<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
APEX MORTGAGE CAPITAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[LOGO]
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
AND
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JUNE 30, 1999
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Holders of Shares of Common Stock of Apex Mortgage Capital, Inc.:
The 1999 Annual Meeting of Shareholders of Apex Mortgage Capital, Inc. will
be held on June 30, 1999 at The Wilshire Grand Hotel, located at 930 Wilshire
Boulevard, Los Angeles, California 90017 at 9:00 a.m. Pacific Time, for the
following purposes:
- To elect three directors to hold office for a term of three years, or
until their successors are elected and qualified.
- To ratify the appointment of Deloitte & Touche LLP, independent public
accountants, as auditors for the current year; and
- To take action on other business that may properly come before the
meeting.
To assure your representation at the meeting, please mark, sign and date
your proxy card and return it in the envelope provided after reading the
accompanying proxy statement.
MICHAEL E. CAHILL
SECRETARY
Los Angeles, California
April 30, 1999
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT.
PLEASE PROMPTLY DATE, SIGN AND RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE>
April 30, 1999
PROXY STATEMENT
---------------------
GENERAL INFORMATION
This proxy statement and accompanying proxy card are being mailed to
shareholders beginning on or about May 10, 1999 in connection with the
solicitation of proxy cards by the Board of Directors of Apex Mortgage Capital,
Inc. (hereinafter referred to as the "Company") for use at the 1999 Annual
Meeting of Shareholders. The principal office of the Company is located at 865
South Figueroa Street, Los Angeles, California 90017.
Holders of record of Company common stock at the close of business on April
30, 1999 are entitled to notice of and to vote at the meeting. At the close of
business on April 23, 1999 there were 5,753,000 shares of common stock
outstanding, each of which entitles its holder to one vote. Cumulative voting is
not allowed.
THE BOARD OF DIRECTORS SOLICITS AND RECOMMENDS YOUR EXECUTION OF THE
ENCLOSED PROXY CARD. You may revoke your proxy card at any time prior to it
being used at the meeting by submission of a later proxy, giving notice in
writing to the Secretary of the Company or voting in person.
Shares for which a properly signed proxy card is received will be
represented at the Annual Meeting and will be voted as instructed on the proxy
card. Shareholders are urged to specify their choices by marking an "X" in the
appropriate box on the proxy card. If no choices are specified, the shares
represented will be voted as recommended by your Board of Directors.
The presence at the Annual Meeting, in person or by proxy, of a majority of
the shares of the Company's common stock issued and outstanding as of April 30,
1999, will constitute a quorum. A quorum is necessary for the transaction of
business at the Annual Meeting. The Company will treat abstentions as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum, but as not voting for purposes of any matter submitted to the
stockholders for a vote. If a broker indicates on the enclosed proxy or its
substitute that it does not have discretionary authority as to certain shares to
vote on a particular matter ("broker non-votes"), those shares will be treated
as abstentions with respect to that matter. Shares represented by improperly
marked proxy cards will be treated as abstentions.
Once a quorum is present, a majority of the votes cast at the Annual Meeting
is sufficient to take or authorize action upon any matter which may properly
come before the meeting and a plurality of all the votes cast at the meeting is
sufficient to elect a director.
Votes cast at the Annual Meeting will be tabulated by the persons appointed
by the Company to act as inspectors of election for the Annual Meeting.
The enclosed proxy is solicited by the Board of Directors of the Company.
The cost of the solicitation will be borne by the Company. Proxy solicitations
will be made by mail, and may also be made by personal interview, telephone,
facsimile transmission and telegram on behalf of the Company by directors and
officers of the Company. Banks, brokerage houses, nominees and other fiduciaries
will be requested to forward the proxy soliciting materials to the beneficial
owners and obtain authorization for the execution of proxies. The Company may
reimburse brokers, banks and other fiduciaries for postage and reasonable
expenses incurred by them in the forwarding of proxy material to beneficial
owners of stock. The Company does not expect to engage an outside firm to
solicit proxies.
1
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Except during the
first term of office following the Company's commencement of operations, each
class will serve a three-year term. The present term for the Class I directors
expires at the Annual Meeting, and the present terms for the Class II and Class
III directors expire at the annual meetings of stockholders to be held in 2000
and 2001, respectively. Each director holds such office until his or her
successor is duly elected or qualified.
