
and
liquidity
constraints
i
n
the capital markets since June 30, 2007, including with respect to net income, net interest income,
non- performing assets, and
provisions
for loan and lease losses.
I
t
appears
that such developments
will be significantly worse and longer lasting than originally expected. See WMI Recent
Developments.
Holders of Trust Securities may have adverse tax consequences as a result of a Conditional
Exchange.
For United States federal income tax purposes, a Conditional Exchange would most likely be a
taxable event to holders of Trust Securities; and holders would recognize gain or loss, as the case
may be, measured
b
y the difference between their adjusted tax basis
i
n the Trust Securities and the
fair market value of the Depositary Shares received
i
n the exchange. In addition, dividends,
i
f
any,
paid
to
Foreign
Holders
o
f
Depositary
Shares received
upon a Conditional
Exchange generally
will be
subject to a 30% U. S. withholding tax unless the holder qualifies
for a reduction from
withholding tax
under an applicable United States income tax treaty.
A decline in WMIs financial condition
may
restrict its ability to
pay
dividends and could result
in a loss on the investment of the former holders of Trust Securities.
I
f WMIs financial condition were to deteriorate
(which
would be quite likely
to have occurred or
occur thereafter
i
n the event of a Conditional Exchange), the holders of the Depositary Shares could
suffer direct and significantly adverse consequences, including suspension o
f
the payment o
f
non
cumulative dividends on the Series N WMI Preferred Stock and, i
f a dissolution, liquidation or winding
up o
f
WMI were
t
o
occur, loss by holders of Depositary Shares
o
f
a
l
l
or part o
f
their investment.
29
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A Conditional
Exchange may
be based on WMBs receivership, which could
likely
lead to
WMIs
bankruptcy
and would mean that others are likely
to have
liquidation claims senior to
that of the holders of the
Depositary
Shares.
An
Exchange
Event
triggering a Conditional
Exchange
will occur i
f WMB
i
s
placed
into
conservatorship or receivership. WMBs conservatorship or receivership could likely lead to WMI
becoming subject to a voluntary or involuntary proceeding
under the
U
.
S.
Bankruptcy
Code.
I
n the
event of WMIs
bankruptcy,
the claims o
f
WMIs secured, senior, general and subordinated creditors
would be entitled to a priority o
f
payment over the claims
o
f
holders of equity interests such as the
Series N WMI Preferred Stock. As a result
o
f
such subordination, i
f WMI became
subject t
o
a
bankruptcy proceeding
after a Conditional Exchange,
the holders of the
Depositary
Shares would
likely receive, i
f
anything, substantially
less than
they
would have received had the Conditional
Exchange
not occurred. -
Upon
the occurrence of a Conditional Exchange,
the, holders of the
Depositary Shares will not
have the benefit of the same favorable covenants as the Series 2007-B
Company
Preferred
Securities.
Upon
the occurrence of a Conditional
Exchange,
the holders
o
f
the
Depositary
Shares will not
benefit from the same favorable covenants as the Series 2007- B
Company
Preferred Securities.
WMI
i
s not
obligated
to
pay
dividends on the Series N WMI Preferred Stock and dividends on
these securities are not cumulative.
Dividends on the Series N WMI Preferred Stock are not cumulative.
Consequently, i
f the board
o
f
directors o
f
WMI ( WMIs Board of
Directors) does not declare dividends on the Series N WMI
Preferred Stock for any quarterly period, the holders o
f
the Depositary Shares would not be entitled to
any
such dividend whether or not funds are or subsequently
become available.
WMIs Board of Directors
may
determine that
i
t would be in WMIs best interest to
pay
less than
the full amount of the stated dividends on the Series N WMI Preferred Stock or no dividends for
any
quarter even i
f funds are available. Factors that would be considered
b
y WMIs Board of Directors
i
n
making
this determination are WMIs financial condition and
capital needs, the
impact o
f
current and
pending legislation
and
regulations,
economic conditions, tax considerations, and such other factors
as WMIs Board of Directors
may
deem relevant.
The Series N WMI Preferred Stock will rank subordinate to the direct indebtedness of WMI.
The Series N WMI Preferred Stock will be subordinate and rank
junior i
n
right o
f
payment
to all
of WMIs indebtedness for borrowed money
and indebtedness evidenced
by
notes or other securities.
Because the sole source of funds for
payment i
n
respect o
f
the
Depositary
Shares
i
s the Series N
WMI Preferred Stock, the
Depositary
Shares are effectively subordinated on the same basis as the
Series N WMI Preferred Stock. The terms o
f
the
Depositary
Shares and the Series N WMI Preferred
Stock will not limit
i
n
any way
WMIs
ability to incur additional indebtedness.
The Series N WMI Preferred Stock will be structurally subordinated to all
obligations
of WMIs
subsidiaries, and as a holding company, WMI may require cash from its subsidiaries to make
payments
with
respect to the Series N WMI Preferred Stock.
WMI
i
s a holding company
that conducts its
operations through
its
operating
subsidiaries and
relies
primarily on dividends and
proceeds
from
intercompany
transactions and loans from thOse
subsidiaries to meet its
obligations
for
payment
with
respect
to its
outstanding equity securities, any
and all of which
may
be
subject
to contractual restrictions and
regulatory
restrictions.
Accordingly,
the
Series N WMI Preferred Stock
(and
thus the
Depositary Shares) will be
structurally
subordinated to all
existing
and future liabilities of WMIs subsidiaries, including WMB. Holders of
Depositary Shares
should look
only
to the assets
o
f
WMI, and
notany o
f
its subsidiaries, for
payments
with respect to
30
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Return
the Depositary Shares. I
f
WMI i
s unable to obtain cash from its subsidiaries i
t
may be unable to fund
dividend
payments i
n
respect o
f
the Series N WMI Preferred Stock.
Upon the occurrence of a Conditional
Exchange, the holders of the Depositary Shares will not
have the benefit of the same favorable covenants as the Series 2007- B
Company
Preferred
Securities.
Upon
the occurrence o
f
a Conditional
Exchange,
the holders
o
f
the
Depositary
Shares will not
benefit from the same favorable covenants as the Series 2007- B
Company
Preferred Securities.
There is no active trading market for Series N WMI Preferred Stock or the Depositary
Shares
and such a trading
market
may never develop.
The Series N WMI Preferred Stock and the
Depositary
Shares will be new issues
o
f
securities.
WMI does not intend
t
o
cause the listing or quotation of the Series N WMI Preferred Stock or the
Depositary
Shares on any securities exchange or automated dealer
quotation system.
The Initial
Purchasers
are under no obligation
to and do not intend to make a market
i
n the
Depositary
Shares.
Consequently, i
t
i
s
unlikely
that an active and
liquid trading public
market for the
Depositary
Shares or
the
underlying Series N WMI Preferred Stock will
develop or be maintained. The lack of
liquidity
and
an active
trading
market could
adversely
affect
ability
of the holders of
Depositary
Shares to
dispose
o
f
such shares.
I
n
addition,
neither the
Depositary
Shares nor the Series N WMI Preferred Stock
represented by
such shares have been or will be
registered
under the Securities Act and will be deemed to be
restricted securities within the
meaning
of Rule 144 of the Securities Act. Holders of
Depositary
Shares will not be able to offer, sell, pledge or otherwise transfer the
Depositary
Shares other than:
to a qualified
institutional
buyer
within the
meaning o
f
Rule 144A of the Securities Act
i
n
a
transaction
complying
with Rule 1 44A;
otherwise i
n accordance with an applicable exemption from the registration requirements of the
Securities Act; or
to WMI or one o
f
WMIs affiliates,
and, i
n
any case, i
n accordance with exemptions from
any applicable state securities or blue
sky
laws.
These restrictions on transfer may inhibit the development o
f
an active and liquid trading market
for the Depositary Shares and may adversely impact the market
price o
f
such shares.
Risks
Relating to the
Mortgage
Loans
General economic conditions in the United States could
change
and possible resulting
changes
in
delinquency rates of the Mortgage Loans could
negatively impact
the
Companys
financial condition, results of
operations
and
ability
to
pay
dividends.
A
t
the time
o
f
the contribution of the HELs
i
n March 2006 and the
Option
ARMs
i
n December
2006, no loans that were delinquent
30
days or more were included
i
n such
Mortgage
Loans that
were contributed to Asset Trust I and Asset Trust
I
I
,
as applicable. Similarly,
the Flex- 5 ARMs to be
contributed to Asset Trust I
l
l
will not include
any
loans that are 30
days
or more
delinquent.
Delinquency
rates
may
be affected
b
y
many factors, including general
economic
conditions,
applicable
interest rates and the
availability o
f
refinancing opportunities. Recently, many mortgage
lenders, including WMB, have
experienced increasing delinquency
rates due to such factors. Eco
nomic conditions
may generally
dedine, interest rates
may
increase and
refinancing opportunities may
become constrained
by tightening
credit and
underwriting
standards or declining property prices.
There can
be
no assurance that delinquencies
with
respect
to the
HEL5, Option
ARMs and/ or the
Flex- 5 ARMs held
i
n the
applicable
Asset Trusts will not be
negatively
affected
i
n the future or that
31
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such
delinquencies
will not be
higher
than those
experienced
b
y other lenders or
b
y WMB with
respect
to loans owned or originated by i
t that are not
part
of the
Companys
Portfolio.
Since the Companys income consists primarily of payments received on the Mortgage Loans in
the
Companys Portfolio, an increase
i
n
delinquencies
with respect to such
Mortgage
Loans
may
adversely
affect the
Companys ability
to
pay full, or even partial,
dividends on the Series 2007- B
Company
Preferred Securities.
The Company has no control over changes in interest rates and such changes could nega
tively
affect the
Companys
finanial condition, results of
operations
and
ability
to
pay
dividends.
The Companys income will consist primarily of payments received on the HELs that are the
underlying
assets supporting the Asset Trust I Class A Trust Certificate, on the Option ARMs that are
the
underlying
assets
supporting
the Asset Trust
I
I Class A Trust Certificate and on the Flex-5 ARMs
that will be the
underlying
assets
supporting
the Asset Trust
I
l
l Class A Trust Certificate
(such
underlying assets, together
with
any
collateral with
respect
to
any
Additional Assets, the
Companys
Portfolio). As
o
f
September 30, 2007, all of the HELs included i
n the Companys Portfolio bore
interest at fixed rates, substantially
all
o
f
the
Option
ARMs bore interest at
floating rates, and as of
September 30, 2007, substantially
all
o
f
the Flex-5 ARMs bore interest at fixed rates
( subject
to
change to adjustable
rates after the
expiration
of the
respective
five
year period
from the date of
origination o
f
each Flex- 5 ARM)
and other related
mortgage
assets included
i
n the
Companys
Portfolio bore interest at adjustable rates. In the future, the
Company
could
acquire
Additional Assets
that include or are secured
b
y loans with a fully or partially adjustable
rate.
Adjustable
rate loans
decrease the risks to a lender associated with
changes i
n interest rates but involve other risks. As
interest rates rise,
the
payment required
from the borrower rises to the extent
permitted
b
y the terms
of the loan, and the increased
payment obligation
increases the
potential
for default.
I
n
addition, i
f
credit and
underwriting
standards become more restrictive in a period
of
increasing
interest rates, as
i
s
currently
the case i
n the United States,
borrowers
facing
increased
payments
under the terms of
their
respective loans may become unable
t
o refinance their loans,
thus further
heightening
the
potential
for increased payment delinquencies and ultimately,
defaults.
A
t
the same time, the market
ability of the underlying property may be adversely affected
b
y
higher interest rates. Thus, an
increasing
interest rate environment may adversely affect the Companys ability to pay full, or even
partial,
dividends on the Series 2007- B
Company
Preferred Securities. I
n
a declining interest rate
environment, there
may
be an increase
i
n
prepayments on the HELs, Option
ARMs or other assets i
n
the Companys Portfolio as borrowers refinance their mortgages at lower interest rates. Under these
circumstances, the Company may find i
t
more difficult to acquire Additional Assets with rates sufficient
to
support
the
payment
of the dividends on the Series 2007- B
Company
Preferred Securities. A
declining
interest rate environment would adversely
affect the
Companys ability
to
pay full, or even
partial,
dividends on the Series 2007- B
Company
Preferred Securities.