Three Class I directors are to be elected at the Annual Meeting to hold
office until the Annual Meeting of Stockholders in 2002 and until their
respective successors are duly elected and qualified. The Board of Directors has
nominated John C. Argue, Carl C. Gregory, III and Jeffrey E. Gundlach to
continue to serve as Class I directors (the "Nominees"). Each of the Nominees is
currently serving as a director of the Company. The Board of Directors
anticipates that each Nominee will serve, if elected, as a director. However, if
any person nominated by the Board of Directors is unable to serve, the proxy
confers upon the holders thereof discretionary authority to vote for the
election of such other person or persons as the Board of Directors may
recommend.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES. PROXIES RECEIVED WILL BE VOTED FOR EACH OF THE NOMINEES UNLESS
STOCKHOLDERS SPECIFY OTHERWISE IN THE PROXY.
PROPOSAL 2: APPOINTMENT OF AUDITORS
Deloitte & Touche LLP, independent public accountants, have been appointed
as auditors by the Board of Directors of the Company to examine the books and
accounts of the Company for the year ending December 31, 1999. A representative
of Deloitte & Touche LLP is expected to attend the Annual Meeting. This
representative will have the opportunity to make a statement and is expected to
be available to respond to appropriate questions raised at the meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS ITEM. PROXIES RECEIVED
WILL BE VOTED FOR THIS ITEM UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THE PROXY.
OTHER BUSINESS
Management does not intend to present and does not know that others will
present any other items of business at the Annual Meeting. However, if any other
matters properly come before the meeting, the appointed Proxies will vote in
their discretion.
DIRECTORS AND EXECUTIVE OFFICERS
CLASS I DIRECTORS
JOHN C. ARGUE, 67, has been an unaffiliated director of the Company and a
member of its Audit Committee since December 1997. Since 1990 Mr. Argue has been
Of Counsel to the law firm of Argue Pearson Harbison & Myers. Mr. Argue is also
a Director of Avery Dennison Corporation, Nationwide Health Properties Inc., the
TCW Galileo Family of Funds and TCW Convertible Securities Fund, Inc. He is an
advisory director of LAACO Ltd. Mr. Argue is also a trustee of the TCW/DW Funds.
He is Chairman of The Rose Hills Foundation.
CARL C. GREGORY, III, 54, has been an unaffiliated director of the Company
and a member of its Audit Committee since December 1997. Since January 1998, Mr.
Gregory has been Chairman and Chief Executive Officer of West Capital Financial
Services Corp. From January 1996 through 1997, he was Managing Partner of
American Western Partners and from 1991 through 1995 he was Chairman, Chief
Executive Officer and a Director of MIP Properties, Inc. Mr. Gregory has also
been a Director of Pacific
2
<PAGE>
Gulf Properties, Inc. since 1997. Mr. Gregory received a B.A. degree in
Accounting from Southern Methodist University and an M.B.A. degree in Finance
from the University of Southern California.
JEFFREY E. GUNDLACH, 39, is Chief Investment Officer, Vice Chairman and has
been an affiliated director of the Company since October 1997. Mr. Gundlach is a
Group Managing Director of TCW Investment Management Company (the "Manager"),
and of certain affiliates of the Manager. Mr. Gundlach has been with The TCW
Group, Inc. and its subsidiaries and affiliates ("TCW") since 1985. Previously,
Mr. Gundlach was employed by Transamerica Corporation's Property/Casualty
Insurance division, where he was a Senior Loss Reserve Analyst responsible for
investment discount and funding strategies. Mr. Gundlach is also a member of
TCW's mortgage backed securities group. Mr. Gundlach is a graduate of Dartmouth
College, holding B.A. degrees in Mathematics and Philosophy (summa cum laude).
He also attended Yale University as a Ph.D. candidate in Mathematics.
CLASS II DIRECTORS
PETER G. ALLEN, 40, has been an unaffiliated director of the Company and a
member of its Audit Committee since December 1997. He is also Chairman of its
Compensation Committee. Mr. Allen is an investment banker who has worked for
Credit Suisse First Boston as a Managing Director and co-head of their West
Coast office since October, 1998. Previously, he worked at Morgan Stanley & Co.
Incorporated for 15 years through January, 1997, where he was the Managing
Director responsible for the firm's investment banking operations in the
southwestern United States. During his tenure at Morgan Stanley, Mr. Allen
advised a number of companies in a wide variety of strategic and financial
transactions. Mr. Allen was also the Managing Partner at Chartwell Partners from
January 1997 through July 1997. Mr. Allen received his B.A. degree in Economics,
summa cum laude, from Yale University in 1980 and his M.B.A. degree from
Stanford University in 1984.