More
generally,
the Mortgage Loans in the Companys Portfolio are subject to economic condi
tions that could
negatively
affect the value of the collateral
securing
such
Mortgage
Loans
and/ or the results of the
Companys operations.
The value of the Mortgage Loans underlying the Companys
Portfolio and/ or the results o
f
the
Companys operations could be affected
b
y various conditions i
n the economy, such as:
local and other economic conditions
affecting
real estate and other collateral values;
32
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Return
sudden or unexpected changes i
n economic conditions, including changes
that
might
result
from terrorist attacks and the United States response
to such attacks;
and
the continued financial
stability o
f
a borrower and the borrowers
ability
to -make loan
principal
and interest
payments,
which
may
be
adversely
affected
by job loss, recession, divorce, illness
or personal bankruptcy.
A substantlal
portion
of the Flex-5 ARMs, and
particularly
the
Option ARMs, may experience
Negative
Amortization.
A substantial
portion o
f
the
Option
ARMs and Flex- 5 ARMs
may experience Negative
Amortiza
tion. After
giving
effect to the contribution
o
f
the Flex- 5 ARMs to Asset Trust Ill, approximately 62.70%
o
f
the
Companys assets, on a pro forma basis as of September 30, 2007, will consist
o
f
a portfolio o
f
Option ARMs and Flex- 5 ARMs, which will be held
through
Asset Trust
I
I and Asset Trust Ill,
respectively.
After an initial fixed- rate
period (generally one or three months i
n the case o
f
Option
ARMs and five
years i
n the case o
f
the Flex- 5
ARMs),
the
mortgage
interest rate on substantially
all
Option
ARMs and Flex- 5 ARMS will be
adjusted monthly
to
equal
the sum o
f
an index and the
per
annum rate
specified i
n each
mortgage note, which means that the interest
payable
with
respect
to
substantially
all of the
Option
ARMs and Flex- 5 ARMs which are no longer
in their initial fixed- rate
period
will
change monthly,
and
may
increase
through
time.
Substantially
all the Option ARMs grant borrowers the option to pay a minimum
monthly payment
that i
s
typically less than the amount o
f
interest calculated
a
t
the
fully
indexed interest rate, i
n which
case the difference between the amount of interest calculated at the
fully
indexed rate and the
minimum
monthly payment
would be added to the
principal
balance of the loan.
Substantially
all of the
Flex- 5 ARMs
provide
for a
minimum
monthly payment during
the initial fixed
period
sufficient to
fully
pay
the interest on the loan. Thereafter
during
the
adjustable
rate
period
for each Flex- 5 ARM the
minimum
monthly payment i
s reset on
an annual basis to an amount sufficient to
fully
amortize the
mortgage
loan over the term based on an assumed interest rate. The borrower
i
s
given
the
option
to
pay
this minimum
monthly payment even i
f the
applicable
index rate which
i
s used for the calculation
of interest
actually accruing on
the loan
i
s
higher
than the assumed interest rate, i
n which case the
difference between the amount of interest calculated at the
fully
indexed rate and the minimum
monthly payment
would be added to the principal balance of the loan. I
n
either case, the addition to
the principal balance of the Option ARM or the Flex- 5 ARM, as the case may be, i
s referred to
generally as negative
amortization. Increases i
n the related index are a significant possibility
for
any
Option ARM or Flex- 5 ARM, particularly i
f
i
t was originated a
t
a time when the value
o
f
the index was
low relative to historical values, and
any
such increase
may
create
negative
amortization.
Many
factors, including changes i
n economic conditions and
monetary policy o
f
the U. S. Federal Reserve
System, may
lead to increases
i
n the index.
With respect t
o
Option ARMs, i
n
general, during the first five
years
the minimum
monthly
payment may not increase by more than specified amounts, and will not increase at all during the first
year o
f
the
mortgage.
Even after the first
year,
when the minimum monthly payment may increase,
this adjustment may not be enough t
o
raise the minimum
monthly payment to the amount necessary
to pay
the interest due on the
Option
ARM based on the sum of the
applicable
index and the
margin
in effect. I
f the minimum
monthly payment increases, but
i
s still less than the amount
o
f
interest due,
there will continue to be
negative
amortization i
f the
mortgagor
chooses to
pay
the minimum
monthly
payment.
With respect to Flex- 5 ARMs, there should not be negative amortization during the initial fixed
rate period. Thereafter, negative amortization may occur t
o the extent that the
applicable
index rate
rises above the assumed interest rate used for the annual calculation of the
applicable
minimum
monthly payment,
and the borrower chooses to make
only
the minimum
monthly payment
rather than
a
payment equal
to the full amount of interest
actually
accrued for such month.
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Return
Negative amortization can increase both the likelihood of default, and the severity of losses in
the event of a loan default. As a result
o
f
negative amortization, Option
ARMs and Flex- 5 ARMs
owned
b
y Asset Trust
I
I and Asset Trust lii, respectively, may i
n the future have increased loan- to-
value ratios. The result could be to increase the likelihood of default because the mortgagors principal
obligation i
s increased.
I
n addition, when interest due on an Option
ARM or Flex- 5 ARM
i
s added to
the principal
balance
o
f
such
Option
ARM or Flex- 5 ARM
through negative amortization, the
mortgaged property provides proportionally
less overcollateralization for the
repayment o
f
such
Option
ARM or Flex- 5 ARM. Therefore,
i
f the mortgagor
defaults on such Option ARM or Flex- 5 ARM there
i
s
a greater
likelihood that a loss will be incurred
upon
the liquidation
o
f
the
mortgaged property.
Furthermore, the loss will be larger than would otherwise have been recognized in the absence of
negative
amortization. These losses could
adversely
affect the funds available to pay
dividends to the
holders of the
Company
Preferred Securities, including the Series 2007- B Company Preferred
Securities, or to return to investors the liquidation amount
o
f
the Company Preferred Securities
i
f the
Company were liquidated.