PHILIP A. BARACH, 46, is President, Chief Executive Officer and has been an
affiliated director of the Company since October 1997. Mr. Barach is also a
Group Managing Director and Chief Investment Officer of Investment Grade Fixed
Income of the Manager and certain of its affiliates. Mr. Barach is a member of
TCW's mortgage backed securities group. Mr. Barach joined TCW in 1987 after
being employed by Sun Life Insurance Company, where he was Senior Vice President
and Chief of Investments. Previously, Mr. Barach served as head of Fixed Income
Investments for the State of California Retirement System. Mr. Barach attended
the Hebrew University of Jerusalem, where he received a B.A. degree in
International Relations and an M.B.A. degree in Finance.
CLASS III DIRECTORS
THE HON. JOHN A. GAVIN, 68, has been an unaffiliated director of the Company
and a member of its Audit Committee since December 1997. Mr. Gavin is founder
and, since 1968, chairman of Gamma Holdings, an international capital and
consulting firm. He is a partner and Managing Director of Hicks, Muse, Tate &
Furst (Latin America) and a Managing Director of Global Crossing and Pacific
Capital Group. Mr. Gavin is a member of the board of directors of Atlantic
Richfield Company (ARCO), International Wire Group and Krause's Furniture, Inc.
Mr. Gavin is also a trustee of the Hotchkis & Wiley Funds (a Merrill Lynch
company). From 1981 to 1986, Mr. Gavin was the United States Ambassador to
Mexico. Mr. Gavin graduated from Stanford University with a degree in Economic
History of Latin America.
MARC I. STERN, 55, is Chairman and has been an affiliated director of the
Company since September 1997. Mr. Stern is Vice Chairman of the Board of
Directors of the Manager and TCW Asset Management Company, Chairman of the Board
of Directors of TCW Funds Management, Inc. and a Director of The TCW Group, Inc.
and Trust Company of the West. Mr. Stern is also President of The TCW Group,
Inc., Chairman of the TCW Galileo Family of Funds and a trustee of the TCW/DW
Funds. Mr. Stern joined TCW in 1990. Previously, Mr. Stern was President of
SunAmerica, Inc., Managing
3
<PAGE>
Director and Chief Administrative Officer of the Henley Group, Inc. and Senior
Vice President of Allied-Signal, Inc. and related entities. Mr. Stern is also
Director of Qualcomm, Inc. and the Los Angeles Music Center Opera, and a member
of the Board of Trustees of The Salk Institute and Dickinson College. Mr. Stern
received a B.A. degree from Dickinson College, an M.A. degree from the Columbia
University School of Public Law and Government, and a J.D. degree from the
Columbia University School of Law.
BIOGRAPHICAL INFORMATION REGARDING EACH EXECUTIVE OFFICER WHO IS NOT A DIRECTOR
IS SET FORTH BELOW:
DANIEL K. OSBORNE, 34, has been Executive Vice President, Chief Operating
Officer and Chief Financial Officer of the Company since September 1997. Mr.
Osborne is also a Senior Vice President of the Manager and certain of its
affiliates. Mr. Osborne joined TCW in 1994 as part of its mortgage backed
securities group, managing fixed income mutual funds. Prior to joining TCW, from
1992 to 1994, Mr. Osborne was a Vice President of ASR Investments Corporation
("ASR"), a publicly held REIT investing in Mortgage Assets. At ASR, Mr. Osborne
was responsible for asset/liability management and the supervision and
preparation of public reporting. Prior to his employment with ASR, Mr. Osborne
was a Certified Public Accountant with Deloitte & Touche LLP specializing in
REITs, mortgage securities and publicly held companies. He holds a B.S. degree
in Accounting from Arizona State University.
DAVID S. DEVITO, 36, has been Controller of the Company since March, 1999.
Mr. DeVito is also a Managing Director and the Corporate Controller of the
Manager and certain of its affiliates. Prior to joining TCW in 1993, Mr. DeVito
was a Senior Manager with Deloitte & Touche LLP, specializing in serving the
investment management and securities broker/dealer industries. He received his
B.A. in Business Economics from the University of California at Los Angeles and
is a Certified Public Accountant in the state of California. He is also a member
of the American Institute of Certified Public Accountants and the California
Society of Certified Public Accountants.
JOSEPH J. GALLIGAN, 40, has been Senior Vice President of the Company since
September 1997. Prior to joining TCW in 1991, Mr. Galligan was a Vice President
at Smith Barney in the Mortgage-Backed Specialist Group. Prior to that, he spent
five years at First Boston as Vice President in the same area. In addition, Mr.
Galligan spent over three years at Scudder Stevens & Clark as a Portfolio
Manager/Trader. He holds a B.S. degree in Economics with a concentration in
Finance from the Wharton School of Business at the University of Pennsylvania.
Mr. Galligan is a Chartered Financial Analyst.
MICHAEL E. CAHILL, 48, has been Secretary of the Company since September
1997. Mr. Cahill is a Managing Director and General Counsel of the Manager and
certain of its affiliates. Prior to joining TCW in 1991, Mr. Cahill was Senior
Vice President and General Counsel of Act III Communications. Previously, he was
in private law practice with O'Melveny & Myers and, prior to that, with Shenas,
Robbins, Shenas & Shaw in San Diego. He is a member of the State Bar of
California and of the Province of Ontario and is admitted to various courts,
including the U.S. Supreme Court. Mr. Cahill holds B.A. degrees in Mathematics
and Philosophy from Bishops University, Quebec, an LL.M. degree from Harvard
University and an LL.B. degree from Osgoode Hall Law School, York University,
Toronto.
PHILIP K. HOLL, 49 has been Assistant Secretary of the Company since
December 1997. Mr. Holl joined TCW in 1994 and is Senior Vice President and
Associate General Counsel of the Manager and certain of its affiliates. Prior to
joining TCW, Mr. Holl was General Counsel and Secretary to The Reserve Group of
Mutual Funds (New York). Mr. Holl received a B.A. in Economics from Rutgers
College, a J.D. from the Rutgers University School of Law (Camden) and a LL.M.
from the New York University School of Law.
4
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
BOARD OF DIRECTORS
The Company is managed by a Board of Directors composed of seven members, a
majority of whom are independent of the Company's management. The Board of
Directors met six times in 1998. All directors attended 75% or more of the
meetings held in 1998 by the Board of Directors.
AUDIT COMMITTEE
The Board of Directors' Audit Committee consists of Messrs. Allen, Argue,
Gavin and Gregory. Mr. Gavin serves as the Audit Committee's Chairman. The Audit
Committee makes recommendations concerning the appointment of independent public
accountants. The committee also reviews the Company's financial statements and
meets with management, financial personnel and the independent public
accountants to consider the adequacy of the internal controls of the Company.
Since the audited 1997 financial statements covered less than one month of
operations, the Audit Committee did not meet in 1998.
COMPENSATION COMMITTEE
The Board of Directors' Compensation Committee is comprised entirely of
directors independent of the Company's management and consists of Messrs. Allen,
Argue, Gavin and Gregory. Mr. Allen serves as the Compensation Committee's
Chairman. The Compensation Committee's primary duty is to administer the
Company's Stock Option Plan. No interlocking relationship exists between the
Company's Board of Directors or officers responsible for compensation decisions
and the board of directors or compensation committee of any other company, nor
has any such interlocking relationship existed in the past. The Compensation
Committee met once in 1998 and Mr. Gavin did not attend the meeting.
NOMINATING COMMITTEE
The Board of Directors does not have a standing nominating committee.
COMPENSATION OF DIRECTORS
The Company pays an annual director's fee to each unaffiliated director of
$10,000, a fee of $1,250 for each meeting of the Board of Directors attended by
each unaffiliated director and reimbursement of costs and expenses of all
directors for attending such meetings. The Company does not separately
compensate affiliated directors.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and holders of more than 10% of the Company's
Common Stock, to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Such officers, directors and 10%
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on its review of such forms
that it received, or written representations from reporting persons that no Form
5's were required for such persons, the Company believes that, during fiscal
1998, all Section 16(a) filing requirements were satisfied on a timely basis.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table discloses compensation received by the Company's Chief
Executive Officer and the four remaining most highly paid executive officers for
each of the two fiscal years ended December 31 since the Company's inception.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------
AWARDS
------------------------------
ANNUAL COMPENSATION NUMBER OF
----------------------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL RESTRICTED UNDERLYING
POSITION YEAR SALARY($) BONUS($) COMPENSATION(2) STOCK AWARDS($) OPTIONS(#)
- ------------------------- --------- --------------- ------------- --------------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip A. Barach ........ 1997 -- -- -- -- 40,000
President & 1998 -- -- -- -- 26,000
Chief Executive Officer
Jeffrey E. Gundlach ..... 1997 -- -- -- -- 40,000
Chief Investment 1998 -- -- -- -- 26,000
Officer
Daniel K. Osborne ....... 1997 -- -- -- -- 35,000
Executive Vice 1998 -- -- -- -- 26,000
President,
Chief Operating Officer
and Chief Financial
Officer
Joseph J. Galligan ...... 1997 -- -- -- -- 25,000
Senior Vice President 1998 -- -- -- -- 16,000
Michael E. Cahill ....... 1997 -- -- -- -- 15,000
Secretary 1998 -- -- -- -- 7,000
<CAPTION>
PAYOUTS
NAME AND PRINCIPAL ------------- ALL OTHER
POSITION LTIP PAYOUTS COMPENSATION
- ------------------------- ------------- -------------------
<S> <C> <C>
Philip A. Barach ........ -- --
President & -- --
Chief Executive Officer
Jeffrey E. Gundlach ..... -- --
Chief Investment -- --
Officer
Daniel K. Osborne ....... -- --
Executive Vice -- --
President,
Chief Operating Officer
and Chief Financial
Officer
Joseph J. Galligan ...... -- --
Senior Vice President -- --
Michael E. Cahill ....... -- --
Secretary -- --
</TABLE>
- ------------------------
(1) The officers of the Company are separately compensated by the Manager for
certain of their duties performed on behalf of the Company.