The interest accrued and due on an Option ARM or Flex-5 ARM
i
s considered interest income
under US GAAP without respect to any negative amortization that may occur. As a result, the reported
financials of the
Company may
include non- cash income related
t
o
negative amortization. As a result,
funds available
t
o
pay dividends
t
o the holders
o
f
the Company Preferred Securities, including the
Series 2007- B Company Preferred Securities, could materially differ from income actually received
from Asset Trust
I
I and Asset Trust
I
l
l as reported
b
y the Company.
The HELs, Option ARMS and Flex-5 ARMs
i
n the Companys Portfolio that are or will be held
through
Asset Trust
I
, Asset Trust
i
l and Asset Trust ill, respectively are concentrated in
spe
cific
states,
and adverse conditions in those states, in particular, could have a negative impact
on the Companys operations.
As
o
f
September, 30, 2007, approximately 79.84% (
a
s a
percentage
of such loans unpaid
principal balances) of the HELs
i
n the Companys
Portfolio were located
i
n Texas and California. As
o
f
September 30, 2007, approximately
73.19% (
a
s a percentage of such loans unpaid principal
balances) of the Option ARMs
i
n the Companys
Portfolio and, as
o
f
September 30, 2007,
approx
imately
45.30% (
a
s
a percentage o
f
such loans unpaid principal balances)
o
f
the Flex- 5 ARMs
i
n the
Companys Portfolio were located
i
n California~ Because
o
f
the concentration of the Companys
interest
i
n those states, i
n the event of adverse economic conditions
i
n those states, the Company
would
likely experience higher rates
o
f
loss and
delinquency on the
Companys
Portfolio than
i
f the
underlying HELs, Option ARMs or FIex-5 ARMs were more geographically diversified.
Additionally,
the
HELs, Option ARMs and Flex- 5 ARMs
i
n the Companys Portfolio may be subject to a greater risk
o
f
default than other comparable mortgage loans
i
n the event
o
f
adverse economic, political, or business
developments or natural hazards that may affect Texas and California, and the ability o
f
property
owners or commercial borrowers
i
n those states to make payments of principal and interest on the
underlying mortgage
loans.
I
n the event
o
f
any
adverse
development or natural disaster
i
n those
states, the
Companys ability to
pay
dividends on the
Company
Preferred Securities, including
the
Series 2007- B Company Preferred Securities could be adversely affected.
The origination of mortgage loans, including those currently owned by the
Company through
the Asset Trusts,
i
s
heavily regulated, and real or alleged violations of statutes or regulations
applicable to the
origination
of the Companys mortgage
loans could have an adverse effect
on the Companys financial condition and results of operation and its ability to
pay
dividends
on the Company Preferred Securities.
The origination of the HELs, Option ARMs and Flex- 5 ARMs currently owned
b
y the Company
through
the Asset Trusts, and other
mortgage loans that the
Company may
own in the future,
i
s
governed
b
y a variety of laws and regulations, including, for example, the Truth in Lending Act
(
TILA)
and various anti- fraud and consumer protection statutes. The
Company believes its mortgage loans
34
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were originated i
n
compliance with applicable laws and regulations i
n all material respects. From time
to time, however, borrowers may allege
that the origination o
f
their
mortgage loans did not
comply
with
applicable
laws or regulations i
n
one or more respects.
Borrowers
may assert such violations as
an affirmative defense
t
o
payment or to the exercise
b
y the
Company o
f
i
t
s
remedies, including
foreclosure proceedings, or i
n an action seeking statutory and other damages i
n connection with such
alleged violations. The Company could become involved i
n
litigation i
n connection with any such
dispute, including
class action lawsuits.
I
f
the Company were not successful
i
n
demonstrating that the
mortgage loans
i
n
dispute were originated i
n accordance with applicable statutes and
regulations,
the
Company
could become
subject
to
monetary damages
and other civil
penalties, including possible
rescission
o
f
the affected
mortgage loans, and could incur substantial
litigation
costs over a period o
f
time that could be
protracted.
The risk that borrowers will
allege
a defense
t
o
payment o
f
their
mortgage loans, including
that the
origination
of the
mortgage
loan did not
comply i
n some respect
with laws or regulations,
increases to the extent
general
economic conditions
i
n the United States
deteriorate and
delinquencies
and foreclosures
accordingly
increase.
I
n connection with the transfer of the HELs, the
Option
ARMs and the Flex-5 ARMs, WMB has
represented
and warranted to the
Company
that the HELS, the
Option ARMs, the Flex- 5 ARMs and
their
origination complied i
n all material
respects
with
applicable
federal and state laws and related
regulations, including
lILA.
I
f WMB were determined to have breached those
representations
and
warranties, the
Companys recourse against
WMB
i
n connection with these breaches could be
impaired i
f at that time WMB itself was i
n financial distress. This could i
n turn
negatively
affect the
Companys financial condition, results from operations and ability to pay dividends.
35
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CERTAIN INFORMATION CONCERNING WMB
Geera
Washington
Mutual Bank ( WMB) i
s a federally chartered savings association, chartered and
operating under the United States Home Owners Loan Act
o
f
1933, as amended. WMB accepts
deposits
from the
general public; originates, purchases,
services and sells home loans; makes credit
card, home equity and commercial real estate loans (the latter being loans secured primarily
b
y multi
family properties); and, offers cash
management
and
deposit
services. WMB
purchases,
sells and
services loans to subprime borrowers through its subprime mortgage channel. WMB also markets
annuities and other insurance
products
and offers securities
brokerage
services. As a federal
savings
association, WMB
i
s subject to
regulation
and examination
by
the U. S. Office of Thrift
Supervision
(together with any successor regulator, the OTS), its primary regulator. WMB
i
s an indirect
wholly-
owned
subsidiary o
f
WMI.
The Trust Securities will be
exchangeable,
without the
approval or any
action on the
part o
f
the
holders of such securities, for Depositary
Shares under~ any
of the following circumstances, each of
which
i
s referred to as an Exchange
Event:
WMB becomes
undercapitalized
under the OTSs
prompt
corrective action
regulations;
WMB
i
s placed into conservatorship or receivership; or
the OTS, in its sole discretion, anticipates that WMB
may
become undercapitalized in the
near term or takes supervisory
action that limits the
payment
of dividends
b
y WMB, and
i
n
connection therewith, directs such exchange.

Upon occurrence of an Exchange Event, the OTS


may
direct that eah Trust
Security
be
automatically exchanged for a likeamount of Depositary
Shares.
Capital Adequacy
WMB
i
s subject to OTS capital requirements. The capital adequacy requirements are quantitative
measuresestablished
b
y OTS
regulations
that require WMB to maintain minimum amounts and ratios
of capital. The OTS requires WMB to maintain minimum ratios of core and total capital to risk-
weighted assets, as well as core capital to adjusted
total assets and
tangible capital to adjusted
total
assets. Under applicable OTS regulations Tier 1 capital and core capital have the same meaning.
Federal law and regulations establish minimum capital standards, and under the OTS regula
tions, WMB
i
s
required to have a (
i
) leverage
ratio
o
f
core capital to adjusted
total assets
o
f
at least
4.00%, (
i
i
) a ratio
o
f
cOre capitalto total risk- weighted assets of
a
t
least 4.00%, ( iii) a ratio
o
f
total
capital to risk- weighted assets of at least 8.00% and (
i
v
)
a ratio of
tangible capital to adjusted total
assets of
a
t
least 1.50%. A
savings
associations adjusted total assets represent the
savings
associations total assets on its Thrift Financial
Report
filed with the OTS less assets
o
f
non- includable
subsidiaries, goodwill and other intangibles assets (exclusive of mortgage servicing rights
and
purchased credit card relationships), disallowed servicing assets and purchased credit card relation
ships and accumulated gains (losses) on certain available-for- sale securities and cash flow hedges.
For purposes o
f
determining risk- weighted assets for the risk- based capital ratios, the book value
o
f
each of the
savings
associations on- balance sheet assets, and a portion of certain off- balance sheet
items and
exposures,
are weighted
from 0% to 100% based on broad categories. For instance,
U. S.
government
debt
obligations are generally risk- weighted at 0%; certain
qualifying
residential
mortgage loans on one- to-four family dwellings are generally risk weighted at 50%; and commercial
loans and most other assets are generally risk- weighted at 100%. Off-balance sheet items
(including
letters of credit, loan commitments,
swaps
and other derivatives) are converted into on- balance sheet
equivalent amounts for risk- based
capital purposes,
then
assigned a risk
weight
like other assets.
The capital risk weighting assigned to certain asset-backed securities may vary from 20% to 200%
36
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Return
depending on credit rating. Subordinated residual interests retained in asset securitizations, credit
enhancement and forms of recourse can result
i
n
higher capital charges or deductions from capital.
For purposes o
f
the OTS regulations, total capital i
s defined as the sum o
f
core capital and
supplementary capital. Core capital generally includes: common shareholders equity (which includes
related surplus); non- cumulative perpetual preferred stock (which includes related surplus); and
qualifying minority interests
i
n the equity accounts
o
f
consolidated subsidiaries (which may include
such instruments as qualifying REIT preferred stock andthe Company Preferred Securities). Supple
mentary capital generally includes (subject t
o certain limits and sub- limits): cumulative perpetual
preferred stock; maturing capital instruments; Dutch auction and
money
market preferred stock; hybrid
capital
instruments
( including
certain
mandatory
convertible
notes); term subordinated debt; the
savings associations allowance for loan and lease losses (
u
p to a maximum
o
f
1.25%
o
f
total risk-
weighted assets);
and
up
to 45% of the pretax net unrealized gains of available- for- sale equity
securities investments.
Supplementary capital i
s
permitted to count towards
only
one- half
o
f
total
capital. Both core capital and
tangible capital are subject to various deductions. Tangible capital i
s
defined, generally, as common stock and retained earnings, noncumulative perpetual preferred stock
and retained
earnings,
certain nonwithdrawable accounts, and
minority
interests
i
n
fully
consolidated
subsidiaries ( which includes, among other instruments, the Company
Preferred
Securities), less
certain amounts of
intangible assets, servicing assets, credit- enhancing interest- only strips
and
investments ( both equity and debt) i
n certain subsidiaries. Some
o
f
these deductions are more
stringent for tangible capital than core capital, including goodwill, certain other intangible assets, and
certain servicing assets
i
n excess
o
f
certain limits.
Federal law and regulations also establish five capital categories
for
savings associations: well-
capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically under
capitalized. A savings association
i
s treated as well- capitalized i
f its ratio
o
f
total capital to risk-
weighted assets
i
s 10.00% or more, its ratio of core capital
t
o risk- weighted assets i
s 6.00% or
more,
its leverage ratio
i
s 5.00% or more, and
i
t
i
s not subject to any federal supervisory agreement order or
directive
t
o meet a specific capital level. I
n
order to be adequately capitalized, any savings association
must have a ratio
o
f
total capital to risk- weighted assets
o
f
not less than 8.00%, a ratio
o
f
core capital
to risk- weighted assets of not less than 4.00%, and ( unless i
t
i
s
i
n the most highly- rated category) a
leverage
ratio of not less than 4.00%.
Any savings
association that
i
s neither well- capitalized nor
adequately capitalized will be considered undercapitalized. Any savings association with a tangible
equity
ratio
o
f
2.00% or less will be considered
critically undercapitalized.
Undercapitalized savings
associations are subject to certain prompt corrective action require
ments, regulatory controls and restrictions, which become more extensive as an association becomes
more
severely undercapitalized. Failure by WMB to comply with applicable capital requirements, i
f
unremedied, would result in restrictions on its activities and lead to regulatory enforcement actions
against WMB including, but not limited to, the issuance ofa capital directive to ensure the
maintenance
o
f
required capital levels. The Federal
Deposit Insurance Corporation Improvement
Act
o
f
1991 requires the federal banking regulators to take prompt corrective action with respect to
depository institutions that do not meet minimum capital requirements. Additionally, FDIC or OTS
approval o
f
any regulatory application filed for its review may be dependent on compliance with capital
requirements.
In addition, the OTS from time to time
may impose higher specific capital requirements on
any
savings association that
i
s prceivedto have risks, exposures, credit concentration, rapid growth or
other circumstances warranting special attention. Failure to satisfy such a capital directive could
subject an association to civil money penalties, judicial enforcement and administrative remedies
available
t
o the OTS, as well as a finding that a savings association
i
s
undercapitalized.