(2) The options granted during 1998 included dividend equivalent rights ("DERs")
which enable the option recipient to receive an amount equal to any
dividends declared and paid by the Company on each underlying share. No DER
payments were made during 1998.
STOCK OPTIONS GRANTED
The following table represents the total number of stock options granted to
executive officers of the Company during the year ended December 31, 1998.
6
<PAGE>
STOCK OPTIONS GRANTED DURING YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENT OF APPRECIATION FOR
UNDERLYING TOTAL OPTIONS EXERCISE OPTION TERM(3)
OPTIONS GRANTED TO PRICE(2) EXPIRATION --------------------
NAME GRANTED(1) EMPLOYEES ($/SHARE) DATE 5%($) 10%($)
- -------------------------------------------- ----------- ------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Philip A. Barach............................ 26,000 21.3% 10.375 12/16/08 169,644 429,912
Jeffrey E. Gundlach......................... 26,000 21.3% 10.375 12/16/08 169,644 429,912
Daniel K. Osborne........................... 26,000 21.3% 10.375 12/16/08 169,644 429,912
Joseph J. Galligan.......................... 16,000 13.1% 10.375 12/16/08 104,397 264,561
Michael E. Cahill........................... 7,000 5.7% 10.375 12/16/08 45,673 115,746
</TABLE>
- ------------------------
(1) The options were granted on December 16, 1998 and are exercisable in two
annual installments starting 12 months after the date of grant. These
options include an equal number of attached DERs.
(2) The exercise price and tax withholding obligations incurred upon exercise of
the options may be paid by the option holder by delivering already owned
shares of Company common stock, including those which are issuable upon
exercise of the options.
(3) The dollar amounts under these columns are the result of calculations at 5%
and 10% compounded annual rates set by the SEC, and therefore are not
intended to forecast future appreciation, if any, in the price of common
stock.
OPTIONS EXERCISED AND YEAR END HOLDINGS
The following table represents the total number of stock options exercised
by executive officers of the Company during the year ended December 31, 1998,
and the value of unexercised options held by executive officers of the Company
as of December 31, 1998.
AGGREGATED OPTION EXERCISES IN 1998 AND
DECEMBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, DECEMBER 31,
1998(#) 1998($)
------------- -----------------
SHARES ACQUIRED ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) VALUE REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ---------------------------------------------- ------------------ ----------------------- ------------- -----------------
<S> <C> <C> <C> <C>
Philip A. Barach.............................. None Exercised 0 0/66,000 0/0(1)
Jeffrey E. Gundlach........................... None Exercised 0 0/66,000 0/0(1)
Daniel K. Osborne............................. None Exercised 0 0/61,000 0/0(1)
Joseph J. Galligan............................ None Exercised 0 0/41,000 0/0(1)
Michael E. Cahill............................. None Exercised 0 0/22,000 0/0(1)
</TABLE>
- ------------------------
(1) The Company's common stock as of December 31, 1998 traded at a value less
than the options' exercise price; the reported options are therefore not
in-the-money options.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company has been informed that as of the dates indicated the following
persons were beneficial owners of more than five percent of the Company's common
stock.
<TABLE>
<CAPTION>
CLASS OF NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF VOTING
STOCK BENEFICIAL OWNER BENEFICIALLY OWNED / AS OF SECURITIES OUTSTANDING(1)
- ------------- ----------------------------- -------------------------- ---------------------------
<S> <C> <C> <C>
Common The TCW Group, Inc. 294,667 / Dec. 31, 1998 5.12%
865 South Figueroa Street
Los Angeles, CA 90017(2)
</TABLE>
- ------------------------
(1) Based on 5,753,000 shares of common stock issued and outstanding as of April
23, 1999.
(2) This information was obtained from a Schedule 13G filing made by The TCW
Group, Inc. and Robert Day (the "Reporting Persons") on April 30, 1999
regarding the Reporting Persons' ownership of the Company's common stock as
of December 31, 1998. The TCW Group, Inc. reported sole voting and
dispositive power of no shares of the Company's common stock, and shared
voting and dispositive power of 294,667 shares of the Company's common stock
owned by TCW Capital Investment Corporation, a subsidiary of The TCW Group,
Inc. Robert Day reported sole voting and dispositive power of 66,667 shares
of the Company's common stock, and shared voting and dispositive power of
the 294,667 shares reported by The TCW Group, Inc. Robert Day's ownership
position, including the double-counted shares, was reported as 6.3% of the
voting securities outstanding.
The following table shows shares of stock beneficially owned as of April 23,
1999 by all Directors, Executive Officers and all Directors and Officers as a
group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
CLASS OF BENEFICIALLY PERCENT OF VOTING
STOCK NAME OF BENEFICIAL OWNER OWNED SECURITIES OUTSTANDING(1)
- ------------- ----------------------------- ----------------- ---------------------------
<S> <C> <C> <C>
Common Peter G. Allen 18,333(2) 0.32%
Common John C. Argue 10,183(2) 0.18%
Common Philip A. Barach 84,133(3) 1.46%
Common Michael E. Cahill 5,000(4) 0.09%
Common Joseph J. Galligan 13,333(2) 0.23%
Common John A. Gavin 8,333(2) 0.14%
Common Carl C. Gregory, III 15,833(2) 0.27%
Common Jeffrey E. Gundlach 43,333(3) 0.75%
Common Daniel K. Osborne 41,667(5) 0.72%
Common Marc I. Stern 34,166(6) 0.59%
Common All Directors and Officers as 270,814(7) 4.63%
a Group
</TABLE>
- ------------------------
(1) Based on 5,753,000 shares of common stock issued and outstanding as of April
23, 1999 plus any shares issuable upon the Beneficial Owner's (or Owners')
exercise of vested options.
(2) Includes 8,333 shares issuable upon the exercise of vested options.
(3) Includes 13,333 shares issuable upon the exercise of vested options.
(4) Includes 5,000 shares issuable upon the exercise of vested options.
(5) Includes 11,667 shares issuable upon the exercise of vested options.
(6) Includes 10,000 shares issuable upon the exercise of vested options.
(7) Includes 94,998 shares issuable upon the exercise of vested options.
8
<PAGE>
REPORT FROM THE COMPENSATION COMMITTEE
Because the Company does not pay direct compensation to its officers, the
Compensation Committee's primary duty is to administer the Company's Stock
Option Plan. During 1998, the Compensation Committee granted stock options to
the following officers and directors of the Company: Peter G. Allen (12,000),
John C. Argue (12,000), Philip A. Barach (26,000), Michael E. Cahill (7,000),
Joseph J. Galligan (16,000), John A. Gavin (12,000), Carl C. Gregory, III
(12,000), Jeffrey E. Gundlach (26,000), Philip K. Holl (9,000), Daniel K.
Osborne (26,000) and Marc I. Stern (12,000). As to those options granted to the
Compensation Committee, their grant was approved unanimously by the Board of
Directors, including those members not on the Compensation Committee. The
options were granted on December 16, 1998 and are exercisable in two equal
annual installments starting 12 months after grant. The stock options also
include an equal number of attached DERs.
The philosophy behind the Committee's compensation program is to attract,
retain and motivate skilled and talented executives, and align their
compensation with the Company's performance. The Committee's objective has been
to utilize equity-based compensation to provide appropriate incentives for the
officers and directors to achieve the business objectives of the Company. The
Committee believes that stock options are an important means to link the
interests of officers and directors with stockholders and to encourage
management to adopt a longer-term perspective. The Committee decided to include
DERs with this year's grants so as to place optionees in a position more similar
to stockholders, who receive returns both in the form of stock price
appreciation and dividends. We feel DERs are particularly important to properly
incentivize a REIT's officers and directors in light of the REIT rules
requirement that most of the REIT's income be distributed. In determining the
appropriate level of stock options and DERs, the Compensation Committee reviewed
the option grants and other compensation levels established by similar real
estate investment trusts.