Whether WMB would ever be determined
b
y the OTS
t
o be undercapitalized or at risk of
becoming undercapitalized i
n the near term thereby triggering the exchange o
f
the Trust Securities
for Depositary Shares

could be influenced not only


b
y the OTSs capital adequacy regulations, but
37
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Return
also by the regulators interpretations and judgment on other matters. For example, the OTSs views
on asset credit quality potentially could affect a thrift or savings associations capital status. Among
other things, the OTS typically evaluates asset quality, loan loss reserves and procedures during
periodic regulatory examinations of each federal -savings association.
I
f
,
following
such an examination
or otherwise, the OTS
i
n its discretion were to require WMB to significantly increase its reserves
against credit losses (
i
.
e
.
,
the allowance for loan and lease losses), this could
potentially reduce
WMBs retained earnings and
regulatory capital. As noted above, a
savings
associations allowance
for loan and lease losses
i
s includable within
supplementary capital only up to a limit, and
i
s not
included at all
i
n core capital.
The OTS has
proposed to require savings
associations that have certain aggregated covered
positions (including on- and off- balance sheet positions i
n the savings associations
trading account
and all foreign exchange and commodity positions whether or not
i
n the
trading account) equal to
10 percent or more of total assets or $1 billion or
more,
to maintain
regulatory capital against the
market risk of their trading positions. The other federal
banking agencies already impose a market risk
capital requirement for their regulated entities (bank holding companies and
banks).
WMB and WMI
are assessing the potential impacts of the proposed market risk capital rule.
A savings associations regulatory capital status, and the risk of being deemed
~

undercapital
ized, could also be affected
by other developments or by future changes i
n
regulatory capital
and
other standards. WMB and WMI cOntinue
t
o actively follow the
progress o
f
the U. S.
banking agencies
and the Base! Committee on Banking Supervision
i
n developing a new set of
regulatory
risk- based
capital requirements. The Basel Committee on Banking Supervision
i
s a committee
o
f
bank
supervi
sory
authorities established by the central bank
governors
of certain industrialized nations, including
the United States. The new requirements are commonly referred to as Basel
I
I or The New Basel
Capital Accord; however, final requirements have nOt been adopted. WMB and WMI are also
assessing the potential impacts o
f
Basel 11. Based on public
U. S.
regulatory guidance to date, WMB
believes that
i
t will be a required early adopter of Basel
I
I
requirements when final guidance regarding
compliance
with Basel
I
I
i
s released.
The
regulatory capital
ratios calculated for WMB, along
with the
capital amounts and ratios for
the minimum
regulatory requirement and the minimumamounts and ratios required to be categorized
as well- capitalized
under the
regulatory
framework for
prompt
corrective action were as follows:
June 30, 2007
Minimum to be
Categorized as
Well- Capitalized
Under the
Minimum OTSs Prompt
Regulatory
Corrective Action
Actual Requirement RegUlations
WMB Amount Ratio Amount Ratio Amount Ratio
(Dollars i
n millions)
Total
capital to total
risk- weighted
assets $28,966 12.17% $19,048 8.00% $23,810 10.00%
Core
capital to total risk- weighted
assets 19,379 8.14 9,524 4.00 14,286 6.00
Core capital to adjusted total assets
(leverage) 21,159 7.02 12,056 4.00 15,070 5.00
Tangible capital t
o
tangible assets
(tangible equity) 20,830 6.92 6,021 >2.00 n/ a n/ a
38
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December 31, 2006
Minimum to be
Categorized as
Well- Capitalized
Under the
Minimum OTSs
Prompt
Regulatory
Corrective Action
Actual
Requirement Regulations
WMB Amount Ratio Amount Ratio Amount Ratio
(Dollars i
n
millions)
Total
capital
to total
risk- weighted
assets $30,950 12.16% $20,364 8.00% $25,455 10.00%
Core capital t
o total risk- weighted
assets
21,081
8.28
10,182
4.00
15,273 6.00
Core
capital
to
adjusted
total assets
(leverage) 22,790 6.79 13,422 4.00(
1
)
16,777 5.00
Tangible capital to tangible assets
(tangible equity) 22,397 6.68 6,703 >2.00
n
/
a
n
/
a
December 31, 2005(
2
)
Minimum to be
Categorized as
Well- Capitalized
Under the
Minimum OTSs
Prompt
Regulatory
Corrective Action
Actual
Requirement Regulations
WMB Amount Ratio Amount Ratio Amount Ratio
(Dollars
in
millions)
Total
capital
to total
risk- weighted
assets $26,219 11.50% $18,240 8.00% $22,800 10.00%
Core
capital
to total
risk- weighted
assets 19,350 8.49 9,120 4.00 13,680 6.00
Core
capital t
o
adjusted
total assets
(leverage) 20,787
6.47 12,850 4.00 16,062 5.00
Tangible capital
to
tangible
assets
(tangible equity) 20,331 6.34 6,416 >2.00 n/ a
n
/
a
( 1
)
The minimum leverage ratio guideline i
s 3% for financial institutions that do not anticipate significant growth and that have
well- diversified risk, excellent asset quality, high liquidity, good earnings, effective management and monitoring of market
risk and, i
n general, are onsidered top- rate, strong banking organizations.
(
2
)
Represents regulatory capital ratios as filed for the year ended December 31, 2005, prior to the
merger o
f
Long Beach Mort
gage Company with and into WMB. Amounts have not been restated to reflect the
merger.
Benefits to WMB
The OTS has confirmed to WMB that the Series 2007- B Company
Preferred Securities and
Outstanding Company
Preferred Seurities will constitute core capital o
f
WMB under the OTSs
applicable regulatory capital regulations.
39
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Return
USE OF PROCEEDS
The Trust will use the
proceeds
of the sale
o
f
the Trust Securities i
n this
Offering, expected
to be
approximately $975,000,000
net of
underwriting commissions,
to
purchase
from WMB a like amount
o
f
Series 2007- B
Company
Preferred Securities, which the
Company
will issue to WMB in
exchange
for the
conveyance o
f
the Flex-5 ARMs to the
Company.
The WMI Group will use the proceeds from
the sale of the Series 2007- B Company Preferred Securities to the Trust for
general corporate
purposes.