The Compensation Committee
Peter G. Allen (Chairman)
John C. Argue
John A. Gavin
Carl C. Gregory, III
TOTAL RETURN COMPARISON
The following graph presents a total return comparison of the Company's
common stock since the commencement of the Company's operations on December 4,
1997 through December 31, 1998, to the S&P Composite 500 Stock Index and the
NAREIT Mortgage REIT Index. The total return reflects stock appreciation and the
value of dividends for the Company's common stock and for each of the
comparative indices. The information herein has been obtained from sources
believed to be reliable, but neither its accuracy nor its completeness is
guaranteed. The graph assumes that the value of the investment in the Company's
common stock and each index was $100 on December 4, 1997, the commencement of
the Company's operations, and that all dividends were reinvested. The total
return performance shown on the graph is not necessarily indicative of future
total return performance.
9
<PAGE>
TOTAL RETURN COMPARISON SINCE COMMENCEMENT
OF OPERATIONS (DECEMBER 4, 1997)
THROUGH DECEMBER 31, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
APEX MORTGAGE S&P COMPOSITE NAREIT MORTGAGE
<S> <C> <C> <C>
Capital, Inc. 500 Stock Index REIT Index
12/4/97 $100 $100 $100
12/31/97 $93.60 $99.83 $95.27
12/31/98 $71.09 $128.37 $68.16
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to being Chairman and a director of the Company, Mr. Stern is
Vice Chairman and a director of the Manager. Mr. Barach, in addition to being
President, Chief Executive Officer and a director of the Company is also a Group
Managing Director of the Manager. Mr. Gundlach, the Vice Chairman and Chief
Investment Officer of the Company, is also a Group Managing Director of the
Manager. Mr. Osborne, in addition to being Executive Vice President, Chief
Operating Officer and Chief Financial Officer of the Company, is also a Senior
Vice President of the Manager. Mr. Cahill, Secretary of the Company, is also
General Counsel, Secretary and a Managing Director of the Manager.
The Manager will receive annual base management compensation based on the
Average Net Invested Capital of the Company, payable monthly in arrears, equal
to 3/4 of 1% of Average Net Invested Capital. "Average Net Invested Capital"
means for any period (i) the arithmetic average of the sum of the gross proceeds
of the offerings of its equity securities by the Company, after deducting any
underwriting discounts and commissions and other expenses and costs relating to
such offering, plus (A) the Company's retained earnings (taking into account any
losses incurred) and (B) any non-cash charges or reserves, including
depreciation, mark-to-market adjustments and unrealized credit loss, computed by
taking the average of such values at the end of each month during such period,
plus (ii) any unsecured debt approved by a majority of the Unaffiliated
Directors to be included in Average Net Invested Capital, minus (iii) the
cumulative amounts paid by the Company to repurchase its shares. For the year
ended December 31, 1998, the Manager received a base management fee of $644,000
from the Company.
The Manager shall also be entitled to receive as incentive compensation for
each fiscal quarter, an amount equal to 30% of the Net Income of the Company,
before incentive compensation, in excess of the amount that would produce an
annualized Return on Equity equal to the Ten-Year U.S. Treasury Rate plus
10
<PAGE>
1%. The incentive compensation calculation and payment will be made quarterly in
arrears. The term "Return on Equity" is calculated for any quarter by dividing
the Company's Net Income for the quarter by its Average Net Worth for the
quarter. For purposes of calculating the incentive compensation payable, the
definition "Return on Equity" is not related to the actual distributions
received by stockholders or to an individual investor's actual return on
investment. For such calculations, the "Net Income" of the Company means the
taxable income of the Company (including net capital gains, if any) before the
Manager's incentive compensation, net operating loss deductions arising from
losses in prior periods and deductions permitted by the Internal Revenue Code of
1986, as amended, in calculating taxable income for a REIT plus the effects of
adjustments, if any, necessary to record hedging and interest transactions in
accordance with generally accepted accounting principles. A deduction for all of
the Company's interest expenses for borrowed funds is taken into account in
calculating Net Income. "Average Net Worth" for any period means the arithmetic
average of the sum of the gross proceeds from the offerings of its equity
securities by the Company, before deducting any underwriting discounts and
commissions and other expenses and costs relating to the offerings, plus the
Company's retained earnings (without taking into account any losses incurred in
prior periods) computed by taking the average of such values at the end of each
month during such period, minus the cumulative amounts paid by the Company to
repurchase its shares. For the Year Ended December 31, 1998 the Manager received
$619,000 as incentive compensation.
ANNUAL REPORT
This proxy statement is accompanied by the mailing of the Annual Report to
Shareholders for the fiscal year ended December 31, 1998, which contains
financial and other information about the activities of the Company.
THE COMPANY WILL FURNISH TO A SHAREHOLDER, WITHOUT CHARGE, A COPY OF ITS
MOST RECENT ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION (FORM 10-K)
UPON RECEIPT OF A WRITTEN REQUEST TO INVESTOR RELATIONS, APEX MORTGAGE CAPITAL,
INC., 865 SOUTH FIGUEROA STREET, LOS ANGELES, CALIFORNIA 90017.
PROPOSALS OF SECURITY HOLDERS
Notice is hereby given that any shareholder proposal intended to be
presented at the Annual Meeting of Shareholders in 2000 must be received at the
Company's principal office on or before December 31, 1999.
By Order of the Board of Directors
[SIGNATURE]
Michael E. Cahill
Los Angeles, California
April 30, 1999
11
<PAGE>
APEX MORTGAGE CAPITAL, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
IN CONJUNCTION WITH THE 1999 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints PHILIP A. BARACH and MARC I. STERN proxies
with power to act without the other and with full power of substitution, and
hereby authorizes them to represent and vote the shares of Common Stock of
Apex Mortgage Capital, Inc. held of record by the undersigned on April 30,
1999, as directed on the reverse side and, in their discretion, on all other
matters which may properly come before the 1999 Annual Meeting of
Shareholders to be held on June 30, 1999, and at any adjournment or
postponement thereof, as if the undersigned were present and voting at the
meeting.
Whether or not you expect to attend the meeting, you are urged to
execute and return this proxy, which may be revoked at any time prior to its
use.
PROPOSAL NO. 1: THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ELECTION OF EACH OF THE NOMINEES. PROXIES RECEIVED WILL BE VOTED FOR EACH OF
THE NOMINEES UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THE PROXY. ANY
RECEIVED PROXY THAT DOES NOT WITHHOLD AUTHORITY TO VOTE FOR THE ELECTION OF
ANY NOMINEE SHALL BE DEEMED TO GRANT SUCH AUTHORITY.
PROPOSAL NO. 2: THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS
ITEM. PROXIES RECEIVED WILL BE VOTED FOR THIS ITEM UNLESS STOCKHOLDERS
SPECIFY OTHERWISE IN THE PROXY.
IN ADDITION, PROXIES RECEIVED WILL BE VOTED IN THE PROXIES'
DISCRETION ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE 1999 ANNUAL
MEETING.
Unless contrary instructions are given on the reverse, this Proxy
shall be voted according to the recommendations of the Board of Directors.
(Continued, and to be signed and dated on the reverse side.)
APEX MORTGAGE CAPITAL, INC.
P.O. BOX 11444
NEW YORK, N.Y. 10203-0444
<PAGE>
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
AUTHORITY GIVEN / / AUTHORITY WITHHELD / / ABSTAIN / /
Authority given, except authority to vote is withheld from the following
Nominee(s):
--------------------------------------------------------------
Authority to elect the following three (3) named Nominees to the Board of
Directors to hold office until the Annual Meeting of Stockholders in 2002 and
until their respective successors are duly elected and qualified.
NOMINEES: John C. Argue Carl C. Gregory, III Jeffrey E. Gundlach
(The Board of Directors recommends a vote FOR each of the Nominees.)
PROPOSAL NO. 2:
APPOINTMENT OF INDEPENDENT ACCOUNTANTS FOR / / AGAINST / / ABSTAIN / /
(The Board of Directors recommends a vote FOR.)
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and of the Proxy Statement.
I/WE PLAN TO
ATTEND THE MEETING / /
Change of Address and/or
Comments Mark Here / /
Please print name(s) exactly
as it/they appear of record
in connection with those
shares over which you have
voting authority. Joint owners
should each sign personally.
Where applicable, indicate
your official position or
representation capacity.
Dated: , 1999
-----------------
-----------------------------
Signature(s)
-----------------------------
Print Names(s)
(PLEASE SIGN, DATE AND RETURN THIS PROXY VOTES MUST BE INDICATED(X)
IN THE ENCLOSED POSTAGE PREPAID ENVELOPE) IN BLACK OR BLUE INK. /X/