40
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THE TRUST
Washington
Mutual Preferred
Funding
Trust IV
(the Trust) i
s
a statutory
trust created under the
Delaware
Statutory
Trust Act, as amended
(the
Trust
Act), pursuant
to a certificate of trust filed with
the Secretary o
f
State
o
f
the State of Delaware and the execution of a trust
agreement o
f
the Trust on
August 9
,
2007. The Trust will continue its existence from and after the closing of this Offering
pursuant to an amended and restated trust agreement (
a
s
so amended and restated, the Trust Agree
ment), to be entered into
b
y and
among
the
Company, as grantor, Wilmington
Trust
Company, as
property trustee ( the Property Trustee), and Wilmington Trust Company, as Delaware trustee ( the
Delaware
Trustee), as o
f
the date the Trust Securities are issued. The
rights o
f
the holders of the
Trust
Securities, including
economic
rights, rights t
o information and
voting rights, are as set forth
i
n
the Trust
Agreement
and the Trust Act.
The Trust
Agreement generally
limits the Trusts activities to (
i
)
holding
the Series 2007- B
Company
Preferred Securities, (
i
i
)
issuing
the Trust Securities, (
i
i
i
)
passing through
dividends and
redemption
and
liquidation payments paid
b
y the
Company
to the Trust on the Series 2007- B
Company
Preferred Securities and
(iv) performing
functions
necessary
or incidental thereto. The Trust
i
s
prohibited
from
issuing
other
equity
securities or any
debt securities or engaging i
n
any
other
activities.
Subject
to the limitations and
assumptions
described under Certain U. S. Federal Income
Tax Considerations, the Trust intends
t
o be treated as a grantor
trust for United States federal income
tax purposes, with the result that holders of Trust Securities are expected to be treated as beneficial
owners of the Series 2007- B
Company
Preferred Securities for United States federal income tax
purposes. The Series 2007- B Company Preferred Securities will be the only assets
o
f
the Trust. The
principal executive offices
o
f
the Trust will be located a
t
1301 Second Avenue, Seattle, Washington
98101. The office
o
f
the Delaware Trustee
i
s
Rodney Square North, 1100 North Market Street,
Wilmington,
Delaware 19890. Copies
of the Trust
Agreement
will be available upon request
to WMI.
As set forth in, and
subject to,
the Trust
Agreement,
the
Property
Trustee and the Delaware
Trustee will have exclusive and
complete authority
to
carry
out the
purposes o
f
the Trust.
The
Property
Trustee will hold title to theSeries 2007- B Company Preferred Securities for the
benefit of the holders
o
f
the Trust Securities, and, as such holder, the
Property
Trustee will have the
power to exercise all rights, powers and privileges with respect to the Series 2007- B Company
Preferred Securitiesunder the LLC
Agreement. I
n
addition, the
Property
Trustee will maintain
exclusive control
o
f
a segregated
non- interest
bearing
bank account to hold all
payments
made
i
n
respect
of the Series 2007- B
Company
Preferred Securities for the benefit
o
f
the holders
o
f
the
Trust Securities.
Pursuant to the Trust
Agreement,
all
charges or expenses o
f
the Trust other than
payments
required under the terms of the Trust Securities, including the fees, charges and
expenses o
f
the
Property Trustee, the Delaware Trustee, the
Registrar, the Transfer
Agent or any Paying Agent, will be
paid or caused to be paid
b
y
the Company; provided, however, that i
f the Company does not pay or
cause t
o be
paid
such fees, charges and expenses or can pay
such fees, charges and expenses only
in a manner that would allocate such fees, charges
and
expenses against
the interests of the holders
o
f
the Series N
Company
Preferred
Stock,
WMB will
pay
such fees,
charges
and
expenses; provided
further, that
i
f the
Property
Trustee or the Delaware Trustee incurs fees, charges or expenses
for
which
i
t
i
s not otherwise liable under the Trust
Agreement, or i
f the
Paying Agent,
the
Registrar
or the
Transfer
Agent
incurs fees, charges or expenses
for which
i
t
i
s not otherwise liable under the
Agency
Agreement,
in each case at the
request
of a holder of Trust Securities or other
person, such holder or
other
person
will be liable for such fees, charges
and
expenses.
The information with
respect to the Trust that i
s
required by paragraph (d)(
4
)
(
i
) of Rule 144A
under the Securities Act, will be available
upon request to the
Property
Trustee until the earlier
o
f
(
i
) the redemption in full o
f
the Trust Securities or (
i
i
) the Conditional Exchange.
41
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Return
THE COMPANY
Washington Mutual Preferred
Funding
LLC (the Company) i
s a Delaware limited
liability
company formed onFebruary
3
,
2006 under the Delaware Limited-- Liability Company Act, asamended
(the LLC Act), pursuant to an initial limited liability company agreement and a certificate
o
f
formation
filed with the Secretary o
f
State
o
f
the State of Delaware. The limited
liability company agreement was
amended and restated
i
n its entirety i
n connection with each of the issuance
o
f
the Series 2006- A
Company Preferred Securities
i
n March 2006, the Series 2006- C Company Preferred Securities
i
n
December 2006 and the Series 2007- A Company Preferred Securities
i
n
May 2007. The limited
liability company agreement of the Company
will be further amended and restated to include the
terms of the Series 2007- B
Company
Preferred Securities
upon
the closing of this
Offering (
a
s so
amended, the LLC
Agreement).
The LLC
Agreement generally limits the Companys activities to (
i
) issuing (
a
)
the Series 2006- A
Company Preferred Securities, which were sold to Trust
I
, (
b
)
the Series 2006- B
Company Preferred
Securities, which were sold to WaMu Cayman, (
C
)
the Series 2006- C Company Preferred Securities,
which were sold to Trust
I
I
,
(
d
)
the
Series 2007- A Company Preferred Securities, which were sold to
Trust Ill, (
e
)
other
Parity Equity Secu~ ities, such as the Series 2007- B
Company
Preferred Securities,
subject to the limitations described
i
n this offering circular, (
f
) the common securities of the
Company
( the Company
Common
Securities) to University Street, Inc., an indirect subsidiary of WMB
(
University Street),
and
(
g
)
additional Junior
Equity Securities, subject to certain limitations described
i
n this
offering circular, (
i
i
)
acquiring
and
holding Eligible Investments, including
the Asset Trust I
Class A Trust Certificate, the Asset Trust
I
I Class A Trust Certificate and the Asset Trust
I
I
I Class A
Trust Certificate (which, other than Permitted Investments, will be the sole Eligible Investments of the
Company immediately after the completion of this Offering) i
n accordance with the investment
policy
as described in

Business
o
f
the Company
Assets of the Company i
n and (
i
i
i
) performing
functions
necessary
or incidental thereto. Subject to the limitations and assumptions described under
Certain U. S. Federal Income Tax Considerations, the
Company
intends to be treated as a
partnership (other than a publicly traded partnership taxable as a corporation) for United States
federal income tax
purposes.
The
Company may
not take
any
action, or permit any
action to be taken,
that would cause the Company
t
o fail to be treated as a partnership for United States federal income
tax purposes
for so long as any Company Preferred Securities of
any
series are
outstanding, except
with the consent or affirmative vote
o
f
the holders
o
f
at least two- thirds of all the series of Company
Preferred Securities, voting together as a single class. The principal executive office
o
f
the
Company
i
s do
Washington Mutual, Inc., 1301 Second Avenue, Seattle, Washington 98101. Copies of the LLC
Agreement will be available upon request to WMI.
The Company will receive the opinion of Mayer Brown LLP to the effect that, for United States
federal income tax
purposes, the Company will not be treated as an association taxable as a
corporation or as a publicly traded partnership taxable as a corporation.
Capitalization
Upon completion
of this Offering, University
Street will continue to hold all of the
Company
Common Securities, representing 100%
o
f
the voting rights i
n the
Company (subject
t
o the limited
voting rights of holders of the Series 2007- B
Company
Preferred Securities and the other Company
Preferred Securities described under Description of the Series 2007- B
Company
Preferred Securities

Voting Rights
and
Covenants). Upon completion o
f
this Offering, the Trust will hold all
o
f
the
Series 2007- B
Company
Preferred Securities. Trust I will continue to hold all the Series 2006- A
Company Preferred Securities, WaMu
Cayman
will continue to hold all the Series 2006- B
Company
Preferred Securities, Trust
I
l will continue to hold all the Series 2006- C
Company
Preferred Securities
and Trust
I
l
l will continue to hold
a
l
l
the Series 2007- A Company Preferred Securities.
42
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002209.00055
Return
The following table illustrates the capitalization o
f
the Company as o
f
June 30, 2007 and the
expected capitalization o
f
the
Company as o
f
the
closing o
f
this
Offering ( the Closing Date),
after
giving
effect to the issuance
o
f
the Series 2007- B
Company
Preferred Securities:
As of June 30, As of the
2007(
1
)
Closing
DateW
(Unaudited) (Unaudited)
Series 2006- A Company Preferred Securities $1,250,000,000 $ 1,250,000,000
Series 2006- B
Company
Preferred Securities 750,000,000 750,000,000
Series 2006-C
Company
Preferred Securities 500,000,000 500,000,000
Series 2007- A Company
Preferred Securities 500,000,000 500,000,000
Series 2007- B
Company
Preferred Securities
1,000,000,000
Company
Common Securities 3,896,229,848 7,644,035,493
Total Capitalization $6,596,229,848 $11,644,035,493
( 1
)
These figures exclude certain capitalized costs associated with the issuance of the Company Preferred Securities and
exclude retained earnings.
Business of the
Company
Assets of the
Company
I
n
connection with the
February
2006
offering
of the Series 2006- A
Company
Preferred Securi
ties and Series 2006- B
Company
Preferred Securities, WMB
conveyed a portfolio
of first
lien, closed-
end,
fixed rate home
equity
loans
(

HELs) to the
Company
in
exchange
for 100% of the Series 2006- A
Company
Preferred Securities and Series 2006- B
Company
Preferred Securities.
Concurrently
with
this transfer
b
y
WMB, University
Street
conveyed a portfolio
of HEL5 to the
Company i
n
exchange
for
100% of the
Company
Common Securities. The
portfolio conveyed by
WMB and
University
Street to
the
Company
and
subsequently
transferred to Asset Trust I consisted
o
f
approximately
$5,389,459,150 of HELs
i
n the
aggregate,
calculated as of
January 31, 2006. The
Company conveyed
100%
o
f
the HELs that
i
t received to Asset Trust I
i
n
exchange for the interests i
n Asset Trust I
represented by the Class A Asset Trust Certificate of Asset Trust I (the
Asset Trust I Class A
Trust
Certificate)
and a residual certificate
( the
Asset Trust / Class R Trust Certificate), which the
Company transferred t
o
WMB. WMB then sold the Series 2006- A
Company
Preferred Securities and
Series 2006- B
Company
Preferred Securities for cash to Trust I and WaMu
Cayman, respectively.
I
n connection with the December 2006 offering of the Series 2006- C
Company
Preferred
Securities, WMB
conveyed a portfolio o
f
payment option adjustable rate mortgages
(

Option ARMs)
to the
Company i
n
exchange for 100% o
f
the Series 2006- C
Company
Preferred Securities, and
University Street contributed a pool o
f
Option
ARMs to the
Company as a capital
contribution. The
aggregate outstanding principal
balance
o
f
all
Option
ARMs contributed to the
Company
b
y WMB and
University
Street and
subsequently
transferred to Asset Trust
I
I
was approximately $2,899,877,211 i
n
the
aggregate,
calculated as of November 14, 2006. The
Company conveyed
100% of the
Option
ARMs that
i
t received to Asset Trust
I
I
i
n
exchange
for interests in Asset Trust
I
I
represented by
the
Class A Asset Trust Certificate of Asset Trust
I
I
(the
Asset Trust
I
I Class A Trust
Certificate)
and a
residual certificate
( the
Asset Trust
I
I Class R Trust Certificate), which the Company transferred to
WMB. WMB then sold the Series 2006- C Company Preferred Securities for cash to Trust
I
I
.
As of
September 30, 2007, the
Companys
assets consisted of
approximately $4,083,6